<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 8, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
NORWEST ASSET SECURITIES CORPORATION
(Exact name of registrant as specified in its charter)
--------------
DELAWARE 52-1972128
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) No.)
7485 NEW HORIZON WAY
FREDERICK, MARYLAND 21703
(301) 846-8881
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
LAWRENCE D. RUBENSTEIN, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
NORWEST ASSET SECURITIES CORPORATION
C/O NORWEST MORTGAGE, INC.
343 THORNALL STREET, 5TH FLOOR
EDISON, NEW JERSEY 08837
(732) 906-3909
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
--------------
COPIES TO:
JORDAN M. SCHWARTZ, ESQ.
CADWALADER, WICKERSHAM & TAFT
100 MAIDEN LANE
NEW YORK, NEW YORK 10038
(212) 504-6000
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------
If the only securities being registered on this Form are being offered pur-
suant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [X]
If this form is filed to register additional securities for an offering pur-
suant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier ef-
fective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c) un-
der the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration state-
ment for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
--------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES AMOUNT OFFERING PRICE AGGREGATE REGISTRATION
BEING REGISTERED BEING REGISTERED PER UNIT OFFERING PRICE FEE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mortgage Pass-Through
Certificates......... $1,000,000.00 100%(1) $1,000,000 $295
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
PURSUANT TO RULE 429 OF THE SECURITIES AND EXCHANGE COMMISSION'S RULES AND
REGULATIONS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, THE PROSPECTUS AND
PROSPECTUS SUPPLEMENT CONTAINED IN THIS REGISTRATION STATEMENT ALSO RELATE TO
THE REGISTRANT'S REGISTRATION STATEMENT ON FORM S-3 (REGISTRATION NO. 333-
45021).
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE +
+CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT +
+FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPEC- +
+TUS SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLIC- +
+ITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE +
+IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION OCTOBER 8, 1998
LOGO OF NORWEST]
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED ,199 )
NORWEST ASSET SECURITIES CORPORATION 199 - TRUST
ISSUER
NORWEST ASSET SECURITIES CORPORATION
(NASCOR SM)
SELLER
$ (APPROXIMATE)
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 199
PRINCIPAL AND INTEREST PAYABLE MONTHLY, COMMENCING IN 199
-----------------------------------------------------------------------------
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE S-13 OF THIS
PROSPECTUS SUPPLEMENT.
Neither the offered certificates nor the underlying mortgage loans are insured
or guaranteed by any governmental agency or instrumentality.
The offered certificates will represent interests in the trust only and will
not represent interests in or obligations of NASCOR SM or any NASCOR SM
affiliate.
This prospectus supplement may be used to offer and sell the offered
certificates only if accompanied by the prospectus.
- --------------------------------------------------------------------------------
THE TRUST WILL ISSUE--
. Twenty-three Classes of senior Class A Certificates.
. Six Classes of Class B Certificates, all of which are
subordinated to, and provide credit enhancement for, the
Class A Certificates. Each Class of Class B Certificates is
also subordinated to each Class of Class B Certificates, if
any, with a lower number.
The Classes of offered certificates are listed under the
heading "Offered Certificates" in the table on page S-4.
THE YIELD TO MATURITY OF INTEREST ONLY AND PRINCIPAL ONLY
CERTIFICATES WILL BE PARTICULARLY SENSITIVE TO THE RATE OF
PRINCIPAL PAYMENTS ON THE MORTGAGE LOANS IN THE TRUST. IF YOU
ARE PURCHASING INTEREST ONLY CERTIFICATES YOU SHOULD CONSIDER
THE RISK THAT A FASTER THAN ANTICIPATED RATE OF PRINCIPAL
PAYMENTS ON THE MORTGAGE LOANS WILL RESULT IN AN ACTUAL YIELD
THAT IS LOWER THAN YOUR EXPECTED YIELD AND COULD RESULT IN
THE LOSS OF ALL OR PART OF YOUR INITIAL INVESTMENT.
THE ASSETS OF THE TRUST WILL INCLUDE--
. A pool of fully amortizing, one- to four-family,
residential first mortgage loans (excluding the Fixed
Retained Yield described in this prospectus supplement),
substantially all of which loans have original terms to
stated maturity of approximately years.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THE
CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT OR DETERMINED THAT THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[UNDERWRITERS]
, 199
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information is provided to you about the Offered Certificates in two sepa-
rate documents that progressively provide more detail: (a) the accompanying
Prospectus, which provides general information, some of which may not apply to
your Certificates and (b) this Prospectus Supplement, which describes the spe-
cific terms of your Certificates.
IF THE DESCRIPTION OF THE TERMS OF YOUR CERTIFICATES VARIES BETWEEN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE
INFORMATION IN THIS PROSPECTUS SUPPLEMENT.
Cross-references are included in this Prospectus Supplement and the accompa-
nying Prospectus to captions in these materials where you can find further re-
lated discussions. The following Table of Contents and the Table of Contents
included in the accompanying Prospectus provide the pages on which these cap-
tions are located.
You can find a listing of the pages where capitalized terms used in this
Prospectus Supplement and the accompanying Prospectus are defined under the
caption "Index of Prospectus Supplement Definitions" beginning on page S-65 in
this document and under the caption "Index of Significant Definitions" begin-
ning on page 94 in the accompanying Prospectus. Any capitalized terms used but
not defined in this Prospectus Supplement have the meanings assigned in the
Prospectus.
---------------------
This Prospectus Supplement and the accompanying Prospectus contain forward-
looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended. Such forward-looking statements, together with related qual-
ifying language and assumptions, are found in the material, including each of
the tables, set forth under "Risk Factors" and "Prepayment and Yield Consider-
ations." Forward-looking statements are also found elsewhere in this Prospec-
tus Supplement and the Prospectus, and may be identified by, among other
things, accompanying language including the words "expects," "intends," "an-
ticipates," "estimates" or analogous expressions, or by qualifying language or
assumptions. Such statements involve known and unknown risks, uncertainties
and other important factors that could cause the actual results or performance
to differ materially from such forward-looking statements. Such risks, uncer-
tainties and other factors include, among others, general economic and busi-
ness conditions, competition, changes in political, social and economic condi-
tions, regulatory initiatives and compliance with government regulations, cus-
tomer preference and various other matters, many of which are beyond the Sell-
er's control. These forward-looking statements speak only as of the date of
this Prospectus Supplement. The Seller expressly disclaims any obligation or
undertaking to disseminate any updates or revisions to such forward-looking
statements to reflect any change in the Seller's expectations with regard
thereto or any change in events, conditions or circumstances on which any for-
ward-looking statement is based.
S-2
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY INFORMATION.................................................... S-5
RISK FACTORS........................................................... S-13
Prepayments May Adversely Affect
Yield................................................................ S-13
Geographic Concentration May
Increase Risk of Loss Because of
Adverse Economic Conditions or
Natural Disasters.................................................... S-13
Subordination of Class B
Certificates Increases Risk of
Loss................................................................. S-14
Rights of Beneficial Owners May Be
Limited By Book-Entry System for
Certain Classes of Class A
Certificates......................................................... S-14
Certificates May Not Be Appropriate
for Individual Investors............................................. S-14
Risks Associated with Year 2000
Compliance........................................................... S-14
DESCRIPTION OF THE CERTIFICATES........................................ S-16
Denominations; Form of
Certificates......................................................... S-16
Distributions......................................................... S-16
Interest.............................................................. S-19
Principal (Including Prepayments)..................................... S-23
Calculation of Amount to be
Distributed on the Certificates..................................... S-23
Allocation of Amount to be
Distributed on the Class A
Certificates........................................................ S-27
Principal Payment Characteristics
of the PAC Certificates, the
Scheduled Certificates and the
Companion Certificates.............................................. S-29
Additional Rights of the Class A-R
and Class A-LR Certificateholders.................................... S-30
Periodic Advances..................................................... S-30
Restrictions on Transfer of the
Class A-R, Class A-LR and Class B
Certificates......................................................... S-30
Subordination of Class B
Certificates......................................................... S-32
Allocation of Losses................................................. S-32
DESCRIPTION OF THE MORTGAGE LOANS...................................... S-35
General............................................................... S-35
Mortgage Loan Underwriting............................................ S-35
Selected Mortgage Loan Data........................................... S-36
Mandatory Repurchase or Substitution
of Mortgage Loans.................................................... S-40
Optional Repurchase of Defaulted
Mortgage Loans....................................................... S-40
DELINQUENCY AND FORECLOSURE
EXPERIENCE............................................................ S-41
PREPAYMENT AND YIELD CONSIDERATIONS.................................... S-41
Sensitivity of the Class A-3, Class
A-12 and Class A-18 Certificates..................................... S-51
Yield Considerations with Respect to
the Class B-2 and Class B-3
Certificates......................................................... S-52
POOLING AND SERVICING AGREEMENT........................................ S-55
General............................................................... S-55
Distributions......................................................... S-55
Voting................................................................ S-55
Trustee............................................................... S-55
Master Servicer....................................................... S-55
Special Servicing Agreements.......................................... S-56
Optional Termination.................................................. S-56
SERVICING OF THE MORTGAGE LOANS........................................ S-56
The Servicers......................................................... S-57
Servicer Custodial Accounts........................................... S-57
Unscheduled Principal Receipts........................................ S-57
Anticipated Changes in Servicing...................................... S-58
Fixed Retained Yield; Servicing
Compensation and Payment of
Expenses............................................................. S-59
Servicer Defaults..................................................... S-59
FEDERAL INCOME TAX CONSIDERATIONS...................................... S-59
Regular Certificates.................................................. S-60
Residual Certificates................................................. S-61
ERISA CONSIDERATIONS................................................... S-62
LEGAL INVESTMENT....................................................... S-62
SECONDARY MARKET....................................................... S-63
UNDERWRITING........................................................... S-63
RECENT DEVELOPMENTS.................................................... S-63
LEGAL MATTERS.......................................................... S-64
USE OF PROCEEDS........................................................ S-64
RATINGS................................................................ S-64
INDEX OF PROSPECTUS SUPPLEMENT
DEFINITIONS........................................................... S-65
</TABLE>
S-3
<PAGE>
THE SERIES 199 CERTIFICATES
<TABLE>
<CAPTION>
INITIAL RATING
INITIAL PASS-THROUGH OF OFFERED
CLASS PRINCIPAL BALANCE(1) RATE PRINCIPAL TYPES(2) INTEREST TYPES(2) CERTIFICATES(3)
- ----- -------------------- ------------ ---------------------------- ----------------- ---------------
OFFERED CERTIFICATES
<S> <C> <C> <C> <C> <C>
Class A-1............... $ % Senior, Planned Amortization Fixed Rate
Class A-2............... $ % Senior, Planned Amortization Fixed Rate
Class A-3............... (4) % Senior, Notional Amount Fixed Rate,
Interest Only
Class A-4............... $ % Senior, Accretion Directed Fixed Rate
Class A-5............... $ % Senior, Accretion Directed Fixed Rate
Class A-6............... $ % Senior, Accretion Directed, Accrual,
Companion Fixed Rate
Class A-7............... $ % Senior, Companion Accrual,
Fixed Rate
Class A-8............... $ % Senior, Accretion Directed Fixed Rate
Class A-9............... $ % Senior, Accretion Directed, Accrual,
Companion Fixed Rate
Class A-10.............. $ % Senior, Accretion Directed, Accrual,
Companion Fixed Rate
Class A-11.............. $ % Senior, Companion Accrual,
Fixed Rate
Class A-12.............. $ (5) Senior, Companion Principal Only
Class A-13.............. $ % Senior, Accretion Directed Fixed Rate
Class A-14.............. $ % Senior, Accretion Directed Fixed Rate
Class A-15.............. $ % Senior, Accretion Directed Fixed Rate
Class A-16.............. $ % Senior, Companion Accrual,
Fixed Rate
Class A-17.............. $ % Senior Fixed Rate
Class A-18.............. (6) % Senior, Notional Amount Fixed Rate,
Interest Only
Class A-19.............. $ % Senior Fixed Rate
Class A-20.............. $ % Senior Fixed Rate
Class A-R............... $ % Senior Fixed Rate
Class A-LR.............. $ % Senior Fixed Rate
Class B-1............... $ % Subordinated Fixed Rate
Class B-2............... $ % Subordinated Fixed Rate
Class B-3............... $ % Subordinated Fixed Rate
NON-OFFERED CERTIFICATES
Class A-PO.............. $ (7) Senior Principal Only
Class B-4............... $ % Subordinated Fixed Rate
Class B-5............... $ % Subordinated Fixed Rate
Class B-6............... $ % Subordinated Fixed Rate
</TABLE>
- --------------------
(1) Approximate. The initial Principal Balances are subject to adjustment as
described herein.
(2) See "Description of the Certificates -- Categories of Classes of Certifi-
cates" in the Prospectus for a description of the principal and interest
categories listed.
(3) A description of the ratings of the Offered Certificates is set forth under
the heading "Rating of Certificates" on page S-5 of the Summary Information
and under "Ratings" in the main text of this Prospectus Supplement.
(4) The Class A-3 Certificates are interest-only certificates, have no Princi-
pal Balance and will bear interest on the Class A-3 Notional Amount (ini-
tially approximately $ ) as described herein under "Description of the
Certificates -- Interest."
(5) The Class A-12 Certificates are principal-only certificates and will not be
entitled to distributions in respect of interest.
(6) The Class A-18 Certificates are interest-only certificates, have no Princi-
pal Balance and will bear interest on the Class A-18 Notional Amount (ini-
tially approximately $ ) as described herein under "Description of Cer-
tificates -- Interest."
(7) The Class A-PO Certificates are principal-only certificates and will not be
entitled to distributions in respect of interest.
S-4
<PAGE>
SUMMARY INFORMATION
. THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT, BUT DOES NOT
CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER IN MAKING YOUR
INVESTMENT DECISION. PLEASE READ THIS ENTIRE PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS (THE "PROSPECTUS") CAREFULLY FOR ADDITIONAL DETAILED
INFORMATION ABOUT THE OFFERED CERTIFICATES.
RELEVANT PARTIES
ISSUER
The Norwest Asset Securities Corporation 199 - Trust (the "TRUST") will own
the Mortgage Loans and issue the Certificates.
SELLER
Norwest Asset Securities Corporation (the "SELLER") will acquire the Mortgage
Loans from Norwest Mortgage, Inc. ("NORWEST MORTGAGE"), an affiliate of the
Seller and the Master Servicer, and will transfer the Mortgage Loans into the
Trust.
MASTER SERVICER
Norwest Bank Minnesota, National Association, an affiliate of the Seller and
Norwest Mortgage ("NORWEST BANK" and, in its capacity as master servicer, the
"MASTER SERVICER"), will supervise the Servicers and perform certain other du-
ties with respect to the Certificates.
SERVICERS
Norwest Mortgage and one or more other Servicers approved by the Master
Servicer will provide customary servicing functions with respect to the Mort-
gage Loans pursuant to servicing agreements (each, an "UNDERLYING SERVICING
AGREEMENT") assigned to the Trust.
TRUSTEE
(the "TRUSTEE") will act as the trustee for the Trust.
RATING OF CERTIFICATES
The Trust will not issue the Offered Certificates unless they have received at
least the ratings set forth on page S-4 from (" ") and, if applicable, (" "
and, together with , the "RATING AGENCIES").
. The ratings of the Rating Agencies are not recommendations to buy, sell or
hold the Certificates rated. A rating may be subject to revision or
withdrawal at any time by the assigning Rating Agency.
. The ratings do not address the possibility that, as a result of principal
prepayments, the yield on your Certificate may be lower than anticipated.
. The ratings do not address the possibility that if you hold Class A-3 or
Class A-18 Certificates, you may not recover your initial investment as a re-
sult of principal prepayments on the Mortgage Loans.
See "-- Effects of Prepayments on Investment Expectations" below and "Ratings"
in this Prospectus Supplement.
DESCRIPTION OF CERTIFICATES
The Mortgage Pass-Through Certificates, Series 199 (the "CERTIFICATES") will
be issued on or about , 199 (the "CLOSING DATE").
The Certificates consist of:
. The twenty-three Classes of senior certificates designated as "Senior" Cer-
tificates in the table on page S-4 of this Prospectus Supplement (collective-
ly, the "CLASS A CERTIFICATES"); and
. The six Classes of junior certificates designated as "Subordinated" Certifi-
cates in the table on page S-4 of this Prospectus Supplement (collectively,
the "SUBORDINATED CERTIFICATES" or the "CLASS B CERTIFICATES").
Only the Class A Certificates (other than the Class A-PO Certificates) and the
Class B-1, Class B-2 and Class B-3 Certificates (collectively, the "OFFERED
CERTIFICATES") are being offered by this Prospectus Supplement and the accompa-
nying Prospectus. The Class A-PO, Class B-4, Class B-5 and Class B-6 Certifi-
cates are not being offered pursuant to this Prospectus Supplement and the ac-
companying Prospectus, and the Seller may retain or sell such Classes.
See page S-4 of this Prospectus Supplement for more information with respect to
each Class of Certificates.
S-5
<PAGE>
PRINCIPAL BALANCE AND INTERESTS EVIDENCED BY THE CERTIFICATES
The Certificates will have an approximate aggregate initial Principal Balance
of $ . Any difference between the aggregate Principal Balance of the
Certificates as of the date of issuance of the Certificates and the approximate
aggregate initial Principal Balance of the Certificates as of the date of this
Prospectus Supplement will not exceed 5% of the aggregate initial Principal
Balance of the Certificates. Any such difference will be allocated among the
various Classes of Certificates so as to materially retain the characteristics
of the Offered Certificates described in this Prospectus Supplement.
The following table sets forth the approximate undivided interest in the prin-
cipal balance of the Mortgage Loans that the Seller expects each Class or group
of Classes indicated to evidence as of the Closing Date.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
APPROXIMATE INITIAL
CLASS UNDIVIDED INTEREST
- ------------------------------- ---------------------
<S> <C> <C>
Class A (other than Class A-PO) %
Class A-PO* %
---------
Class A (all Classes) %
Class B-1 %
Class B-2 %
Class B-3 %
Classes B-4, B-5 and B-6 %
----------
Total 100.00%
==========
</TABLE>
- --------------------
* The Class A-PO Certificates in the aggregate represent an approximate %
initial interest in the principal balance of the Discount Mortgage Loans.
- --------------------------------------------------------------------------------
The following table sets forth for the Class A and Class B Certificates the ap-
proximate undivided interest in the Pool Balance (Non-PO Portion) that the
Seller expects such Class or group of Classes indicated to evidence, in the ag-
gregate, as of the Closing Date.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
APPROXIMATE INITIAL
UNDIVIDED INTEREST
-----------------------
CLASS PERCENTAGE IN DOLLARS
- ------------------------------- ---------- ------------
<S> <C> <C>
Class A (other than Class A-PO) % $
Class B % $
------ ------------
Totals 100.00% $
====== ============
- ---------------------------------------------------------
</TABLE>
The relative interests in the initial Pool Balance (Non-PO Portion) represented
by the Class A Certificates in the aggregate (other than the Class A-PO Certif-
icates) and the Class B Certificates in the aggregate are subject to change
over time because:
. Certain unscheduled principal payments will be disproportionally allocated to
the Class A Certificates (other than the Class A-PO Certificates) for a spec-
ified period; and
. Certain losses and certain shortfalls will be allocated first to the Classes
of Class B Certificates in reverse numerical order prior to the allocation of
such losses and shortfalls to the Class A Certificates, as discussed in "De-
scription of the Certificates -- Distributions" and "-- Subordination
of Class B Certificates" in this Prospectus Supplement.
FORMS OF CERTIFICATES; DENOMINATIONS
Your Certificates will be issued either in book-entry form or in fully regis-
tered, certificated form. The table under "Description of the Certificates --
Denominations; Form of Certificates" in this Prospectus Supplement sets forth
the original certificate form, the minimum denomination and the incremental de-
nomination of the Offered Certificates. The Offered Certificates are not in-
tended to be directly or indirectly held or beneficially owned by anyone in
amounts lower than such minimum denominations.
MORTGAGE POOL
The Mortgage Loans, which are the source of distributions to holders of the
Certificates, will consist of conventional, fixed interest rate, monthly pay,
fully amortizing, one- to four-family, residential first mortgage loans, sub-
stantially all of which have original terms to stated maturity of approximately
years. Some of the Mortgage Loans may be loans secured by cooperative housing
corporations.
The Seller expects the Mortgage Loans to have the further specifications set
forth in the table below and under the heading "Description of the Mortgage
Loans" in this Prospectus Supplement.
S-6
<PAGE>
- -------------------------------------------------------------------------------
SELECTED MORTGAGE LOAN DATA/(1)/
(AS OF THE CUT-OFF DATE)
<TABLE>
<S> <C> <C>
Cut-Off Date: , 199
Number of Mortgage Loans:
Aggregate Unpaid Principal Balance/(2)/: $
Range of Unpaid Principal Balances/(2)/: $ to $
Average Unpaid Principal Balance/(2)/: $
Range of Mortgage Interest Rates: % to %
Weighted Average Mortgage Interest Rate/(2)/: %
Range of Remaining Terms to Stated Maturity: months to months
Weighted Average Remaining Term to Stated
Maturity/(2)/: months
Range of Original Loan-to-Value Ratios/(2)/: % to %
Weighted Average Original Loan-to-Value Ratio/(2)/: %
Geographic Concentration of Mortgaged Properties
Securing Mortgage Loans in Excess of 5% of the
Aggregate Unpaid Principal Balance/(2)/: [STATES] %
%
Maximum Five-Digit Zip Code Concentration/(2)/: %
</TABLE>
- -------------------
(1) Information concerning the Discount Mortgage Loans and Premium Mortgage
Loans is set forth under "Description of the Mortgage Loans -- General."
(2) Approximate.
- -------------------------------------------------------------------------------
CHANGES TO MORTGAGE POOL
The Seller may remove Mortgage Loans from the pool, or may make substitutions
for certain Mortgage Loans, in advance of the Closing Date.
After the issuance of the Certificates, the Seller may remove certain Mortgage
Loans from the pool through repurchase or, under certain circumstances, may
make substitutions for certain Mortgage Loans.
See "Description of the Mortgage Loans" in this Prospectus Supplement.
OPTIONAL TERMINATION OF THE TRUST
The Seller may, subject to certain conditions including the then-remaining
size of the pool, purchase all outstanding Mortgage Loans in the pool and
thereby effect early retirement of the Certificates. See "Pooling and Servic-
ing Agreement -- Optional Termination" in this Prospectus Supplement.
UNDERWRITING STANDARDS
Approximately % (by aggregate unpaid principal balance as of the Cut-Off
Date) of the Mortgage Loans were generally originated in conformity with the
underwriting standards described in the Prospectus under the heading "The
Mortgage Loan Programs -- Mortgage Loan Underwriting -- Norwest Mortgage Un-
derwriting" (the "UNDERWRITING STANDARDS"). In certain instances, Norwest
Mortgage may have granted exceptions to the Underwriting Standards.
The remaining approximate % of the Mortgage Loans were purchased by Norwest
Mortgage in bulk purchase transactions and were underwritten using underwrit-
ing standards which may vary from the Underwriting Standards (the "BULK PUR-
CHASE UNDERWRITTEN LOANS"). However, Norwest Mortgage has in each case re-
viewed the underwriting standards applied to such Bulk Purchase Underwritten
Loans and determined that such standards were not materially different than
the Underwriting Standards.
See "Description of the Mortgage Loans" in this Prospectus Supplement and "The
Mortgage Loan Programs -- Mortgage Loan Underwriting" in the Prospectus.
DISTRIBUTIONS OF PRINCIPAL AND INTEREST TO CERTIFICATEHOLDERS
On each Distribution Date the Pool Distribution Amount, which consists of
those payments, recoveries, advances and other receipts in respect of the
Mortgage Loans which are available for distribution on such date, will be dis-
tributed generally in the following order of priority:
S-7
<PAGE>
. First, pro rata, to the holders of the Class A Certificates in respect of in-
terest which they are entitled to receive on such Distribution Date;
. Second, to the holders of the Class A Certificates in respect of principal
which they are entitled to receive on such Distribution Date; and
. Third, to the holders of the Class B Certificates in numerical order (i.e.,
first to the Class B-1 Certificates, then the Class B-2 Certificates, etc.)
in respect of interest and principal which they are entitled to receive on
such Distribution Date.
However, if you are purchasing Accrual Certificates you will not receive inter-
est distributions with respect to your Certificates until the applicable Accre-
tion Termination Date. Prior to the applicable Accretion Termination Date,
interest which would otherwise be distributed on a Class of Accrual Certifi-
cates will be added to the Principal Balance of such Class of Accrual Certifi-
cates and will be distributed instead as principal to the holders of the Class
or Classes of Class A Certificates specified under "Description of the Certifi-
cates -- Principal (Including Prepayments)" in this Prospectus Supplement.
In addition, the portion, if any, of principal to which the Class A-PO Certifi-
cates are entitled on a Distribution Date which consists of the Class A-PO De-
ferred Amount will only be paid out of amounts otherwise distributable as prin-
cipal to the Class B Certificates on such Distribution Date.
INTEREST DISTRIBUTIONS
The amount of interest which will accrue on your Certificates (unless you own
Class A-12 Certificates) each month is equal to:
. 1/12th of the Pass-Through Rate for your Class of Certificates multiplied by
the outstanding Principal Balance (or notional amount, in the case of the
Class A-3 and Class A-18 Certificates) of such Class on the related Distribu-
tion Date minus
. the amount of certain interest shortfalls arising from the timing of prepay-
ments on the Mortgage Loans and interest losses allocated to your Class of
Certificates, as described under "Description of the Certificates --
Interest" in this Prospectus Supplement.
Because the Class A-12 Certificates are principal-only certificates, if you own
Class A-12 Certificates, you will not be entitled to distributions of interest.
The allocation of interest distributions among the Class A Certificates will be
made as described under "Description of the Certificates -- Distributions" and
"Interest" in this Prospectus Supplement.
PRINCIPAL DISTRIBUTIONS
The calculation of the amount of principal which each Class of Offered Certifi-
cates is entitled to receive on each Distribution Date and the priority of
principal distributions among the Class A Certificates are described under "De-
scription of the Certificates -- Distributions" and "-- Principal (Including
Prepayments)" in this Prospectus Supplement.
CREDIT ENHANCEMENT
The rights of the holders of each Class of Class B Certificates to receive dis-
tributions will be subordinated to the rights of the holders of the Class A
Certificates and the holders of the Classes of Class B Certificates, if any,
with lower numerical designations to receive distributions.
In general, the protection afforded the holders of more senior Classes of Cer-
tificates by means of this subordination will be effected in two ways:
. By the preferential right of the holders of such Classes to receive, prior to
any distribution being made on any Distribution Date to the holders of the
more junior Classes of Certificates, the amounts of interest and principal
due on the more senior Classes of Certificates (other than the Class A-PO De-
ferred Amount) and, if necessary, by the right of such more senior holders to
receive future distributions on the Mortgage Loans that would otherwise have
been allocated to the holders of the more junior Classes of Certificates; and
. By the allocation to the more junior Classes of Certificates (in inverse or-
der of seniority), until their respective Principal Balances have been re-
duced to zero, of losses resulting from the liquidation of defaulted Mortgage
Loans or the bankruptcy of mortgagors prior to the allocation of such losses
to the more senior Classes of Certificates (other than certain excess losses
arising from special hazards, mortgagor fraud or mortgagor bankruptcy).
See "Description of the Certificates -- Distributions" and "-- Subordination of
Class B Certificates" in this Prospectus Supplement.
In addition, in order to increase the period during which the Principal Bal-
ances of the Class B Certifi-
S-8
<PAGE>
cates remain available as credit enhancement to the Class A Certificates, a
disproportionate amount of prepayments and certain unscheduled recoveries with
respect to the Mortgage Loans will be allocated to the Class A Certificates in
the aggregate (other than the Class A-PO Certificates). This allocation will
accelerate the amortization of the Class A Certificates (other than the Class
A-PO Certificates) while, in the absence of losses due to the liquidation of
defaulted Mortgage Loans or losses resulting from the bankruptcy of mortga-
gors, increasing the percentage interest in the principal balance of the Mort-
gage Loans evidenced by the Class B Certificates. See "Description of the Cer-
tificates" and "Prepayment and Yield Considerations" in this Prospectus Sup-
plement.
After the Principal Balances of the Class B Certificates have been reduced to
zero, the principal portion of all losses (other than the portion attributable
to the Discount Mortgage Loans) will be allocated to the Class A Certificates
(other than the Class A-PO Certificates). To the extent such losses arise with
respect to Discount Mortgage Loans, principal losses will be shared among the
Class A Certificates according to their respective interests in such Mortgage
Loans. The principal portion of any losses borne by the Class A Certificates
(other than losses borne by the Class A-PO Certificates) will be shared pro
rata by the Classes of Class A Certificates (other than the Class A-PO Certif-
icates) based on their then-outstanding Principal Balances (or, in the case of
the Accrual Certificates, their initial Principal Balances, if lower) and the
interest portion of such losses will be shared pro rata by such Classes based
on interest accrued. See "Description of the Certificates -- Interest" and "--
Subordination of Class B Certificates -- Allocation of Losses" in this Pro-
spectus Supplement.
IF YOU ARE PURCHASING CLASS B CERTIFICATES, YOU SHOULD CONSIDER THAT THE YIELD
TO MATURITY ON EACH CLASS OF CLASS B CERTIFICATES WILL BE MORE SENSITIVE TO
LOSSES DUE TO LIQUIDATIONS OF THE MORTGAGE LOANS (AND THE TIMING THEREOF) THAN
THAT ON THE MORE SENIOR CLASSES OF CERTIFICATES IN THE EVENT THAT THE AGGRE-
GATE PRINCIPAL BALANCE OF THE CLASSES OF CERTIFICATES THAT ARE JUNIOR TO IT
HAS BEEN REDUCED TO ZERO.
The sensitivity of the yield to maturity of the Class B-2 and Class B-3 Cer-
tificates to losses is illustrated in the tables under the heading "Prepayment
and Yield Considerations -- Yield Considerations with Respect to the Class B-2
and Class B-3 Certificates" in this Prospectus Supplement. These illustrations
are based on default, loss and other assumptions which are unlikely to match
actual experience on the Mortgage Loans. Therefore, your results will vary.
See "Description of the Certificates -- Subordination of Class B Certificates"
in this Prospectus Supplement.
EFFECTS OF PREPAYMENTS ON YOUR INVESTMENT EXPECTATIONS
The Offered Certificates were structured assuming, among other things, that
prepayments on the Mortgage Loans occur at a constant rate of % SPA. Howev-
er, no one can predict the actual rate of prepayment of principal on the Mort-
gage Loans.
IN DECIDING WHETHER TO PURCHASE ANY OFFERED CERTIFICATES, YOU SHOULD MAKE AN
INDEPENDENT DECISION AS TO THE APPROPRIATE PREPAYMENT ASSUMPTIONS TO USE. If
prepayments on the Mortgage Loans are higher or lower than you anticipate, the
investment performance of the Offered Certificates may vary materially and ad-
versely from your investment expectations.
In addition, if you are purchasing Class A Certificates you should consider
that the Class A Certificates (other than the Class A-PO Certificates) in the
aggregate will be more sensitive to prepayments on the Mortgage Loans than the
Class B Certificates because such prepayments will be disproportionately allo-
cated to the Class A Certificates then entitled to principal distributions
during the nine years beginning on the first Distribution Date. See "Descrip-
tion of the Certificates -- Principal (Including Prepayments)" and "Prepayment
and Yield Considerations" in this Prospectus Supplement.
The actual yield on your Certificates may not be equal to the yield you antic-
ipated at the time of purchase or, notwithstanding that the actual yield is
equal to the yield you anticipated at that time, the total return on invest-
ment you expected or the expected weighted average life of your Certificates
may not be realized. These effects are summarized below.
YIELD
The actual yield on your Certificates in relation to the related Pass-Through
Rate will vary depending upon the price you paid for your Certificates.
. If you purchase an Offered Certificate (other than a Class A-12 Certificate)
at an amount equal to its unpaid Principal Balance (that is, at "par"), your
effective yield (assuming that there are no interest
S-9
<PAGE>
shortfalls and assuming the full return of your invested principal) will ap-
proximate the Pass-Through Rate on that Certificate.
. If you pay less or more than the unpaid Principal Balance of an Offered Cer-
tificate (that is, buy the Certificate at a "discount" or "premium," respec-
tively), then, your effective yield (assuming that there are no interest
shortfalls and assuming the full return of your invested principal) will be
higher or lower, respectively, than the Pass-Through Rate on the Certifi-
cate, because such discount or premium will be amortized over the life of
the Certificate.
The yield on your Certificates will also be affected by the rate and timing of
prepayments on the Mortgage Loans. Any deviation in the actual rate of prepay-
ments on the Mortgage Loans from the rate you assumed will affect the period
of time over which, or the rate at which, the discount or premium will be am-
ortized and, consequently, will cause your actual yield to differ from that
which you anticipated.
If you purchase Class A-3 or Class A-18 Certificates, which do not have Prin-
cipal Balances, your yield will be sensitive to both the timing of receipt of
prepayments and the overall rate of prepayment on the Mortgage Loans.
If you purchase Class A-12 Certificates, which do not bear interest, your
yield will primarily be a function of the price you paid for your Class A-12
Certificates, the rate and timing of principal payments on the Mortgage Loans
and losses incurred on and after the Cross-Over Date.
The particular sensitivities of the Class A-3, Class A-12 and Class A-18 Cer-
tificates are separately displayed in the tables appearing under the heading
"Prepayment and Yield Considerations" in this Prospectus Supplement.
IF YOU ARE PURCHASING OFFERED CERTIFICATES AT A DISCOUNT, PARTICULARLY THE
CLASS A-12 CERTIFICATES, YOU SHOULD CONSIDER THE RISK THAT A SLOWER THAN AN-
TICIPATED RATE OF PRINCIPAL PAYMENTS ON THE MORTGAGE LOANS WILL RESULT IN AN
ACTUAL YIELD THAT IS LOWER THAN YOUR EXPECTED YIELD.
IF YOU ARE PURCHASING OFFERED CERTIFICATES AT A PREMIUM, OR IF YOU ARE PUR-
CHASING CLASS A-3 OR CLASS A-18 CERTIFICATES, WHICH DO NOT HAVE PRINCIPAL BAL-
ANCES, YOU SHOULD CONSIDER THE RISK THAT A FASTER THAN ANTICIPATED RATE OF
PRINCIPAL PAYMENTS ON THE MORTGAGE LOANS WILL RESULT IN AN ACTUAL YIELD THAT
IS LOWER THAN YOUR EXPECTED YIELD. YOU SHOULD ALSO CONSIDER THE RISK THAT A
RAPID RATE OF PRINCIPAL PAYMENTS ON THE MORTGAGE LOANS COULD RESULT IN THE
LOSS OF ALL OR PART OF YOUR INITIAL INVESTMENT.
REINVESTMENT RISK
As stated above, if you purchase an Offered Certificate at par, fluctuations
in the rate of distributions of principal will generally not affect your yield
to maturity. However, the total return on your investment, even if you pur-
chase your Certificates at par, will be reduced if principal distributions re-
ceived on your Certificates cannot be reinvested at a rate as high as the
stated Pass-Through Rate.
You should consider the risk that rapid rates of prepayments on the Mortgage
Loans may coincide with periods of low prevailing market interest rates. Dur-
ing periods of low prevailing market interest rates, mortgagors may be ex-
pected to prepay or refinance Mortgage Loans that carry interest rates signif-
icantly higher than then-current interest rates for mortgage loans. Conse-
quently, the amount of principal distributions available to you for reinvest-
ment at such low prevailing interest rates may be relatively large.
Conversely, slow rates of prepayments on the Mortgage Loans may coincide with
periods of high prevailing market interest rates. During such periods, it is
less likely that mortgagors will elect to prepay or refinance Mortgage Loans
and, therefore, the amount of principal distributions available to you for re-
investment at such high prevailing interest rates may be relatively small.
WEIGHTED AVERAGE LIFE VOLATILITY
One indication of the impact of varying prepayment speeds on a security is the
change in its weighted average life.
. The "weighted average life" of an Offered Certificate (other than a Class A-
3 or Class A-18 Certificate) is the average amount of time that will elapse
between the date of issuance of the Certificate and the date on which each
dollar in reduction of the principal balance of the Certificate is distrib-
uted to the investor.
. The weighted average life of a Class A-3 Certificate is the average amount
of time that will elapse between the date of issuance of the Certificates
and the date on which each dollar in reduction of the Principal Balance of
the Class A-1 Certificates (a portion of the Principal Balance of which
corre-
S-10
<PAGE>
sponds to the notional amount of the Class A-3 Certificates) is distributed
to the investors in the Class A-1 Certificates.
. The weighted average life of a Class A-18 Certificate is the average amount
of time that will elapse between the date of issuance of the Certificates
and the date on which each dollar in reduction of the Principal Balance of
the Class A-17 Certificates (the Principal Balance of which corresponds to
the notional amount of the Class A-18 Certificates) is distributed to the
investors in the Class A-17 Certificates.
Low rates of prepayment may result in the extension of the weighted average
life of a Certificate. High rates of prepayment may result in the shortening
of the weighted average life of a Certificate.
In general, if you purchase your Certificates at par and the weighted average
life of your Certificates is extended beyond your anticipated time period, the
market value of your Certificates may be adversely affected even though the
yield to maturity on your Certificates is unaffected.
IF YOU ARE PURCHASING COMPANION CERTIFICATES, YOU SHOULD CONSIDER THAT THEIR
WEIGHTED AVERAGE LIVES WILL BE HIGHLY SENSITIVE TO THE RATE OF PREPAYMENTS ON
THE MORTGAGE LOANS.
The sensitivity of the weighted average lives of the Offered Certificates to
prepayment is illustrated in the tables appearing under the heading "Prepay-
ment and Yield Considerations" in this Prospectus Supplement. THESE ILLUSTRA-
TIONS ARE BASED ON PREPAYMENT AND OTHER ASSUMPTIONS WHICH ARE UNLIKELY TO
MATCH THE ACTUAL EXPERIENCE ON THE MORTGAGE LOANS. THEREFORE, YOUR RESULTS
WILL VARY.
See "Risk Factors -- Prepayments May Adversely Affect Yield," "Prepayment and
Yield Considerations" and "Description of the Certificates -- Principal (In-
cluding Prepayments) -- Principal Payment Characteristics of the PAC Certifi-
cates and the Companion Certificates" in this Prospectus Supplement.
FEDERAL INCOME TAX STATUS
For federal income tax purposes, the Trust Estate will consist of two real es-
tate mortgage investment conduits (the "UPPER-TIER REMIC" and the "LOWER-TIER
REMIC," respectively, and each a "REMIC"). The Offered Certificates and the
Class A-PO, Class B-4, Class B-5 and Class B-6 Certificates (collectively, the
"REGULAR CERTIFICATES") will constitute "regular interests" in the Upper-Tier
REMIC. The Class A-R Certificate will be the "residual interest" in the Upper-
Tier REMIC and the Class A-LR Certificate will be the "residual interest" in
the Lower-Tier REMIC.
The Regular Certificates will be treated as newly-originated debt instruments
for most federal income tax purposes. You must report income received on your
Regular Certificates as it accrues from Distribution Date to Distribution
Date, which will be before such income is distributed in cash to you. Addi-
tionally, as described under "Federal Income Tax Consequences in this Prospec-
tus Supplement, certain Classes of Regular Certificates may be issued with
"original issue discount" ("OID"). If your class of Regular Certificates is
issued with OID, you must report OID income over the life of the Regular Cer-
tificate, often well before such income is distributed in cash to you.
The Class A-R and Class A-LR Certificates will not be treated as debt instru-
ments for federal income tax purposes. Instead, if you are the holder of the
Class A-R or Class A-LR Certificate, you must include the taxable income or
loss of the Upper-Tier REMIC or the Lower-Tier REMIC, respectively, in deter-
mining your federal taxable income. All or most of the taxable income of the
Upper-Tier REMIC and the Lower-Tier REMIC includible by the Class A-R and
Class A-LR Certificateholders will be treated as "excess inclusion" income
which is subject to special limitations for federal tax purposes. AS A RESULT
OF THIS TAX TREATMENT, YOUR AFTER-TAX RETURN ON THE CLASS A-R OR CLASS A-LR
CERTIFICATE MAY BE SIGNIFICANTLY LOWER THAN WOULD BE THE CASE IF THE CLASS A-R
AND CLASS A-LR CERTIFICATES WERE TAXED AS DEBT INSTRUMENTS, OR MAY BE NEGATIVE
(I.E., YOU MAY HAVE TO USE FUNDS OTHER THAN DISTRIBUTIONS ON YOUR CERTIFICATE
TO MEET THE TAX LIABILITIES RESULTING FROM THE OWNERSHIP OF A CLASS A-R OR
CLASS A-LR CERTIFICATE).
Additionally, the Class A-R and Class A-LR Certificates will be considered
"non-economic residual interests" for tax purposes. AS A RESULT, CERTAIN
TRANSFERS OF THE CLASS A-R OR CLASS A-LR CERTIFICATES MAY BE DISREGARDED FOR
FEDERAL TAX PURPOSES, WITH THE TRANSFEROR CONTINUING TO HAVE TAX LIABILITIES
FOR THE TRANSFERRED CERTIFICATES. See "Description of the Certificates -- Re-
strictions on Transfer of the Class A-R, Class A-LR and Class B Certificates"
and "Federal Income Tax Considerations" in this Prospectus Supplement and
"Certain Federal Income
S-11
<PAGE>
Tax Consequences -- Federal Income Tax Consequences for REMIC Certificates" in
the Prospectus.
ERISA CONSIDERATIONS
If you are a fiduciary of an employee benefit plan or other retirement plan or
arrangement subject to Title I of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), or Section 4975 of the Internal Revenue Code of
1986, as amended (the "CODE"), or a governmental plan, as defined in Sec-
tion 3(32) of ERISA, subject to any federal, state or local law ("SIMILAR
LAW") which is, to a material extent, similar to the foregoing provisions of
ERISA or the Code (collectively, a "PLAN"), you should carefully review with
your legal advisors whether the purchase or holding of Offered Certificates
could give rise to a transaction prohibited or not otherwise permissible under
ERISA, the Code or Similar Law.
BECAUSE THE CLASS B-1, CLASS B-2 AND CLASS B-3 CERTIFICATES ARE SUBORDINATED
TO THE CLASS A CERTIFICATES WITH RESPECT TO CERTAIN LOSSES, THE CLASS B-1,
CLASS B-2 AND CLASS B-3 CERTIFICATES MAY NOT BE TRANSFERRED UNLESS THE TRANS-
FEREE HAS DELIVERED TO THE TRUSTEE AND THE SELLER:
. A REPRESENTATION LETTER STATING EITHER (A) THAT THE TRANSFEREE IS NOT A PLAN
AND IS NOT ACTING ON BEHALF OF A PLAN OR USING THE ASSETS OF A PLAN TO EF-
FECT SUCH PURCHASE OR (B) SUBJECT TO CERTAIN CONDITIONS DESCRIBED HEREIN,
THAT THE SOURCE OF FUNDS USED TO PURCHASE SUCH CERTIFICATES IS AN "INSURANCE
COMPANY GENERAL ACCOUNT"; OR
. AN OPINION OF COUNSEL AND SUCH OTHER DOCUMENTATION AS DESCRIBED UNDER "DE-
SCRIPTION OF THE CERTIFICATES -- RESTRICTIONS ON TRANSFER OF THE CLASS A-R,
CLASS A-LR AND CLASS B CERTIFICATES" IN THIS PROSPECTUS SUPPLEMENT.
THE CLASS A-R AND CLASS A-LR CERTIFICATES MAY NOT BE PURCHASED BY OR TRANS-
FERRED TO A PLAN OR A PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A
PLAN. See "Description of the Certificates -- Restrictions on Transfer of the
Class A-R, Class A-LR and Class B Certificates" and "ERISA Considerations" in
this Prospectus Supplement.
LEGAL INVESTMENT
. The Class A and Class B-1 Certificates will constitute "mortgage related se-
curities" for purposes of the Secondary Mortgage Market Enhancement Act of
1984, as amended ("SMMEA") so long as they are rated in one of the two high-
est rating categories by at least one nationally recognized statistical rat-
ing organization.
. The Class B-2 and Class B-3 Certificates will not constitute "mortgage re-
lated securities" under SMMEA.
If your investment activities are subject to legal investment laws and regula-
tions, regulatory capital requirements or review by regulatory authorities you
may be subject to restrictions on investment in the Offered Certificates and
should consult your own legal, tax and accounting advisors in determining the
suitability of and consequences to you of the purchase, ownership and disposi-
tion of the Offered Certificates.
See "Legal Investment" in the Prospectus.
MONTHLY REPORTS AND ADDITIONAL INFORMATION
The Master Servicer will prepare, and the Trustee will forward to
Certificateholders with each distribution, a copy of the Monthly Report de-
scribed under "Reports to Certificateholders" and "Pooling and Servicing
Agreement -- Reports to Certificateholders" in the Prospectus. In addition,
the Seller intends to make the information contained in the Monthly Report,
together with certain additional information, available to any interested in-
vestor via the internet and other electronic means described under "Where You
Can Find More Information" in the Prospectus.
S-12
<PAGE>
RISK FACTORS
PREPAYMENTS MAY ADVERSELY AFFECT YIELD
The rate of distributions of principal and the yield to maturity on your
Certificates will be directly related to the rate of payments of principal on
the Mortgage Loans and the amount and timing of mortgagor defaults resulting
in Realized Losses. Mortgagors are permitted to prepay the Mortgage Loans, in
whole or in part, at any time without penalty. The rate of principal payments
on the Mortgage Loans will be affected by, among other things:
. the amortization schedules of the Mortgage Loans;
. the rate of principal prepayments (including partial prepayments and
those resulting from refinancing) thereon by mortgagors;
. liquidations of defaulted Mortgage Loans;
. repurchases of Mortgage Loans by the Seller as a result of defective
documentation or breaches of representations and warranties, optional
purchase by the Seller of defaulted Mortgage Loans; and
. the optional purchase by the Seller of all of the Mortgage Loans in con-
nection with the termination of the Trust Estate.
See "Prepayment and Yield Considerations" and "Pooling and Servicing Agree-
ment -- Optional Termination" herein and "The Pooling and Servicing Agree-
ment -- Assignment of Mortgage Loans to the Trustee," "-- Optional Purchases"
and "-- Termination; Optional Purchase of Mortgage Loans" in the Prospectus.
The rate of payments (including prepayments) on pools of mortgage loans is
influenced by a variety of economic, geographic, social and other factors.
. If prevailing rates for similar mortgage loans fall below the Mortgage
Interest Rates on the Mortgage Loans, the rate of prepayment would gen-
erally be expected to increase.
. Conversely, if interest rates on similar mortgage loans rise above the
Mortgage Interest Rates on the Mortgage Loans, the rate of prepayment
would generally be expected to decrease.
The rate of prepayment on the Mortgage Loans may also be influenced by pro-
grams offered by mortgage originators (including Norwest Mortgage), on a gen-
eral or targeted basis, to encourage refinancing. See "Prepayment and Yield
Considerations--Refinancings" in the Prospectus.
If you are purchasing Offered Certificates at a discount, or are purchasing
the Class A-12 Certificates, you should consider the risk that if principal
payments on the Mortgage Loans occur at a rate slower than you expected, your
yield may be lower than you expected.
If you are purchasing Offered Certificates at a premium, or are purchasing
the Class A-3 or Class A-18 Certificates, you should consider the risk that if
principal payments on the Mortgage Loans occur at a rate faster than you ex-
pected, your yield may be lower than you expected. IF YOU ARE PURCHASING CLASS
A-3 OR CLASS A-18 CERTIFICATES, YOU SHOULD CONSIDER THE RISK THAT A RAPID RATE
OF PRINCIPAL PAYMENTS ON THE MORTGAGE LOANS COULD RESULT IN YOUR FAILURE TO
RECOVER YOUR INITIAL INVESTMENT.
The particular sensitivities of the Class A-3, Class A-12 and Class A-18
Certificates are separately displayed in the tables appearing under the head-
ing "Prepayment and Yield Considerations" in this Prospectus Supplement.
See "Summary Information -- Effects of Prepayments on Investment Expecta-
tions" and "Prepayment and Yield Considerations" herein.
GEOGRAPHIC CONCENTRATION MAY INCREASE RISK OF LOSS BECAUSE OF ADVERSE ECONOMIC
CONDITIONS OR NATURAL DISASTERS
The yield to maturity on your Certificates may be affected by the geographic
concentration of the Mortgaged Properties securing the Mortgage Loans. Certain
geographic regions of the United States from time to time will experience
weaker regional economic conditions and housing markets and, consequently,
will experience higher rates of loss and delinquency on mortgage loans gener-
ally. Any concentration of the Mortgage Loans in such a region may present
risk considerations in addition to those generally present for similar mort-
gage-backed securities without such concentration. In addition, California,
Florida and several other regions have experienced natural disasters, includ-
ing earthquakes, fires, floods and hurricanes, which may adversely affect
property values.
S-13
<PAGE>
Any deterioration in housing prices in the states in which there is a signifi-
cant concentration of Mortgaged Properties, as well as the other states in
which the Mortgaged Properties are located, and any deterioration of economic
conditions in such states which adversely affects the ability of borrowers to
make payments on the Mortgage Loans may increase the likelihood of losses on
the Mortgage Loans. Such losses, if they occur, may have an adverse effect on
the yield to maturity of your Certificates, especially if they are subordi-
nated and particularly if they are Class B-3 Certificates. The states and geo-
graphic areas where there are large concentrations of Mortgaged Properties are
identified under "Description of the Mortgage Loans".
SUBORDINATION OF CLASS B CERTIFICATES INCREASES RISK OF LOSS
The rights of the holders of each Class of Class B Certificates to receive
distributions will be subordinated to such rights of the holders of the Class
A Certificates and the lower-numbered Classes of Class B Certificates, if any.
In addition, Realized Losses, other than Excess Losses, will be allocated to
the Class B Certificates in the reverse order in which they are entitled to
distributions of principal before being allocated to the Class A Certificates.
Accordingly, if you are purchasing Class B Certificates, you will be more
likely to experience losses as a result of the occurrence of losses or inter-
est shortfalls on the Mortgage Loans. See "Description of the Certificates --
Subordination of Class B Certificates."
RIGHTS OF BENEFICIAL OWNERS MAY BE LIMITED BY BOOK-ENTRY SYSTEM FOR CERTAIN
CLASSES OF CLASS A CERTIFICATES
Transactions in the Book-Entry Certificates generally can only be carried
out through DTC, DTC Participants and Indirect DTC Participants. If you are a
Beneficial Owner of Book Entry Certificates, your ability to pledge your Cer-
tificates, and the liquidity of your Certificates in general, may be limited
due to the fact that you will not have a physical certificate. In addition,
you may experience delays in receiving payments on your Certificates. See
"Risk Factors -- Book-Entry Certificates May Experience Decreased Liquidity
and Payment Delay" and "Description of the Certificates -- Book-Entry Form" in
the Prospectus.
CERTIFICATES MAY NOT BE APPROPRIATE FOR INDIVIDUAL INVESTORS
If you are an individual investor who does not have sufficient resources or
expertise to evaluate the particular characteristics of the applicable Class
of Offered Certificates, the Offered Certificates may not be an appropriate
investment for you. This may be the case because, among other things:
. If you purchase your Certificates at a price other than par, your yield
to maturity will be sensitive to the uncertain rate and timing of prin-
cipal prepayments on the Mortgage Loans;
. The rate of principal distributions on, and the weighted average life
of, the Offered Certificates will be sensitive to the uncertain rate and
timing of principal prepayments on the Mortgage Loans and the priority
of principal distributions among the Classes of Certificates, and as
such the Offered Certificates may be inappropriate investments for you
if you require a distribution of a particular amount of principal on a
specific date or an otherwise predictable stream of distributions;
. There can be no assurance that you will be able to reinvest amounts dis-
tributed in respect of principal on your Certificates (which, in gener-
al, are expected to be greater during periods of relatively low interest
rates) at a rate at least as high as the applicable Pass-Through Rate;
and
. There can be no assurance that a secondary market for the Offered Cer-
tificates will develop or provide you with liquidity of investment.
If you are an individual investor considering the purchase of an Offered
Certificate, you should also carefully consider the further risks and other
special considerations discussed above and under the headings "Summary Infor-
mation -- Effects of Prepayments on Investment Expectations" and "Prepayment
and Yield Considerations" herein and "Risk Factors -- Rate of Prepayment on
Mortgage Loans May Adversely Affect Average Lives and Yields on Certificates"
in the Prospectus.
RISKS ASSOCIATED WITH YEAR 2000 COMPLIANCE
The Seller is aware of the issues associated with the programming code in
existing computer systems as the millennium (year 2000) approaches. The "year
2000 problem" is pervasive and complex; virtually every computer operation
will be affected in some way by the rollover of the two digit year value to
00. The issue is whether computer systems will properly recognize date-sensi-
tive information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail.
S-14
<PAGE>
The Seller has been advised by the Master Servicer, Norwest Mortgage and the
Trustee that they are committed to either (i) implementing modifications to
their respective existing systems to the extent required to cause them to be
year 2000 compliant or (ii) acquiring computer systems that are year 2000 com-
pliant, in each case prior to January 1, 2000. The Seller has also been ad-
vised by the Master Servicer that the Master Servicer is engaged in the proc-
ess of ascertaining the efforts of the Other Servicers to achieve year 2000
compliance. However, neither the Seller nor any affiliate of the Seller has
made any independent investigation of the computer systems of the Trustee or
any of the Other Servicers. In the event that computer problems arise out of a
failure of such efforts to be completed on time, or in the event that the com-
puter systems of the Trustee, the Master Servicer, Norwest Mortgage or an
Other Servicer are not fully year 2000 compliant, the resulting disruptions
in the collection or distribution of receipts on the Mortgage Loans could ma-
terially adversely affect your Certificates.
See "Risk Factors" in the Prospectus for a description of certain other
risks and special considerations applicable to the Offered Certificates.
S-15
<PAGE>
DESCRIPTION OF THE CERTIFICATES
DENOMINATIONS; FORM OF CERTIFICATES
Offered Certificates issued in fully registered, certificated form are re-
ferred to herein as "DEFINITIVE CERTIFICATES." The Trustee or other paying
agent will make distributions of principal of, and interest on, the Definitive
Certificates directly to holders of Definitive Certificates in accordance with
the procedures set forth in the Pooling and Servicing Agreement. The Defini-
tive Certificates will be transferable and exchangeable at the offices of the
Trustee or other certificate registrar. No service charge will be imposed for
any registration of transfer or exchange, but the Trustee may require payment
of a sum sufficient to cover any tax or other governmental charge imposed in
connection therewith.
Offered Certificates, other than those initially issued as Definitive Cer-
tificates, will be issued in book-entry form and are referred to herein as
"BOOK-ENTRY CERTIFICATES." Each Class of the Book-Entry Certificates initially
will be represented by one physical certificate registered in the name of Cede
& Co. ("CEDE"), as nominee of The Depository Trust Company ("DTC"), which will
be the "HOLDER" or "CERTIFICATEHOLDER" of such Certificates, as such terms are
used herein. A person acquiring an interest in the Book-Entry Certificates (a
"BENEFICIAL OWNER") will not be entitled to receive a Definitive Certificate
representing such person's interest in the Book-Entry Certificates, except as
set forth under "Description of the Certificates -- Book-Entry Form" in the
Prospectus. Unless and until Definitive Certificates are issued under the lim-
ited circumstances described therein, all references to actions taken by
Certificateholders or holders shall, in the case of the Book-Entry Certifi-
cates, refer to actions taken by DTC upon instructions from its DTC Partici-
pants (as defined under "Description of the Certificates -- Book-Entry Form"
in the Prospectus), and all references herein to distributions, notices, re-
ports and statements to Certificateholders or holders shall, in the case of
the Book-Entry Certificates, refer to distributions, notices, reports and
statements to DTC or Cede, as the registered holder of the Book-Entry Certifi-
cates, as the case may be, for distribution to Beneficial Owners in accordance
with DTC procedures. See "Description of the Certificates -- Book-Entry Form"
in the Prospectus.
The following table sets forth the original certificate form, the minimum
denomination and the incremental denomination of the Offered Certificates. The
Offered Certificates are not intended to be directly or indirectly held or
beneficially owned in amounts lower than such minimum denominations.
FORM AND DENOMINATIONS OF OFFERED CERTIFICATES
<TABLE>
<CAPTION>
ORIGINAL CERTIFICATE MINIMUM INCREMENTAL
CLASS FORM DENOMINATION DENOMINATION
----- -------------------- ------------ ------------
<S> <C> <C> <C>
Classes A-1, A-2, A-4, A-5, A-6,
A-7, A-8, A-9, A-10, A-11, A-
13, A-14, A-15, A-16 and A-19
............................... $ $
Class A-3....................... $ $
Class A-12...................... $ $
Class A-17...................... $ $
Class A-18...................... $ $
Class A-20...................... $ $
Classes A-R and A-LR............ $ N/A
Classes B-1, B-2 and B-3........ $ $
</TABLE>
DISTRIBUTIONS
The Trustee or other paying agent will make distributions of interest and in
reduction of Principal Balance to holders of each Class of Certificates month-
ly, to the extent of each Class's entitlement thereto, on the 25th day of each
month or, if such day is not a business day, on the succeeding business day
(each, a "DISTRIBUTION DATE"), beginning in 199 . The "DETERMINATION DATE"
with respect to each Distribution Date will be the 17th day of each month or,
if such day is not a business day, the preceding business day. Distributions
will be made on each Distribution Date to holders of record (which, in the
case of the Book-Entry Certificates, will be Cede, as nominee for DTC) at the
close of business on the last business day of the preceding month (each, a
"RECORD DATE").
The aggregate amount available for distribution to Certificateholders on
each Distribution Date will be the Pool Distribution Amount. The "POOL DISTRI-
BUTION AMOUNT" for a Distribution Date will be the sum of:
S-16
<PAGE>
(i) all previously undistributed payments or other receipts on account of
principal (including principal prepayments and Liquidation Proceeds in re-
spect of principal, if any), and interest on or in respect of the Mortgage
Loans received by the Master Servicer, including without limitation any re-
lated insurance proceeds and the proceeds of any purchase of a related
Mortgage Loan for breach of a representation or warranty or the sale of a
Mortgaged Property by a Servicer in connection with the liquidation of the
related Mortgage Loan on or prior to the Remittance Date in the month in
which such Distribution Date occurs;
(ii) all Periodic Advances made; and
(iii) all other amounts (including any insurance proceeds and Compensat-
ing Interest) placed in the Certificate Account by any Servicer on or be-
fore the Remittance Date or by the Master Servicer on or before the Distri-
bution Date pursuant to the Pooling and Servicing Agreement, but excluding
the following:
(a) amounts received as late payments of principal or interest re-
specting which one or more unreimbursed Periodic Advances has been
made;
(b) to the extent permitted by the Pooling and Servicing Agreement,
that portion of Liquidation Proceeds with respect to a Mortgage Loan
that represents any unreimbursed Periodic Advances of such Servicer;
(c) those portions of each payment of interest on a particular Mort-
gage Loan which represent (i) the applicable Servicing Fee, (ii) the
Master Servicing Fee and (iii) the Fixed Retained Yield, if any;
(d) all amounts representing scheduled payments of principal and in-
terest due after the Due Date occurring in the month in which such Dis-
tribution Date occurs;
(e) all principal prepayments in full, all partial principal prepay-
ments, all proceeds of any Mortgage Loans or property acquired in re-
spect thereof, or liquidated pursuant to the Pooling and Servicing
Agreement, including Net Partial Liquidation Proceeds but excluding any
Net Foreclosure Profits (as defined under "Description of the Certifi-
cates" in the Prospectus), and other unscheduled receipts in respect of
principal of the Mortgage Loans other than proceeds of a repurchase of
a Mortgage Loan by the Seller or amounts deposited by the Seller in the
Certificate Account in connection with the substitution of a Mortgage
Loan (collectively, "UNSCHEDULED PRINCIPAL RECEIPTS") that were re-
ceived by each Servicer after the Unscheduled Principal Receipt Period
(as described under "Servicing of the Mortgage Loans --Unscheduled
Principal Receipts" below) relating to the Distribution Date for the
applicable type of Unscheduled Principal Receipt, and all related pay-
ments of interest on such amounts;
(f) all repurchase proceeds with respect to Mortgage Loans repur-
chased by the Seller on or following the Due Date in the month in which
such Distribution Date occurs and the excess of the unpaid principal
balance of any defective Mortgage Loan for which a Mortgage Loan was
substituted over the unpaid principal balance of such substituted Mort-
gage Loan on or following the Due Date in the month in which such Dis-
tribution Date occurs;
(g) to the extent permitted by the Pooling and Servicing Agreement,
that portion of Liquidation Proceeds or insurance proceeds with respect
to a Mortgage Loan or proceeds of any Mortgaged Property that becomes
owned by the Trust Estate which represents any unpaid Servicing Fee or
Master Servicing Fee to which such Servicer or the Master Servicer, re-
spectively, is entitled, or which represents unpaid Fixed Retained
Yield, and the portion of net Liquidation Proceeds used to reimburse
any unreimbursed Periodic Advances;
(h) all amounts representing certain expenses reimbursable to the
Master Servicer and other amounts permitted to be retained by the Mas-
ter Servicer or withdrawn by the Master Servicer from the Certificate
Account pursuant to the Pooling and Servicing Agreement;
(i) reinvestment earnings on payments received in respect of the
Mortgage Loans or on other amounts on deposit in the Certificate Ac-
count;
(j) Net Foreclosure Profits;
(k) Month End Interest; and
S-17
<PAGE>
(l) generally, the amount of any recoveries in respect of principal
which had previously been allocated as a loss to one or more Classes of
Certificates.
The "REMITTANCE DATE" with respect to any Distribution Date and (i) any
Mortgage Loan serviced by an Other Servicer will be the 18th day of each month
or, if any such day is not a business day, the preceding business day and (ii)
any Mortgage Loan serviced by Norwest Mortgage will, except as described below
under "Servicing of the Mortgage Loans -- Anticipated Changes in Servicing,"
be the 24th day of each month or, if any such day is not a business day, the
preceding business day.
"PARTIAL LIQUIDATION PROCEEDS" are Liquidation Proceeds received by a
Servicer on a Mortgage Loan prior to such Mortgage Loan becoming a Liquidated
Loan and "NET PARTIAL LIQUIDATION PROCEEDS" are Partial Liquidation Proceeds
less expenses incurred with respect to such liquidation.
Each Servicer is required to deposit in the Certificate Account by the Re-
mittance Date certain amounts in respect of the Mortgage Loans as set forth
herein under "Servicing of the Mortgage Loans -- Custodial Accounts." The Mas-
ter Servicer is required to remit to the Trustee on or before the Distribution
Date any payments constituting part of the Pool Distribution Amount that are
received by the Master Servicer or are required to be made with the Master
Servicer's own funds. Except as described below under "Description of the Cer-
tificates -- Periodic Advances," neither the Master Servicer nor the Trustee
is obligated to remit any amounts which a Servicer was required but failed to
deposit in the Certificate Account.
On each Distribution Date, the Pool Distribution Amount will be allocated
among the Classes of Certificates and distributed to the holders thereof of
record as of the related Record Date as follows (the "POOL DISTRIBUTION AMOUNT
ALLOCATION"):
first, to the Classes of Class A Certificates, pro rata, based on their re-
spective Interest Accrual Amounts, in an aggregate amount up to the sum of
their Interest Accrual Amounts with respect to such Distribution Date; pro-
vided that prior to the applicable Accretion Termination Date, an amount equal
to the amount that would otherwise be distributable in respect of interest to
each Class of Accrual Certificates pursuant to this provision will be distrib-
uted in reduction of the Principal Balances of certain Classes of Class A Cer-
tificates as set forth below under "-- Principal (Including Prepayments) --
Allocation of Amount to be Distributed on the Class A Certificates";
second, to the Classes of Class A Certificates, pro rata, based on their re-
spective unpaid Interest Shortfall Amounts, in an aggregate amount up to the
sum of their unpaid Interest Shortfall Amounts; provided that prior to the ap-
plicable Accretion Termination Date, an amount equal to the amount that would
otherwise be distributable as interest shortfalls to each Class of Accrual
Certificates pursuant to this provision will be distributed in reduction of
the Principal Balances of certain Classes of Class A Certificates as set forth
below under "-- Principal (Including Prepayments) -- Allocation of Amount to
be Distributed on the Class A Certificates";
third, concurrently, pro rata, to the Class A Certificates (other than the
Class A-PO Certificates), based on the Class A Non-PO Optimal Principal
Amount, and the Class A-PO Certificates, based on the Class A-PO Optimal Prin-
cipal Amount, (A) to the Classes of Class A Certificates (other than the Class
A-PO Certificates) in an aggregate amount up to the Class A Non-PO Optimal
Principal Amount, such distribution to be allocated among such Classes in ac-
cordance with the priorities set forth below under "-- Principal (Including
Prepayments) -- Allocation of Amount to be Distributed on the Class A Certifi-
cates" and (B) to the Class A-PO Certificates in an amount up to the Class A-
PO Optimal Principal Amount;
fourth, to the Class A-PO Certificates in an amount up to the Class A-PO De-
ferred Amount, but only from amounts otherwise distributable (without regard
to this priority) to the Class B Certificates, in inverse order of priority
pursuant to priority fifth clause (C) of this Pool Distribution Amount Alloca-
tion; and
fifth, sequentially, to the Class B-1, Class B-2, Class B-3, Class B-4,
Class B-5 and Class B-6 Certificates so that each such Class shall receive (A)
first, an amount up to its Interest Accrual Amount with respect to such Dis-
tribution Date, (B) then, an amount up to its previously unpaid Interest
Shortfall Amounts and (C) finally, an amount up to its Class B Optimal Princi-
pal Amount before any Classes of Class B Certificates with higher numerical
designations receive any payments in respect of interest or principal; provid-
ed, however, that the amount distributable pursuant to this priority fifth
clause (C) to any Classes of Class B Certificates will be
S-18
<PAGE>
reduced by the amount, if any, otherwise distributable as principal hereunder
used to pay the Class A-PO Deferred Amount in accordance with priority fourth.
The undivided percentage interest (the "PERCENTAGE INTEREST") represented by
any Offered Certificate of a Class in distributions to such Class will be
equal to the percentage obtained by dividing the initial principal balance of
such Certificate (or initial notional amount in the case of the Class A-3 and
Class A-18 Certificates) by the aggregate initial Principal Balance (or ini-
tial notional amount) of all Certificates of such Class.
INTEREST
The amount of interest that will accrue on each Class of Certificates, other
than the Class A-12 and Class A-PO Certificates, during each month, after tak-
ing into account any Non-Supported Interest Shortfalls and the interest por-
tion of certain losses allocated to such Class, is referred to herein as the
"INTEREST ACCRUAL AMOUNT" for such Class.
The Interest Accrual Amount for each Class of Certificates (other than the
Class A-12 and Class A-PO Certificates) will equal (a) the product of (i)
1/12th of the Pass-Through Rate for such Class and (ii) the outstanding Prin-
cipal Balance of such Class or, in the case of the Class A-3 and Class A-18
Certificates, the outstanding Class A-3 Notional Amount or Class A-18 Notional
Amount, as applicable, minus (b) the sum of (i) any Non-Supported Interest
Shortfall allocable to such Class, (ii) the interest portion of any Excess
Losses allocable to such Class and (iii) the interest portion of any Realized
Losses, other than the interest portion of any Excess Losses, allocable to
such Class on or after the Cross-Over Date. The pass-through rate for each
Class of Offered Certificates (other than the Class A-12 Certificates) (the
"PASS-THROUGH RATE"), is the percentage set forth on page S-4 of this Prospec-
tus Supplement.
The Class A-3 Certificates are interest-only certificates and have no Prin-
cipal Balance. The "CLASS A-3 NOTIONAL AMOUNT" with respect to each Distribu-
tion Date will be equal to approximately % of the Principal Balance of
the Class A-1 Certificates. Accordingly, any distributions in respect of prin-
cipal made to, or losses in respect of principal allocated in reduction of,
the Principal Balance of the Class A-1 Certificates will result in a propor-
tional reduction in the Class A-3 Notional Amount. See "-- Principal (Includ-
ing Prepayments)" and "-- Subordination of Class B Certificates -- Allocation
of Losses" herein. The Class A-3 Notional Amount with respect to the first
Distribution Date will be approximately $ .
The Class A-18 Certificates are interest-only certificates and have no Prin-
cipal Balance. The "CLASS A-18 NOTIONAL AMOUNT" with respect to each Distribu-
tion Date will be equal to the Principal Balance of the Class A-17 Certifi-
cates. Accordingly, any distributions in respect of principal made to, or
losses in respect of principal allocated in reduction of, the Principal Bal-
ance of the Class A-17 Certificates will result in a like reduction in the
Class A-18 Notional Amount. See "-- Principal (Including Prepayments)" and "--
Subordination of Class B Certificates -- Allocation of Losses" herein. The
Class A-18 Notional Amount with respect to the first Distribution Date will be
approximately $ .
No interest will accrue on the Class A-12 and Class A-PO Certificates.
The "PRINCIPAL BALANCE" of a Class of Class A Certificates (other than the
Class A-3, Class A-18 and Class A-PO Certificates) as of any Determination
Date will be the principal balance of such Class on the date of initial issu-
ance of the Class A Certificates plus, in the case of the Accrual Certifi-
cates, the applicable Accrual Distribution Amounts, as described under "--
Principal (Including Prepayments)" below, previously added to the Principal
Balance of the corresponding Class of Accrual Certificates, less (i) all
amounts previously distributed to holders of Certificates of such Class in re-
duction of the principal balance of such Class and (ii) such Class's pro rata
share of the principal portion of Excess Losses allocated through such Deter-
mination Date to the holders of Class A Certificates (other than the Class
A-PO Certificates) in the manner described herein under "-- Subordination of
Class B Certificates -- Allocation of Losses." After the Cross-Over Date, the
Principal Balance of a Class of Class A Certificates (other than the Class A-
3, Class A-18 and Class A-PO Certificates) may be subject to further reduction
in an amount equal to such Class's pro rata share of the difference, if any,
between (a) the Class A Non-PO Principal Balance as of such Determination Date
without regard to this provision and (b) the difference between (i) the Ad-
justed Pool Amount for the preceding Distribution Date and (ii) the Adjusted
Pool Amount (PO Portion) for the preceding Distribution Date. Any pro rata al-
location among the Classes of Class A Certificates (other than the Class A-PO
Certificates) described in this paragraph will be
S-19
<PAGE>
made among the Classes on the basis of their then-outstanding Principal Bal-
ances or, in the case of a Class of Accrual Certificates, their initial Prin-
cipal Balance, if lower.
The Class A-3 and Class A-18 Certificates will be interest-only Certificates
and will not have a Principal Balance.
The "PRINCIPAL BALANCE" of the Class A-PO Certificates as of any Determina-
tion Date will be the Principal Balance of such Class on the date of initial
issuance of the Class A Certificates less (i) all amounts previously distrib-
uted to the holders of the Class A-PO Certificates pursuant to priorities
third clause (B) and fourth of the Pool Distribution Amount Allocation and
(ii) the principal portion of Excess Losses allocated through such Determina-
tion Date to the Class A-PO Certificates in the manner described herein under
"-- Subordination of Class B Certificates -- Allocation of Losses." After the
Cross-Over Date, the Principal Balance of the Class A-PO Certificates will be
subject to further reduction in an amount equal to the excess, if any, of (a)
the Principal Balance of the Class A-PO Certificates as of such Determination
Date without regard to this provision over (b) the Adjusted Pool Amount (PO
Portion) for the preceding Distribution Date.
The "PRINCIPAL BALANCE" of a Class of Class B Certificates as of any Deter-
mination Date will be the lesser of (a) the principal balance of such Class on
the date of initial issuance of the Class B Certificates less (i) all amounts
previously distributed to holders of such Class in reduction of the principal
balance thereof and (ii) the principal portion of Excess Losses allocated
through such Determination Date to the holders of such Class in the manner de-
scribed under "-- Subordination of Class B Certificates -- Allocation of Loss-
es" and (b) the Adjusted Pool Amount as of the preceding Distribution Date
less the sum of (i) the Class A Principal Balance and (ii) the Principal Bal-
ances of the Classes of Class B Certificates with lower numerical designa-
tions, each as of such Determination Date.
The "CLASS A PRINCIPAL BALANCE" as of any Determination Date will be equal
to the sum of the Principal Balances of the Classes of Class A Certificates as
of such date.
The "CLASS A NON-PO PRINCIPAL BALANCE" as of any Determination Date will be
equal to the sum of the Principal Balances of the Classes of Class A Certifi-
cates (other than the Class A-PO Certificates) as of such date.
The "CLASS B PRINCIPAL BALANCE" as of any date will be equal to the sum of
the Principal Balances of the Classes of Class B Certificates as of such date.
The "AGGREGATE PRINCIPAL BALANCE" as of any date will be equal to the sum of
the Class A Principal Balance and the Class B Principal Balance as of such
date.
The "AGGREGATE NON-PO PRINCIPAL BALANCE" as of any date will be equal to the
sum of the Class A Non-PO Principal Balance and the Class B Principal Balance
as of such date.
With respect to any Distribution Date, the "ADJUSTED POOL AMOUNT" will equal
the aggregate unpaid principal balance of the Mortgage Loans as of the Cut-
Off-Date minus the sum of (i) all amounts in respect of principal received in
respect of the Mortgage Loans (including amounts received as Periodic Advanc-
es, principal prepayments and Liquidation Proceeds in respect of principal)
and distributed to holders of the Certificates on such Distribution Date and
all prior Distribution Dates and (ii) the principal portion of all Realized
Losses (other than Debt Service Reductions) incurred on the Mortgage Loans
from the Cut-Off Date through the end of the month preceding such Distribution
Date.
With respect to any Distribution Date, the "ADJUSTED POOL AMOUNT (PO POR-
TION)" will equal the sum as to each Mortgage Loan outstanding at the Cut-Off
Date of the product of (A) the PO Fraction for such Mortgage Loan and (B) the
principal balance of such Mortgage Loan as of the Cut-Off Date less the sum of
(i) all amounts in respect of principal received in respect of such Mortgage
Loan (including amounts received as Periodic Advances, principal prepayments
and Liquidation Proceeds in respect of principal) and distributed to holders
of the Certificates on such Distribution Date and all prior Distribution Dates
and (ii) the principal portion of any Realized Loss (other than a Debt Service
Reduction) incurred on such Mortgage Loan from the Cut-Off Date through the
end of the month preceding the month in which such Distribution Date occurs.
S-20
<PAGE>
The "NET MORTGAGE INTEREST RATE" on each Mortgage Loan will be equal to the
Mortgage Interest Rate on such Mortgage Loan as stated in the related mortgage
note minus the sum of (i) the Servicing Fee Rate, (ii) the Master Servicing
Fee Rate and (iii) the Fixed Retained Yield rate, if any, for such Mortgage
Loan. See "Servicing of the Mortgage Loans -- Fixed Retained Yield; Servicing
Compensation and Payment of Expenses" herein.
When mortgagors prepay principal, or when principal is recovered through
foreclosure sales or other liquidations of defaulted Mortgage Loans, or when
other Unscheduled Principal Receipts occur, a full month's interest for the
month of payment or recovery may not be paid or recovered, resulting in inter-
est shortfalls to the extent that such payment or recovery is not included in
the distribution to Certificateholders made in the month in which it is re-
ceived. Interest shortfalls resulting from principal prepayments in full made
by mortgagors ("PREPAYMENTS IN FULL") are referred to herein as "PREPAYMENT
INTEREST SHORTFALLS." The Master Servicer will be obligated, on or before each
Distribution Date, to pay to the Trustee for the benefit of
Certificateholders, from the Master Servicer's own funds (including amounts
otherwise payable to the Master Servicer in respect of such Distribution Date
as Master Servicing Fees) an amount (such amount, "COMPENSATING INTEREST")
equal to the lesser of (i) the aggregate Prepayment Interest Shortfall with
respect to such Distribution Date and (ii) the lesser of (X) the product of
(A) 1/12th of 0.20% and (B) the aggregate Scheduled Principal Balance of the
Mortgage Loans for such Distribution Date and (Y) the Available Master Servic-
ing Compensation for such Distribution Date.
The "AVAILABLE MASTER SERVICING COMPENSATION" for any Distribution Date will
be equal to the sum of (a) the Master Servicing Fee for such Distribution
Date, (b) interest earned through the business day preceding the applicable
Distribution Date on any Prepayments in Full remitted to the Master Servicer
and deposited in the Certificate Account (which amount of interest with re-
spect to Prepayments in Full on the Mortgage Loans serviced by Norwest Mort-
gage is expected to be zero unless the Remittance Date for such Mortgage Loans
changes as described below under "Servicing of the Mortgage Loans -- Antici-
pated Changes in Servicing") and (c) the aggregate amount of Month End Inter-
est remitted by the Servicers to the Master Servicer pursuant to the related
Underlying Servicing Agreements. With respect to the Mortgage Loans serviced
by Norwest Mortgage, "MONTH END INTEREST" for each Distribution Date will be
equal to the lesser of (i) the aggregate Prepayment Interest Shortfalls with
respect to the Mortgage Loans serviced by Norwest Mortgage and (ii) the prod-
uct of 1/12th of 0.20% and the aggregate scheduled principal balance (as de-
termined in the applicable Underlying Servicing Agreement) of the Mortgage
Loans serviced by Norwest Mortgage. With respect to the Mortgage Loans serv-
iced by each Other Servicer, "MONTH END INTEREST" for each Distribution Date
depends in part on whether such Other Servicer is required to remit to the
Master Servicer Prepayments in Full for deposit into the Certificate Account
daily on a specified business day following the receipt thereof. "MONTH END
INTEREST" for Other Servicers will generally equal the lesser of (a) (i) with
respect to Other Servicers required to remit Prepayments in Full on a daily
basis, the aggregate Curtailment Interest Shortfalls with respect to the Mort-
gage Loans serviced by such Other Servicer or (ii) with respect to Other
Servicers not required to remit Prepayments in Full on a daily basis, the sum
of the aggregate Prepayment Interest Shortfalls and aggregate Curtailment In-
terest Shortfalls with respect to the Mortgage Loans serviced by such Other
Servicer and (b) the sum of (X) for each Mortgage Loan serviced by such Other
Servicer, the product of 1/12th of the Servicing Fee Rate and the scheduled
principal balance (as determined in the applicable Underlying Servicing Agree-
ment) of such Mortgage Loan serviced by such Other Servicer and (Y) reinvest-
ment earnings on payments received in respect of the Mortgage Loans or on
other amounts on deposit in the related Servicer Custodial Account pursuant to
the related Underlying Servicing Agreement on such Distribution Date (other
than with respect to Mortgage Loans serviced by Merrill Lynch Credit Corp.).
As described below under "Servicing of the Mortgage Loans -- Anticipated
Changes in Servicing," a Servicer not currently remitting Prepayments in Full
on a daily basis may agree to begin to do so at some time in the future and,
in conjunction therewith, the amount of Month End Interest such Servicer is
required to remit may be decreased or such Servicer may be relieved of its ob-
ligation to remit any Month End Interest. If an Other Servicer that is not
currently remitting Prepayments in Full on a daily basis begins to do so, such
change may have an impact on the amount of Compensating Interest by increasing
the amount described in clause (b) of the definition of Available Master Ser-
vicing Compensation and decreasing the amount described in clause (c) of the
definition thereof. No assurance can be given as to the timing of any such
changes or that any such changes will occur.
S-21
<PAGE>
As to any Distribution Date, Prepayment Interest Shortfalls to the extent
that they exceed Compensating Interest are referred to herein as "NON-SUP-
PORTED INTEREST SHORTFALLS" and will be allocated to (i) the Class A Certifi-
cates according to the percentage obtained by dividing the then-outstanding
Class A Non-PO Principal Balance by the Aggregate Non-PO Principal Balance and
(ii) the Class B Certificates according to the percentage obtained by dividing
the then-outstanding Class B Principal Balance by the Aggregate Non-PO Princi-
pal Balance. Such allocation of Non-Supported Interest Shortfalls will reduce
the amount of interest due to be distributed to holders of Certificates then
entitled to distributions in respect of interest. Any such reduction in re-
spect of interest allocated to the Class A Certificates will be allocated
among the Classes of Class A Certificates, pro rata, on the basis of their re-
spective Interest Accrual Amounts, without regard to any reduction pursuant to
this paragraph, for such Distribution Date. Any such reduction in respect of
interest allocated to the Class B Certificates will be allocated among such
Classes of Class B Certificates, pro rata, on the basis of their respective
Interest Accrual Amounts, without regard to any reduction pursuant to this
paragraph, for such Distribution Date.
Any interest shortfalls arising from Unscheduled Principal Receipts in full
that are not Prepayments in Full and any interest shortfalls resulting from
the timing of the receipt of partial principal prepayments by mortgagors
("CURTAILMENT INTEREST SHORTFALLS") or of other partial Unscheduled Principal
Receipts with respect to the Mortgage Loans will not be offset by Compensating
Interest, but instead will be borne first by the Classes of Class B Certifi-
cates in reverse numerical order and then pro rata by the Class A Certificates
based on interest accrued. See "-- Subordination of Class B Certificates"
herein. After the Cross-Over Date all interest shortfalls arising from
Unscheduled Principal Receipts, other than Prepayment Interest Shortfalls cov-
ered by Compensating Interest, will be treated as Non-Supported Interest
Shortfalls and allocated in reduction of interest accrued on the Class A Cer-
tificates.
The interest portion of any Excess Losses will be allocated among the Clas-
ses of Certificates, pro rata, based on their respective Interest Accrual
Amounts, without regard to any reduction pursuant to this paragraph, for such
Distribution Date.
Allocations of the interest portion of Realized Losses (other than Excess
Losses) first to the Classes of Class B Certificates in reverse numerical or-
der will result from the priority of distribution first to the holders of the
Class A Certificates and then to the holders of the Classes of Class B Certif-
icates in numerical order of the Pool Distribution Amount as described above
under "-- Distributions."
On each Distribution Date on which the amount available to be distributed in
respect of interest on a Class of Certificates pursuant to the Pool Distribu-
tion Amount Allocation is less than such Class's Interest Accrual Amount, the
amount of any such deficiency (as to each Class, an "INTEREST SHORTFALL
AMOUNT") will be added to the amount of interest distributable on such Class
on subsequent Distribution Dates, but only for so long as such Class's Princi-
pal Balance is greater than zero. No interest will accrue on any Interest
Shortfall Amounts.
Prior to the applicable Accretion Termination Date, interest in an amount
equal to the Interest Accrual Amount for a Class of Accrual Certificates will
accrue on such Class, but such amount will not be distributed as interest to
such Class until such Accretion Termination Date. Prior to such time, an
amount equal to the accrued and unpaid interest on such Class will be added to
the Principal Balance thereof and distributed as described under "-- Principal
(Including Prepayments) -- Allocation of Amount to be Distributed on the Class
A Certificates" below. The "ACCRETION TERMINATION DATE" (A) for the Class A-6
Certificates will be the earlier to occur of (i) the Distribution Date follow-
ing the Distribution Date on which the Principal Balances of the Class A-4 and
Class A-5 Certificates have been reduced to zero or (ii) the Cross-Over Date;
(B) for the Class A-7 Certificates will be the earlier to occur of (i) the
Distribution Date following the Distribution Date on which the Principal Bal-
ances of the Class A-4, Class A-5 and Class A-6 Certificates have been reduced
to zero or (ii) the Cross-Over Date, (C) for the Class A-9 Certificates will
be the earlier to occur of (i) the Distribution Date following the Distribu-
tion Date on which Principal Balance of the Class A-8 Certificates has been
reduced to zero or (ii) the Cross-Over Date, (D) for the Class A-10 Certifi-
cates will be the earlier to occur of (i) the Distribution Date following the
Distribution Date on which the Principal Balances of the Class A-8 and Class
A-9 Certificates have been reduced to zero or (ii) the Cross-Over Date; (E)
for the Class A-11 Certificates will be the earlier to occur of (i) the Dis-
tribution Date following the Distribution Date on which the Principal Balances
of the Class A-8 and Class A-10 Certificates have been reduced to zero or (ii)
the Cross-Over Date and (F) for the Class A-16 Certificates will be the ear-
lier to occur of (i) the Distribution Date following the Distribu-
S-22
<PAGE>
tion Date on which Principal Balances of the Class A-13, Class A-14 and Class
A-15 Certificates have been reduced to zero or (ii) the Cross-Over Date.
PRINCIPAL (INCLUDING PREPAYMENTS)
The principal balance of a Certificate at any time is equal to the product
of the related Class's Principal Balance and such Certificate's Percentage In-
terest, and represents the maximum specified dollar amount (exclusive of (i)
any interest that may accrue on such Certificate (other than interest added to
the Principal Balances of the Accrual Certificates), and (ii) in the case of
the Class A-R and Class A-LR Certificates, any additional amounts to which the
holder of such Certificate may be entitled as described below under "-- Addi-
tional Rights of the Class A-R and Class A-LR Certificateholders") to which
the holder thereof is entitled from the cash flow on the Mortgage Loans at
such time, and will decline to the extent of distributions in reduction of the
principal balance of, and allocations of losses to, such Certificate. The ap-
proximate initial Principal Balance of each Class of Offered Certificates
(other than the Class A-3 and Class A-18 Certificates) is set forth on page S-
4 of this Prospectus Supplement. The Class A-3 and Class A-18 Certificates
will have no Principal Balance. The initial Principal Balance of the Class A-
PO Certificates, which are not offered hereby, will be approximately $ .
Calculation of Amount to be Distributed on the Certificates
Distributions in reduction of the Principal Balance of the Class A Certifi-
cates (other than the Class A-PO Certificates) will be made on each Distribu-
tion Date pursuant to the Pool Distribution Amount Allocation, in an aggregate
amount equal to the Class A Non-PO Principal Distribution Amount. The "CLASS A
NON-PO PRINCIPAL DISTRIBUTION AMOUNT" with respect to any Distribution Date
will be equal to the sum of (i) the sum of the Accrual Distribution Amounts,
if any, with respect to such Distribution Date and (ii) the Class A Non-PO
Principal Amount with respect to such Distribution Date.
The "ACCRUAL DISTRIBUTION AMOUNT" with respect to any Distribution Date and
any Class of Accrual Certificates will be equal to the sum of (i) the portion,
if any, of current interest allocated but not distributed with respect to such
Class of Accrual Certificates on such Distribution Date in accordance with
priority first of the Pool Distribution Amount Allocation and (ii) the por-
tion, if any, of the unpaid Interest Shortfall Amount allocated but not dis-
tributed with respect to such Class of Accrual Certificates on such Distribu-
tion Date in accordance with priority second of the Pool Distribution Amount
Allocation.
The "CLASS A NON-PO PRINCIPAL AMOUNT" with respect to any Distribution Date
will be equal to the amount distributed pursuant to priority third clause (A)
of the Pool Distribution Amount Allocation, in an aggregate amount up to the
Class A Non-PO Optimal Principal Amount.
Distributions in reduction of the Principal Balance of the Class A-PO Cer-
tificates will be made on each Distribution Date in an aggregate amount equal
to the Class A-PO Distribution Amount. The "CLASS A-PO DISTRIBUTION AMOUNT"
with respect to any Distribution Date will be equal to the sum of (i) the
amount distributed pursuant to priority third clause (B) of the Pool Distribu-
tion Amount Allocation, in an aggregate amount up to the Class A-PO Optimal
Principal Amount and (ii) the amount distributed pursuant to priority fourth
of the Pool Distribution Amount Allocation, in an aggregate amount up to the
Class A-PO Deferred Amount.
Distributions in reduction of the Principal Balances of the Class B-1, Class
B-2 and Class B-3 Certificates will be made on each Distribution Date first to
the Class B-1 Certificates, second to the Class B-2 Certificates and then to
the Class B-3 Certificates, pursuant to priority fifth clause (C) of the Pool
Distribution Amount Allocation, in an aggregate amount with respect to each
such Class (the "CLASS B-1 PRINCIPAL DISTRIBUTION AMOUNT," "CLASS B-2 PRINCI-
PAL DISTRIBUTION AMOUNT" and "CLASS B-3 PRINCIPAL DISTRIBUTION AMOUNT," re-
spectively) up to the Class B Optimal Principal Amount for such Class.
The "CLASS A NON-PO OPTIMAL PRINCIPAL AMOUNT", the "CLASS B OPTIMAL PRINCI-
PAL AMOUNT" for each Class of Class B Certificates and the "CLASS A-PO OPTIMAL
PRINCIPAL AMOUNT" with respect to each Distribution Date will be an amount
equal to the sum for each outstanding Mortgage Loan (including each defaulted
Mortgage Loan, other than a Liquidated Loan, with respect to which the related
Mortgaged Property has been acquired by the Trust Estate) of the product of:
S-23
<PAGE>
(A) (i) in the case of the Class A Non-PO Optimal Principal Amount and
the Class B Optimal Principal Amount, the Non-PO Fraction for such Mortgage
Loan and (ii) in the case of the Class A-PO Optimal Principal Amount, the
PO Fraction for such Mortgage Loan; and
(B) the sum of:
(i) the applicable Class Percentage of (x) the scheduled payment of
principal due on such Mortgage Loan on the first day of the month in
which the Distribution Date occurs, less (y) if the Bankruptcy Loss
Amount is zero, the principal portion of Debt Service Reductions with
respect to such Mortgage Loan;
(ii) the applicable Class Prepayment Percentage of all Unscheduled
Principal Receipts that were received by a Servicer with respect to
such Mortgage Loan during the Unscheduled Principal Receipt Period re-
lating to such Distribution Date for each applicable type of
Unscheduled Principal Receipt;
(iii) the applicable Class Prepayment Percentage of the Scheduled
Principal Balance of such Mortgage Loan which, during the month preced-
ing the month of such Distribution Date was repurchased by the Seller,
as described under the heading "Description of the Mortgage Loans --
Mandatory Repurchase or Substitution of Mortgage Loans" herein; and
(iv) the applicable Class Percentage of the excess of the unpaid
principal balance of any defective Mortgage Loan for which a Mortgage
Loan was substituted during the month preceding the month in which such
Distribution Date occurs over the unpaid principal balance of such sub-
stituted Mortgage Loan, less the amount allocable to the principal por-
tion of any unreimbursed advances in respect of such defective Mortgage
Loan. See "The Pooling and Servicing Agreement -- Assignment of the
Mortgage Loans to the Trustee" in the Prospectus.
The "CLASS PERCENTAGE" will equal (i) the Class A Percentage, in the case of
the calculation of the Class A Non-PO Optimal Principal Amount; (ii) the ap-
plicable Class B Percentage, in the case of the calculation of the Class B Op-
timal Principal Amount for a Class of Class B Certificates; and (iii) 100% in
the case of the calculation of the Class A-PO Optimal Principal Amount.
The "CLASS PREPAYMENT PERCENTAGE" will equal (i) the Class A Prepayment Per-
centage, in the case of the calculation of the Class A Non-PO Optimal Princi-
pal Amount; (ii) the applicable Class B Prepayment Percentage, in the case of
the calculation of the Class B Optimal Principal Amount for a Class of Class B
Certificates; and (iii) 100% in the case of the calculation of the Class A-PO
Optimal Principal Amount.
The "CLASS A-PO DEFERRED AMOUNT" for any Distribution Date prior to the
Cross-Over Date will equal the difference between (A) the sum of (i) the
amount by which the Class A-PO Optimal Principal Amount for all prior Distri-
bution Dates exceeds the amounts distributed to the Class A-PO Certificates on
such prior Distribution Dates pursuant to priority third, clause (B) of the
Pool Distribution Amount Allocation, but only to the extent such shortfall is
not attributable to Realized Losses allocated to the Class A-PO Certificates
as described in "-- Subordination of Class B Certificates -- Allocation of
Losses" below and (ii) the sum of the product for each Discount Mortgage Loan
which became a Liquidated Loan at any time on or prior to the last day of the
applicable Unscheduled Principal Receipt Period for the current Distribution
Date of (a) the PO Fraction for such Discount Mortgage Loan and (b) an amount
equal to the principal portion of Realized Losses (other than Bankruptcy
Losses due to Debt Service Reductions) incurred with respect to such Discount
Mortgage Loan other than Excess Losses and (B) amounts distributed on the
Class A-PO Certificates on prior Distribution Dates pursuant to priority
fourth of the Pool Distribution Amount Allocation. On or after the Cross-Over
Date, the Class A-PO Deferred Amount will be zero. No interest will accrue on
any Class A-PO Deferred Amount.
The principal distribution to the holders of a Class of Class B Certificates
will be reduced on any Distribution Date on which (i) the Principal Balance of
such Class of Class B Certificates on the following Determination Date would
be reduced to zero as a result of principal distributions or allocation of
losses and (ii) the Principal Balance of any Class A Certificates or any Class
of Class B Certificates with a lower numerical designation, would be subject
to reduction on such Determination Date as a result of allocation of Realized
Losses (other than Excess Losses). The amount of any such reduction in the
principal distributed to the holders of such Class of Class B Certificates
will instead be distributed pro rata to the holders of any Class (other than
the Class A-PO Certificates) senior in priority to receive distributions in
accordance with the Pool Distribution Amount Allocation.
S-24
<PAGE>
Generally, in the event that there is any recovery of an amount in respect
of principal which had previously been allocated as a Realized Loss to any
Class of Certificates, such Class will be entitled to its pro rata share of
such recovery in an amount up to the amount by which the Principal Balance of
such Class was reduced as a result of such Realized Loss.
The "SCHEDULED PRINCIPAL BALANCE" of a Mortgage Loan as of any Distribution
Date is the unpaid principal balance of such Mortgage Loan as specified in the
amortization schedule at the time relating thereto (before any adjustment to
such schedule by reason of bankruptcy (other than Deficient Valuations), mora-
torium or similar waiver or grace period) as of the Due Date occurring in the
month preceding the month in which such Distribution Date occurs, after giving
effect to any principal prepayments or other unscheduled recoveries of princi-
pal previously received, to any partial principal prepayments and Deficient
Valuations occurring prior to such Due Date, to the payment of principal due
on such Due Date irrespective of any delinquency in payment by the mortgagor
and to any Unscheduled Principal Receipts received or applied during the ap-
plicable Unscheduled Principal Receipt Period for the Distribution Date in the
month preceding the month in which such Distribution Date occurs.
A "REALIZED LOSS" is any Liquidated Loan Loss (including any Special Hazard
Loss and any Fraud Loss) or any Bankruptcy Loss. A "LIQUIDATED LOAN" is a de-
faulted Mortgage Loan as to which the Servicer has determined that all recov-
erable liquidation and insurance proceeds have been received. A "LIQUIDATED
LOAN LOSS" on a Liquidated Loan is equal to the excess, if any, of (i) the un-
paid principal balance of such Liquidated Loan, plus accrued interest thereon
at the Net Mortgage Interest Rate through the last day of the month in which
such Mortgage Loan was liquidated, over (ii) net Liquidation Proceeds. For
purposes of calculating the amount of any Liquidated Loan Loss, all net Liqui-
dation Proceeds (after reimbursement of any previously unreimbursed Periodic
Advance) will be applied first to accrued interest and then to the unpaid
principal balance of the Liquidated Loan. A "SPECIAL HAZARD LOSS" is (A) a
Liquidated Loan Loss suffered by a Mortgaged Property on account of direct
physical loss exclusive of (i) any loss covered by a standard hazard insurance
policy or, if the Mortgaged Property is located in an area identified in the
Federal Register by the Federal Emergency Management Agency as having special
flood hazards, a flood insurance policy, of the types described in the Pro-
spectus under "Servicing of the Mortgage Loans -- Insurance Policies" and (ii)
any loss caused by or resulting from (a) normal wear and tear, (b) dishonest
acts of the Trustee, the Master Servicer or the Servicer or (c) errors in de-
sign, faulty workmanship or faulty materials, unless the collapse of the prop-
erty or a part thereof ensues or (B) a Liquidated Loan Loss arising from or
relating to the presence or suspected presence of hazardous wastes or sub-
stances on a Mortgaged Property. A "FRAUD LOSS" is a Liquidated Loan Loss in-
curred on a Liquidated Loan as to which there was fraud in the origination of
such Mortgage Loan. A "BANKRUPTCY LOSS" is a Debt Service Reduction or a Defi-
cient Valuation. A "DEBT SERVICE REDUCTION" means a reduction in the amount of
monthly payments due to certain bankruptcy proceedings, but does not include
any permanent forgiveness of principal. A "DEFICIENT VALUATION" with respect
to a Mortgage Loan means a valuation by a court of the Mortgaged Property in
an amount less than the outstanding indebtedness under the Mortgage Loan or
any reduction in the amount of monthly payments that results in a permanent
forgiveness of principal, which valuation or reduction results from a bank-
ruptcy proceeding.
The "NON-PO FRACTION" with respect to any Mortgage Loan will equal the Net
Mortgage Interest Rate for such Mortgage Loan divided by %, but will not be
greater than 1.0.
The "POOL BALANCE (NON-PO PORTION)" is the sum for each outstanding Mortgage
Loan of the product of (i) the Non-PO Fraction for such Mortgage Loan and (ii)
the Scheduled Principal Balance of such Mortgage Loan as of such Distribution
Date.
The "PO FRACTION" with respect to any Mortgage Loan with a Net Mortgage In-
terest Rate less than % (a "DISCOUNT MORTGAGE LOAN") will equal the differ-
ence between 1.0 and the Non-PO Fraction for such Mortgage Loan. The PO Frac-
tion with respect to each Mortgage Loan that is not a Discount Mortgage Loan
(a "PREMIUM MORTGAGE LOAN") will be zero.
The "POOL BALANCE (PO PORTION)" is the sum for each Discount Mortgage Loan
of the product of the Scheduled Principal Balance of such Discount Mortgage
Loan and the PO Fraction for such Discount Mortgage Loan.
S-25
<PAGE>
The "CLASS A PERCENTAGE" for any Distribution Date occurring on or prior to
the Cross-Over Date is the percentage (subject to rounding), which in no event
will exceed 100%, obtained by dividing the Class A Non-PO Principal Balance as
of such date (before taking into account distributions in reduction of princi-
pal balance on such date) by the Pool Balance (Non-PO Portion). The Class A
Percentage for the first Distribution Date will be approximately %. The Class
A Percentage for each Distribution Date occurring after the Cross-Over Date
will be 100%.
The "CLASS A PREPAYMENT PERCENTAGE" for any Distribution Date will be the
percentage indicated below:
<TABLE>
<CAPTION>
DISTRIBUTION DATE OCCURRING IN CLASS A PREPAYMENT PERCENTAGE
- ------------------------------ ---------------------------------
<S> <C>
through ............................ 100%;
through ............................ the Class A Percentage, plus 70%
of the Subordinated Percentage;
through ............................ the Class A Percentage, plus 60%
of the Subordinated Percentage;
through ............................ the Class A Percentage, plus 40%
of the Subordinated Percentage;
through ............................ the Class A Percentage, plus 20%
of the Subordinated Percentage;
and
and thereafter........................... the Class A Percentage;
</TABLE>
provided, however, that if on any of the foregoing Distribution Dates the
Class A Percentage exceeds the initial Class A Percentage, the Class A Prepay-
ment Percentage for such Distribution Date will once again equal 100%. See
"Prepayment and Yield Considerations" herein and in the Prospectus. Notwith-
standing the foregoing, no reduction of the Class A Prepayment Percentage will
occur on any Distribution Date if (i) as of such Distribution Date as to which
any such reduction applies, the average outstanding principal balance on such
Distribution Date and for the preceding five Distribution Dates on the Mort-
gage Loans that were delinquent 60 days or more (including for this purpose
any Mortgage Loans in foreclosure and Mortgage Loans with respect to which the
related Mortgaged Property has been acquired by the Trust Estate) is greater
than or equal to 50% of the then-outstanding Class B Principal Balance, or
(ii) for any Distribution Date, cumulative Realized Losses with respect to the
Mortgage Loans exceed the percentages of the principal balance of the Subordi-
nated Certificates as of the Cut-Off Date (the "ORIGINAL SUBORDINATED PRINCI-
PAL BALANCE") indicated below:
<TABLE>
<CAPTION>
PERCENTAGE OF
ORIGINAL SUBORDINATED
DISTRIBUTION DATE OCCURRING IN PRINCIPAL BALANCE
- ------------------------------ ---------------------
<S> <C>
through ....................................... 30%
through ....................................... 35%
through ....................................... 40%
through ....................................... 45%
and thereafter...................................... 50%
</TABLE>
This disproportionate allocation of certain unscheduled payments in respect
of principal will have the effect of accelerating the amortization of the
Class A Certificates (other than the Class A-PO Certificates) while, in the
absence of Realized Losses, increasing the interest in the principal balance
of the Mortgage Loans evidenced by the Class B Certificates. Increasing the
respective interest of the Class B Certificates relative to that of the Class
A Certificates (other than the Class A-PO Certificates) is intended to pre-
serve the availability of the subordination provided by the Class B Certifi-
cates. See "-- Subordination of Class B Certificates" below. The "SUBORDINATED
PERCENTAGE" for any Distribution Date will be calculated as the difference be-
tween 100% and the Class A Percentage for such date. The "SUBORDINATED PREPAY-
MENT PERCENTAGE" for any Distribution Date will be calculated as the differ-
ence between 100% and the Class A Prepayment Percentage for such date.
The "CLASS B PERCENTAGE" and "CLASS B PREPAYMENT PERCENTAGE" for a Class of
Class B Certificates will equal the portion of the Subordinated Percentage and
Subordinated Prepayment Percentage, as the case may be, represented by the
fraction, the numerator of which is the then-outstanding Principal Balance for
such Class of Class B Certificates and the denominator of which is the sum of
the Principal Balances of the Classes of Class B Certificates entitled to
principal distributions for such Distribution Date as described below. In the
event that a
S-26
<PAGE>
Class of Class B Certificates is not entitled to principal distributions for
such Distribution Date, the Class B Percentage and Class B Prepayment Percent-
age for such Class will both be 0% with respect to such Distribution Date.
In the event that on any Distribution Date the Current Fractional Interest
of any Class of Class B Certificates is less than the Original Fractional In-
terest of such Class, then the Classes of Certificates that are subordinate to
such Class will not be entitled to distributions in respect of principal and
the Principal Balances of such subordinated Classes will not be used to deter-
mine the Class B Percentage and Class B Prepayment Percentage of the Classes
of Class B Certificates that are senior to such subordinated Classes for such
Distribution Date. The Class B-6 Certificates will not have original or cur-
rent fractional interests which are required to be maintained as described
above.
The "ORIGINAL FRACTIONAL INTEREST" of a Class of Class B Certificates is the
percentage obtained by dividing the sum of the initial Principal Balances of
the Classes of Certificates that are subordinate to such Class by the initial
Aggregate Non-PO Principal Balance. The "CURRENT FRACTIONAL INTEREST" of a
Class of Class B Certificates for any Distribution Date is the percentage ob-
tained by dividing the sum of the then-outstanding Principal Balances of the
Classes of Certificates that are subordinate to such Class by the then-
outstanding Aggregate Non-PO Principal Balance.
The following table sets forth the expected approximate Original Fractional
Interest for each Class of Class B Certificates on the date of issuance of the
Certificates.
<TABLE>
<CAPTION>
APPROXIMATE
ORIGINAL
FRACTIONAL
CLASS INTEREST
----- -----------
<S> <C>
B-1.............................................................. %
B-2.............................................................. %
B-3.............................................................. %
B-4.............................................................. %
B-5.............................................................. %
B-6.............................................................. N/A
</TABLE>
Allocation of Amount to be Distributed on the Class A Certificates
The Class A-3 and Class A-18 Certificates are interest-only Certificates and
are not entitled to distributions in respect of principal.
On each Distribution Date occurring prior to the Cross-Over Date, the Class
A Non-PO Principal Distribution Amount will be allocated among and distributed
in reduction of the Principal Balances of the Class A Certificates (other than
the Class A-PO Certificates) in accordance with the following priorities.
[INSERT PAYMENT PRIORITIES]
The "PAC PRINCIPAL AMOUNT" for any Distribution Date and for any Class of
PAC Certificates means the amount, if any, that would reduce the Principal
Balance of such Class to the percentage of its initial Principal Balance shown
in the tables set forth below with respect to such Distribution Date.
Notwithstanding the foregoing, on each Distribution Date occurring on or af-
ter the Cross-Over Date, the Class A Non-PO Principal Distribution Amount will
be distributed among the Classes of Class A Certificates (other than the Class
A-PO Certificates) pro rata in accordance with their respective outstanding
Principal Balances without regard to the priorities set forth above.
Any amounts distributed on a Distribution Date to the holders of any Class
in reduction of Principal Balance will be allocated among the holders of such
Class pro rata in accordance with their respective Percentage Interests.
The following tables set forth for each Distribution Date the planned Prin-
cipal Balances for the PAC Certificates, expressed as a percentage of the ini-
tial Principal Balance of such Class.
S-27
<PAGE>
PLANNED PRINCIPAL BALANCES AS PERCENTAGE
OF THE INITIAL PRINCIPAL BALANCE
CLASS A-1 CERTIFICATES
PERCENTAGE OF
INITIAL
DISTRIBUTION DATE PRINCIPAL BALANCE
- ----------------- -----------------
CLASS A-2 CERTIFICATES
PERCENTAGE OF
INITIAL
DISTRIBUTION DATE PRINCIPAL BALANCE
- ----------------- -----------------
S-28
<PAGE>
Principal Payment Characteristics of the PAC Certificates and the Companion
Certificates
The percentages of the initial Principal Balances of the PAC Certificates
set forth in the preceding tables were calculated using the Structuring As-
sumptions. Based on such assumptions, the Principal Balance of each Class of
PAC Certificates would be reduced to the percentage of its initial Principal
Balance indicated in the preceding table for each Distribution Date if prepay-
ments on the Mortgage Loans occur at any constant rate between approximately
% SPA (as defined herein under "Prepayment and Yield Considerations") and
approximately % SPA. However, it is highly unlikely that principal prepay-
ments on the Mortgage Loans will occur at any constant rate or that the Mort-
gage Loans will prepay at the same rate. In addition, even if principal pre-
payments were to occur at a constant rate, there may be differences between
the characteristics of the mortgage loans ultimately included in the Trust Es-
tate and the Mortgage Loans which are expected to be included as described
herein. Therefore, there can be no assurance that the Principal Balances of
the PAC Certificates, after the application of the distributions to be made on
any Distribution Date, will be equal to the applicable percentage of the ini-
tial Principal Balances for such Distribution Date specified in the tables
above.
The weighted average lives of the Classes of PAC Certificates will vary un-
der different prepayment scenarios. To the extent that principal prepayments
occur at a constant rate that is slower than approximately % SPA, the Class A
Non-PO Principal Amount on each Distribution Date may be insufficient to make
distributions in reduction of the Principal Balances of the PAC Certificates
in amounts that would reduce their Principal Balances to their planned Princi-
pal Balances for such Distribution Date. The weighted average lives of the
Classes of PAC Certificates may therefore be extended, as illustrated for the
PAC Certificates by the tables on page S-46. To the extent that such principal
prepayments occur at a constant rate that is faster than approximately % SPA,
the weighted average lives of the PAC Certificates may be shortened as illus-
trated for the PAC Certificates by the tables on page S-46.
Because any Excess Principal Payments (as defined below) for any Distribu-
tion Date will be distributed to Certificateholders on such Distribution Date,
the ability to distribute the PAC Principal Amounts on any Distribution Date
will not be enhanced by the averaging of high and low principal prepayment
rates on the Mortgage Loans over several Distribution Dates, as might be the
case if any such Excess Principal Payments were held for future applications
and not distributed monthly. There is no assurance that, with respect to the
Class A Non-PO Principal Amount distributions in reduction of the Principal
Balance of a Class of PAC Certificates (i) will not commence significantly
earlier than the first Distribution Date shown in the preceding table relating
to such Class, (ii) will not commence significantly later than the first Dis-
tribution Date shown in the preceding table relating to such Class or (iii)
will not be reduced to zero significantly earlier or significantly later than
the last Distribution Date shown in the preceding tables.
The extent to which the planned principal balances of the PAC Certificates
will be achieved and the sensitivity of the PAC Certificates to principal pre-
payments on the Mortgage Loans will depend, in part, upon the period of time
during which the Companion Certificates remain outstanding. On each Distribu-
tion Date, the excess of the portion of the Class A Non-PO Principal Amount
available to make distributions of principal to the PAC Certificates over the
PAC Principal Amounts (the "EXCESS PRINCIPAL PAYMENTS") for such Distribution
Date will be distributed to the Companion Certificates before being distrib-
uted to the PAC Certificates in accordance with the priorities set forth above
under "-- Allocation of Amount to be Distributed on the Class A Certificates."
This is intended to decrease the likelihood that the PAC Certificates will be
reduced below their planned Principal Balances on a given Distribution Date.
As such, and in accordance with the priorities described above, the Companion
Certificates support the PAC Certificates. However, under certain relatively
fast prepayment scenarios, one or more Classes of the PAC Certificates may
continue to be outstanding when the Companion Certificates are no longer out-
standing. Under such circumstances, all Excess Principal Payments will be ap-
plied to the PAC Certificates then outstanding in accordance with the priori-
ties described herein. Thus, when the Principal Balances of the Companion Cer-
tificates have been reduced to zero, the PAC Certificates if outstanding will,
in accordance with the priorities set forth above, become more sensitive to
the rate of prepayment on the Mortgage Loans as such Classes will receive all
Excess Principal Payments until the principal balances of the PAC Certificates
have been reduced to zero. Conversely, under certain relatively slow prepay-
ment scenarios, the portion of the Class A Non-PO Principal Amount available
to make distributions of principal to the PAC Certificates may not be suffi-
cient to pay the PAC Principal Amounts for the PAC Certificates on a given
Distribution Date. In such cases, the portion of the Class A Non-PO Principal
Amount available to make
S-29
<PAGE>
distributions of principal to the PAC Certificates for each subsequent Distri-
bution Date will be applied in accordance with the priorities described herein
such that the Companion Certificates will not receive any distributions in re-
duction of their principal balances from the Class A Non-PO Principal Amount
until the outstanding principal balances of the PAC Certificates have reached
their planned principal balances for such Distribution Date. As a result, the
weighted average lives of the Classes of PAC Certificates, if they do not re-
ceive their PAC Principal Amounts on a Distribution Date, may be extended.
THE WEIGHTED AVERAGE LIVES OF THE COMPANION CERTIFICATES WILL BE HIGHLY SEN-
SITIVE TO THE RATE OF PREPAYMENTS ON THE MORTGAGE LOANS. See "Prepayment and
Yield Considerations" herein.
ADDITIONAL RIGHTS OF THE CLASS A-R AND CLASS A-LR CERTIFICATEHOLDERS
The Class A-R and Class A-LR Certificates will remain outstanding for as
long as the Trust Estate shall exist, whether or not either such Class is re-
ceiving current distributions of principal or interest. The holders of the
Class A-R and Class A-LR Certificates will be entitled to receive the proceeds
of the remaining assets of the Trust Estate, if any, on the final Distribution
Date for the Certificates, after distributions in respect of any accrued but
unpaid interest on the Certificates and after distributions in reduction of
Principal Balance have reduced the Principal Balances of the Certificates to
zero. It is not anticipated that there will be any assets remaining in the
Trust Estate on the final Distribution Date following the distributions of in-
terest and in reduction of Principal Balance made on the Certificates on such
date.
In addition, the Class A-LR Certificateholder will be entitled on each Dis-
tribution Date to receive any Pool Distribution Amount remaining after all
distributions pursuant to the Pool Distribution Amount Allocation have been
made and any Net Foreclosure Profits, as described under "Description of the
Certificates" in the Prospectus. It is not anticipated that there will be any
such Net Foreclosure Profits or undistributed portion of the Pool Distribution
Amount.
PERIODIC ADVANCES
If, on any Determination Date, payments of principal and interest due on any
Mortgage Loan in the Trust Estate on the related Due Date have not been re-
ceived, the related Servicer will, in certain circumstances, be required to
advance on or before the related Distribution Date for the benefit of holders
of the Certificates an amount in cash equal to all delinquent payments of
principal and interest due on each Mortgage Loan in the Trust Estate (with in-
terest adjusted to the applicable Net Mortgage Interest Rate) not previously
advanced, but only to the extent that such Servicer believes that such amounts
will be recoverable by it from liquidation proceeds or other recoveries in re-
spect of the related Mortgage Loan (each, a "PERIODIC ADVANCE"). Upon a
Servicer's failure to make a required Periodic Advance required by the Under-
lying Servicing Agreement, the Trustee, if such Servicer is Norwest Mortgage,
or the Master Servicer, if such Servicer is not Norwest Mortgage, will be re-
quired to make such Periodic Advance. In addition, if under the terms of the
applicable Underlying Servicing Agreement, an Other Servicer is not obligated
to make Periodic Advances while a Mortgage Loan is in liquidation, the Master
Servicer will, under certain circumstances be required to make such Periodic
Advances.
The Underlying Servicing Agreements and the Pooling and Servicing Agreement
provide that any advance of the kind described in the preceding paragraph may
be reimbursed to the related Servicer, the Master Servicer or the Trustee, as
applicable, at any time from funds available in the Servicer Custodial Account
or the Certificate Account, as the case may be, to the extent that (i) such
funds represent receipts on, or liquidation, insurance, purchase or repurchase
proceeds in respect of, the Mortgage Loans to which the advance relates or
(ii) the Servicer, the Master Servicer or Trustee, as applicable, has deter-
mined in good faith that the advancing party will be unable to recover such
advance from funds of the type referred to in clause (i) above.
RESTRICTIONS ON TRANSFER OF THE CLASS A-R, CLASS A-LR AND CLASS B CERTIFICATES
The Class A-R and Class A-LR Certificates will be subject to the following
restrictions on transfer, and each of the Class A-R and Class A-LR Certifi-
cates will contain a legend describing such restrictions.
The REMIC provisions of the Code impose certain taxes on (i) transferors of
residual interests to, or agents that acquire residual interests on behalf of,
Disqualified Organizations and (ii) certain Pass-Through Entities (as defined
in the Prospectus) that have Disqualified Organizations as beneficial owners.
No tax will be imposed on
S-30
<PAGE>
a Pass-Through Entity (other than an "electing large partnership," as defined
in the Prospectus) with respect to the Class A-R or Class A-LR Certificate to
the extent it has received an affidavit from the owner thereof that such owner
is not a Disqualified Organization or a nominee for a Disqualified Organiza-
tion. The Pooling and Servicing Agreement will provide that no legal or bene-
ficial interest in the Class A-R or Class A-LR Certificate may be transferred
to or registered in the name of any person unless (i) the proposed purchaser
provides to the Trustee an affidavit (or, to the extent acceptable to the
Trustee, a representation letter signed under penalty of perjury) to the ef-
fect that, among other items, such transferee is not a Disqualified Organiza-
tion (as defined in the Prospectus) and is not purchasing the Class A-R or
Class A-LR Certificate as an agent for a Disqualified Organization (i.e., as a
broker, nominee, or other middleman thereof) and (iii) the transferor states
in writing to the Trustee that it has no actual knowledge that such affidavit
or letter is false. Further, such affidavit or letter requires the transferee
to affirm that it (i) historically has paid its debts as they have come due
and intends to do so in the future, (ii) understands that it may incur tax li-
abilities with respect to the Class A-R or Class A-LR Certificate in excess of
cash flows generated thereby, (iii) intends to pay taxes associated with hold-
ing the Class A-R or Class A-LR Certificate as such taxes become due and (iv)
will not transfer the Class A-R or Class A-LR Certificate to any person or en-
tity that does not provide a similar affidavit or letter. The transferor must
certify in writing to the Trustee that, as of the date of the transfer, it had
no knowledge or reason to know that the affirmations made by the transferee
pursuant to the preceding sentence were false.
In addition, the Class A-R and Class A-LR Certificates may not be purchased
by or transferred to any person that is not a "U.S. Person," unless (i) such
person holds such Class A-R or Class A-LR Certificate in connection with the
conduct of a trade or business within the United States and furnishes the
transferor and the Trustee with an effective Internal Revenue Service Form
4224 or (ii) the transferee delivers to both the transferor and the Trustee an
opinion of a nationally recognized tax counsel to the effect that such trans-
fer is in accord with the requirements of the Code and the regulations promul-
gated and that such transfer of the Class A-R or Class A-LR Certificate will
not be disregarded for federal income tax purposes. The term "U.S. PERSON"
means a citizen or resident of the United States, a corporation, partnership
(except to the extent provided in applicable Treasury Regulations) or other
entity created or organized in or under the laws of the United States, any
State thereof or the District of Columbia or any political subdivision there-
of, an estate that is subject to United States federal income tax regardless
of the source of its income, or a trust if a court within the United States is
able to exercise primary supervision over the administration of such trust,
and one or more such U.S. Persons have the authority to control all substan-
tial decisions of such trust (or, to the extent provided in Treasury regula-
tions, certain trusts in existence on August 20, 1996 which are eligible to
elect to be treated as U.S. Persons).
The Pooling and Servicing Agreement will provide that any attempted or pur-
ported transfer in violation of these transfer restrictions will be null and
void and will vest no rights in any purported transferee. Any transferor or
agent to whom the Trustee provides information as to any applicable tax im-
posed on such transferor or agent may be required to bear the cost of comput-
ing or providing such information. See "Certain Federal Income Tax Conse-
quences -- Federal Income Tax Consequences for REMIC Certificates -- Taxation
of Residual Certificates -- Tax-Related Restrictions on Transfer of Residual
Certificates" in the Prospectus.
The Class A-R and Class A-LR Certificates may not be purchased by or trans-
ferred to any person which is an employee benefit plan or other retirement
plan or arrangement subject to Title I of ERISA or Code Section 4975 (an
"ERISA PLAN") or which is a governmental plan, as defined in Section 3(32) of
ERISA, subject to any federal, state or local law ("SIMILAR LAW") which is, to
a material extent, similar to the foregoing provisions of ERISA or the Code
(collectively, with an ERISA Plan, a "PLAN"), or any person acting on behalf
of or investing the assets of such Plan. See "ERISA Considerations" herein and
in the Prospectus.
Under current law the purchase and holding of the Class B Certificates by or
on behalf of a Plan may result in "prohibited transactions" within the meaning
of ERISA and Code Section 4975 or Similar Law. Transfer of the Class B Certif-
icates will not be made unless the transferee (i) executes a representation
letter in form and substance satisfactory to the Trustee and the Seller stat-
ing that (a) it is not, and is not acting on behalf of, any such Plan or using
the assets of any such Plan to effect such purchase or (b) if it is an insur-
ance company, that the source of funds used to purchase the Class B Certifi-
cates is an "insurance company general account" (as such term is defined in
Section V(e) of Prohibited Transaction Class Exemption 95-60 ("PTE 95-60"), 60
Fed. Reg. 35925 (July 12, 1995)), there is no Plan with respect to which the
amount of such general account's reserves and liabilities for the contract(s)
held by or on behalf of such Plan and all other Plans maintained by the same
S-31
<PAGE>
employer (or affiliate thereof as defined in Section V(a)(1) of PTE 95-60) or
by the same employee organization exceeds 10% of the total of all reserves and
liabilities of such general account (as such amounts are determined under Sec-
tion I(a) of PTE 95-60) at the date of acquisition and the purchase and hold-
ing of such Certificates by the transferee are covered by Sections I and III
of PTE 95-60, or (ii) provides (A) an opinion of counsel in form and substance
satisfactory to the Trustee and the Seller that the purchase or holding of the
Class B Certificates by or on behalf of such Plan will not result in the as-
sets of the Trust Estate being deemed to be "plan assets" and subject to the
prohibited transaction provisions of ERISA, the Code or Similar Law and will
not subject the Seller, the Master Servicer or the Trustee to any obligation
in addition to those undertaken in the Pooling and Servicing Agreement and (B)
such other opinions of counsel, officers' certificates and agreements as the
Seller or the Master Servicer may require in connection with such transfer.
The Class B Certificates will contain a legend describing such restrictions on
transfer and the Pooling and Servicing Agreement will provide that any at-
tempted or purported transfer in violation of these transfer restrictions will
be null and void and will vest no rights in any purported transferee. See
"ERISA Considerations" herein and in the Prospectus.
SUBORDINATION OF CLASS B CERTIFICATES
The rights of the holders of the Class B Certificates to receive distribu-
tions with respect to the Mortgage Loans in the Trust Estate will be subordi-
nated to such rights of the holders of the Class A Certificates and the rights
of the holders of the Classes of Class B Certificates with higher numerical
designations to receive distributions with respect to the Mortgage Loans in
the Trust Estate will be subordinated to such rights of the holders of Classes
of Class B Certificates with lower numerical designations, all to the extent
described below. This subordination is intended to enhance the likelihood of
timely receipt by the holders of the more senior Certificates of the full
amount of their scheduled monthly payments of interest and principal and to
afford the holders of the more senior Certificates protection against Realized
Losses, as more fully described below. If Realized Losses exceed the credit
support provided through subordination to a given Class of Certificates, or if
Excess Losses occur, all or a portion of such losses will be borne by such
Class of Certificates.
The protection afforded to the holders of more senior Classes of Certifi-
cates by means of the subordination feature will be accomplished by the pref-
erential right of such holders to receive, prior to any distribution being
made on a Distribution Date in respect of the more junior Classes of Certifi-
cates, the amounts of principal and interest due such holders on each Distri-
bution Date out of the Pool Distribution Amount with respect to such date and,
if necessary, by the right of such holders to receive future distributions on
the Mortgage Loans that would otherwise have been payable to the holders of
the more junior Classes of Certificates. Because of the priority in which the
Class A Non-PO Principal Distribution Amount is allocated among the Classes of
Class A Certificates (other than the Class A-PO Certificates), the application
of this subordination to cover Realized Losses experienced in periods prior to
the periods in which a Class of Class A Certificates is entitled to distribu-
tions in reduction of Principal Balance will decrease the protection provided
by the subordination to any such Class.
Amounts distributed to holders of Subordinated Certificates will not be
available to cover delinquencies or Realized Losses in respect of subsequent
Distribution Dates.
Allocation of Losses
Realized Losses (other than Excess Losses) will not be allocated to the
holders of the Class A Certificates until the date on which the amount of
principal payments on the Mortgage Loans to which the holders of the Subordi-
nated Certificates are entitled has been reduced to zero as a result of the
allocation of losses to the Subordinated Certificates, i.e., the Distribution
Date preceding the Distribution Date for which the Subordinated Percentage is
equal to zero (the "CROSS-OVER DATE"). Prior to such time, such Realized
Losses will be allocated to the Classes of Class B Certificates sequentially
in reverse numerical order, until the Principal Balance of each such Class has
been reduced to zero.
The allocation of the principal portion of a Realized Loss (other than a
Debt Service Reduction or Excess Loss) will be effected through the adjustment
of the Principal Balance of the most subordinate Class then outstanding in
such amount as is necessary to cause the Aggregate Principal Balance to equal
the Adjusted Pool Amount.
S-32
<PAGE>
Allocations to the Classes of Class B Certificates of (i) the principal por-
tion of Debt Service Reductions, (ii) the interest portion of Realized Losses
(other than Excess Losses), (iii) any interest shortfalls resulting from de-
linquencies for which the Servicer, the Master Servicer or the Trustee does
not advance, (iv) any interest shortfalls or losses resulting from the appli-
cation of the Soldiers' and Sailors' Civil Relief Act of 1940, as more fully
described under "Certain Legal Aspects of the Mortgage Loans -- Soldiers' and
Sailors' Civil Relief Act" in the Prospectus and (v) any interest shortfalls
resulting from the timing of the receipt of Unscheduled Principal Receipts
(other than Prepayments in Full) with respect to Mortgage Loans will result
from the priority of distributions of the Pool Distribution Amount first to
the Class A Certificates and then to the Classes of Class B Certificates in
numerical order as described above under "-- Distributions."
The allocation of the principal portion of Realized Losses (other than Ex-
cess Losses) in respect of the Mortgage Loans allocated on or after the Cross-
Over Date will be effected through the adjustment on any Determination Date of
the Class A Non-PO Principal Balance and the Principal Balance of the Class A-
PO Certificates such that (i) the Class A Non-PO Principal Balance equals the
Adjusted Pool Amount less the Adjusted Pool Amount (PO Portion) as of the pre-
ceding Distribution Date and (ii) the Principal Balance of the Class A-PO Cer-
tificates equals the Adjusted Pool Amount (PO Portion) as of the preceding
Distribution Date. The principal portion of such Realized Losses allocated to
the Class A Certificates (other than the Class A-PO Certificates) will be al-
located to such outstanding Classes of Class A Certificates pro rata in accor-
dance with their Principal Balances or, in the case of a Class of Accrual Cer-
tificates, their initial Principal Balance, if lower. The interest portion of
any Realized Loss allocated on or after the Cross-Over Date will be allocated
among the outstanding Classes of Class A Certificates pro rata in accordance
with their respective Interest Accrual Amounts, without regard to any reduc-
tion pursuant to this sentence. Any such losses will be allocated among the
outstanding Class A Certificates within each Class pro rata in accordance with
their respective Percentage Interests.
If due to losses on the Mortgage Loans the Pool Distribution Amount is not
sufficient to cover the Class A Non-PO Optimal Principal Amount on a particu-
lar Distribution Date, then the percentage of principal payments on the Mort-
gage Loans to which the holders of the Class A Certificates (other than the
Class A-PO Certificates) will be entitled (i.e., the Class A Percentage) on
and after the next Distribution Date will be proportionately increased,
thereby reducing, as a relative matter, the respective interest of the Class B
Certificates in future payments of principal on the Mortgage Loans in the
Trust Estate.
Special Hazard Losses, Fraud Losses and Bankruptcy Losses, other than Excess
Losses, will be allocated solely to the Classes of Class B Certificates in re-
verse numerical order. Special Hazard Losses, Fraud Losses and Bankruptcy
Losses in excess of the Special Hazard Loss Amount, the Fraud Loss Amount and
the Bankruptcy Loss Amount, respectively, are "EXCESS SPECIAL HAZARD LOSSES,"
"EXCESS FRAUD LOSSES" and "EXCESS BANKRUPTCY LOSSES," respectively, and are
referred to herein collectively as "EXCESS LOSSES".
Any Excess Losses will be allocated (i) with respect to the principal por-
tion of such losses (a) to the outstanding Classes of the Class A Certificates
(other than the Class A-PO Certificates) and Class B Certificates pro rata
based on their outstanding Principal Balances in proportion to the Non-PO
Fraction of such losses and (b) in respect of Discount Mortgage Loans, to the
Class A-PO Certificates in proportion to the PO Fraction of such losses and
(ii) with respect to the interest portion of such losses, to the Class A and
Class B Certificates pro rata based on interest accrued by reducing their re-
spective Interest Accrual Amounts. The principal portion of any such losses so
allocated to the Class A Certificates (other than the Class A-PO Certificates)
will be allocated to such outstanding Classes of Class A Certificates pro rata
in accordance with their then-outstanding Principal Balances or, in the case
of a Class of Accrual Certificates, their initial Principal Balance, if lower.
Any losses allocated to a Class of Certificates will be allocated among the
outstanding Certificates within such Class pro rata in accordance with their
respective Percentage Interests.
Upon initial issuance of the Certificates, the "SPECIAL HAZARD LOSS AMOUNT"
with respect thereto will be equal to approximately % (approximately $ )
of the aggregate unpaid principal balance of the Mortgage Loans as of the Cut-
Off Date. As of any Distribution Date, the Special Hazard Loss Amount will
equal the initial Special Hazard Loss Amount less the sum of (A) any Special
Hazard Losses allocated solely to the Class B Certificates and (B) the Adjust-
ment Amount. The "ADJUSTMENT AMOUNT" on each anniversary of the Cut-Off Date
will be equal to the amount, if any, by which the Special Hazard Amount, with-
out giving effect to the deduction of the Adjustment Amount for such anniver-
sary, exceeds the greater of (i) 1.00% (or, if greater
S-33
<PAGE>
than 1.00%, the highest percentage of Mortgage Loans by principal balance in
any California zip code) times the aggregate principal balance of all the
Mortgage Loans on such anniversary (ii) twice the principal balance of the
single Mortgage Loan having the largest principal balance, and (iii) that
which is necessary to maintain the original ratings assigned to the Class A,
Class B-1, Class B-2 and Class B-3 Certificates by the applicable Rating Agen-
cies, as evidenced by letters to that effect delivered by such Rating Agencies
to the Master Servicer and the Trustee. On and after the Cross-Over Date, the
Special Hazard Loss Amount will be zero.
Upon initial issuance of the Certificates, the "FRAUD LOSS AMOUNT" with re-
spect thereto will be equal to approximately % (approximately $ ) of
the aggregate unpaid principal balance of the Mortgage Loans as of the Cut-Off
Date. As of any Distribution Date prior to the first anniversary of the Cut-
Off Date, the Fraud Loss Amount will equal the initial Fraud Loss Amount minus
the aggregate amount of Fraud Losses allocated solely to the Class B Certifi-
cates through the related Determination Date. As of any Distribution Date from
the first through fifth anniversary of the Cut-Off Date, the Fraud Loss Amount
will be an amount equal to (1) the lesser of (a) the Fraud Loss Amount as of
the most recent anniversary of the Cut-Off Date and (b) 1.00% of the aggregate
principal balance of all of the Mortgage Loans as of the most recent anniver-
sary of the Cut-Off Date minus (2) the aggregate amounts allocated solely to
the Class B Certificates with respect to Fraud Losses since the most recent
anniversary of the Cut-Off Date through the related Determination Date. On and
after the Cross-Over Date or after the fifth anniversary of the Cut-Off Date,
the Fraud Loss Amount will be zero.
Upon initial issuance of the Certificates, the "BANKRUPTCY LOSS AMOUNT" with
respect thereto will be equal to approximately % (approximately $ ) of
the aggregate unpaid principal balance of the Mortgage Loans as of the Cut-Off
Date. As of any Distribution Date prior to the first anniversary of the Cut-
Off Date, the Bankruptcy Loss Amount will equal the initial Bankruptcy Loss
Amount minus the aggregate amount of Bankruptcy Losses allocated solely to the
Class B Certificates through the related Determination Date. As of any Distri-
bution Date on or after the first anniversary of the Cut-Off Date, the Bank-
ruptcy Loss Amount will equal the excess, if any, of (1) the lesser of (a) the
Bankruptcy Loss Amount as of the business day next preceding the most recent
anniversary of the Cut-Off Date and (b) an amount, if any, calculated pursuant
to the terms of the Pooling and Servicing Agreement, which amount as calcu-
lated will provide for a reduction in the Bankruptcy Loss Amount, over (2) the
aggregate amount of Bankruptcy Losses allocated solely to the Class B Certifi-
cates since such anniversary. The Bankruptcy Loss Amount and the related cov-
erage levels described above may be reduced or modified upon written confirma-
tion from each Rating Agency that such reduction or modification will not ad-
versely affect the then-current ratings assigned to the Certificates by it.
Such a reduction or modification may adversely affect the coverage provided by
subordination with respect to Bankruptcy Losses. On and after the Cross-Over
Date, the Bankruptcy Loss Amount will be zero.
Notwithstanding the foregoing, the provisions relating to subordination will
not be applicable in connection with a Bankruptcy Loss so long as the applica-
ble Servicer has notified the Trustee and the Master Servicer in writing that
such Servicer is diligently pursuing any remedies that may exist in connection
with the representations and warranties made regarding the related Mortgage
Loan and when (A) the related Mortgage Loan is not in default with regard to
the payments due thereunder or (B) delinquent payments of principal and inter-
est under the related Mortgage Loan and any premiums on any applicable Stan-
dard Hazard Insurance Policy and any related escrow payments in respect of
such Mortgage Loan are being advanced on a current basis by such Servicer, in
either case without giving effect to any Debt Service Reduction.
As a result of the mechanism described above, the risk of Special Hazard
Losses, Fraud Losses and Bankruptcy Losses will be borne solely by the Class B
Certificates to a lesser extent (i.e., only up to the Special Hazard Loss
Amount, Fraud Loss Amount and Bankruptcy Loss Amount, respectively) than the
risk of other Realized Losses, which will be allocated first to the Class B
Certificates in reverse numerical order to the full extent of their initial
Principal Balances.
S-34
<PAGE>
DESCRIPTION OF THE MORTGAGE LOANS(/1/)
GENERAL
The mortgage loans to be included in the Trust Estate will be fixed interest
rate, conventional, monthly pay, fully amortizing, one- to four-family, resi-
dential first mortgage loans substantially all of which have original terms to
stated maturity of approximately years (the "MORTGAGE LOANS"), which may in-
clude loans secured by shares ("CO-OP SHARES") issued by private non-profit
housing corporations ("COOPERATIVES"), and the related proprietary leases or
occupancy agreements granting exclusive rights to occupy specified units in
such Cooperatives' buildings. The Mortgage Loans are expected to be secured by
first liens (the "MORTGAGES") on one- to four-family residential properties
(the "MORTGAGED PROPERTIES") and to have the additional characteristics de-
scribed below and in the Prospectus.
Each of the Mortgage Loans is subject to a due-on-sale clause. See "Certain
Legal Aspects of the Mortgage Loans -- Due-on-Sale' Clauses" and "Servicing of
the Mortgage Loans -- Enforcement of Due-on-Sale Clauses; Realization Upon De-
faulted Mortgage Loans" in the Prospectus.
MORTGAGE LOAN UNDERWRITING
Approximately % (by the aggregate unpaid principal balance as of the
Cut-Off Date) of the Mortgage Loans were generally originated in conformity
with the underwriting standards described in the Prospectus under the heading
"The Mortgage Loan Programs -- Mortgage Loan Underwriting -- Norwest Mortgage
Underwriting" (the "UNDERWRITING STANDARDS"). In certain instances, exceptions
to the Underwriting Standards may have been granted by Norwest Mortgage. See
"The Mortgage Loan Programs -- Mortgage Loan Underwriting" in the Prospectus.
The remaining approximate % (by the aggregate unpaid principal balance as
of the Cut-Off Date) of the Mortgage Loans were purchased by Norwest Mortgage
in bulk purchase transactions and were underwritten using underwriting stan-
dards which may vary from the Underwriting Standards (the "BULK PURCHASE UN-
DERWRITTEN LOANS"). However, Norwest Mortgage has in each case reviewed the
underwriting standards applied for such Bulk Purchase Underwritten Loans and
determined that such variances did not depart materially from the Underwriting
Standards. See "Description of the Mortgage Loans" in this Prospectus Supple-
ment and "The Mortgage Loan Programs -- Mortgage Loan Underwriting" in the
Prospectus.
- ---------------------
(1) The descriptions in this Prospectus Supplement of the Trust Estate and the
properties securing the Mortgage Loans to be included in the Trust Estate
are based upon the expected characteristics of the Mortgage Loans at the
close of business on the Cut-Off Date, as adjusted for the scheduled prin-
cipal payments due on or before such date. Notwithstanding the foregoing,
any of such Mortgage Loans may be excluded from the Trust Estate (i) as a
result of principal prepayment thereof in full or (ii) if, as a result of
delinquencies or otherwise, the Seller otherwise deems such exclusion nec-
essary or desirable. In either event, other Mortgage Loans may be included
in the Trust Estate. The Seller believes that the information set forth
herein with respect to the expected characteristics of the Mortgage Loans
on the Cut-Off Date is representative of the characteristics as of the
Cut-Off Date of the Mortgage Loans to be included in the Trust Estate as
it will be constituted at the time the Certificates are issued, although
the aggregate unpaid principal balance of the Mortgage Loans as of the
Cut-Off Date, the range of Mortgage Interest Rates and maturities, and
certain other characteristics of the Mortgage Loans in the Trust Estate
may vary. In the event that any of the characteristics as of the Cut-Off
Date of the Mortgage Loans that constitute the Trust Estate on the date of
initial issuance of the Certificates vary materially from those described
herein, revised information regarding the Mortgage Loans will be made
available to purchasers of the Offered Certificates, on or before such is-
suance date, and a Current Report on Form 8-K containing such information
will be filed with the Securities and Exchange Commission within 15 days
following such date.
S-35
<PAGE>
The following table sets forth certain characteristics of all the Mortgage
Loans, the Premium Mortgage Loans and the Discount Mortgage Loans.
SELECTED MORTGAGE LOAN DATA
(AS OF , 199 (THE "CUT-OFF DATE"))
<TABLE>
<CAPTION>
ALL PREMIUM DISCOUNT
MORTGAGE MORTGAGE MORTGAGE
LOANS LOANS LOANS
------------ --------- ---------
<S> <C> <C> <C>
Number of Mortgage Loans
Aggregate Unpaid Principal Balance/(1)/
Range of Unpaid Principal Balances/(1)/
Average Unpaid Principal Balance/(1)/
Range of Mortgage Interest Rates
Weighted Average Mortgage Interest Rate/(1)/
Weighted Average Net Mortgage Interest
Rate/(1)/
Range of Remaining Terms to Stated Maturity
Weighted Average Remaining Term to Stated
Maturity/(1)/
Range of Original Loan-to-Value Ratios/(1)/
Weighted Average Original Loan-to-Value Ra-
tio/(1)/
Number of Mortgage Loans with Original Loan-
to-Value Ratios greater than 80% originated
without Primary Mortgage Insurance
Mortgage Loans with Original Loan-to-Value
Ratios greater than 80% originated without
Primary Mortgage Insurance as a Percentage
of Aggregate Unpaid Principal Balance/(1)/
Weighted Average Original Loan-to-Value Ratio
of Mortgage Loans with Original Principal
Balance greater than $600,000/(1)/
Maximum Original Loan-to-Value Ratio of
Mortgage Loans with Original Principal
Balance greater than $600,000/(1)/
Number of Mortgage Loans which are Subsidy
Loans
</TABLE>
- --------------------
(1) Approximate.
S-36
<PAGE>
SELECTED MORTGAGE LOAN DATA (CONT.)
<TABLE>
<CAPTION>
ALL PREMIUM DISCOUNT
MORTGAGE MORTGAGE MORTGAGE
LOANS LOANS LOANS
---------------- ---------------- --------------
<S> <C> <C> <C>
Geographic Concentration of
Mortgage Properties securing
Mortgage Loans in Excess of
5% of the Aggregate Unpaid
Principal Balance/(1)/
[STATES]
Maximum Five-Digit Zip Code
Concentration/(1)/
Earliest Origination Month
Latest Origination Month
Latest Stated Maturity Date
Number of Buy-Down Loans
Buy-Down Loans as a
Percentage of Aggregate
Unpaid Principal
Balance/(1)/
Weighted Average FICO
Score/(1)/
</TABLE>
- --------------------
(1) Approximate.
*Less than 5% of the aggregate unpaid principal balance as of the Cut-Off
Date.
S-37
<PAGE>
MORTGAGE LOAN DATA
Set forth below is a description of certain additional expected characteris-
tics of the Mortgage Loans as of the Cut-Off Date (except as otherwise indi-
cated).
MORTGAGE INTEREST RATES
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL
AGGREGATE AGGREGATE
NUMBER OF UNPAID UNPAID
MORTGAGE MORTGAGE PRINCIPAL PRINCIPAL
INTEREST RATE LOANS BALANCE BALANCE
- ------------- --------- ---------------- -------------
<S> <C> <C> <C>
----- ---------------- ------
100.00%
===== ================ ======
</TABLE>
MORTGAGE LOAN DOCUMENTATION LEVELS
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL
AGGREGATE AGGREGATE
NUMBER OF UNPAID UNPAID
MORTGAGE PRINCIPAL PRINCIPAL
DOCUMENTATION LEVEL LOANS BALANCE BALANCE
- ------------------- --------- --------------- -------------
<S> <C> <C> <C>
Full Documenta-
tion...........
Income Verifica-
tion...........
Asset Verifica-
tion...........
Preferred
Processing.....
----- --------------- ------
Total....... 100.00%
===== =============== ======
</TABLE>
Documentation levels vary depending
upon several factors, including loan
amount, Loan-to-Value Ratio and the
type and purpose of the Mortgage
Loan. Asset, income and mortgage
verifications were obtained for
Mortgage Loans processed with "full
documentation." In the case of "pre-
ferred processing," neither asset
nor income verifications were ob-
tained. In most instances, a verifi-
cation of the borrower's employment
was obtained. However, for all of
the Mortgage Loans, a credit report
on the borrower and a property ap-
praisal were obtained. See "The
Mortgage Loan Programs -- Mortgage
Loan Underwriting" in the Prospec-
tus.
REMAINING TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL
AGGREGATE AGGREGATE
NUMBER OF UNPAID UNPAID
REMAINING STATED MORTGAGE PRINCIPAL PRINCIPAL
TERM (MONTHS) LOANS BALANCE BALANCE
- ---------------- --------- --------------- -------------
<S> <C> <C> <C>
----- --------------- ------
100.00%
===== =============== ======
</TABLE>
YEARS OF ORIGINATION
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL
AGGREGATE AGGREGATE
NUMBER OF UNPAID UNPAID
MORTGAGE PRINCIPAL PRINCIPAL
YEAR OF ORIGINATION LOANS BALANCE BALANCE
- ------------------- --------- ---------------- -------------
<S> <C> <C> <C>
1996............
1997............
1998............
----- ---------------- ------
Total....... 100.00%
===== ================ ======
</TABLE>
MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL
AGGREGATE AGGREGATE
NUMBER OF UNPAID UNPAID
MORTGAGE PRINCIPAL PRINCIPAL
PROPERTY LOANS BALANCE BALANCE
- -------- --------- --------------- -------------
<S> <C> <C> <C>
Single-family
detached.......
Two- to four-
family units...
Condominiums
High-
rise(greater
than four
stories).......
Low-rise(four
stories or
less)..........
Planned unit
developments...
Townhouses......
Cooperative
Units..........
----- --------------- ------
Total....... 100.00%
===== =============== ======
</TABLE>
S-38
<PAGE>
GEOGRAPHIC DISTRIBUTION OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL
AGGREGATE AGGREGATE
NUMBER OF UNPAID UNPAID
MORTGAGE PRINCIPAL PRINCIPAL
GEOGRAPHIC AREA LOANS BALANCE BALANCE
- --------------- --------- --------------- -------------
<S> <C> <C> <C>
----- --------------- ------
100.00%
===== =============== ======
</TABLE>
ORIGINAL LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL
AGGREGATE AGGREGATE
RANGE OF NUMBER OF UNPAID UNPAID
ORIGINAL LOAN-TO- MORTGAGE PRINCIPAL PRINCIPAL
VALUE RATIO LOANS BALANCE BALANCE
- --------------------------------------- --------- ---------------- -------------
<S> <C> <C> <C>
50% or less............................
50.01- 55.00%..........................
55.01- 60.00%..........................
60.01- 65.00%..........................
65.01- 70.00%..........................
70.01- 75.00%..........................
75.01- 80.00%..........................
80.01- 85.00%..........................
85.01- 90.00%..........................
90.01- 95.00%..........................
----- ---------------- ------
Total.............................. 100.00%
===== ================ ======
</TABLE>
The Loan-to-Value Ratio of a Mort-
gage Loan is calculated using the
lesser of (i) the appraised value of
the related Mortgaged Property, as
established by an appraisal obtained
by the originator from an appraiser
at the time of origination and (ii)
the sale price for such property.
For the purpose of calculating the
Loan-to-Value Ratio of any Mortgage
Loan that is the result of the refi-
nancing (including a refinancing for
"equity take out" purposes) of an
existing mortgage loan, the ap-
praised value of the related Mort-
gaged Property is generally deter-
mined by reference to an appraisal
obtained in connection with the
origination of the replacement loan.
There can be no assurance that such
appraisal, which is based on the in-
dependent judgment of an appraiser
and not an arms-length sales trans-
action, is an accurate representa-
tion of the market value of a Mort-
gaged Property. See "The Trust Es-
tates -- Mortgage Loans" in the Pro-
spectus. No assurance can be given
that the values of the Mortgaged
Properties securing the Mortgage
Loans have remained or will remain
at the levels used in calculating
the Loan-to-Value Ratios shown
above. The Seller has taken no ac-
tion to establish the current value
of any Mortgaged Property. See "Risk
Factors -- Real Estate Market Condi-
tions Affect Mortgage Loan Perfor-
mance" and "-- Geographic Concentra-
tion May Increase Rates of Loss and
Delinquency" in the Prospectus.
FICO SCORES
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL WEIGHTED
NUMBER AGGREGATE AGGREGATE AVERAGE
RANGE OF OF UNPAID UNPAID LOAN-TO-
FICO MORTGAGE PRINCIPAL PRINCIPAL VALUE
SCORES LOANS BALANCE BALANCE RATIO
-------- -------- --------------- ------------- --------
<S> <C> <C> <C> <C>
250-300........................
301-350........................
351-400........................
401-450........................
451-500........................
501-550........................
551-600........................
601-650........................
651-700........................
701-750........................
751-800........................
801-850........................
851-900........................
Not Available
----- --------------- ------ -----
Total/ Weighted Average........ 100.00%
===== =============== ====== =====
</TABLE>
"FICO SCORES" are statistical credit
scores obtained by many mortgage
lenders in connection with the loan
application to help assess a borrow-
er's credit-worthiness. FICO Scores
are generated by models developed by
a third party and are made available
to lenders through three national
credit bureaus. The models were de-
rived by analyzing data on consumers
in order to establish patterns which
are believed to be indicative of the
borrower's probability of default.
The FICO Score is based on a borrow-
er's historical credit data, includ-
ing, among other things, payment
history, delinquencies on accounts,
levels of outstanding indebtedness,
length of credit history, types of
credit, and bankruptcy experience.
FICO Scores range from approximately
250 to approximately 900, with
higher scores indicating an individ-
ual with a more favorable credit
history compared to an individual
with a lower score. However, a FICO
Score purports only to be a measure-
ment of the relative degree of risk
a borrower represents to a lender,
i.e., that a borrower with a higher
score is statistically expected to
be less likely to default in payment
than a borrower with a lower score.
In addition, it should be noted that
FICO Scores were developed to indi-
cate a level of default probability
over a two-year period which does
not correspond to the life of a
mortgage loan. Furthermore, FICO
Scores were not developed specifi-
cally for use in connection with
mortgage loans, but for consumer
loans in general. Therefore, a FICO
Score does not take into considera-
tion the effect of mortgage loan
characteristics on the probability
of repayment by the borrower. The
FICO Scores set forth in the table
above were obtained at either the
time of origination of the Mortgage
Loan or more recently. Neither the
Seller nor Norwest Mortgage makes
any representations or warranties as
to the actual performance of any
Mortgage Loan or that a particular
FICO Score should be relied upon as
a basis for an expectation that the
borrower will repay the Mortgage
Loan according to its terms. See
"The Mortgage Loan Programs -- Mort-
gage Loan Underwriting" in the Pro-
spectus."
S-39
<PAGE>
ORIGINAL MORTGAGE LOAN PRINCIPAL BALANCES
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL
RANGE OF AGGREGATE AGGREGATE
ORIGINAL MORTGAGE NUMBER OF UNPAID UNPAID
LOAN PRINCIPAL MORTGAGE PRINCIPAL PRINCIPAL
BALANCE LOANS BALANCE BALANCE
- ---------------- --------- --------------- -------------
<S> <C> <C> <C>
Less than or
equal to
$200,000.......
$200,001-
$250,000.......
$250,001-
$300,000.......
$300,001-
$350,000.......
$350,001-
$400,000.......
$400,001-
$450,000.......
$450,001-
$500,000.......
$500,001-
$550,000.......
$550,001-
$600,000.......
$600,001-
$650,000.......
$650,001-
$700,000.......
$700,001-
$750,000.......
$750,001-
$800,000.......
$800,001-
$850,000.......
$850,001-
$900,000.......
$950,001-
$1,000,000.....
----- --------------- ------
Total....... 100.00%
===== =============== ======
</TABLE>
ORIGINATORS OF MORTGAGE LOANS
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL
AGGREGATE AGGREGATE
NUMBER OF UNPAID UNPAID
MORTGAGE PRINCIPAL PRINCIPAL
ORIGINATOR LOANS BALANCE BALANCE
- ---------- --------- --------------- -------------
<S> <C> <C> <C>
NMI or
Affiliate......
Other
Originators....
----- --------------- ------
Total....... 100.00%
===== =============== ======
</TABLE>
It is expected that as of the
Cut-Off Date, two of the "Other
Originators" will have accounted for
approximately % and 6.16%, re-
spectively, of the aggregate unpaid
principal balance of the Mortgage
Loans as of the Cut-Off Date. No
other single "Other Originator" is
expected to have accounted for more
than % of the aggregate unpaid
principal balance of the Mortgage
Loans as of the Cut-Off Date.
PURPOSES OF MORTGAGE LOANS
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL
AGGREGATE AGGREGATE
NUMBER OF UNPAID UNPAID
MORTGAGE PRINCIPAL PRINCIPAL
LOAN PURPOSE LOANS BALANCE BALANCE
- ------------ --------- --------------- -------------
<S> <C> <C> <C>
Purchase........
Equity Take Out
Refinance......
Rate/Term
Refinance......
----- --------------- ------
Total....... 100.00%
===== =============== ======
</TABLE>
In general, in the case of a
Mortgage Loan made for "rate/term"
refinance purposes, substantially
all of the proceeds are used to pay
in full the principal balance of a
previous mortgage loan of the mort-
gagor with respect to a Mortgaged
Property and to pay origination and
closing costs associated with such
refinancing. However, in the case of
a Mortgage Loan made for "equity
take out" refinance purposes, all or
a portion of the proceeds are gener-
ally retained by the mortgagor for
uses unrelated to the Mortgaged
Property. The amount of such pro-
ceeds retained by the mortgagor may
be substantial. See "The Mortgage
Loan Programs -- Mortgage Loan Un-
derwriting" in the Prospectus.
OCCUPANCY OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL
AGGREGATE AGGREGATE
NUMBER OF UNPAID UNPAID
MORTGAGE PRINCIPAL PRINCIPAL
OCCUPANCY CODE LOANS BALANCE BALANCE
- -------------- --------- --------------- -------------
<S> <C> <C> <C>
Primary
Residence......
Second Home.....
----- --------------- ------
Total....... 100.00%
===== =============== ======
</TABLE>
MANDATORY REPURCHASE OR SUBSTITUTION OF MORTGAGE LOANS
The Seller is required, with respect to Mortgage Loans that are found by the
Trustee to have defective documentation, or in respect of which the Seller has
breached a representation or warranty, either to repurchase such Mortgage
Loans or, if within two years of the date of initial issuance of the Certifi-
cates, to substitute new Mortgage Loans therefor. Any Mortgage Loan so substi-
tuted must, among other things, have an unpaid principal balance equal to or
less than the Scheduled Principal Balance of the Mortgage Loan for which it is
being substituted (after giving effect to the scheduled principal payment due
in the month of substitution on the Mortgage Loan for which a new Mortgage
Loan is being substituted), a Loan-to-Value Ratio less than or equal to, and a
Mortgage Interest Rate equal to that of the Mortgage Loan for which it is be-
ing substituted. See "Prepayment and Yield Considerations" herein and "The
Pooling and Servicing Agreement -- Assignment of Mortgage Loans to the Trust-
ee" in the Prospectus.
OPTIONAL REPURCHASE OF DEFAULTED MORTGAGE LOANS
The Seller may, in its sole discretion, repurchase from the Trust Estate any
defaulted Mortgage Loan, or any Mortgage Loan as to which default is reasona-
bly foreseeable, at a price equal to the unpaid principal balance of such
Mortgage Loan, together with accrued interest at a rate equal to the Mortgage
Interest Rate through the last day of the month in which such repurchase oc-
curs. See "The Pooling and Servicing Agreement -- Optional Purchases" in the
Prospectus. A Servicer may, in its sole discretion, allow the assumption of a
defaulted Mortgage Loan serviced by such Servicer, subject to certain condi-
tions specified in the applicable Underlying Servicing Agreement, or encourage
the refinancing of a defaulted Mortgage Loan. See "Prepayment and Yield Con-
siderations" herein and "Servicing of the Mortgage Loans -- Enforcement of
Due-on-Sale Clauses; Realization Upon Defaulted Mortgage Loans" in the Pro-
spectus.
S-40
<PAGE>
DELINQUENCY AND FORECLOSURE EXPERIENCE
Certain information concerning recent delinquency and foreclosure experience
as reported to the Master Servicer by the applicable servicers, on mortgage
loans included in various mortgage pools underlying all series of the Seller's
mortgage pass-through certificates is set forth in the tables under "Delin-
quency and Foreclosure Experience" in the Prospectus. There can be no assur-
ance that the delinquency and foreclosure experience set forth in any table
with respect to any category of mortgage loans, including categories of mort-
gage loans similar to the Mortgage Loans included in the Trust Estate, will be
representative of the results that may be experienced with respect to the
Mortgage Loans included in the Trust Estate.
See "Delinquency and Foreclosure Experience" in the Prospectus for a discus-
sion of various factors affecting delinquencies and foreclosures generally.
PREPAYMENT AND YIELD CONSIDERATIONS
The rate of distributions in reduction of the Principal Balance of any Class
of the Offered Certificates, the aggregate amount of distributions on any
Class of the Offered Certificates and the yield to maturity and weighted aver-
age life of any Class of the Offered Certificates purchased at a discount or
premium will be directly related to the rate of payments of principal on the
Mortgage Loans in the Trust Estate and the amount and timing of mortgagor de-
faults resulting in Realized Losses. Prepayments (which, as used herein, in-
clude all unscheduled payments of principal, including payments as the result
of liquidations, purchases and repurchases) of the Mortgage Loans in the Trust
Estate will result in distributions to Certificateholders then entitled to
distributions in respect of principal of amounts which would otherwise be dis-
tributed over the remaining terms of such Mortgage Loans. Since the rate of
prepayment on the Mortgage Loans will depend on future events and a variety of
factors (as described more fully below and in the Prospectus under "Prepayment
and Yield Considerations"), no assurance can be given as to such rate or the
rate of principal payments or yield on, or weighted average life of, any Class
of the Offered Certificates or the aggregate amount of distributions on any
Class of the Offered Certificates.
The rate of principal payments on the Mortgage Loans will be affected by the
amortization schedules of the Mortgage Loans, the rate of principal prepay-
ments (including partial prepayments and those resulting from refinancing)
thereon by mortgagors, liquidations of defaulted Mortgage Loans, repurchases
by the Seller of Mortgage Loans as a result of defective documentation or
breaches of representations and warranties and optional purchases by the
Seller of all of the Mortgage Loans in connection with the termination of the
Trust Estate. See "Description of the Mortgage Loans -- Mandatory Repurchase
or Substitution of Mortgage Loans" and "Pooling and Servicing Agreement -- Op-
tional Termination" herein and "The Pooling and Servicing Agreement --Assign-
ment of Mortgage Loans to the Trustee," "-- Optional Purchases" and "-- Termi-
nation; Optional Purchase of Mortgage Loans" in the Prospectus. Mortgagors are
permitted to prepay the Mortgage Loans, in whole or in part, at any time with-
out penalty. If prevailing rates for similar mortgage loans fall below the
Mortgage Interest Rates on the Mortgage Loans, the rate of prepayment would
generally be expected to increase. Conversely, if interest rates on similar
mortgage loans rise above the Mortgage Interest Rates on the Mortgage Loans,
the rate of prepayment would generally be expected to decrease. The rate of
prepayment on the Mortgage Loans may also be influenced by programs offered by
mortgage loan originators (including Norwest Mortgage), servicers (including
Norwest Mortgage) and mortgage loan brokers to encourage refinancing through
such originators, servicers and brokers, including, but not limited to, gen-
eral or targeted solicitations (which may be based on characteristics includ-
ing, but not limited to, the mortgage loan interest rate or payment history
and the geographic location of the Mortgaged Property), reduced origination
fees or closing costs, pre-approved applications, waiver of pre-closing inter-
est accrued with respect to a refinanced loan prior to the pay-off of such
loan, or other financial incentives. In particular, the application of Norwest
Mortgage's "retention program," which enables qualifying mortgagors to refi-
nance at greatly reduced cost, to its servicing portfolio may substantially
affect the rate of prepayment on the Mortgage Loans. See "Prepayment and Yield
Considerations -- Refinancings" in the Prospectus. In addition, Norwest Mort-
gage or third parties may enter into agreements with borrowers providing for
the bi-weekly payment of principal and interest on the related mortgage loan,
thereby accelerating payment of the mortgage loan resulting in partial prepay-
ments.
S-41
<PAGE>
Other factors affecting prepayment of mortgage loans include changes in
mortgagors' housing needs, job transfers, unemployment or substantial fluctua-
tions in income, significant declines in real estate values and adverse eco-
nomic conditions either generally or in particular geographic areas, mortga-
gors' equity in the Mortgaged Properties, including the use of the properties
as second or vacation homes, and servicing decisions, such as, without limita-
tion, the decision as to whether to foreclose on a Mortgage Loan or to modify
the terms of the related Mortgage Note and decisions as to the timing of any
foreclosure. In addition, all of the Mortgage Loans contain due-on-sale
clauses which will generally be exercised upon the sale of the related Mort-
gaged Properties. Consequently, acceleration of mortgage payments as a result
of any such sale will affect the level of prepayments on the Mortgage Loans.
The extent to which defaulted Mortgage Loans are assumed by transferees of the
related Mortgaged Properties will also affect the rate of principal payments.
The rate of prepayment and, therefore, the yield to maturity of the Offered
Certificates will be affected by the extent to which (i) the Seller elects to
repurchase, rather than substitute for, Mortgage Loans which are found by the
Trustee to have defective documentation or with respect to which the Seller
has breached a representation or warranty, (ii) a Servicer elects to encourage
the refinancing of any defaulted Mortgage Loan rather than to permit an as-
sumption thereof by a mortgagor or (iii) a Servicer agrees to modify the pay-
ment terms of a Mortgage Note rather than foreclose on the related Mortgage
Loan. See "Servicing of the Mortgage Loans -- Enforcement of Due-on-Sale
Clauses; Realization Upon Defaulted Mortgage Loans" in the Prospectus.
As described under "Description of the Certificates -- Principal (Including
Prepayments)" herein, all or a disproportionate percentage of principal pre-
payments on the Mortgage Loans (including liquidations and repurchases of
Mortgage Loans) will be distributed, to the extent of the Non-PO Fraction, to
the holders of the Class A Certificates (other than the Class A-PO Certifi-
cates) then entitled to distributions in respect of principal during the nine
years beginning on the first Distribution Date, and, to the extent that such
principal prepayments are made in respect of a Discount Mortgage Loan, to the
Class A-PO Certificates in proportion to the interest of the Class A-PO Cer-
tificates in such Discount Mortgage Loan represented by the PO Fraction.
THE YIELD TO MATURITY OF THE OFFERED CERTIFICATES WILL BE SENSITIVE IN VARY-
ING DEGREES TO THE RATE AND TIMING OF PRINCIPAL PAYMENTS (INCLUDING PREPAY-
MENTS, WHICH MAY BE MADE AT ANY TIME WITHOUT PENALTY) ON THE MORTGAGE LOANS.
INVESTORS IN THE OFFERED CERTIFICATES SHOULD CONSIDER THE ASSOCIATED RISKS,
INCLUDING, IN THE CASE OF OFFERED CERTIFICATES PURCHASED AT A DISCOUNT, PAR-
TICULARLY THE CLASS A-12 CERTIFICATES, THE RISK THAT A SLOWER THAN ANTICIPATED
RATE OF PAYMENTS IN RESPECT OF PRINCIPAL (INCLUDING PREPAYMENTS) ON THE MORT-
GAGE LOANS COULD RESULT IN AN ACTUAL YIELD THAT IS LOWER THAN ANTICIPATED AND,
IN THE CASE OF OFFERED CERTIFICATES PURCHASED AT A PREMIUM, PARTICULARLY THE
CLASS A-3 AND CLASS A-18 CERTIFICATES, WHICH DO NOT HAVE PRINCIPAL BALANCES,
THAT A FASTER THAN ANTICIPATED RATE OF PAYMENTS IN RESPECT OF PRINCIPAL (IN-
CLUDING PREPAYMENTS) ON THE MORTGAGE LOANS COULD RESULT IN AN ACTUAL YIELD
THAT IS LOWER THAN ANTICIPATED. INVESTORS PURCHASING OFFERED CERTIFICATES AT A
PREMIUM, AND INVESTORS PURCHASING CLASS A-3 OR CLASS A-18 CERTIFICATES, WHICH
DO NOT HAVE PRINCIPAL BALANCES, SHOULD ALSO CONSIDER THE RISK THAT A RAPID
RATE OF PAYMENTS IN RESPECT OF PRINCIPAL (INCLUDING PREPAYMENTS) ON THE MORT-
GAGE LOANS COULD RESULT IN THE FAILURE OF SUCH INVESTORS TO FULLY RECOVER
THEIR INITIAL INVESTMENTS. An investor is urged to make an investment decision
with respect to any Class of Offered Certificates based on the anticipated
yield to maturity of such Class resulting from its purchase price and such in-
vestor's own determination as to anticipated Mortgage Loan prepayment rates
under a variety of scenarios.
The timing of changes in the rate of prepayment on the Mortgage Loans may
significantly affect the actual yield to maturity experienced by an investor
who purchases an Offered Certificate at a price other than par, even if the
average rate of principal payments experienced over time is consistent with
such investor's expectation. In general, the earlier a prepayment of principal
on the underlying Mortgage Loans, the greater the effect on such investor's
yield to maturity. As a result, the effect on such investor's yield of princi-
pal payments occurring at a rate higher (or lower) than the rate anticipated
by the investor during the period immediately following the issuance of the
Offered Certificates would not be fully offset by a subsequent like reduction
(or increase) in the rate of principal payments.
The yield to maturity on the Classes of Class B Certificates with higher nu-
merical designations will generally be more sensitive to losses than the Clas-
ses with lower numerical designations because the entire amount of such losses
(except for the portion of Excess Losses allocated to the Class A Certificates
and Classes of Class B Certificates with lower numerical designations) will be
allocable to the Classes of Class B Certificates in reverse
S-42
<PAGE>
numerical order, except as provided herein. To the extent not covered by Peri-
odic Advances, delinquencies on Mortgage Loans will also have a relatively
greater effect on the yield to maturity on the Classes of Class B Certificates
with higher numerical designations because amounts otherwise distributable to
holders of the Class B Certificates will be made available to protect the
holders of the Class A Certificates against interruptions in distributions due
to such unadvanced mortgagor delinquencies. Such unadvanced delinquencies,
even if subsequently cured, may affect the timing of the receipt of distribu-
tions by the holders of the Class B Certificates.
The actual yield to maturity experienced by an investor may also be affected
by the occurrence of interest shortfalls resulting from Unscheduled Principal
Receipts to the extent, if any, to which such interest shortfalls are not cov-
ered by Compensating Interest or subordination. See "Description of the Cer-
tificates -- Interest" and "Servicing of the Mortgage Loans -- Anticipated
Changes in Servicing."
The yield to maturity on the Offered Certificates and more particularly on
the Class B-1, Class B-2 and especially the Class B-3 Certificates, may be af-
fected by the geographic concentration of the Mortgaged Properties securing
the Mortgage Loans. In recent periods, California, the New York metropolitan
area, the Washington D.C. metropolitan area and several other regions in the
United States have experienced significant declines in housing prices. In ad-
dition, California and several other regions have experienced natural disas-
ters, including earthquakes, fires, floods and hurricanes, which may adversely
affect property values. See "Description of the Mortgage Loans." Any deterio-
ration in housing prices in the states in which there is a significant concen-
tration of Mortgaged Properties, as well as the other states in which the
Mortgaged Properties are located, and any deterioration of economic conditions
in such states which adversely affects the ability of borrowers to make pay-
ments on the Mortgage Loans, may increase the likelihood of losses on the
Mortgage Loans. Such losses, if they occur, may have an adverse effect on the
yield to maturity of the Offered Certificates and more particularly on the
Class B-1, Class B-2 and especially the Class B-3 Certificates.
As to Mortgaged Properties in regions that have recently experienced natural
disasters, neither the Seller nor Norwest Mortgage has undertaken the physical
inspection of such Mortgaged Properties. As a result, there can be no assur-
ance that material damage to any Mortgaged Property in an affected region has
not occurred. In the Pooling and Servicing Agreement, the Seller will repre-
sent and warrant that, as of the date of issuance of the Certificates, each
Mortgaged Property is undamaged by flood, water, fire, earthquake or earth
movement, windstorm, tornado or similar casualty (excluding casualty from the
presence of hazardous wastes or hazardous substances, as to which the Seller
makes no representation) so as to adversely affect the value of such Mortgaged
Property as security for such Mortgage Loan or the use for which such premises
were intended. In the event of a breach of such representation with respect to
a Mortgaged Property which materially and adversely affects the interests of
Certificateholders in the related Mortgage Loan, the Seller will be obligated
to repurchase or substitute for such Mortgage Loan, as described under "The
Mortgage Loan Programs -- Representations and Warranties" and "The Pooling and
Servicing Agreement -- Assignment of Mortgage Loans to the Trustee" in the
Prospectus. Repurchase of any such Mortgage Loan will affect in varying de-
grees the yields and weighted average lives of the Classes of Offered Certifi-
cates and could adversely affect the yield of any Offered Certificates pur-
chased at a premium.
No representation is made as to the rate of principal payments on the Mort-
gage Loans or as to the yield to maturity of any Class of Offered Certifi-
cates.
An investor should consider the risk that rapid rates of prepayments on the
Mortgage Loans, and therefore of amounts distributable in reduction of princi-
pal balance of the Offered Certificates, may coincide with periods of low pre-
vailing interest rates. During such periods, the effective interest rates on
securities in which an investor may choose to reinvest amounts distributed in
reduction of the principal balance of such investor's Offered Certificate may
be lower than the applicable Pass-Through Rate. Conversely, slower rates of
prepayments on the Mortgage Loans, and therefore of amounts distributable in
reduction of principal balance of the Offered Certificates, may coincide with
periods of high prevailing interest rates. During such periods, the amount of
principal distributions available to an investor for reinvestment at such high
prevailing interest rates may be relatively small.
DUE TO THE SPECIAL TAX TREATMENT OF RESIDUAL INTERESTS, THE AFTER-TAX RETURN
OF THE CLASS A-R AND CLASS A-LR CERTIFICATES MAY BE SIGNIFICANTLY LOWER THAN
WOULD BE THE CASE IF THE CLASS A-R AND CLASS A-LR
S-43
<PAGE>
CERTIFICATES WERE TAXED AS DEBT INSTRUMENTS, OR MAY BE NEGATIVE. See "Federal
Income Tax Considerations" herein.
As referred to herein, the "WEIGHTED AVERAGE LIFE" of a Class of Offered
Certificates (other than the Class A-3 and Class A-18 Certificates) refers to
the average amount of time that will elapse from the date of issuance of such
Class until each dollar in reduction of the Principal Balance of such Class is
distributed to the investor. The weighted average life of a Class A-3 Certifi-
cate is the average amount of time that will elapse between the date of issu-
ance of the Certificates and the date on which each dollar in reduction of the
Principal Balance of the Class A-1 Certificates (a portion of the Principal
Balance of which corresponds to the notional amount of the Class A-3 Certifi-
cates) is distributed to the investors in the Class A-1 Certificates. The
weighted average life of a Class A-18 Certificate is the average amount of
time that will elapse between the date of issuance of the Certificates and the
date on which each dollar in reduction of the Principal Balance of the Class
A-17 Certificates (the Principal Balance of which corresponds to the notional
amount of the Class A-18 Certificates) is distributed to the investors in the
Class A-17 Certificates.
THE WEIGHTED AVERAGE LIVES OF THE COMPANION CERTIFICATES WILL BE HIGHLY SEN-
SITIVE TO THE RATE OF PREPAYMENTS ON THE MORTGAGE LOANS. Specifically, on each
Distribution Date up to and including the Distribution Date on which the Prin-
cipal Balances of the Companion Certificates are reduced to zero, after the
PAC Principal Amounts have been distributed for such Distribution Date any Ex-
cess Principal Payments for such Distribution Date will be applied to such
Companion Certificates before being distributed to the PAC Certificates in the
priorities set forth above under "Description of the Certificates -- Principal
(Including Prepayments) -- Allocation of Amount to be Distributed on the Class
A Certificates." Further, the Companion Certificates will receive no distribu-
tions in reduction of principal on such Distribution Date from the Class A
Non-PO Principal Amount if the portion of the Class A Non-PO Principal Amount
available to make distributions of principal to the PAC Certificates in accor-
dance with the priorities set forth under "Description of the Certificates --
Principal (Including Prepayments) -- Allocation of Amount to be Distributed
on the Class A Certificates" is equal to or less than the PAC Principal
Amounts on such Distribution Date.
Prepayments on mortgage loans are commonly measured relative to a prepayment
standard or model. The model used in this Prospectus Supplement, the Standard
Prepayment Assumption ("SPA"), represents an assumed rate of prepayment each
month relative to the then outstanding principal balance of a pool of new
mortgage loans. A prepayment assumption of 100% SPA assumes constant prepay-
ment rates of 0.2% per annum of the then outstanding principal balance of such
mortgage loans in the first month of the life of the mortgage loans and an ad-
ditional 0.2% per annum in each month thereafter until the thirtieth month.
Beginning in the thirtieth month and in each month thereafter during the life
of the mortgage loans, 100% SPA assumes a constant prepayment rate of 6% per
annum each month. As used in the table below, "0% SPA" assumes prepayment
rates equal to 0% of SPA, i.e., no prepayments. SPA does not purport to be a
historical description of prepayment experience or a prediction of the antici-
pated rate of prepayment of any pool of mortgage loans, including the Mortgage
Loans.
The tables set forth below have been prepared on the basis of the character-
istics of the Mortgage Loans that are expected to be included in the Trust Es-
tate, as described under "Description of the Mortgage Loans." The tables set
forth below have been prepared assuming, among other things, the following
(the "STRUCTURING ASSUMPTIONS"): (i) the scheduled payment in each month for
each Mortgage Loan has been based on its outstanding balance as of the first
day of the month preceding the month of such payment, its Mortgage Interest
Rate and its remaining term to stated maturity, so that such scheduled pay-
ments would amortize the remaining balance over its remaining term to maturi-
ty, (ii) scheduled monthly payments of the principal and interest on the Mort-
gage Loans will be timely received on the first day of each month (with no de-
faults), commencing in 199 , (iii) the Seller does not repurchase any
Mortgage Loan and the Seller does not exercise its option to purchase the
Mortgage Loans and thereby cause a termination of the Trust Estate, (iv) prin-
cipal prepayments in full on the Mortgage Loans will be received on the last
day of each month commencing in 199 at the respective constant percent-
ages of SPA set forth in the tables and there are no partial principal prepay-
ments or Prepayment Interest Shortfalls, (v) the Certificates will be issued
on , 199 , (vi) distributions to Certificateholders will be made on the
25th day of each month, commencing in 199 , and (vii) the initial Principal
Balance of each Class of Offered Certificates (or, the initial Class A-3 and
Class A-18 Notional Amounts, in the case of the Class A-3 and Class A-18 Cer-
tificates) will be as set forth on the cover hereof and
S-44
<PAGE>
the Principal Balances of the Class A-PO, Class B-4, Class B-5 and Class B-6
Certificates are approximately $ , $ , $ and $ , respectively.
It is highly unlikely that the Mortgage Loans will prepay at any constant
rate, that all of the Mortgage Loans will prepay at the same rate or that the
Mortgage Loans will not experience any losses. In addition, there may be dif-
ferences between the characteristics of the mortgage loans ultimately included
in the Trust Estate and the Mortgage Loans which are expected to be included,
as described above. Any difference may have an effect upon the actual percent-
ages of initial Principal Balances (or initial Class A-3 and Class A-18
Notional Amounts, in the case of the Class A-3 and Class A-18 Certificates) of
the Classes of Certificates outstanding, the actual weighted average lives of
the Classes of Certificates and the date on which the Principal Balance (or
Class A-3 and Class A-18 Notional Amounts, in the case of Class A-3 and Class
A-18 Certificates) of any Class of Certificates is reduced to zero.
Based upon the foregoing assumptions, the following tables indicate the
weighted average life of each Class of Offered Certificates, and set forth the
percentages of the initial Principal Balance (or initial Class A-3 and Class
A-18 Notional Amounts, in the case of the Class A-3 and Class A-18 Certifi-
cates) of each Class of Offered Certificates that would be outstanding after
each of the dates shown at the constant percentages of SPA presented.
S-45
<PAGE>
PERCENTAGE OF INITIAL PRINCIPAL BALANCE/(1)/ OUTSTANDING FOR:
<TABLE>
<CAPTION>
CLASS A-1 AND CLASS A-3 CLASS A-2
CERTIFICATES AT THE CERTIFICATES AT THE
FOLLOWING PERCENTAGES FOLLOWING PERCENTAGES
OF OF
SPA SPA
----------------------- -----------------------
DISTRIBUTION DATE 0% % % % % % 0% % % % % %
- ----------------- --- --- --- --- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Weighted Average
life (years)/(2)/
</TABLE>
<TABLE>
<CAPTION>
CLASS A-4
CERTIFICATES AT THE CLASS A-5
FOLLOWING PERCENTAGES CERTIFICATES AT THE
OF FOLLOWING PERCENTAGES OF
SPA SPA
----------------------- ---------------------------
DISTRIBUTION DATE 0% % % % % % 0% % % % % % %
- ----------------- --- --- --- --- --- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Weighted Average
life (years)/(2)/
</TABLE>
- ---------------------
(1) With respect to the Class A-3 Certificates, percentages are expressed as a
percentage of the Initial Class A-3 Notional Amount.
(2) The weighted average life of an Offered Certificate is determined by (i)
multiplying the amount of each distribution in reduction of principal bal-
ance or notional amount by the number of years from the date of the issu-
ance of such Certificate to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate distribution in reduc-
tion of principal balance or notional amount referred to in clause (i).
S-46
<PAGE>
PERCENTAGE OF INITIAL PRINCIPAL BALANCE OUTSTANDING FOR:
<TABLE>
<CAPTION>
CLASS A-6 CLASS A-7 CLASS A-8
CERTIFICATES AT THE CERTIFICATES AT THE CERTIFICATES AT THE
FOLLOWING PERCENTAGES FOLLOWING PERCENTAGES FOLLOWING PERCENTAGES
OF OF OF
SPA SPA SPA
----------------------- ----------------------- -----------------------
DISTRIBUTION
DATE 0% % % % % % 0% % % % % % 0% % % % % %
- ------------ --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Weighted
Average Life
(years)/(1)/
</TABLE>
<TABLE>
<CAPTION>
CLASS A-9 CLASS A-10 CLASS A-11
CERTIFICATES AT THE CERTIFICATES AT THE CERTIFICATES AT THE
FOLLOWING PERCENTAGES FOLLOWING PERCENTAGES FOLLOWING PERCENTAGES
OF OF OF
SPA SPA SPA
----------------------- ----------------------- -----------------------
DISTRIBUTION
DATE 0% % % % % % 0% % % % % % 0% % % % % %
- ------------ --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Weighted
Average LIfe
(years)/(1)/
</TABLE>
- ---------------------
(1) The weighted average life of an Offered Certificate is determined by (i)
multiplying the amount of each distribution in reduction of principal bal-
ance by the number of years from the date of the issuance of such Certifi-
cate to the related Distribution Date, (ii) adding the results and
(iii) dividing the sum by the aggregate distributions in reduction of
principal balance referred to in clause (i).
S-47
<PAGE>
PERCENTAGE OF INITIAL PRINCIPAL BALANCE/(1)/ OUTSTANDING FOR:
<TABLE>
<CAPTION>
CLASS A-12 CLASS A-13, CLASS A-14
CERTIFICATES AT THE AND CLASS A-15
FOLLOWING CERTIFICATES AT THE
PERCENTAGES OF FOLLOWING PERCENTAGES
SPA OF
------------------- SPA
DISTRIBUTION -----------------------
DATE 0% % % % % 0% % % % % %
- ------------ --- --- --- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Weighted Average
Life (years)/(2)/
</TABLE>
<TABLE>
<CAPTION>
CLASS A-17 AND
CLASS A-18
CERTIFICATES AT
CLASS A-16 THE
CERTIFICATES AT THE FOLLOWING
FOLLOWING PERCENTAGES OF PERCENTAGES OF
SPA SPA
--------------------------- -------------------
DISTRIBUTION
DATE 0% % % % % % % 0% % % % %
- ------------ --- --- --- --- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Weighted Average
Life (years)/(2)/
</TABLE>
- ---------------------
(1) With respect to the Class A-18 Certificates, percentages are expressed as
a percentage of the initial Class A-18 Notional Amount.
(2) The weighted average life of an Offered Certificate is determined by (i)
multiplying the amount of each distribution in reduction of principal bal-
ance or notional amount by the number of years from the date of the issu-
ance of such Certificate to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate distributions in re-
duction of principal balance or notional amount referred to in clause (i).
S-48
<PAGE>
PERCENTAGE OF INITIAL PRINCIPAL BALANCE OUTSTANDING FOR:
<TABLE>
<CAPTION>
CLASS A-19 CLASS A-20
CERTIFICATES AT THE CERTIFICATES AT THE
FOLLOWING PERCENTAGES FOLLOWING PERCENTAGES
OF OF
SPA SPA
---------------------------- ----------------------------
DISTRIBUTION
DATE 0% % % % % 0% % % % %
- ------------ --- --- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Weighted Average
Life (years)/(1)/
</TABLE>
<TABLE>
<CAPTION>
CLASS A-R CLASS A-LR
CERTIFICATE AT THE CERTIFICATE AT THE
FOLLOWING PERCENTAGES FOLLOWING PERCENTAGES
OF OF
SPA SPA
---------------------------- ----------------------------
DISTRIBUTION
DATE 0% % % % % 0% % % % %
- ------------ --- --- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Weighted Average
Life (years)/(1)/
</TABLE>
- ---------------------
(1) The weighted average life of an Offered Certificate is determined by (i)
multiplying the amount of each distribution in reduction of principal bal-
ance by the number of years from the date of the issuance of such Certifi-
cate to the related Distribution Date, (ii) adding the results and
(iii) dividing the sum by the aggregate distributions in reduction of
principal balance referred to in clause (i).
S-49
<PAGE>
PERCENTAGE OF INITIAL PRINCIPAL BALANCE OUTSTANDING FOR:
<TABLE>
<CAPTION>
CLASS B-1, CLASS B-2 AND CLASS B-3
CERTIFICATES AT THE
FOLLOWING PERCENTAGES OF
SPA
---------------------------------------------------------------------------
DISTRIBUTION
DATE 0% % % % %
- ------------ --- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Weighted Average
Life (years)/(1)/
</TABLE>
- ---------------------
(1) The weighted average life of an Offered Certificate is determined by (i)
multiplying the amount of each distribution in reduction of principal bal-
ance by the number of years from the date of the issuance of such Certifi-
cate to the related Distribution Date, (ii) adding the results and
(iii) dividing the sum by the aggregate distributions in reduction of
principal balance referred to in clause (i).
S-50
<PAGE>
Interest accrued on the Offered Certificates will be reduced by the amount
of any interest portions of Realized Losses allocated to such Certificates as
described under "Description of the Certificates -- Interest" herein. The
yield to maturity on the Offered Certificates will be less than the yield oth-
erwise produced by their respective Pass-Through Rates and the prices at which
such Certificates are purchased because the interest which accrues on the
Mortgage Loans during each month will not be passed through to
Certificateholders until the 25th day of the month following the end of such
month (or if such 25th day is not a business day, the following business day).
The Seller intends to file certain additional yield tables and other compu-
tational materials with respect to one or more Classes of Offered Certificates
with the Securities and Exchange Commission in a Report on Form 8-K. See "In-
corporation of Certain Information By Reference" in the Prospectus. Such ta-
bles and materials will have been prepared by the Underwriters at the request
of certain prospective investors, based on assumptions provided by, and satis-
fying the special requirements of, such investors. Such tables and assumptions
may be based on assumptions that differ from the Structuring Assumptions. Ac-
cordingly, such tables and other materials may not be relevant to or appropri-
ate for investors other than those specifically requesting them.
SENSITIVITY OF THE CLASS A-3, CLASS A-12 AND CLASS A-18 CERTIFICATES
THE YIELD TO MATURITY TO INVESTORS IN THE CLASS A-3, CLASS A-12 AND CLASS A-
18 CERTIFICATES WILL BE HIGHLY SENSITIVE TO THE RATE AND TIMING OF PRINCIPAL
PAYMENTS (INCLUDING PREPAYMENTS) ON THE MORTGAGE LOANS, WHICH RATE MAY FLUCTU-
ATE SIGNIFICANTLY FROM TIME TO TIME. AN INVESTOR SHOULD FULLY CONSIDER THE AS-
SOCIATED RISKS, INCLUDING THE RISK THAT A RAPID RATE OF PRINCIPAL PAYMENTS
(INCLUDING PREPAYMENTS), IN THE CASE OF THE CLASS A-3 AND CLASS A-18 CERTIFI-
CATES, COULD RESULT IN THE FAILURE OF AN INVESTOR IN THE CLASS A-3 AND CLASS
A-18 CERTIFICATES TO FULLY RECOVER ITS INITIAL INVESTMENT OR THE RISK THAT A
RELATIVELY LOW RATE OF PRINCIPAL PAYMENTS (INCLUDING PREPAYMENTS), IN THE CASE
OF THE CLASS A-12 CERTIFICATES, WILL HAVE A NEGATIVE EFFECT ON THE YIELD TO
MATURITY TO AN INVESTOR IN THE CLASS A-12 CERTIFICATES.
The following tables indicate the sensitivities to various rates of prepay-
ment on the Mortgage Loans of the pre-tax yields to maturity on a corporate
bond equivalent ("CBE") basis of the Class A-3, Class A-12 and Class A-18 Cer-
tificates. Such calculations are based on distributions made in accordance
with "Description of the Certificates" above, on the Structuring Assumptions
and on the further assumption that the Class A-3, Class A-12 and Class A-18
Certificates will be purchased on , 199 at a purchase price equal to, in
the case of the Class A-3 Certificates, approximately % of the initial Class
A-3 Notional Amount plus accrued interest thereon from , 199 to (but not
including) , 199 , in the case of the Class A-12 Certificates, approxi-
mately % of initial Principal Balance of the Class A-12 Certificates and
in the case of the Class A-18 Certificates, approximately % of the initial
Class A-18 Notional Amount plus accrued interest thereon from , 199 to
(but not including) , 199 .
SENSITIVITY OF THE PRE-TAX YIELD TO MATURITY OF THE CLASS A-3 CERTIFICATES TO
PREPAYMENTS
<TABLE>
<CAPTION>
PERCENTAGES OF PSA
---------------------------
% % % % % %
--- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Pre-Tax Yield to Maturity (CBE).....................
</TABLE>
SENSITIVITY OF THE PRE-TAX YIELD TO MATURITY OF THE CLASS A-12 CERTIFICATES TO
PREPAYMENTS
<TABLE>
<CAPTION>
PERCENTAGES OF PSA
-----------------------
% % % % %
--- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Pre-Tax Yield to Maturity (CBE).........................
</TABLE>
SENSITIVITY OF THE PRE-TAX YIELD TO MATURITY OF THE CLASS A-18 CERTIFICATES TO
PREPAYMENTS
<TABLE>
<CAPTION>
PERCENTAGES OF PSA
-----------------------
% % % % % %
--- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Pre-Tax Yield to Maturity (CBE).........................
</TABLE>
The pre-tax yields to maturity set forth in the preceding tables were calcu-
lated by (i) determining the monthly discount rates which, when applied to the
assumed stream of cash flows to be paid on the Class A-3,
S-51
<PAGE>
Class A-12 and Class A-18 Certificates would cause the discounted present
value of such assumed stream of cash flows to equal an assumed purchase price
for the Class A-3 Certificates equal to approximately % of the initial
Class A-3 Notional Amount plus accrued interest from , 199 to (but not
including) , 199 , for the Class A-12 Certificates an assumed purchase
price equal to approximately % of the initial Principal Balance of the
Class A-12 Certificates and for the Class A-18 Certificates an assumed pur-
chase price equal to approximately % of the initial Class A-18 Notional
Amount plus accrued interest from , 199 to (but not including) , 199 ;
and (ii) converting such monthly rates to corporate bond equivalent rates.
Such calculations do not take into account the interest rates at which invest-
ors may be able to reinvest funds received by such investors as distributions
on the Class A-3, Class A-12 or Class A-18 Certificates and consequently do
not purport to reflect the return on any investment in the Class A-3, Class A-
12 or Class A-18 Certificates when such reinvestment rates are considered.
Notwithstanding the assumed prepayment rates reflected in the preceding ta-
bles, it is highly unlikely that the Mortgage Loans will prepay at a constant
rate until maturity, that all of the Mortgage Loans will prepay at the same
rate or that the Mortgage Loans will not experience any losses. The Mortgage
Loans initially included in the Trust Estate may differ from those currently
expected to be included in the Trust Estate, and thereafter may be changed as
a result of permitted substitutions. As a result of these factors, the pre-tax
yields to maturity on the Class A-3, Class A-12 and Class A-18 Certificates
are likely to differ from those shown in such tables, even if all of the Mort-
gage Loans prepay at the indicated percentages of SPA.
YIELD CONSIDERATIONS WITH RESPECT TO THE CLASS B-2 AND CLASS B-3 CERTIFICATES
Defaults on mortgage loans may be measured relative to a default standard or
model. The model used in this Prospectus Supplement, the standard default as-
sumption ("SDA"), represents an assumed rate of default each month relative to
the then-outstanding performing principal balance of a pool of new mortgage
loans. A default assumption of 100% SDA assumes constant default rates of
0.02% per annum of the then-outstanding principal balance of such mortgage
loans in the first month of the life of the mortgage loans and an additional
0.02% per annum in each month thereafter until the 30th month. Beginning in
the 30th month and in each month thereafter through the 60th month of the life
of the mortgage loans, 100% SDA assumes a constant default rate of 0.60% per
annum each month. Beginning in the 61st month and in each month thereafter
through the 120th month of the life of the mortgage loans, 100% SDA assumes
that the constant default rate declines each month by 0.0095% per annum, and
that the constant default rate remains at 0.03% per annum in each month after
the 120th month. For the purposes of the following tables, it is assumed that
there is no delay between the default and liquidation of the mortgage loans.
As used in the following tables, "0% SDA" assumes default rates equal to 0% of
SDA (no defaults). SDA does not purport to be a historical description of de-
fault experience or a prediction of the anticipated rate of default of any
pool of mortgage loans, including the Mortgage Loans.
The following tables indicate the sensitivity of the pre-tax yield to matu-
rity on the Class B-2 and Class B-3 Certificates to various rates of prepay-
ment and varying levels of aggregate Realized Losses. The tables set forth be-
low are based upon, among other things, the Structuring Assumptions (other
than the assumption that no defaults shall have occurred with respect to the
Mortgage Loans) and the additional assumption that liquidations (other than
those scenarios indicated as 0% of SDA (no defaults)) occur monthly on the
last day of the preceding month at the percentages of SDA set forth in the ta-
ble.
In addition, it was assumed that (i) Realized Losses on liquidations of %
or % of the outstanding principal balance of such liquidated Mortgage Loans,
as indicated in the tables below (referred to as a "LOSS SEVERITY PERCENTAGE")
will occur at the time of liquidation, (ii) there are no Special Hazard Loss-
es, Fraud Losses or Bankruptcy Losses and (iii) the Class B-2 and Class B-3
Certificates are purchased on , 199 at assumed purchase prices equal to
% and %, respectively, of the Principal Balances thereof plus ac-
crued interest from , 199 to (but not including) , 199 .
It is highly unlikely that the Mortgage Loans will have the precise charac-
teristics referred to herein or that they will prepay or liquidate at any of
the rates specified or that the Realized Losses will be incurred according to
one particular pattern. The assumed percentages of SDA and SPA and the loss
severities shown in the tables below are for illustrative purposes only and
the Seller makes no representations with respect to the reasonableness of such
assumptions or that the actual rates of prepayment and liquidation and loss
severity experience of the Mortgage Loans will in any way correspond to any of
the assumptions made herein. For these reasons, and
S-52
<PAGE>
because the timing of cash flows is critical to determining yield, the pre-tax
yields to maturity of the Class B-2 and Class B-3 Certificates are likely to
differ from the pre-tax yields to maturity shown below in the tables.
The pre-tax yields to maturity set forth in the following tables were calcu-
lated by determining the monthly discount rates which, when applied to the as-
sumed streams of cash flows to be paid on the Class B-2 and Class B-3 Certifi-
cates, would cause the discounted present value of such assumed streams of
cash flows to equal the aggregate assumed purchase prices of the Class B-2 and
Class B-3 Certificates set forth above. In all cases, monthly rates were then
converted to the semi-annual corporate bond equivalent yields shown below. Im-
plicit in the use of any discounted present value or internal rate of return
calculations such as these is the assumption that intermediate cash flows are
reinvested at the discount rate or internal rate of return. Thus, these calcu-
lations do not take into account the different interest rates at which invest-
ors may be able to reinvest funds received by them as distributions on the
Class B-2 and Class B-3 Certificates. Consequently, these yields do not pur-
port to reflect the total return on any investment in the Class B-2 and Class
B-3 Certificates when such reinvestment rates are considered.
SENSITIVITY OF PRE-TAX YIELDS TO MATURITY OF THE CLASS B-2 CERTIFICATES TO
PREPAYMENTS AND REALIZED LOSSES
<TABLE>
<CAPTION>
LOSS PERCENTAGE OF SPA
PERCENTAGE SEVERITY -------------------
OF SDA PERCENTAGE % % % % %
- ------------------------------------------------ ---------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
0%............................................
50%............................................
50%............................................
75%............................................
75%............................................
100%............................................
100%............................................
150%............................................
150%............................................
SENSITIVITY OF PRE-TAX YIELDS TO MATURITY OF THE CLASS B-3
CERTIFICATES TO PREPAYMENTS AND REALIZED LOSSES
<CAPTION>
LOSS PERCENTAGE OF SPA
PERCENTAGE SEVERITY -------------------
OF SDA PERCENTAGE % % % % %
- ------------------------------------------------ ---------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
0%............................................
50%............................................
50%............................................
75%............................................
75%............................................
100%............................................
100%............................................
150%............................................
150%............................................
</TABLE>
Investors are urged to make their investment decisions based on their deter-
minations as to anticipated rates of prepayment and Realized Losses under a
variety of scenarios. Investors in Class B-2 and Class B-3 Certificates should
fully consider the risk that Realized Losses on the Mortgage Loans could re-
sult in the failure of such investors to fully recover their investments.
S-53
<PAGE>
The following table sets forth the amount of Realized Losses that would be
incurred with respect to the Mortgage Loans, expressed as a percentage of the
aggregate outstanding principal balance of the Mortgage Loans as of the Cut-
Off Date.
AGGREGATE REALIZED LOSSES
<TABLE>
<CAPTION>
LOSS PERCENTAGE OF SPA
PERCENTAGE SEVERITY -----------------------
OF SDA PERCENTAGE % % % % %
- -------------------------------------------- ---------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
50%........................................
50%........................................
75%........................................
75%........................................
100%........................................
100%........................................
150%........................................
150%........................................
</TABLE>
Investors are urged to make their investment decisions based on their deter-
minations as to anticipated rates of prepayment and Realized Losses under a
variety of scenarios. Investors in Class B-2 and Class B-3 Certificates should
fully consider the risk that Realized Losses on the Mortgage Loans could re-
sult in the failure of such investors to fully recover their investments.
S-54
<PAGE>
POOLING AND SERVICING AGREEMENT
GENERAL
The Certificates will be issued pursuant to a Pooling and Servicing Agree-
ment to be dated as of the date of initial issuance of the Certificates (the
"POOLING AND SERVICING AGREEMENT") among the Seller, the Master Servicer and
the Trustee. Reference is made to the Prospectus for important additional in-
formation regarding the terms and conditions of the Pooling and Servicing
Agreement and the Certificates. See "Description of the Certificates," "Ser-
vicing of the Mortgage Loans" and "The Pooling and Servicing Agreement" in the
Prospectus.
The Trust Estate created pursuant to the Pooling and Servicing Agreement
will consist of (i) the Mortgage Loans as described under "Description of the
Mortgage Loans," (ii) such assets as from time to time are identified as de-
posited in any account held for the benefit of the Certificateholders, (iii)
any Mortgaged Properties acquired on behalf of the Certificateholders by fore-
closure or by deed in lieu of foreclosure after the date of original issuance
of the Certificates and (iv) the rights of the Trustee to receive the proceeds
of all insurance policies and performance bonds, if any, required to be main-
tained pursuant to the Pooling and Servicing Agreement.
DISTRIBUTIONS
Distributions (other than the final distribution in retirement of the Of-
fered Certificates of each Class) will be made by check mailed to the address
of the person entitled thereto as it appears on the Certificate Register. How-
ever, with respect to any holder of an Offered Certificate evidencing at least
a $500,000 initial Principal Balance, or any holder of a Class A-3 and Class
A-18 Certificate evidencing a 100% Percentage Interest, distributions will be
made on each Distribution Date by wire transfer in immediately available
funds. The final distribution in respect of each Class of Offered Certificates
will be made only upon presentation and surrender of the related Certificate
at the office or agency appointed by the Trustee specified in the notice of
final distribution with respect to the related Class. See "Description of the
Certificates -- General" in the Prospectus.
DTC will receive distributions on the Book-Entry Certificates from the
Trustee and transmit them to participants for distribution to Beneficial Own-
ers or their nominees.
VOTING
With respect to any provisions of the Pooling and Servicing Agreement pro-
viding for the action, consent or approval of the holders of all Certificates
evidencing specified Voting Interests in the Trust Estate, the Class A-3 and
Class A-18 Certificates will each be entitled to 1% of the aggregate Voting
Interest represented by all Certificates and each remaining Class of Certifi-
cates will be entitled to a pro rata portion of the remaining Voting Interest
based on the outstanding Principal Balance of such Class. Each
Certificateholder of a Class will have a Voting Interest equal to the product
of the Voting Interest to which such Class is collectively entitled and the
Percentage Interest in such Class represented by such holder's Certificates.
With respect to any provisions of the Pooling and Servicing Agreement provid-
ing for action, consent or approval of each Class of Certificates or specified
Classes of Certificates, each Certificateholder of a Class will have a Voting
Interest in such Class equal to such holder's Percentage Interest in such
Class. Unless Definitive Certificates are issued as described above, Benefi-
cial Owners of Book-Entry Certificates may exercise their voting rights only
through Participants.
TRUSTEE
The Trustee for the Certificates will be . The cor-
porate trust office of the Trustee is located at . See
"The Pooling and Servicing Agreement -- The Trustee" in the Prospectus. The
Trustee will be required to make Periodic Advances to the limited extent de-
scribed herein. See "Description of the Certificates -- Periodic Advances"
herein.
MASTER SERVICER
Norwest Bank will act as "MASTER SERVICER" of the Mortgage Loans and, in
that capacity, will supervise the servicing of the Mortgage Loans, cause the
Mortgage Loans to be serviced in the event a Servicer is terminated and a suc-
cessor servicer is not appointed, provide certain reports to the Trustee re-
garding the Mortgage Loans and the Certificates and make Periodic Advances to
the limited extent described herein. See "De-
S-55
<PAGE>
scription of the Certificates -- Periodic Advances" herein. Under the Pooling
and Servicing Agreement, any good faith interpretation of the Master Servicer
of any provisions of the Pooling and Servicing Agreement relating to the dis-
tributions to be made on or the allocation of any losses to the Certificates
which the Master Servicer concludes are ambiguous or unclear will be binding
on Certificateholders. The Master Servicer will be entitled to a "MASTER SER-
VICING FEE" payable monthly equal to the product of (i) 1/12th of 0.17% (the
"MASTER SERVICING FEE RATE") and (ii) the aggregate Scheduled Principal Bal-
ances of the Mortgage Loans as of the first day of each month. The Master
Servicer will pay all administrative expenses to the Trust Estate subject to
reimbursement as described under "Master Servicer" in the Prospectus.
SPECIAL SERVICING AGREEMENTS
The Pooling and Servicing Agreement may permit the Master Servicer to enter
into a special servicing agreement with an unaffiliated holder of a Class of
Class B Certificates or of a class of securities representing interests in one
or more Classes of Class B Certificates and/or other subordinated mortgage
pass-through certificates. Pursuant to such an agreement, such holder may in-
struct the Master Servicer to instruct the Servicers, to the extent provided
in the applicable Underlying Servicing Agreement to commence or delay foreclo-
sure proceedings with respect to delinquent Mortgage Loans. Such commencement
or delay at such holder's direction will be taken by the Master Servicer only
after such holder deposits a specified amount of cash with the Master
Servicer. Such cash will be available for distribution to Certificateholders
if Liquidation Proceeds are less than they otherwise may have been had the
Servicers acted pursuant to their normal servicing procedures.
OPTIONAL TERMINATION
The Seller may purchase from the Trust Estate all of the Mortgage Loans, and
thereby effect early retirement of the Certificates, on any Distribution Date
when the aggregate Scheduled Principal Balance of the Mortgage Loans is less
than 10% of the aggregate unpaid principal balance of the Mortgage Loans as of
the Cut-Off Date. Any such purchase is required to be made only in connection
with a "qualified liquidation" of each of the Upper-Tier REMIC and the Lower-
Tier REMIC within the meaning of Section 860F(a)(4)(A) of the Code. The pur-
chase price will generally be equal to the unpaid principal balance of each
Mortgage Loan plus the fair market value of other property (including any
Mortgaged Property title to which has been acquired by the Trust Estate ("REO
PROPERTY")) in the Trust Estate plus accrued interest. In the event the Trust
Estate is liquidated as described above, holders of the Certificates, to the
extent funds are available, will receive the unpaid principal balance of their
Certificates and any accrued and unpaid interest thereon. The amount, if any,
remaining in the Certificate Account after the payment of all principal and
interest on the Certificates and expenses of the Upper-Tier REMIC and the
Lower-Tier REMIC will be distributed to the holder of the Class A-LR Certifi-
cate. See "Description of the Certificates -- Additional Rights of the Class
A-R and Class A-LR Certificateholders" herein and "The Pooling and Servicing
Agreement -- Termination; Optional Purchase of Mortgage Loans" in the Prospec-
tus. The exercise of the foregoing option will be in the Seller's sole discre-
tion. Without limitation, the Seller may enter into agreements with third par-
ties to (i) exercise such option at the direction of such third party or (ii)
forbear from the exercise of such option.
SERVICING OF THE MORTGAGE LOANS
Norwest Mortgage and the other servicers listed below (the "OTHER
SERVICERS," and collectively with Norwest Mortgage, the "SERVICERS") will
service the Mortgage Loans, each pursuant to a separate Underlying Servicing
Agreement. The rights to enforce the related Servicer's obligations under each
Underlying Servicing Agreement with respect to the related Mortgage Loans will
be assigned to the Trustee for the benefit of Certificateholders. Among other
things, the Servicers are obligated under certain circumstances to advance de-
linquent payments of principal and interest with respect to the Mortgage
Loans. See "Servicing of the Mortgage Loans" in the Prospectus.
S-56
<PAGE>
THE SERVICERS
The Mortgage Loans initially will be serviced by the following entities:
<TABLE>
<CAPTION>
APPROXIMATE PERCENTAGE OF
AGGREGATE UNPAID PRINCIPAL BALANCE
NAME OF SERVICER AS OF THE CUT-OFF DATE SERVICED
---------------- ----------------------------------
<S> <C>
Norwest Mortgage, Inc. ...................
-------
Total................................... 100.00%
=======
</TABLE>
SERVICER CUSTODIAL ACCOUNTS
Each Servicer is required to establish and maintain a custodial account for
principal and interest (each such account, a "SERVICER CUSTODIAL ACCOUNT"),
into which it will deposit all collections of principal (including principal
prepayments and Liquidation Proceeds in respect of principal, if any) and in-
terest (net of Servicing Fees) on any Mortgage Loan that such Servicer servic-
es, related insurance proceeds, advances made from the Servicer's own funds
and the proceeds of any purchase of a related Mortgage Loan for breach of a
representation or warranty or the sale of a Mortgaged Property in connection
with liquidation of the related Mortgage Loan. All Servicer Custodial Accounts
are required to be held in a depository institution and invested in the manner
specified in the related Underlying Servicing Agreement. Funds in such ac-
counts generally must be held separate and apart from the assets of the
Servicer and generally may not be commingled with funds held by a Servicer
with respect to mortgage loans other than the Mortgage Loans.
Not later than the Remittance Date, the Servicers are obligated to remit to
the Certificate Account amounts on deposit in the Servicer Custodial Account
as of the close of business on the business day preceding the Remittance Date
as described in the Prospectus under "Servicing of the Mortgage Loans -- Pay-
ments on Mortgage Loans".
UNSCHEDULED PRINCIPAL RECEIPTS
The Pooling and Servicing Agreement specifies, as to each type of
Unscheduled Principal Receipt, a period (as to each type of Unscheduled Prin-
cipal Receipt, the "UNSCHEDULED PRINCIPAL RECEIPT PERIOD") during which all
Unscheduled Principal Receipts of such type received by the Servicers will be
distributed to Certificateholders on the related Distribution Date. Each
Unscheduled Principal Receipt Period will either be (i) the one month period
ending on the last day of the calendar month preceding the month in which the
applicable Remittance Date occurs (such period a "PRIOR MONTH RECEIPT PERIOD")
or (ii) the one month period ending on the day preceding the Determination
Date preceding the applicable Remittance Date (such period a "MID-MONTH RE-
CEIPT PERIOD").
With respect to the certain Mortgage Loans serviced by Norwest Mortgage
("NORWEST TYPE 1 LOANS"), the Unscheduled Principal Receipt Period with re-
spect to all types of Unscheduled Principal Receipts is a Mid-Month Receipt
Period. With respect to the certain other Mortgage Loans serviced by Norwest
Mortgage ("NORWEST TYPE 2 LOANS") and Mortgage Loans serviced by certain Other
Servicers, the Unscheduled Principal Receipt Period with respect to all types
of Unscheduled Principal Receipts is a Prior Month Receipt Period. For
S-57
<PAGE>
certain Other Servicers, the Unscheduled Principal Receipt Period with respect
to partial Unscheduled Principal Receipts is a Prior Month Receipt Period and
with respect to Unscheduled Principal Receipts in full is a Mid-Month Receipt
Period. Approximately % and % of the aggregate unpaid principal balance of
the Mortgage Loans as of the Cut-Off Date were Norwest Type 1 Loans and
Norwest Type 2 Loans, respectively.
ANTICIPATED CHANGES IN SERVICING
Changes in Timing of Remittances of Unscheduled Principal Receipts in Full
and Elimination of Month End Interest. The Pooling and Servicing Agreement
will provide that the Master Servicer may (but is not required), from time to
time and without the consent of any Certificateholder or the Trustee, require
Norwest Mortgage as Servicer under the related Underlying Servicing Agreement
to or enter into an amendment to any applicable Underlying Servicing Agreement
to require any Other Servicer to, remit Unscheduled Principal Receipts in full
to the Master Servicer for deposit into the Certificate Account daily on a
specified business day following receipt thereof (to the extent such Other
Servicer is not currently remitting such amount on a daily basis) which will
generally result in a deposit earlier than on the following Remittance Date.
In conjunction with any such change, the applicable Servicer may be relieved
of its obligation to remit Month End Interest and certain other conforming
changes may be made. Such changes would have an effect on the amount of Com-
pensating Interest as described herein under the heading "Description of the
Certificates -- Interest." Further, the Pooling and Servicing Agreement will
provide that the Master Servicer may (but is not required to), without the
consent of any Certificateholder or the Trustee, require Norwest Mortgage or
any successor thereto under the applicable Underlying Servicing Agreement to
make remittances to the Certificate Account (other than any remittances which
are required to be made daily) on the 18th day of each month, or if such 18th
day is not a business day, on the preceding business day. No assurance can be
given as to the timing of any such changes or that any such changes will oc-
cur.
Changes in Unscheduled Principal Receipt Period. The Pooling and Servicing
Agreement will provide that the Master Servicer may (but is not required to),
from time to time and without the consent of any Certificateholder or the
Trustee, (i) direct Norwest Mortgage, as Servicer under the related Underlying
Servicing Agreement, to change the Unscheduled Principal Receipt Period appli-
cable to any type of Unscheduled Principal Receipt within the parameters de-
scribed in (i), (ii) and (iii) below or (ii) with respect to any Other
Servicer, enter into an amendment to any applicable Underlying Servicing
Agreement for the purpose of changing the Unscheduled Principal Receipt Period
applicable to any type of Unscheduled Principal Receipt within the parameters
described in (iv) below and making any necessary conforming changes incident
thereto. In connection therewith, (i) the Unscheduled Principal Receipt Period
for the Norwest Type 2 Loans may be changed (to achieve consistency with the
Norwest Type 1 Loans) to a Mid-Month Receipt Period with respect to all types
of Unscheduled Principal Receipts; (ii) the Unscheduled Principal Receipt Pe-
riod for the Norwest Type 2 Loans may be changed to achieve an Unscheduled
Principal Receipt Period regime (the "TARGET REGIME") under which the
Unscheduled Principal Receipt Period with respect to partial Unscheduled Prin-
cipal Receipts would be a Prior Month Receipt Period and the Unscheduled Prin-
cipal Receipt Period with respect to Unscheduled Principal Receipts in full
would be a Mid-Month Receipt Period; (iii) the Unscheduled Principal Receipt
Period for the Norwest Type 1 Loans may be changed to the Target Regime and
(iv) the Unscheduled Principal Receipt Periods for the Mortgage Loans serviced
by Other Servicers which do not currently conform to the Target Regime may be
changed to the Target Regime.
Because Unscheduled Principal Receipts will result in interest shortfalls to
the extent that they are not distributed to Certificateholders in the month in
which they are received by the applicable Servicer, changing the applicable
Unscheduled Principal Receipt Period from a Mid-Month Receipt Period to a
Prior Month Receipt Period may have the effect of increasing the amount of in-
terest shortfalls with respect to the applicable type of Unscheduled Principal
Receipt. Conversely, changing the applicable Unscheduled Principal Receipt Pe-
riod from a Prior Month Receipt Period to a Mid-Month Receipt Period may de-
crease the amount of interest shortfalls with respect to the applicable type
of Unscheduled Principal Receipt. See "Description of the Certificates--Inter-
est." No assurance can be given as to the timing of any change to any
Unscheduled Principal Receipt Period or that any such changes will occur.
S-58
<PAGE>
FIXED RETAINED YIELD; SERVICING COMPENSATION AND PAYMENT OF EXPENSES
A fixed percentage of the interest on each Mortgage Loan (the "FIXED RE-
TAINED YIELD") with a per annum Mortgage Interest Rate greater than (i) the
sum of (a) %, (b) the Servicing Fee Rate and (c) the Master Servicing Fee
Rate, which will be determined on a loan by loan basis and will equal the
Mortgage Interest Rate on each Mortgage Loan minus the rate described in
clause (i), will not be included in the Trust Estate. There will be no Fixed
Retained Yield on any Mortgage Loan with a Mortgage Interest Rate equal to or
less than the rate described in clause (i). See "Servicing of the Mortgage
Loans -- Fixed Retained Yield, Servicing Compensation and Payment of Expenses"
in the Prospectus for further information regarding Fixed Retained Yield.
The primary compensation payable to each of the Servicers is the aggregate
of the Servicing Fees applicable to the related Mortgage Loans. The Servicing
Fee applicable to each Mortgage Loan is expressed as a fixed percentage (the
"SERVICING FEE RATE") of the scheduled principal balance (as defined in the
Underlying Servicing Agreement) of such Mortgage Loan as of the first day of
each month. The Servicing Fee Rate for each Mortgage Loan is % per annum.
The Servicers also are entitled to additional servicing compensation as de-
scribed in the Prospectus under "Servicing of the Mortgage Loans -- Fixed Re-
tained Yield, Servicing Compensation and Payment of Expenses."
The Master Servicer will pay all routine expenses, including fees of the
Trustee incurred in connection with its responsibilities under the Pooling and
Servicing Agreement, subject to certain rights of reimbursement as described
in the Prospectus. The servicing fees and other expenses of the Upper-Tier
REMIC and Lower-Tier REMIC will be allocated to the holder of the Class A-R
and Class A-LR Certificates, respectively. Unless and until applicable author-
ity provides otherwise, the Seller intends to treat all such expenses as in-
curred by the Lower-Tier REMIC and, therefore as allocable to the holder of
the Class A-LR Certificate. See "Federal Income Tax Considerations" herein and
"Certain Federal Income Tax Consequences -- Federal Income Tax Consequences
for REMIC Certificates -- Limitations on Deduction of Certain Expenses" in the
Prospectus.
SERVICER DEFAULTS
The Trustee will have the right pursuant to the Underlying Servicing Agree-
ments to terminate a Servicer in certain events, including the breach by such
Servicer of any of its material obligations under its Underlying Servicing
Agreement. In the event of such termination, (i) the Trustee may enter into a
substitute Underlying Servicing Agreement with the Master Servicer or, at the
Master Servicer's nomination, another servicing institution acceptable to the
Trustee and each Rating Agency; and (ii) the Master Servicer shall assume cer-
tain of the Servicer's servicing obligations under such Underlying Servicing
Agreement, including the obligation to make Periodic Advances (limited as pro-
vided herein under the heading "Description of the Certificates -- Periodic
Advances"), until such time as a successor servicer is appointed. See "Servic-
ing of the Mortgage Loans -- Fixed Retained Yield, Servicing Compensation and
Payment of Expenses" in the Prospectus.
FEDERAL INCOME TAX CONSIDERATIONS
The following discussion represents the opinion of Cadwalader, Wickersham &
Taft as to the anticipated material federal income tax consequences of the
purchase, ownership and disposition of the Offered Certificates.
The Trust Estate will consist of two segregated asset groupings, each of
which will qualify as a REMIC for federal income tax purposes. One REMIC (the
"LOWER-TIER REMIC") will issue certain uncertificated interests (each, a "LOW-
ER-TIER REMIC REGULAR INTEREST"), each of which will be designated as a regu-
lar interest in the Lower-Tier REMIC, and the Class A-LR Certificate, which
will be designated as the residual interest in the Lower-Tier REMIC. The as-
sets of the Lower-Tier REMIC will include the Mortgage Loans (exclusive of
Fixed Retained Yield), together with the amounts held by the Master Servicer
in a separate account in which collections on the Mortgage Loans will be de-
posited (the "CERTIFICATE ACCOUNT"), the hazard insurance policies and primary
mortgage insurance policies, if any, relating to the Mortgage Loans and any
property that secured a Mortgage Loan that is acquired by foreclosure or deed
in lieu of foreclosure.
The second REMIC (the "UPPER-TIER REMIC") will issue all Classes of the
Class A Certificates (other than the Class A-LR Certificate) and all Class B
Certificates. Each Class of Offered Certificates (other than the Class A-R and
Class A-LR Certificates) (collectively, the "REGULAR CERTIFICATES"), together
with each Class of
S-59
<PAGE>
Certificates not offered hereby, will be designated as regular interests in
the Upper-Tier REMIC, and the Class A-R Certificate will be designated as the
residual interest in the Upper-Tier REMIC. The regular interests and the re-
sidual interest in the Upper-Tier REMIC are referred to herein collectively as
the "UPPER-TIER CERTIFICATES." The Class A-R and Class A-LR Certificates are
"RESIDUAL CERTIFICATES" for purposes of the Prospectus. The assets of the Up-
per-Tier REMIC will include the uncertificated Lower-Tier REMIC Regular Inter-
ests and a separate account in which distributions on the uncertificated Low-
er-Tier REMIC Regular Interests will be deposited. The aggregate amount dis-
tributed to the holders of the Upper-Tier Certificates, payable from such sep-
arate account, will be equal to the aggregate distributions in respect of the
Mortgage Loans on the uncertificated Lower-Tier REMIC Regular Interests.
The Offered Certificates will be treated as "loans . . . secured by an in-
terest in real property which is . . . residential real property" for a domes-
tic building and loan association, "real estate assets" for a real estate in-
vestment trust and, other than the Class A-R and Class A-LR Certificates,
"qualified mortgages" for a REMIC and "permitted assets" for a financial asset
securitization investment trust, to the extent described in the Prospectus.
REGULAR CERTIFICATES
The Regular Certificates generally will be treated as newly originated debt
instruments for federal income tax purposes. Beneficial Owners (or, in the
case of Definitive Certificates, holders) of the Regular Certificates will be
required to report income on such Certificates in accordance with the accrual
method of accounting.
The Class A-12 Certificates will be issued with original issue discount in
an amount equal to the excess of the initial Principal Balance thereof over
their issue price. The Class A- , Class A- , Class A- , Class A- , Class A-
and Class A- Certificates will be issued with original issue discount in an
amount equal to the excess of the sum of all distributions of principal and
interest (whether current or accrued) expected to be received thereon over
their respective issue prices (including accrued interest). It is anticipated
that the Class B- Certificates will be issued with original issue discount in
an amount equal to the excess of their initial Principal Balance (plus one day
of interest at the Pass-Through Rate thereon) over their issue price (includ-
ing accrued interest). It is also anticipated that the Class A- , Class A- ,
Class A- , Class A- , Class A- and Class A- Certificates will be issued at a
premium and that the Class A- , Class A- , Class A- , Class A- , Class A- ,
Class B- and Class B- Certificates will be issued with de minimis original
issue discount for federal income tax purposes. Finally, it is anticipated
that the Class A-PO, Class B-4, Class B-5 and Class B-6 Certificates, which
are not offered hereby, will be issued with original issue discount for fed-
eral income tax purposes.
Although unclear for federal income tax purposes, it is anticipated that the
Class A-3 and Class A-18 Certificates will be considered to be issued with
original issue discount in an amount equal to the excess of all distributions
of interest expected to be received thereon over their issue price (including
accrued interest). Any "negative" amounts of original issue discount on the
Class A-3 or Class A-18 Certificates attributable to rapid prepayments with
respect to the Mortgage Loans will not be deductible currently, but may be
offset against future positive accruals of original issue discount, if any.
Finally, a holder of a Class A-3 or Class A-18 Certificate may be entitled to
a loss deduction to the extent it becomes certain that such holder will not
recover a portion of its basis in such Certificate, assuming no further pre-
payments. In the alternative, it is possible that rules similar to the "non-
contingent bond method" of the contingent interest rules in the OID Regula-
tions, as amended on June 12, 1996, may be promulgated with respect to the
Class A-3 and Class A-18 Certificates. See "Certain Federal Income Tax Conse-
quences -- Federal Income Tax Consequences For REMIC Certificates -- Taxation
of Regular Certificates -- Original Issue Discount" in the Prospectus. Under
the non contingent bond method, if the interest payable for any period is
greater or less than the amount projected, the amount of income included for
that period would be either increased or decreased accordingly. Any net reduc-
tion in the income accrual for the taxable year below zero (a "NEGATIVE AD-
JUSTMENT") would be treated by a Certificateholder as ordinary loss to the ex-
tent of prior income accruals and would be carried forward to offset future
interest accruals. At maturity, any remaining Negative Adjustment would be
treated as a loss on retirement of the Certificate. The legislative history of
relevant Code provisions indicates, however, that negative amounts of original
issue discount on an instrument such as a REMIC regular interest may not give
rise to taxable losses in any accrual period prior to the instrument's dispo-
sition or retirement. Thus, it is not clear whether any losses resulting from
a Negative
S-60
<PAGE>
Adjustment would be recognized currently or be carried forward until disposi-
tion of retirement of the debt obligation.
The Prepayment Assumption (as defined in the Prospectus) that the Master
Servicer intends to use in determining the rate of accrual of original issue
discount and whether the original issue discount is considered de minimis, and
that may be used by Beneficial Owners (or holders) to amortize premium, will
be calculated using % of SPA. No representation is made as to the actual
rate at which the Mortgage Loans will prepay.
RESIDUAL CERTIFICATES
The holders of the Class A-R and Class A-LR Certificates must include the
taxable income or loss of the Upper-Tier REMIC and Lower-Tier REMIC, respec-
tively, in determining their federal taxable income. The Class A-R and Class
A-LR Certificates will remain outstanding for federal income tax purposes un-
til there are no Certificates of any other Class outstanding. PROSPECTIVE IN-
VESTORS ARE CAUTIONED THAT THE CLASS A-R AND CLASS A-LR CERTIFICATEHOLDERS'
REMIC TAXABLE INCOME AND THE TAX LIABILITY THEREON MAY EXCEED, AND MAY SUB-
STANTIALLY EXCEED, CASH DISTRIBUTIONS TO SUCH HOLDER DURING CERTAIN PERIODS,
IN WHICH EVENT, THE HOLDER THEREOF MUST HAVE SUFFICIENT ALTERNATIVE SOURCES OF
FUNDS TO PAY SUCH TAX LIABILITY. Furthermore, it is anticipated that all or a
substantial portion of the taxable income of the Upper-Tier REMIC and Lower-
Tier REMIC includible by the holder of the Class A-R and Class A-LR Certifi-
cates, respectively, will be treated as "excess inclusion" income, resulting
in (i) the inability of such holder to use net operating losses to offset such
income from the respective REMIC, (ii) the treatment of such income as "unre-
lated business taxable income" to certain holders who are otherwise tax-ex-
empt, and (iii) the treatment of such income as subject to 30% withholding tax
to certain non-U.S. investors, with no exemption or treaty reduction.
Each of the Class A-R and Class A-LR Certificates will be considered a
"noneconomic residual interest," with the result that transfers thereof would
be disregarded for federal income tax purposes if any significant purpose of
the transferor was to impede the assessment or collection of tax. Accordingly,
the Class A-R and Class A-LR Certificates are subject to certain restrictions
on transfer and any prospective transferee thereof will be required to furnish
to the Trustee an affidavit as described herein under "Description of the Cer-
tificates -- Restrictions on Transfer of the Class A-R, Class A-LR and Class B
Certificates". See "Certain Federal Income Tax Consequences -- Federal Income
Tax Consequences for REMIC Certificates -- Taxation of Residual Certifi-
cates -- Limitations on Offset or Exemption of REMIC Income" and "-- Tax-Re-
lated Restrictions on Transfer of Residual Certificates -- Noneconomic Resid-
ual Interests" in the Prospectus.
An individual, trust or estate that holds the Class A-R or Class A-LR Cer-
tificate (whether such Certificate is held directly or indirectly through cer-
tain pass-through entities) also may have additional gross income with respect
to, but may be subject to limitations on the deductibility of, Servicing Fees
on the Mortgage Loans and other administrative expenses of the REMIC in com-
puting such holder's regular tax liability, and may not be able to deduct such
fees or expenses to any extent in computing such holder's alternative minimum
tax liability. In addition, some portion of a purchaser's basis, if any, in
the Class A-R or Class A-LR Certificate may not be recovered until termination
of the respective REMIC. Furthermore, the federal income tax consequences of
any consideration paid to a transferee on a transfer of the Class A-R or Class
A-LR Certificate are unclear. The preamble to the REMIC Regulations indicates
that the Internal Revenue Service anticipates providing guidance with respect
to the federal tax treatment of such consideration. Any transferee receiving
consideration with respect to the Class A-R or Class A-LR Certificate should
consult its tax advisors.
DUE TO THE SPECIAL TAX TREATMENT OF RESIDUAL INTERESTS, THE EFFECTIVE AFTER-
TAX RETURN OF THE CLASS A-R AND CLASS A-LR CERTIFICATES MAY BE SIGNIFICANTLY
LOWER THAN WOULD BE THE CASE IF THE CLASS A-R AND CLASS A-LR CERTIFICATES WERE
TAXED AS DEBT INSTRUMENTS, OR MAY BE NEGATIVE.
See "Certain Federal Income Tax Consequences" in the Prospectus.
S-61
<PAGE>
ERISA CONSIDERATIONS
Neither the Class A-R nor the Class A-LR Certificate may be purchased by or
transferred to a Plan or a person acting on behalf of or investing the assets
of a Plan. See "Description of the Certificates -- Restrictions on Transfer of
the Class A-R, Class A-LR and Class B Certificates."
In addition, because the Class B Certificates are subordinated to the Class
A Certificates with respect to certain losses, the Class B Certificates may
not be transferred unless the transferee has delivered (i) a representation
letter to the Trustee and Seller stating either (a) that the transferee is not
a Plan and is not acting on behalf of a Plan or using the assets of a Plan to
effect such purchase or (b) subject to the conditions described herein, that
the source of funds used to purchase the Class B Certificates is an "insurance
company general account" as defined in Section V(e) of PTE 95-60 and the pur-
chase and holding of such Certificates are covered by Sections I and III of
PTE 95-60, or (ii) an opinion of counsel and such other documentation as de-
scribed herein under "Description of the Certificates -- Restrictions on
Transfer of the Class A-R, Class A-LR and Class B Certificates."
Accordingly, the following discussion applies to the Class A Certificates
(other than the Class A-R and Class A-LR Certificates) offered hereby and does
not purport to discuss the considerations under ERISA, Code Section 4975 or
Similar Law with respect to the purchase, acquisition or resale of the Class
A-R, Class A-LR or Class B Certificates.
As described in the Prospectus under "ERISA Considerations," ERISA and the
Code impose certain duties and restrictions on ERISA Plans and certain persons
who perform services for ERISA Plans. Comparable duties and restrictions may
exist under Similar Law on governmental plans and certain persons who perform
services for governmental plans. For example, unless exempted, investment by a
Plan in the Class A Certificates may constitute a prohibited transaction under
ERISA, the Code or Similar Law. There are certain exemptions issued by the
United States Department of Labor (the "DOL") that may be applicable to an in-
vestment by an ERISA Plan in the Class A Certificates, including the individ-
ual administrative exemption described below. For a further discussion of the
individual administrative exemption and PTE 83-1, including the necessary con-
ditions to their applicability, and other important factors to be considered
by an ERISA Plan contemplating investing in the Class A Certificates, see
"ERISA Considerations" in the Prospectus.
On , the DOL issued to [Underwriter] an individual administrative
exemption, Prohibited Transaction Exemption , Fed. Reg. (the "EXEMP-
TION"), from certain of the prohibited transaction rules of ERISA with respect
to the initial purchase, the holding and the subsequent resale by an ERISA
Plan of certificates in pass-through trusts that meet the conditions and re-
quirements of the Exemption. The Exemption might apply to the acquisition,
holding and resale of the Class A Certificates by an ERISA Plan, provided that
specified conditions are met.
Among the conditions which would have to be satisfied for the Exemption to
apply to the acquisition by an ERISA Plan of the Class A Certificates is the
condition that the ERISA Plan investing in the Class A Certificates be an "ac-
credited investor" as defined in Rule 501(a)(1) of Regulation D of the Securi-
ties and Exchange Commission under the Securities Act of 1933, as amended (the
"SECURITIES ACT").
Before purchasing a Class A Certificate, a fiduciary of an ERISA Plan should
make its own determination as to the availability of the exemptive relief pro-
vided in the Exemption or the availability of any other prohibited transaction
exemptions, and whether the conditions of any such exemption will be applica-
ble to the Class A Certificates, and a fiduciary of a governmental plan should
make its own determination as to the need for and availability of any
exemptive relief under Similar Law. Any fiduciary of an ERISA Plan considering
whether to purchase a Class A Certificate should also carefully review with
its own legal advisors the applicability of the fiduciary duty provisions of
ERISA and the prohibited transaction provisions of ERISA and the Code to such
investment. See "ERISA Considerations" in the Prospectus.
LEGAL INVESTMENT
The Class A and Class B-1 Certificates constitute "mortgage related securi-
ties" for purposes of the Secondary Mortgage Market Enhancement Act of 1984,
as amended ("SMMEA") so long as they are rated in one
S-62
<PAGE>
of the two highest rating categories by at least one nationally recognized
statistical rating organization. The Class B-2 and Class B-3 Certificates will
not constitute "mortgage related securities" under SMMEA.
Prospective purchasers whose investment activities are subject to legal in-
vestment laws and regulations, regulatory capital requirements or review by
regulatory authorities may be subject to restrictions on investment in the Of-
fered Certificates and should consult their own legal, tax and accounting ad-
visors in determining the suitability of and consequences to them of the pur-
chase, ownership and disposition of the Offered Certificates. See "Legal In-
vestment" in the Prospectus.
SECONDARY MARKET
There will not be any market for the Offered Certificates prior to the issu-
ance thereof. Each Underwriter intends to act as a market maker in the Offered
Certificates purchased by such Underwriter subject to applicable provisions of
federal and state securities laws and other regulatory requirements, but is
under no obligation to do so. There can be no assurance that a secondary mar-
ket in the Offered Certificates will develop or, if such a market does
develop, that it will provide holders of Offered Certificates with liquidity
of investment at any particular time or for the life of the Offered Certifi-
cates. As a source of information concerning the Certificates and the Mortgage
Loans, prospective investors in Certificates may obtain copies of the reports
included in monthly statements to Certificateholders described under "The
Pooling and Servicing Agreement -- Reports to Certificateholders" in the Pro-
spectus upon written request to the Trustee at the Corporate Trust Office.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement dated
and the terms agreement dated , 199 (together, the "UNDERWRITING
AGREEMENT") among Norwest Mortgage, the Seller and [Underwriter] ("UNDERWRIT-
ER"), as underwriter, and the underwriting agreement dated and the terms
agreement dated , 199 (the "UNDERWRITING AGREEMENT") among Norwest
Mortgage, the Seller and [Underwriter] ("UNDERWRITER"), as underwriter, the
Class A Certificates being offered hereby are being purchased from the Seller
by [Underwriter] and the Class B Certificates being offered hereby are being
purchased from the Seller by [Underwriter], in each case upon issuance there-
of. Each of [Underwriter] is referred to herein as an "UNDERWRITER," and to-
gether, as the "UNDERWRITERS," and each of the [Underwriter] Underwriting
Agreement is referred to herein as an "UNDERWRITING AGREEMENT." [Underwriter]
is committed to purchase all of the Class A Certificates offered hereby if any
such Certificates are purchased, and [Underwriter] is committed to purchase
all of the Class B Certificates offered hereby if any such Certificates are
purchased. Each Underwriter has advised the Seller that it proposes to offer
the Offered Certificates purchased by such Underwriter, from time to time, for
sale in negotiated transactions or otherwise at prices determined at the time
of sale. Proceeds to the Seller from the sale of the Offered Certificates are
expected to be approximately % of the initial aggregate Principal Balance
of the Class A Certificates offered hereby, approximately % of the aggre-
gate Principal Balance of the Class B-1 Certificates, approximately % of
the aggregate initial Principal Balance of the Class B-2 Certificates and ap-
proximately % of the aggregate initial Principal Balance of the Class B-3
Certificates plus, in each case, accrued interest thereon at the rate of
% per annum, from , 199 to (but not including) , 199 , before
deducting expenses payable by the Seller. Neither Underwriter is an affiliate
of the Seller. [Underwriter] has advised the Seller that it has not allocated
the purchase price paid to the Seller for the Classes of Class A Certificates
being offered among such Classes. The Underwriters and any dealers that par-
ticipate with any Underwriter in the distribution of the Offered Certificates
may be deemed to be underwriters, and any discounts or commissions received by
them and any profit on the resale of Offered Certificates by them may be
deemed to be underwriting discounts or commissions, under the Securities Act.
Each Underwriting Agreement provides that the Seller or Norwest Mortgage
will indemnify the applicable Underwriter against certain civil liabilities
under the Securities Act or contribute to payments which such Underwriter may
be required to make in respect thereof.
RECENT DEVELOPMENTS
The Seller, the Master Servicer, and Norwest Mortgage are wholly-owned sub-
sidiaries of Norwest Corporation ("NORWEST"), a bank holding company based in
Minneapolis, Minnesota. Norwest and Wells Fargo &
S-63
<PAGE>
Company ("WELLS") have entered into an Agreement and Plan of Merger dated June
7, 1998 (the "MERGER AGREEMENT"). Under the Merger Agreement, Wells will merge
into and with Norwest. The name of the combined holding company will be "Wells
Fargo & Company" and its headquarters will be located in San Francisco, Cali-
fornia. Completion of the merger is subject, among other closing conditions,
to regulatory and shareholder approval, and if approved, is expected to close
in the fourth quarter of 1998.
The Seller believes that the proposed merger will not have a material effect
on the ability of the Seller, the Master Servicer or Norwest Mortgage to per-
form their respective obligations under the Pooling and Servicing Agreement or
Norwest Mortgage's Underlying Servicing Agreement.
LEGAL MATTERS
The validity of the Offered Certificates and certain tax matters with re-
spect thereto will be passed upon for the Seller by Cadwalader, Wickersham &
Taft, New York, New York. Certain legal matters will be passed upon for the
Underwriters by .
USE OF PROCEEDS
The net proceeds to be received from the sale of the Offered Certificates
will be applied by the Seller to the purchase from Norwest Mortgage of the
Mortgage Loans underlying the Certificates.
RATINGS
It is a condition to the issuance of the Class A Certificates offered hereby
that each such Class will have been rated " " by and . It is a condition
to the issuance of the Class B-1 Certificates that they will have been rated
at least " " by and . It is a condition to the issuance of the Class B-2
and Class B-3 Certificates that they will have been rated at least " " and
" ," respectively, by . A security rating is not a recommendation to buy,
sell or hold securities and may be subject to revision or withdrawal at any
time by the assigning rating agency. Each security rating should be evaluated
independently of any other security rating.
The ratings assigned by to mortgage pass-through certificates address the
likelihood of the receipt by certificateholders of all distributions to which
they are entitled under the transaction structure. ratings reflect its
analysis of the riskiness of the mortgage loans and its analysis of the struc-
ture of the transactions as set forth in the operative documents. ratings
do not address the effect on the certificates' yield attributable to prepay-
ments or recoveries on the underlying mortgage loans. In addition, the rating
of the Class A-R and Class A-LR Certificates do not address the likelihood of
return to an investor in the Class A-R or Class A-LR Certificate, except to
the extent of the Principal Balance thereof and interest thereon.
The ratings of on mortgage pass-through certificates address the likeli-
hood of the receipt by certificateholders of timely payments of interest and
the ultimate return of principal. ratings take into consideration the
credit quality of the mortgage pool, including any credit support providers,
structural and legal aspects associated with the certificates, and the extent
to which the payment stream on the mortgage pool is adequate to make payments
required under the certificates. ratings on such certificates do not, how-
ever, constitute a statement regarding frequency of prepayments on the mort-
gage loans. rating does not address the possibility that investors may suf-
fer a lower than anticipated yield as a result of prepayments of the under-
lying mortgages. In addition, it should be noted that in some structures a de-
fault on a mortgage is treated as a prepayment and may have the same effect on
yield as a prepayment.
The rating of and also do not address the possibility that, as a re-
sult of principal prepayments, a holder of a Class A-3 or Class A-18 Certifi-
cate may not fully recover their initial investment.
The Seller has not requested a rating on the Offered Certificates of any
Class by any rating agency other than and , although data with respect to
the Mortgage Loans may have been provided to other rating agencies solely for
their informational purposes. There can be no assurance that any rating as-
signed by any other agency to the Offered Certificates will be as high as
those assigned by and .
S-64
<PAGE>
INDEX OF
PROSPECTUS SUPPLEMENT DEFINITIONS
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Accretion Termination Date....................... S-22
Accrual Distribution Amount...................... S-23
Adjusted Pool Amount............................. S-20
Adjusted Pool Amount (PO Portion)................ S-20
Adjustment Amount................................ S-33
Aggregate Non-PO Principal Balance............... S-20
Aggregate Principal Balance...................... S-20
Available Master Servicing
Compensation.................................... S-21
Bankruptcy Loss.................................. S-25
Bankruptcy Loss Amount........................... S-34
Beneficial Owner................................. S-16
Book-Entry Certificates.......................... S-16
Bulk Purchase Underwritten Loans................. S-35
CBE.............................................. S-51
Cede............................................. S-16
Certificate Account.............................. S-59
Certificateholder................................ S-16
Certificates..................................... S-5
Class A Certificates............................. S-5
Class A Non-PO Optimal Principal
Amount.......................................... S-23
Class A Non-PO Principal Amount.................. S-23
Class A Non-PO Principal Balance................. S-20
Class A Non-PO Principal Distribution
Amount.......................................... S-23
Class A Percentage............................... S-26
Class A Prepayment Percentage.................... S-26
Class A Principal Balance........................ S-20
Class A-PO Deferred Amount....................... S-24
Class A-PO Distribution Amount................... S-23
Class A-PO Optimal Principal Amount.............. S-23
Class A-3 Notional Amount........................ S-19
Class A-18 Notional Amount....................... S-19
Class B Certificates............................. S-5
Class B Optimal Principal Amount................. S-23
Class B Percentage............................... S-26
Class B Prepayment Percentage.................... S-26
Class B Principal Balance........................ S-20
Class B-1 Principal Distribution
Amount.......................................... S-23
Class B-2 Principal Distribution
Amount.......................................... S-23
Class B-3 Principal Distribution
Amount.......................................... S-23
Class Percentage................................. S-24
Class Prepayment Percentage...................... S-24
Closing Date..................................... S-5
Code............................................. S-12
Compensating Interest............................ S-21
Co-op Shares..................................... S-35
Cooperatives..................................... S-35
Cross-Over Date.................................. S-32
Current Fractional Interest...................... S-27
Curtailment Interest Shortfalls.................. S-22
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Cut-Off Date...................................... S-36
Debt Service Reduction............................ S-25
Deficient Valuation............................... S-25
Definitive Certificates........................... S-16
Determination Date................................ S-16
Discount Mortgage Loan............................ S-25
Distribution Date................................. S-16
DOL............................................... S-62
DTC............................................... S-16
ERISA............................................. S-12
ERISA Plan........................................ S-31
Excess Bankruptcy Losses.......................... S-33
Excess Fraud Losses............................... S-33
Excess Losses..................................... S-33
Excess Principal Payments......................... S-29
Excess Special Hazard Losses...................... S-33
Exemption......................................... S-62
FICO Scores....................................... S-39
Fixed Retained Yield.............................. S-59
Fraud Loss........................................ S-25
Fraud Loss Amount................................. S-34
Interest Accrual Amount........................... S-19
Interest Shortfall Amount......................... S-22
Liquidated Loan................................... S-25
Liquidated Loan Loss.............................. S-25
Loss Severity Percentage.......................... S-52
Lower-Tier REMIC.................................. S-59
Lower-Tier REMIC Regular Interest................. S-59
Master Servicer................................... S-55
Master Servicing Fee.............................. S-56
Master Servicing Fee Rate......................... S-56
Merger Agreement.................................. S-64
Mid-Month Receipt Period.......................... S-57
Month End Interest................................ S-21
Mortgage Loans.................................... S-35
Mortgaged Properties.............................. S-35
Mortgages......................................... S-35
Negative Adjustment............................... S-60
Net Mortgage Interest Rate........................ S-21
Net Partial Liquidation Proceeds.................. S-18
Non-PO Fraction................................... S-25
Non-Supported Interest Shortfalls................. S-22
Norwest........................................... S-63
Norwest Bank...................................... S-5
Norwest Mortgage.................................. S-5
Norwest Type 1 Loans.............................. S-57
Norwest Type 2 Loans.............................. S-57
Offered Certificates.............................. S-5
OID............................................... S-11
</TABLE>
S-65
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Original Subordinated Principal Balance.......... S-26
Original Fractional Interest..................... S-27
Other Servicers.................................. S-56
PAC Principal Amount............................. S-27
Partial Liquidation Proceeds..................... S-18
Pass-Through Rate................................ S-19
Percentage Interest.............................. S-19
Periodic Advance................................. S-30
Plan............................................. S-31
PO Fraction...................................... S-25
Pool Balance (Non-PO Portion).................... S-25
Pool Balance (PO Portion)........................ S-25
Pool Distribution Amount......................... S-16
Pool Distribution Amount Allocation.............. S-18
Pooling and Servicing Agreement.................. S-55
Premium Mortgage Loan............................ S-25
Prepayments in Full.............................. S-21
Prepayment Interest Shortfalls................... S-21
Principal Balance................................ S-19
Prior Month Receipt Period....................... S-57
Prospectus....................................... S-5
PTE 95-60........................................ S-31
Rating Agencies.................................. S-5
Realized Loss.................................... S-25
Record Date...................................... S-16
Regular Certificates............................. S-59
REMIC............................................ S-11
Remittance Date.................................. S-18
REO Property..................................... S-56
Residual Certificates............................ S-60
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Scheduled Principal Balance....................... S-25
SDA............................................... S-52
Securities Act.................................... S-62
Seller............................................ S-5
Servicers......................................... S-56
Servicer Custodial Account........................ S-57
Servicing Fee Rate................................ S-59
Similar Law....................................... S-31
SMMEA............................................. S-62
SPA............................................... S-44
Special Hazard Loss............................... S-25
Special Hazard Loss Amount........................ S-33
Structuring Assumptions........................... S-44
Subordinated Certificates......................... S-5
Subordinated Percentage........................... S-26
Subordinated Prepayment Percentage................ S-26
Target Regime..................................... S-58
Trust............................................. S-5
Trustee........................................... S-5
U.S. Person....................................... S-31
Underlying Servicing Agreement.................... S-5
Underwriter....................................... S-63
Underwriting Agreement............................ S-63
Underwriting Standards............................ S-35
Unscheduled Principal Receipt Period.............. S-57
Unscheduled Principal Receipts.................... S-16
Upper-Tier Certificates........................... S-60
Upper-Tier REMIC.................................. S-59
Weighted Average Life............................. S-44
Wells............................................. S-64
</TABLE>
S-66
<PAGE>
[LOGO OF NORWEST APPEARS HERE]
NORWEST ASSET SECURITIES CORPORATION 19 - TRUST
Issuer
NORWEST ASSET SECURITIES CORPORATION
(NASCOR (SM))
Seller
$
(APPROXIMATE)
MORTGAGE PASS-THROUGH
CERTIFICATES, SERIES 199
------------------
PROSPECTUS SUPPLEMENT
------------------
[UNDERWRITERS]
You should rely only on the information contained or
incorporated by reference in this Prospectus Supplement and
the accompanying Prospectus. No one has been authorized to
provide you with different information.
The Offered Certificates are not being offered in any state
where the offer is not permitted.
The Seller does not claim the accuracy of the information in
this Prospectus Supplement and the accompanying Prospectus as
of any date other than the dates stated on their respective
covers.
Dealers will deliver a Prospectus Supplement and Prospectus
when acting as underwriters of the Offered Certificates and
with respect to their unsold allotments or subscriptions. In
addition, all dealers selling the Offered Certificates will
deliver a Prospectus Supplement and Prospectus until ninety
days following the date of this Prospectus Supplement.
, 19
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY +
+NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SE- +
+CURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OF- +
+FER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE +
+SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION OCTOBER 8, 1998
PROSPECTUS
NORWEST ASSET SECURITIES CORPORATION
(NASCOR(SM))
SELLER
MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES BY SEPARATE TRUSTS)
-----------
- --------------------------------------------------------------------------------
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 13 OF THIS
PROSPECTUS.
Neither the certificates of any series nor the related underlying mortgage
loans will be insured or guaranteed by any governmental agency or
instrumentality.
The certificates of each series will represent interests in the related trust
only and will not represent interests in or obligations of NASCOR(SM) or any
NASCOR(SM) affiliate.
This prospectus may be used to offer and sell any series of certificates only
if accompanied by the prospectus supplement for that series.
- --------------------------------------------------------------------------------
EACH TRUST--
. will issue a series of mortgage pass-through certificates,
which will consist of one or more classes of certificates;
and
. will own--
. a pool or pools of fixed or adjustable interest rate,
conventional mortgage loans which are secured by a first
lien on a one- to four-family residential property; and
. other assets described in this prospectus and the
accompanying prospectus supplement.
EACH POOL OF MORTGAGE LOANS--
. will be sold to the related Trust by NASCOR SM, who will
have in turn purchased them from Norwest Mortgage, Inc.,
one of its affiliates;
. will be underwritten to Norwest Mortgage, Inc.'s standards
or such other standards as described in this prospectus and
the accompanying prospectus supplement; and
. will be serviced by Norwest Mortgage, Inc. individually or
together with other servicers.
EACH SERIES OF CERTIFICATES--
. will represent interests in the related Trust;
. may provide credit support for certain classes by
"subordinating" certain classes to other classes of
certificates; any subordinated classes will be entitled to
payment subject to the payment of more senior classes and
may bear losses before more senior classes;
. may be entitled to one or more of the other types of credit
support described in this prospectus; and
. will be paid only from the assets of the related Trust.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THE
CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
THE DATE OF THIS PROSPECTUS IS , 199
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS AND THE
ACCOMPANYING PROSPECTUS SUPPLEMENT
Information is provided to you about the Certificates in two separate
documents that progressively provide more detail: (a) this Prospectus, which
provides general information, some of which may not apply to a particular
Series of Certificates, including your Series, and (b) the accompanying
Prospectus Supplement, which will describe the specific terms of your Series
of Certificates, including:
.the principal balances and/or interest rates of each Class and/or
Subclass;
.the timing and priority of interest and principal payments;
.statistical and other information about the Mortgage Loans;
.information about credit enhancement, if any, for each Class or Subclass;
.the ratings for each Class or Subclass; and
.the method for selling the Certificates.
IF THE TERMS OF A PARTICULAR SERIES OF CERTIFICATES VARY BETWEEN THIS
PROSPECTUS AND THE PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION
IN THE PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in this Prospectus and the
accompanying Prospectus Supplement including the information incorporated by
reference. No one has been authorized to provide you with different
information. The Certificates are not being offered in any state where the
offer is not permitted. The Seller does not claim the accuracy of the
information in this Prospectus or the accompanying Prospectus Supplement as of
any date other than the dates stated on their respective covers.
Cross-references are included in this Prospectus and in the accompanying
Prospectus Supplement to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table of
Contents included in the accompanying Prospectus Supplement provide the pages
on which these captions are located.
You can find a listing of the pages where capitalized terms used in this
Prospectus are defined under the caption "Index of Prospectus Definitions"
beginning on page 94 in this Prospectus.
--------------
2
<PAGE>
TABLE OF CONTENTS
PROSPECTUS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS AND THE
ACCOMPANYING PROSPECTUS SUPPLEMENT...................................... 2
SUMMARY OF PROSPECTUS.................................................... 5
RISK FACTORS............................................................. 9
Limited Liquidity for Certificates..................................... 9
Limited Assets for Payment of Certificates............................. 9
Credit Enhancement is Limited in Amount and Coverage................... 9
Real Estate Market Conditions Affect Mortgage Loan Performance......... 10
Geographic Concentration May Increase Rates of Loss and Delinquency.... 10
Rate of Prepayment on Mortgage Loans May Adversely Affect Average Lives
and Yields on Certificates............................................ 10
Book-Entry Certificates May Experience Decreased Liquidity and Payment
Delay................................................................. 11
Cash Flow Agreements are Subject to Counterparty Risk.................. 11
THE TRUST ESTATES........................................................ 11
General................................................................ 11
Mortgage Loans......................................................... 12
Cash Flow Agreements................................................... 15
THE SELLER............................................................... 15
NORWEST MORTGAGE......................................................... 15
NORWEST BANK............................................................. 16
THE MORTGAGE LOAN PROGRAMS............................................... 16
Mortgage Loan Production Sources....................................... 16
Acquisition of Mortgage Loans from Correspondents...................... 17
Mortgage Loan Underwriting............................................. 17
Norwest Mortgage Underwriting........................................ 17
Pool Certification Underwriting...................................... 21
Representations and Warranties......................................... 22
DESCRIPTION OF THE CERTIFICATES.......................................... 23
General................................................................ 23
Definitive Form........................................................ 24
Book-Entry Form........................................................ 24
Distributions to Certificateholders.................................... 26
General.............................................................. 26
Distributions of Interest............................................ 27
Distributions of Principal........................................... 28
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Categories of Classes of Certificates................................... 29
Other Credit Enhancement................................................ 31
Limited Guarantee..................................................... 31
Financial Guaranty Insurance Policy or Surety Bond.................... 31
Letter of Credit...................................................... 32
Pool Insurance Policies............................................... 32
Special Hazard Insurance Policies..................................... 32
Mortgagor Bankruptcy Bond............................................. 32
Reserve Fund.......................................................... 32
Cross Support......................................................... 32
PREPAYMENT AND YIELD CONSIDERATIONS....................................... 33
Pass-Through Rates...................................................... 33
Scheduled Delays in Distributions....................................... 33
Effect of Principal Prepayments......................................... 33
Weighted Average Life of Certificates................................... 34
Refinancings............................................................ 35
DELINQUENCY AND FORECLOSURE EXPERIENCE.................................... 35
SERVICING OF THE MORTGAGE LOANS........................................... 39
The Master Servicer..................................................... 39
The Servicers........................................................... 39
Payments on Mortgage Loans.............................................. 40
Periodic Advances and Limitations Thereon............................... 42
Collection and Other Servicing Procedures............................... 43
Enforcement of Due-on-Sale Clauses; Realization Upon Defaulted Mortgage
Loans.................................................................. 44
Insurance Policies...................................................... 45
Fixed Retained Yield, Servicing Compensation and Payment of Expenses.... 46
Evidence as to Compliance............................................... 47
CERTAIN MATTERS REGARDING THE MASTER SERVICER............................. 48
THE POOLING AND SERVICING AGREEMENT....................................... 49
Assignment of Mortgage Loans to the Trustee............................. 49
Optional Purchases...................................................... 50
Reports to Certificateholders........................................... 50
List of Certificateholders.............................................. 51
Events of Default....................................................... 51
Rights Upon Event of Default............................................ 52
Amendment............................................................... 52
Termination; Optional Purchase of Mortgage Loans........................ 53
The Trustee............................................................. 53
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS............................... 54
General................................................................. 54
Foreclosure............................................................. 54
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Foreclosure on Shares of Cooperatives................................... 55
Rights of Redemption.................................................... 56
Anti-Deficiency Legislation, the Bankruptcy Code and Other Limitations
on Lenders............................................................. 56
Soldiers' and Sailors' Civil Relief Act and Similar Laws................ 58
Environmental Considerations............................................ 59
"Due-on-Sale" Clauses................................................... 60
Applicability of Usury Laws............................................. 61
Enforceability of Certain Provisions.................................... 62
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................................... 62
Federal Income Tax Consequences for REMIC Certificates................... 62
General................................................................. 62
Status of REMIC Certificates............................................ 63
Qualification as a REMIC................................................ 63
Taxation of Regular Certificates........................................ 65
General............................................................... 65
Original Issue Discount............................................... 65
Acquisition Premium................................................... 67
Variable Rate Regular Certificates.................................... 67
Market Discount....................................................... 68
Premium............................................................... 69
Election to Treat All Interest Under the Constant Yield Method........ 69
Treatment of Losses................................................... 69
Sale or Exchange of Regular Certificates.............................. 70
Taxation of Residual Certificates....................................... 71
Taxation of REMIC Income.............................................. 71
Basis and Losses...................................................... 71
Treatment of Certain Items of REMIC Income and Expense................ 72
Limitations on Offset or Exemption of REMIC Income.................... 73
Tax-Related Restrictions on Transfer of Residual Certificates......... 73
Sale or Exchange of a Residual Certificate............................ 75
Mark to Market Regulations............................................ 76
Taxes That May Be Imposed on the REMIC Pool............................. 76
Prohibited Transactions............................................... 76
Contributions to the REMIC Pool After the Startup Day................. 77
Net Income from Foreclosure Property.................................. 77
Liquidation of the REMIC Pool........................................... 77
Administrative Matters.................................................. 77
Limitations on Deduction of Certain Expenses............................ 77
Taxation of Certain Foreign Investors................................... 78
Regular Certificates.................................................. 78
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Residual Certificates................................................. 78
Backup Withholding...................................................... 79
Reporting Requirements.................................................. 79
Federal Income Tax Consequences for Certificates as to Which No REMIC
Election Is Made........................................................ 79
General................................................................. 79
Tax Status.............................................................. 80
Premium and Discount.................................................... 81
Premium............................................................... 81
Original Issue Discount............................................... 81
Market Discount....................................................... 81
Recharacterization of Servicing Fees.................................... 81
Sale or Exchange of Certificates........................................ 82
Stripped Certificates................................................... 82
General............................................................... 82
Status of Stripped Certificates....................................... 83
Taxation of Stripped Certificates..................................... 83
Reporting Requirements and Backup Withholding........................... 85
Taxation of Certain Foreign Investors................................... 85
ERISA CONSIDERATIONS...................................................... 85
General................................................................. 85
Certain Requirements Under ERISA........................................ 86
General............................................................... 86
Parties in Interest/Disqualified Persons.............................. 86
Delegation of Fiduciary Duty.......................................... 86
Administrative Exemptions............................................... 86
Individual Administrative Exemptions.................................. 86
PTE 83-1.............................................................. 88
Exempt Plans............................................................ 88
Unrelated Business Taxable Income--Residual Certificates................ 88
LEGAL INVESTMENT.......................................................... 89
PLAN OF DISTRIBUTION...................................................... 90
USE OF PROCEEDS........................................................... 91
LEGAL MATTERS............................................................. 91
RATING.................................................................... 91
REPORTS TO CERTIFICATEHOLDERS............................................. 91
WHERE YOU CAN FIND MORE INFORMATION....................................... 92
Registration Statement and Other Materials Filed With the SEC........... 92
Detailed Information Relating to the Mortgage Loans of a Series......... 92
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE......................... 93
INDEX OF SIGNIFICANT DEFINITIONS.......................................... 94
</TABLE>
4
<PAGE>
SUMMARY OF PROSPECTUS
. THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT, BUT DOES NOT
CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER IN MAKING YOUR
INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF A SERIES OF
CERTIFICATES, PLEASE READ THIS ENTIRE DOCUMENT AND THE ACCOMPANYING
PROSPECTUS SUPPLEMENT CAREFULLY.
. THIS SUMMARY PROVIDES AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOWS AND
OTHER INFORMATION TO AID YOUR UNDERSTANDING OF THE TERMS OF THE CERTIFICATES
AND IS QUALIFIED BY THE FULL DESCRIPTION OF THESE CALCULATIONS, CASH FLOWS
AND OTHER INFORMATION IN THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS
SUPPLEMENT.
RELEVANT PARTIES FOR EACH SERIES OF CERTIFICATES
ISSUER
Each series (each, a "SERIES") of certificates (the "CERTIFICATES") will be is-
sued by a separate trust (a "TRUST" or, together with all assets owned by such
Trust, a "TRUST ESTATE"). Each Trust Estate will be formed pursuant to a pool-
ing and servicing agreement (each, a "POOLING AND SERVICING AGREEMENT") among
the Seller, the Master Servicer and the Trustee specified in the applicable
Prospectus Supplement.
SELLER
With respect to each Trust Estate, Norwest Asset Securities Corporation (the
"SELLER") will acquire the Mortgage Loans from Norwest Mortgage, Inc. ("NORWEST
MORTGAGE") and will transfer the Mortgage Loans to the Trust. The Seller is a
direct, wholly-owned subsidiary of Norwest Mortgage. Norwest Mortgage is an in-
direct, wholly-owned subsidiary of Norwest Corporation ("NORWEST CORPORATION").
MASTER SERVICER
Norwest Bank Minnesota, National Association ("NORWEST BANK" and, in such ca-
pacity, the "MASTER SERVICER") will supervise the Servicers and perform certain
other administrative and reporting duties with respect to each Series of Cer-
tificates. In addition, the Master Servicer will generally be required to make
Periodic Advances with respect to the Mortgage Loans in each Trust Estate to
the extent that the related Servicer (other than Norwest Mortgage) fails to
make a required Periodic Advance.
Norwest Bank is a direct, wholly-owned subsidiary of Norwest Corporation and an
affiliate of the Seller.
SERVICERS
Norwest Mortgage and, if specified in the applicable Prospectus Supplement, one
or more other entities (each, a "SERVICER") will service the Mortgage Loans in
each Trust. Each Servicer will perform certain servicing functions with respect
to the Mortgage Loans serviced by it pursuant to a related Servicing Agreement
(each, an "UNDERLYING SERVICING AGREEMENT").
THE MORTGAGE LOANS
Each Trust will own the related Mortgage Loans (other than the Fixed Retained
Yield described in this Prospectus, if any) and certain other related property,
as specified in the applicable Prospectus Supplement.
The Mortgage Loans in each Trust Estate:
. will be conventional, fixed or adjustable interest rate, mortgage loans
secured by first liens on one- to four-family residential properties;
. will have been acquired by the Seller from Norwest Mortgage;
. will have been originated by Norwest Mortgage or an affiliate or will have
been acquired by Norwest Mortgage directly or indirectly from other mortgage
loan originators; and
. will have been underwritten either to Norwest Mortgage's standards or, to the
extent specified in the applicable Prospectus Supplement, to the standards of
a Pool Insurer or to other standards.
See "The Trust Estates" and "The Mortgage Loan Programs--Mortgage Loan Under-
writing."
You should refer to the applicable Prospectus Supplement for the precise char-
acteristics or expected characteristics of the Mortgage Loans and a description
of the other property, if any, included in a particular Trust Estate.
DISTRIBUTIONS ON THE CERTIFICATES
Each Series of Certificates will include one or more classes (each, a "CLASS"),
any of which may be divided into one or
5
<PAGE>
more subclasses (each, a "SUBCLASS"). A Class or Subclass of Certificates will
be entitled, to the extent of funds available, to either:
. principal and interest payments in respect of the related Mortgage Loans;
. principal distributions, with no interest distributions;
. interest distributions, with no principal distributions; or
. such other distributions as are described in the applicable Prospectus
Supplement.
INTEREST DISTRIBUTIONS
With respect to each Series of Certificates, interest on the related Mortgage
Loans at the weighted average of their Mortgage Interest Rates (net of servic-
ing fees and certain other amounts as described in this Prospectus or in the
applicable Prospectus Supplement), will be passed through to holders of the
related Classes of Certificates in accordance with the particular terms of
each such Class of Certificates. The terms of each Class of Certificates will
be described in the related Prospectus Supplement. See "Description of the
Certificates--Distributions to Certificateholders--Distributions of Interest".
Except as otherwise specified in the applicable Prospectus Supplement, inter-
est on each Class and Subclass of Certificates of each Series will accrue at
the pass-through rate for each Class and Subclass indicated in the applicable
Prospectus Supplement (each, a "PASS-THROUGH RATE") on their outstanding prin-
cipal balance or notional amount.
PRINCIPAL DISTRIBUTIONS
With respect to a Series of Certificates, principal payments (including pre-
payments) on the related Mortgage Loans will be passed through to holders of
the related Certificates or otherwise applied in accordance with the related
Pooling and Servicing Agreement on each Distribution Date. Distributions in
reduction of principal balance will be allocated among the Classes and
Subclasses of Certificates of a Series in the manner specified in the applica-
ble Prospectus Supplement. See "Description of the Certificates--Distributions
to Certificateholders--Distributions of Principal."
DISTRIBUTION DATES
Distributions on the Certificates will generally be made on the 25th day (or,
if such day is not a business day, the business day following the 25th day) of
each month, commencing with the month following the month in which the appli-
cable Cut-Off Date occurs (each, a "DISTRIBUTION DATE"). The "CUT-OFF DATE"
for each Series will be the date specified in the applicable Prospectus Sup-
plement.
If so specified in the applicable Prospectus Supplement, distributions on Cer-
tificates may be made on a different day of each month or may be made quarter-
ly, or semi-annually, on the dates specified in such Prospectus Supplement.
RECORD DATES
Distributions will be made on each Distribution Date to Certificateholders of
record at the close of business on (unless a different date is specified in
the applicable Prospectus Supplement) the last business day of the month pre-
ceding the month in which such Distribution Date occurs (each, a "RECORD
DATE").
CREDIT ENHANCEMENT
SUBORDINATION
A Series of Certificates may include one or more Classes of senior certifi-
cates (the "SENIOR CERTIFICATES") and one or more Classes of subordinated cer-
tificates (the "SUBORDINATED CERTIFICATES"). The rights of the holders of Sub-
ordinated Certificates of a Series to receive distributions will be subordi-
nated to such rights of the holders of the Senior Certificates of the same Se-
ries to the extent and in the manner specified in the applicable Prospectus
Supplement.
Subordination is intended to enhance the likelihood of the timely receipt by
the Senior Certificateholders of their proportionate share of scheduled
monthly principal and interest payments on the related Mortgage Loans and to
protect them from losses. This protection will be effected by:
. the preferential right of the Senior Certificateholders to receive, prior to
any distribution being made in respect of the related Subordinated
Certificates on each Distribution Date, current distributions on the related
Mortgage Loans of principal and interest due them on each Distribution Date
out of the funds available for distributions on such date;
. the right of such holders to receive future distributions on the Mortgage
Loans that would otherwise have been payable to the holders of Subordinated
Certificates; and/or
. the prior allocation to the Subordinated Certificates of all or a portion of
losses realized on the underlying Mortgage Loans.
OTHER TYPES OF CREDIT ENHANCEMENT
If so specified in the applicable Prospectus Supplement, the Certificates of
any Series, or any one or more Classes of a
6
<PAGE>
Series, may be entitled to the benefits of other types of credit enhancement,
including but not limited to:
.limited guarantee .mortgage pool insurance policy
.financial guaranty .reserve fund
insurance policy .cross-support
.surety bond
.letter of credit
Any credit support will be described in the applicable Prospectus Supplement.
See "Description of the Certificates--Other Credit Enhancement."
PERIODIC ADVANCES ON DELINQUENT PAYMENTS
In the event that a payment on a Mortgage Loan is delinquent, the Servicer of
the Mortgage Loan will be obligated, to the extent specified in the Underlying
Servicing Agreement, to make cash advances ("PERIODIC ADVANCES") to the
Servicer Custodial Account if the Servicer determines that it will be able to
recover such amounts from future payments and collections on such Mortgage
Loan. A Servicer who makes Periodic Advances will be reimbursed for such Peri-
odic Advances as described in this Prospectus and in the applicable Prospectus
Supplement. In certain circumstances, the Master Servicer or Trustee will be
required to make Periodic Advances upon a Servicer default.
In addition, the Master Servicer may be required to make Periodic Advances if
the Underlying Servicing Agreement does not require the Servicer to make Peri-
odic Advances while a Mortgage Loan is in the process of being liquidated.
See "Servicing of the Mortgage Loans--Periodic Advances and Limitations There-
on."
FORMS OF CERTIFICATES
The Certificates will be issued either:
. in book-entry form ("BOOK-ENTRY CERTIFICATES") through the facilities of The
Depository Trust Company ("DTC"); or
. in fully registered, certificated form ("DEFINITIVE CERTIFICATES").
If you own Book-Entry Certificates, you will not receive a physical certifi-
cate representing your ownership interest in such Book-Entry Certificates, ex-
cept under extraordinary circumstances which are discussed in "Description of
the Certificates--Definitive Form" in this Prospectus. Instead, DTC will ef-
fect payments and transfers by means of its electronic recordkeeping services,
acting through certain participating organizations. This may result in certain
delays in your receipt of distributions and may restrict your ability to
pledge your securities. Your rights with respect to Book-Entry Certificates
may generally only be exercised through DTC and its participating organiza-
tions.
See "Description of the Certificates--Book-Entry Form."
OPTIONAL PURCHASE OF CERTAIN MORTGAGE LOANS
The Seller may, to the extent specified in the related Prospectus Supplement
and subject to the terms of the applicable Pooling and Servicing Agreement,
purchase from the related Trust:
. any defaulted Mortgage Loan or any Mortgage Loan as to which default is
reasonably foreseeable; and
. any Mortgage Loan as to which the originator of such Mortgage Loan breached
a representation or warranty to Norwest Mortgage regarding the
characteristics of such Mortgage Loan.
See "Pooling and Servicing Agreement--Optional Purchases."
OPTIONAL PURCHASE OF ALL MORTGAGE LOANS
If so specified in the Prospectus Supplement with respect to a Series, all,
but not less than all, of the Mortgage Loans in the related Trust and any
property acquired with respect to such Mortgage Loans may be purchased by the
Seller, Norwest Mortgage or such other party as is specified in the applicable
Prospectus Supplement. Any such purchase must be made in the manner and at the
price specified in such Prospectus Supplement.
In the event that an election is made to treat the related Trust Estate (or
one or more segregated pools of assets in the Trust Estate) as a "real estate
mortgage investment conduit" (a "REMIC"), any such purchase will be effected
only pursuant to a "qualified liquidation," as defined under Section
860F(a)(4)(A) of the Internal Revenue Code of 1986, as amended (the "CODE").
Exercise of the right of purchase will effect the early retirement of the Cer-
tificates of that Series.
See "Prepayment and Yield Considerations."
7
<PAGE>
ERISA LIMITATIONS
If you are a fiduciary of any employee benefit plan subject to the fiduciary
responsibility provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), you should carefully review with your own legal
advisors whether the purchase or holding of Certificates could give rise to a
transaction prohibited or otherwise impermissible under ERISA or the Code.
See "ERISA Considerations."
TAX STATUS
The treatment of the Certificates for federal income tax purposes will depend
on:
. whether a REMIC election is made with respect to a Series of Certificates;
and
. if a REMIC election is made, by whether the Certificates are Regular
Interests or Residual Interests.
See "Certain Federal Income Tax Consequences."
LEGAL INVESTMENT
The applicable Prospectus Supplement will specify whether the Class or Classes
of Certificates offered will constitute "mortgage related securities" for pur-
poses of the Secondary Mortgage Market Enhancement Act of 1984, as amended. If
your investment authority is subject to legal restrictions you should consult
your own legal advisors to determine whether and to what extent such Certifi-
cates constitute legal investments for you.
See "Legal Investment" in this Prospectus and in the applicable Prospectus
Supplement.
RATING
Certificates of any Series will not be offered pursuant to this Prospectus and
a Prospectus Supplement unless each Offered Class or Subclass is rated in one
of the four highest rating categories by at least one nationally recognized
statistical rating organization (a "RATING AGENCY").
. A security rating is not a recommendation to buy, sell or hold the
Certificates of any Series and is subject to revision or withdrawal at any
time by the assigning rating agency.
. Ratings do not address the effect of prepayments on the yield you may antic-
ipate when you purchase your Certificates.
8
<PAGE>
RISK FACTORS
You should consider, among other things, the following factors in connection
with the purchase of Certificates.
LIMITED LIQUIDITY FOR CERTIFICATES
The liquidity of your Certificates may be limited. You should consider that:
. a secondary market for the Certificates of any Series may not develop, or
if it does, it may not provide you with liquidity of investment, or it
may not continue for the life of the Certificates of any Series;
. the Prospectus Supplement for any Series of Certificates may indicate
that an underwriter intends to establish a secondary market in such
Certificates, but no underwriter will be obligated to do so; and
. unless specified in the applicable Prospectus Supplement, the
Certificates will not be listed on any securities exchange.
LIMITED ASSETS FOR PAYMENT OF CERTIFICATES
Except for any related insurance policies and any reserve fund or credit
enhancement described in the applicable Prospectus Supplement:
. Mortgage Loans included in the related Trust Estate will be the sole
source of payments on the Certificates of a Series;
. the Certificates of any Series will not represent an interest in or
obligation of the Seller, Norwest Mortgage, Norwest Bank, the Trustee or
any of their affiliates, except for the Seller's limited obligations with
respect to certain breaches of its representations and warranties,
Norwest Mortgage's obligations as Servicer and Norwest Bank's obligations
as Master Servicer; and
. neither the Certificates of any Series nor the related Mortgage Loans
will be guaranteed or insured by any governmental agency or
instrumentality, the Seller, Norwest Mortgage, Norwest Bank, the Trustee,
any of their affiliates or any other person.
Consequently, in the event that payments on the Mortgage Loans underlying
your Series of Certificates are insufficient or otherwise unavailable to make
all payments required on your Certificates, there will be no recourse to the
Seller, Norwest Mortgage, Norwest Bank, the Trustee or, except as specified in
the applicable Prospectus Supplement, any other entity.
CREDIT ENHANCEMENT IS LIMITED IN AMOUNT AND COVERAGE
With respect to each Series of Certificates, credit enhancement may be
provided in limited amounts to cover certain types of losses on the underlying
Mortgage Loans. Credit enhancement will be provided in one or more of the
forms referred to in this Prospectus, including, but not limited to:
subordination of other Classes of Certificates of the same Series; a limited
guarantee; a financial guaranty insurance policy; a surety bond; a letter of
credit; a pool insurance policy; a special hazard insurance policy; a
mortgagor bankruptcy bond; a reserve fund; cross-support; and any combination
of the preceding types of credit enhancement. See "Description of the
Certificates--Other Credit Enhancement".
Regardless of the form of credit enhancement provided:
. the amount of coverage will be limited in amount and in most cases will
be subject to periodic reduction in accordance with a schedule or
formula;
. may provide only very limited coverage as to certain types of losses, and
may provide no coverage as to certain other types of losses; and
. all or a portion of the credit enhancement for any Series of Certificates
will generally be permitted to be reduced, terminated or substituted for,
in the sole discretion of the Master Servicer, if each applicable Rating
Agency indicates that the then-current ratings will not be adversely
affected.
In the event losses exceed the amount of coverage provided by any credit
enhancement or losses of a type not covered by any credit enhancement occur,
such losses will be borne by the holders of the related Certificates (or
certain Classes).
9
<PAGE>
The rating of any Series of Certificates by any applicable Rating Agency may
be lowered following the initial issuance thereof as a result of the
downgrading of the obligations of any applicable credit support provider, or
as a result of losses on the related Mortgage Loans in excess of the levels
contemplated by such Rating Agency at the time of its initial rating analysis.
Neither the Seller, Norwest Mortgage, Norwest Bank, nor any of their
affiliates will have any obligation to replace or supplement any credit
enhancement, or to take any other action to maintain any rating of any Class
of Certificates.
See "Description of the Certificates--Other Credit Enhancement."
REAL ESTATE MARKET CONDITIONS AFFECT MORTGAGE LOAN PERFORMANCE
An investment in securities such as the Certificates, which generally
represent interests in pools of residential mortgage loans, may be affected by
a decline in real estate values and changes in the mortgagor's financial
condition. There is no assurance that the values of the Mortgaged Properties
securing the Mortgage Loans underlying any Series of Certificates have
remained or will remain at their levels on the dates of origination of the
related Mortgage Loans.
If the residential real estate market should experience an overall decline
in property values such that the outstanding balances of the Mortgage Loans
contained in a particular Trust Estate and any secondary financing on the
Mortgaged Properties, become equal to or greater than the value of the
Mortgaged Properties, delinquencies, foreclosures and losses could be higher
than those now generally experienced in the mortgage lending industry and
those experienced in Norwest Mortgage's or other Servicers' servicing
portfolios.
To the extent that losses on Mortgage Loans underlying a Series are not
covered by credit enhancement, Certificateholders of the Series will bear all
risk of loss resulting from default by mortgagors and will have to look
primarily to the value of the Mortgaged Properties for recovery of the
outstanding principal and unpaid interest on the defaulted Mortgage Loans. See
"The Trusts Estates--Mortgage Loans" and "The Mortgage Loan Programs--Mortgage
Loan Underwriting."
GEOGRAPHIC CONCENTRATION MAY INCREASE RATES OF LOSS AND DELINQUENCY
In addition to risk factors related to the residential real estate market
generally, certain geographic regions of the United States from time to time
will experience weaker regional economic conditions and housing markets or be
directly or indirectly affected by natural disasters or civil disturbances
such as earthquakes, hurricanes, floods, eruptions or riots. Mortgage loans in
such areas will experience higher rates of loss and delinquency than on
mortgage loans generally. Although Mortgaged Properties located in certain
identified flood zones will be required to be covered, to the maximum extent
available, by flood insurance, as described under "Servicing of the Mortgage
Loans--Insurance Policies," no Mortgaged Properties will otherwise be required
to be insured against earthquake damage or any other loss not covered by
Standard Hazard Insurance Policies, as described under "Servicing of the
Mortgage Loans--Insurance Policies."
The ability of mortgagors to make payments on the Mortgage Loans may also be
affected by factors which do not necessarily affect property values, such as
adverse economic conditions generally, in particular geographic areas or
industries, or affecting particular segments of the borrowing community (such
as mortgagors relying on commission income and self-employed mortgagors). Such
occurrences may accordingly affect the actual rates of delinquencies,
foreclosures and losses with respect to any Trust Estate.
The Mortgage Loans underlying certain Series of Certificates may be
concentrated in certain regions. Such concentration may present risk
considerations in addition to those generally present for similar mortgage-
backed securities without such concentration. See "The Mortgage Loan
Programs--Mortgage Loan Underwriting" and "Prepayment and Yield
Considerations--Weighted Average Life of Certificates."
RATE OF PREPAYMENT ON MORTGAGE LOANS MAY ADVERSELY AFFECT AVERAGE LIVES AND
YIELDS ON CERTIFICATES
The yield of the Certificates of each Series will depend in part on the rate
of principal payment on the Mortgage Loans (including prepayments,
liquidations due to defaults and mortgage loan repurchases). Such yield may be
adversely affected, depending upon whether a particular Certificate is
purchased at a premium or a discount, by a higher or lower than anticipated
rate of prepayments on the related Mortgage Loans. In particular:
. the yield on Classes of Certificates entitling their holders primarily or
exclusively to payments of interest or primarily or exclusively to
payments of principal will be extremely sensitive to the rate of
prepayments on the related Mortgage Loans; and
10
<PAGE>
. the yield on certain Classes of Certificates may be relatively more
sensitive to the rate of prepayment of specified Mortgage Loans than
other Classes of Certificates.
The rate of prepayments on Mortgage loans is influenced by a number of
factors, including:
. prevailing mortgage market interest rates;
. local and national economic conditions;
. homeowner mobility; and
. the ability of the borrower to obtain refinancing.
In addition, your yield may be adversely affected by interest shortfalls
which may result from the timing of the receipt of prepayments or liquidations
to the extent that such interest shortfalls are not covered by aggregate
Servicing Fees or other mechanisms specified in the applicable Prospectus
Supplement. Your yield will be also adversely affected to the extent that
losses on the Mortgage Loans in the related Trust Estate are allocated to your
Certificates and may be adversely affected to the extent of unadvanced
delinquencies on the Mortgage Loans in the related Trust. Classes of
Certificates identified in the applicable Prospectus Supplement as
Subordinated Certificates are more likely to be affected by delinquencies and
losses than other Classes of Certificates.
See "Prepayment and Yield Considerations."
BOOK ENTRY CERTIFICATES MAY EXPERIENCE DECREASED LIQUIDITY AND PAYMENT DELAY
Since transactions in the Classes and Subclasses of Book-Entry Certificates
of any Series generally can be effected only through DTC, DTC Participants and
Indirect DTC Participants:
. your ability to pledge Book-Entry Certificates to someone who does not
participate in the DTC system, or to otherwise act with respect to such
Book-Entry Certificates, may be limited due to the lack of a physical
certificate;
. you may experience delays in your receipt of payments on Book-Entry
Certificates because distributions will be made by the Master Servicer,
or a Paying Agent on behalf of the Master Servicer, to Cede, as nominee
for DTC; and
. the liquidity of Book-Entry Certificates in any secondary trading market
that may develop may be limited because investors may be unwilling to
purchase securities for which they cannot obtain delivery of physical
certificates.
See "Description of the Certificates--Book-Entry Form."
CASH FLOW AGREEMENTS ARE SUBJECT TO COUNTERPARTY RISK
The assets of a Trust Estate may, if specified in the related Prospectus
Supplement, include agreements, such as interest rate swap, cap, floor or
similar agreements (each a "CASH FLOW AGREEMENT"), which will require the
provider of such instrument (the "COUNTERPARTY") to make payments to the Trust
Estate under the circumstances described in the Prospectus Supplement. To the
extent that payments on the Certificates of the related Series depend in part
on payments to be received under a Cash Flow Agreement, the ability of the
Trust Estate to make payments on the Certificates will be subject to the
credit risk of the Counterparty. The Prospectus Supplement for a Series of
Certificates will describe any mechanism, such as the payment of "breakage
fees," which may exist to facilitate replacement of a Cash Flow Agreement upon
the default or credit impairment of the related Counterparty. However, there
can be no assurance that any such mechanism will result in the ability of the
Master Servicer to obtain a replacement Cash Flow Agreement.
THE TRUST ESTATES
GENERAL
The Trust Estate for each Series of Certificates will consist primarily of
fixed or adjustable interest rate, conventional first mortgage loans
("MORTGAGE LOANS") evidenced by promissory notes (the "MORTGAGE NOTES")
secured by mortgages, deeds of trust or other instruments creating first liens
(the "MORTGAGES") on some or all of the following six types of property (as so
secured, the "MORTGAGED PROPERTIES"), to the extent set forth in the
applicable Prospectus Supplement: (i) one- to four-family detached residences,
(ii) townhouses, (iii) condominium units, (iv) units within planned unit
developments, (v) long-term leases with respect to any of the foregoing, and
(vi) shares issued by private non-profit housing corporations ("COOPERATIVES")
and the related proprietary leases or occupancy agreements granting exclusive
rights to occupy specified units in such cooperatives' buildings. In addition,
a Trust Estate will also include (i) amounts held from time to time in the
related Certificate Account, (ii) the
11
<PAGE>
Seller's interest in any primary mortgage insurance, hazard insurance, title
insurance or other insurance policies relating to a Mortgage Loan, (iii) any
property which initially secured a Mortgage Loan and which has been acquired
by foreclosure or trustee's sale or deed in lieu of foreclosure or trustee's
sale, (iv) if applicable, and to the extent set forth in the applicable
Prospectus Supplement, any reserve fund or funds, (v) if applicable, and to
the extent set forth in the applicable Prospectus Supplement, contractual
obligations of any person to make payments in respect of any form of credit
enhancement or any interest subsidy agreement and (vi) such other assets as
may be specified in the applicable Prospectus Supplement. The Trust Estate
will not include the portion of interest on the Mortgage Loans which
constitutes the Fixed Retained Yield, if any. See "Servicing of the Mortgage
Loans--Fixed Retained Yield, Servicing Compensation and Payment of Expenses."
MORTGAGE LOANS
The Mortgage Loans will have been acquired by the Seller from its affiliate,
Norwest Mortgage. The Mortgage Loans will have been originated by Norwest
Mortgage or will have been acquired by Norwest Mortgage from other affiliated
or unaffiliated mortgage loan originators. Each Mortgage Loan will have been
underwritten either to Norwest Mortgage's standards, to the extent specified
in the applicable Prospectus Supplement, to the standards of a Pool Insurer or
to such other standards set forth in the applicable Prospectus Supplement. See
"The Mortgage Loan Programs--Mortgage Loan Production Sources" and "--Mortgage
Loan Underwriting." The Prospectus Supplement for each Series will set forth
the respective number and principal amounts of Mortgage Loans (i) originated
by Norwest Mortgage or its affiliate and (ii) purchased by Norwest Mortgage or
its affiliates from unaffiliated mortgage loan originators through Norwest
Mortgage's mortgage loan purchase programs.
Each of the Mortgage Loans will be secured by a Mortgage on a Mortgaged
Property located in any of the 50 states or the District of Columbia.
Generally, the land underlying a Mortgaged Property will consist of five acres
or less but may consist of greater acreage in Norwest Mortgage's discretion.
The borrowers for each of the Mortgage Loans will be natural persons or, under
certain conditions, borrowers may be inter vivos revocable trusts established
by natural persons.
If specified in the applicable Prospectus Supplement, the Mortgage Loans may
be secured by leases on real property under circumstances that Norwest
Mortgage determines in its discretion are commonly acceptable to institutional
mortgage investors. A Mortgage Loan secured by a lease on real property is
secured not by a fee simple interest in the Mortgaged Property but rather by a
lease under which the mortgagor has the right, for a specified term, to use
the related real estate and the residential dwelling located on the property.
Generally, a Mortgage Loan will be secured by a lease only if (i) the use of
leasehold estates as security for mortgage loans is customary in the area,
(ii) the lease is not subject to any prior lien that could result in
termination of the lease and (iii) the term of the lease ends at least five
years beyond the maturity date of the related Mortgage Loan. The provisions of
each lease securing a Mortgage Loan will expressly permit (i) mortgaging of
the leasehold estate, (ii) assignment of the lease without the lessor's
consent and (iii) acquisition by the holder of the Mortgage, in its own or its
nominee's name, of the rights of the lessee upon foreclosure or assignment in
lieu of foreclosure, unless alternative arrangements provide the holder of the
Mortgage with substantially similar protections. No lease will contain
provisions which (i) provide for termination upon the lessee's default without
the holder of the Mortgage being entitled to receive written notice of, and
opportunity to cure, such default, (ii) provide for termination in the event
of damage or destruction as long as the Mortgage is in existence or (iii)
prohibit the holder of the Mortgage from being insured under the hazard
insurance policy or policies related to the premises.
The Prospectus Supplement will set forth the geographic distribution of
Mortgaged Properties and the number and aggregate unpaid principal balances of
the Mortgage Loans by category of Mortgaged Property. The Prospectus
Supplement for each Series will also set forth the range of original terms to
maturity of the Mortgage Loans in the Trust Estate, the weighted average
remaining term to stated maturity at the Cut-Off Date of such Mortgage Loans,
the earliest and latest months of origination of such Mortgage Loans, the
range of Mortgage Interest Rates borne by such Mortgage Loans, if such
Mortgage Loans have varying Net Mortgage Interest Rates, the weighted average
Net Mortgage Interest Rate at the Cut-Off Date of such Mortgage Loans, the
range of Loan-to-Value Ratios at the time of origination of such Mortgage
Loans and the range of principal balances at origination of such Mortgage
Loans.
The information with respect to the Mortgage Loans and Mortgaged Properties
described in the preceding two paragraphs may be presented in the Prospectus
Supplement for a Series as ranges in which the actual characteristics of such
Mortgage Loans and Mortgaged Properties are expected to fall. In all such
cases, information as to the final characteristics of the Mortgage Loans and
Mortgaged Properties will be available in a Current Report on Form 8-K which
the Seller will file with the Commission within 15 days of the initial
issuance of the related Series.
12
<PAGE>
The Mortgage Loans in a Trust will generally have monthly payments due on
the first of each month (each, a "DUE DATE") but may, if so specified in the
applicable Prospectus Supplement, have payments due on a different day of each
month. Each Mortgage Loan will be of one of the following types of mortgage
loans:
a. Fixed Rate Loans. If so specified in the applicable Prospectus
Supplement, a Trust Estate may include fixed-rate, fully-amortizing Mortgage
Loans providing for level monthly payments of principal and interest and terms
at origination or modification of not more than 30 years. If specified in the
applicable Prospectus Supplement, fixed rates on certain Mortgage Loans may be
converted to adjustable rates after origination of such Mortgage Loans and
upon the satisfaction of other conditions specified in the applicable
Prospectus Supplement. If so specified in the applicable Prospectus
Supplement, the Pooling and Servicing Agreement will require the Seller or
another party to repurchase each such converted Mortgage Loan at the price set
forth in the applicable Prospectus Supplement. A Trust Estate containing fixed
rate Mortgage Loans may contain convertible Mortgage Loans which have
converted from an adjustable interest rate prior to the formation of the Trust
Estate and which are subject to no further conversions.
b. Adjustable Rate Loans. If so specified in the applicable Prospectus
Supplement, a Trust Estate may include adjustable-rate, fully-amortizing
Mortgage Loans having an original or modified term to maturity of not more
than 30 years with a related Mortgage Interest Rate which generally adjusts
initially either six months, one, three, five, seven or ten years subsequent
to the initial Due Date, and thereafter at either six-month, one-year or other
intervals over the term of the Mortgage Loan to equal the sum of a fixed
margin set forth in the related Mortgage Note and an index. The applicable
Prospectus Supplement will set forth the relevant index and the highest,
lowest and weighted average margin with respect to the adjustable rate
mortgage loans in the related Trust. The applicable Prospectus Supplement will
also indicate any periodic or lifetime limitations on changes in any per annum
Mortgage Rate at the time of any adjustment.
If specified in the applicable Prospectus Supplement, adjustable rates on
certain Mortgage Loans may be converted to fixed rates after origination of
such Mortgage Loans and upon the satisfaction of the conditions specified in
the applicable Prospectus Supplement. If specified in the applicable
Prospectus Supplement, the Seller or another party will generally be required
to repurchase each such converted Mortgage Loan at the price set forth in the
applicable Prospectus Supplement. A Trust Estate containing adjustable-rate
Mortgage Loans may contain convertible Mortgage Loans which have converted
from a fixed interest rate prior to the formation of the Trust Estate.
The scheduled monthly payment for an adjustable rate Mortgage Loan will be
adjusted as and when described in the applicable Prospectus Supplement to an
amount that would fully amortize the Mortgage Loan over its remaining term on
a level debt service basis; provided that increases in the scheduled monthly
payment may be subject to certain limitations as specified in the applicable
Prospectus Supplement. If the adjustments made to monthly payments for an
adjustable rate Mortgage Loan are made at intervals different from the
intervals at which the Mortgage Interest Rate is adjusted, "negative
amortization" of principal may result with respect to such Mortgage Loan.
Negative amortization will occur if an adjustment to the Mortgage Interest
Rate on such a Mortgage Loan causes the amount of interest accrued thereon in
any month to exceed the current scheduled monthly payment on such mortgage
loan. The resulting amount of interest that has accrued but is not then
payable ("DEFERRED INTEREST") will be added to the principal balance of such
Mortgage Loan.
c. Graduated Payment Loans. If so specified in the applicable Prospectus
Supplement, a Trust Estate may contain fixed-rate, graduated payment Mortgage
Loans having original or modified terms to maturity of not more than 30 years
with monthly payments during the first year calculated on the basis of an
assumed interest rate which is a specified percentage below the Mortgage Rate
on such Mortgage Loan. Such monthly payments increase at the beginning of the
second year by a specified percentage of the monthly payment during the
preceding year and each year specified thereafter to the extent necessary to
amortize the Mortgage Loan over the remainder of its term or other shorter
period. Mortgage Loans incorporating such graduated payment features may
include (i) "GRADUATED PAY MORTGAGE LOANS", pursuant to which amounts
constituting Deferred Interest are added to the principal balances of such
mortgage loans, (ii) "TIERED PAYMENT MORTGAGE LOANS", pursuant to which, if
the amount of interest accrued in any month exceeds the current scheduled
payment for such month, such excess amounts are paid from a subsidy account
(usually funded by a home builder or family member) established at closing and
(iii) "GROWING EQUITY MORTGAGE LOANS", for which the monthly payments increase
at a rate which has the effect of amortizing the loan over a period shorter
than the stated term.
d. Subsidy Loans. If so specified in the applicable Prospectus Supplement, a
Trust Estate may contain Mortgage Loans subject to temporary interest subsidy
agreements ("SUBSIDY LOANS") pursuant to which the monthly payments made by
the related
13
<PAGE>
mortgagors will be less than the scheduled monthly payments on such Mortgage
Loans with the present value of the resulting difference in payment ("SUBSIDY
PAYMENTS") being provided by the employer of the mortgagor, generally on an
annual basis. Subsidy Payments will generally be placed in a custodial account
("SUBSIDY ACCOUNT") by the related Servicer. Despite the existence of a
subsidy program, a mortgagor remains primarily liable for making all scheduled
payments on a Subsidy Loan and for all other obligations provided for in the
related Mortgage Note and Mortgage Loan.
The terms of the subsidy agreements relating to Subsidy Loans generally
range from one to ten years. Subsidy Loans are offered by employers generally
through either a "graduated" or "fixed" subsidy loan program, or programs that
combine features of graduated and fixed subsidy loan programs. The subsidy
agreements relating to Subsidy Loans made under a graduated program generally
will provide for subsidy payments that result in effective subsidized interest
rates between three percentage points (3%) and five percentage points (5%)
below the Mortgage Interest Rates specified in the related Mortgage Notes
during the term of the subsidy agreement. Generally, under a graduated
program, the subsidized rate for a Mortgage Loan will increase approximately
one percentage point per year until it equals the full Mortgage Interest Rate.
For example, if the initial subsidized interest rate is five percentage points
below the Mortgage Interest Rate in year one, the subsidized rate will
increase to four percentage points below the Mortgage Interest Rate in year
two, and likewise until year six, when the subsidized rate will equal the
Mortgage Interest Rate. Where the subsidy agreements relating to Subsidy Loans
are in effect for longer than five years, the subsidized interest rates
generally increase at smaller percentage increments for each year. The subsidy
agreements relating to Subsidy Loans made under a fixed program generally will
provide for subsidized interest rates at fixed percentages (generally one
percentage point to two percentage points) below the Mortgage Interest Rates
for the term of the subsidy agreement. The subsidy agreements relating to
Subsidy Loans pursuant to combination fixed/graduated programs generally will
provide for an initial fixed subsidy of up to five percentage points below the
related Mortgage Interest Rate for up to five years, and then a periodic
reduction in the subsidy for up to five years, at an equal fixed percentage
per year until the subsidized rate equals the Mortgage Interest Rate.
Generally, employers may terminate subsidy programs in the event of (i) the
mortgagor's death, retirement, resignation or termination of employment, (ii)
the full prepayment of the Subsidy Loan by the mortgagor, (iii) the sale or
transfer by the mortgagor of the related Mortgaged Property as a result of
which the mortgagee is entitled to accelerate the Subsidy Loan pursuant to the
"due-on-sale" clause contained in the Mortgage, or (iv) the commencement of
foreclosure proceedings or the acceptance of a deed in lieu of foreclosure. In
addition, some subsidy programs provide that if prevailing market rates of
interest on mortgage loans similar to a Subsidy Loan are less than the
Mortgage Interest Rate of such Subsidy Loan, the employer may request that the
mortgagor refinance such Subsidy Loan and may terminate the related subsidy
agreement if the mortgagor fails to do so. In the event the mortgagor
refinances a Subsidy Loan, the new loan will not be included in the Trust
Estate. See "Prepayment and Yield Considerations." In the event a subsidy
agreement is terminated, the amount remaining in the Subsidy Account will be
returned to the employer, and the mortgagor will be obligated to make the full
amount of all remaining scheduled payments, if any. The mortgagor's reduced
monthly housing expense as a consequence of payments under a subsidy agreement
is used by Norwest Mortgage in determining certain expense-to-income ratios
utilized in underwriting a Subsidy Loan. See "The Mortgage Loan Programs--
Mortgage Loan Underwriting."
e. Buy-Down Loans. If so specified in the applicable Prospectus Supplement,
a Trust Estate may contain Mortgage Loans subject to temporary buy-down plans
("BUY-DOWN LOANS") pursuant to which the monthly payments made by the
mortgagor during the early years of the Mortgage Loan will be less than the
scheduled monthly payments on the Mortgage Loan. The resulting difference in
payment will be compensated for from an amount contributed by the seller of
the related Mortgaged Property or another source, including the originator of
the Mortgage Loan (generally on a present value basis) and, if so specified in
the applicable Prospectus Supplement, placed in a custodial account (the "BUY-
DOWN FUND") by the related Servicer. If the mortgagor on a Buy-Down Loan
prepays such Mortgage Loan in its entirety, or defaults on such Mortgage Loan
and the Mortgaged Property is sold in liquidation thereof, during the period
when the mortgagor is not obligated, on account of the buy-down plan, to pay
the full monthly payment otherwise due on such loan, the unpaid principal
balance of such Buy-Down Loan will be reduced by the amounts remaining in the
Buy-Down Fund with respect to such Buy-Down Loan, and such amounts will be
deposited in the Servicer Custodial Account or the Certificate Account, net of
any amounts paid with respect to such Buy-Down Loan by any insurer, guarantor
or other person pursuant to a credit enhancement arrangement described in the
applicable Prospectus Supplement.
f. Balloon Loans. If so specified in the applicable Prospectus Supplement, a
Trust Estate may contain Mortgage Loans which are amortized over a fixed
period not exceeding 30 years but which have shorter terms to maturity
("BALLOON LOANS") that causes the outstanding principal balance of the related
Mortgage Loan to be due and payable at the end of a certain specified
14
<PAGE>
period (the "BALLOON PERIOD"). The borrower of such Balloon Loan will be
obligated to pay the entire outstanding principal balance of the Balloon Loan
at the end of the related Balloon Period. In the event the related mortgagor
refinances a Balloon Loan at maturity, the new loan will not be included in
the Trust Estate. See "Prepayment and Yield Considerations."
g. Pledged Asset Mortgage Loans. If so specified in the applicable
Prospectus Supplement, a Trust Estate may contain fixed-rate mortgage loans
having original terms to stated maturity of not more than 30 years which are
either (i) secured by a security interest in additional collateral (normally
securities) owned by the borrower or (ii) supported by a third party guarantee
(usually a parent of the borrower) which is in turn secured by a security
interest in collateral (usually securities) owned by such guarantor (any such
loans, "PLEDGED ASSET MORTGAGE LOANS," and any such collateral, "ADDITIONAL
COLLATERAL"). Generally, the amount of such Additional Collateral will not
exceed 30% of the amount of such loan, and the requirement to maintain
Additional Collateral will terminate when the principal amount of the Mortgage
Loan is paid down to a predetermined amount.
A Trust Estate may also include other types of first lien, residential
Mortgage Loans to the extent set forth in the applicable Prospectus
Supplement.
CASH FLOW AGREEMENTS
If specified in the Prospectus Supplement, the Trust Estate may include
guaranteed investment contracts pursuant to which moneys held in the funds and
accounts established for the related Series of Certificates will be invested
at a specified rate. The Trust Estate may also include certain other
agreements, such as interest rate exchange or swap agreements, interest rate
cap or floor agreements or similar agreements provided to reduce the effects
of interest rate fluctuations on the assets or on one or more Classes of
Certificates. The principal terms of any such guaranteed investment contract
or other agreement (any such agreement, a "CASH FLOW AGREEMENT", including,
without limitation, provisions relating to the timing, manner and amount of
payments thereunder and provisions relating to the termination thereof, will
be described in the Prospectus Supplement for the related Series of
Certificates. In addition, the related Prospectus Supplement will provide
certain information with respect to the obligor under any such Cash Flow
Agreement.
THE SELLER
Norwest Asset Securities Corporation (the "SELLER") is a direct, wholly
owned subsidiary of Norwest Mortgage, Inc. and an indirect, wholly owned
subsidiary of Norwest Corporation, a corporation organized under the laws of
Delaware ("NORWEST CORPORATION"). The Seller was incorporated in the State of
Delaware on March 28, 1996.
The limited purposes of the Seller are, in general, to acquire, own and sell
mortgage loans; to issue, acquire, own, hold and sell mortgage pass-through
securities which represent ownership interests in mortgage loans, collections
thereon and related properties; and to engage in any acts which are incidental
to, or necessary, suitable or convenient to accomplish, the foregoing.
The Seller maintains its principal office at 7485 New Horizon Way,
Frederick, Maryland 21703. Its telephone number is (301) 846-8881.
At the time of the formation of any Trust Estate, the Seller will be the
sole owner of all the related Mortgage Loans. The Seller will have acquired
the Mortgage Loans included in any Trust Estate from Norwest Mortgage. Except
to the extent otherwise specified in the applicable Prospectus Supplement, the
Seller's only obligation with respect to the Certificates of any Series will
be to repurchase or substitute for Mortgage Loans in a Trust Estate in the
event of defective documentation or upon the breach of certain representations
and warranties made by the Seller. See "The Pooling and Servicing Agreement--
Assignment of Mortgage Loans to the Trustee."
NORWEST MORTGAGE
Norwest Mortgage, Inc. ("NORWEST MORTGAGE") was originally incorporated as a
Minnesota corporation on July 1, 1983. On August 30, 1995, Norwest Mortgage
and Directors Mortgage Loan Corporation, a California corporation, completed a
statutory merger. As a result of the merger, Norwest became a California
corporation as of September 1, 1995. Norwest Mortgage is engaged principally
in the business of (i) originating, purchasing and selling residential
mortgage loans in its own name and through its affiliates, Norwest Funding,
Inc. and Norwest Funding II, Inc. (collectively, "NORWEST FUNDING") and (ii)
servicing residential mortgage loans for its own account or for the account of
others. Norwest Mortgage is a direct, wholly owned subsidiary of Norwest Nova,
Inc. and an indirect, wholly owned subsidiary of Norwest Corporation. The
executive offices of Norwest Mortgage are located at 405 Southwest 5th Street,
Des Moines, Iowa 50309-4603, and its telephone number is (515) 221-7300.
15
<PAGE>
On May 7, 1996 Norwest Mortgage and Norwest Funding acquired all of the
mortgage origination, servicing and secondary marketing operations of The
Prudential Home Mortgage Company, Inc. ("PHMC"), an indirect, wholly owned
subsidiary of The Prudential Insurance Company of America, and purchased
certain mortgage loans from PHMC and a substantial portion of PHMC's mortgage
servicing portfolio (such transaction, the "PHMC ACQUISITION").
On January 7, 1997, a complaint was served on PHMC with respect to an
individual and purported class action filed by The Capitol Life Insurance
Company ("CAPITOL LIFE") in the Superior Court of New Jersey against PHMC, The
Prudential Home Mortgage Securities Company, Inc. ("PHMSC") and certain of
their affiliates and 100 unnamed "Doe defendants". On March 26, 1997, PHMC and
others filed a motion to dismiss the complaint for failure to state a claim on
which relief can be granted. On June 2, 1997, an amended complaint was filed
and American Investors Life Insurance Company joined Capitol Life as a named
plaintiff in the actions. As amended, the complaint asserts claims against
PHMC, PHMSC, certain of their present and former affiliates and certain former
employees as well as Merrill Lynch & Co., Kidder, Peabody & Co. Incorporated,
Lehman Brothers Inc. and Salomon Brothers Inc. As amended, the complaint
alleges, among other things, that the defendants made false and misleading
statements and/or omissions of material fact and fraudulently concealed
material facts in connection with the purchase by the plaintiffs of certain of
PHMSC's Subordinated Mortgage Securities, Series 1992-A. One of the named
defendants, who is a former employee of PHMC and certain of its affiliates, is
an officer and employee of the Seller and Norwest Mortgage. The Seller has
been advised that PHMC, PHMSC, their affiliated defendants and such common
employee will vigorously defend the action. Based on the foregoing, the Seller
does not believe that this litigation will have an adverse effect on any
Series of Certificates.
Norwest Mortgage is an approved servicer of FNMA, FHLMC and the Government
National Mortgage Association. As of December 31, 1997, Norwest Mortgage had a
net worth of approximately $446.5 million.
NORWEST BANK
Norwest Bank Minnesota, National Association ("NORWEST BANK") will act as
Master Servicer with respect to each Series. Norwest Bank is a direct, wholly
owned subsidiary of Norwest Corporation. Norwest Bank is a national banking
association originally chartered in 1872 and is engaged in a wide range of
activities typical of a national bank.
Norwest Bank's principal office is located at Norwest Center, Sixth and
Marquette, Minneapolis, Minnesota 55479. Norwest Bank conducts its master
servicing and securities administration services at its offices in Columbia,
Maryland. Its address there is 11000 Broken Land Parkway, Columbia, Maryland
21044-3662 and its telephone number is (410) 884-2000.
THE MORTGAGE LOAN PROGRAMS
MORTGAGE LOAN PRODUCTION SOURCES
Norwest Mortgage conducts a significant portion of its mortgage loan
originations through more than 700 loan production offices (the "LOAN STORES")
located throughout all 50 states. Norwest Mortgage also conducts a significant
portion of its mortgage loan originations through centralized production
offices located in Frederick, Maryland and Minneapolis, Minnesota. At the
latter locations, Norwest Mortgage receives applications for home mortgage
loans on toll-free telephone numbers that can be called from anywhere in the
United States.
The following are Norwest Mortgage's primary sources of mortgage loan
originations: (i) direct contact with prospective borrowers (including
borrowers with mortgage loans currently serviced by Norwest Mortgage or
borrowers referred by borrowers with mortgage loans currently serviced by
Norwest Mortgage), (ii) referrals by realtors, other real estate professionals
and prospective borrowers to the Loan Stores, (iii) referrals from selected
corporate clients, (iv) originations by Norwest Mortgage's Private Mortgage
Banking division (including referrals from the private banking group of
Norwest Bank and other affiliated banks), which division specializes in
providing services to individuals meeting certain earnings, liquidity or net
worth parameters, (v) several joint ventures into which Norwest Mortgage,
through its wholly owned subsidiary, Norwest Mortgage Ventures, Inc., has
entered with realtors and banking institutions (the "JOINT VENTURES") and (vi)
referrals from mortgage brokers and similar entities. In addition to its own
mortgage loan originations, Norwest Mortgage acquires qualifying mortgage
loans from other unaffiliated originators ("CORRESPONDENTS"). See "--
Acquisition of Mortgage Loans from Correspondents" below. The relative
contribution of each of these sources to Norwest Mortgage's business, measured
by the volume of loans generated, tends to fluctuate over time.
Norwest Mortgage Ventures, Inc. owns at least a 50% interest in each of the
Joint Ventures, with the remaining ownership interest in each being owned by a
realtor or a banking institution having significant contact with potential
borrowers. Mortgage
16
<PAGE>
loans that are originated by Joint Ventures in which Norwest Mortgage's
partners are realtors are generally made to finance the acquisition of
properties marketed by such Joint Venture partners. Applications for mortgage
loans originated through Joint Ventures are generally taken by Joint Venture
employees and underwritten by Norwest Mortgage in accordance with its standard
underwriting criteria. Such mortgage loans are then closed by the Joint
Ventures in their own names and subsequently purchased by Norwest Mortgage or
Norwest Funding.
Norwest Mortgage may directly contact prospective borrowers (including
borrowers with mortgage loans currently serviced by Norwest Mortgage) through
general and targeted solicitations. Such solicitations are made through direct
mailings, mortgage loan statement inserts and television, radio and print
advertisements and by telephone. Norwest Mortgage's targeted solicitations may
be based on characteristics such as the borrower's mortgage loan interest rate
or payment history and the geographic location of the mortgaged property. See
"Prepayment and Yield Considerations."
A majority of Norwest Mortgage's corporate clients are companies that
sponsor relocation programs for their employees and in connection with which
Norwest Mortgage provides mortgage financing. Eligibility for a relocation
loan is based, in general, on an employer's providing financial assistance to
the relocating employee in connection with a job-required move. Although
Subsidy Loans are typically generated through such corporate-sponsored
programs, the assistance extended by the employer need not necessarily take
the form of a loan subsidy. (Not all relocation loans are generated by Norwest
Mortgage through referrals from its corporate clients; some relocation loans
are generated as a result of referrals from mortgage brokers and similar
entities and others are generated through Norwest Mortgage's acquisition of
mortgage loans from other originators.) Also among Norwest Mortgage's
corporate clients are various professional associations. These associations,
as well as the other corporate clients, promote the availability of a broad
range of Norwest Mortgage mortgage products to their members or employees,
including refinance loans, second-home loans and investment-property loans.
ACQUISITION OF MORTGAGE LOANS FROM CORRESPONDENTS
In order to qualify for participation in Norwest Mortgage's mortgage loan
purchase programs, lending institutions must (i) meet and maintain certain net
worth and other financial standards, (ii) demonstrate experience in
originating residential mortgage loans, (iii) meet and maintain certain
operational standards, (iv) evaluate each loan offered to Norwest Mortgage for
consistency with Norwest Mortgage's underwriting guidelines or the standards
of a Pool Insurer and represent that each loan was underwritten in accordance
with Norwest Mortgage standards or the standards of a Pool Insurer and (v)
utilize the services of qualified appraisers.
The contractual arrangements with Correspondents may involve the commitment
by Norwest Mortgage to accept delivery of a certain dollar amount of mortgage
loans over a period of time. This commitment may be satisfied either by
delivery of mortgage loans one at a time or in multiples as aggregated by the
Correspondent. The contractual arrangements with Correspondents may also
involve the delegation of all underwriting functions to such Correspondents
("DELEGATED UNDERWRITING"), which will result in Norwest Mortgage not
performing any underwriting functions prior to acquisition of the loan but
instead relying on such originators' representations, and Norwest Mortgage's
post-purchase reviews of samplings of mortgage loans acquired from such
originators regarding the originators' compliance with Norwest Mortgage's
underwriting standards. In all instances, however, acceptance by Norwest
Mortgage is contingent upon the loans being found to satisfy Norwest
Mortgage's program standards or the standards of a Pool Insurer. Norwest
Mortgage may also acquire portfolios of loans in negotiated transactions.
MORTGAGE LOAN UNDERWRITING
Norwest Mortgage Underwriting
The following is a summary of Norwest Mortgage's "general" underwriting
standards and the substantially less restrictive underwriting criteria
applicable to Norwest Mortgage's "retention program".
General Standards. Norwest Mortgage's underwriting standards are applied by
or on behalf of Norwest Mortgage to evaluate the applicant's credit standing
and ability to repay the loan, as well as the value and adequacy of the
mortgaged property as collateral. The underwriting standards that guide the
determination represent a balancing of several factors that may affect the
ultimate recovery of the loan amount, including, among others, the amount of
the loan, the ratio of the loan amount to the property value (i.e., the lower
of the appraised value of the mortgaged property and the purchase price), the
borrower's means of support and the borrower's credit history. Norwest
Mortgage's guidelines for underwriting may vary according to the nature of the
17
<PAGE>
borrower or the type of loan, since differing characteristics may be perceived
as presenting different levels of risk. With respect to certain Mortgage
Loans, the originators of such loans may have contracted with unaffiliated
third parties to perform the underwriting process. Except as described below,
the Mortgage Loans will be underwritten by or on behalf of Norwest Mortgage
generally in accordance with the standards and procedures described herein.
Norwest Mortgage utilizes various systems of credit scoring as a tool to
supplement the mortgage loan underwriting process. Credit scoring assists
Norwest Mortgage in the mortgage loan approval process by providing
consistent, objective measures of borrower credit and loan attributes. Such
objective measures are used to evaluate loan applications and assign each
application a "CREDIT SCORE".
The portion of the Credit Score related to borrower credit history is
generally based on computer models developed by a third party. These models
evaluate information available from three major credit reporting bureaus
regarding historical patterns of consumer credit behavior in relation to
default experience for similar types of borrower profiles. A particular
borrower's credit patterns are then considered in order to derive a "FICO
SCORE" which indicates a level of default probability over a two-year period.
The Credit Score is used to determine the type of underwriting process and
which level of underwriter will review the loan file. For transactions which
are determined to be low-risk transactions, based upon the Credit Score and
other parameters (including the mortgage loan production source), the lowest
underwriting authority is generally required. For moderate and higher risk
transactions, higher level underwriters and a full review of the mortgage file
are generally required. Borrowers who have a satisfactory Credit Score (based
upon the mortgage loan production source) are generally subject to streamlined
credit review (which relies on the credit scoring process for various elements
of the underwriting assessments). Such borrowers may also be eligible for a
limited documentation program and are generally permitted a greater latitude
in the application of borrower debt-to-income ratios.
With respect to all mortgage loans underwritten by Norwest Mortgage, Norwest
Mortgage's underwriting of a mortgage loan may be based on data obtained by
parties other than Norwest Mortgage that are involved at various stages in the
mortgage origination or acquisition process. This typically occurs under
circumstances in which loans are subject to more than one approval process, as
when correspondents, certain mortgage brokers or similar entities that have
been approved by Norwest Mortgage to process loans on its behalf, or
independent contractors hired by Norwest Mortgage to perform underwriting
services on its behalf ("CONTRACT UNDERWRITERS") make initial determinations
as to the consistency of loans with Norwest Mortgage underwriting guidelines.
The underwriting of mortgage loans acquired by Norwest Mortgage pursuant to a
Delegated Underwriting arrangement with a Correspondent is not reviewed prior
to acquisition of the mortgage loan by Norwest Mortgage although the mortgage
loan file is reviewed by Norwest Mortgage to confirm that certain documents
are included in the file. Instead, Norwest Mortgage relies on (i) the
Correspondent's representations that such mortgage loan was underwritten in
accordance with Norwest Mortgage's underwriting standards and (ii) a post-
purchase review of a sampling of all mortgage loans acquired from such
originator. In addition, in order to be eligible to sell mortgage loans to
Norwest Mortgage pursuant to a Delegated Underwriting arrangement, the
originator must meet certain requirements including, among other things,
certain quality, operational and financial guidelines.
A prospective borrower applying for a mortgage loan is required to complete
a detailed application. The loan application elicits pertinent information
about the applicant, with particular emphasis on the applicant's financial
health (assets, liabilities, income and expenses), the property being financed
and the type of loan desired. A self-employed applicant may be required to
submit his or her most recent signed federal income tax returns. With respect
to every applicant, credit reports are obtained from commercial reporting
services, summarizing the applicant's credit history with merchants and
lenders. Significant unfavorable credit information reported by the applicant
or a credit reporting agency must be explained by the applicant. The credit
review process generally is streamlined for borrowers with a qualifying Credit
Score.
Verifications of employment, income, assets or mortgages may be used to
supplement the loan application and the credit report in reaching a
determination as to the applicant's ability to meet his or her monthly
obligations on the proposed mortgage loan, as well as his or her other
mortgage payments (if any), living expenses and financial obligations. A
mortgage verification involves obtaining information regarding the borrower's
payment history with respect to any existing mortgage the applicant may have.
This verification is accomplished by either having the present lender complete
a verification of mortgage form, evaluating the information on the credit
report concerning the applicant's payment history for the existing mortgage,
communicating, either
18
<PAGE>
verbally or in writing, with the applicant's present lender or analyzing
cancelled checks provided by the applicant. Verifications of income, assets or
mortgages may be waived under certain programs offered by Norwest Mortgage,
but Norwest Mortgage's underwriting guidelines require, in most instances, a
verbal or written verification of employment to be obtained. In some cases,
employment histories may be obtained through V.I.E., Inc., an affiliate of
Norwest Mortgage, that obtains employment data from state unemployment
insurance departments or other state agencies. In addition, the loan applicant
may be eligible for a loan approval process permitting limited documentation.
The above referenced reduced documentation options and waivers limit the
amount of documentation required for an underwriting decision and have the
effect of increasing the relative importance of the credit report and the
appraisal. Documentation requirements vary based upon a number of factors,
including the purpose of the loan, the amount of the loan, the ratio of the
loan amount to the property value and the mortgage loan production source.
Norwest Mortgage accepts alternative methods of verification, in those
instances where verifications are part of the underwriting decision; for
example, salaried income may be substantiated either by means of a form
independently prepared and signed by the applicant's employer or by means of
the applicant's most recent paystub and W-2. In cases where two or more
persons have jointly applied for a mortgage loan, the gross incomes and
expenses of all of the applicants, including nonoccupant co-mortgagors, are
combined and considered as a unit.
In general, borrowers applying for loans must demonstrate that the ratio of
their total monthly housing debt to their monthly gross income (except for
borrowers who apply through Norwest Mortgage's Private Mortgage Banking
division), and the ratio of their total monthly debt to their monthly gross
income do not exceed certain maximum levels. Such maximum levels vary
depending on a number of factors including Loan-to-Value Ratio, a borrower's
credit history, a borrower's liquid net worth, the potential of a borrower for
continued employment advancement or income growth, the ability of the borrower
to accumulate assets or to devote a greater portion of income to basic needs
such as housing expense, a borrower's Credit Score and the type of loan for
which the borrower is applying. These calculations are based on the
amortization schedule and the interest rate of the related loan, with each
ratio being computed on the basis of the proposed monthly mortgage payment. In
the case of adjustable-rate mortgage loans, the interest rate used to
determine a mortgagor's monthly payment for purposes of such ratios may, in
certain cases, be the initial mortgage interest rate or another interest rate,
which, in either case, is lower than the sum of the index rate that would have
been applicable at origination plus the applicable margin. In evaluating
applications for Subsidy Loans and Buy-Down Loans, such ratios are determined
by including in the applicant's total monthly housing expense and total
monthly debt the proposed monthly mortgage payment reduced by the amount
expected to be applied on a monthly basis under the related subsidy agreement
or buy-down agreement or, in certain cases, the mortgage payment that would
result from an interest rate lower than the Mortgage Interest Rate but higher
than the effective rate to the mortgagor as a result of the subsidy agreement
or the buy-down agreement. See "The Trust Estates--Mortgage Loans." In the
case of a mortgage loan referred by Norwest Mortgage's Private Mortgage
Banking division, only one qualifying ratio is calculated (the applicant's
ratio of total monthly debt to monthly gross income). In addition, for certain
applicants referred by this division, qualifying income may be based on an
"asset dissipation" approach under which future income is projected from the
assumed liquidation of a portion of the applicant's specified assets.
Secondary financing is permitted on mortgage loans under certain
circumstances. In those cases, the payment obligations under both primary and
secondary financing are included in the computation of the housing debt-to-
income ratios, and the combined amount of primary and secondary loans will be
used to calculate the combined loan-to-value ratio. Any secondary financing
permitted will generally mature prior to the maturity date of the related
mortgage loan. In evaluating an application with respect to a "non-owner-
occupied" property, which Norwest Mortgage defines as a property leased to a
third party by its owner (as distinct from a "second home," which Norwest
Mortgage defines as an owner-occupied, non-rental property that is not the
owner's principal residence), Norwest Mortgage will include projected rental
income net of certain mortgagor obligations and other assumed expenses or loss
from such property to be included in the applicant's monthly gross income or
total monthly debt in calculating the foregoing ratios. A mortgage loan
secured by a two- to four-family Mortgaged Property is considered to be an
owner-occupied property if the borrower occupies one of the units; rental
income on the other units is generally taken into account in evaluating the
borrower's ability to repay the mortgage loan.
Mortgage Loans will not generally have had at origination a Loan-to-Value
Ratio in excess of 95%. However, if so specified in the applicable Prospectus
Supplement, Mortgage Loans that had Loan-to-Value Ratios at origination in
excess of 95% may be included in the related Trust Estate. The "LOAN-TO-VALUE
RATIO" is the ratio, expressed as a percentage, of the principal amount of the
Mortgage Loan at origination to the lesser of (i) the appraised value of the
related Mortgaged Property, as established by an appraisal obtained by the
originator generally no more than four months prior to origination (or, with
respect to newly constructed properties, no more than twelve months prior to
origination), or (ii) the sale price for such property. In some instances, the
Loan-to-
19
<PAGE>
Value Ratio may be based on an appraisal that was obtained by the originator
more than four months prior to origination, provided that (i) a
recertification of the original appraisal is obtained and (ii) the original
appraisal was obtained no more than twelve months prior to origination. For
the purpose of calculating the Loan-to-Value Ratio of any Mortgage Loan that
is the result of the refinancing (including a refinancing for "equity take
out" purposes) of an existing mortgage loan, the appraised value of the
related Mortgaged Property is generally determined by reference to an
appraisal obtained in connection with the origination of the replacement loan.
In connection with certain of its mortgage originations, Norwest Mortgage
currently obtains appraisals through its affiliate, Value Information
Technology, Inc.
No assurance can be given that values of the Mortgaged Properties have
remained or will remain at the levels which existed on the dates of appraisal
(or, where applicable, recertification of value) of the related Mortgage
Loans. The appraisal of any Mortgaged Property reflects the individual
appraiser's judgment as to value, based on the market values of comparable
homes sold within the recent past in comparable nearby locations and on the
estimated replacement cost. The appraisal relates both to the land and to the
structure; in fact, a significant portion of the appraised value of a
Mortgaged Property may be attributable to the value of the land rather than to
the residence. Because of the unique locations and special features of certain
Mortgaged Properties, identifying comparable properties in nearby locations
may be difficult. The appraised values of such Mortgaged Properties will be
based to a greater extent on adjustments made by the appraisers to the
appraised values of reasonably similar properties rather than on objectively
verifiable sales data. If residential real estate values generally or in
particular geographic areas decline such that the outstanding balances of the
Mortgage Loans and any secondary financing on the Mortgaged Properties in a
particular Trust Estate become equal to or greater than the values of the
related Mortgaged Properties, the actual rates of delinquencies, foreclosures
and losses could be higher than those now generally experienced in the
mortgage lending industry and those now experienced in Norwest Mortgage's
servicing portfolios. In addition, adverse economic conditions generally, in
particular geographic areas or industries, or affecting particular segments of
the borrowing community (such as mortgagors relying on commission income and
self-employed mortgagors) and other factors which may or may not affect real
property values, including the purposes for which the Mortgage Loans were made
and the uses of the Mortgaged Properties, may affect the timely payment by
mortgagors of scheduled payments of principal and interest on the Mortgage
Loans and, accordingly, the actual rates of delinquencies, foreclosures and
losses with respect to any Trust Estate. See "Prepayment and Yield
Considerations--Weighted Average Life of Certificates." To the extent that
such losses are not covered by the methods of credit support or the insurance
policies described herein, they will be borne by holders of the Certificates
of the Series evidencing interests in such Trust Estate.
Norwest originates mortgage loans with Loan-to-Value Ratios in excess of 80%
either with or without the requirement to obtain primary mortgage insurance.
In cases for which such primary mortgage insurance is obtained, the excess
over 75% (or such lower percentage as Norwest Mortgage may require at
origination) will be covered by primary mortgage insurance from an approved
primary mortgage insurance company until the unpaid principal balance of the
Mortgage Loan is reduced to an amount that will result in a Loan-to-Value
Ratio less than or equal to 80%. However, Norwest Mortgage does not require
primary mortgage insurance on loans that have Loan-to-Value Ratios exceeding
80% if such loans are secured by primary residences or second homes (excluding
cooperatives). Each loan originated without primary mortgage insurance will
have been made at an interest rate that was higher than the rate would have
been if the Loan-to-Value Ratios was 80% or less or if primary mortgage
insurance was obtained. The Prospectus Supplement will specify the number and
percentage of Mortgage Loans contained in the Trust Estate for a particular
Series of Certificates with Loan-to-Value Ratios at origination in excess of
80% which were originated without primary mortgage insurance.
Except as described below, Mortgage Loans will generally be covered by an
appropriate standard form American Land Title Association ("ALTA") title
insurance policy, or a substantially similar policy or form of insurance
acceptable to Fannie Mae ("FNMA") or the Federal Home Loan Mortgage
Corporation ("FHLMC"). Certain Mortgage Loans ("T.O.P. LOANS") originated by
Norwest Mortgage or Norwest Funding in connection with the "TITLE OPTION PLUS"
program are not covered by title insurance policies, although title searches
are performed in connection with the origination of T.O.P. Loans by American
Land Title Company, Inc., an affiliate of Norwest Mortgage. The Seller will
represent and warrant to the Trustee of any Trust Estate that the Mortgaged
Property related to each Mortgage Loan (including each T.O.P. Loan) is free
and clear of all encumbrances and liens having priority over the first lien of
the related Mortgage, subject to certain limited exceptions as set forth below
under "--Representations and Warranties." However in the event that a lien
senior to the lien of the Mortgage related to a T.O.P. Loan that is contained
in the Trust Estate for any Series is found to exist, the sole recourse of the
Trustee will be against the Seller for breach of its representation and
warranty. The Trustee will not have recourse against any title insurance
company or other party.
20
<PAGE>
Where permitted by law, Norwest Mortgage generally requires that a borrower
include in each monthly payment a portion of the real estate taxes,
assessments, primary mortgage insurance (if applicable), and hazard insurance
premiums and other similar items with respect to the related mortgage loan.
Norwest Mortgage may, however, on a case-by-case basis, in its discretion not
require such advance payments for certain Mortgage Loans, based on an
evaluation of the borrowers' ability to pay such taxes and charges as they
become due.
Retention Program Standards. A borrower whose mortgage loan is serviced by
Norwest Mortgage may be eligible for Norwest Mortgage's "retention program."
Provided such a borrower is current in his or her mortgage payment
obligations, Norwest Mortgage may permit a refinancing of the mortgage loan to
a current market interest rate without applying any significant borrower
credit or property underwriting standards. As a result, borrowers who qualify
under the retention program may not need to demonstrate that their current
monthly housing debt or total monthly debt obligations in relation to their
monthly income levels do not exceed certain ratios; Norwest Mortgage may not
obtain a current credit report for the borrower or apply a new Credit Score to
the refinanced loan; and the borrower may not be required to provide any
verifications of current employment, income level or extent of assets. In
addition, no current appraisal or indication of market value may be required
with respect to the properties securing the mortgage loans which are
refinanced under the retention program. Mortgage Loans initially included in
the Trust Estate for a particular Series of Certificates may have been the
subject of a refinancing under the retention program and, to the extent that
borrowers become eligible for the retention program after their Mortgage Loans
have been included in a particular Trust Estate, such Mortgage Loans may be
refinanced under such program. See "Prepayment and Yield Considerations" in
this Prospectus and in the Prospectus Supplement for a description of the
potential effects on Certificateholders resulting from such refinancings.
Pool Certification Underwriting
If specified in the applicable Prospectus Supplement, certain of the
Mortgage Loans will have been reviewed by General Electric Mortgage Insurance
Corporation ("GEMICO"), United Guaranty Residential Insurance Company
("UGRIC") or a similar entity (collectively, the "POOL INSURERS" ) to
determine conformity, in the aggregate, with such company's respective credit,
appraisal and underwriting guidelines. Norwest Mortgage will not have
underwritten such Mortgage Loans. Neither GEMICO nor UGRIC have underwritten
any of the Mortgage Loans for compliance with any investor guidelines.
Based on information provided by the relevant company, as a condition to
eligibility of a Mortgage Loan for inclusion in a mortgage pool to be insured
by GEMICO or UGRIC, the loan originator generally will be required to comply
with the following procedures, although exceptions may be made if permitted by
such company.
Initially, a prospective borrower must fill out a detailed application
providing pertinent credit information. The loan originator obtains a credit
report, which summarizes the prospective borrower's credit history with
merchants and lenders and any record of bankruptcy, or other pertinent legal
history. In addition, a verification of employment for the last two years is
made from either the applicant's employer or a Form W-2 for the most recent
two years and the applicant's most recent pay stub. If an applicant is self-
employed, such applicant submits copies of signed tax returns with all
schedules for the prior two years together with a current year-to-date profit
and loss statement and any other documentation deemed necessary. Rental income
used to qualify the applicant is verified either by lease agreements or by the
borrower's tax returns. In the case of refinancings, the loan originator must
require, among other things, that there has not been more than one delinquency
in the prior 12 months nor, in the case of mortgage loans reviewed by GEMICO,
any delinquency in the past 90 days on the prior mortgage loan.
In determining the adequacy of the Mortgaged Property as collateral, an
independent appraisal must be made of each property considered for financing.
Each appraiser must be selected in accordance with predetermined guidelines
established for appraisers. The appraiser is required to inspect the property
and verify that it is in good condition and that construction, if new, has
been completed. The appraisal is based on the market value of comparable
homes. No appraisal more than six months old will be accepted by GEMICO and no
appraisal more than 120 days old will be accepted by UGRIC.
Once all applicable employment, credit and property information is received,
a determination must be made by the loan originator (and confirmed on review
by GEMICO or UGRIC) as to whether the prospective borrower has sufficient
monthly income to meet (i) the monthly payment obligations on the proposed
mortgage loan (including principal and interest payments, real estate taxes,
insurance on the subject property, and homeowners' association dues and
secondary financing, if any), and (ii) the
21
<PAGE>
aggregate of the foregoing and all other financial obligations not expected to
be fully repaid within the next 10 months. As a general rule, UGRIC permits a
maximum ratio of a prospective borrower's debt, as described in clauses (i)
and (ii) above, to such borrower's income to be 33% and 38%, respectively for
fixed rate, fixed payment loans and for adjustable rate loans with Loan-to-
Value Ratios of 75% or less. Maximum ratios of 28% and 33%, respectively, are
permitted for adjustable rate loans with Loan-to-Value Ratios above 75%. The
general rule may be varied, and higher debt-to-income ratios may be permitted,
in appropriate cases characterized by lower Loan-to-Value Ratios or other
favorable factors. GEMICO's underwriting process relies on a combination of
its own proprietory credit score model (which includes factors related to a
borrower's credit history as well as specific loan attributes) and the
consideration of borrower debt-to-income ratios. Depending upon the credit
score, GEMICO will permit maximum ratios, as described in clauses (i) and (ii)
above, of 40% and 50%, respectively.
In some special cases, GEMICO and UGRIC may underwrite loans under a
"limited documentation" program. With respect to such loans, limited
investigation into the borrower's credit history and income profile is
undertaken by the originator and such loans may be underwritten primarily on
the basis of an appraisal of the mortgaged property and Loan-to-Value Ratio on
origination. Thus, if the Loan-to-Value Ratio is less than the percentage
required under standard guidelines, the originator may forego certain aspects
of the review relating to monthly income, and, in the case of mortgage loans
reviewed by GEMICO, traditional ratios of monthly or total expenses to gross
income may not be applied. At a minimum, a limited documentation program must
require a loan application, a credit report, an appraisal acceptable to
FNMA/FHLMC performed by an independent appraiser, and a verification of
downpayment or three months of bank statements. The maximum Loan-to-Value
Ratio allowed under any limited documentation program underwritten by GEMICO
and UGRIC is 70%. UGRIC's "limited documentation" program is limited
exclusively to self-employed borrowers.
For any rate or term refinance of a mortgage loan, or conversion of an
adjustable rate mortgage loan, where GEMICO or UGRIC has already insured the
prior loan, GEMICO or UGRIC may have determined a loan's insurability without
reviewing updated credit or collateral information. In the case of seasoned
loans, GEMICO or UGRIC may have determined a loan's insurability by performing
a more limited credit and collateral review.
The foregoing should not be taken as a full and complete discussion of all
of the procedures undertaken in connection with a particular underwriting.
Both GEMICO and UGRIC consider various other factors including, but not
limited to, reviewing sales contracts, verifying deposits and other assets and
examining additional supporting documentation in certain instances such as
divorce decrees and separation agreements. Investors should consult the
particular Pool Insurer's underwriting guidelines for more specific and
complete requirements regarding underwriting standards. Furthermore, the
underwriting process often results in certain compensating factors being
considered to offset the existence of other negative factors in a loan file.
The use of pool certification underwriting by a Pool Insurer in no way
indicates that the related Certificates or Mortgage Loans are insured or
guaranteed under a mortgage pool insurance policy unless the applicable
Prospectus Supplement so specifies.
REPRESENTATIONS AND WARRANTIES
In connection with the transfer of the Mortgage Loans related to any Series
by the Seller to the Trust Estate, the Seller will generally make certain
representations and warranties regarding the Mortgage Loans. In certain cases
where Norwest Mortgage acquired some or all of the Mortgage Loans related to a
Series from a Correspondent, if so indicated in the applicable Prospectus
Supplement, the Seller may, rather than itself making representations and
warranties, cause the representations and warranties made by the Correspondent
in connection with its sale of Mortgage Loans to Norwest Mortgage or Norwest
Funding to be assigned to the Trust Estate. In such cases, the Correspondent's
representations and warranties may have been made as of a date prior to the
date of execution of the Pooling and Servicing Agreement. Unless otherwise
provided in the applicable Prospectus Supplement, such representations and
warranties (whether made by the Seller or another party) will generally
include the following with respect to the Mortgage Loans, or each Mortgage
Loan, as the case may be: (i) the schedule of Mortgage Loans appearing as an
exhibit to such Pooling and Servicing Agreement is correct in all material
respects at the date or dates respecting which such information is furnished
as specified therein; (ii) immediately prior to the transfer and assignment
contemplated by the Pooling and Servicing Agreement, the Seller is the sole
owner and holder of the Mortgage Loan, free and clear of any and all liens,
pledges, charges or security interests of any nature and has full right and
authority to sell and assign the same; (iii) no Mortgage Note or Mortgage is
subject to any right of rescission, set-off, counterclaim or defense; (iv) the
Mortgage Loan (other than a T.O.P. Loan as described above under "--Mortgage
Loan Underwriting") is covered by a title insurance policy (or in the case of
any Mortgage Loan
22
<PAGE>
secured by a Mortgaged Property located in a jurisdiction where such policies
are generally not available, an opinion of counsel of the type customarily
rendered in such jurisdiction in lieu of title insurance is instead received);
(v) the Mortgage is a valid, subsisting and enforceable first lien on the
related Mortgaged Property and the Mortgaged Property is free and clear of all
encumbrances and liens having a priority over the first lien of the Mortgage
except for those liens set forth in the Pooling and Servicing Agreement;
(vi) the Mortgaged Property is undamaged by water, fire, earthquake or earth
movement, windstorm, flood, tornado or similar casualty (excluding casualty
from the presence of hazardous wastes or hazardous substances, as to which no
representation is made), 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; (vii) all payments required to be made up to the Due Date
immediately preceding the Cut-Off Date for such Mortgage Loan under the terms
of the related Mortgage Note have been made and no Mortgage loan had more than
one delinquency in the 12 months preceding the Cut-Off Date; and (viii) any
and all requirements of any federal, state or local law with respect to the
origination of the Mortgage Loans including, without limitation, usury, truth-
in-lending, real estate settlement procedures, consumer credit protection,
equal credit opportunity or disclosure laws applicable to the Mortgage Loans
have been complied with.
No representations or warranties are made by the Seller or any other party
as to the environmental condition of any Mortgaged Property including the
absence, presence or effect of hazardous wastes or hazardous substances on
such Mortgaged Property or any effect from the presence or effect of hazardous
wastes or hazardous substances on, near or emanating from such Mortgaged
Property. See "Certain Legal Aspects of the Mortgage Loans--Environmental
Considerations" below.
In addition, no representations or warranties are made by the Seller or any
other party with respect to the absence or effect of fraud in the origination
of any Mortgage Loan, and any loss or liability resulting from the presence or
effect of fraud will be borne solely by Certificateholders.
See "The Pooling and Servicing Agreement--Assignment of Mortgage Loans to
the Trustee" for a description of the limited remedies available in connection
with breaches of the foregoing representations and warranties.
DESCRIPTION OF THE CERTIFICATES
GENERAL
Each Series of Certificates will include one or more Classes, each of which
may be divided into two or more Subclasses. Any references herein to the
characteristics of a Class of Certificates may also describe the
characteristics of a Subclass of Certificates. In addition, any Class or
Subclass of Certificates may consist of two or more non-severable components,
each of which may exhibit any of the principal or interest payment
characteristics described herein with respect to a Class of Certificates. A
Series may include one or more Classes of Certificates entitled, to the extent
of funds available, to (i) principal and interest distributions in respect of
the related Mortgage Loans, (ii) principal distributions, with no interest
distributions, (iii) interest distributions, with no principal distributions
or (iv) such other distributions as are described in the applicable Prospectus
Supplement.
Each Series of Certificates will be issued pursuant to a Pooling and
Servicing Agreement (the "POOLING AND SERVICING AGREEMENT") among the Seller,
Norwest Bank, as the Master Servicer, and the Trustee named in the applicable
Prospectus Supplement. An illustrative form of Pooling and Servicing Agreement
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The following summaries describe certain provisions
common to the Certificates and to each Pooling and Servicing Agreement. The
summaries do not purport to be complete and are subject to, and are qualified
in their entirety by reference to, all of the provisions of the Pooling and
Servicing Agreement for each Series of Certificates and the applicable
Prospectus Supplement. Wherever particular sections or defined terms of the
Pooling and Servicing Agreement are referred to, such sections or defined
terms are thereby incorporated herein by reference from the form of Pooling
and Servicing Agreement filed as an exhibit to the Registration Statement.
Unless otherwise specified in the applicable Prospectus Supplement,
distributions to Certificateholders of all Series (other than the final
distribution in retirement of the Certificates) will be made by check mailed
to the address of the person entitled thereto (which in the case of Book-Entry
Certificates will be Cede as nominee for DTC) as it appears on the certificate
register, except that, with respect to any holder of a Certificate evidencing
not less than a certain minimum denomination set forth in the applicable
Prospectus Supplement, distributions will be made by wire transfer in
immediately available funds, provided that the Master
23
<PAGE>
Servicer or the Paying Agent acting on behalf of the Master Servicer shall
have been furnished with appropriate wiring instructions not less than seven
business days prior to the related Distribution Date. The final distribution
in retirement of Certificates will be made only upon presentation and
surrender of the Certificates at the office or agency maintained by the
Trustee or other entity for such purpose, as specified in the final
distribution notice to Certificateholders.
Each Series of Certificates will represent ownership interests in the
related Trust Estate. An election may be made to treat the Trust Estate (or
one or more segregated pools of assets therein) with respect to a Series of
Certificates as a REMIC. If such an election is made, such Series will consist
of one or more Classes of Certificates that will represent "regular interests"
within the meaning of Code Section 860G(a)(1) (such Class or Classes
collectively referred to as the "REGULAR CERTIFICATES") and one Class or
Subclass of Certificates with respect to each REMIC that will be designated as
the "residual interest" within the meaning of Code Section 860G(a)(2) (the
"RESIDUAL CERTIFICATES") representing the right to receive distributions as
specified in the Prospectus Supplement for such Series. See "Certain Federal
Income Tax Consequences."
The Seller may sell certain Classes or Subclasses of the Certificates of a
Series, including one or more Classes of Subordinated Certificates, in
privately negotiated transactions exempt from registration under the
Securities Act. Alternatively, if so specified in a Prospectus Supplement
relating to such Subordinated Certificates, the Seller may offer one or more
Classes of the Subordinated Certificates of a Series by means of this
Prospectus and such Prospectus Supplement.
DEFINITIVE FORM
Certificates of a Series that are issued in fully registered, certificated
form are referred to herein as "DEFINITIVE CERTIFICATES." Distributions of
principal of, and interest on, the Definitive Certificates will be made
directly to holders of Definitive Certificates in accordance with the
procedures set forth in the Pooling and Servicing Agreement. The Definitive
Certificates of a Series offered hereby and by means of the applicable
Prospectus Supplements will be transferable and exchangeable at the office or
agency maintained by the Trustee or such other entity for such purpose set
forth in the applicable Prospectus Supplement. No service charge will be made
for any transfer or exchange of Definitive Certificates, but the Trustee or
such other entity may require payment of a sum sufficient to cover any tax or
other governmental charge in connection with such transfer or exchange.
In the event that an election is made to treat the Trust Estate (or one or
more segregated pools of assets therein) as a REMIC, the "residual interest"
thereof will be issued as a Definitive Certificate. No legal or beneficial
interest in all or any portion of any "residual interest" may be transferred
without the receipt by the transferor and the Trustee of an affidavit signed
by the transferee stating, among other things, that the transferee (i) is not
a disqualified organization within the meaning of Code Section 860E(e) or an
agent (including a broker, nominee, or middleman) thereof and (ii) understands
that it may incur tax liabilities in excess of any cash flows generated by the
residual interest. Further, the transferee must state in the affidavit that it
(x) historically has paid its debts as they have come due, (y) intends to pay
its debts as they come due in the future and (z) intends to pay taxes
associated with holding the residual interest as they become due. The
transferor must certify to the Trustee that, as of the time of the transfer,
it has no actual knowledge that any of the statements made in the transferee
affidavit are false and no reason to know that the statements made by the
transferee pursuant to clauses (x), (y) and (z) of the preceding sentence are
false. See "Certain Federal Income Tax Consequences--Federal Income Tax
Consequences for REMIC Certificates--Taxation of Residual Certificates--Tax-
Related Restrictions on Transfer of Residual Certificates."
BOOK-ENTRY FORM
Each Class or Subclass of the Book-Entry Certificates of a Series initially
will be represented by one or more physical certificates registered in the
name of Cede & Co. ("CEDE"), as nominee of DTC, which will be the "holder" or
"CERTIFICATEHOLDER" of such Certificates, as such terms are used herein. No
person acquiring an interest in a Book-Entry Certificate (a "BENEFICIAL
OWNER") will be entitled to receive a Definitive Certificate representing such
person's interest in the Book-Entry Certificate, except as set forth below.
Unless and until Definitive Certificates are issued under the limited
circumstances described herein, all references to actions taken by
Certificateholders or holders shall, in the case of the Book-Entry
Certificates, refer to actions taken by DTC upon instructions from its DTC
Participants, and all references herein to distributions, notices, reports and
statements to Certificateholders or holders shall, in the case of the Book-
Entry Certificates, refer to distributions, notices, reports and statements to
DTC or Cede, as the registered holder of the Book-Entry Certificates, as the
case may be, for distribution to Beneficial Owners in accordance with DTC
procedures.
24
<PAGE>
DTC is a limited purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to Section 17A of the Securities Exchange Act of
1934, as amended. DTC was created to hold securities for its participating
organizations ("DTC PARTICIPANTS") and to facilitate the clearance and
settlement of securities transactions among DTC Participants through
electronic book-entries, thereby eliminating the need for physical movement of
certificates. DTC Participants include securities brokers and dealers (which
may include any underwriter identified in the Prospectus Supplement applicable
to any Series), banks, trust companies and clearing corporations. Indirect
access to the DTC system also is available to banks, brokers, dealers, trust
companies and other institutions that clear through or maintain a custodial
relationship with a DTC Participant, either directly or indirectly ("INDIRECT
DTC PARTICIPANTS").
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "RULES"), DTC is required to make book-entry transfers of
Book-Entry Certificates among DTC Participants on whose behalf it acts with
respect to the Book-Entry Certificates and to receive and transmit
distributions of principal of and interest on the Book-Entry Certificates. DTC
Participants and Indirect DTC Participants with which Beneficial Owners have
accounts with respect to the Book-Entry Certificates similarly are required to
make book-entry transfers and receive and transmit such payments on behalf of
their respective Beneficial Owners.
Beneficial Owners that are not DTC Participants or Indirect DTC Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Book-Entry Certificates may do so only through DTC Participants
and Indirect DTC Participants. In addition, Beneficial Owners will receive all
distributions of principal and interest from the Master Servicer, or a Paying
Agent on behalf of the Master Servicer, through DTC Participants. DTC will
forward such distributions to its DTC Participants, which thereafter will
forward them to Indirect DTC Participants or Beneficial Owners. Beneficial
Owners will not be recognized by the Trustee or the Master Servicer or any
paying agent as Certificateholders, as such term is used in the Pooling and
Servicing Agreement, and Beneficial Owners will be permitted to exercise the
rights of Certificateholders only indirectly through DTC and its DTC
Participants.
Because DTC can only act on behalf of DTC Participants, who in turn act on
behalf of Indirect DTC Participants and certain banks, the ability of a
Beneficial Owner to pledge Book-Entry Certificates to persons or entities that
do not participate in the DTC system, or to otherwise act with respect to such
Book-Entry Certificates, may be limited due to the lack of a physical
certificate for such Book-Entry Certificates. In addition, under a book-entry
format, Beneficial Owners may experience delays in their receipt of payments,
since distributions will be made by the Master Servicer, or a Paying Agent on
behalf of the Master Servicer, to Cede, as nominee for DTC.
DTC has advised the Seller that it will take any action permitted to be
taken by a Certificateholder under the Pooling and Servicing Agreement only at
the direction of one or more DTC Participants to whose accounts with DTC the
Book-Entry Certificates are credited. Additionally, DTC has advised the Seller
that it will take such actions with respect to specified Voting Interests only
at the direction of and on behalf of DTC Participants whose holdings of Book-
Entry Certificates evidence such specified Voting Interests. DTC may take
conflicting actions with respect to Voting Interests to the extent that DTC
Participants whose holdings of Book-Entry Certificates evidence such Voting
Interests authorize divergent action.
Neither the Seller, the Master Servicer nor the Trustee will have any
responsibility for any aspect of the records relating to or payments made on
account of beneficial ownership interests of the Book-Entry Certificates held
by Cede, as nominee for DTC, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests. In the event of the
insolvency of DTC, a DTC Participant or an Indirect DTC Participant in whose
name Book-Entry Certificates are registered, the ability of the Beneficial
Owners of such Book-Entry Certificates to obtain timely payment and, if the
limits of applicable insurance coverage by the Securities Investor Protection
Corporation are exceeded or if such coverage is otherwise unavailable,
ultimate payment, of amounts distributable with respect to such Book-Entry
Certificates may be impaired.
The Book-Entry Certificates will be converted to Definitive Certificates and
reissued to Beneficial Owners or their nominees, rather than to DTC or its
nominee, only if (i) the Trustee is advised in writing that DTC is no longer
willing or able to discharge properly its responsibilities as depository with
respect to the Book-Entry Certificates and the Trustee is unable to locate a
qualified successor, (ii) the Master Servicer, at its option, elects to
terminate the book-entry system through DTC or (iii) after the occurrence of a
dismissal or resignation of the Master Servicer under the Pooling and
Servicing Agreement, Beneficial Owners representing
25
<PAGE>
not less than 51% of the Voting Interests of the outstanding Book-Entry
Certificates advise the Trustee through DTC, in writing, that the continuation
of a book-entry system through DTC (or a successor thereto) is no longer in
the Beneficial Owners' best interest.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Trustee will be required to notify all Beneficial Owners
through DTC Participants of the availability of Definitive Certificates. Upon
surrender by DTC of the physical certificates representing the Book-Entry
Certificates and receipt of instructions for re-registration, the Trustee will
reissue the Book- Entry Certificates as Definitive Certificates to Beneficial
Owners. The procedures relating to payment on and transfer of Certificates
initially issued as Definitive Certificates will thereafter apply to those
Book-Entry Certificates that have been reissued as Definitive Certificates.
DISTRIBUTIONS TO CERTIFICATEHOLDERS
General
On each Distribution Date, each holder of a Certificate of a Class will be
entitled to receive its Certificate's Percentage Interest of the portion of
the Pool Distribution Amount (as defined below) allocated to such Class. The
undivided percentage interest (the "PERCENTAGE INTEREST") represented by any
Certificate of a Subclass or any Class in distributions to such Subclass or
Class will be equal to the percentage obtained by dividing the initial
principal balance (or notional amount) of such Certificate by the aggregate
initial principal balance (or notional amount) of all Certificates of such
Subclass or Class, as the case may be.
In general, the funds available for distribution to Certificateholders of a
Series of Certificates with respect to each Distribution Date for such Series
(the "POOL DISTRIBUTION AMOUNT") will be the sum of all previously
undistributed payments or other receipts on account of principal (including
principal prepayments and Liquidation Proceeds, if any) and interest on or in
respect of the related Mortgage Loans received by the related Servicer after
the Cut-Off Date (except for amounts due on or prior to the Cut-Off Date), or
received by the related Servicer on or prior to the Cut-Off Date but due after
the Cut-Off Date, in either case received on or prior to the business day
preceding the Determination Date in the month in which such Distribution Date
occurs, plus all Periodic Advances with respect to payments due to be received
on the Mortgage Loans on the Due Date preceding such Distribution Date, but
excluding the following:
(a) amounts received as late payments of principal or interest respecting
which one or more unreimbursed Periodic Advances has been made;
(b) that portion of Liquidation Proceeds with respect to a Mortgage Loan
which represents any unreimbursed Periodic Advances;
(c) those portions of each payment of interest on a particular Mortgage
Loan which represent (i) the Fixed Retained Yield, if any, (ii) the
applicable Servicing Fee, (iii) the applicable Master Servicing Fee, (iv)
the Trustee Fee, if any, and (v) any other amounts described in the
applicable Prospectus Supplement;
(d) all amounts representing scheduled payments of principal and interest
due after the Due Date occurring in the month in which such Distribution
Date occurs;
(e) all proceeds (including Liquidation Proceeds other than, in certain
cases as specified in the applicable Prospectus Supplement, Liquidation
Proceeds which were received prior to the related Servicer's determination
that no further recoveries on a defaulted Mortgage Loan will be forthcoming
("PARTIAL LIQUIDATION PROCEEDS")) of any Mortgage Loans, or property
acquired in respect thereof, that were liquidated, foreclosed, purchased or
repurchased pursuant to the applicable Pooling and Servicing Agreement,
which proceeds were received on or after the Due Date occurring in the
month in which such Distribution Date occurs and all principal prepayments
in full, partial principal prepayments and Partial Liquidation Proceeds
received by the related Servicer on or after the Determination Date (or, in
certain cases as specified in the applicable Prospectus Supplement, the Due
Date) occurring in the month in which such Distribution Date occurs, and
all related payments of interest on such amounts;
(f) that portion of Liquidation Proceeds which represents any unpaid
Servicing Fees, Master Servicing Fee or any Trustee Fee to which the
related Servicer, the Trustee or the Master Servicer, respectively, is
entitled and any unpaid Fixed Retained Yield;
26
<PAGE>
(g) if an election has been made to treat the applicable Trust Estate as
a REMIC, any Net Foreclosure Profits with respect to such Distribution
Date;
(h) all amounts representing certain expenses reimbursable to the Master
Servicer or any Servicer and other amounts permitted to be withdrawn by the
Master Servicer from the Certificate Account, in each case pursuant to the
applicable Pooling and Servicing Agreement;
(i) all amounts in the nature of late fees, assumption fees, prepayment
fees and similar fees and payments of interest related to principal
prepayments received on or after the first day of the month in which a
Distribution Date occurs and prior to the Determination Date in the month
of such Distribution Date which the related Servicer is entitled to retain
pursuant to the applicable Underlying Servicing Agreement;
(j) reinvestment earnings on payments received in respect of the Mortgage
Loans; and
(k) any recovery of an amount in respect of principal which had
previously been allocated as a realized loss to such Series of
Certificates.
The applicable Prospectus Supplement for a Series will describe any
variation in the calculation of the Pool Distribution Amount for such Series.
"NET FORECLOSURE PROFITS" with respect to a Distribution Date will be the
excess of (i) the portion of aggregate net Liquidation Proceeds which
represents the amount by which aggregate profits on liquidated Mortgage Loans
with respect to which net Liquidation Proceeds exceed the unpaid principal
balance thereof plus accrued interest thereon at the Mortgage Interest Rate
over (ii) aggregate realized losses on liquidated Mortgage Loans with respect
to which net Liquidation Proceeds are less than the unpaid principal balance
thereof plus accrued interest thereon at the Mortgage Interest Rate.
Distributions of Interest
With respect to each Series of Certificates, interest on the related
Mortgage Loans at the weighted average of the applicable Net Mortgage Interest
Rates thereof, will be passed through monthly to holders of the related
Classes of Certificates in the aggregate, in accordance with the particular
terms of each such Class of Certificates. The "NET MORTGAGE INTEREST RATE" for
each Mortgage Loan in a given period will equal the mortgage interest rate for
such Mortgage Loan in such period, as specified in the related mortgage note
(the "MORTGAGE INTEREST RATE"), less the portion thereof, if any, not
contained in the Trust Estate (the "FIXED RETAINED YIELD"), and less amounts
payable to the Servicers for servicing the Mortgage Loan (the "SERVICING
FEE"), the fee payable to the Master Servicer (the "MASTER SERVICING FEE"),
the fee payable to the Trustee (the "TRUSTEE FEE"), if any, and any related
expenses specified in the applicable Prospectus Supplement.
Interest will accrue on the principal balance (or notional amount, as
described below) of each Class of Certificates entitled to interest at the
Pass-Through Rate for such Class indicated in the applicable Prospectus
Supplement (which may be a fixed rate or an adjustable rate) from the date and
for the periods specified in such Prospectus Supplement. To the extent the
Pool Distribution Amount is available therefor, interest accrued during each
such specified period on each Class of Certificates entitled to interest
(other than a Class that provides for interest that accrues, but is not
currently payable, referred to hereafter as "ACCRUAL CERTIFICATES") will be
distributable on the Distribution Dates specified in the applicable Prospectus
Supplement until the principal balance (or notional amount) of such Class has
been reduced to zero. Distributions allocable to interest on each Certificate
that is not entitled to distributions allocable to principal will generally be
calculated based on the notional amount of such Certificate. The notional
amount of a Certificate will not evidence an interest in or entitlement to
distributions allocable to principal but will be solely for convenience in
expressing the calculation of interest and for certain other purposes.
With respect to any Class of Accrual Certificates, any interest that has
accrued but is not paid on a given Distribution Date will be added to the
principal balance of such Class of Certificates on that Distribution Date.
Distributions of interest on each Class of Accrual Certificates will commence
only after the occurrence of the events or the existence of the circumstance
specified in such Prospectus Supplement and, prior to such time, or in the
absence of such circumstances, the principal balance of such Class will
increase on each Distribution Date by the amount of interest that accrued on
such Class during the preceding interest accrual period but that was not
required to be distributed to such Class on such Distribution Date. Any such
Class of Accrual Certificates will thereafter accrue interest on its
outstanding principal balance as so adjusted.
27
<PAGE>
Distributions of Principal
The principal balance of any Class of Certificates entitled to distributions
of principal will generally be the original principal balance of such Class
specified in such Prospectus Supplement, reduced by all distributions reported
to the holders of such Certificates as allocable to principal and any losses
on the related Mortgage Loans allocated to such Class of Certificates and (i)
in the case of Accrual Certificates, increased by all interest accrued but not
then distributable on such Accrual Certificates and (ii) in the case of a
Series of Certificates representing interests in a Trust Estate containing
adjustable-rate Mortgage Loans, increased by any Deferred Interest allocable
to such Class. The principal balance of a Class or Subclass of Certificates
generally represents the maximum specified dollar amount (exclusive of any
interest that may accrue on such Class or Subclass to which the holder thereof
is entitled from the cash flow on the related Mortgage Loans at such time) and
will decline to the extent of distributions in reduction of the principal
balance of, and allocations of losses to such Class or Subclass. Certificates
with no principal balance will not receive distributions in respect of
principal. The applicable Prospectus Supplement will specify the method by
which the amount of principal to be distributed on the Certificates on each
Distribution Date will be calculated and the manner in which such amount will
be allocated among the Classes of Certificates entitled to distributions of
principal.
If so provided in the applicable Prospectus Supplement, one or more Classes
of Senior Certificates will be entitled to receive all or a disproportionate
percentage of the payments of principal that are received from borrowers in
advance of their scheduled due dates and are not accompanied by amounts
representing scheduled interest due after the months of such payments or of
other unscheduled principal receipts or recoveries in the percentages and
under the circumstances or for the periods specified in such Prospectus
Supplement. Any such allocation of principal prepayments or other unscheduled
receipts or recoveries in respect of principal to such Class or Classes of
Senior Certificates will have the effect of accelerating the amortization of
such Senior Certificates while increasing the interests evidenced by the
Subordinated Certificates in the Trust Estate. Increasing the interests of the
Subordinated Certificates relative to that of the Senior Certificates is
intended to preserve the availability of the subordination provided by the
Subordinated Certificates.
If specified in the applicable Prospectus Supplement, the rights of the
holders of the Subordinated Certificates of a Series of Certificates for which
credit enhancement is provided through subordination to receive distributions
with respect to the Mortgage Loans in the related Trust Estate will be
subordinated to such rights of the holders of the Senior Certificates of the
same Series to the extent described below, except as otherwise set forth in
such Prospectus Supplement. This subordination is intended to enhance the
likelihood of regular receipt by holders of Senior Certificates of the full
amount of scheduled monthly payments of principal and interest due them and to
provide limited protection to the holders of the Senior Certificates against
losses due to mortgagor defaults.
The protection afforded to the holders of Senior Certificates of a Series of
Certificates for which credit enhancement is provided through subordination by
the subordination feature described above will be effected by (i) the
preferential right of such holders to receive, prior to any distribution being
made in respect of the related Subordinated Certificates on each Distribution
Date, current distributions on the related Mortgage Loans of principal and
interest due them on each Distribution Date out of the funds available for
distribution on such date in the related Certificate Account, (ii) by the
right of such holders to receive future distributions on the Mortgage Loans
that would otherwise have been payable to the holders of Subordinated
Certificates and/or (iii) by the prior allocation to the Subordinated
Certificates of all or a portion of losses realized on the related Mortgage
Loans.
Losses realized on liquidated Mortgage Loans (other than Excess Special
Hazard Losses, Excess Fraud Losses and Excess Bankruptcy Losses as described
below) will be allocated to the holders of Subordinated Certificates through a
reduction of the amount of principal payments on the Mortgage Loans to which
such holders are entitled before any corresponding reduction is made in
respect of the Senior Certificate.
A "SPECIAL HAZARD LOSS" is a loss on a liquidated Mortgage Loan occurring as
a result of a hazard not insured against under a standard hazard insurance
policy of the type described herein under "Servicing of the Mortgage Loans--
Insurance Policies." A "FRAUD LOSS" is a loss on a liquidated Mortgage Loan as
to which there was fraud in the origination of such Mortgage Loan. A
"BANKRUPTCY LOSS" is a loss on a liquidated Mortgage Loan attributable to
certain actions which may be taken by a bankruptcy court in connection with a
Mortgage Loan, including a reduction by a bankruptcy court of the principal
balance of or the interest rate on a Mortgage Loan or an extension of its
maturity. Special Hazard Losses in excess of the amount specified in the
applicable Prospectus Supplement (the "SPECIAL HAZARD LOSS AMOUNT") are
"EXCESS SPECIAL HAZARD LOSSES."
28
<PAGE>
Fraud Losses in excess of the amount specified in the applicable Prospectus
Supplement (the "FRAUD LOSS AMOUNT") are "EXCESS FRAUD LOSSES." Bankruptcy
losses in excess of the amount specified in the applicable Prospectus
Supplement (the "BANKRUPTCY LOSS AMOUNT") are "EXCESS BANKRUPTCY LOSSES." Any
Excess Special Hazard Losses, Excess Fraud Losses or Excess Bankruptcy Losses
with respect to a Series will be allocated on a pro rata basis among the
related Classes of Senior and Subordinated Certificates. An allocation of a
loss on a "pro rata basis" among two or more Classes of Certificates means an
allocation on a pro rata basis to each such Class of Certificates on the basis
of their then-outstanding principal balances in the case of the principal
portion of a loss or based on the accrued interest thereon in the case of an
interest portion of a loss.
Since the amounts of the Special Hazard Loss Amount, Fraud Loss Amount and
Bankruptcy Loss Amount for a Series of Certificates are each expected to be
less than the amount of principal payments on the Mortgage Loans to which the
holders of the Subordinated Certificates of such Series are initially entitled
(such amount being subject to reduction, as described above, as a result of
allocation of losses on liquidated Mortgage Loans that are not Special Hazard
Losses, Fraud Losses or Bankruptcy Losses), the holders of Subordinated
Certificates of such Series will bear the risk of Special Hazard Losses, Fraud
Losses and Bankruptcy Losses to a lesser extent than they will bear other
losses on liquidated Mortgage Loans.
Although the subordination feature described above is intended to enhance
the likelihood of timely payment of principal and interest to the holders of
Senior Certificates, shortfalls could result in certain circumstances. For
example, a shortfall in the payment of principal otherwise due the holders of
Senior Certificates could occur if losses realized on the Mortgage Loans in a
Trust Estate were exceptionally high and were concentrated in a particular
month.
The holders of Subordinated Certificates will not be required to refund any
amounts previously properly distributed to them, regardless of whether there
are sufficient funds on a subsequent Distribution Date to make a full
distribution to holders of each Class of Senior Certificates of the same
Series.
CATEGORIES OF CLASSES OF CERTIFICATES
The Certificates of any Series may be comprised of one or more Classes. Such
Classes, in general, fall into different categories. The following chart
identifies and generally defines certain of the more typical categories. The
Prospectus Supplement for a Series of Certificates may identify the Classes
which comprise such Series by reference to the following categories or another
category specified in the applicable Prospectus Supplement.
CATEGORIES OF DEFINITION
CLASSES PRINCIPAL TYPES
Accretion Directed
Class................ A Class that receives principal payments from amounts
that would otherwise be distributed as interest on
specified Accrual Classes. Such principal payments may
be in lieu of or in addition to principal payments from
principal receipts on the Mortgage Loans for the
related Series.
Companion Class
(also sometimes
referred to as a
"SUPPORT CLASS").... A Class that is entitled to receive principal payments
on any Distribution Date only if scheduled payments
have been made on specified Planned Amortization
Classes, Targeted Amortization Classes and/or Scheduled
Amortization Classes.
Component Class...... A Class consisting of two or more specified components
(each, a "COMPONENT") as described in the applicable
Prospectus Supplement. The Components of a Class of
Component Certificates may have different principal
and/or interest payment characteristics but together
constitute a single class and do not represent
severable interests. Each Component of a Class of
Component Certificates may be identified as falling
into one or more of the categories in this chart.
29
<PAGE>
Lockout Class........ A senior Class that is designed not to participate in
or to participate to a limited extent in (i.e., to be
"locked out" of), for a specified period, the receipt
of (1) principal prepayments on the Mortgage Loans that
are allocated disproportionately to the senior Classes
of such Series as a group pursuant to a "shifting
interest" structure and/or (2) scheduled principal
payments on the Mortgage Loans that are allocated to
the senior Classes as a group. A Lockout Class will
typically not be entitled to receive, or will be
entitled to receive only a restricted portion of,
distributions of principal prepayments and/or scheduled
principal payments, as applicable, for a period of
several years, during which time all or a portion of
such principal payments that it would otherwise be
entitled to receive in the absence of a "lockout"
structure will be distributed in reduction of the
Principal Balances of other Senior Classes. Lockout
Classes are designed to minimize weighted average life
volatility during the lockout period.
Notional Amount
Class................ A Class having no principal balance and bearing
interest on the related notional amount. The notional
amount is used for purposes of the determination of
interest distributions.
Planned Amortization
Class (also sometimes
referred to as
a "PAC")............ A Class that is designed to receive principal payments
using a predetermined principal balance schedule
derived by assuming two constant prepayment rates for
the underlying Mortgage Loans. These two rates are the
endpoints for the "structuring range" for the Planned
Amortization Class. The Planned Amortization Classes in
any Series of Certificates may be subdivided into
different categories (e.g., Planned Amortization Class
I ("PAC I") Planned Amortization Class II ("PAC II")
and so forth) derived using different structuring
ranges. A PAC is designed to provide protection against
volatility of weighted average life if prepayments
occur at a constant rate within the structuring range.
Scheduled
Amortization Class... A Class that is designed to receive principal payments
using a predetermined principal balance schedule but is
not designated as a Planned Amortization Class or
Targeted Amortization Class. The schedule is derived by
assuming either two constant prepayment rates or a
single constant prepayment rate for the underlying
Mortgage Loans. In the former case, the two rates are
the endpoints for the "structuring range" for the
Scheduled Amortization Class and such range generally
is narrower than that for a Planned Amortization Class.
Typically, the Support Class(es) for the applicable
Series of Certificates generally will represent a
smaller percentage of the Scheduled Amortization Class
than a Support Class generally would represent in
relation to a Planned Amortization Class or a Targeted
Amortization Class. A Scheduled Amortization Class is
generally less sensitive to weighted average life
volatility as a result of prepayments than a Support
Class but more sensitive than a Planned Amortization
Class or a Targeted Amortization Class.
Senior Class......... A Class that is entitled to receive payments of
principal and interest on each Distribution Date prior
to the Classes of Subordinated Certificates.
Sequential Pay
Class................ A Class that is entitled to receive principal payments
in a prescribed sequence, that does not have a
predetermined principal balance schedule and that, in
most cases, is entitled to receive payments of
principal continuously from the first Distribution Date
on which it receives principal until it is retired.
Sequential Pay Classes may receive principal payments
concurrently with one or more other Sequential Pay
Classes. A single Class that is entitled to receive
principal payments before or after other Classes in the
same Series of Certificates may be identified as a
Sequential Pay Class.
Strip Class.......... A Class that is entitled to receive a constant
proportion, or "strip," of the principal payments on
the underlying Mortgage Loans.
Subordinated Class... A Class that is entitled to receive payments of
principal and interest on each Distribution Date only
after the Senior Certificates and certain Classes of
Subordinated Certificates with higher priority of
distributions have received their full principal and
interest entitlements.
30
<PAGE>
Targeted
Amortization Class
(also sometimes
referred to as a
"TAC").............. A Class that is designed to receive principal payments
using a predetermined principal balance schedule
derived by assuming a single constant prepayment rate
for the underlying Mortgage Loans. A TAC is designed to
provide some protection against shortening of weighted
average life if prepayments occur at a rate exceeding
the assumed constant prepayment rate used to derive the
principal balances schedule of such Class.
INTEREST TYPES
Fixed Rate Class..... A Class with an interest rate that is fixed throughout
the life of the Class or a Class with more than one
interest rate where each rate is fixed for a specified
period during the life of the Class.
Floating Rate
Class................ A Class with an interest rate that resets periodically
based upon a designated index and that varies directly
with changes in such index.
Inverse Floating
Rate Class........... A Class with an interest rate that resets periodically
based upon a designated index and that varies inversely
with changes in such index and with changes in the
interest rate payable on the related Floating Rate
Class.
Variable Rate
Class................ A Class with an interest rate that resets periodically
and is calculated by reference to the rate or rates of
interest applicable to the Mortgage Loans.
Interest Only
Class................ A Class that is entitled to receive some or all of the
interest payments made on the Mortgage Loans and little
or no principal. Interest Only Classes have either a
nominal principal balance or a notional amount. A
nominal principal balance represents actual principal
that will be paid on the Class. It is referred to as
nominal since it is extremely small compared to other
Classes. A notional amount is the amount used as a
reference to calculate the amount of interest due on an
Interest Only Class that is not entitled to any
distributions in respect of principal.
Principal Only
Class................ A Class that does not bear interest and is entitled to
receive only distributions in respect of principal.
Accrual Class........ A Class that accretes the amount of accrued interest
otherwise distributable on such Class, which amount
will be added as principal to the principal balance of
such Class on each applicable Distribution Date. Such
accretion may continue until some specified event has
occurred or until such Accrual Class is retired.
OTHER CREDIT ENHANCEMENT
In addition to, or in substitution for, the subordination discussed above,
credit enhancement may be provided with respect to any Series of Certificates
in any other manner which may be described in the applicable Prospectus
Supplement, including, but not limited to, credit enhancement through an
alternative form of subordination and/or one or more of the methods described
below.
Limited Guarantee
If so specified in the Prospectus Supplement with respect to a Series of
Certificates, credit enhancement may be provided in the form of a limited
guarantee issued by a guarantor named therein.
Financial Guaranty Insurance Policy or Surety Bond
If so specified in the Prospectus Supplement with respect to a Series of
Certificates credit enhancement may be provided in the form of a financial
guaranty insurance policy or a surety bond issued by an insurer named therein.
31
<PAGE>
Letter of Credit
Alternative credit support with respect to a Series of Certificates may be
provided by the issuance of a letter of credit by the bank or financial
institution specified in the applicable Prospectus Supplement. The coverage,
amount and frequency of any reduction in coverage provided by a letter of
credit issued with respect to a Series of Certificates will be set forth in
the Prospectus Supplement relating to such Series.
Pool Insurance Policies
If so specified in the Prospectus Supplement relating to a Series of
Certificates, the Seller will obtain a pool insurance policy for the Mortgage
Loans in the related Trust Estate. The pool insurance policy will cover any
loss (subject to the limitations described in the applicable Prospectus
Supplement) by reason of default to the extent a related Mortgage Loan is not
covered by any primary mortgage insurance policy. The amount and principal
terms of any such coverage will be set forth in the Prospectus Supplement.
Special Hazard Insurance Policies
If so specified in the applicable Prospectus Supplement, for each Series of
Certificates as to which a pool insurance policy is provided, the Seller will
also obtain a special hazard insurance policy for the related Trust Estate in
the amount set forth in such Prospectus Supplement. The special hazard
insurance policy will, subject to the limitations described in the applicable
Prospectus Supplement, protect against loss by reason of damage to Mortgaged
Properties caused by certain hazards not insured against under the standard
form of hazard insurance policy for the respective states in which the
Mortgaged Properties are located. The amount and principal terms of any such
coverage will be set forth in the Prospectus Supplement.
Mortgagor Bankruptcy Bond
If so specified in the applicable Prospectus Supplement, losses resulting
from a bankruptcy proceeding relating to a mortgagor affecting the Mortgage
Loans in a Trust Estate with respect to a Series of Certificates will be
covered under a mortgagor bankruptcy bond (or any other instrument that will
not result in a downgrading of the rating of the Certificates of a Series by
the Rating Agency or Rating Agencies that rated such Series). Any mortgagor
bankruptcy bond or such other instrument will provide for coverage in an
amount meeting the criteria of the Rating Agency or Rating Agencies rating the
Certificates of the related Series, which amount will be set forth in the
applicable Prospectus Supplement. The amount and principal terms of any such
coverage will be set forth in the Prospectus Supplement.
Reserve Fund
If so specified in the applicable Prospectus Supplement, credit enhancement
with respect to a Series of Certificates may be provided by the establishment
of one or more reserve funds (each, a "RESERVE FUND") for such Series.
The Reserve Fund for a Series may be funded (i) by the deposit therein of
cash, U.S. Treasury securities or instruments evidencing ownership of
principal or interest payments thereon, letters of credit, demand notes,
certificates of deposit or a combination thereof in the aggregate amount
specified in the applicable Prospectus Supplement, (ii) by the deposit therein
from time to time of certain amounts, as specified in the applicable
Prospectus Supplement, to which the certain Classes of Certificates would
otherwise be entitled or (iii) in such other manner as may be specified in the
applicable Prospectus Supplement.
Cross Support
If specified in the applicable Prospectus Supplement, the beneficial
ownership of separate groups of Mortgage Loans included in a Trust Estate may
be evidenced by separate Classes of Certificates. In such case, credit support
may be provided by a cross support feature which requires that distributions
be made with respect to certain Classes from mortgage loan payments that would
otherwise be distributed to Subordinated Certificates evidencing a beneficial
ownership interest in other loan groups within the same Trust Estate. The
applicable Prospectus Supplement for a Series that includes a cross support
feature will describe the specific operation of any such cross support
feature.
32
<PAGE>
PREPAYMENT AND YIELD CONSIDERATIONS
PASS-THROUGH RATES
Any Class of Certificates of a Series may have a fixed Pass-Through Rate, or
a Pass-Through Rate which varies based on changes in an index or based on
changes with respect to the underlying Mortgage Loans (such as, for example,
varying on the basis of changes in the weighted average Net Mortgage Interest
Rate of the underlying Mortgage Loans).
The Prospectus Supplement for each Series will specify the range and the
weighted average of the Mortgage Interest Rates and, if applicable, Net
Mortgage Interest Rates for the Mortgage Loans underlying such Series as of
the Cut-Off Date. If the Trust Estate includes adjustable-rate Mortgage Loans
or includes Mortgage Loans with different Net Mortgage Interest Rates, the
weighted average Net Mortgage Interest Rate may vary from time to time as set
forth below. See "The Trust Estates." The Prospectus Supplement for a Series
will also specify the initial weighted average Pass-Through Rate for each
Class of Certificates of such Series and will specify whether each such Pass-
Through Rate is fixed or is variable.
The Net Mortgage Interest Rate for any adjustable-rate Mortgage Loan will
change with any changes in the index specified in the applicable Prospectus
Supplement on which such Mortgage Interest Rate adjustments are based, subject
to any applicable periodic or aggregate caps or floors on the related Mortgage
Interest Rate. The weighted average Net Mortgage Interest Rate with respect to
any Series may vary due to changes in the Net Mortgage Interest Rates of
adjustable-rate Mortgage Loans, to the timing of the Mortgage Interest Rate
readjustments of such Mortgage Loans and to different rates of payment of
principal of fixed- or adjustable-rate Mortgage Loans bearing different
Mortgage Interest Rates.
SCHEDULED DELAYS IN DISTRIBUTIONS
At the date of initial issuance of the Certificates of each Series offered
hereby, the initial purchasers of a Class of Certificates may be required to
pay accrued interest at the applicable Pass-Through Rate for such Class from
the Cut-Off Date for such Series to, but not including, the date of issuance.
The effective yield to Certificateholders will be below the yield otherwise
produced by the applicable Pass-Through Rate because the distribution of
principal and interest which is due on each Due Date will not be made until
the 25th day (or, if such day is not a business day, the first business day
following the 25th day) of the month in which such Due Date occurs (or until
such other Distribution Date specified in the applicable Prospectus
Supplement).
EFFECT OF PRINCIPAL PREPAYMENTS
When a Mortgage Loan is prepaid in full, the mortgagor pays interest on the
amount prepaid only to the date of prepayment and not thereafter. Liquidation
Proceeds (as defined herein) and amounts received in settlement of insurance
claims are also likely to include interest only to the time of payment or
settlement. When a Mortgage Loan is prepaid in full or in part, an interest
shortfall may result depending on the timing of the receipt of the prepayment
and the timing of when those prepayments are passed through to
Certificateholders. To partially mitigate this reduction in yield, the
Underlying Servicing Agreements relating to a Series may provide, to the
extent specified in the applicable Prospectus Supplement, that with respect to
certain principal prepayments received, the Master Servicer will be obligated,
on or before each Distribution Date, to pay an amount equal to the lesser of
(i) the aggregate interest shortfall with respect to such Distribution Date
resulting from principal prepayments in full by mortgagors and (ii) the
portion of the Master Servicer's master servicing compensation for such
Distribution Date specified in the applicable Prospectus Supplement. No
comparable interest shortfall coverage will be provided by the Master Servicer
with respect to liquidations of any Mortgage Loans or partial principal
payments. Any interest shortfall arising from prepayments not so covered or
from liquidations will be covered by means of the subordination of the rights
of Subordinated Certificateholders or any other credit support arrangements.
A lower rate of principal prepayments than anticipated would negatively
affect the total return to investors in any Certificates of a Series that are
offered at a discount to their principal amount and a higher rate of principal
prepayments than anticipated would negatively affect the total return to
investors in the Certificates of a Series that are offered at a premium to
their principal amount. The yield on Certificates that are entitled solely or
disproportionately to distributions of principal or interest may be
particularly sensitive to prepayment rates, and further information with
respect to yield on such Certificates will be included in the applicable
Prospectus Supplement.
33
<PAGE>
WEIGHTED AVERAGE LIFE OF CERTIFICATES
The Mortgage Loans may be prepaid in full or in part at any time. Mortgage
Loan generally will not provide for a prepayment penalty but may so provide if
indicated in the related Prospectus Supplement. Fixed rate Mortgage Loans
generally will contain due-on-sale clauses permitting the mortgagee to
accelerate the maturities of the Mortgage Loans upon conveyance of the related
Mortgaged Properties, and adjustable-rate Mortgage Loans generally will permit
creditworthy borrowers to assume the then-outstanding indebtedness on the
Mortgage Loans.
Prepayments on Mortgage Loans are commonly measured relative to a prepayment
standard or model. The Prospectus Supplement for each Series of Certificates
may describe one or more such prepayment standards or models and contain
tables setting forth the weighted average life of each Class and the
percentage of the original aggregate principal balance of each Class that
would be outstanding on specified Distribution Dates for such Series and the
projected yields to maturity on certain Classes thereof, in each case based on
the assumptions stated in such Prospectus Supplement, including assumptions
that prepayments on the Mortgage Loans are made at rates corresponding to
various percentages of the prepayment standard or model specified in such
Prospectus Supplement.
There is no assurance that prepayment of the Mortgage Loans underlying a
Series of Certificates will conform to any level of the prepayment standard or
model specified in the applicable Prospectus Supplement. A number of factors,
including but not limited to homeowner mobility, economic conditions, natural
disasters, changes in mortgagors' housing needs, job transfers, unemployment
or, in the case of borrowers relying on commission income and self-employed
borrowers, significant fluctuations in income or adverse economic conditions,
mortgagors' net equity in the properties securing the mortgage loans,
including the use of second or "home equity" mortgage loans by mortgagors or
the use of the properties as second or vacation homes, servicing decisions,
enforceability of due-on-sale clauses, mortgage market interest rates,
mortgage recording taxes, competition among mortgage loan originators
resulting in reduced refinancing costs, reduction in documentation
requirements and willingness to accept higher loan-to-value ratios, and the
availability of mortgage funds, may affect prepayment experience. In general,
however, if prevailing mortgage interest rates fall below the Mortgage
Interest Rates borne by the Mortgage Loans underlying a Series of
Certificates, the prepayment rates of such Mortgage Loans are likely to be
higher than if prevailing rates remain at or above the rates borne by such
Mortgage Loans. Conversely, if prevailing mortgage interest rates rise above
the Mortgage Interest Rates borne by the Mortgage Loans, the Mortgage Loans
are likely to experience a lower prepayment rate than if prevailing rates
remain at or below such Mortgage Interest Rates. However, there can be no
assurance that prepayments will rise or fall according to such changes in
mortgage interest rates. It should be noted that Certificates of a Series may
evidence an interest in a Trust Estate with different Mortgage Interest Rates.
Accordingly, the prepayment experience of such Certificates will to some
extent be a function of the mix of interest rates of the Mortgage Loans. In
addition, the terms of the Underlying Servicing Agreements will require the
related Servicer to enforce any due-on-sale clause to the extent it has
knowledge of the conveyance or the proposed conveyance of the underlying
Mortgaged Property; provided, however, that any enforcement action that the
Servicer determines would jeopardize any recovery under any related primary
mortgage insurance policy will not be required and provided, further, that the
Servicer may permit the assumption of defaulted Mortgage Loans. See "Servicing
of the Mortgage Loans--Enforcement of Due-on-Sale Clauses; Realization Upon
Defaulted Mortgage Loans" and "Certain Legal Aspects of the Mortgage Loans--
Due-On-Sale Clauses" for a description of certain provisions of each Pooling
and Servicing Agreement and certain legal developments that may affect the
prepayment experience on the Mortgage Loans.
Prepayments on the Mortgage Loans are also affected by the obligation or
right of the Seller, Servicer or other party specified in the applicable
Prospectus Supplement to repurchase or purchase certain or all of the Mortgage
Loans under certain circumstances. The Seller will be obligated, under certain
circumstances, to repurchase certain of the Mortgage Loans. In addition, if
specified in the applicable Prospectus Supplement, the Pooling and Servicing
Agreement will permit, but not require, the Seller, and the terms of certain
insurance policies relating to the Mortgage Loans may permit the applicable
insurer, to purchase any Mortgage Loan which is in default or as to which
default is reasonably foreseeable. The proceeds of any such purchase or
repurchase will be deposited in the related Certificate Account and such
purchase or repurchase will have the same effect as a prepayment in full of
the related Mortgage Loan. See "The Pooling and Servicing Agreement--
Assignment of Mortgage Loans to the Trustee" and "--Optional Purchases." In
addition, if so specified in the applicable Prospectus Supplement, the Seller
or another person identified therein will have the option to purchase all, but
not less than all, of the Mortgage Loans in any Trust Estate under the limited
conditions specified in such Prospectus Supplement. For any Series of
Certificates for which an election has been made to treat the Trust Estate (or
one or more segregated pools of assets therein) as a REMIC, any such purchase
or
34
<PAGE>
repurchase may be effected only pursuant to a "qualified liquidation," as
defined in Code Section 860F(a)(4)(A). See "The Pooling and Servicing
Agreement--Termination; Optional Purchase of Mortgage Loans."
REFINANCINGS
At the request of the mortgagor, a Servicer, including Norwest Mortgage, may
allow the refinancing of a Mortgage Loan in any Trust Estate serviced by such
Servicer by accepting prepayments thereon and permitting a new loan secured by
a Mortgage on the same property. Upon such refinancing, the new loan will not
be included in the Trust Estate. A mortgagor may be legally entitled to
require the Servicer to allow such a refinancing. Any such refinancing will
have the same effect as a prepayment in full of the related Mortgage Loan. In
this regard a Servicer may, from time to time, implement programs designed to
encourage refinancing through such Servicer, including but not limited to
general or targeted solicitations, or the offering of pre-approved
applications, reduced or nominal origination fees or closing costs, or other
financial incentives. A Servicer may also encourage refinancing of defaulted
Mortgage Loans, including Mortgage Loans that would permit creditworthy
borrowers to assume the outstanding indebtedness.
Norwest Mortgage is in the process of instituting a new "retention program"
applicable to its servicing portfolio. Provided the borrower is current in his
or her mortgage payment obligations, Norwest Mortgage may agree to refinance
the mortgage loan in order to reduce the borrower's mortgage interest rate,
without the application of any significant new borrower credit or property
underwriting standards. See "The Mortgage Loan Programs--Mortgage Loan
Underwriting; Retention Program Standards" in this Prospectus. The streamlined
procedures, minimal borrower cost and the absence of significant underwriting
standards associated with this retention program may result in an increase in
the number of Mortgage Loans eligible for refinancing and a narrowing of the
interest rate differential that may otherwise need to exist before a
refinancing is practical and economic for the borrower. These factors,
together with increased borrower sophistication in general regarding the
benefits of refinancing may also result in a significant increase in the rate
of prepayments on the Mortgage Loans. In addition, the success of Norwest
Mortgage over time in attracting borrowers to its retention program who are
current in their mortgage payment obligations may result in a higher
proportion of Mortgage Loans not eligible for such program remaining in the
Trust Estate, thereby increasing the relative percentage of delinquent
Mortgage Loans in such Trust Estate.
DELINQUENCY AND FORECLOSURE EXPERIENCE
The following tables set forth certain information concerning recent
delinquency and foreclosure experience as reported to the Master Servicer by
the applicable Servicers of such mortgage loans on (i) the conventional fixed-
rate mortgage loans included in various mortgage pools underlying all Series
of the Seller's Mortgage Pass-Through Certificates (the "TOTAL LOANS"), (ii)
the Total Loans having original terms to maturity of approximately 20 years to
approximately 30 years (the "30-YEAR LOANS"), including, in clauses (i) and
(ii) mortgage loans originated in connection with the purchases of residences
of relocated employees of various corporate employers that participated in the
relocation program of Norwest Mortgage and of various non-participant
employers ("RELOCATION MORTGAGE LOANS"), (iii) the Total Loans which are not
Relocation Mortgage Loans ("TOTAL NON-RELOCATION LOANS"), (iv) the Total Non-
Relocation Loans having original terms to maturity of approximately 20 years
to approximately 30 years (the "30-YEAR NON-RELOCATION LOANS") and (v) the
Total Non-Relocation Loans having original terms to maturity of approximately
10 years to approximately 15 years (the "15-YEAR NON-RELOCATION LOANS"). There
can be no assurance that the delinquency and foreclosure experience set forth
in any of the following tables which include mortgage loans with various terms
to stated maturity, may or may not include Relocation Mortgage Loans, and
include loans having a variety of payment characteristics such as Subsidy
Loans and Buy-Down Loans, will be representative of the results that may be
experienced with respect to the Mortgage Loans included in the Trust Estate
with respect to any Series.
Delinquencies and foreclosures generally are expected to occur more
frequently after the first full year of the life of mortgage loans.
Accordingly, because a large number of mortgage loans included in the mortgage
pools underlying the Seller's Mortgage Pass-Through Certificates have been
recently originated, the current level of delinquencies and foreclosures may
not be representative of the levels which may be experienced over the lives of
such mortgage loans. In addition, if the volume of Norwest Mortgage's new loan
originations and acquisitions does not continue to grow at the rate
experienced in recent years, resulting in a decrease in growth in the number
of mortgage loans included in the mortgage pools underlying the Seller's
Mortgage Pass-Through Certificates, the levels of delinquencies and
foreclosures as percentages of the various portfolios mortgage loans covered
by the following tables could rise significantly above the rates indicated in
such tables.
35
<PAGE>
TOTAL LOANS
<TABLE>
<CAPTION>
BY DOLLAR BY DOLLAR BY DOLLAR
BY NO. AMOUNT BY NO. AMOUNT BY NO. AMOUNT
OF LOANS OF LOANS OF LOANS OF LOANS OF LOANS OF LOANS
-------- ---------- -------- ---------- -------- -----------
AS OF AS OF AS OF
DECEMBER 31, 1996 DECEMBER 31, 1997 JUNE 30, 1998
------------------- ------------------- --------------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total Loans............. 8,012 $2,285,959 26,137 $7,497,698 41,699 $12,325,475
===== ========== ====== ========== ====== ===========
Period of
Delinquency(1).........
30 to 59 days.......... 24 $ 6,704 57 $ 17,187 148 $ 39,966
60 to 89 days.......... 2 735 4 1,000 28 7,202
90 days or more........ 1 232 18 5,461 24 7,242
----- ---------- ------ ---------- ------ -----------
Total Delinquent Loans.. 27 $ 7,671 79 $ 23,648 200 $ 54,410
===== ========== ====== ========== ====== ===========
Percent of Total Loans.. 0.34% 0.34% 0.30% 0.32% 0.48% 0.44%
<CAPTION>
AS OF AS OF AS OF
DECEMBER 31, 1996 DECEMBER 31, 1997 JUNE 30, 1998
------------------- ------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Foreclosures(2)......... $843 $798 $5,765
Foreclosure Ratio(3).... 0.04% 0.01% 0.05%
</TABLE>
30-YEAR LOANS
<TABLE>
<CAPTION>
BY DOLLAR BY DOLLAR BY DOLLAR
BY NO. AMOUNT BY NO. AMOUNT BY NO. AMOUNT
OF LOANS OF LOANS OF LOANS OF LOANS OF LOANS OF LOANS
-------- ---------- -------- ---------- -------- -----------
AS OF AS OF AS OF
DECEMBER 31, 1996 DECEMBER 31, 1997 JUNE 30, 1998
------------------- ------------------- --------------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total 30-Year Loans..... 6,511 $1,838,405 21,960 $6,289,006 34,477 $10,147,699
===== ========== ====== ========== ====== ===========
Period of
Delinquency(1).........
30 to 59 days.......... 19 $ 5,240 51 $ 15,343 130 $ 35,197
60 to 89 days.......... 2 735 3 870 26 6,758
90 days or more........ 1 232 18 5,461 23 6,972
----- ---------- ------ ---------- ------ -----------
Total Delinquent Loans.. 22 $ 6,207 72 $ 21,674 179 $ 48,927
===== ========== ====== ========== ====== ===========
Percent of 30-Year
Loans.................. 0.34% 0.34% 0.33% 0.34% 0.52% 0.48%
<CAPTION>
AS OF AS OF AS OF
DECEMBER 31, 1996 DECEMBER 31, 1997 JUNE 30, 1998
------------------- ------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Foreclosures(2)......... $843 $798 $5,765
Foreclosure Ratio(3).... 0.05% 0.01% 0.06%
</TABLE>
- -------
(1) The indicated periods of delinquency are based on the number of days past
due, based on a 30-day month. No mortgage loan is considered delinquent
for these purposes until one month has passed since its contractual due
date. A mortgage loan is no longer considered delinquent once foreclosure
proceedings have commenced.
(2) Includes loans in the applicable portfolio for which foreclosure
proceedings had been instituted or with respect to which the related
property had been acquired as of the dates indicated.
(3) Foreclosure as a percentage of total loans in the applicable portfolio at
the end of each period.
36
<PAGE>
TOTAL NON-RELOCATION LOANS
<TABLE>
<CAPTION>
BY DOLLAR BY DOLLAR BY DOLLAR
BY NO. AMOUNT BY NO. AMOUNT BY NO. AMOUNT
OF LOANS OF LOANS OF LOANS OF LOANS OF LOANS OF LOANS
-------- ---------- -------- ---------- -------- ----------
AS OF AS OF AS OF
DECEMBER 31, 1996 DECEMBER 31, 1997 JUNE 30, 1998
------------------- ------------------- -------------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total Non-Relocation
Loans.................. 6,451 $1,831,229 21,270 $6,070,912 33,919 $9,993,847
===== ========== ====== ========== ====== ==========
Period of
Delinquency(1).........
30 to 59 days.......... 24 $ 6,704 55 $ 16,601 136 $ 36,592
60 to 89 days.......... 1 491 4 1,000 25 6,388
90 days or more........ 1 232 17 5,238 24 7,242
----- ---------- ------ ---------- ------ ----------
Total Delinquent Loans.. 26 $ 7,427 76 $ 22,839 185 $ 50,222
===== ========== ====== ========== ====== ==========
Percent of Total Non-
Relocation Loans....... 0.40% 0.41% 0.36% 0.38% 0.55% 0.50%
<CAPTION>
AS OF AS OF AS OF
DECEMBER 31, 1996 DECEMBER 31, 1997 JUNE 30, 1998
------------------- ------------------- -------------------
<S> <C> <C> <C>
Foreclosures(2)......... $843 $798 $5,765
Foreclosure Ratio(3).... 0.05% 0.01% 0.06%
</TABLE>
30-YEAR NON-RELOCATION LOANS
<TABLE>
<CAPTION>
BY DOLLAR BY DOLLAR BY DOLLAR
BY NO. AMOUNT BY NO. AMOUNT BY NO. AMOUNT
OF LOANS OF LOANS OF LOANS OF LOANS OF LOANS OF LOANS
-------- ---------- -------- ---------- -------- ----------
AS OF AS OF AS OF
DECEMBER 31, 1996 DECEMBER 31, 1997 JUNE 30, 1998
------------------- ------------------- -------------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total 30-Year Non-
Relocation Loans....... 4,950 $1,383,675 17,093 $4,862,220 26,697 $7,816,071
===== ========== ====== ========== ====== ==========
Period of
Delinquency(1).........
30 to 59 days.......... 19 $ 5,240 49 $ 14,757 118 $ 31,824
60 to 89 days.......... 1 491 3 870 23 5,944
90 days or more........ 1 232 17 5,238 23 6,972
----- ---------- ------ ---------- ------ ----------
Total Delinquent Loans.. 21 $ 5,963 69 $ 20,865 164 $ 44,740
===== ========== ====== ========== ====== ==========
Percent of Total 30-Year
Non-Relocation Loans... 0.42% 0.43% 0.40% 0.43% 0.61% 0.57%
<CAPTION>
AS OF AS OF AS OF
DECEMBER 31, 1996 DECEMBER 31, 1997 JUNE 30, 1998
------------------- ------------------- -------------------
<S> <C> <C> <C>
Foreclosures(2)......... $843 $798 $5,765
Foreclosure Ratio(3).... 0.06% 0.02% 0.07%
</TABLE>
- -------
(1) The indicated periods of delinquency are based on the number of days past
due, based on a 30-day month. No mortgage loan is considered delinquent
for these purposes until one month has passed since its contractual due
date. A mortgage loan is no longer considered delinquent once foreclosure
proceedings have commenced.
(2) Includes loans in the applicable portfolio for which foreclosure
proceedings had been instituted or with respect to which the related
property had been acquired as of the dates indicated.
(3) Foreclosure as a percentage of total loans in the applicable portfolio at
the end of each period.
37
<PAGE>
15-YEAR NON-RELOCATION LOANS
<TABLE>
<CAPTION>
BY DOLLAR BY DOLLAR BY DOLLAR
BY NO. AMOUNT BY NO. AMOUNT BY NO. AMOUNT
OF LOANS OF LOANS OF LOANS OF LOANS OF LOANS OF LOANS
-------- --------- -------- ---------- -------- ----------
AS OF AS OF AS OF
DECEMBER 31, 1996 DECEMBER 31, 1997 JUNE 30, 1998
------------------ ------------------- -------------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total 15-Year Non-
Relocation Loans....... 1,501 $447,554 4,177 $1,208,692 7,222 $2,177,776
===== ======== ===== ========== ===== ==========
Period of
Delinquency(1).........
30 to 59 days.......... 5 $ 1,464 6 $ 1,844 18 $ 4,768
60 to 89 days.......... 0 0 1 130 2 444
90 days or more........ 0 0 0 0 1 270
----- -------- ----- ---------- ----- ----------
Total Delinquent Loans.. 5 $ 1,464 7 $ 1,974 21 $ 5,482
===== ======== ===== ========== ===== ==========
Percent of Total 15-Year
Non-Relocation Loans... 0.33% 0.33% 0.17% 0.16% 0.29% 0.25%
<CAPTION>
AS OF AS OF AS OF
DECEMBER 31, 1996 DECEMBER 31, 1997 JUNE 30, 1998
------------------ ------------------- -------------------
<S> <C> <C> <C>
Foreclosures(2)......... $0 $0 $0
Foreclosure Ratio(3).... 0.00% 0.00% 0.00%
</TABLE>
- -------
(1) The indicated periods of delinquency are based on the number of days past
due, based on a 30-day month. No mortgage loan is considered delinquent
for these purposes until one month has passed since its contractual due
date. A mortgage loan is no longer considered delinquent once foreclosure
proceedings have commenced.
(2) Includes loans in the applicable portfolio for which foreclosure
proceedings had been instituted or with respect to which the related
property had been acquired as of the dates indicated.
(3) Foreclosure as a percentage of total loans in the applicable portfolio at
the end of each period.
The likelihood that a mortgagor will become delinquent in the payment of his
or her mortgage loan or the rate of any subsequent foreclosures may be
affected by a number of factors related to a borrower's personal
circumstances, including, but not limited to, unemployment or change in
employment (or in the case of self-employed mortgagors or mortgagors relying
on commission income, fluctuations in income), marital separation and the
mortgagor's equity in the related mortgaged property. In addition, delinquency
and foreclosure experience may be sensitive to adverse economic conditions,
either nationally or regionally, may exhibit seasonal variations and may be
influenced by the level of interest rates and servicing decisions on the
applicable mortgage loans. Regional economic conditions (including declining
real estate values) may particularly affect delinquency and foreclosure
experience on mortgage loans to the extent that mortgaged properties are
concentrated in certain geographic areas. Furthermore, the level of
foreclosures reported is affected by the length of time legally required to
complete the foreclosure process and take title to the related property, which
varies from jurisdiction to jurisdiction. The changes in the delinquency and
foreclosure and experience on the mortgage loans underlying the Seller's
Mortgage Pass-Through Certificates during the periods set forth in the
preceding tables may be attributable to factors such as those described above,
although there can be no assurance as to whether these changes are the result
of any particular factor or a combination of factors. The delinquency and
foreclosure experience on the mortgage loans underlying the Seller's Mortgage
Pass-Through Certificates may be particularly affected to the extent that the
related Mortgage Properties are concentrated in areas which experience adverse
economic conditions or declining real estate values. See "Description of the
Mortgage Loans" and "Prepayment and Yield Considerations" in the applicable
Prospectus Supplement.
38
<PAGE>
SERVICING OF THE MORTGAGE LOANS
The following is a summary of certain provisions of the forms of the
Underlying Servicing Agreement and the Pooling and Servicing Agreement that
have been filed as exhibits to the Registration Statement of which this
Prospectus forms a part. The summaries do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all of the
provisions of the Pooling and Servicing Agreement and Underlying Servicing
Agreements for each Series of Certificates and the applicable Prospectus
Supplement.
THE MASTER SERVICER
The Master Servicer with respect to each Series of Certificates will be
Norwest Bank. See "Norwest Bank." The Master Servicer generally will (a) be
responsible under each Pooling and Servicing Agreement for providing general
administrative services for the Trust Estate for any such Series, including,
among other things, (i) for administering and supervising the performance by
the Servicers of their duties and responsibilities under the Underlying
Servicing Agreements, (ii) oversight of payments received on Mortgage Loans,
(iii) monitoring the amounts on deposit in various trust accounts, (iv)
calculation of the amounts payable to Certificateholders on each Distribution
Date, (v) preparation of periodic reports to the Trustee or the
Certificateholders with respect to the foregoing matters, (vi) preparation of
federal and applicable state and local tax and information returns; (vii)
preparation of reports, if any, required under the Securities and Exchange Act
of 1934, as amended and (viii) performing certain of the servicing obligations
of a terminated Servicer as described below under "--The Servicers"; (b)
maintain any mortgage pool insurance policy, mortgagor bankruptcy bond,
special hazard insurance policy or other form of credit support that may be
required with respect to any Series and (c) make advances of delinquent
payments of principal and interest on the Mortgage Loans to the limited extent
described herein under the heading "Servicing of Mortgage Loans--Periodic
Advances and Limitations Thereon," if such amounts are not advanced by a
Servicer (other than Norwest Mortgage). The Master Servicer will also perform
additional duties as described in the applicable Pooling and Servicing
Agreement. The Master Servicer will be entitled to receive a portion of the
interest payments on the Mortgage Loans included in the Trust Estate for such
a Series to cover its fees as Master Servicer. The Master Servicer may
subcontract with Norwest Mortgage or any other entity the obligations of the
Master Servicer under any Pooling and Servicing Agreement. The Master Servicer
will remain primarily liable for any such contractor's performance in
accordance with the applicable Pooling and Servicing Agreement. The Master
Servicer may be released from its obligations in certain circumstances. See
"Certain Matters Regarding the Master Servicer."
The Master Servicer will generally be required to pay all expenses incurred
in connection with the administration of the Trust Estate, including, without
limitation, fees or other amounts payable pursuant to any applicable agreement
for the provision of credit enhancement for such Series, the fees and
disbursements of the Trustee and any custodian, fees due to the independent
accountants and expenses incurred in connection with distributions and reports
to Certificateholders. Certain of these expenses may be reimbursable to the
Master Servicer pursuant to the terms of the applicable Pooling and Servicing
Agreement.
THE SERVICERS
For each Series, Norwest Mortgage and, if specified in the applicable
Prospectus Supplement, one or more other Servicers will provide certain
customary servicing functions with respect to Mortgage Loans pursuant to
separate Underlying Servicing Agreements with the Seller or an affiliate
thereof. The rights of the Seller or such affiliate under the applicable
Underlying Servicing Agreements in respect of the Mortgage Loans included in
the Trust Estate for any such Series will be assigned (directly or indirectly)
to the Trustee for such Series. The Servicers may be entitled to withhold
their Servicing Fees and certain other fees and charges from remittances of
payments received on Mortgage Loans serviced by them.
Each Servicer generally will be approved by FNMA or FHLMC as a servicer of
mortgage loans and must be approved by the Master Servicer. In determining
whether to approve a Servicer, the Master Servicer will perform a review of
the Servicer that includes minimum net worth requirements, servicing
experience, errors and omissions and fidelity bond coverage and other
standards to be set forth in the applicable Underlying Servicing Agreement. In
addition, the Master Servicer's mortgage servicing personnel will review the
Servicer's servicing record and evaluate the ability of the Servicer to
conform with required servicing procedures. Once a Servicer is approved, the
Master Servicer will continue to monitor the compliance of the Servicer
according to the Underlying Servicing Agreement on an annual basis.
39
<PAGE>
The duties to be performed by each Servicer include collection and
remittance of principal and interest payments on the Mortgage Loans,
administration of mortgage escrow accounts, collection of insurance claims,
foreclosure procedures, and, if necessary, the advance of funds to the extent
certain payments are not made by the mortgagor and have not been determined by
the Servicer to be not recoverable under the applicable insurance policies
with respect to such Series, from proceeds of liquidation of such Mortgage
Loans or otherwise. Each Servicer also will provide such accounting and
reporting services as are necessary to enable the Master Servicer to provide
required information to the Trustee with respect to the Mortgage Loans
included in the Trust Estate for such Series. Each Servicer is entitled to a
periodic Servicing Fee equal to a specified percentage of the outstanding
principal balance of each Mortgage Loan serviced by such Servicer. With the
consent of the Master Servicer, any of the servicing obligations of a Servicer
may be delegated to another person approved by the Master Servicer. In
addition, certain limited duties of a Servicer may be delegated without
consent.
The Trustee, or if so provided in the applicable Pooling and Servicing
Agreement, the Master Servicer, may terminate a Servicer who has failed to
comply with its covenants or breached one of its representations contained in
the Underlying Servicing Agreement or in certain other circumstances. Upon
termination of a Servicer by the Master Servicer, the Master Servicer will
assume certain servicing obligations of the terminated Servicer, or, at its
option, may appoint a substitute Servicer acceptable to the Trustee (which
substitute Servicer may be Norwest Mortgage) to assume the servicing
obligations of the terminated Servicer. The Master Servicer's obligations to
act as a servicer following the termination of an Underlying Servicing
Agreement will not, however, require the Master Servicer to (i) purchase a
Mortgage Loan from the Trust Estate due to a breach by such Servicer of a
representation or warranty in respect of such Mortgage Loan or (ii) with
respect to a default by Norwest Mortgage as Servicer, advance payments of
principal and interest on a delinquent Mortgage Loan.
PAYMENTS ON MORTGAGE LOANS
The Master Servicer will, as to each Series of Certificates, establish and
maintain a separate trust account in the name of the Trustee (the "CERTIFICATE
ACCOUNT"). Such account may be established at Norwest Bank or an affiliate
thereof. Each such account must be maintained with a depository institution
("DEPOSITORY") either (i) whose long-term debt obligations (or, in the case of
a depository institution which is part of a holding company structure, the
long-term debt obligations of such parent holding company) are, at the time of
any deposit therein rated in at least one of the two highest rating categories
by each nationally recognized statistical rating organization that rated the
related Series of Certificates, or (ii) that is otherwise acceptable to the
Rating Agency or Rating Agencies rating the Certificates of such Series and,
if a REMIC election has been made, that would not cause the related Trust
Estate (or one or more segregated pools of assets therein) to fail to qualify
as a REMIC. To the extent that the portion of funds deposited in the
Certificate Account at any time exceeds the limit of insurance coverage
established by the Federal Deposit Insurance Corporation (the "FDIC"), such
excess will be subject to loss in the event of the failure of the Depository.
Such insurance coverage will be based on the number of holders of
Certificates, rather than the number of underlying mortgagors. Holders of the
Subordinated Certificates of a Series will bear any such loss up to the amount
of principal payments on the related Mortgage Loans to which such holders are
entitled.
Pursuant to the applicable Underlying Servicing Agreements with respect to a
Series, each Servicer will be required to establish and maintain one or more
accounts (collectively, the "SERVICER CUSTODIAL ACCOUNT") into which the
Servicer will be required to deposit on a daily basis amounts received with
respect to Mortgage Loans serviced by such Servicer included in the Trust
Estate for such Series, as more fully described below. Each Servicer Custodial
Account must be a separate custodial account insured to the available limits
by the FDIC or otherwise acceptable to the applicable Rating Agencies (such
acceptable account, an "ELIGIBLE CUSTODIAL ACCOUNT") and limited to funds held
with respect to a particular Series, unless the Underlying Servicing Agreement
specifies that a Servicer may establish an account which is an eligible
account to serve as a unitary Servicer Custodial Account both for such Series
and for other Series of Certificates for which Norwest Bank is the Master
Servicer and having the same financial institution acting as Trustee and to be
maintained in the name of such financial institution, in its respective
capacities as Trustee for each such Series.
Each Servicer will be required to deposit in the Certificate Account for
each Series of Certificates on the date the Certificates are issued any
amounts representing scheduled payments of principal and interest on the
Mortgage Loans serviced by such Servicer due after the applicable Cut-Off Date
but received on or prior thereto, and except as specified in the applicable
Pooling and Servicing Agreement or Underlying Servicing Agreement, will
deposit in the Servicer Custodial Account on receipt and, thereafter, not
later than the 24th calendar day of each month or such earlier day as may be
specified in the Underlying Servicing Agreement
40
<PAGE>
(the "REMITTANCE DATE"), will remit to the Master Servicer for deposit in the
Certificate Account, the following payments and collections received or made
by such Servicer with respect to the Mortgage Loans serviced by such Servicer
subsequent to the applicable Cut-Off Date (other than (a) payments due on or
before the Cut-Off Date, (b) amounts held for future distribution, (c) amounts
representing certain expenses reimbursable to the Servicer, (d) amounts
representing reimbursements for Periodic Advances made by the Servicer, (e)
amounts representing additional servicing compensation and (f) any other
amounts permitted to be retained by the Servicer pursuant to the applicable
Underlying Servicing Agreement):
(i) all payments on account of principal, including prepayments, and
interest;
(ii) all amounts received by the Servicer in connection with the
liquidation of defaulted Mortgage Loans or property acquired in respect
thereof, whether through foreclosure sale or otherwise, including payments
in connection with defaulted Mortgage Loans received from the mortgagor
other than amounts required to be paid to the mortgagor pursuant to the
terms of the applicable Mortgage Loan or otherwise pursuant to law
("LIQUIDATION PROCEEDS") less, to the extent permitted under the applicable
Underlying Servicing Agreement, the amount of any expenses incurred in
connection with the liquidation of such Mortgage Loans;
(iii) all proceeds received by the Servicer under any title, hazard or
other insurance policy covering any such Mortgage Loan, other than proceeds
to be applied to the restoration or repair of the property subject to the
related Mortgage or released to the mortgagor in accordance with the
Underlying Servicing Agreement;
(iv) all Periodic Advances made by the Servicer;
(v) all amounts withdrawn from Buy-Down Funds or Subsidy Funds, if any,
with respect to such Mortgage Loans, in accordance with the terms of the
respective agreements applicable thereto;
(vi) all proceeds of any such Mortgage Loans or property acquired in
respect thereof purchased or repurchased pursuant to the Pooling and
Servicing Agreement or the Underlying Servicing Agreement; and
(vii) all other amounts required to be deposited therein pursuant to the
applicable Pooling and Servicing Agreement or the Underlying Servicing
Agreement.
Notwithstanding the foregoing, if at any time the sums in (x) any Servicer
Custodial Account, other than any Eligible Custodial Account, exceed $100,000
or (y) any such Servicer Custodial Account, in certain circumstances, exceed
such amount less than $100,000 as shall have been specified by the Master
Servicer, the Servicer will be required within one business day to withdraw
such excess funds from such account and remit such amounts to the Certificate
Account.
Notwithstanding the foregoing, each Servicer will be entitled, at its
election, either (a) to withhold and pay itself the applicable Servicing Fee
from any payment or other recovery on account of interest as received and
prior to deposit in the Servicer Custodial Account or (b) to withdraw from the
Servicer Custodial Account the applicable Servicing Fee after the entire
payment or recovery has been deposited in such account.
The Master Servicer or Trustee will deposit in the Certificate Account any
Periodic Advances made by the Master Servicer or Trustee in the event of a
Servicer default or as otherwise required by the Pooling and Servicing
Agreement not later than the Distribution Date on which such amounts are
required to be distributed. All other amounts will be deposited in the
Certificate Account not later than the business day next following the day of
receipt and posting by the Master Servicer. On or before each Distribution
Date, the Master Servicer will withdraw from the Certificate Account and remit
to the Trustee for distribution to Certificateholders all amounts allocable to
the Pool Distribution Amount for such Distribution Date.
If a Servicer, the Master Servicer or the Trustee deposits in the
Certificate Account for a Series any amount not required to be deposited
therein, the Master Servicer may at any time withdraw such amount from such
account for itself or for remittance to such Servicer or the Trustee, as
applicable. Funds on deposit in the Certificate Account may be invested in
certain investments acceptable to the Rating Agencies ("ELIGIBLE INVESTMENTS")
maturing in general not later than the business day preceding the next
Distribution Date. In the event that an election has been made to treat the
Trust Estate (or one or more segregated pools of assets therein) with respect
to a Series as a REMIC, no such Eligible Investments will be sold or disposed
of at a gain prior to maturity unless the Master Servicer has received an
opinion of counsel or other evidence satisfactory to it that such sale or
disposition will not cause the Trust Estate (or segregated pool of assets) to
be subject to the tax on "prohibited transactions" imposed by Code Section
860F(a)(1), otherwise subject the Trust Estate (or segregated pool of assets)
to tax, or cause the Trust
41
<PAGE>
Estate (or any segregated pool of assets) to fail to qualify as a REMIC while
any Certificates of the Series are outstanding. Except as otherwise specified
in the applicable Prospectus Supplement, all income and gain realized from any
such investment will be for the account of the Master Servicer as additional
compensation and all losses from any such investment will be deposited by the
Master Servicer out of its own funds to the Certificate Account immediately as
realized.
The Master Servicer is permitted, from time to time, to make withdrawals
from the Certificate Account for the following purposes, to the extent
permitted in the applicable Pooling and Servicing Agreement (and, in the case
of Servicer reimbursements by the Master Servicer, only to the extent funds in
the respective Servicer Custodial Account are not sufficient therefor):
(i) to reimburse the Master Servicer, the Trustee or any Servicer for
Advances;
(ii) to reimburse any Servicer for liquidation expenses and for amounts
expended by itself or any Servicer, as applicable, in connection with the
restoration of damaged property;
(iii) to pay to itself the applicable Master Servicing Fee and any other
amounts constituting additional master servicing compensation, to pay the
Trustee the applicable Trustee Fee, to pay any other fees described in the
applicable Prospectus Supplement; and to pay to the owner thereof any Fixed
Retained Yield;
(iv) to reimburse itself or any Servicer for certain expenses (including
taxes paid on behalf of the Trust Estate) incurred by and recoverable by or
reimbursable to itself or the Servicer, as applicable;
(v) to pay to the Seller, a Servicer or itself with respect to each
Mortgage Loan or property acquired in respect thereof that has been
repurchased by the Seller or purchased by a Servicer or the Master Servicer
all amounts received thereon and not distributed as of the date as of which
the purchase price of such Mortgage Loan was determined;
(vi) to pay to itself any interest earned on or investment income earned
with respect to funds in the Certificate Account (all such interest or
income to be withdrawn not later than the next Distribution Date);
(vii) to pay to itself, the Servicer and the Trustee from net Liquidation
Proceeds allocable to interest, the amount of any unpaid Master Servicing
Fee, Servicing Fees or Trustee Fees and any unpaid assumption fees, late
payment charges or other mortgagor charges on the related Mortgage Loan;
(viii) to withdraw from the Certificate Account any amount deposited in
such account that was not required to be deposited therein; and
(ix) to clear and terminate the Certificate Account.
The Master Servicer will be authorized to appoint a paying agent (the
"PAYING AGENT") to make distributions, as agent for the Master Servicer, to
Certificateholders of a Series. If the Paying Agent for a Series is the
Trustee of such Series, such Paying Agent will be authorized to make
withdrawals from the Certificate Account in order to make distributions to
Certificateholders. If the Paying Agent for a Series is not the Trustee for
such Series, the Master Servicer will, on each Distribution Date, deposit in
immediately available funds in an account designated by any such Paying Agent
the amount required to be distributed to the Certificateholders on such
Distribution Date.
The Master Servicer will cause any Paying Agent that is not the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
agrees with the Trustee that such Paying Agent will:
(1) hold all amounts deposited with it by the Master Servicer for
distribution to Certificateholders in trust for the benefit of
Certificateholders until such amounts are distributed to Certificateholders
or otherwise disposed of as provided in the applicable Pooling and
Servicing Agreement;
(2) give the Trustee notice of any default by the Master Servicer in the
making of such deposit; and
(3) at any time during the continuance of any such default, upon written
request to the Trustee, forthwith pay to the Trustee all amounts held in
trust by such Paying Agent.
PERIODIC ADVANCES AND LIMITATIONS THEREON
Generally each Servicer will be required to make (i) Periodic Advances to
cover delinquent payments of principal and interest on such Mortgage Loan and
(ii) other advances of cash ("OTHER ADVANCES" and, collectively with Periodic
Advances, "ADVANCES") to cover (x) delinquent payments of taxes, insurance
premiums, and other escrowed items and (y) rehabilitation
42
<PAGE>
expenses and foreclosure costs, including reasonable attorneys' fees, in
either case unless such Servicer has determined that any subsequent payments
on that Mortgage Loan or from the borrower will ultimately not be available to
reimburse such Servicer for such amounts. The failure of the Servicer to make
any required Periodic Advances or Other Advances under an Underlying Servicing
Agreement constitutes a default under such agreement for which the Servicer
will be terminated. Upon default by a Servicer, other than Norwest Mortgage,
the Master Servicer may, and upon default by Norwest Mortgage the Trustee may,
in each case if so provided in the Pooling and Servicing Agreement, be
required to make Periodic Advances to the extent necessary to make required
distributions on certain Certificates or certain Other Advances, provided that
the Master Servicer or Trustee, as applicable, determines that funds will
ultimately be available to reimburse it. In addition, if under the terms of an
Underlying Servicing Agreement, the applicable Servicer is not obligated to
make Periodic Advances while a Mortgage Loan is in liquidation, the Master
Servicer, to the extent provided in the Pooling and Servicing Agreement, may
be required to make the Periodic Advances during the period the Servicer is
not required to do so. In the case of Certificates of any Series for which
credit enhancement is provided in the form of a mortgage pool insurance
policy, the Seller may obtain an endorsement to the mortgage pool insurance
policy which obligates the Pool Insurer to advance delinquent payments of
principal and interest. The Pool Insurer would only be obligated under such
endorsement to the extent the mortgagor fails to make such payment and the
Master Servicer or Trustee fails to make a required advance.
The advance obligation of the Master Servicer and Trustee may be further
limited to an amount specified by the Rating Agency rating the Certificates.
Any such Periodic Advances by the Servicers or the Master Servicer or Trustee,
as the case may be, must be deposited into the applicable Servicer Custodial
Account or the Certificate Account and will be due no later than the business
day before the Distribution Date to which such delinquent payment relates.
Advances by the Servicers or the Master Servicer or Trustee, as the case may
be, will be reimbursable out of insurance proceeds or Liquidation Proceeds of,
or, except for Other Advances, future payments on, the Mortgage Loans for
which such amounts were advanced. If an Advance made by a Servicer, the Master
Servicer or the Trustee later proves, or is deemed by the Master Servicer or
the Trustee, to be unrecoverable, such Servicer, the Master Servicer or the
Trustee, as the case may be, will be entitled to reimbursement from funds in
the Certificate Account prior to the distribution of payments to the
Certificateholders to the extent provided in the Pooling and Servicing
Agreement.
Any Periodic Advances made by a Servicer, the Master Servicer or the Trustee
with respect to Mortgage Loans included in the Trust Estate for any Series are
intended to enable the Trustee to make timely payment of the scheduled
distributions of principal and interest on the Certificates of such Series.
However, neither the Master Servicer, the Trustee, any Servicer nor any other
person will, except as otherwise specified in the applicable Prospectus
Supplement, insure or guarantee the Certificates of any Series or the Mortgage
Loans included in the Trust Estate for any Certificates.
COLLECTION AND OTHER SERVICING PROCEDURES
Each Servicer will be required by the related Underlying Servicing Agreement
to make reasonable efforts to collect all payments called for under the
Mortgage Loans and, consistent with the applicable Underlying Servicing
Agreement and any applicable agreement governing any form of credit
enhancement, to follow such collection procedures as it follows with respect
to mortgage loans serviced by it that are comparable to the Mortgage Loans.
Consistent with the above, the Servicer may, in its discretion, (i) waive any
prepayment charge, assumption fee, late payment charge or any other charge in
connection with the prepayment of a Mortgage Loan and (ii) arrange with a
mortgagor a schedule for the liquidation of deficiencies running for not more
than 180 days (or such longer period to which the Master Servicer and any
applicable Pool Insurer or primary mortgage insurer have consented) after the
applicable Due Date.
Under each Underlying Servicing Agreement, each Servicer, to the extent
permitted by law, will establish and maintain one or more escrow accounts
(each such account, a "SERVICING ACCOUNT") in which each such Servicer will be
required to deposit any payments made by mortgagors in advance for taxes,
assessments, primary mortgage (if applicable) and hazard insurance premiums
and other similar items. Withdrawals from the Servicing Account may be made to
effect timely payment of taxes, assessments, mortgage and hazard insurance, to
refund to mortgagors amounts determined to be overages, to pay interest to
mortgagors on balances in the Servicing Account, if required, and to clear and
terminate such account. Each Servicer will be responsible for the
administration of its Servicing Account. A Servicer will be obligated to
advance certain amounts which are not timely paid by the mortgagors, to the
extent that it determines, in good faith, that they will be recoverable out of
insurance proceeds, liquidation proceeds, or otherwise. Alternatively, in lieu
of establishing a Servicing Account, a Servicer may procure a
43
<PAGE>
performance bond or other form of insurance coverage, in an amount acceptable
to the Master Servicer and each Rating Agency rating the related Series of
Certificates, covering loss occasioned by the failure to escrow such amounts.
ENFORCEMENT OF DUE-ON-SALE CLAUSES; REALIZATION UPON DEFAULTED MORTGAGE LOANS
With respect to each Mortgage Loan having a fixed interest rate, the
applicable Underlying Servicing Agreement will generally provide that, when
any Mortgaged Property is about to be conveyed by the mortgagor, the Servicer
will, to the extent it has knowledge of such prospective conveyance, exercise
its rights to accelerate the maturity of such Mortgage Loan under the "due-on-
sale" clause applicable thereto, if any, unless it is not exercisable under
applicable law or if such exercise would result in loss of insurance coverage
with respect to such Mortgage Loan or would, in the Servicer's judgment, be
reasonably likely to result in litigation by the mortgagor and such Servicer
has not obtained the Master Servicer's consent to such exercise. In either
case, the Servicer is authorized to take or enter into an assumption and
modification agreement from or with the person to whom such Mortgaged Property
has been or is about to be conveyed, pursuant to which such person becomes
liable under the Mortgage Note and, unless prohibited by applicable state law,
the mortgagor remains liable thereon, provided that the Mortgage Loan will
continue to be covered by any pool insurance policy and any related primary
mortgage insurance policy and the Mortgage Interest Rate with respect to such
Mortgage Loan and the payment terms shall remain unchanged. The Servicer will
also be authorized, with the prior approval of the pool insurer and the
primary mortgage insurer, if any, to enter into a substitution of liability
agreement with such person, pursuant to which the original mortgagor is
released from liability and such person is substituted as mortgagor and
becomes liable under the Mortgage Note.
Each Underlying Servicing Agreement and Pooling and Servicing Agreement with
respect to a Series will require the Servicer or the Master Servicer, as the
case may be, to present claims to the insurer under any insurance policy
applicable to the Mortgage Loans included in the Trust Estate for such Series
and to take such reasonable steps as are necessary to permit recovery under
such insurance policies with respect to defaulted Mortgage Loans, or losses on
the Mortgaged Property securing the Mortgage Loans.
Each Servicer is obligated under the applicable Underlying Servicing
Agreement for each Series to realize upon defaulted Mortgage Loans in
accordance with its normal servicing practices, which will conform generally
to those of prudent mortgage lending institutions which service mortgage loans
of the same type in the same jurisdictions. In addition, the Servicer is
authorized under the applicable Underlying Servicing Agreement to permit the
assumption of a defaulted Mortgage Loan rather than to foreclose or accept a
deed-in-lieu of foreclosure if, in the Servicer's judgment, the default is
unlikely to be cured and the assuming borrower meets Norwest Mortgage's
applicable underwriting guidelines. In connection with any such assumption,
the Mortgage Interest Rate and the payment terms of the related Mortgage Note
will not be changed. Each Servicer may also, with the consent of the Master
Servicer, modify the payment terms of Mortgage Loans that are in default, or
as to which default is reasonably foreseeable, that remain in the Trust Estate
rather than foreclose on such Mortgage Loans; provided that no such
modification shall forgive principal owing under such Mortgage Loan or
permanently reduce the interest rate on such Mortgage Loan. Any such
modification will be made only upon the determination by the Servicer and the
Master Servicer that such modification is likely to increase the proceeds of
such Mortgage Loan over the amount expected to be collected pursuant to
foreclosure. See also "The Pooling and Servicing Agreement--Optional
Purchases," above, with respect to the Seller's right to repurchase Mortgage
Loans that are in default, or as to which default is reasonably foreseeable.
Further, a Servicer may encourage the refinancing of such defaulted Mortgage
Loans, including Mortgage Loans that would permit creditworthy borrowers to
assume the outstanding indebtedness. In connection with the decision of the
Servicer regarding the foreclosure or assumption of a Mortgage Loan, the
modification of the related Mortgage Note or any other action to be taken with
respect to a defaulted Mortgage Loan, the Servicer is expressly permitted by
the Underlying Servicing Agreement to take into account the interests of the
borrower.
In the case of foreclosure or of damage to a Mortgaged Property from an
uninsured cause, the Servicer will not be required to expend its own funds to
foreclose or restore any damaged property, unless it reasonably determines (i)
that such foreclosure or restoration will increase the proceeds to
Certificateholders of such Series of liquidation of the Mortgage Loan after
reimbursement to the related Servicer for its expenses and (ii) that such
expenses will be recoverable to it through Liquidation Proceeds or any
applicable insurance policy in respect of such Mortgage Loan. In the event
that Servicer has expended its own funds for foreclosure or to restore damaged
property, it will be entitled to be reimbursed from the Certificate Account
for such Series an amount equal to all costs and expenses incurred by it.
44
<PAGE>
Norwest Mortgage will not be obligated to, and any other Servicer will not
(except with the express written approval of the Master Servicer), foreclose
on any Mortgaged Property which it believes may be contaminated with or
affected by hazardous wastes or hazardous substances. See "Certain Legal
Aspects of the Mortgage Loans--Environmental Considerations." If a Servicer
does not foreclose on a Mortgaged Property, the Certificateholders of the
related Series may experience a loss on the related Mortgage Loan. A Servicer
will not be liable to the Certificateholders if it fails to foreclose on a
Mortgaged Property which it believes may be so contaminated or affected, even
if such Mortgaged Property is, in fact, not so contaminated or affected.
Conversely, a Servicer will not be liable to the Certificateholders if, based
on its belief that no such contamination or effect exists, the Servicer
forecloses on a Mortgaged Property and takes title to such Mortgaged Property,
and thereafter such Mortgaged Property is determined to be so contaminated or
affected.
The Servicer may foreclose against property securing a defaulted Mortgage
Loan either by foreclosure, by sale or by strict foreclosure and in the event
a deficiency judgment is available against the mortgagor or other person (see
"Certain Legal Aspects of the Mortgage Loans--Anti-Deficiency Legislation and
Other Limitations on Lenders" for a discussion of the availability of
deficiency judgments), may proceed for the deficiency. It is anticipated that
in most cases the Servicer will not seek deficiency judgments, and will not be
required under the applicable Underlying Servicing Agreement to seek
deficiency judgments. In lieu of foreclosure, each Servicer may arrange for
the sale by the borrower of the Mortgaged Property related to a defaulted
Mortgage Loan to a third party, rather than foreclosing upon and selling such
Mortgaged Property.
With respect to a Trust Estate (or any segregated pool of assets therein) as
to which a REMIC election has been made, if the Trustee acquires ownership of
any Mortgaged Property as a result of a default or reasonably foreseeable
default of any Mortgage Loan secured by such Mortgaged Property, the Trustee
or Master Servicer will be required to dispose of such property prior to the
close of the third calendar year following the year the Trust Estate acquired
such property (or such shorter period as is provided in the applicable
Underlying Servicing Agreement) unless the Trustee (a) receives an opinion of
counsel to the effect that the holding of the Mortgaged Property by the Trust
Estate will not cause the Trust Estate to be subject to the tax on "prohibited
transactions" imposed by Code Section 860F(a)(1) or cause the Trust Estate (or
any segregated pool of assets therein as to which one or more REMIC elections
have been made or will be made) to fail to qualify as a REMIC or (b) applies
for and is granted an extension of the applicable period in the manner
contemplated by Code Section 856(e)(3). The Servicer also will be required to
administer the Mortgaged Property in a manner which does not cause the
Mortgaged Property to fail to qualify as "foreclosure property" within the
meaning of Code Section 860G(a)(8) or result in the receipt by the Trust
Estate of any "net income from foreclosure property" within the meaning of
Code Section 860G(c)(2), respectively. In general, this would preclude the
holding of the Mortgaged Property by a party acting as a dealer in such
property or the receipt of rental income based on the profits of the lessee of
such property. See "Certain Federal Income Tax Consequences."
INSURANCE POLICIES
Each Underlying Servicing Agreement will require the related Servicer to
cause to be maintained for each Mortgage Loan a standard hazard insurance
policy issued by a generally acceptable insurer insuring the improvements on
the Mortgaged Property underlying such Mortgage Loan against loss by fire,
with extended coverage (a "STANDARD HAZARD INSURANCE POLICY"). The Underlying
Servicing Agreements will require that such Standard Hazard Insurance Policy
be in an amount at least equal to the lesser of 100% of the insurable value of
the improvements on the Mortgaged Property or the principal balance of such
Mortgage Loan; provided, however, that such insurance may not be less than the
minimum amount required to fully compensate for any damage or loss on a
replacement cost basis. Each Servicer will also maintain on property acquired
upon foreclosure, or deed in lieu of foreclosure, of any Mortgage Loan, a
Standard Hazard Insurance Policy in an amount that is at least equal to the
lesser of 100% of the insurable value of the improvements which are a part of
such property or the principal balance of such Mortgage Loan plus accrued
interest and liquidation expenses; provided, however, that such insurance may
not be less than the minimum amount required to fully compensate for any
damage or loss on a replacement cost basis. Any amounts collected under any
such policies (other than amounts to be applied to the restoration or repair
of the Mortgaged Property or released to the borrower in accordance with
normal servicing procedures) will be deposited in the Servicer Custodial
Account for remittance to the Certificate Account by a Servicer.
The Standard Hazard Insurance Policies covering the Mortgage Loans generally
will cover physical damage to, or destruction of, the improvements on the
Mortgaged Property caused by fire, lightning, explosion, smoke, windstorm,
hail, riot, strike and civil commotion, subject to the conditions and
exclusions particularized in each policy. Because the Standard Hazard
Insurance Policies
45
<PAGE>
relating to such Mortgage Loans will be underwritten by different insurers and
will cover Mortgaged Properties located in various states, such policies will
not contain identical terms and conditions. The most significant terms
thereof, however, generally will be determined by state law and generally will
be similar. Most such policies typically will not cover any physical damage
resulting from the following: war, revolution, governmental actions, floods
and other water-related causes, earth movement (including earthquakes,
landslides and mudflows), nuclear reaction, wet or dry rot, vermin, rodents,
insects or domestic animals, hazardous wastes or hazardous substances, theft
and, in certain cases, vandalism. The foregoing list is merely indicative of
certain kinds of uninsured risks and is not all-inclusive.
In general, if the improvements on a Mortgaged Property are located in an
area identified in the Federal Register by the Federal Emergency Management
Agency as having special flood hazards (and such flood insurance has been made
available) each Underlying Servicing Agreement will require the related
Servicer to cause to be maintained a flood insurance policy meeting the
requirements of the current guidelines of the Federal Insurance Administration
with a generally acceptable insurance carrier. Generally, the Underlying
Servicing Agreement will require that such flood insurance be in an amount not
less than the least of (i) the outstanding principal balance of the Mortgage
Loan, (ii) the full insurable value of the improvements, or (iii) the maximum
amount of insurance which is available under the National Flood Insurance Act
of 1968, as amended. Norwest Mortgage does not provide financing for flood
zone properties located in communities not participating in the National Flood
Insurance Program or if available insurance coverage is, in its judgment,
unrealistically low.
Each Servicer may maintain a blanket policy insuring against hazard losses
on all of the Mortgaged Properties in lieu of maintaining the required
Standard Hazard Insurance Policies and may maintain a blanket policy insuring
against special hazards in lieu of maintaining any required flood insurance.
Each Servicer will be liable for the amount of any deductible under a blanket
policy if such amount would have been covered by a required Standard Hazard
Insurance Policy or flood insurance, had it been maintained.
Any losses incurred with respect to Mortgage Loans due to uninsured risks
(including earthquakes, mudflows, floods and hazardous wastes or hazardous
substances) or insufficient hazard insurance proceeds will adversely affect
distributions to the Certificateholders.
FIXED RETAINED YIELD, SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Fixed Retained Yield with respect to any Mortgage Loan is that portion, if
any, of interest at the Mortgage Interest Rate that is not included in the
related Trust Estate. The Prospectus Supplement for a Series will specify
whether there is any Fixed Retained Yield with respect to the Mortgage Loans
of such Series. If so, the Fixed Retained Yield will be established on a loan-
by-loan basis and will be specified in the schedule of Mortgage Loans attached
as an exhibit to the applicable Pooling and Servicing Agreement. Norwest
Mortgage as Servicer may deduct the Fixed Retained Yield from mortgagor
payments as received or deposit such payments in the Servicer Custodial
Account or Certificate Account for such Series and then either withdraw the
Fixed Retained Yield from the Servicer Custodial Account or Certificate
Account or request the Master Servicer to withdraw the Fixed Retained Yield
from the Certificate Account for remittance to Norwest Mortgage. In the case
of any Fixed Retained Yield with respect to Mortgage Loans serviced by a
Servicer other than Norwest Mortgage, the Master Servicer will make
withdrawals from the Certificate Account for the purpose of remittances to
Norwest Mortgage as owner of the Fixed Retained Yield. Notwithstanding the
foregoing, with respect to any payment of interest received by Norwest
Mortgage as Servicer relating to a Mortgage Loan (whether paid by the
mortgagor or received as Liquidation Proceeds, insurance proceeds or
otherwise) which is less than the full amount of interest then due with
respect to such Mortgage Loan, the owner of the Fixed Retained Yield with
respect to such Mortgage Loan will bear a ratable share of such interest
shortfall.
For each Series of Certificates, each Servicer will be entitled to be paid
the Servicing Fee on the related Mortgage Loans serviced by such Servicer
until termination of the applicable Underlying Servicing Agreement. A
Servicer, at its election, will pay itself the Servicing Fee for a Series with
respect to each Mortgage Loan by (a) withholding the Servicing Fee from any
scheduled payment of interest prior to deposit of such payment in the Servicer
Custodial Account for such Series or (b) withdrawing the Servicing Fee from
the Servicer Custodial Account after the entire interest payment has been
deposited in such account. A Servicer may also pay itself out of the
Liquidation Proceeds of a Mortgage Loan or other recoveries with respect
thereto, or withdraw from the Servicer Custodial Account or request the Master
Servicer to withdraw from the Certificate Account for remittance to the
Servicer such amounts after the deposit thereof in such accounts, or if such
Liquidation Proceeds or other recoveries are
46
<PAGE>
insufficient, from Net Foreclosure Profits with respect to the related
Distribution Date the Servicing Fee in respect of such Mortgage Loan to the
extent provided in the applicable Pooling and Servicing Agreement. The
Servicing Fee or the range of Servicing Fees with respect to the Mortgage
Loans underlying the Certificates of a Series will be specified in the
applicable Prospectus Supplement. Additional servicing compensation in the
form of prepayment charges, assumption fees, late payment charges or otherwise
will be retained by the Servicers.
Each Servicer will pay all expenses incurred in connection with the
servicing of the Mortgage Loans serviced by such Servicer underlying a Series,
including, without limitation, payment of the hazard insurance policy
premiums. The Servicer will be entitled, in certain circumstances, to
reimbursement from the Certificate Account of Periodic Advances, of Other
Advances made by it to pay taxes, insurance premiums and similar items with
respect to any Mortgaged Property or for expenditures incurred by it in
connection with the restoration, foreclosure or liquidation of any Mortgaged
Property (to the extent of Liquidation Proceeds or insurance policy proceeds
in respect of such Mortgaged Property) and of certain losses against which it
is indemnified by the Trust Estate.
As set forth in the preceding paragraph, a Servicer may be entitled to
reimbursement for certain expenses incurred by it, and payment of additional
fees for certain extraordinary services rendered by it (provided that such
fees do not exceed those which would be charged by third parties for similar
services) in connection with the liquidation of defaulted Mortgage Loans and
related Mortgaged Properties. In the event that claims are either not made or
are not fully paid from any applicable form of credit enhancement, the related
Trust Estate will suffer a loss to the extent that Liquidation Proceeds, after
reimbursement of the Servicing Fee and the expenses of the Servicer, are less
than the principal balance of the related Mortgage Loan.
EVIDENCE AS TO COMPLIANCE
Each Servicer will deliver annually to the Trustee or Master Servicer, as
applicable, on or before the date specified in the applicable Underlying
Servicing Agreement, an Officer's Certificate stating that (i) a review of the
activities of such Servicer during the preceding calendar year and of
performance under the applicable Underlying Servicing Agreement has been made
under the supervision of such officer, and (ii) to the best of such officer's
knowledge, based on such review, such Servicer has fulfilled all its
obligations under the applicable Underlying Servicing 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 officer and the nature
and status thereof. Such Officer's Certificate shall be accompanied by a
statement of a firm of independent public accountants to the effect that, on
the basis of an examination of certain documents and records relating to a
random sample of the mortgage loans being serviced by such Servicer pursuant
to such Underlying Servicing Agreement and/or other similar agreements,
conducted substantially in compliance with the Uniform Single Audit Program
for Mortgage Bankers, the servicing of such mortgage loans was conducted in
compliance with the provisions of the applicable Underlying Servicing
Agreement and other similar agreements, except for (i) such exceptions as such
firm believes to be immaterial and (ii) such other exceptions as are set forth
in such statement.
The Master Servicer will deliver annually to the Trustee, on or before the
date specified in the applicable Pooling and Servicing Agreement, an Officer's
Certificate stating that such officer has received, with respect to each
Servicer, the Officer's Certificate and accountant's statement described in
the preceding paragraph, and, that on the basis of such officer's review of
such information, each Servicer has fulfilled all its obligations under the
applicable Underlying Servicing 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 officer and the nature and status thereof.
47
<PAGE>
CERTAIN MATTERS REGARDING THE MASTER SERVICER
The Master Servicer may not resign from its obligations and duties under the
Pooling and Servicing Agreement for each Series without the consent of the
Trustee, except upon its determination that its duties thereunder are no
longer permissible under applicable law or are in material conflict by reason
of applicable law with any other activities of a type and nature carried on by
it. No such resignation will become effective until the Trustee for such
Series or a successor master servicer has assumed the Master Servicer's
obligations and duties under the Pooling and Servicing Agreement. If the
Master Servicer resigns for any of the foregoing reasons and the Trustee is
unable or unwilling to assume responsibility for its duties under the Pooling
and Servicing Agreement, it may appoint another institution to so act as
described under "The Pooling and Servicing Agreement--Rights Upon Event of
Default."
The Pooling and Servicing Agreement will also provide that neither the
Master Servicer nor any subcontractor, nor any partner, director, officer,
employee or agent of any of them, will be under any liability to the Trust
Estate or the Certificateholders, for the taking of any action or for
refraining from the taking of any action in good faith pursuant to the Pooling
and Servicing Agreement, or for errors in judgment; provided, however, that
neither the Master Servicer, any subcontractor, nor any such person will be
protected against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence in the performance of his
or its duties or by reason of reckless disregard of his or its obligations and
duties thereunder. The Pooling and Servicing Agreement will further provide
that the Master Servicer, any subcontractor, and any partner, director,
officer, employee or agent of either of them shall be entitled to
indemnification by the Trust Estate and will be held harmless against any
loss, liability or expense incurred in connection with any legal action
relating to the Pooling and Servicing Agreement or the Certificates, other
than any loss, liability or expense incurred by reason of willful misfeasance,
bad faith or gross negligence in the performance of his or its duties
thereunder or by reason of reckless disregard of his or its obligations and
duties thereunder. In addition, the Pooling and Servicing Agreement will
provide that the Master Servicer will not be under any obligation to appear
in, prosecute or defend any legal action that is not incidental to its duties
under the Pooling and Servicing Agreement and that in its opinion may involve
it in any expense or liability. The Master Servicer may, however, in its
discretion, undertake any such action deemed by it necessary or desirable with
respect to the Pooling and Servicing Agreement and the rights and duties of
the parties thereto and the interests of the Certificateholders thereunder. In
such event, the legal expenses and costs of such action and any liability
resulting therefrom will be expenses, costs and liabilities of the Trust
Estate and the Master Servicer will be entitled to be reimbursed therefor out
of the Certificate Account, and any loss to the Trust Estate arising from such
right of reimbursement will be allocated first to the Subordinated Certificate
of a Series before being allocated to the related Senior Certificates, or if
such Series does not contain Subordinated Certificates, pro rata among the
various Classes of Certificates unless otherwise specified in the applicable
Pooling and Servicing Agreement.
Any person into which the Master Servicer may be merged or consolidated, or
any person resulting from any merger, conversion or consolidation to which the
Master Servicer is a party, or any person succeeding to the business through
the transfer of substantially all of its assets or all assets relating to such
business, or otherwise, of the Master Servicer will be the successor of the
Master Servicer under the Pooling and Servicing Agreement for each Series
provided that such successor or resulting entity has a net worth of not less
than $15,000,000 and is qualified to service mortgage loans for FNMA or FHLMC.
The Master Servicer also has the right to assign its rights and delegate its
duties and obligations under the Pooling and Servicing Agreement for each
Series; provided that, if the Master Servicer desires to be released from its
obligations under the Pooling and Servicing Agreement, (i) the purchaser or
transferee accepting such assignment or delegation is qualified to service
mortgage loans for FNMA or FHLMC, (ii) the purchaser is satisfactory to the
Trustee for such Series, in the reasonable exercise of its judgment, and
executes and delivers to the Trustee an agreement, in form and substance
reasonably satisfactory to the Trustee, which contains an assumption by such
purchaser or transferee of the due and punctual performance and observance of
each covenant and condition to be performed or observed by the Master Servicer
under the Pooling and Servicing Agreement from and after the date of such
agreement; and (iii) each applicable Rating Agency's rating of any
Certificates for such Series in effect immediately prior to such assignment,
sale or transfer would not be qualified, downgraded or withdrawn as a result
of such assignment, sale or transfer and the Certificates would not be placed
on credit review status by any such Rating Agency. The Master Servicer will be
released from its obligations under the Pooling and Servicing Agreement upon
any such assignment and delegation, except that the Master Servicer will
remain liable for all liabilities and obligations incurred by it prior to the
time that the conditions contained in clauses (i), (ii) and (iii) above are
met.
48
<PAGE>
THE POOLING AND SERVICING AGREEMENT
ASSIGNMENT OF MORTGAGE LOANS TO THE TRUSTEE
The Seller will have acquired the Mortgage Loans included in each Trust
Estate from Norwest Mortgage pursuant to an agreement (the "NORWEST MORTGAGE
SALE AGREEMENT"). In connection with the conveyance of the Mortgage Loans to
the Seller, Norwest Mortgage will (i) agree to deliver to the Seller all of
the documents which the Seller is required to deliver to the Trustee; (ii)
make certain representations and warranties to the Seller which will be the
basis of certain of the Seller's representations and warranties to the Trustee
or assign the representations and warranties made by a Correspondent to
Norwest Mortgage; and (iii) agree to repurchase or substitute (or assign
rights to a comparable agreement of a Correspondent) for any Mortgage Loan for
which any document is not delivered or is found to be defective in any
material respect, or which Mortgage Loan is discovered at any time not to be
in conformance with any representation and warranty Norwest Mortgage has made
to the Seller and the breach of such representation and warranty materially
and adversely affects the interests of the Certificateholders in the related
Mortgage Loan, if Norwest Mortgage cannot deliver such document or cure such
defect or breach within 60 days after notice thereof. Such agreement will
inure to the benefit of the Trustee and is intended to help ensure the
Seller's performance of its limited obligation to repurchase or substitute for
Mortgage Loans. See "The Mortgage Loan Programs--Representations and
Warranties."
At the time of issuance of each Series of Certificates, the Mortgage Loans
in the related Trust Estate will, pursuant to the applicable Pooling and
Servicing Agreement, be assigned to the Trustee, together with all principal
and interest received on or with respect to such Mortgage Loans after the
applicable Cut-Off Date other than principal and interest due and payable on
or before such Cut-Off Date and interest attributable to the Fixed Retained
Yield on such Mortgage Loans, if any. See "Servicing of the Mortgage Loans--
Fixed Retained Yield, Servicing Compensation and Payment of Expenses." The
Trustee or its agent will, concurrently with such assignment, authenticate and
deliver the Certificates evidencing such Series to the Seller in exchange for
the Mortgage Loans. Each Mortgage Loan will be identified in a schedule
appearing as an exhibit to the applicable Pooling and Servicing Agreement.
Each such schedule will include, among other things, the unpaid principal
balance as of the close of business on the applicable Cut-Off Date, the
maturity date and the Mortgage Interest Rate for each Mortgage Loan in the
related Trust Estate.
In addition, with respect to each Mortgage Loan in a Trust Estate, the
mortgage or other promissory note or a lost note affidavit executed by the
applicable Servicer, any assumption, modification or conversion to fixed
interest rate agreement, a mortgage assignment in recordable form and the
recorded Mortgage (or other documents as are required under applicable law to
create perfected security interest in the Mortgaged Property in favor of the
Trustee) will be delivered to the Trustee or, if indicated in the applicable
Prospectus Supplement, to a custodian; provided that, in instances where
recorded documents cannot be delivered due to delays in connection with
recording, copies thereof, certified by the Seller to be true and complete
copies of such documents sent for recording, may be delivered and the original
recorded documents will be delivered promptly upon receipt. The assignment of
each Mortgage will be recorded promptly after the initial issuance of
Certificates for the related Trust Estate, except in states where, in the
opinion of counsel acceptable to the Trustee, such recording is not required
to protect the Trustee's interest in the Mortgage Loan against the claim of
any subsequent transferee or any successor to or creditor of the Seller,
Norwest Mortgage or the originator of such Mortgage Loan.
Notwithstanding the preceding paragraph, with respect to any Mortgage which
has been recorded in the name of Mortgage Electronic Registration Systems,
Inc. ("MERS") or its designee, no mortgage assignment in favor of the Trustee
will be required to be prepared or delivered. Instead, the Trustee and the
applicable Servicer will be required to take all actions as are necessary to
cause the applicable Trust Estate to be shown as the owner of the related
Mortgage Loan on the records of MERS for purposes of the system of recording
transfers of beneficial ownership of mortgages maintained by MERS.
The Trustee or custodian will hold all Mortgage Loan documents delivered to
it in trust for the benefit of Certificateholders of the related Series and
will review such documents within 180 days of the date of the applicable
Pooling and Servicing Agreement. If any document is not delivered or is found
to be defective in any material respect, or if the Seller is in breach of any
of its representations and warranties, and such breach materially and
adversely affects the interests of the Certificateholders in a Mortgage Loan,
and the Seller cannot deliver such document or cure such defect or breach
within 60 days after written notice thereof, the Seller will, within 60 days
of such notice, either repurchase the related Mortgage Loan from the Trustee
at a price equal to the then unpaid principal balance thereof, plus accrued
and unpaid interest at the applicable Mortgage Interest Rate (minus
49
<PAGE>
any Fixed Retained Yield) through the last day of the month in which such
repurchase takes place, or (in the case of a Series for which one or more
REMIC elections have been or will be made, unless the maximum period as may be
provided by the Code or applicable regulations of the Department of the
Treasury ("TREASURY REGULATIONS") shall have elapsed since the execution of
the applicable Pooling and Servicing Agreement) substitute for such Mortgage
Loan a new mortgage loan having characteristics such that the representations
and warranties of the Seller made pursuant to the applicable Pooling and
Servicing Agreement (except for representations and warranties as to the
correctness of the applicable schedule of mortgage loans) would not have been
incorrect had such substitute Mortgage Loan originally been a Mortgage Loan.
In the case of a repurchased Mortgage Loan, the purchase price will be
deposited by the Seller in the related Certificate Account. In the case of a
substitute Mortgage Loan, the mortgage file relating thereto will be delivered
to the Trustee or the custodian and the Seller will deposit in the Certificate
Account, an amount equal to the excess of (i) the unpaid principal balance of
the Mortgage Loan which is substituted for, over (ii) the unpaid principal
balance of the substitute Mortgage Loan, together with interest on such excess
at the Mortgage Interest Rate (minus any Fixed Retained Yield) to the next
scheduled Due Date of the Mortgage Loan which is being substituted for. In no
event will any substitute Mortgage Loan have an unpaid principal balance
greater than the scheduled principal balance calculated in accordance with the
amortization schedule (the "SCHEDULED PRINCIPAL BALANCE") of the Mortgage Loan
for which it is substituted (after giving effect to the scheduled principal
payment due in the month of substitution on the Mortgage Loan substituted
for), or a term greater than, a Mortgage Interest Rate less than, a Mortgage
Interest Rate more than one percent per annum greater than or a Loan-to-Value
Ratio greater than, the Mortgage Loan for which it is substituted. If
substitution is to be made for an adjustable rate Mortgage Loan, the
substitute Mortgage Loan will have an unpaid principal balance no greater than
the Scheduled Principal Balance of the Mortgage Loan for which it is
substituted (after giving effect to the scheduled principal payment due in the
month of substitution on the Mortgage Loan substituted for), a Loan-to-Value
Ratio less than or equal to, and a Mortgage Interest Rate at least equal to,
that of the Mortgage Loan for which it is substituted, and will bear interest
based on the same index, margin and frequency of adjustment as the substituted
Mortgage Loan. The repurchase obligation and the mortgage substitution
referred to above will constitute the sole remedies available to the
Certificateholders or the Trustee with respect to missing or defective
documents or breach of the Seller's representations and warranties.
If no custodian is named in the Pooling and Servicing Agreement, the Trustee
will be authorized to appoint a custodian to maintain possession of the
documents relating to the Mortgage Loans and to conduct the review of such
documents described above. Any custodian so appointed will keep and review
such documents as the Trustee's agent under a custodial agreement.
OPTIONAL PURCHASES
To the extent specified in the related Prospectus Supplement and subject to
the provisions of the applicable Pooling and Servicing Agreement, the Seller
or the Master Servicer may, at such party's option, repurchase (i) any
Mortgage Loan which is in default or as to which default is reasonably
foreseeable if, in the Seller's or the Master Servicer's judgment, the related
default is not likely to be cured by the borrower or default is not likely to
be averted, up to the limit specified in such Pooling and Servicing Agreement
and (ii) any Mortgage Loan as to which the originator of such Mortgage Loan
breached a representation or warranty to Norwest Mortgage regarding the
characteristics of such Mortgage Loan, at a price equal to the unpaid
principal balance thereof plus accrued interest thereon and under the
conditions set forth in the applicable Prospectus Supplement.
REPORTS TO CERTIFICATEHOLDERS
Unless otherwise specified or modified in the related Pooling and Servicing
Agreement for each Series, the Master Servicer will prepare and the Trustee
will include with each distribution to Certificateholders of record of such
Series a Monthly Report setting forth the following information, if
applicable:
(i) the amount of such distribution allocable to principal of the related
Mortgage Loans, separately identifying the aggregate amount of any
principal prepayments included therein, the amount of such distribution
allocable to interest on the related Mortgage Loans and the aggregate
unpaid principal balance of the Mortgage Loans evidenced by each Class
after giving effect to the principal distributions on such Distribution
Date;
(ii) the amount of servicing compensation with respect to the related
Trust Estate and such other customary information as is required to enable
Certificateholders to prepare their tax returns;
(iii) the amount by which the Servicing Fee for the related Distribution
Date has been reduced by interest shortfalls due to prepayments;
50
<PAGE>
(iv) the aggregate amount of any Periodic Advances by the Servicer, the
Master Servicer or the Trustee included in the amounts actually distributed
to the Certificateholders;
(v) to each holder of a Certificate entitled to the benefits of payments
under any form of credit enhancement or from any Reserve Fund:
(a) the amounts so distributed under any such form of credit
enhancement or from any such Reserve Fund on the applicable Distribution
Date; and
(b) the amount of coverage remaining under any such form of credit
enhancement and the balance in any such Reserve Fund, after giving
effect to any payments thereunder and other amounts charged thereto on
the Distribution Date;
(vi) in the case of a Series of Certificates with a variable Pass-Through
Rate, such Pass-Through Rate;
(vii) the amount of the remaining Special Hazard Loss Amount, Fraud Loss
Amount and Bankruptcy Loss Amount as of the close of business on such
Distribution Date;
(viii) the book value of any collateral acquired by the Trust Estate
through foreclosure or otherwise;
(ix) the unpaid principal balance of any Mortgage Loan as to which the
Servicer has notified the Master Servicer that such Servicer has determined
not to foreclose because it believes the related Mortgaged Property may be
contaminated with or affected by hazardous wastes or hazardous substances;
and
(x) the number and aggregate principal amount of Mortgage Loans one
month, two months and three or more months delinquent.
In addition, within a reasonable period of time after the end of each
calendar year, the Master Servicer will furnish either directly, or through
the Trustee, a report to each Certificateholder of record at any time during
such calendar year such information as required by the Code and applicable
regulations thereunder to enable Certificateholders to prepare their tax
returns. In the event that an election has been made to treat the Trust Estate
(or one or more segregated pools of assets therein) as a REMIC, the Trustee
will be required to sign the federal and applicable state and local income tax
returns of the REMIC (which will be prepared by the Master Servicer). See
"Certain Federal Income Tax Consequences--Federal Income Tax Consequences for
REMIC Certificates--Administrative Matters."
LIST OF CERTIFICATEHOLDERS
The Pooling and Servicing Agreement for each Series will require the Trustee
to provide access to the most current list of names and addresses of
Certificateholders of such Series to any group of five or more
Certificateholders who advise the Trustee in writing that they desire to
communicate with other Certificateholders with respect to their rights under
the Pooling and Servicing Agreement or under the Certificates.
EVENTS OF DEFAULT
Events of Default under the Pooling and Servicing Agreement for each Series
include (i) any failure by the Master Servicer to make a required deposit
which continues unremedied for three business days after the giving of written
notice of such failure to the Master Servicer by the Trustee for such Series,
or to the Master Servicer and the Trustee by the holders of Certificates of
such Series having voting rights allocated to such Certificates ("VOTING
INTERESTS") aggregating not less than 25% of the Voting Interests allocated to
all Certificates for such Series; (ii) any failure by the Master Servicer duly
to observe or perform in any material respect any other of its covenants or
agreements in the Pooling and Servicing Agreement which continues unremedied
for 60 days (or 30 days in the case of a failure to maintain any pool
insurance policy required to be maintained pursuant to the Pooling and
Servicing Agreement) after the giving of written notice of such failure to the
Master Servicer by the Trustee, or to the Master Servicer and the Trustee by
the holders of Certificates aggregating not less than 25% of the Voting
Interests; (iii) certain events of insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings and certain action
by the Master Servicer indicating its insolvency, reorganization or inability
to pay its obligations and (iv) it and any subservicer appointed by it
becoming ineligible to service for both FNMA and FHLMC (unless remedied within
90 days).
51
<PAGE>
RIGHTS UPON EVENT OF DEFAULT
So long as an Event of Default remains unremedied under the Pooling and
Servicing Agreement for a Series, the Trustee for such Series or holders of
Certificates of such Series evidencing not less than 66 2/3% of the Voting
Interests in the Trust Estate for such Series may terminate all of the rights
and obligations of the Master Servicer under the Pooling and Servicing
Agreement and in and to the Mortgage Loans (other than the Master Servicer's
right to recovery of the aggregate Master Servicing Fees due prior to the date
of termination, and other expenses and amounts advanced pursuant to the terms
of the Pooling and Servicing Agreement, which rights the Master Servicer will
retain under all circumstances), whereupon the Trustee will succeed to all the
responsibilities, duties and liabilities of the Master Servicer under the
Pooling and Servicing Agreement and will be entitled to monthly compensation
not to exceed the aggregate Master Servicing Fees together with the other
compensation to which the Master Servicer is entitled under the Pooling and
Servicing Agreement. In the event that the Trustee is unwilling or unable so
to act, it may select, pursuant to the public bid procedure described in the
applicable Pooling and Servicing Agreement, or petition a court of competent
jurisdiction to appoint, a housing and home finance institution, bank or
mortgage servicing institution with a net worth of at least $10,000,000 to act
as successor to the Master Servicer under the provisions of the Pooling and
Servicing Agreement; provided however, that until such a successor Master
Servicer is appointed and has assumed the responsibilities, duties and
liabilities of the Master Servicer under the Pooling and Servicing Agreement,
the Trustee shall continue as the successor to the Master Servicer as
described above. In the event such public bid procedure is utilized, the
successor would be entitled to compensation in an amount equal to the
aggregate Master Servicing Fees, together with the other compensation to which
the Master Servicer is entitled under the Pooling and Servicing Agreement, and
the Master Servicer would be entitled to receive the net profits, if any,
realized from the sale of its rights and obligations under the Pooling and
Servicing Agreement.
During the continuance of any Event of Default under the Pooling and
Servicing Agreement for a Series, the Trustee for such Series will have the
right to take action to enforce its rights and remedies and to protect and
enforce the rights and remedies of the Certificateholders of such Series, and
holders of Certificates evidencing not less than 25% of the Voting Interests
for such Series may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred upon the Trustee. However, the Trustee will not be under any
obligation to pursue any such remedy or to exercise any of such trusts or
powers unless such Certificateholders have offered the Trustee reasonable
security or indemnity against the cost, expenses and liabilities which may be
incurred by the Trustee thereby. Also, the Trustee may decline to follow any
such direction if the Trustee determines that the action or proceeding so
directed may not lawfully be taken or would involve it in personal liability
or be unjustly prejudicial to the non-assenting Certificateholders.
No Certificateholder of a Series, solely by virtue of such holder's status
as a Certificateholder, will have any right under the Pooling and Servicing
Agreement for such Series to institute any proceeding with respect to the
Pooling and Servicing Agreement, unless such holder previously has given to
the Trustee for such Series written notice of default and unless the holders
of Certificates evidencing not less than 25% of the Voting Interests for such
Series have made written request upon the Trustee to institute such proceeding
in its own name as Trustee thereunder and have offered to the Trustee
reasonable indemnity and the Trustee for 60 days has neglected or refused to
institute any such proceeding.
AMENDMENT
Each Pooling and Servicing Agreement may be amended by the Seller, the
Master Servicer and the Trustee without the consent of the Certificateholders,
(i) to cure any ambiguity or mistake, (ii) to correct or supplement any
provision therein that may be inconsistent with any other provision therein,
(iii) to modify, eliminate or add to any of its provisions to such extent as
shall be necessary to maintain the qualification of the Trust Estate (or one
or more segregated pools of assets therein) as a REMIC at all times that any
Certificates are outstanding or to avoid or minimize the risk of the
imposition of any tax on the Trust Estate pursuant to the Code that would be a
claim against the Trust Estate, provided that the Trustee has received an
opinion of counsel to the effect that such action is necessary or desirable to
maintain such qualification or to avoid or minimize the risk of the imposition
of any such tax and such action will not, as evidenced by such opinion of
counsel, adversely affect in any material respect the interests of any
Certificateholder, (iv) to change the timing and/or nature of deposits into
the Certificate Account, provided that such change will not, as evidenced by
an opinion of counsel, adversely affect in any material respect the interests
of any Certificateholder and that such change will not adversely affect the
then current rating assigned to any Certificates, as evidenced by a letter
from each Rating Agency to such effect, (v) to add to, modify or eliminate any
provisions therein restricting transfers of Residual Certificates to certain
disqualified organizations described below under "Certain Federal Income Tax
Consequences--Federal Income Tax
52
<PAGE>
Consequences for REMIC Certificates--Taxation of Residual Certificates--Tax-
Related Restrictions on Transfer of Residual Certificates," (vi) to make
certain provisions with respect to the denominations of, and the manner of
payments on, certain Classes or Subclasses of Certificates initially retained
by the Seller or an affiliate, or (vii) to make any other provisions with
respect to matters or questions arising under such Pooling and Servicing
Agreement that are not inconsistent with the provisions thereof, provided that
such action will not, as evidenced by an opinion of counsel, adversely affect
in any material respect the interests of the Certificateholders of the related
Series. The Pooling and Servicing Agreement may also be amended by the Seller,
the Master Servicer and the Trustee with the consent of the holders of
Certificates evidencing interests aggregating not less than 66 2/3% of the
Voting Interests evidenced by the Certificates of each Class or Subclass
affected thereby, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of such Pooling and Servicing
Agreement or of modifying in any manner the rights of the Certificateholders;
provided, however, that no such amendment may (i) reduce in any manner the
amount of, or delay the timing of, any payments received on or with respect to
Mortgage Loans that are required to be distributed on any Certificates,
without the consent of the holder of such Certificate, (ii) adversely affect
in any material respect the interests of the holders of a Class or Subclass of
Certificates of a Series in a manner other than that set forth in (i) above
without the consent of the holders of Certificates aggregating not less than
66 2/3% of the Voting Interests evidenced by such Class or Subclass, or (iii)
reduce the aforesaid percentage of Certificates of any Class or Subclass, the
holders of which are required to consent to such amendment, without the
consent of the holders of all Certificates of such Class or Subclass affected
then outstanding. Notwithstanding the foregoing, the Trustee will not consent
to any such amendment if such amendment would subject the Trust Estate (or any
segregated pool of assets therein) to tax or cause the Trust Estate (or any
segregated pool of assets therein) to fail to qualify as a REMIC.
TERMINATION; OPTIONAL PURCHASE OF MORTGAGE LOANS
The obligations created by the Pooling and Servicing Agreement for a Series
of Certificates will terminate on the Distribution Date following the final
payment or other liquidation of the last Mortgage Loan subject thereto and the
disposition of all property acquired upon foreclosure of any such Mortgage
Loan. In no event, however, will the trust created by the Pooling and
Servicing Agreement continue beyond the expiration of 21 years from the death
of the last survivor of certain persons named in such Pooling and Servicing
Agreement. For each Series of Certificates, the Trustee will give written
notice of termination of the Pooling and Servicing Agreement to each
Certificateholder, and the final distribution will be made only upon surrender
and cancellation of the Certificates at an office or agency appointed by the
Seller and specified in the notice of termination.
If so provided in the applicable Prospectus Supplement, the Pooling and
Servicing Agreement for each Series of Certificates will permit, but not
require, the Seller, Norwest Mortgage or such other party as is specified in
the applicable Prospectus Supplement, to purchase from the Trust Estate for
such Series all remaining Mortgage Loans at the time subject to the Pooling
and Servicing Agreement at a price specified in such Prospectus Supplement. In
the event that such party has caused the related Trust Estate (or any
segregated pool of assets therein) to be treated as a REMIC, any such purchase
will be effected only pursuant to a "qualified liquidation" as defined in Code
Section 860F(a)(4)(A) and, if the Trust Estate is liquidated other than in the
manner specified in the Pooling and Servicing Agreement, the receipt by the
Trustee of an opinion of counsel or other evidence that such other liquidation
method will not (i) result in the imposition of a tax on "prohibited
transactions" under Code Section 860F(a)(1), (ii) otherwise subject the Trust
Estate to tax, or (iii) cause the Trust Estate (or any segregated pool of
assets) to fail to qualify as a REMIC. The exercise of such right will effect
early retirement of the Certificates of that Series, but the right so to
purchase may be exercised only after the aggregate principal balance of the
Mortgage Loans for such Series at the time of purchase is less than a
specified percentage of the aggregate principal balance at the Cut-Off Date
for the Series, or after the date set forth in the applicable Prospectus
Supplement.
THE TRUSTEE
The Trustee under each Pooling and Servicing Agreement (the "TRUSTEE") will
be named in the applicable Prospectus Supplement. The commercial bank or trust
company serving as Trustee may have normal banking relationships with the
Seller or any of its affiliates.
The Trustee may resign at any time, in which event the Master Servicer will
be obligated to appoint a successor trustee. The Master Servicer may also
remove the Trustee if the Trustee ceases to be eligible to act as Trustee
under the Pooling and Servicing Agreement, if the Trustee becomes insolvent or
in order to change the situs of the Trust Estate for state tax reasons. Upon
becoming aware of such circumstances, the Master Servicer will become
obligated to appoint a successor trustee. The Trustee
53
<PAGE>
may also be removed at any time by the holders of Certificates evidencing not
less than 51% of the Voting Interests in the Trust Estate, except that, any
Certificate registered in the name of the Seller, the Master Servicer or any
affiliate thereof will not be taken into account in determining whether the
requisite Voting Interest in the Trust Estate necessary to effect any such
removal has been obtained. Any resignation and removal of the Trustee, and the
appointment of a successor trustee, will not become effective until acceptance
of such appointment by the successor trustee. The Trustee, and any successor
trustee, will have a combined capital and surplus of at least $50,000,000, or
will be a member of a bank holding system, the aggregate combined capital and
surplus of which is at least $50,000,000, provided that the Trustee's and any
such successor trustee's separate capital and surplus shall at all times be at
least the amount specified in Section 310(a)(2) of the Trust Indenture Act of
1939, and will be subject to supervision or examination by federal or state
authorities.
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS
The following discussion contains summaries of certain legal aspects of
mortgage loans which are general in nature. Because such legal aspects are
governed by applicable state law (which laws may differ substantially), the
summaries do not purport to be complete or to reflect the laws of any
particular state, nor to encompass the laws of all states in which the
security for the Mortgage Loans is situated. The summaries are qualified in
their entirety by reference to the applicable federal and state laws governing
the Mortgage Loans.
GENERAL
The Mortgage Loans will, in general, be secured by either first mortgages or
first deeds of trust, depending upon the prevailing practice in the state in
which the underlying property is located. A mortgage creates a lien upon the
real property described in the mortgage. There are two parties to a mortgage:
the mortgagor, who is the borrower (or, in the case of a Mortgage Loan secured
by a property that has been conveyed to an inter vivos revocable trust, the
settlor of such trust); and the mortgagee, who is the lender. In a mortgage
instrument state, the mortgagor delivers to the mortgagee a note or bond
evidencing the loan and the mortgage. Although a deed of trust is similar to a
mortgage, a deed of trust has three parties: a borrower called the trustor
(similar to a mortgagor), a lender called the beneficiary (similar to a
mortgagee), and a third-party grantee called the trustee. Under a deed of
trust, the borrower grants the property, irrevocably until the debt is paid,
in trust, generally with a power of sale, to the trustee to secure payment of
the loan. The trustee's authority under a deed of trust and the mortgagee's
authority under a mortgage are governed by the express provisions of the deed
of trust or mortgage, applicable law, and, in some cases, with respect to the
deed of trust, the directions of the beneficiary.
FORECLOSURE
Foreclosure of a mortgage is generally accomplished by judicial action.
Generally, the action is initiated by the service of legal pleadings upon all
parties having an interest of record in the real property. Delays in
completion of the foreclosure occasionally may result from difficulties in
locating necessary parties defendant. When the mortgagee's right of
foreclosure is contested, the legal proceedings necessary to resolve the issue
can be time-consuming. After the completion of a judicial foreclosure
proceeding, the court may issue a judgment of foreclosure and appoint a
receiver or other officer to conduct the sale of the property. In some states,
mortgages may also be foreclosed by advertisement, pursuant to a power of sale
provided in the mortgage. Foreclosure of a mortgage by advertisement is
essentially similar to foreclosure of a deed of trust by non-judicial power of
sale.
Foreclosure of a deed of trust is generally accomplished by a non-judicial
trustee's sale under a specific provision in the deed of trust that authorizes
the trustee to sell the property to a third party upon any default by the
borrower under the terms of the note or deed of trust. In certain states, such
foreclosure also may be accomplished by judicial action in the manner provided
for foreclosure of mortgages. In some states, the trustee must record a notice
of default and send a copy to the borrower-trustor and to any person who has
recorded a request for a copy of a notice of default and notice of sale. In
addition, the trustee must provide notice in some states to any other
individual having an interest of record in the real property, including any
junior lienholders. If the deed of trust is not reinstated within any
applicable cure period, a notice of sale must be posted in a public place and,
in most states, published for a specified period of time in one or more
newspapers. In addition, some state laws require that a copy of the notice of
sale be posted on the property and sent to all parties having an interest of
record in the property.
54
<PAGE>
In some states, the borrower-trustor has the right to reinstate the loan at
any time following default until shortly before the trustee's sale. In
general, the borrower, or any other person having a junior encumbrance on the
real estate, may, during a reinstatement period, cure the default by paying
the entire amount in arrears plus the costs and expenses incurred in enforcing
the obligation. Certain state laws control the amount of foreclosure expenses
and costs, including attorneys' fees, which may be recovered by a lender.
In case of foreclosure under either a mortgage or a deed of trust, the sale
by the receiver or other designated officer, or by the trustee, is a public
sale. However, because of the difficulty a potential buyer at the sale would
have in determining the exact status of title and because the physical
condition of the property may have deteriorated during the foreclosure
proceedings, it is uncommon for a third party to purchase the property at the
foreclosure sale. Rather, it is common for the lender to purchase the property
from the trustee or receiver for an amount equal to the unpaid principal
amount of the note, accrued and unpaid interest and the expenses of
foreclosure. Thereafter, subject to the right of the borrower in some states
to remain in possession during the redemption period, the lender will assume
the burdens of ownership, including obtaining hazard insurance and making such
repairs at its own expense as are necessary to render the property suitable
for sale. The lender commonly will obtain the services of a real estate broker
and pay the broker a commission in connection with the sale of the property.
Depending upon market conditions, the ultimate proceeds of the sale of the
property may not equal the lender's investment in the property. Any loss may
be reduced by the receipt of mortgage insurance proceeds, if any, or by
judicial action against the borrower for the deficiency, if such action is
permitted by law. See "--Anti-Deficiency Legislation and Other Limitations on
Lenders" below.
FORECLOSURE ON SHARES OF COOPERATIVES
The cooperative shares owned by the tenant-stockholder and pledged to the
lender are, in almost all cases, subject to restrictions on transfer as set
forth in the cooperative's Certificate of Incorporation and By-laws, as well
as in the proprietary lease or occupancy agreement, and may be cancelled by
the cooperative for failure by the tenant-stockholder to pay rent or other
obligations or charges owed by such tenant-stockholder, including mechanics'
liens against the cooperative apartment building incurred by such tenant-
stockholder. The proprietary lease or occupancy agreement generally permits
the cooperative to terminate such lease or agreement in the event an obligor
fails to make payments or defaults in the performance of covenants required
thereunder. Typically, the lender and the cooperative enter into a recognition
agreement which establishes the rights and obligations of both parties in the
event of a default by the tenant-stockholder on its obligations under the
proprietary lease or occupancy agreement. A default by the tenant-stockholder
under the proprietary lease or occupancy agreement will usually constitute a
default under the security agreement between the lender and the tenant-
stockholder.
The recognition agreement generally provides that, in the event that the
tenant-stockholder has defaulted under the proprietary lease or occupancy
agreement, the cooperative will take no action to terminate such lease or
agreement until the lender has been provided an opportunity to cure the
default. The recognition agreement typically provides that if the proprietary
lease or occupancy agreement is terminated, the cooperative will recognize the
lender's lien against proceeds from a sale of the cooperative apartment,
subject, however, to the cooperative's right to sums due under such
proprietary lease or occupancy agreement. The total amount owed to the
cooperative by the tenant-stockholder, which the lender generally cannot
restrict and does not monitor, could reduce the value of the collateral below
the outstanding principal balance of the cooperative loan and accrued and
unpaid interest thereon.
Recognition agreements also provide that in the event of a foreclosure on a
cooperative loan, the lender must obtain the approval or consent of the
cooperative as required by the proprietary lease before transferring the
cooperative shares or assigning the proprietary lease. Generally, the lender
is not limited by the agreement in any rights it may have to dispossess the
tenant-stockholders.
Foreclosure on the cooperative shares is accomplished by a sale in
accordance with the provisions of Article 9 of the Uniform Commercial Code
(the "UCC") and the security agreement relating to those shares. Article 9 of
the UCC requires that a sale be conducted in a "commercially reasonable"
manner. Whether a foreclosure sale has been conducted in a "commercially
reasonable" manner will depend on the facts in each case. In determining
commercial reasonableness, a court will look to the notice given the debtor
and the method, manner, time, place and terms of the foreclosure. Generally, a
sale conducted according to the usual practice of banks selling similar
collateral will be considered reasonably conducted.
55
<PAGE>
Article 9 of the UCC provides that the proceeds of the sale will be applied
first to pay the costs and expenses of the sale and then to satisfy the
indebtedness secured by the lender's security interest. The recognition
agreement, however, generally provides that the lender's right to
reimbursement is subject to the right of the cooperative corporation to
receive sums due under the proprietary lease or occupancy agreement. If there
are proceeds remaining, the lender must account to the tenant-stockholder for
the surplus. Conversely, if a portion of the indebtedness remains unpaid, the
tenant-stockholder is generally responsible for the deficiency. See "--Anti-
Deficiency Legislation and Other Limitations on Lenders" below.
RIGHTS OF REDEMPTION
In some states, after sale pursuant to a deed of trust and/or foreclosure of
a mortgage, the borrower and certain foreclosed junior lienors are given a
statutory period in which to redeem the property from the foreclosure sale. In
most states where the right of redemption is available, statutory redemption
may occur upon payment of the foreclosure purchase price, accrued interest and
taxes. In some states, the right to redeem is an equitable right. The effect
of a right of redemption is to delay the ability of the lender to sell the
foreclosed property. The exercise of a right of redemption would defeat the
title of any purchaser at a foreclosure sale, or of any purchaser from the
lender subsequent to judicial foreclosure or sale under a deed of trust.
Consequently, the practical effect of the redemption right is to force the
lender to maintain the property and pay the expenses of ownership until the
redemption period has run.
ANTI-DEFICIENCY LEGISLATION, THE BANKRUPTCY CODE AND OTHER LIMITATIONS ON
LENDERS
Certain states have imposed statutory prohibitions which limit the remedies
of a beneficiary under a deed of trust or a mortgagee under a mortgage. In
some states, statutes limit the right of the beneficiary or mortgagee to
obtain a deficiency judgment against the borrower following foreclosure or
sale under a deed of trust. A deficiency judgment would be a personal judgment
against the former borrower equal in most cases to the difference between the
net amount realized upon the public sale of the real property and the amount
due to the lender. Other statutes require the beneficiary or mortgagee to
exhaust the security afforded under a deed of trust or mortgage by foreclosure
in an attempt to satisfy the full debt before bringing a personal action
against the borrower. Finally, other statutory provisions limit any deficiency
judgment against the former borrower following a judicial sale to the excess
of the outstanding debt over the fair market value of the property at the time
of public sale. The purpose of these statutes is generally to prevent a
beneficiary or a mortgagee from obtaining a large deficiency judgment against
the former borrower as a result of low or no bids at the judicial sale.
Generally, Article 9 of the UCC governs foreclosure on cooperative shares
and the related proprietary lease or occupancy agreement and foreclosure on
the beneficial interest in a land trust. Some courts have interpreted Section
9-504 of the UCC to prohibit a deficiency award unless the creditor
establishes that the sale of the collateral (which, in the case of a Mortgage
Loan secured by shares of a cooperative, would be such shares and the related
proprietary lease or occupancy agreement) was conducted in a commercially
reasonable manner.
A Servicer generally will not be required under the applicable Underlying
Servicing Agreement to pursue deficiency judgments on the Mortgage Loans even
if permitted by law.
In addition to anti-deficiency and related legislation, numerous other
federal and state statutory provisions, including the United States Bankruptcy
Code, 11 U.S.C. Sections 101 et seq. (the "BANKRUPTCY CODE"), and state laws
affording relief to debtors may interfere with or affect the ability of a
secured mortgage lender to obtain payment of a mortgage loan, to realize upon
collateral and/or enforce a deficiency judgment. For example, under the
Bankruptcy Code, virtually all actions (including foreclosure actions and
deficiency judgment proceedings) are automatically stayed upon the filing of a
bankruptcy petition, and, usually, no interest or principal payments are made
during the course of the bankruptcy case. Foreclosure of an interest in real
property of a debtor in a case under the Bankruptcy Code can typically occur
only if the bankruptcy court vacates the stay, an action, the court may be
reluctant to take, particularly if the debtor has the prospect of
restructuring his or her debts and the mortgage collateral is not
deteriorating in value. The delay and the consequences thereof caused by such
automatic stay can be significant. Also, under the Bankruptcy Code, the filing
of a petition in bankruptcy by or on behalf of a junior lienor (a subordinate
lender secured by a mortgage on the property) may stay a senior lender from
taking action to foreclose.
56
<PAGE>
A homeowner may file for relief under the Bankruptcy Code under any of three
different chapters of the Bankruptcy Code. Under Chapter 7, the assets of the
debtor are liquidated and a lender secured by a lien may "bid in" (i.e., bid
up to the amount of the debt) at the sale of the asset. See "--Foreclosure." A
homeowner may also file for relief under Chapter 11 of the Bankruptcy Code and
reorganize his or her debts through his or her reorganization plan.
Alternatively, a homeowner may file for relief under Chapter 13 of the
Bankruptcy Code and address his or her debts in a rehabilitation plan.
(Chapter 13 is often referred to as the "wage earner chapter" or "consumer
chapter" because most individuals seeking to restructure their debts file for
relief under Chapter 13 rather than Chapter 11).
The Bankruptcy Code permits a mortgage loan that is secured by property that
does not consist solely of the debtor's principal residence to be modified
without the consent of the lender provided certain substantive and procedural
safeguards are met. Under the Bankruptcy Code, the lender's security interest
may be reduced to the then-current value of the property as determined by the
court if the value is less than the amount due on the loan, thereby leaving
the lender as a general unsecured creditor for the difference between the
value of the collateral and the outstanding balance of the mortgage loan. A
borrower's unsecured indebtedness will typically be discharged in full upon
payment of a substantially reduced amount. Other modifications to a mortgage
loan may include a reduction in the amount of each scheduled payment, which
reduction may result from a reduction in the rate of interest, an alteration
of the repayment schedule, an extension of the final maturity date, and/or a
reduction in the outstanding balance of the secured portion of the loan. In
certain circumstances, subject to the court's approval, a debtor in a case
under Chapter 11 of the Bankruptcy Code may have the power to grant liens
senior to the lien of a mortgage.
A reorganization plan under Chapter 11 and a rehabilitation plan under
Chapter 13 of the Bankruptcy Code may each allow a debtor to cure a default
with respect to a mortgage loan on such debtor's residence by paying
arrearages over a period of time and to deaccelerate and reinstate the
original mortgage loan payment schedule, even though the lender accelerated
the loan and a final judgment of foreclosure had been entered in state court
(provided no sale of the property had yet occurred) prior to the filing of the
debtor's petition under the Bankruptcy Code. Under a Chapter 13 plan, curing
of defaults must be accomplished within the five year maximum term permitted
for repayment plans, such term commencing when repayment plan becomes
effective, while defaults may be cured over a longer period of time under a
Chapter 11 plan of reorganization.
Generally, a repayment plan in a case under Chapter 13 and a plan of
reorganization under Chapter 11 may not modify the claim of a mortgage lender
if the borrower elects to retain the property, the property is the borrower's
principal residence and the property is the lender's only collateral. Certain
courts have allowed modifications when the mortgage loan is secured both by
the debtor's principal residence and by collateral that is not "inextricably
bound" to the real property, such as appliances, machinery, or furniture.
The general protection for mortgages secured only by the debtor's principal
residence is not applicable in a case under Chapter 13 if the last payment on
the original payment schedule is due before the final date for payment under
the debtor's Chapter 13 plan (which date could be up to five years after the
debtor emerges from bankruptcy). Under several recently decided cases, the
terms of such a loan can be modified in the manner described above. While
these decisions are contrary to the holding in a prior case by a senior
appellate court, it is possible that the later decisions will become the
accepted interpretation in view of the language of the applicable statutory
provision. If this interpretation is adopted by a court considering the
treatment in a Chapter 13 repayment plan of a Mortgage Loan, it is possible
that the Mortgage Loan could be modified.
State statutes and general principles of equity may also provide a mortgagor
with means to halt a foreclosure proceeding or sale and to force a
restructuring of a mortgage loan on terms a lender would not otherwise accept.
In a bankruptcy or similar proceeding of a mortgagor, action may be taken
seeking the recovery, as a preferential transfer or on other grounds, of any
payments made by the mortgagor under the related mortgage loan prior to the
bankruptcy or similar proceeding. Payments on long-term debt may be protected
from recovery as preferences if they are payments in the ordinary course of
business made on debts incurred in the ordinary course of business or if the
value of the collateral exceeds the debt at the time of payment. Whether any
particular payment would be protected depends upon the facts specific to a
particular transaction.
A trustee in bankruptcy, in some cases, may be entitled to collect its costs
and expenses in preserving or selling the mortgaged property ahead of a
payment to the lender. Moreover, the laws of certain states also give priority
to certain tax and mechanics
57
<PAGE>
liens over the lien of a mortgage. Under the Bankruptcy Code, if the court
finds that actions of the mortgagee have been unreasonable and inequitable,
the lien of the related mortgage may be subordinated to the claims of
unsecured creditors.
The National Bankruptcy Review Commission (the "BANKRUPTCY COMMISSION"), an
independent commission established under the Bankruptcy Reform Act of 1994 to
study issues and make recommendations relating to the Bankruptcy Code,
delivered its report to the President and Congress in October, 1997. The
Bankruptcy Commission recommended in its report that the Bankruptcy Code be
amended to treat any claim secured only by a junior lien on a borrower's
principal residence as unsecured to the extent that the amount of such claim
exceeds the appraised value of the mortgaged property at the date of
origination of the loan minus the value of all senior liens. If such a change
in the Bankruptcy Code were to be enacted, and if such change were to apply to
loans originated prior to enactment, a substantial number of the Mortgage
Loans in a Trust Estate could be treated, in whole or in part, as unsecured
debt in a case under Chapter 13 of the Bankruptcy Code. As a consequence,
borrowers who become Chapter 13 debtors could have substantially less
incentive to make arrangements for repayment of the Mortgage Loans, and there
is, accordingly, a significant risk that the recovery on such Mortgage Loans
would be materially less than the outstanding balance of such Mortgage Loans,
or that there could be no recovery.
The Bankruptcy Commission recommendation described was not incorporated in
bankruptcy reform legislation that was passed by the House of Representatives
in June, 1998. There can be no assurance, however, that such proposal would
not be enacted on other legislation.
Bankruptcy reform legislation being considered by the Senate would amend the
Bankruptcy Code (such amendment, the "TILA AMENDMENT") to authorize bankruptcy
court judges to disallow claims based on secured debt if the creditor failed
to comply with certain provisions of the federal Truth in Lending Act. As most
recently proposed, such provision would apply retroactively to secured debt
incurred by a debtor prior to the date of effectiveness of such legislation,
including the Mortgage Loans. The House bill does not include a comparable
provision as of the date hereof. If the TILA Amendment were to become law, a
violation of the Truth in Lending Act with respect to a Mortgage Loan could
result in a total loss with respect to such loan in a bankruptcy proceeding.
Any such violation would be a breach of representation and warranty of the
depositor, and the depositor would be obligated to repurchase such Mortgage
Loan as described herein.
Various proposals to amend the Bankruptcy Code in ways that could adversely
affect the value of the Mortgage Loans in a trust have been considered by
Congress, and more such proposed legislation may be considered in the future.
No assurance can be given that any particular proposal will or will not be
enacted into law, or that any provision so enacted will not differ materially
from the proposals described above.
The Code provides priority to certain tax liens over the lien of the
mortgage. In addition, substantive requirements are imposed upon mortgage
lenders in connection with the origination and the servicing of mortgage loans
by numerous federal and some state consumer protection laws. These laws
include the federal Trust-in-Lending Act, Real Estate Settlement Procedures
Act, Equal Credit Opportunity Act, Fair Credit Billing Act, Fair Credit
Reporting Act, and related statutes. These federal laws impose specific
statutory liabilities upon lenders who originate mortgage loans and who fail
to comply with the provisions of the applicable laws. In some cases, this
liability may affect assignees of the Mortgage Loans.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT AND SIMILAR LAWS
Generally, under the terms of the Soldiers' and Sailors' Civil Relief Act of
1940, as amended (the "RELIEF ACT"), a borrower who enters military service
after the origination of such borrower's Mortgage Loan (including a borrower
who is a member of the National Guard or is in reserve status at the time of
the origination of the Mortgage Loan and is later called to active duty) may
not be charged interest above an annual rate of 6% during the period of such
borrower's active duty status, unless a court orders otherwise upon
application of the lender. It is possible that such action could have an
effect, for an indeterminate period of time, on the ability of the Servicer to
collect full amounts of interest on certain of the Mortgage Loans in a Trust
Estate. Any shortfall in interest collections resulting from the application
of the Relief Act could result in losses to the holders of the Certificates of
the related Series. Further, the Relief Act imposes limitations which would
impair the ability of the Servicer to foreclose on an affected Mortgage Loan
during the borrower's period of active duty status. Thus, in the event that
such a Mortgage Loan goes into default, there may be delays and losses
occasioned by the inability to realize upon the Mortgaged Property in a timely
fashion. Certain states have enacted comparable legislation which may
interfere with or affect the ability of the Servicer to timely collect
payments
58
<PAGE>
of principal and interest on, or to foreclose on, Mortgage Loans of borrowers
in such states who are active or reserve members of the armed services.
ENVIRONMENTAL CONSIDERATIONS
A lender may be subject to unforeseen environmental risks when taking a
security interest in real or personal property. Property subject to such a
security interest may be subject to federal, state, and local laws and
regulations relating to environmental protection. Such laws may regulate,
among other things: emissions of air pollutants; discharges of wastewater or
storm water; generation, transport, storage or disposal of hazardous waste or
hazardous substances; operation, closure and removal of underground storage
tanks; removal and disposal of asbestos-containing materials; management of
electrical or other equipment containing polychlorinated biphenyls ("PCBS").
Failure to comply with such laws and regulations may result in significant
penalties, including civil and criminal fines. Under the laws of certain
states, environmental contamination on a property may give rise to a lien on
the property to ensure the availability and/or reimbursement of cleanup costs.
Generally all subsequent liens on such property are subordinated to such a
lien and, in some states, even prior recorded liens are subordinated to such
liens ("SUPERLIENS"). In the latter states, the security interest of the
Trustee in a property that is subject to such a Superlien could be adversely
affected.
Under the federal Comprehensive Environmental Response, Compensation and
Liability Act, as amended ("CERCLA"), and under state law in certain states, a
secured party which takes a deed in lieu of foreclosure, purchases a mortgaged
property at a foreclosure sale, operates a mortgaged property or undertakes
certain types of activities that may constitute management of the mortgaged
property may become liable in certain circumstances for the costs of remedial
action ("CLEANUP COSTS") if hazardous wastes or hazardous substances have been
released or disposed of on the property. Such Cleanup Costs may be substantial
and could exceed the value of the property and the aggregate assets of the
owner or operator. CERCLA imposes strict, as well as joint and several
liability for environmental remediation and/or damage costs on several classes
of "potentially responsible parties," including current "owners and/or
operators" of property, irrespective of whether those owners or operators
caused or contributed to contamination on the property. In addition, owners
and operators of properties that generate hazardous substances that are
disposed of at other "off-site" locations may held strictly, jointly and
severally liable for environmental remediation and/or damages at those off-
site locations. Many states also have laws that are similar to CERCLA.
Liability under CERCLA or under similar state law could exceed the value of
the property itself as well as the aggregate assets of the property owner.
The law is unclear as to whether and under what precise circumstances
cleanup costs, or the obligation to take remedial actions, could be imposed on
a secured lender such as the Trust Estate. Under the laws of some states and
under CERCLA, a lender may be liable as an "owner or operator" for costs of
addressing releases or threatened releases of hazardous substances on a
mortgaged property if such lender or its agents or employees have
"participated in the management" of the operations of the borrower, even
though the environmental damage or threat was caused by a prior owner or
current owner or operator or other third party. Excluded from CERCLA's
definition of "owner or operator," is a person "who without participating in
the management of . . . [the] facility, holds indicia of ownership primarily
to protect his security interest" (the "secured-creditor exemption"). This
exemption for holders of a security interest such as a secured lender applies
only to the extent that a lender seeks to protect its security interest in the
contaminated facility or property. Thus, if a lender's activities begin to
encroach on the actual management of such facility or property, the lender
faces potential liability as an "owner or operator" under CERCLA. Similarly,
when a lender forecloses and takes title to a contaminated facility or
property, the lender may incur potential CERCLA liability in various
circumstances including, among others, when it holds the facility or property
as an investment (including leasing the facility or property to a third
party), fails to market the property in a timely fashion or fails to properly
address environmental conditions at the property or facility.
The Resource Conservation and Recovery Act, as amended ("RCRA"), contains a
similar secured-creditor exemption for those lenders who hold a security
interest in a petroleum underground storage tank ("UST") or in real estate
containing a UST, or that acquire title to a petroleum UST or facility or
property on which such a UST is located. As under CERCLA, a lender may lose
its secured-creditor exemption and be held liable under RCRA as a UST owner or
operator if such lender or its employees or agents participate in the
management of the UST. In addition, if the lender takes title to or possession
of the UST or the real estate containing the UST, under certain circumstances
the secured-creditor exemption may be deemed to be unavailable.
59
<PAGE>
A decision in May 1990 of the United States Court of Appeals for the
Eleventh Circuit in United States v. Fleet Factors Corp. very narrowly
construed CERCLA's secured-creditor exemption. The court's opinion suggested
that a lender need not have involved itself in the day-to-day operations of
the facility or participated in decisions relating to hazardous waste to be
liable under CERCLA, rather, liability could attach to a lender if its
involvement with the management of the facility were broad enough to support
the inference that the lender had the capacity to influence the borrower's
treatment of hazardous waste. The court added that a lender's capacity to
influence such decisions could be inferred from the extent of its involvement
in the facility's financial management. A subsequent decision by the United
States Court of Appeals for the Ninth Circuit in In re Bergsoe Metal Corp.,
apparently disagreeing with, but not expressly contradicting, the Fleet
Factors court, held that a secured lender had no liability absent "some actual
management of the facility" on the part of the lender.
Court decisions have taken varying views of the scope of the secured-
creditor exemption, leading to administrative and legislative efforts to
provide guidance to lenders on the scope of activities that would trigger
CERCLA and/or RCRA liability. Until recently, these efforts have failed to
provide substantial guidance.
On September 30, 1996, however, the President signed into law the Asset
Conservation Lender Liability and Deposit Insurance Protection Act of 1996
(the "ASSET CONSERVATION ACT"). The Asset Conservation Act was intended to
clarify the scope of the secured-creditor exemption under both CERCLA and
RCRA. The Asset Conservation Act more explicitly defined the kinds of
"participation in management" that would trigger liability under CERCLA and
specified certain activities that would not constitute "participation in
management" or otherwise result in a forfeiture of the secured-creditor
exemption prior to foreclosure or during a workout period. The Asset
Conservation Act also clarified the extent of protection against liability
under CERCLA in the event of foreclosure and authorized certain regulatory
clarifications of the scope of the secured-creditor exemption for purposes of
RCRA, similar to the statutory protections under CERCLA. However, since the
courts have not yet had the opportunity to interpret the new statutory
provisions, the scope of the additional protections offered by the Asset
Conservation Act is not fully defined. It also is important to note that the
Asset Conservation Act does not offer complete protection to lenders and that
the risk of liability remains.
If a secured lender does become liable, it may be entitled to bring an
action for contribution against the owner or operator who created the
environmental contamination or against some other liable party, but that
person or entity may be bankrupt or otherwise judgment-proof. It is therefore
possible that cleanup or other environmental liability costs could become a
liability of the Trust Estate and occasion a loss to the Trust Estate and to
Certificateholders in certain circumstances. The new secured creditor
amendments to CERCLA, also, would not necessarily affect the potential for
liability in actions by either a state or a private party under other federal
or state laws which may impose liability on "owners or operators" but do not
incorporate the secured-creditor exemption.
Traditionally, residential mortgage lenders have not taken steps to evaluate
whether hazardous wastes or hazardous substances are present with respect to
any mortgaged property prior to the origination of the mortgage loan or prior
to foreclosure or accepting a deed-in-lieu of foreclosure. Accordingly,
neither the Seller, Norwest Mortgage nor Norwest Funding has made such
evaluations prior to the origination of the Mortgage Loans, nor does Norwest
Mortgage or Norwest Funding require that such evaluations be made by
originators who have sold the Mortgage Loans to Norwest Mortgage. Neither the
Seller nor Norwest Mortgage is required to undertake any such evaluations
prior to foreclosure or accepting a deed-in-lieu of foreclosure. Neither the
Seller nor the Master Servicer makes any representations or warranties or
assumes any liability with respect to: the environmental condition of such
Mortgaged Property; the absence, presence or effect of hazardous wastes or
hazardous substances on any Mortgaged Property; any casualty resulting from
the presence or effect of hazardous wastes or hazardous substances on, near or
emanating from such Mortgaged Property; the impact on Certificateholders of
any environmental condition or presence of any substance on or near such
Mortgaged Property; or the compliance of any Mortgaged Property with any
environmental laws, nor is any agent, person or entity otherwise affiliated
with the Seller authorized or able to make any such representation, warranty
or assumption of liability relative to any such Mortgaged Property. See
"Mortgage Loan Programs--Representations and Warranties" and "Servicing of the
Mortgage Loans--Enforcement of Due-on-Sale Clauses; Realization Upon Defaulted
Mortgage Loans" above.
"DUE-ON-SALE" CLAUSES
The forms of note, mortgage and deed of trust relating to conventional
Mortgage Loans may contain a "due-on-sale" clause permitting acceleration of
the maturity of a loan if the borrower transfers its interest in the property.
In recent years, court decisions
60
<PAGE>
and legislative actions placed substantial restrictions on the right of
lenders to enforce such clauses in many states. However, effective October 15,
1982, Congress enacted the Garn-St Germain Depository Institutions Act of 1982
(the "GARN ACT") which purports to preempt state laws which prohibit the
enforcement of "due-on-sale" clauses by providing among other matters, that
"due-on-sale" clauses in certain loans (which loans may include the Mortgage
Loans) made after the effective date of the Garn Act are enforceable, within
certain limitations as set forth in the Garn Act and the regulations
promulgated thereunder. "Due-on-sale" clauses contained in mortgage loans
originated by federal savings and loan associations or federal savings banks
are fully enforceable pursuant to regulations of the Office of Thrift
Supervision ("OTS"), as successor to the Federal Home Loan Bank Board
("FHLBB"), which preempt state law restrictions on the enforcement of such
clauses. Similarly, "due-on-sale" clauses in mortgage loans made by national
banks and federal credit unions are now fully enforceable pursuant to
preemptive regulations of the Comptroller of the Currency and the National
Credit Union Administration, respectively.
The Garn Act created a limited exemption from its general rule of
enforceability for "due-on-sale" clauses in certain mortgage loans ("WINDOW
PERIOD LOANS") which were originated by non-federal lenders and made or
assumed in certain states ("WINDOW PERIOD STATES") during the period, prior to
October 15, 1982, in which that state prohibited the enforcement of "due-on-
sale" clauses by constitutional provision, statute or statewide court decision
(the "WINDOW PERIOD"). Though neither the Garn Act nor the OTS regulations
actually names the Window Period States, FHLMC has taken the position, in
prescribing mortgage loan servicing standards with respect to mortgage loans
which it has purchased, that the Window Period States were: Arizona, Arkansas,
California, Colorado, Georgia, Iowa, Michigan, Minnesota, New Mexico, Utah and
Washington. Under the Garn Act, unless a Window Period State took action by
October 15, 1985, the end of the Window Period, to further regulate
enforcement of "due-on-sale" clauses in Window Period Loans, "due-on-sale"
clauses would become enforceable even in Window Period Loans. Five of the
Window Period States (Arizona, Minnesota, Michigan, New Mexico and Utah) have
taken actions which restrict the enforceability of "due-on-sale" clauses in
Window Period Loans beyond October 15, 1985. The actions taken vary among such
states.
By virtue of the Garn Act, a Servicer may generally be permitted to
accelerate any conventional Mortgage Loan which contains a "due-on-sale"
clause upon transfer of an interest in the property subject to the mortgage or
deed of trust. With respect to any Mortgage Loan secured by a residence
occupied or to be occupied by the borrower, this ability to accelerate will
not apply to certain types of transfers, including (i) the granting of a
leasehold interest which has a term of three years or less and which does not
contain an option to purchase, (ii) a transfer to a relative resulting from
the death of a borrower, or a transfer where the spouse or children become an
owner of the property in each case where the transferee(s) will occupy the
property, (iii) a transfer resulting from a decree of dissolution of marriage,
legal separation agreement or from an incidental property settlement agreement
by which the spouse becomes an owner of the property, (iv) the creation of a
lien or other encumbrance subordinate to the lender's security instrument
which does not relate to a transfer of rights of occupancy in the property
(provided that such lien or encumbrance is not created pursuant to a contract
for deed), (v) a transfer by devise, descent or operation of law on the death
of a joint tenant or tenant by the entirety, (vi) a transfer into an inter
vivos trust in which the borrower is the beneficiary and which does not relate
to a transfer of rights of occupancy; and (vii) other transfers as set forth
in the Garn Act and the regulations thereunder. The extent of the effect of
the Garn Act on the average lives and delinquency rates of the Mortgage Loans
cannot be predicted. See "Prepayment and Yield Considerations."
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control Act
of 1980, enacted in March 1980 ("TITLE V"), provides that state usury
limitations shall not apply to certain types of residential first mortgage
loans originated by certain lenders after March 31, 1980. The OTS as successor
to the FHLBB is authorized to issue rules and regulations and to publish
interpretations governing implementation of Title V. The statute authorized
any state to reimpose interest rate limits by adopting before April 1, 1983, a
law or constitutional provision which expressly rejects application of the
federal law. Fifteen states have adopted laws reimposing or reserving the
right to reimpose interest rate limits. In addition, even where Title V is not
so rejected, any state is authorized to adopt a provision limiting certain
other loan charges.
The Seller will represent and warrant in the Pooling and Servicing Agreement
to the Trustee for the benefit of Certificateholders that all Mortgage Loans
are originated in full compliance with applicable state laws, including usury
laws. See "The Pooling and Servicing Agreement--Assignment of Mortgage Loans
to the Trustee."
61
<PAGE>
ENFORCEABILITY OF CERTAIN PROVISIONS
Standard forms of note, mortgage and deed of trust generally contain
provisions obligating the borrower to pay a late charge if payments are not
timely made and in some circumstances may provide for prepayment fees or
penalties if the obligation is paid prior to maturity. In certain states,
there are or may be specific limitations upon late charges which a lender may
collect from a borrower for delinquent payments. Certain states also limit the
amounts that a lender may collect from a borrower as an additional charge if
the loan is prepaid. Under the Pooling and Servicing Agreement, late charges
and prepayment fees (to the extent permitted by law and not waived by the
Servicer) will be retained by the Servicer as additional servicing
compensation.
Courts have imposed general equitable principles upon foreclosure. These
equitable principles are generally designed to relieve the borrower from the
legal effect of defaults under the loan documents. Examples of judicial
remedies that may be fashioned include judicial requirements that the lender
undertake affirmative and expensive actions to determine the causes for the
borrower's default and the likelihood that the borrower will be able to
reinstate the loan. In some cases, courts have substituted their judgment for
the lender's judgment and have required lenders to reinstate loans or recast
payment schedules to accommodate borrowers who are suffering from temporary
financial disability. In some cases, courts have limited the right of lenders
to foreclose if the default under the mortgage instrument is not monetary,
such as the borrower failing to adequately maintain the property or the
borrower executing a second mortgage or deed of trust affecting the property.
In other cases, some courts have been faced with the issue of whether federal
or state constitutional provisions reflecting due process concerns for
adequate notice require that borrowers under the deeds of trust receive
notices in addition to the statutorily-prescribed minimum requirements. For
the most part, these cases have upheld the notice provisions as being
reasonable or have found that the sale by a trustee under a deed of trust or
under a mortgage having a power of sale does not involve sufficient state
action to afford constitutional protections to the borrower.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following general discussion represents the opinion of Cadwalader,
Wickersham & Taft as to the anticipated material federal income tax
consequences of the purchase, ownership and disposition of Certificates. The
discussion below does not purport to address all federal income tax
consequences that may be applicable to particular categories of investors,
some of which may be subject to special rules. The authorities on which this
discussion is based are subject to change or differing interpretations, and
any such change or interpretation could apply retroactively. This discussion
reflects the applicable provisions of the Code, as well as regulations (the
"REMIC REGULATIONS") promulgated by the U.S. Department of the Treasury.
Investors should consult their own tax advisors in determining the federal,
state, local and any other tax consequences to them of the purchase, ownership
and disposition of Certificates.
For purposes of this discussion, where the applicable Prospectus Supplement
provides for a Fixed Retained Yield with respect to the Mortgage Loans of a
Series of Certificates, references to the Mortgage Loans will be deemed to
refer to that portion of the Mortgage Loans held by the Trust Estate that does
not include the Fixed Retained Yield. References to a "HOLDER" or
"CERTIFICATEHOLDER" in this discussion generally mean the beneficial owner of
a Certificate.
FEDERAL INCOME TAX CONSEQUENCES FOR REMIC CERTIFICATES
GENERAL
With respect to a particular Series of Certificates, an election may be made
to treat the Trust Estate or one or more segregated pools of assets therein as
one or more REMICs within the meaning of Code Section 860D. A Trust Estate or
a portion or portions thereof as to which one or more REMIC elections will be
made will be referred to as a "REMIC POOL." For purposes of this discussion,
Certificates of a Series as to which one or more REMIC elections are made are
referred to as "REMIC CERTIFICATES" and will consist of one or more Classes of
"REGULAR CERTIFICATES" and one Class of "RESIDUAL CERTIFICATES" in the case of
each REMIC Pool. Qualification as a REMIC requires ongoing compliance with
certain conditions. With respect to each Series of REMIC Certificates,
Cadwalader, Wickersham & Taft, counsel to the Seller, has advised the Seller
that in the firm's opinion, assuming (i) the making of an appropriate
election, (ii) compliance with the Pooling and Servicing Agreement, and (iii)
compliance with any changes in the law, including any amendments to the Code
or applicable Treasury regulations thereunder, each REMIC
62
<PAGE>
Pool will qualify as a REMIC. In such case, the Regular Certificates will be
considered to be "regular interests" in the REMIC Pool and generally will be
treated for federal income tax purposes as if they were newly originated debt
instruments, and the Residual Certificates will be considered to be "residual
interests" in the REMIC Pool. The Prospectus Supplement for each Series of
Certificates will indicate whether one or more REMIC elections with respect to
the related Trust Estate will be made, in which event references to "REMIC" or
"REMIC POOL" herein shall be deemed to refer to each such REMIC Pool.
STATUS OF REMIC CERTIFICATES
REMIC Certificates held by a domestic building and loan association will
constitute "a regular or residual interest in a REMIC" within the meaning of
Code Section 7701(a)(19)(C)(xi) in the same proportion that the assets of the
REMIC Pool would be treated as "loans . . . secured by an interest in real
property which is . . . residential real property" within the meaning of Code
Section 7701(a)(19)(C)(v) or as other assets described in Code Section
7701(a)(19)(C). REMIC Certificates held by a real estate investment trust will
constitute "real estate assets" within the meaning of Code Section
856(c)(4)(A), and interest on the Regular Certificates and income with respect
to Residual Certificates will be considered "interest on obligations secured
by mortgages on real property or on interests in real property" within the
meaning of Code Section 856(c)(3)(B) in the same proportion that, for both
purposes, the assets of the REMIC Pool would be so treated. If at all times
95% or more of the assets of the REMIC Pool qualify for each of the foregoing
treatments, the REMIC Certificates will qualify for the corresponding status
in their entirety. For purposes of Code Section 856(c)(4)(A), payments of
principal and interest on the Mortgage Loans that are reinvested pending
distribution to holders of REMIC Certificates qualify for such treatment.
Where two REMIC Pools are a part of a tiered structure they will be treated as
one REMIC for purposes of the tests described above respecting asset ownership
of more or less than 95%. In addition, if the assets of the REMIC include Buy-
Down Loans, it is possible that the percentage of such assets constituting
"loans . . . secured by an interest in real property which is . . .
residential real property" for purposes of Code Section 7701(a)(19)(C)(v) may
be required to be reduced by the amount of the related Buy-Down Funds. Regular
Certificates will represent "qualified mortgages," within the meaning of Code
Section 860G(a)(3), for other REMICs and "permitted assets," within the
meaning of Code Section 860L(c), for financial asset securitization investment
trusts. REMIC Certificates held by a regulated investment company will not
constitute "GOVERNMENT SECURITIES" within the meaning of Code Section
851(b)(3)(A)(i). REMIC Certificates held by certain financial institutions
will constitute an "evidence of indebtedness" within the meaning of Code
Section 582(c)(1). The Small Business Job Protection Act of 1996 (the "SBJPA
OF 1996") repealed the reserve method for bad debts of domestic building and
loan associations and mutual savings banks, and thus has eliminated the asset
category of "qualifying real property loans" in former Code Section 593(d) for
taxable years beginning after December 31, 1995. The requirement in the SBJPA
of 1996 that such institutions must "recapture" a portion of their existing
bad debt reserves is suspended if a certain portion of their assets are
maintained in "residential loans" under Code Section 7701(a)(19)(C)(v), but
only if such loans were made to acquire, construct or improve the related real
property and not for the purpose of refinancing. However, no effort will be
made to identify the portion of the Mortgage Loans of any Series meeting this
requirement, and no representation is made in this regard.
QUALIFICATION AS A REMIC
In order for the REMIC Pool to qualify as a REMIC, there must be ongoing
compliance on the part of the REMIC Pool with the requirements set forth in
the Code. The REMIC Pool must fulfill an asset test, which requires that no
more than a de minimis portion of the assets of the REMIC Pool, as of the
close of the third calendar month beginning after the "STARTUP DAY" (which for
purposes of this discussion is the date of issuance of the REMIC Certificates)
and at all times thereafter, may consist of assets other than "qualified
mortgages" and "permitted investments." The REMIC Regulations provide a safe
harbor pursuant to which the de minimis requirement will be met if at all
times the aggregate adjusted basis of the nonqualified assets is less than 1%
of the aggregate adjusted basis of all the REMIC Pool's assets. An entity that
fails to meet the safe harbor may nevertheless demonstrate that it holds no
more than a de minimis amount of nonqualified assets. A REMIC Pool also must
provide "reasonable arrangements" to prevent its residual interests from being
held by "disqualified organizations" or agents thereof and must furnish
applicable tax information to transferors or agents that violate this
requirement. See "--Taxation of Residual Certificates--Tax-Related
Restrictions on Transfer of Residual Certificates--Disqualified
Organizations."
A qualified mortgage is any obligation that is principally secured by an
interest in real property and that is either transferred to the REMIC Pool on
the Startup Day or is purchased by the REMIC Pool within a three-month period
thereafter pursuant to a fixed price contract in effect on the Startup Day.
Qualified mortgages include whole mortgage loans, such as the Mortgage Loans,
and, generally, certificates of beneficial interest in a grantor trust that
holds mortgage loans and regular interests in another REMIC,
63
<PAGE>
such as lower-tier regular interests in a tiered REMIC. The REMIC Regulations
specify that loans secured by timeshare interests and shares held by a tenant
stockholder in a cooperative housing corporation can be qualified mortgages. A
qualified mortgage includes a qualified replacement mortgage, which is any
property that would have been treated as a qualified mortgage if it were
transferred to the REMIC Pool on the Startup Day and that is received either
(i) in exchange for any qualified mortgage within a three-month period
thereafter or (ii) in exchange for a "defective obligation" within a two-year
period thereafter. A "defective obligation" includes (i) a mortgage in default
or as to which default is reasonably foreseeable, (ii) a mortgage as to which
a customary representation or warranty made at the time of transfer to the
REMIC Pool has been breached, (iii) a mortgage that was fraudulently procured
by the mortgagor, and (iv) a mortgage that was not in fact principally secured
by real property (but only if such mortgage is disposed of within 90 days of
discovery). A Mortgage Loan that is "defective" as described in clause (iv)
that is not sold or, if within two years of the Startup Day, exchanged, within
90 days of discovery, ceases to be a qualified mortgage after such 90-day
period.
Permitted investments include cash flow investments, qualified reserve
assets, and foreclosure property. A cash flow investment is an investment,
earning a return in the nature of interest, of amounts received on or with
respect to qualified mortgages for a temporary period, not exceeding 13
months, until the next scheduled distribution to holders of interests in the
REMIC Pool. A qualified reserve asset is any intangible property held for
investment that is part of any reasonably required reserve maintained by the
REMIC Pool to provide for payments of expenses of the REMIC Pool or amounts
due on the regular or residual interests in the event of defaults (including
delinquencies) on the qualified mortgages, lower than expected reinvestment
returns, prepayment interest shortfalls and certain other contingencies. The
reserve fund will be disqualified if more than 30% of the gross income from
the assets in such fund for the year is derived from the sale or other
disposition of property held for less than three months, unless required to
prevent a default on the regular interests caused by a default on one or more
qualified mortgages. A reserve fund must be reduced "promptly and
appropriately" as payments on the Mortgage Loans are received. Foreclosure
property is real property acquired by the REMIC Pool in connection with the
default or imminent default of a qualified mortgage and generally not held
beyond the close of the third calendar year following the year in which such
property is acquired with an extension that may be granted by the Internal
Revenue Service.
In addition to the foregoing requirements, the various interests in a REMIC
Pool also must meet certain requirements. All of the interests in a REMIC Pool
must be either of the following: (i) one or more classes of regular interests
or (ii) a single class of residual interests on which distributions, if any,
are made pro rata. A regular interest is an interest in a REMIC Pool that is
issued on the Startup Day with fixed terms, is designated as a regular
interest, and unconditionally entitles the holder to receive a specified
principal amount (or other similar amount), and provides that interest
payments (or other similar amounts), if any, at or before maturity either are
payable based on a fixed rate or a qualified variable rate, or consist of a
specified, nonvarying portion of the interest payments on qualified mortgages.
Such a specified portion may consist of a fixed number of basis points, a
fixed percentage of the total interest, or a qualified variable rate, inverse
variable rate or difference between two fixed or qualified variable rates on
some or all of the qualified mortgages. The specified principal amount of a
regular interest that provides for interest payments consisting of a
specified, nonvarying portion of interest payments on qualified mortgages may
be zero. A residual interest is an interest in a REMIC Pool other than a
regular interest that is issued on the Startup Day and that is designated as a
residual interest. An interest in a REMIC Pool may be treated as a regular
interest even if payments of principal with respect to such interest are
subordinated to payments on other regular interests or the residual interest
in the REMIC Pool, and are dependent on the absence of defaults or
delinquencies on qualified mortgages or permitted investments, lower than
reasonably expected returns on permitted investments, unanticipated expenses
incurred by the REMIC Pool or prepayment interest shortfalls. Accordingly, the
Regular Certificates of a Series will constitute one or more classes of
regular interests, and the Residual Certificates with respect to that Series
will constitute a single class of residual interests on which distributions
are made pro rata.
If an entity, such as the REMIC Pool, fails to comply with one or more of
the ongoing requirements of the Code for REMIC status during any taxable year,
the Code provides that the entity will not be treated as a REMIC for such year
and thereafter. In this event, an entity with multiple classes of ownership
interests may be treated as a separate association taxable as a corporation
under Treasury regulations, and the Regular Certificates may be treated as
equity interests therein. The Code, however, authorizes the Treasury
Department to issue regulations that address situations where failure to meet
one or more of the requirements for REMIC status occurs inadvertently and in
good faith, and disqualification of the REMIC Pool would occur absent
regulatory relief. Investors should be aware, however, that the Conference
Committee Report to the Tax Reform Act of 1986 (the "1986 ACT")
64
<PAGE>
indicates that the relief may be accompanied by sanctions, such as the
imposition of a corporate tax on all or a portion of the REMIC Pool's income
for the period of time in which the requirements for REMIC status are not
satisfied.
TAXATION OF REGULAR CERTIFICATES
General
In general, interest, original issue discount, and market discount on a
Regular Certificate will be treated as ordinary income to a holder of the
Regular Certificate (the "REGULAR CERTIFICATEHOLDER"), and principal payments
on a Regular Certificate will be treated as a return of capital to the extent
of the Regular Certificateholder's basis in the Regular Certificate allocable
thereto. Regular Certificateholders must use the accrual method of accounting
with regard to Regular Certificates, regardless of the method of accounting
otherwise used by such Regular Certificateholders.
Original Issue Discount
Compound Interest Certificates will be, and other classes of Regular
Certificates may be, issued with "original issue discount" within the meaning
of Code Section 1273(a). Holders of any Class or Subclass of Regular
Certificates having original issue discount generally must include original
issue discount in ordinary income for federal income tax purposes as it
accrues, in accordance with a constant interest method that takes into account
the compounding of interest, in advance of receipt of the cash attributable to
such income. The following discussion is based in part on temporary and final
Treasury regulations issued on February 2, 1994, as amended on June 14, 1996,
(the "OID REGULATIONS") under Code Sections 1271 through 1273 and 1275 and in
part on the provisions of the 1986 Act. Regular Certificateholders should be
aware, however, that the OID Regulations do not adequately address certain
issues relevant to prepayable securities, such as the Regular Certificates. To
the extent such issues are not addressed in such regulations, the Seller
intends to apply the methodology described in the Conference Committee Report
to the 1986 Act. No assurance can be provided that the Internal Revenue
Service will not take a different position as to those matters not currently
addressed by the OID Regulations. Moreover, the OID Regulations include an
anti-abuse rule allowing the Internal Revenue Service to apply or depart from
the OID Regulations where necessary or appropriate to ensure a reasonable tax
result in light of the applicable statutory provisions. A tax result will not
be considered unreasonable under the anti-abuse rule in the absence of a
substantial effect on the present value of a taxpayer's tax liability.
Investors are advised to consult their own tax advisors as to the discussion
herein and the appropriate method for reporting interest and original issue
discount with respect to the Regular Certificates.
Each Regular Certificate (except to the extent described below with respect
to a Regular Certificate on which principal is distributed in a single
installment or by lots of specified principal amounts upon the request of a
Certificateholder or by random lot (a "NON-PRO RATA CERTIFICATE")) will be
treated as a single installment obligation for purposes of determining the
original issue discount includible in a Regular Certificateholder's income.
The total amount of original issue discount on a Regular Certificate is the
excess of the "stated redemption price at maturity" of the Regular Certificate
over its "issue price." The issue price of a Class of Regular Certificates
offered pursuant to this Prospectus generally is the first price at which a
substantial amount of such Class is sold to the public (excluding bond houses,
brokers and underwriters). Although unclear under the OID Regulations, the
Seller intends to treat the issue price of a Class as to which there is no
substantial sale as of the issue date or that is retained by the Seller as the
fair market value of that Class as of the issue date. The issue price of a
Regular Certificate also includes any amount paid by an initial Regular
Certificateholder for accrued interest that relates to a period prior to the
issue date of the Regular Certificate, unless the Regular Certificateholder
elects on its federal income tax return to exclude such amount from the issue
price and to recover it on the first Distribution Date. The stated redemption
price at maturity of a Regular Certificate always includes the original
principal amount of the Regular Certificate, but generally will not include
distributions of interest if such distributions constitute "qualified stated
interest." Under the OID Regulations, qualified stated interest generally
means interest payable at a single fixed rate or a qualified variable rate (as
described below) provided that such interest payments are unconditionally
payable at intervals of one year or less during the entire term of the Regular
Certificate. Because there is no penalty or default remedy in the case of
nonpayment of interest with respect to a Regular Certificate, it is possible
that no interest on any Class of Regular Certificates will be treated as
qualified stated interest. However, except as provided in the following three
sentences or in the applicable Prospectus Supplement, because the underlying
Mortgage Loans provide for remedies in the event of default, the Seller
intends to treat interest with respect to the Regular Certificates as
qualified stated interest. Distributions of interest on a Compound Interest
Certificate, or on other Regular Certificates with respect to which deferred
interest will accrue, will not constitute qualified
65
<PAGE>
stated interest, in which case the stated redemption price at maturity of such
Regular Certificates includes all distributions of interest as well as
principal thereon. Likewise, the Seller intends to treat an interest-only
Class or a Class on which interest is substantially disproportionate to its
principal amount (a so-called "super-premium" Class) as having no qualified
stated interest. Where the interval between the issue date and the first
Distribution Date on a Regular Certificate is shorter than the interval
between subsequent Distribution Dates, the interest attributable to the
additional days will be included in the stated redemption price at maturity.
Under a de minimis rule, original issue discount on a Regular Certificate
will be considered to be zero if such original issue discount is less than
0.25% of the stated redemption price at maturity of the Regular Certificate
multiplied by the weighted average maturity of the Regular Certificate. For
this purpose, the weighted average maturity of the Regular Certificate is
computed as the sum of the amounts determined by multiplying the number of
full years (i.e., rounding down partial years) from the issue date until each
distribution in reduction of stated redemption price at maturity is scheduled
to be made by a fraction, the numerator of which is the amount of each
distribution included in the stated redemption price at maturity of the
Regular Certificate and the denominator of which is the stated redemption
price at maturity of the Regular Certificate. The Conference Committee Report
to the 1986 Act provides that the schedule of such distributions should be
determined in accordance with the assumed rate of prepayment of the Mortgage
Loans (the "PREPAYMENT ASSUMPTION") and the anticipated reinvestment rate, if
any, relating to the Regular Certificates. The Prepayment Assumption with
respect to a Series of Regular Certificates will be set forth in the
applicable Prospectus Supplement. Holders generally must report de minimis
original issue discount pro rata as principal payments are received, and such
income will be capital gain if the Regular Certificate is held as a capital
asset. Under the OID Regulations, however, Regular Certificateholders may
elect to accrue all de minimis original issue discount as well as market
discount and market premium, under the constant yield method. See "--Election
to Treat All Interest Under the Constant Yield Method."
A Regular Certificateholder generally must include in gross income for any
taxable year the sum of the "daily portions," as defined below, of the
original issue discount on the Regular Certificate accrued during an accrual
period for each day on which it holds the Regular Certificate, including the
date of purchase but excluding the date of disposition. The Seller will treat
the monthly period ending on the day before each Distribution Date as the
accrual period. With respect to each Regular Certificate, a calculation will
be made of the original issue discount that accrues during each successive
full accrual period (or shorter period from the date of original issue) that
ends on the day before the related Distribution Date on the Regular
Certificate. The Conference Committee Report to the 1986 Act states that the
rate of accrual of original issue discount is intended to be based on the
Prepayment Assumption. Other than as discussed below with respect to a Non-Pro
Rata Certificate, the original issue discount accruing in a full accrual
period would be the excess, if any, of (i) the sum of (a) the present value of
all of the remaining distributions to be made on the Regular Certificate as of
the end of that accrual period, and (b) the distributions made on the Regular
Certificate during the accrual period that are included in the Regular
Certificate's stated redemption price at maturity, over (ii) the adjusted
issue price of the Regular Certificate at the beginning of the accrual period.
The present value of the remaining distributions referred to in the preceding
sentence is calculated based on (i) the yield to maturity of the Regular
Certificate at the issue date, (ii) events (including actual prepayments) that
have occurred prior to the end of the accrual period, and (iii) the Prepayment
Assumption. For these purposes, the adjusted issue price of a Regular
Certificate at the beginning of any accrual period equals the issue price of
the Regular Certificate, increased by the aggregate amount of original issue
discount with respect to the Regular Certificate that accrued in all prior
accrual periods and reduced by the amount of distributions included in the
Regular Certificate's stated redemption price at maturity that were made on
the Regular Certificate in such prior periods. The original issue discount
accruing during any accrual period (as determined in this paragraph) will then
be divided by the number of days in the period to determine the daily portion
of original issue discount for each day in the period. With respect to an
initial accrual period shorter than a full accrual period, the daily portions
of original issue discount must be determined according to an appropriate
allocation under any reasonable method.
Under the method described above, the daily portions of original issue
discount required to be included in income by a Regular Certificateholder
generally will increase to take into account prepayments on the Regular
Certificates as a result of prepayments on the Mortgage Loans that exceed the
Prepayment Assumption, and generally will decrease (but not below zero for any
period) if the prepayments are slower than the Prepayment Assumption. An
increase in prepayments on the Mortgage Loans with respect to a Series of
Regular Certificates can result in both a change in the priority of principal
payments with respect to certain Classes of Regular Certificates and either an
increase or decrease in the daily portions of original issue discount with
respect to such Regular Certificates.
66
<PAGE>
In the case of a Non-Pro Rata Certificate, the Seller intends to determine
the yield to maturity of such Certificate based upon the anticipated payment
characteristics of the Class as a whole under the Prepayment Assumption. In
general, the original issue discount accruing on each Non-Pro Rata Certificate
in a full accrual period would be its allocable share of the original issue
discount with respect to the entire Class, as determined in accordance with
the preceding paragraph. However, in the case of a distribution in retirement
of the entire unpaid principal balance of any Non-Pro Rata Certificate (or
portion of such unpaid principal balance), (a) the remaining unaccrued
original issue discount allocable to such Certificate (or to such portion)
will accrue at the time of such distribution, and (b) the accrual of original
issue discount allocable to each remaining Certificate of such Class (or the
remaining unpaid principal balance of a partially redeemed Non-Pro Rata
Certificate after a distribution of principal has been received) will be
adjusted by reducing the present value of the remaining payments on such Class
and the adjusted issue price of such Class to the extent attributable to the
portion of the unpaid principal balance thereof that was distributed. The
Seller believes that the foregoing treatment is consistent with the "pro rata
prepayment" rules of the OID Regulations, but with the rate of accrual of
original issue discount determined based on the Prepayment Assumption for the
Class as a whole. Investors are advised to consult their tax advisors as to
this treatment.
Acquisition Premium
A purchaser of a Regular Certificate at a price greater than its adjusted
issue price but less than its stated redemption price at maturity will be
required to include in gross income the daily portions of the original issue
discount on the Regular Certificate reduced pro rata by a fraction, the
numerator of which is the excess of its purchase price over such adjusted
issue price and the denominator of which is the excess of the remaining stated
redemption price at maturity over the adjusted issue price. Alternatively,
such a subsequent purchaser may elect to treat all such acquisition premium
under the constant yield method, as described below under the heading "--
Election to Treat All Interest Under the Constant Yield Method."
Variable Rate Regular Certificates
Regular Certificates may provide for interest based on a variable rate.
Under the OID Regulations, interest is treated as payable at a variable rate
if, generally, (i) the issue price does not exceed the original principal
balance by more than a specified amount and (ii) the interest compounds or is
payable at least annually at current values of (a) one or more "qualified
floating rates," (b) a single fixed rate and one or more qualified floating
rates, (c) a single "objective rate," or (d) a single fixed rate and a single
objective rate that is a "qualified inverse floating rate." A floating rate is
a qualified floating rate if variations in the rate can reasonably be expected
to measure contemporaneous variations in the cost of newly borrowed funds,
where such rate is subject to a fixed multiple that is greater than 0.65 but
not more than 1.35. Such rate may also be increased or decreased by a fixed
spread or subject to a fixed cap or floor, or a cap or floor that is not
reasonably expected as of the issue date to affect the yield of the instrument
significantly. An objective rate is any rate (other than a qualified floating
rate) that is determined using a single fixed formula and that is based on
objective financial or economic information, provided that such information is
not (i) within the control of the issuer or a related party or (ii) unique to
the circumstances of the issuer or a related party. A qualified inverse
floating rate is a rate equal to a fixed rate minus a qualified floating rate
that inversely reflects contemporaneous variations in the cost of newly
borrowed funds; an inverse floating rate that is not a qualified inverse
floating rate may nevertheless be an objective rate. A Class of Regular
Certificates may be issued under this Prospectus that does not have a variable
rate under the foregoing rules, for example, a Class that bears different
rates at different times during the period it is outstanding such that it is
considered significantly "front-loaded" or "back-loaded" within the meaning of
the OID Regulations. It is possible that such a Class may be considered to
bear "contingent interest" within the meaning of the OID Regulations. The OID
Regulations, as they relate to the treatment of contingent interest, are by
their terms not applicable to Regular Certificates. However, if final
regulations dealing with contingent interest with respect to Regular
Certificates apply the same principles as the OID Regulations, such
regulations may lead to different timing of income inclusion than would be the
case under the OID Regulations for non-contingent debt instruments.
Furthermore, application of such principles could lead to the characterization
of gain on the sale of contingent interest Regular Certificates as ordinary
income. Investors should consult their tax advisors regarding the appropriate
treatment of any Regular Certificate that does not pay interest at a fixed
rate or variable rate as described in this paragraph.
Under the REMIC Regulations, a Regular Certificate (i) bearing a rate that
qualifies as a variable rate under the OID Regulations that is tied to current
values of a variable rate (or the highest, lowest or average of two or more
variable rates, including a rate based on the average cost of funds of one or
more financial institutions), or a positive or negative multiple of such a
rate (plus or minus a specified number of basis points), or that represents a
weighted average of rates on some or all of the Mortgage
67
<PAGE>
Loans, including such a rate that is subject to one or more caps or floors, or
(ii) bearing one or more such variable rates for one or more periods, or one
or more fixed rates for one or more periods, and a different variable rate or
fixed rate for other periods, qualifies as a regular interest in a REMIC.
Accordingly, unless otherwise indicated in the applicable Prospectus
Supplement, the Seller intends to treat Regular Certificates that qualify as
regular interests under this rule in the same manner as obligations bearing a
variable rate for original issue discount reporting purposes.
The amount of original issue discount with respect to a Regular Certificate
bearing a variable rate of interest will accrue in the manner described above
under "--Original Issue Discount," with the yield to maturity and future
payments on such Regular Certificate generally to be determined by assuming
that interest will be payable for the life of the Regular Certificate based on
the initial rate (or, if different, the value of the applicable variable rate
as of the pricing date) for the relevant Class. Unless required otherwise by
applicable final regulations, the Seller intends to treat such variable
interest as qualified stated interest, other than variable interest on an
interest-only or super-premium Class, which will be treated as non-qualified
stated interest includible in the stated redemption price at maturity.
Ordinary income reportable for any period will be adjusted based on subsequent
changes in the applicable interest rate index.
Although unclear under the OID Regulations, unless required otherwise by
applicable final regulations, the Seller intends to treat Regular Certificates
bearing an interest rate that is a weighted average of the net interest rates
on Mortgage Loans as having qualified stated interest, except to the extent
that initial "teaser" rates cause sufficiently "back-loaded" interest to
create more than de minimis original issue discount. The yield on such Regular
Certificates for purposes of accruing original issue discount will be a
hypothetical fixed rate based on the fixed rates, in the case of fixed-rate
Mortgage Loans, and initial "teaser rates" followed by fully indexed rates, in
the case of adjustable-rate Mortgage Loans. In the case of adjustable-rate
Mortgage Loans, the applicable index used to compute interest on the Mortgage
Loans in effect on the pricing date (or possibly the issue date) will be
deemed to be in effect beginning with the period in which the first weighted
average adjustment date occurring after the issue date occurs. Adjustments
will be made in each accrual period either increasing or decreasing the amount
of ordinary income reportable to reflect the actual Pass-Through Rate on the
Regular Certificates.
Market Discount
A purchaser of a Regular Certificate also may be subject to the market
discount rules of Code Sections 1276 through 1278. Under these sections and
the principles applied by the OID Regulations in the context of original issue
discount, "market discount" is the amount by which the purchaser's original
basis in the Regular Certificate (i) is exceeded by the then-current principal
amount of the Regular Certificate, or (ii) in the case of a Regular
Certificate having original issue discount, is exceeded by the adjusted issue
price of such Regular Certificate at the time of purchase. Such purchaser
generally will be required to recognize ordinary income to the extent of
accrued market discount on such Regular Certificate as distributions
includible in the stated redemption price at maturity thereof are received, in
an amount not exceeding any such distribution. Such market discount would
accrue in a manner to be provided in Treasury regulations and should take into
account the Prepayment Assumption. The Conference Committee Report to the 1986
Act provides that until such regulations are issued, such market discount
would accrue either (i) on the basis of a constant interest rate, or (ii) in
the ratio of stated interest allocable to the relevant period to the sum of
the interest for such period plus the remaining interest as of the end of such
period, or in the case of a Regular Certificate issued with original issue
discount, in the ratio of original issue discount accrued for the relevant
period to the sum of the original issue discount accrued for such period plus
the remaining original issue discount as of the end of such period. Such
purchaser also generally will be required to treat a portion of any gain on a
sale or exchange of the Regular Certificate as ordinary income to the extent
of the market discount accrued to the date of disposition under one of the
foregoing methods, less any accrued market discount previously reported as
ordinary income as partial distributions in reduction of the stated redemption
price at maturity were received. Such purchaser will be required to defer
deduction of a portion of the excess of the interest paid or accrued on
indebtedness incurred to purchase or carry a Regular Certificate over the
interest distributable thereon. The deferred portion of such interest expense
in any taxable year generally will not exceed the accrued market discount on
the Regular Certificate for such year. Any such deferred interest expense is,
in general, allowed as a deduction not later than the year in which the
related market discount income is recognized or the Regular Certificate is
disposed of. As an alternative to the inclusion of market discount in income
on the foregoing basis, the Regular Certificateholder may elect to include
market discount in income currently as it accrues on all market discount
instruments acquired by such Regular Certificateholder in that taxable year or
thereafter, in which case the interest deferral rule will not apply. See "--
Election to Treat All Interest Under the Constant Yield Method" below
regarding an alternative manner in which such election may be deemed to be
made.
68
<PAGE>
By analogy to the OID Regulations, market discount with respect to a Regular
Certificate will be considered to be zero if such market discount is less than
0.25% of the remaining stated redemption price at maturity of such Regular
Certificate multiplied by the weighted average maturity of the Regular
Certificate (determined as described above in the third paragraph under "--
Original Issue Discount") remaining after the date of purchase. It appears
that de minimis market discount would be reported in a manner similar to de
minimis original issue discount. See "--Original Issue Discount" above.
Treasury regulations implementing the market discount rules have not yet been
issued, and therefore investors should consult their own tax advisors
regarding the application of these rules. Investors should also consult
Revenue Procedure 92-67 concerning the elections to include market discount in
income currently and to accrue market discount on the basis of the constant
yield method.
Premium
A Regular Certificate purchased at a cost greater than its remaining stated
redemption price at maturity generally is considered to be purchased at a
premium. If the Regular Certificateholder holds such Regular Certificate as a
"capital asset" within the meaning of Code Section 1221, the Regular
Certificateholder may elect under Code Section 171 to amortize such premium
under the constant yield method. Such election will apply to all debt
obligations acquired by the Regular Certificateholder at a premium held in
that taxable year or thereafter, unless revoked with the permission of the
Internal Revenue Service. Final Treasury Regulations issued under Code Section
171 do not by their terms apply to prepayable debt instruments such as the
Regular Certificates. However, the Conference Committee Report to the 1986 Act
indicates a Congressional intent that the same rules that apply to the accrual
of market discount on installment obligations will also apply to amortizing
bond premium under Code Section 171 on installment obligations such as the
Regular Certificates, although it is unclear whether the alternatives to the
constant interest method described above under "--Market Discount" are
available. Amortizable bond premium will be treated as an offset to interest
income on a Regular Certificate, rather than as a separate deduction item. See
"--Election to Treat All Interest Under the Constant Yield Method" below
regarding an alternative manner in which the Code Section 171 election may be
deemed to be made.
Election to Treat All Interest Under the Constant Yield Method
A holder of a debt instrument such as a Regular Certificate may elect to
treat all interest that accrues on the instrument using the constant yield
method, with none of the interest being treated as qualified stated interest.
For purposes of applying the constant yield method to a debt instrument
subject to such an election, (i) "interest" includes stated interest, original
issue discount, de minimis original issue discount, market discount and de
minimis market discount, as adjusted by any amortizable bond premium or
acquisition premium and (ii) the debt instrument is treated as if the
instrument were issued on the holder's acquisition date in the amount of the
holder's adjusted basis immediately after acquisition. It is unclear whether,
for this purpose, the initial Prepayment Assumption would continue to apply or
if a new prepayment assumption as of the date of the holder's acquisition
would apply. A holder generally may make such an election on an instrument by
instrument basis or for a class or group of debt instruments. However, if the
holder makes such an election with respect to a debt instrument with
amortizable bond premium or with market discount, the holder is deemed to have
made elections to amortize bond premium or to report market discount income
currently as it accrues under the constant yield method, respectively, for all
premium bonds held or market discount bonds acquired by the holder in the same
taxable year or thereafter. The election is made on the holder's federal
income tax return for the year in which the debt instrument is acquired and is
irrevocable except with the approval of the Internal Revenue Service.
Investors should consult their own tax advisors regarding the advisability of
making such an election.
Treatment of Losses
Regular Certificateholders will be required to report income with respect to
Regular Certificates on the accrual method of accounting, without giving
effect to delays or reductions in distributions attributable to defaults or
delinquencies on the Mortgage Loans, except to the extent it can be
established that such losses are uncollectible. Accordingly, the holder of a
Regular Certificate, particularly a Subordinated Certificate, may have income,
or may incur a diminution in cash flow as a result of a default or
delinquency, but may not be able to take a deduction (subject to the
discussion below) for the corresponding loss until a subsequent taxable year.
In this regard, investors are cautioned that while they may generally cease to
accrue interest income if it reasonably appears that the interest will be
uncollectible, the Internal Revenue Service may take the position that
original issue discount must continue to be accrued in spite of its
uncollectibility until the debt instrument is disposed of in a taxable
transaction or becomes worthless in accordance with the rules of Code Section
166. To the extent the rules of Code Section 166 regarding bad debts are
69
<PAGE>
applicable, it appears that Regular Certificateholders that are corporations
or that otherwise hold the Regular Certificates in connection with a trade or
business should in general be allowed to deduct as an ordinary loss such loss
with respect to principal sustained during the taxable year on account of any
such Regular Certificates becoming wholly or partially worthless, and that, in
general, Regular Certificateholders that are not corporations and do not hold
the Regular Certificates in connection with a trade or business should be
allowed to deduct as a short-term capital loss any loss sustained during the
taxable year on account of a portion of any such Regular Certificates becoming
wholly worthless. Although the matter is not free from doubt, such non-
corporate Regular Certificateholders should be allowed a bad debt deduction at
such time as the principal balance of such Regular Certificates is reduced to
reflect losses resulting from any liquidated Mortgage Loans. The Internal
Revenue Service, however, could take the position that non-corporate holders
will be allowed a bad debt deduction to reflect such losses only after all the
Mortgage Loans remaining in the Trust Estate have been liquidated or the
applicable Class of Regular Certificates has been otherwise retired. The
Internal Revenue Service could also assert that losses on the Regular
Certificates are deductible based on some other method that may defer such
deductions for all holders, such as reducing future cash flow for purposes of
computing original issue discount. This may have the effect of creating
"negative" original issue discount which would be deductible only against
future positive original issue discount or otherwise upon termination of the
Class. Regular Certificateholders are urged to consult their own tax advisors
regarding the appropriate timing, amount and character of any loss sustained
with respect to such Regular Certificates. While losses attributable to
interest previously reported as income should be deductible as ordinary losses
by both corporate and non-corporate holders, the Internal Revenue Service may
take the position that losses attributable to accrued original issue discount
may only be deducted as capital losses in the case of non-corporate holders
who do not hold the Regular Certificates in connection with a trade or
business. Special loss rules are applicable to banks and thrift institutions,
including rules regarding reserves for bad debts. Such taxpayers are advised
to consult their tax advisors regarding the treatment of losses on Regular
Certificates.
Sale or Exchange of Regular Certificates
If a Regular Certificateholder sells or exchanges a Regular Certificate, the
Regular Certificateholder will recognize gain or loss equal to the difference,
if any, between the amount received and its adjusted basis in the Regular
Certificate. The adjusted basis of a Regular Certificate generally will equal
the cost of the Regular Certificate to the seller, increased by any original
issue discount or market discount previously included in the seller's gross
income with respect to the Regular Certificate and reduced by amounts included
in the stated redemption price at maturity of the Regular Certificate that
were previously received by the seller, by any amortized premium and by any
recognized losses.
Except as described above with respect to market discount, and except as
provided in this paragraph, any gain or loss on the sale or exchange of a
Regular Certificate realized by an investor who holds the Regular Certificate
as a capital asset will be capital gain or loss and will be long-term or
short-term depending on whether the Regular Certificate has been held for the
related capital gain holding period. Such gain will be treated as ordinary
income (i) if a Regular Certificate is held as part of a "conversion
transaction" as defined in Code Section 1258(c), up to the amount of interest
that would have accrued on the Regular Certificateholder's net investment in
the conversion transaction at 120% of the appropriate applicable federal rate
under Code Section 1274(d) in effect at the time the taxpayer entered into the
transaction minus any amount previously treated as ordinary income with
respect to any prior disposition of property that was held as part of such
transaction, (ii) in the case of a non-corporate taxpayer, to the extent such
taxpayer has made an election under Code Section 163(d)(4) to have net capital
gains taxed as investment income at ordinary income rates, or (iii) to the
extent that such gain does not exceed the excess, if any, of (a) the amount
that would have been includible in the gross income of the holder if its yield
on such Regular Certificate were 110% of the applicable federal rate as of the
date of purchase, over (b) the amount of income actually includible in the
gross income of such holder with respect to such Regular Certificate. In
addition, gain or loss recognized from the sale of a Regular Certificate by
certain banks or thrift institutions will be treated as ordinary income or
loss pursuant to Code Section 582(c). Generally, short-term capital gains of
certain non-corporate taxpayers are subject to the same tax rate as the
ordinary income of such taxpayers (39.6%) for property held for not more than
one year, and long-term capital gains of such taxpayers are subject to a
maximum tax rate of 20% for property held for more than one year. The maximum
tax rate for corporations is the same with respect to both ordinary income and
capital gains.
70
<PAGE>
TAXATION OF RESIDUAL CERTIFICATES
Taxation of REMIC Income
Generally, the "daily portions" of REMIC taxable income or net loss will be
includible as ordinary income or loss in determining the federal taxable
income of holders of Residual Certificates ("RESIDUAL HOLDERS"), and will not
be taxed separately to the REMIC Pool. The daily portions of REMIC taxable
income or net loss of a Residual Holder are determined by allocating the REMIC
Pool's taxable income or net loss for each calendar quarter ratably to each
day in such quarter and by allocating such daily portion among the Residual
Holders in proportion to their respective holdings of Residual Certificates in
the REMIC Pool on such day. REMIC taxable income is generally determined in
the same manner as the taxable income of an individual using the accrual
method of accounting, except that (i) the limitations on deductibility of
investment interest expense and expenses for the production of income do not
apply, (ii) all bad loans will be deductible as business bad debts and (iii)
the limitation on the deductibility of interest and expenses related to tax-
exempt income will apply. The REMIC Pool's gross income includes interest,
original issue discount income and market discount income, if any, on the
Mortgage Loans, reduced by amortization of any premium on the Mortgage Loans,
plus income from amortization of issue premium, if any, on the Regular
Certificates, plus income on reinvestment of cash flows and reserve assets,
plus any cancellation of indebtedness income upon allocation of realized
losses to the Regular Certificates. The REMIC Pool's deductions include
interest and original issue discount expense on the Regular Certificates,
servicing fees on the Mortgage Loans, other administrative expenses of the
REMIC Pool and realized losses on the Mortgage Loans. The requirement that
Residual Holders report their pro rata share of taxable income or net loss of
the REMIC Pool will continue until there are no Certificates of any class of
the related Series outstanding.
The taxable income recognized by a Residual Holder in any taxable year will
be affected by, among other factors, the relationship between the timing of
recognition of interest and original issue discount or market discount income
or amortization of premium with respect to the Mortgage Loans, on the one
hand, and the timing of deductions for interest (including original issue
discount) or income from amortization of issue premium on the Regular
Certificates, on the other hand. In the event that an interest in the Mortgage
Loans is acquired by the REMIC Pool at a discount, and one or more of such
Mortgage Loans is prepaid, the Residual Holder may recognize taxable income
without being entitled to receive a corresponding amount of cash because (i)
the prepayment may be used in whole or in part to make distributions in
reduction of principal on the Regular Certificates and (ii) the discount on
the Mortgage Loans which is includible in income may exceed the deduction
allowed upon such distributions on those Regular Certificates on account of
any unaccrued original issue discount relating to those Regular Certificates.
When there is more than one Class of Regular Certificates that distribute
principal sequentially, this mismatching of income and deductions is
particularly likely to occur in the early years following issuance of the
Regular Certificates when distributions in reduction of principal are being
made in respect of earlier Classes of Regular Certificates to the extent that
such Classes are not issued with substantial discount or are issued at a
premium. If taxable income attributable to such a mismatching is realized, in
general, losses would be allowed in later years as distributions on the later
maturing Classes of Regular Certificates are made. Taxable income may also be
greater in earlier years than in later years as a result of the fact that
interest expense deductions, expressed as a percentage of the outstanding
principal amount of such a Series of Regular Certificates, may increase over
time as distributions in reduction of principal are made on the lower yielding
Classes of Regular Certificates, whereas, to the extent the REMIC Pool
consists of fixed-rate Mortgage Loans, interest income with respect to any
given Mortgage Loan will remain constant over time as a percentage of the
outstanding principal amount of that loan. Consequently, Residual Holders must
have sufficient other sources of cash to pay any federal, state, or local
income taxes due as a result of such mismatching or unrelated deductions
against which to offset such income, subject to the discussion of "excess
inclusions" below under "--Limitations on Offset or Exemption of REMIC
Income." The timing of such mismatching of income and deductions described in
this paragraph, if present with respect to a Series of Certificates, may have
a significant adverse effect upon a Residual Holder's after-tax rate of
return. In addition, a Residual Holder's taxable income during certain periods
may exceed the income reflected by such Residual Holder for such periods in
accordance with generally accepted accounting principles. Investors should
consult their own accountants concerning the accounting treatment of their
investment in Residual Certificates.
Basis and Losses
The amount of any net loss of the REMIC Pool that may be taken into account
by the Residual Holder is limited to the adjusted basis of the Residual
Certificate as of the close of the quarter (or time of disposition of the
Residual Certificate if earlier), determined without taking into account the
net loss for the quarter. The initial adjusted basis of a purchaser of a
Residual Certificate
71
<PAGE>
is the amount paid for such Residual Certificate. Such adjusted basis will be
increased by the amount of taxable income of the REMIC Pool reportable by the
Residual Holder and will be decreased (but not below zero), first, by a cash
distribution from the REMIC Pool and, second, by the amount of loss of the
REMIC Pool reportable by the Residual Holder. Any loss that is disallowed on
account of this limitation may be carried over indefinitely with respect to
the Residual Holder as to whom such loss was disallowed and may be used by
such Residual Holder only to offset any income generated by the same REMIC
Pool.
A Residual Holder will not be permitted to amortize directly the cost of its
Residual Certificate as an offset to its share of the taxable income of the
related REMIC Pool. However, that taxable income will not include cash
received by the REMIC Pool that represents a recovery of the REMIC Pool's
basis in its assets. Such recovery of basis by the REMIC Pool will have the
effect of amortization of the issue price of the Residual Certificates over
their life. However, in view of the possible acceleration of the income of
Residual Holders described above under "Taxation of REMIC Income," the period
of time over which such issue price is effectively amortized may be longer
than the economic life of the Residual Certificates.
A Residual Certificate may have a negative value if the net present value of
anticipated tax liabilities exceeds the present value of anticipated cash
flows. The REMIC Regulations appear to treat the issue price of such a
residual interest as zero rather than such negative amount for purposes of
determining the REMIC Pool's basis in its assets. The preamble to the REMIC
Regulations states that the Internal Revenue Service may provide future
guidance on the proper tax treatment of payments made by a transferor of such
a residual interest to induce the transferee to acquire the interest, and
Residual Holders should consult their own tax advisors in this regard.
Further, to the extent that the initial adjusted basis of a Residual Holder
(other than an original holder) in the Residual Certificate is greater than
the corresponding portion of the REMIC Pool's basis in the Mortgage Loans, the
Residual Holder will not recover a portion of such basis until termination of
the REMIC Pool unless future Treasury regulations provide for periodic
adjustments to the REMIC income otherwise reportable by such holder. The REMIC
Regulations currently in effect do not so provide. See "--Treatment of Certain
Items of REMIC Income and Expense--Market Discount" below regarding the basis
of Mortgage Loans to the REMIC Pool and "--Sale or Exchange of a Residual
Certificate" below regarding possible treatment of a loss upon termination of
the REMIC Pool as a capital loss.
Treatment of Certain Items of REMIC Income and Expense
Although the Seller intends to compute REMIC income and expense in
accordance with the Code and applicable regulations, the authorities regarding
the determination of specific items of income and expense are subject to
differing interpretations. The Seller makes no representation as to the
specific method that it will use for reporting income with respect to the
Mortgage Loans and expenses with respect to the Regular Certificates and
different methods could result in different timing of reporting of taxable
income or net loss to Residual Holders or differences in capital gain versus
ordinary income.
Original Issue Discount and Premium. Generally, the REMIC Pool's deductions
for original issue discount and income from amortization of issue premium will
be determined in the same manner as original issue discount income on Regular
Certificates as described above under "--Taxation of Regular Certificates--
Original Issue Discount" and "--Variable Rate Regular Certificates," without
regard to the de minimis rule described therein, and "--Premium."
Market Discount. The REMIC Pool will have market discount income in respect
of Mortgage Loans if, in general, the basis of the REMIC Pool in such Mortgage
Loans is exceeded by their unpaid principal balances. The REMIC Pool's basis
in such Mortgage Loans is generally the fair market value of the Mortgage
Loans immediately after the transfer thereof to the REMIC Pool. The REMIC
Regulations provide that such basis is equal in the aggregate to the issue
prices of all regular and residual interests in the REMIC Pool. The accrued
portion of such market discount would be recognized currently as an item of
ordinary income in a manner similar to original issue discount. Market
discount income generally should accrue in the manner described above under
"--Taxation of Regular Certificates--Market Discount."
Premium. Generally, if the basis of the REMIC Pool in the Mortgage Loans
exceeds the unpaid principal balances thereof, the REMIC Pool will be
considered to have acquired such Mortgage Loans at a premium equal to the
amount of such excess. As stated above, the REMIC Pool's basis in Mortgage
Loans is the fair market value of the Mortgage Loans, based on the aggregate
of the issue prices of the regular and residual interests in the REMIC Pool
immediately after the transfer thereof to the REMIC
72
<PAGE>
Pool. In a manner analogous to the discussion above under "--Taxation of
Regular Certificates--Premium," a person that holds a Mortgage Loan as a
capital asset under Code Section 1221 may elect under Code Section 171 to
amortize premium on Mortgage Loans originated after September 27, 1985 under
the constant yield method. Amortizable bond premium will be treated as an
offset to interest income on the Mortgage Loans, rather than as a separate
deduction item. Because substantially all of the mortgagors on the Mortgage
Loans are expected to be individuals, Code Section 171 will not be available
for premium on Mortgage Loans originated on or prior to September 27, 1985.
Premium with respect to such Mortgage Loans may be deductible in accordance
with a reasonable method regularly employed by the holder thereof. The
allocation of such premium pro rata among principal payments should be
considered a reasonable method; however, the Internal Revenue Service may
argue that such premium should be allocated in a different manner, such as
allocating such premium entirely to the final payment of principal.
Limitations on Offset or Exemption of REMIC Income
A portion (or all) of the REMIC taxable income includible in determining the
federal income tax liability of a Residual Holder will be subject to special
treatment. That portion, referred to as the "excess inclusion," is equal to
the excess of REMIC taxable income for the calendar quarter allocable to a
Residual Certificate over the daily accruals for such quarterly period of (i)
120% of the long-term applicable federal rate that would have applied to the
Residual Certificate (if it were a debt instrument) on the Startup Day under
Code Section 1274(d), multiplied by (ii) the adjusted issue price of such
Residual Certificate at the beginning of such quarterly period. For this
purpose, the adjusted issue price of a Residual Certificate at the beginning
of a quarter is the issue price of the Residual Certificate, plus the amount
of such daily accruals of REMIC income described in this paragraph for all
prior quarters, decreased by any distributions made with respect to such
Residual Certificate prior to the beginning of such quarterly period.
Accordingly, the portion of the REMIC Pool's taxable income that will be
treated as excess inclusions will be a larger portion of such income as the
adjusted issue price of the Residual Certificates diminishes.
The portion of a Residual Holder's REMIC taxable income consisting of the
excess inclusions generally may not be offset by other deductions, including
net operating loss carryforwards, on such Residual Holder's return. However,
net operating loss carryovers are determined without regard to excess
inclusion income. Further, if the Residual Holder is an organization subject
to the tax on unrelated business income imposed by Code Section 511, the
Residual Holder's excess inclusions will be treated as unrelated business
taxable income of such Residual Holder for purposes of Code Section 511. In
addition, REMIC taxable income is subject to 30% withholding tax with respect
to certain persons who are not U.S. Persons (as defined below under "--Tax-
Related Restrictions on Transfer of Residual Certificates--Foreign
Investors"), and the portion thereof attributable to excess inclusions is not
eligible for any reduction in the rate of withholding tax (by treaty or
otherwise). See "--Taxation of Certain Foreign Investors --Residual
Certificates" below. Finally, if a real estate investment trust or a regulated
investment company owns a Residual Certificate, a portion (allocated under
Treasury regulations yet to be issued) of dividends paid by the real estate
investment trust or regulated investment company could not be offset by net
operating losses of its shareholders, would constitute unrelated business
taxable income for tax-exempt shareholders, and would be ineligible for
reduction of withholding to certain persons who are not U.S. Persons. The
SBJPA of 1996 has eliminated the special rule permitting Section 593
institutions ("thrift institutions") to use net operating losses and other
allowable deductions to offset their excess inclusion income from Residual
Certificates that have "significant value" within the meaning of the REMIC
Regulations, effective for taxable years beginning after December 31, 1995,
except with respect to Residual Certificates continuously held by a thrift
institution since November 1, 1995.
In addition, the SBJPA of 1996 provides three rules for determining the
effect of excess inclusions on the alternative minimum taxable income of a
Residual Holder. First, alternative minimum taxable income for a Residual
Holder is determined without regard to the special rule, discussed above, that
taxable income cannot be less than excess inclusions. Second, a Residual
Holder's alternative minimum taxable income for a taxable year cannot be less
than the excess inclusions for the year. Third, the amount of any alternative
minimum tax net operating loss deduction must be computed without regard to
any excess inclusions. These rules are effective for taxable years beginning
after December 31, 1986, unless a Residual Holder elects to have such rules
apply only to taxable years beginning after August 20, 1996.
Tax-Related Restrictions on Transfer of Residual Certificates
Disqualified Organizations. If any legal or beneficial interest in a
Residual Certificate is transferred to a Disqualified Organization (as defined
below), a tax would be imposed in an amount equal to the product of (i) the
present value of the total
73
<PAGE>
anticipated excess inclusions with respect to such Residual Certificate for
periods after the transfer and (ii) the highest marginal federal income tax
rate applicable to corporations. The REMIC Regulations provide that the
anticipated excess inclusions are based on actual prepayment experience to the
date of the transfer and projected payments based on the Prepayment
Assumption. The present value rate equals the applicable federal rate under
Code Section 1274(d) as of the date of the transfer for a term ending with the
last calendar quarter in which excess inclusions are expected to accrue. Such
rate is applied to the anticipated excess inclusions from the end of the
remaining calendar quarters in which they arise to the date of the transfer.
Such a tax generally would be imposed on the transferor of the Residual
Certificate, except that where such transfer is through an agent (including a
broker, nominee or other middleman) for a Disqualified Organization, the tax
would instead be imposed on such agent. However, a transferor of a Residual
Certificate would in no event be liable for such tax with respect to a
transfer if the transferee furnishes to the transferor an affidavit stating
that the transferee is not a Disqualified Organization and, as of the time of
the transfer, the transferor does not have actual knowledge that such
affidavit is false. The tax also may be waived by the Internal Revenue Service
if the Disqualified Organization promptly disposes of the Residual Certificate
and the transferor pays income tax at the highest corporate rate on the excess
inclusion for the period the Residual Certificate is actually held by the
Disqualified Organization.
In addition, if a "Pass-Through Entity" (as defined below) has excess
inclusion income with respect to a Residual Certificate during a taxable year
and a Disqualified Organization is the record holder of an equity interest in
such entity, then a tax is imposed on such entity equal to the product of (i)
the amount of excess inclusions that are allocable to the interest in the
Pass-Through Entity during the period such interest is held by such
Disqualified Organization, and (ii) the highest marginal federal corporate
income tax rate. Such tax would be deductible from the ordinary gross income
of the Pass-Through Entity for the taxable year. The Pass-Through Entity would
not be liable for such tax if it has received an affidavit from such record
holder that it is not a Disqualified Organization or stating such holder's
taxpayer identification number and, during the period such person is the
record holder of the Residual Certificate, the Pass-Through Entity does not
have actual knowledge that such affidavit is false.
For taxable years beginning on or after January 1, 1998, if an "electing
large partnership" holds a Residual Certificate, all interests in the electing
large partnership are treated as held by Disqualified Organizations for
purposes of the tax imposed upon a Pass-Through Entity by Section 860E(c) of
the Code. An exception to this tax, otherwise available to a Pass-Through
Entity that is furnished certain affidavits by record holders of interests in
the entity and that does not know such affidavits are false, is not available
to an electing large partnership.
For these purposes, (i) "DISQUALIFIED ORGANIZATION" means the United States,
any state or political subdivision thereof, any foreign government, any
international organization, any agency or instrumentality of any of the
foregoing (provided, that such term does not include an instrumentality if all
of its activities are subject to tax and a majority of its board of directors
is not selected by any such governmental entity), any cooperative organization
furnishing electric energy or providing telephone service to persons in rural
areas as described in Code Section 1381(a)(2)(C), and any organization (other
than a farmers' cooperative described in Code Section 521) that is exempt from
taxation under the Code unless such organization is subject to the tax on
unrelated business income imposed by Code Section 511, (ii) "PASS-THROUGH
ENTITY" means any regulated investment company, real estate investment trust,
common trust fund, partnership, trust or estate and certain corporations
operating on a cooperative basis. Except as may be provided in Treasury
regulations, any person holding an interest in a Pass-Through Entity as a
nominee for another will, with respect to such interest, be treated as a Pass-
Through Entity, and (iii) an "ELECTING LARGE PARTNERSHIP" means any
partnership having more than 100 members during the preceding tax year (other
than certain service partnerships and commodity pools), which elect to apply
simplified reporting provisions under the Code.
The Pooling and Servicing Agreement with respect to a Series will provide
that no legal or beneficial interest in a Residual Certificate may be
transferred or registered unless (i) the proposed transferee furnishes to the
Seller and the Trustee an affidavit providing its taxpayer identification
number and stating that such transferee is the beneficial owner of the
Residual Certificate and is not a Disqualified Organization and is not
purchasing such Residual Certificate on behalf of a Disqualified Organization
(i.e., as a broker, nominee or middleman thereof) and (ii) the transferor
provides a statement in writing to the Seller and the Trustee that it has no
actual knowledge that such affidavit is false. Moreover, the Pooling and
Servicing Agreement will provide that any attempted or purported transfer in
violation of these transfer restrictions will be null and void and will vest
no rights in any purported transferee. Each Residual Certificate with respect
to a Series will bear a legend referring to such restrictions on transfer, and
each Residual Holder will be deemed to have agreed, as a condition of
ownership thereof, to any amendments to the related Pooling and Servicing
Agreement required under the Code or applicable Treasury regulations to
effectuate the foregoing restrictions. Information necessary to compute an
applicable excise tax must be furnished to the Internal Revenue Service and to
74
<PAGE>
the requesting party within 60 days of the request, and the Seller or the
Trustee may charge a fee for computing and providing such information.
Noneconomic Residual Interests. The REMIC Regulations would disregard
certain transfers of Residual Certificates, in which case the transferor would
continue to be treated as the owner of the Residual Certificates and thus
would continue to be subject to tax on its allocable portion of the net income
of the REMIC Pool. Under the REMIC Regulations, a transfer of a "noneconomic
residual interest" (as defined below) to a Residual Holder (other than a
Residual Holder who is not a U.S. Person, as defined below under "--Foreign
Investors") is disregarded for all federal income tax purposes if a
significant purpose of the transferor is to impede the assessment or
collection of tax. A residual interest in a REMIC (including a residual
interest with a positive value at issuance) is a "noneconomic residual
interest" unless, at the time of the transfer, (i) the present value of the
expected future distributions on the residual interest at least equals the
product of the present value of the anticipated excess inclusions and the
highest corporate income tax rate in effect for the year in which the transfer
occurs, and (ii) the transferor reasonably expects that the transferee will
receive distributions from the REMIC at or after the time at which taxes
accrue on the anticipated excess inclusions in an amount sufficient to satisfy
the accrued taxes on each excess inclusion. The anticipated excess inclusions
and the present value rate are determined in the same manner as set forth
above under "--Disqualified Organizations." The REMIC Regulations explain that
a significant purpose to impede the assessment or collection of tax exists if
the transferor, at the time of the transfer, either knew or should have known
that the transferee would be unwilling or unable to pay taxes due on its share
of the taxable income of the REMIC. A safe harbor is provided if (i) the
transferor conducted, at the time of the transfer, a reasonable investigation
of the financial condition of the transferee and found that the transferee
historically had paid its debts as they came due and found no significant
evidence to indicate that the transferee would not continue to pay its debts
as they came due in the future, and (ii) the transferee represents to the
transferor that it understands that, as the holder of the non-economic
residual interest, the transferee may incur tax liabilities in excess of any
cash flows generated by the interest and that the transferee intends to pay
taxes associated with holding the residual interest as they become due. The
Pooling and Servicing Agreement with respect to each Series of Certificates
will require the transferee of a Residual Certificate to certify to the
matters in the preceding sentence as part of the affidavit described above
under the heading "--Disqualified Organizations."
Foreign Investors. The REMIC Regulations provide that the transfer of a
Residual Certificate that has "tax avoidance potential" to a "foreign person"
will be disregarded for all federal tax purposes. This rule appears intended
to apply to a transferee who is not a "U.S. Person" (as defined below), unless
such transferee's income is effectively connected with the conduct of a trade
or business within the United States. A Residual Certificate is deemed to have
tax avoidance potential unless, at the time of the transfer, (i) the future
value of expected distributions equals at least 30% of the anticipated excess
inclusions after the transfer, and (ii) the transferor reasonably expects that
the transferee will receive sufficient distributions from the REMIC Pool at or
after the time at which the excess inclusions accrue and prior to the end of
the next succeeding taxable year for the accumulated withholding tax liability
to be paid. If the non-U.S. Person transfers the Residual Certificate back to
a U.S. Person, the transfer will be disregarded and the foreign transferor
will continue to be treated as the owner unless arrangements are made so that
the transfer does not have the effect of allowing the transferor to avoid tax
on accrued excess inclusions.
The Prospectus Supplement relating to the Certificates of a Series may
provide that a Residual Certificate may not be purchased by or transferred to
any person that is not a U.S. Person or may describe the circumstances and
restrictions pursuant to which such a transfer may be made. The term "U.S.
PERSON" means a citizen or resident of the United States, a corporation,
partnership (except to the extent provided in applicable Treasury regulations)
or other entity created or organized in or under the laws of the United States
or any political subdivision thereof, an estate that is subject to U.S.
federal income tax regardless of the source of its income, or a trust if a
court within the United States is able to exercise primary supervision over
the administration of such trust, and one or more such U.S. Persons have the
authority to control all substantial decisions of such trust (or, to the
extent provided in applicable Treasury regulations, certain trusts in
existence on August 20, 1996 which are eligible to elect to be treated as U.S.
Persons.
Sale or Exchange of a Residual Certificate
Upon the sale or exchange of a Residual Certificate, the Residual Holder
will recognize gain or loss equal to the excess, if any, of the amount
realized over the adjusted basis (as described above under "--Basis and
Losses") of such Residual Holder in such Residual Certificate at the time of
the sale or exchange. In addition to reporting the taxable income of the REMIC
Pool, a Residual Holder will have taxable income to the extent that any cash
distribution to it from the REMIC Pool exceeds such adjusted
75
<PAGE>
basis on that Distribution Date. Such income will be treated as gain from the
sale or exchange of the Residual Certificate. It is possible that the
termination of the REMIC Pool may be treated as a sale or exchange of a
Residual Holder's Residual Certificate, in which case, if the Residual Holder
has an adjusted basis in its Residual Certificate remaining when its interest
in the REMIC Pool terminates, and if it holds such Residual Certificate as a
capital asset under Code Section 1221, then it will recognize a capital loss
at that time in the amount of such remaining adjusted basis.
Any gain on the sale of a Residual Certificate will be treated as ordinary
income (i) if a Residual Certificate is held as part of a "conversion
transaction" as defined in Code Section 1258(c), up to the amount of interest
that would have accrued on the Residual Certificateholder's net investment in
the conversion transaction at 120% of the appropriate applicable Federal rate
in effect at the time the taxpayer entered into the transaction minus any
amount previously treated as ordinary income with respect to any prior
disposition of property that was held as a part of such transaction or (ii) in
the case of a non-corporate taxpayer, to the extent such taxpayer has made an
election under Code Section 163(d)(4) to have net capital gains taxed as
investment income at ordinary income rates. In addition, gain or loss
recognized from the sale of a Residual Certificate by certain banks or thrift
institutions will be treated as ordinary income or loss pursuant to Code
Section 582(c).
The Conference Committee Report to the 1986 Act provides that, except as
provided in Treasury regulations yet to be issued, the wash sale rules of Code
Section 1091 will apply to dispositions of Residual Certificates where the
seller of the Residual Certificate, during the period beginning six months
before the sale or disposition of the Residual Certificate and ending six
months after such sale or disposition, acquires (or enters into any other
transaction that results in the application of Code Section 1091) any residual
interest in any REMIC or any interest in a "taxable mortgage pool" (such as a
non-REMIC owner trust) that is economically comparable to a Residual
Certificate.
Mark to Market Regulations
The Internal Revenue Service has issued final regulations (the "MARK TO
MARKET REGULATIONS") under Code Section 475 relating to the requirement that a
securities dealer mark to market securities held for sale to customers. This
mark to market requirement applies to all securities of a dealer, except to
the extent that the dealer has specifically identified a security as held for
investment. The Mark to Market Regulations provide that, for purposes of this
mark to market requirement, a Residual Certificate is not treated as a
security and thus may not be marked to market. The Mark to Market Regulations
apply to all Residual Certificates acquired on or after January 4, 1995.
TAXES THAT MAY BE IMPOSED ON THE REMIC POOL
Prohibited Transactions
Income from certain transactions by the REMIC Pool, called prohibited
transactions, will not be part of the calculation of income or loss includible
in the federal income tax returns of Residual Holders, but rather will be
taxed directly to the REMIC Pool at a 100% rate. Prohibited transactions
generally include (i) the disposition of a qualified mortgage other than for
(a) substitution within two years of the Startup Day for a defective
(including a defaulted) obligation (or repurchase in lieu of substitution of a
defective (including a defaulted) obligation at any time) or for any qualified
mortgage within three months of the Startup Day, (b) foreclosure, default, or
imminent default of a qualified mortgage, (c) bankruptcy or insolvency of the
REMIC Pool, or (d) a qualified (complete) liquidation, (ii) the receipt of
income from assets that are not the type of mortgages or investments that the
REMIC Pool is permitted to hold, (iii) the receipt of compensation for
services, or (iv) the receipt of gain from disposition of cash flow
investments other than pursuant to a qualified liquidation. Notwithstanding
(i) and (iv), it is not a prohibited transaction to sell REMIC Pool property
to prevent a default on Regular Certificates as a result of a default on
qualified mortgages or to facilitate a clean-up call (generally, an optional
termination to save administrative costs when no more than a small percentage
of the Certificates is outstanding). The REMIC Regulations indicate that the
modification of a Mortgage Loan generally will not be treated as a disposition
if it is occasioned by a default or reasonably foreseeable default, an
assumption of the Mortgage Loan, the waiver of a due-on-sale or due-on-
encumbrance clause, or the conversion of an interest rate by a mortgagor
pursuant to the terms of a convertible adjustable rate Mortgage Loan.
76
<PAGE>
Contributions to the REMIC Pool After the Startup Day
In general, the REMIC Pool will be subject to a tax at a 100% rate on the
value of any property contributed to the REMIC Pool after the Startup Day.
Exceptions are provided for cash contributions to the REMIC Pool (i) during
the three months following the Startup Day, (ii) made to a qualified reserve
fund by a Residual Holder, (iii) in the nature of a guarantee, (iv) made to
facilitate a qualified liquidation or clean-up call, and (v) as otherwise
permitted in Treasury regulations yet to be issued. It is not anticipated that
there will be any contributions to the REMIC Pool after the Startup Day.
Net Income from Foreclosure Property
The REMIC Pool will be subject to federal income tax at the highest
corporate rate on "net income from foreclosure property," determined by
reference to the rules applicable to real estate investment trusts. Generally,
property acquired by deed in lieu of foreclosure would be treated as
"foreclosure property" for a period not exceeding the close of the third
calendar year after the year in which the REMIC Pool acquired such property,
with a possible extension. Net income from foreclosure property generally
means gain from the sale of a foreclosure property that is inventory property
and gross income from foreclosure property other than qualifying rents and
other qualifying income for a real estate investment trust. It is not
anticipated that the REMIC Pool will have any taxable net income from
foreclosure property.
LIQUIDATION OF THE REMIC POOL
If a REMIC Pool adopts a plan of complete liquidation, within the meaning of
Code Section 860F(a)(4)(A)(i), which may be accomplished by designating in the
REMIC Pool's final tax return a date on which such adoption is deemed to
occur, and sells all of its assets (other than cash) within a 90-day period
beginning on such date, the REMIC Pool will not be subject to the prohibited
transaction rules on the sale of its assets, provided that the REMIC Pool
credits or distributes in liquidation all of the sale proceeds plus its cash
(other than amounts retained to meet claims) to holders of Regular
Certificates and Residual Holders within the 90-day period.
ADMINISTRATIVE MATTERS
The REMIC Pool will be required to maintain its books on a calendar year
basis and to file federal income tax returns for federal income tax purposes
in a manner similar to a partnership. The form for such income tax return is
Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return. The
Trustee will be required to sign the REMIC Pool's returns. Treasury
regulations provide that, except where there is a single Residual Holder for
an entire taxable year, the REMIC Pool will be subject to the procedural and
administrative rules of the Code applicable to partnerships, including the
determination by the Internal Revenue Service of any adjustments to, among
other things, items of REMIC income, gain, loss, deduction, or credit in a
unified administrative proceeding. The Master Servicer will be obligated to
act as "tax matters person," as defined in applicable Treasury regulations,
with respect to the REMIC Pool, in its capacity as either Residual Holder or
agent of the Residual Holders. If the Code or applicable Treasury regulations
do not permit the Master Servicer to act as tax matters person in its capacity
as agent of the Residual Holders, the Residual Holder chosen by the Residual
Holders or such other person specified pursuant to Treasury regulations will
be required to act as tax matters person.
LIMITATIONS ON DEDUCTION OF CERTAIN EXPENSES
An investor who is an individual, estate, or trust will be subject to
limitation with respect to certain itemized deductions described in Code
Section 67, to the extent that such itemized deductions, in the aggregate, do
not exceed 2% of the investor's adjusted gross income. In addition, Code
Section 68 provides that itemized deductions otherwise allowable for a taxable
year of an individual taxpayer will be reduced by the lesser of (i) 3% of the
excess, if any, of adjusted gross income over $124,500 for 1998 ($62,250 in
the case of a married individual filing a separate return) (subject to
adjustment for inflation for each year thereafter), or (ii) 80% of the amount
of itemized deductions otherwise allowable for such year. In the case of a
REMIC Pool, such deductions may include deductions under Code Section 212 for
the Servicing Fee and all administrative and other expenses relating to the
REMIC Pool, or any similar expenses allocated to the REMIC Pool with respect
to a regular interest it holds in another REMIC. Such investors who hold REMIC
Certificates either directly or indirectly through certain pass-through
entities may have their pro rata share of such expenses allocated to them as
additional gross income, but may be subject to such limitation on deductions.
In addition, such expenses are not deductible at all for purposes of computing
the alternative minimum tax, and
77
<PAGE>
may cause such investors to be subject to significant additional tax
liability. Temporary Treasury regulations provide that the additional gross
income and corresponding amount of expenses generally are to be allocated
entirely to the holders of Residual Certificates in the case of a REMIC Pool
that would not qualify as a fixed investment trust in the absence of a REMIC
election. However, such additional gross income and limitation on deductions
will apply to the allocable portion of such expenses to holders of Regular
Certificates, as well as holders of Residual Certificates, where such Regular
Certificates are issued in a manner that is similar to pass-through
certificates in a fixed investment trust. Unless indicated otherwise in the
applicable Prospectus Supplement, all such expenses will be allocable to the
Residual Certificates. In general, such allocable portion will be determined
based on the ratio that a REMIC Certificateholder's income, determined on a
daily basis, bears to the income of all holders of Regular Certificates and
Residual Certificates with respect to a REMIC Pool. As a result, individuals,
estates or trusts holding REMIC Certificates (either directly or indirectly
through a grantor trust, partnership, S corporation, REMIC or certain other
pass-through entities described in the foregoing temporary Treasury
regulations) may have taxable income in excess of the interest income at the
pass-through rate on Regular Certificates that are issued in a single class or
otherwise consistently with fixed investment trust status or in excess of cash
distributions for the related period on Residual Certificates.
TAXATION OF CERTAIN FOREIGN INVESTORS
Regular Certificates
Interest, including original issue discount, distributable to Regular
Certificateholders who are non-resident aliens, foreign corporations, or other
Non-U.S. Persons (as defined below), will be considered "portfolio interest"
and, therefore, generally will not be subject to 30% United States withholding
tax, provided that such Non-U.S. Person (i) is not a "10-percent shareholder"
within the meaning of Code Section 871(h)(3)(B) or a controlled foreign
corporation described in Code Section 881(c)(3)(C) and (ii) provides the
Trustee, or the person who would otherwise be required to withhold tax from
such distributions under Code Section 1441 or 1442, with an appropriate
statement, signed under penalties of perjury, identifying the beneficial owner
and stating, among other things, that the beneficial owner of the Regular
Certificate is a Non-U.S. Person. If such statement, or any other required
statement, is not provided, 30% withholding will apply unless reduced or
eliminated pursuant to an applicable tax treaty or unless the interest on the
Regular Certificate is effectively connected with the conduct of a trade or
business within the United States by such Non-U.S. Person. In the latter case,
such Non-U.S. Person will be subject to United States federal income tax at
regular rates. Investors who are Non-U.S. Persons should consult their own tax
advisors regarding the specific tax consequences to them of owning a Regular
Certificate. The term "NON-U.S. PERSON" means any person who is not a U.S.
Person.
The IRS recently issued final regulations (the "NEW REGULATIONS") which
would provide alternative methods of satisfying the beneficial ownership
certification requirement described above. The New Regulations are effective
January 1, 2000, although valid withholding certificates that are held on
December 31, 1999, remain valid until the earlier of December 31, 2000 or the
due date of expiration of the certificate under the rules as currently in
effect. The New Regulations would require, in the case of Regular Certificates
held by a foreign partnership, that (x) the certification described above be
provided by the partners rather than by the foreign partnership and (y) the
partnership provide certain information, including a United States taxpayer
identification number. A look-through rule would apply in the case of tiered
partnerships. Non-U.S. Persons should consult their own tax advisors
concerning the application of the certification requirements in the New
Regulations.
Residual Certificates
The Conference Committee Report to the 1986 Act indicates that amounts paid
to Residual Holders who are Non-U.S. Persons generally should be treated as
interest for purposes of the 30% (or lower treaty rate) United States
withholding tax. Treasury regulations provide that amounts distributed to
Residual Holders may qualify as "portfolio interest," subject to the
conditions described in "REGULAR CERTIFICATES" above, but only to the extent
that (i) the Mortgage Loans were issued after July 18, 1984 and (ii) the Trust
Estate or segregated pool of assets therein (as to which a separate REMIC
election will be made), to which the Residual Certificate relates, consists of
obligations issued in "registered form" within the meaning of Code Section
163(f)(1). Generally, Mortgage Loans will not be, but regular interests in
another REMIC Pool will be, considered obligations issued in registered form.
Furthermore, a Residual Holder will not be entitled to any exemption from the
30% withholding tax (or lower treaty rate) to the extent of that portion of
REMIC taxable income that constitutes an "excess inclusion." See "--Taxation
of Residual Certificates--Limitations on Offset or Exemption of REMIC Income."
If the amounts paid to Residual Holders who are Non-U.S. Persons are
effectively connected with the conduct of a trade or business within the
United States by such Non-U.S.
78
<PAGE>
Persons, 30% (or lower treaty rate) withholding will not apply. Instead, the
amounts paid to such Non-U.S. Persons will be subject to United States federal
income tax at regular rates. If 30% (or lower treaty rate) withholding is
applicable, such amounts generally will be taken into account for purposes of
withholding only when paid or otherwise distributed (or when the Residual
Certificate is disposed of) under rules similar to withholding upon
disposition of debt instruments that have original issue discount. See "--
Taxation of Residual Certificates--Tax-Related Restrictions on Transfer of
Residual Certificates--Foreign Investors" above concerning the disregard of
certain transfers having "tax avoidance potential." Investors who are Non-U.S.
Persons should consult their own tax advisors regarding the specific tax
consequences to them of owning Residual Certificates.
BACKUP WITHHOLDING
Distributions made on the Regular Certificates, and proceeds from the sale
of the Regular Certificates to or through certain brokers, may be subject to a
"backup" withholding tax under Code Section 3406 of 31% on "reportable
payments" (including interest distributions, original issue discount, and,
under certain circumstances, principal distributions) unless the Regular
Certificateholder complies with certain reporting and/or certification
procedures, including the provision of its taxpayer identification number to
the Trustee, its agent or the broker who effected the sale of the Regular
Certificate, or such Certificateholder is otherwise an exempt recipient under
applicable provisions of the Code. Any amounts to be withheld from
distribution on the Regular Certificates would be refunded by the Internal
Revenue Service or allowed as a credit against the Regular Certificateholder's
federal income tax liability. The New Regulations change certain of the rules
relating to certain presumptions currently available relating to information
reporting and backup withholding. Non-U.S. Persons are urged to contact their
own tax advisors regarding the application to them of backup withholding and
information reporting.
REPORTING REQUIREMENTS
Reports of accrued interest, original issue discount and information
necessary to compute the accrual of market discount will be made annually to
the Internal Revenue Service and to individuals, estates, non-exempt and non-
charitable trusts, and partnerships who are either holders of record of
Regular Certificates or beneficial owners who own Regular Certificates through
a broker or middleman as nominee. All brokers, nominees and all other non-
exempt holders of record of Regular Certificates (including corporations, non-
calendar year taxpayers, securities or commodities dealers, real estate
investment trusts, investment companies, common trust funds, thrift
institutions and charitable trusts) may request such information for any
calendar quarter by telephone or in writing by contacting the person
designated in Internal Revenue Service Publication 938 with respect to a
particular Series of Regular Certificates. Holders through nominees must
request such information from the nominee.
The Internal Revenue Service's Form 1066 has an accompanying Schedule Q,
Quarterly Notice to Residual Interest Holders of REMIC Taxable Income or Net
Loss Allocation. Treasury regulations require that Schedule Q be furnished by
the REMIC Pool to each Residual Holder by the end of the month following the
close of each calendar quarter (41 days after the end of a quarter under
proposed Treasury regulations) in which the REMIC Pool is in existence.
Treasury regulations require that, in addition to the foregoing
requirements, information must be furnished quarterly to Residual Holders,
furnished annually, if applicable, to holders of Regular Certificates, and
filed annually with the Internal Revenue Service concerning Code Section 67
expenses (see "Limitations on Deduction of Certain Expenses" above) allocable
to such holders. Furthermore, under such regulations, information must be
furnished quarterly to Residual Holders, furnished annually to holders of
Regular Certificates, and filed annually with the Internal Revenue Service
concerning the percentage of the REMIC Pool's assets meeting the qualified
asset tests described above under "Status of REMIC Certificates."
FEDERAL INCOME TAX CONSEQUENCES FOR CERTIFICATES AS TO WHICH NO REMIC ELECTION
IS MADE
GENERAL
In the event that no election is made to treat a Trust Estate (or a
segregated pool of assets therein) with respect to a Series of Certificates as
a REMIC, the Trust Estate will be classified as a grantor trust under subpart
E, Part 1 of subchapter J of the Code and not as an association taxable as a
corporation or a "taxable mortgage pool" within the meaning of Code Section
7701(i). Where there is no Fixed Retained Yield with respect to the Mortgage
Loans underlying the Certificates of a Series, and where such Certificates are
not designated as "STRIPPED CERTIFICATES," the holder of each such Certificate
in such Series will be treated
79
<PAGE>
as the owner of a pro rata undivided interest in the ordinary income and
corpus portions of the Trust Estate represented by its Certificate and will be
considered the beneficial owner of a pro rata undivided interest in each of
the Mortgage Loans, subject to the discussion below under "--
Recharacterization of Servicing Fees." Accordingly, the holder of a
Certificate of a particular Series will be required to report on its federal
income tax return its pro rata share of the entire income from the Mortgage
Loans represented by its Certificate, including interest at the coupon rate on
such Mortgage Loans, original issue discount (if any), prepayment fees,
assumption fees, and late payment charges received by the Servicer, in
accordance with such Certificateholder's method of accounting. A
Certificateholder generally will be able to deduct its share of the Servicing
Fee and all administrative and other expenses of the Trust Estate in
accordance with its method of accounting, provided that such amounts are
reasonable compensation for services rendered to that Trust Estate. However,
investors who are individuals, estates or trusts who own Certificates, either
directly or indirectly through certain pass-through entities, will be subject
to limitation with respect to certain itemized deductions described in Code
Section 67, including deductions under Code Section 212 for the Servicing Fee
and all such administrative and other expenses of the Trust Estate, to the
extent that such deductions, in the aggregate, do not exceed two percent of an
investor's adjusted gross income. In addition, Code Section 68 provides that
itemized deductions otherwise allowable for a taxable year of an individual
taxpayer will be reduced by the lesser of (i) 3% of the excess, if any, of
adjusted gross income over $124,500 for 1998 ($62,250 in the case of a married
individual filing a separate return) (in each case, as adjusted for inflation
for each year thereafter), or (ii) 80% of the amount of itemized deductions
otherwise allowable for such year. As a result, such investors holding
Certificates, directly or indirectly through a pass-through entity, may have
aggregate taxable income in excess of the aggregate amount of cash received on
such Certificates with respect to interest at the pass-through rate or as
discount income on such Certificates. In addition, such expenses are not
deductible at all for purposes of computing the alternative minimum tax, and
may cause such investors to be subject to significant additional tax
liability. Moreover, where there is Fixed Retained Yield with respect to the
Mortgage Loans underlying a Series of Certificates or where the servicing fees
are in excess of reasonable servicing compensation, the transaction will be
subject to the application of the "stripped bond" and "stripped coupon" rules
of the Code, as described below under "--Stripped Certificates" and "--
Recharacterization of Servicing Fees," respectively.
TAX STATUS
Cadwalader, Wickersham & Taft has advised the Seller that, except as
described below with respect to Stripped Certificates:
1. A Certificate owned by a "domestic building and loan association"
within the meaning of Code Section 7701(a)(19) will be considered to
represent "loans. . .secured by an interest in real property which
is. . .residential real property" within the meaning of Code Section
7701(a)(19)(C)(v), provided that the real property securing the Mortgage
Loans represented by that Certificate is of the type described in such
section of the Code.
2. A Certificate owned by a real estate investment trust will be
considered to represent "real estate assets" within the meaning of Code
Section 856(c)(4)(A) to the extent that the assets of the related Trust
Estate consist of qualified assets, and interest income on such assets will
be considered "interest on obligations secured by mortgages on real
property" to such extent within the meaning of Code Section 856(c)(3)(B).
3. A Certificate owned by a REMIC will be considered to represent an
"obligation (including any participation or certificate of beneficial
ownership therein) which is principally secured by an interest in real
property" within the meaning of Code Section 860G(a)(3)(A) to the extent
that the assets of the related Trust Estate consist of "qualified
mortgages" within the meaning of Code Section 860G(a)(3).
4. A Certificate owned by a "financial asset securitization investment
trust" within the meaning of Code Section 860L(c) will be considered to
represent "permitted assets" within the meaning of Code Section 860L(c) to
the extent that the assets of the Trust Estate consist of "debt
instruments" or other permitted assets within the meaning of Code Section
860L(c).
An issue arises as to whether Buy-Down Loans may be characterized in their
entirety under the Code provisions cited in clauses 1 and 2 of the immediately
preceding paragraph. There is indirect authority supporting treatment of an
investment in a Buy-Down Loan as entirely secured by real property if the fair
market value of the real property securing the loan exceeds the principal
amount of the loan at the time of issuance or acquisition, as the case may be.
There is no assurance that the treatment described above is proper.
Accordingly, Certificateholders are urged to consult their own tax advisors
concerning the effects of such arrangements on the characterization of such
Certificateholder's investment for federal income tax purposes.
80
<PAGE>
PREMIUM AND DISCOUNT
Certificateholders are advised to consult with their tax advisors as to the
federal income tax treatment of premium and discount arising either upon
initial acquisition of Certificates or thereafter.
Premium
The treatment of premium incurred upon the purchase of a Certificate will be
determined generally as described above under "--Federal Income Tax
Consequences for REMIC Certificates--Taxation of Residual Certificates--
Treatment of Certain Items of REMIC Income and Expense--Premium."
Original Issue Discount
The original issue discount rules of Code Sections 1271 through 1275 will be
applicable to a Certificateholder's interest in those Mortgage Loans as to
which the conditions for the application of those sections are met. Rules
regarding periodic inclusion of original issue discount income are applicable
to mortgages of corporations originated after May 27, 1969, mortgages of
noncorporate mortgagors (other than individuals) originated after July 1,
1982, and mortgages of individuals originated after March 2, 1984. Under the
OID Regulations, such original issue discount could arise by the charging of
points by the originator of the mortgages in an amount greater than the
statutory de minimis exception, including a payment of points that is
currently deductible by the borrower under applicable Code provisions or,
under certain circumstances, by the presence of "teaser" rates on the Mortgage
Loans. See "--Stripped Certificates" below regarding original issue discount
on Stripped Certificates.
Original issue discount generally must be reported as ordinary gross income
as it accrues under a constant interest method that takes into account the
compounding of interest, in advance of the cash attributable to such income.
Unless indicated otherwise in the applicable Prospectus Supplement, no
prepayment assumption will be assumed for purposes of such accrual. However,
Code Section 1272 provides for a reduction in the amount of original issue
discount includible in the income of a holder of an obligation that acquires
the obligation after its initial issuance at a price greater than the sum of
the original issue price and the previously accrued original issue discount,
less prior payments of principal. Accordingly, if such Mortgage Loans acquired
by a Certificateholder are purchased at a price equal to the then unpaid
principal amount of such Mortgage Loans, no original issue discount
attributable to the difference between the issue price and the original
principal amount of such Mortgage Loans (i.e., points) will be includible by
such holder.
Market Discount
Certificateholders also will be subject to the market discount rules to the
extent that the conditions for application of those sections are met. Market
discount on the Mortgage Loans will be determined and will be reported as
ordinary income generally in the manner described above under "Federal Income
Tax Consequences for REMIC Certificates--Taxation of Regular Certificates--
Market Discount," except that the ratable accrual methods described therein
will not apply. Rather, the holder will accrue market discount pro rata over
the life of the Mortgage Loans, unless the constant yield method is elected.
Unless indicated otherwise in the applicable Prospectus Supplement, no
prepayment assumption will be assumed for purposes of such accrual.
RECHARACTERIZATION OF SERVICING FEES
If the servicing fees paid to a Servicer were deemed to exceed reasonable
servicing compensation, the amount of such excess would represent neither
income nor a deduction to Certificateholders. In this regard, there are no
authoritative guidelines for federal income tax purposes as to either the
maximum amount of servicing compensation that may be considered reasonable in
the context of this or similar transactions or whether, in the case of the
Certificate, the reasonableness of servicing compensation should be determined
on a weighted average or loan-by-loan basis. If a loan-by-loan basis is
appropriate, the likelihood that such amount would exceed reasonable servicing
compensation as to some of the Mortgage Loans would be increased. Recently
issued Internal Revenue Service guidance indicates that a servicing fee in
excess of reasonable compensation ("excess servicing") will cause the Mortgage
Loans to be treated under the "stripped bond" rules. Such guidance provides
safe harbors for servicing deemed to be reasonable and requires taxpayers to
demonstrate that the value of servicing fees in excess of such amounts is not
greater than the value of the services provided.
81
<PAGE>
Accordingly, if the Internal Revenue Service's approach is upheld, a
Servicer who receives a servicing fee in excess of such amounts would be
viewed as retaining an ownership interest in a portion of the interest
payments on the Mortgage Loans. Under the rules of Code Section 1286, the
separation of ownership of the right to receive some or all of the interest
payments on an obligation from the right to receive some or all of the
principal payments on the obligation would result in treatment of such
Mortgage Loans as "stripped coupons" and "stripped bonds." Subject to the de
minimis rule discussed below under "--Stripped Certificates," each stripped
bond or stripped coupon could be considered for this purpose as a non-interest
bearing obligation issued on the date of issue of the Certificates, and the
original issue discount rules of the Code would apply to the holder thereof.
While Certificateholders would still be treated as owners of beneficial
interests in a grantor trust for federal income tax purposes, the corpus of
such trust could be viewed as excluding the portion of the Mortgage Loans the
ownership of which is attributed to the Servicer, or as including such portion
as a second class of equitable interest. Applicable Treasury regulations treat
such an arrangement as a fixed investment trust, since the multiple classes of
trust interests should be treated as merely facilitating direct investments in
the trust assets and the existence of multiple classes of ownership interests
is incidental to that purpose. In general, such a recharacterization should
not have any significant effect upon the timing or amount of income reported
by a Certificateholder, except that the income reported by a cash method
holder may be slightly accelerated. See "Stripped Certificates" below for a
further description of the federal income tax treatment of stripped bonds and
stripped coupons.
SALE OR EXCHANGE OF CERTIFICATES
Upon sale or exchange of a Certificate, a Certificateholder will recognize
gain or loss equal to the difference between the amount realized on the sale
and its aggregate adjusted basis in the Mortgage Loans and other assets
represented by the Certificate. In general, the aggregate adjusted basis will
equal the Certificateholder's cost for the Certificate, increased by the
amount of any income previously reported with respect to the Certificate and
decreased by the amount of any losses previously reported with respect to the
Certificate and the amount of any distributions received thereon. Except as
provided above with respect to market discount on any Mortgage Loans, and
except for certain financial institutions subject to the provisions of Code
Section 582(c), any such gain or loss generally would be capital gain or loss
if the Certificate was held as a capital asset. However, gain on the sale of a
Certificate will be treated as ordinary income (i) if a Certificate is held as
part of a "conversion transaction" as defined in Code Section 1258(c), up to
the amount of interest that would have accrued on the Certificateholder's net
investment in the conversion transaction at 120% of the appropriate applicable
Federal rate in effect at the time the taxpayer entered into the transaction
minus any amount previously treated as ordinary income with respect to any
prior disposition of property that was held as a part of such transaction or
(ii) in the case of a non-corporate taxpayer, to the extent such taxpayer has
made an election under Code Section 163(d)(4) to have net capital gains taxed
as investment income at ordinary income rates. Capital gains of certain
noncorporate taxpayers generally are subject to a lower maximum tax rate (20%)
than ordinary income of such taxpayers (39.6%) for property held for more than
one year. The maximum tax rate for corporations is the same with respect to
both ordinary income and capital gains.
STRIPPED CERTIFICATES
General
Pursuant to Code Section 1286, the separation of ownership of the right to
receive some or all of the principal payments on an obligation from ownership
of the right to receive some or all of the interest payments results in the
creation of "stripped bonds" with respect to principal payments and "stripped
coupons" with respect to interest payments. For purposes of this discussion,
Certificates that are subject to those rules will be referred to as "STRIPPED
CERTIFICATES." The Certificates will be subject to those rules if (i) the
Seller or any of its affiliates retains (for its own account or for purposes
of resale), in the form of Fixed Retained Yield or otherwise, an ownership
interest in a portion of the payments on the Mortgage Loans, (ii) the Seller
or any of its affiliates is treated as having an ownership interest in the
Mortgage Loans to the extent it is paid (or retains) servicing compensation in
an amount greater than reasonable consideration for servicing the Mortgage
Loans (see "--Recharacterization of Servicing Fees" above), and (iii) a Class
of Certificates are issued in two or more Classes or Subclasses representing
the right to non-pro-rata percentages of the interest and principal payments
on the Mortgage Loans.
In general, a holder of a Stripped Certificate will be considered to own
"stripped bonds" with respect to its pro rata share of all or a portion of the
principal payments on each Mortgage Loan and/or "stripped coupons" with
respect to its pro rata share of all or a portion of the interest payments on
each Mortgage Loan, including the Stripped Certificate's allocable share of
the servicing
82
<PAGE>
fees paid to a Servicer, to the extent that such fees represent reasonable
compensation for services rendered. See the discussion above under "--
Recharacterization of Servicing Fees." Although not free from doubt, for
purposes of reporting to Stripped Certificateholders, the servicing fees will
be allocated to the Stripped Certificates in proportion to the respective
entitlements to distributions of each Class (or Subclass) of Stripped
Certificates for the related period or periods. The holder of a Stripped
Certificate generally will be entitled to a deduction each year in respect of
the servicing fees, as described above under "--General," subject to the
limitation described therein.
Code Section 1286 treats a stripped bond or a stripped coupon generally as
an obligation issued at an original issue discount on the date that such
stripped interest is purchased. Although the treatment of Stripped
Certificates for federal income tax purposes is not clear in certain respects
at this time, particularly where such Stripped Certificates are issued with
respect to a Mortgage Pool containing variable-rate Mortgage Loans, the Seller
has been advised by counsel that (i) the Trust Estate will be treated as a
grantor trust under subpart E, Part I of subchapter J of the Code and not as
an association taxable as a corporation or a "taxable mortgage pool" within
the meaning of Code Section 7701(i), and (ii) each Stripped Certificate should
be treated as a single installment obligation for purposes of calculating
original issue discount and gain or loss on disposition. This treatment is
based on the interrelationship of Code Section 1286, Code Sections 1272
through 1275, and the OID Regulations. Although it is possible that
computations with respect to Stripped Certificates could be made in one of the
ways described below under "--Taxation of Stripped Certificates--Possible
Alternative Characterizations," the OID Regulations state, in general, that
two or more debt instruments issued by a single issuer to a single investor in
a single transaction should be treated as a single debt instrument.
Accordingly, for OID purposes, all payments on any Stripped Certificates
should be aggregated and treated as though they were made on a single debt
instrument. The Pooling and Servicing Agreement will require that the Trustee
make and report all computations described below using this aggregate
approach, unless substantial legal authority requires otherwise.
Furthermore, Treasury regulations issued December 28, 1992 provide for
treatment of a Stripped Certificate as a single debt instrument issued on the
date it is purchased for purposes of calculating any original issue discount.
In addition, under these regulations, a Stripped Certificate that represents a
right to payments of both interest and principal may be viewed either as
issued with original issue discount or market discount (as described below),
at a de minimis original issue discount, or, presumably, at a premium. This
treatment indicates that the interest component of such a Stripped Certificate
would be treated as qualified stated interest under the OID Regulations,
assuming it is not an interest-only or super-premium Stripped Certificate.
Further, these final regulations provide that the purchaser of such a Stripped
Certificate will be required to account for any discount as market discount
rather than original issue discount if either (i) the initial discount with
respect to the Stripped Certificate was treated as zero under the de minimis
rule, or (ii) no more than 100 basis points in excess of reasonable servicing
is stripped off the related Mortgage Loans. Any such market discount would be
reportable as described above under "Federal Income Tax Consequences for REMIC
Certificates--Taxation of Regular Certificates--Market Discount," without
regard to the de minimis rule therein, assuming that a prepayment assumption
is employed in such computation.
Status of Stripped Certificates
No specific legal authority exists as to whether the character of the
Stripped Certificates, for federal income tax purposes, will be the same as
that of the Mortgage Loans. Although the issue is not free from doubt, counsel
has advised the Seller that Stripped Certificates owned by applicable holders
should be considered to represent "real estate assets" within the meaning of
Code Section 856(c)(4)(A), "obligation[s] . . . principally secured by an
interest in real property" within the meaning of Code Section 860G(a)(3)(A),
"loans . . . secured by an interest in real property" within the meaning of
Code Section 7701(a)(19)(C)(v) and "permitted assets" within the meaning of
Code Section 860L(c), and interest (including original issue discount) income
attributable to Stripped Certificates should be considered to represent
"interest on obligations secured by mortgages on real property" within the
meaning of Code Section 856(c)(3)(B), provided that in each case the Mortgage
Loans and interest on such Mortgage Loans qualify for such treatment. The
application of such Code provisions to Buy-Down Loans is uncertain. See "--Tax
Status" above.
Taxation of Stripped Certificates
Original Issue Discount. Except as described above under "--General," each
Stripped Certificate will be considered to have been issued at an original
issue discount for federal income tax purposes. Original issue discount with
respect to a Stripped Certificate must be included in ordinary income as it
accrues, in accordance with a constant interest method that takes into account
83
<PAGE>
the compounding of interest, which may be prior to the receipt of the cash
attributable to such income. Based in part on the OID Regulations and the
amendments to the original issue discount sections of the Code made by the
1986 Act, the amount of original issue discount required to be included in the
income of a holder of a Stripped Certificate (referred to in this discussion
as a "STRIPPED CERTIFICATEHOLDER") in any taxable year likely will be computed
generally as described above under "--Federal Income Tax Consequences for
REMIC Certificates--Taxation of Regular Certificates--Original Issue Discount"
and "--Variable Rate Regular Certificates." However, with the apparent
exception of a Stripped Certificate qualifying as a market discount obligation
as described above under "--General," the issue price of a Stripped
Certificate will be the purchase price paid by each holder thereof, and the
stated redemption price at maturity will include the aggregate amount of the
payments to be made on the Stripped Certificate to such Stripped
Certificateholder, presumably under the Prepayment Assumption, other than
qualified stated interest.
If the Mortgage Loans prepay at a rate either faster or slower than that
under the Prepayment Assumption, a Stripped Certificateholder's recognition of
original issue discount will be either accelerated or decelerated and the
amount of such original issue discount will be either increased or decreased
depending on the relative interests in principal and interest on each Mortgage
Loan represented by such Stripped Certificateholder's Stripped Certificate.
While the matter is not free from doubt, the holder of a Stripped Certificate
should be entitled in the year that it becomes certain (assuming no further
prepayments) that the holder will not recover a portion of its adjusted basis
in such Stripped Certificate to recognize a loss (which may be a capital loss)
equal to such portion of unrecoverable basis.
As an alternative to the method described above, the fact that some or all
of the interest payments with respect to the Stripped Certificates will not be
made if the Mortgage Loans are prepaid could lead to the interpretation that
such interest payments are "contingent" within the meaning of the OID
Regulations. The OID Regulations, as they relate to the treatment of
contingent interest, are by their terms not applicable to prepayable
securities such as the Stripped Certificates. However, if final regulations
dealing with contingent interest with respect to the Stripped Certificates
apply the same principles as the OID Regulations, such regulations may lead to
different timing of income inclusion than would be the case under the OID
Regulations for non-contingent debt instruments. Furthermore, application of
such principles could lead to the characterization of gain on the sale of
contingent interest Stripped Certificates as ordinary income. Investors should
consult their tax advisors regarding the appropriate tax treatment of Stripped
Certificates.
Sale or Exchange of Stripped Certificates. Sale or exchange of a Stripped
Certificate prior to its maturity will result in gain or loss equal to the
difference, if any, between the amount received and the Stripped
Certificateholder's adjusted basis in such Stripped Certificate, as described
above under "--Federal Income Tax Consequences for REMIC Certificates--
Taxation of Regular Certificates--Sale or Exchange of Regular Certificates."
To the extent that a subsequent purchaser's purchase price is exceeded by the
remaining payments on the Stripped Certificates, such subsequent purchaser
will be required for federal income tax purposes to accrue and report such
excess as if it were original issue discount in the manner described above. It
is not clear for this purpose whether the assumed prepayment rate that is to
be used in the case of a Stripped Certificateholder other than an original
Stripped Certificateholder should be the Prepayment Assumption or a new rate
based on the circumstances at the date of subsequent purchase.
Purchase of More Than One Class of Stripped Certificates. When an investor
purchases more than one Class of Stripped Certificates, it is currently
unclear whether for federal income tax purposes such Classes of Stripped
Certificates should be treated separately or aggregated for purposes of the
rules described above.
Possible Alternative Characterizations. The characterizations of the
Stripped Certificates discussed above are not the only possible
interpretations of the applicable Code provisions. For example, the Stripped
Certificateholder may be treated as the owner of (i) one installment
obligation consisting of such Stripped Certificate's pro rata share of the
payments attributable to principal on each Mortgage Loan and a second
installment obligation consisting of such Stripped Certificate's pro rata
share of the payments attributable to interest on each Mortgage Loan, (ii) as
many stripped bonds or stripped coupons as there are scheduled payments of
principal and/or interest on each Mortgage Loan, or (iii) a separate
installment obligation for each Mortgage Loan, representing the Stripped
Certificate's pro rata share of payments of principal and/or interest to be
made with respect thereto. Alternatively, the holder of one or more Classes of
Stripped Certificates may be treated as the owner of a pro rata fractional
undivided interest in each Mortgage Loan to the extent that such Stripped
Certificate, or Classes of Stripped Certificates in the aggregate, represent
the same pro rata portion of principal and interest on each such Mortgage
Loan, and a stripped bond or stripped coupon (as the case may be), treated as
an installment obligation or contingent payment obligation, as to the
remainder. Final regulations issued on
84
<PAGE>
December 28, 1992 regarding original issue discount on stripped obligations
make the foregoing interpretations less likely to be applicable. The preamble
to those regulations states that they are premised on the assumption that an
aggregation approach is appropriate for determining whether original issue
discount on a stripped bond or stripped coupon is de minimis, and solicits
comments on appropriate rules for aggregating stripped bonds and stripped
coupons under Code Section 1286.
Because of these possible varying characterizations of Stripped Certificates
and the resultant differing treatment of income recognition, Stripped
Certificateholders are urged to consult their own tax advisors regarding the
proper treatment of Stripped Certificates for federal income tax purposes.
REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
The Master Servicer will furnish, within a reasonable time after the end of
each calendar year, to each Certificateholder or Stripped Certificateholder at
any time during such year, such information (prepared on the basis described
above) as is necessary to enable such Certificateholders to prepare their
federal income tax returns. Such information will include the amount of
original issue discount accrued on Certificates held by persons other than
Certificateholders exempted from the reporting requirements. The amount
required to be reported by the Master Servicer may not be equal to the proper
amount of original issue discount required to be reported as taxable income by
a Certificateholder, other than an original Certificateholder that purchased
at the issue price. In particular, in the case of Stripped Certificates,
unless provided otherwise in the applicable Prospectus Supplement, such
reporting will be based upon a representative initial offering price of each
Class of Stripped Certificates. The Master Servicer will also file such
original issue discount information with the Internal Revenue Service. If a
Certificateholder fails to supply an accurate taxpayer identification number
or if the Secretary of the Treasury determines that a Certificateholder has
not reported all interest and dividend income required to be shown on his
federal income tax return, 31% backup withholding may be required in respect
of any reportable payments, as described above under "--Federal Income Tax
Consequences for REMIC Certificates--Backup Withholding."
TAXATION OF CERTAIN FOREIGN INVESTORS
To the extent that a Certificate evidences ownership in Mortgage Loans that
are issued on or before July 18, 1984, interest or original issue discount
paid by the person required to withhold tax under Code Section 1441 or 1442 to
Non-U.S. Persons generally will be subject to 30% United States withholding
tax, or such lower rate as may be provided for interest by an applicable tax
treaty. Accrued original issue discount recognized by the Certificateholder on
the sale or exchange of such a Certificate also will be subject to federal
income tax at the same rate.
Treasury regulations provide that interest or original issue discount paid
by the Trustee or other withholding agent to a Non-U.S. Person evidencing
ownership interest in Mortgage Loans issued after July 18, 1984 will be
"portfolio interest" and will be treated in the manner, and such persons will
be subject to the same certification requirements, described above under "--
Federal Income Tax Consequences for REMIC Certificates--Taxation of Certain
Foreign Investors--Regular Certificates."
ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain requirements on those employee benefit plans to which it
applies ("PLANS") and on those persons who are fiduciaries with respect to
such Plans. The following is a general discussion of such requirements, and
certain applicable exceptions to and administrative exemptions from such
requirements. For purposes of this discussion, a person investing on behalf of
an individual retirement account established under Code Section 408 (an "IRA")
is regarded as a fiduciary and the IRA as a Plan.
Before purchasing any Certificates, a Plan fiduciary should consult with its
counsel and determine whether there exists any prohibition to such purchase
under the requirements of ERISA, whether any prohibited transaction exemption
such as PTE 83-1 or any individual administrative exemption (as described
below) applies, including whether the appropriate conditions set forth therein
would be met, or whether any statutory prohibited transaction exemption is
applicable, and further should consult the applicable Prospectus Supplement
relating to such Series of Certificates.
85
<PAGE>
CERTAIN REQUIREMENTS UNDER ERISA
General
In accordance with ERISA's general fiduciary standards, before investing in
a Certificate a Plan fiduciary should determine whether to do so is permitted
under the governing Plan instruments and is appropriate for the Plan in view
of its overall investment policy and the composition and diversification of
its portfolio. A Plan fiduciary should especially consider the ERISA
requirement of investment prudence and the sensitivity of the return on the
Certificates to the rate of principal repayments (including prepayments) on
the Mortgage Loans, as discussed in "Prepayment and Yield Considerations"
herein.
Parties in Interest/Disqualified Persons
Other provisions of ERISA (and corresponding provisions of the Code)
prohibit certain transactions involving the assets of a Plan and persons who
have certain specified relationships to the Plan (so-called "parties in
interest" within the meaning of ERISA or "disqualified persons" within the
meaning of the Code). The Seller, the Master Servicer, any Servicer or the
Trustee or certain affiliates thereof might be considered or might become
"parties in interest" or "disqualified persons" with respect to a Plan. If so,
the acquisition or holding of Certificates by or on behalf of such Plan could
be considered to give rise to a "prohibited transaction" within the meaning of
ERISA and the Code unless an administrative exemption described below or some
other exemption is available.
Special caution should be exercised before the assets of a Plan (including
assets that may be held in an insurance company's separate or general accounts
where assets in such accounts may be deemed Plan assets for purposes of ERISA)
are used to purchase a Certificate if, with respect to such assets, the
Seller, the Master Servicer, any Servicer or the Trustee or an affiliate
thereof either: (a) has investment discretion with respect to the investment
of such assets of such Plan; or (b) has authority or responsibility to give,
or regularly gives, investment advice with respect to such assets for a fee
and pursuant to an agreement or understanding that such advice will serve as a
primary basis for investment decisions with respect to such assets and that
such advice will be based on the particular investment needs of the Plan.
Delegation of Fiduciary Duty
Further, if the assets included in a Trust Estate were deemed to constitute
Plan assets, it is possible that a Plan's investment in the Certificates might
be deemed to constitute a delegation, under ERISA, of the duty to manage Plan
assets by the fiduciary deciding to invest in the Certificates, and certain
transactions involved in the operation of the Trust Estate might be deemed to
constitute prohibited transactions under ERISA and the Code. Neither ERISA nor
the Code defines the term "plan assets."
The U.S. Department of Labor (the "DEPARTMENT") has issued regulations (the
"REGULATIONS") concerning whether or not a Plan's assets would be deemed to
include an interest in the underlying assets of an entity (such as a Trust
Estate) for purposes of the reporting and disclosure and general fiduciary
responsibility provisions of ERISA, as well as for the prohibited transaction
provisions of ERISA and the Code, if the Plan acquires an "equity interest"
(such as a Certificate) in such an entity.
Certain exceptions are provided in the Regulations whereby an investing
Plan's assets would be deemed merely to include its interest in the
Certificates instead of being deemed to include an interest in the assets of a
Trust Estate. However, it cannot be predicted in advance nor can there be any
continuing assurance whether such exceptions may be met, because of the
factual nature of certain of the rules set forth in the Regulations. For
example, one of the exceptions in the Regulations states that the underlying
assets of an entity will not be considered "plan assets" if less than 25% of
the value of all classes of equity interests are held by "benefit plan
investors," which are defined as Plans, IRAs, and employee benefit plans not
subject to ERISA (for example, governmental plans), and any entity whose
assets include "plan assets" by reason of benefit plan investment in such
entity; this exception is tested immediately after each acquisition of an
equity interest in the entity, whether upon initial issuance or in the
secondary market.
ADMINISTRATIVE EXEMPTIONS
Individual Administrative Exemptions
Several underwriters of mortgage-backed securities have applied for and
obtained ERISA prohibited transaction exemptions (each, an "UNDERWRITER'S
EXEMPTION") which are in some respects broader than Prohibited Transaction
Class Exemption 83-1
86
<PAGE>
(described below). Such exemptions can only apply to mortgage-backed
securities which, among other conditions, are sold in an offering with respect
to which such underwriter serves as the sole or a managing underwriter, or as
a selling or placement agent. If such an Underwriter's Exemption might be
applicable to a Series of Certificates, the applicable Prospectus Supplement
will refer to such possibility.
Among the conditions that must be satisfied for an Underwriter's Exemption
to apply are the following:
(1) The acquisition of Certificates by a Plan is on terms (including the
price for the Certificates) that are at least as favorable to the Plan as
they would be in an arm's length transaction with an unrelated party;
(2) The rights and interests evidenced by Certificates acquired by the
Plan are not subordinated to the rights and interests evidenced by other
Certificates of the Trust Estate;
(3) The Certificates acquired by the Plan have received a rating at the
time of such acquisition that is one of the three highest generic rating
categories from either Standard & Poor's ("S&P"), Moody's Investors
Service, Inc. ("MOODY'S"), Duff & Phelps Credit Rating Co. ("DCR") or Fitch
IBCA, Inc. ("FITCH");
(4) The Trustee must not be an affiliate of any other member of the
Restricted Group (as defined below);
(5) The sum of all payments made to and retained by the underwriter in
connection with the distribution of Certificates represents not more than
reasonable compensation for underwriting the Certificates. The sum of all
payments made to and retained by the Seller pursuant to the assignment of
the Mortgage Loans to the Trust Estate represents not more than the fair
market value of such Mortgage Loans. The sum of all payments made to and
retained by the Servicer (and any other servicer) represents not more than
reasonable compensation for such person's services under the Pooling and
Servicing Agreement and reimbursement of such person's reasonable expenses
in connection therewith; and
(6) The Plan investing in the Certificates is an "accredited investor" as
defined in Rule 501(a)(1) of Regulation D of the Commission under the
Securities Act of 1933, as amended (the "SECURITIES ACT").
The Trust Estate must also meet the following requirements:
(i) the assets of the Trust Estate must consist solely of assets of
the type that have been included in other investment pools in the
marketplace;
(ii) certificates in such other investment pools must have been rated
in one of the three highest rating categories of S&P, Moody's, Fitch or
DCR for at least one year prior to the Plan's acquisition of the
Certificates; and
(iii) certificates evidencing interests in such other investment pools
must have been purchased by investors other than Plans for at least one
year prior to any Plan's acquisition of the Certificates.
If the conditions to an Underwriter's Exemption are met, whether or not a
Plan's assets would be deemed to include an ownership interest in the Mortgage
Loans in a mortgage pool, the acquisition, holding and resale of the
Certificates by Plans would be exempt from the prohibited transaction
provisions of ERISA and the Code.
Moreover, an Underwriter's Exemption can provide relief from certain self-
dealing/conflict of interest prohibited transactions that may occur if a Plan
fiduciary causes a Plan to acquire Certificates in a Trust Estate in which the
fiduciary (or its affiliate) is an obligor on the Mortgage Loans held in the
Trust Estate provided that, among other requirements: (i) in the case of an
acquisition in connection with the initial issuance of Certificates, at least
fifty percent of each class of Certificates in which Plans have invested is
acquired by persons independent of the Restricted Group and at least fifty
percent of the aggregate interest in the Trust Estate is acquired by persons
independent of the Restricted Group (as defined below); (ii) such fiduciary
(or its affiliate) is an obligor with respect to five percent or less of the
fair market value of the Mortgage Loans contained in the Trust Estate; (iii)
the Plan's investment in Certificates of any Class does not exceed twenty-five
percent of all of the Certificates of that Class outstanding at the time of
the acquisition and (iv) immediately after the acquisition no more than
twenty-five percent of the assets of any Plan with respect to which such
person is a fiduciary are invested in Certificates representing an interest in
one or more trusts containing assets sold or served by the same entity.
An Underwriter's Exemption does not apply to Plans sponsored by the Seller,
the underwriter specified in the applicable Prospectus Supplement, the Master
Servicer, the Trustee, the Servicer, any obligor with respect to Mortgage
Loans included in the
87
<PAGE>
Trust Estate constituting more than five percent of the aggregate unamortized
principal balance of the assets in the Trust Estate, or any affiliate of such
parties (the "RESTRICTED GROUP").
PTE 83-1
Prohibited Transaction Class Exemption 83-1 for Certain Transactions
Involving Mortgage Pool Investment Trusts ("PTE 83-1") permits certain
transactions involving the creation, maintenance and termination of certain
residential mortgage pools and the acquisition and holding of certain
residential mortgage pool pass-through certificates by Plans, whether or not
the Plan's assets would be deemed to include an ownership interest in the
mortgages in such mortgage pools, and whether or not such transactions would
otherwise be prohibited under ERISA.
The term "mortgage pool pass-through certificate" is defined in PTE 83-1 as
"a certificate representing a beneficial undivided fractional interest in a
mortgage pool and entitling the holder of such a certificate to pass-through
payment of principal and interest from the pooled mortgage loans, less any
fees retained by the pool sponsor." It appears that, for purposes of PTE 83-1,
the term "mortgage pool pass-through certificate" would include Certificates
issued in a single Class or in multiple Classes that evidence the beneficial
ownership of both a specified percentage of future interest payments (after
permitted deductions) and a specified percentage of future principal payments
on a Trust Estate.
However, it appears that PTE 83-1 does or might not apply to the purchase
and holding of (a) Certificates that evidence the beneficial ownership only of
a specified percentage of future interest payments (after permitted
deductions) on a Trust Estate or only of a specified percentage of future
principal payments on a Trust Estate, (b) Residual Certificates, (c)
Certificates evidencing ownership interests in a Trust Estate which includes
Mortgage Loans secured by multifamily residential properties or shares issued
by cooperative housing corporations, or (d) Certificates which are
subordinated to other Classes of Certificates of such Series. Accordingly,
unless exemptive relief other than PTE 83-1 applies, Plans should not purchase
any such Certificates.
PTE 83-1 sets forth "general conditions" and "specific conditions" to its
applicability. Section II of PTE 83-1 sets forth the following general
conditions to the application of the exemption: (i) the maintenance of a
system of insurance or other protection for the pooled mortgage loans or the
property securing such loans, and for indemnifying certificateholders against
reductions in pass-through payments due to property damage or defaults in loan
payments; (ii) the existence of a pool trustee who is not an affiliate of the
pool sponsor; and (iii) a requirement that the sum of all payments made to and
retained by the pool sponsor, and all funds inuring to the benefit of the pool
sponsor as a result of the administration of the mortgage pool, must represent
not more than adequate consideration for selling the mortgage loans plus
reasonable compensation for services provided by the pool sponsor to the pool.
The system of insurance or protection referred to in clause (i) above must
provide such protection and indemnification up to an amount not less than the
greater of one percent of the aggregate unpaid principal balance of the pooled
mortgages or the unpaid principal balance of the largest mortgage in the pool.
It should be noted that in promulgating PTE 83-1 (and a predecessor
exemption), the Department did not have under its consideration interests in
pools of the exact nature as some of the Certificates described herein.
EXEMPT PLANS
Employee benefit plans which are governmental plans (as defined in Section
3(32) of ERISA), and certain church plans (as defined in Section 3(33) of
ERISA) are not subject to ERISA requirements and assets of such plans may be
invested in Certificates without regard to the ERISA considerations described
above but such plans may be subject to the provisions of other applicable
federal and state law.
UNRELATED BUSINESS TAXABLE INCOME--RESIDUAL CERTIFICATES
The purchase of a Residual Certificate by any employee benefit plan
qualified under Code Section 401(a) and exempt from taxation under Code
Section 501(a), including most varieties of ERISA Plans, may give rise to
"unrelated business taxable income" as described in Code Sections 511-515 and
860E. Further, prior to the purchase of Residual Certificates, a prospective
transferee may be required to provide an affidavit to a transferor that it is
not, nor is it purchasing a Residual Certificate on behalf of, a "DISQUALIFIED
ORGANIZATION," which term as defined above includes certain tax-exempt
entities not subject to Code Section 511 such as certain governmental plans,
as discussed above under the caption "Certain Federal Income Tax
Consequences--
88
<PAGE>
Federal Income Tax Consequences for REMIC Certificates--Taxation of Residual
Certificates--Tax-Related Restrictions on Transfer of Residual Certificates--
Disqualified Organizations."
DUE TO THE COMPLEXITY OF THESE RULES AND THE PENALTIES IMPOSED UPON PERSONS
INVOLVED IN PROHIBITED TRANSACTIONS, IT IS PARTICULARLY IMPORTANT THAT
POTENTIAL INVESTORS WHO ARE PLAN FIDUCIARIES CONSULT WITH THEIR COUNSEL
REGARDING THE CONSEQUENCES UNDER ERISA OF THEIR ACQUISITION AND OWNERSHIP OF
CERTIFICATES.
THE SALE OF CERTIFICATES TO A PLAN IS IN NO RESPECT A REPRESENTATION BY THE
SELLER OR THE APPLICABLE UNDERWRITER THAT THIS INVESTMENT MEETS ALL RELEVANT
LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY PLANS GENERALLY OR ANY
PARTICULAR PLAN, OR THAT THIS INVESTMENT IS APPROPRIATE FOR PLANS GENERALLY OR
ANY PARTICULAR PLAN.
LEGAL INVESTMENT
As will be specified in the applicable Prospectus Supplement, certain
Classes of Certificates will constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended
("SMMEA"), so long as (i) they are rated in one of the two highest rating
categories by at least one Rating Agency, and (ii) are part of a Series
representing interests in a Trust Estate consisting of Mortgage Loans
originated by certain types of originators specified in SMMEA. As "mortgage
related securities," such Classes will constitute legal investments for
persons, trusts, corporations, partnerships, associations, business trusts and
business entities (including but not limited to state-chartered depository
institutions, insurance companies and pension funds) created pursuant to or
existing under the laws of the United States or of any state (including the
District of Columbia and Puerto Rico) whose authorized investments are subject
to state regulation to the same extent that, under applicable law, obligations
issued by or guaranteed as to principal and interest by the United States or
any agency or instrumentality thereof constitute legal investments for such
entities. Pursuant to SMMEA, a number of states enacted legislation, on or
before the October 3, 1991 cut-off for such enactments, limiting to varying
extents the ability of certain entities (in particular, insurance companies)
to invest in "mortgage related securities," in most cases by requiring the
affected investors to rely solely upon existing state law, and not SMMEA.
Accordingly, the investors affected by such legislation will be authorized to
invest in the Certificates only to the extent provided in such legislation.
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in mortgage
related securities without limitation as to the percentage of their assets
represented thereby, federal credit unions may invest in mortgage related
securities, and national banks may purchase mortgage related securities for
their own account without regard to the limitations generally applicable to
investment securities set forth in 12 U.S.C. (S) 24 (Seventh), subject in each
case to such regulations as the applicable federal regulatory authority may
prescribe. In this connection, the Office of the Comptroller of the Currency
(the "OCC") has amended 12 C.F.R. Part 1 to authorize national banks to
purchase and sell for their own account, without limitation as to a percentage
of the bank's capital and surplus (but subject to compliance with certain
general standards in 12 C.F.R. (S) 1.5 concerning "safety and soundness" and
retention of credit information), certain "Type IV securities," defined in 12
C.F.R. (S) 1.2(1) to include certain "residential mortgage-related
securities." As so defined, "residential mortgage-related security" means, in
relevant part, "mortgage related security" within the meaning of SMMEA. The
National Credit Union Administration (the "NCUA") has adopted rules, codified
at 12 C.F.R. Part 703, which permit federal credit unions to invest in
"mortgage related securities" under certain limited circumstances, other than
stripped mortgage related securities, residual interests in mortgage related
securities, and commercial mortgage related securities, unless the credit
union has obtained written approval from the NCUA to participate in the
"investment pilot program" described in 12 C.F.R. (S) 703.140.
All depository institutions considering an investment in the Certificates
should review the "Supervisory Policy Statement on Investment Securities and
End-User Derivatives Activities" (the "1998 POLICY STATEMENT") of the Federal
Financial Institutions Examination Council ("FFIEC"), which has been adopted
by the Board of Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation, the OCC and the Office of Thrift Supervision, effective
May 26, 1998, and by the NCUA, effective October 1, 1998. The 1998 Policy
Statement sets forth general guidelines which depository institutions must
follow in managing risks (including market, credit, liquidity, operational
(transaction), and legal risks) applicable to all securities (including
mortgage pass-through securities and mortgage-derivative products) used for
investment purposes. Until October 1, 1998, federal credit unions will still
be subject to the FFIEC's now-superseded "Supervisory Policy Statement on
Securities Activities" dated
89
<PAGE>
January 28, 1992, as adopted by the NCUA with certain modifications, which
prohibited depository institutions from investing in certain "high-risk
mortgage securities," except under limited circumstances, and set forth
certain investment practices deemed to be unsuitable for regulated
institutions.
Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any of the
Certificates, as certain Series or Classes (in particular, Certificates which
are entitled solely or disproportionately to distributions of principal or
interest) may be deemed unsuitable investments, or may otherwise be
restricted, under such rules, policies or guidelines (in certain instances
irrespective of SMMEA).
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not
limited to, "prudent investor" provisions, percentage-of-assets limits,
provisions which may restrict or prohibit investment in securities which are
not "interest-bearing" or "income-paying," and, with regard to any
Certificates issued in book-entry form, provisions which may restrict or
prohibit investments in securities which are issued in book-entry form.
Except as to the status of certain Classes of Certificates as "mortgage
related securities," no representation is made as to the proper
characterization of the Certificates for legal investment purposes, financial
institution regulatory purposes, or other purposes, or as to the ability of
particular investors to purchase Certificates under applicable legal
investment restrictions. The uncertainties described above (and any
unfavorable future determinations concerning legal investment or financial
institution regulatory characteristics of the Certificates) may adversely
affect the liquidity of the Certificates.
Accordingly, all investors whose investment activities are subject to legal
investment laws and regulations, regulatory capital requirements or review by
regulatory authorities should consult with their legal advisors in determining
whether and to what extent the Certificates of any Class constitute legal
investments or are subject to investment, capital or other restrictions and,
if applicable, whether SMMEA has been overridden in any jurisdiction relevant
to such investor.
PLAN OF DISTRIBUTION
The Certificates are being offered hereby in Series through one or more of
the methods described below. The applicable Prospectus Supplement for each
Series will describe the method of offering being utilized for that Series and
will state the public offering or purchase price of each Class of Certificates
of such Series, or the method by which such price is to be determined, and the
net proceeds to the Seller from such sale.
The Certificates will be offered through the following methods from time to
time and offerings may be made concurrently through more than one of these
methods or an offering of a particular Series of Certificates may be made
through a combination of two or more of these methods:
1. By negotiated firm commitment underwriting and public re-offering by
underwriters specified in the applicable Prospectus Supplement;
2. By placements by the Seller with investors through dealers; and
3. By direct placements by the Seller with investors.
If underwriters are used in a sale of any Certificates, such Certificates
will be acquired by the underwriters for their own account and may be resold
from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices to be
determined at the time of sale or at the time of commitment therefor. Firm
commitment underwriting and public reoffering by underwriters may be done
through underwriting syndicates or through one or more firms acting alone. The
specific managing underwriter or underwriters, if any, with respect to the
offer and sale of a particular Series of Certificates will be set forth on the
cover of the Prospectus Supplement applicable to such Series and the members
of the underwriting syndicate, if any, will be named in such Prospectus
Supplement. The Prospectus Supplement will describe any discounts and
commissions to be allowed or paid by the Seller to the underwriters, any other
items constituting underwriting compensation and any discounts and commissions
to be allowed or paid to the dealers. The obligations of the underwriters will
be
90
<PAGE>
subject to certain conditions precedent. The underwriters with respect to a
sale of any Class of Certificates will be obligated to purchase all such
Certificates if any are purchased. The Seller, and, if specified in the
applicable Prospectus Supplement, Norwest Mortgage, will indemnify the
applicable underwriters against certain civil liabilities, including
liabilities under the Securities Act.
The Prospectus Supplement with respect to any Series of Certificates offered
other than through underwriters will contain information regarding the nature
of such offering and any agreements to be entered into between the Seller and
dealers and/or the Seller and purchasers of Certificates of such Series.
Purchasers of Certificates, including dealers, may, depending on the facts
and circumstances of such purchases, be deemed to be "underwriters" within the
meaning of the Securities Act in connection with reoffers and sales by them of
Certificates. Certificateholders should consult with their legal advisors in
this regard prior to any such reoffer or sale.
If specified in the Prospectus Supplement relating to a Series of
Certificates, the Seller or any affiliate thereof may purchase some or all of
one or more Classes of Certificates of such Series from the underwriter or
underwriters at a price specified or described in such Prospectus Supplement.
Such purchaser may thereafter from time to time offer and sell, pursuant to
this Prospectus, some or all of such Certificates so purchased directly,
through one or more underwriters to be designated at the time of the offering
of such Certificates or through dealers acting as agent and/or principal. Such
offering may be restricted in the matter specified in such Prospectus
Supplement. Such transactions may be effected at market prices prevailing at
the time of sale, at negotiated prices or at fixed prices. The underwriters
and dealers participating in such purchaser's offering of such Certificates
may receive compensation in the form of underwriting discounts or commissions
from such purchaser and such dealers may receive commissions from the
investors purchasing such Certificates for whom they may act as agent (which
discounts or commissions will not exceed those customary in those types of
transactions involved). Any dealer that participates in the distribution of
such Certificates may be deemed to be an "underwriter" within the meaning of
the Securities Act, and any commissions and discounts received by such dealer
and any profit on the resale of such Certificates by such dealer might be
deemed to be underwriting discounts and commissions under the Securities Act.
USE OF PROCEEDS
The net proceeds from the sale of each Series of Certificates will be used
by the Seller for the purchase of the Mortgage Loans represented by the
Certificates of such Series from Norwest Mortgage. It is expected that Norwest
Mortgage will use the proceeds from the sale of the Mortgage Loans to the
Seller for its general business purposes, including, without limitation, the
origination or acquisition of new mortgage loans and the repayment of
borrowings incurred to finance the origination or acquisition of mortgage
loans, including the Mortgage Loans underlying the Certificates of such
Series.
LEGAL MATTERS
Certain legal matters, including the federal income tax consequences to
Certificateholders of an investment in the Certificates of a Series, will be
passed upon for the Seller by Cadwalader, Wickersham & Taft, New York.
RATING
It is a condition to the issuance of the Certificates of any Series offered
pursuant to this Prospectus and a Prospectus Supplement that they be rated in
one of the four highest categories by at least one Rating Agency.
A securities rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning
Rating Agency. Each securities rating should be evaluated independently of any
other rating.
REPORTS TO CERTIFICATEHOLDERS
The Master Servicer will prepare, and the Trustee or other Paying Agent
appointed for each Series by the Master Servicer will forward to the
Certificateholders of each Series, statements containing information with
respect to principal and interest
91
<PAGE>
payments and the related Trust Estate, as described herein and in the
applicable Prospectus Supplement for such Series (the "Monthly Reports.") No
information contained in the Monthly Reports will have been examined or
reported upon by an independent public accountant. See "The Pooling and
Servicing Agreement--Reports to Certificateholders."
The Seller intends to make the information contained in the Monthly Reports
available via the internet (at "http://www.securitieslink.net"), facsimile,
computer modem and CD-ROM through SecuritiesLink(R) Investor Information
Services ("SECURITIESLINK(R)"). On occasion, information may be available to
any interested investor through SecuritiesLink(R) up to two business days
prior to the related Distribution Date, and in that event prior to the
delivery of the Monthly Reports by the Trustee or other Paying Agent to
Certificateholders. The Seller also intends to make available to any
interested investor through SecuritiesLink(R) certain additional information
not contained in the Monthly Reports, including loss severity data and updated
stratification reports with respect to the Mortgage Loans underlying the
Certificates. For further information regarding SecuritiesLink(R), please
contact Norwest Asset Securities Corporation, 7485 New Horizon Way, Frederick,
Maryland 21703, telephone number (301) 846-8881.
In addition, each Servicer for each Series will furnish to the Master
Servicer (who will be required to furnish promptly to the Trustee for such
Series), a statement from a firm of independent public accountants with
respect to the examination of certain documents and records relating to a
random sample of mortgage loans serviced by such Servicer pursuant to the
related Underlying Servicing Agreement and/or other similar agreements. See
"Servicing of the Mortgage Loans--Evidence as to Compliance." Copies of the
statements provided by the Master Servicer to the Trustee will be furnished to
Certificateholders of each Series upon request addressed to the Trustee for
the applicable Series or the Master Servicer c/o Norwest Bank Minnesota,
National Association, 11000 Broken Land Parkway, Columbia, Maryland 21044-
3562, Attention: Securities Administration Services Manager.
WHERE YOU CAN FIND MORE INFORMATION
REGISTRATION STATEMENT AND OTHER MATERIALS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION
The Seller filed a registration statement relating to the Certificates with
the ("SEC" or the "COMMISSION"). This Prospectus is part of the registration
statement, but the Registration Statement includes additional information.
Copies of the Registration Statement may be obtained from the Public
Reference Section of the Commission, Washington, D.C. 20549 upon payment of
the prescribed charges, or may be examined free of charge at the Commission's
offices, 450 Fifth Street N.W., Washington, D.C. 20549 or at the regional
offices of the Commission located at Suite 1300, 7 World Trade Center, New
York, New York 10048 and Suite 1400, Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661-2511. The Commission also maintains a site on the
World Wide Web at "http://www.sec.gov" at which you can view and download
copies of reports, proxy and information statements and other information
filed electronically through the Electronic Data Gathering, Analysis and
Retrieval ("EDGAR") system. The Seller has filed the Registration Statement,
including all exhibits, through the EDGAR system and therefore such materials
should be available by logging onto the Commission's Web site. The Commission
maintains computer terminals providing access to the EDGAR system at each of
the offices referred to above. Copies of any documents incorporated to this
Prospectus by reference will be provided to each person to whom a Prospectus
is delivered upon written or oral request directed to Norwest Asset Securities
Corporation, 7485 New Horizon Way, Frederick, Maryland 21703, telephone number
(301) 846-8881.
DETAILED INFORMATION RELATING TO THE MORTGAGE LOANS OF A SERIES
The Seller intends to offer by subscription through SecuritiesLink(R)
detailed mortgage loan information in machine readable format updated on a
monthly basis (the "DETAILED INFORMATION") with respect to each outstanding
Series of Certificates. The Detailed Information will reflect payments made on
the individual mortgage loans, including prepayments in full and in part made
on such mortgage loans, as well as the liquidation of any such mortgage loans,
and will identify various characteristics of the mortgage loans. Subscribers
of the Detailed Information are expected to include a number of major
investment brokerage firms as well as financial information service firms.
Some of such firms, including certain investment brokerage firms as well as
Bloomberg L.P. through the "The Bloomberg(R)" service and Merrill Lynch
Mortgage Capital Inc. through the "CMO Passport(R)" service, may, in
accordance with their individual business practices and fee schedules, if any,
make portions of, or summaries of portions
92
<PAGE>
of, the Detailed Information available to their customers and subscribers. The
Seller, the Master Servicer and their respective affiliates have no control
over and take no responsibility for the actions of such firms in processing,
analyzing or disseminating such information. For further information regarding
the Detailed Information and subscriptions thereto, please contact the Seller
at 7485 New Horizon Way, Frederick, Maryland 21703, telephone number (301)
846-8881.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows the Seller to "incorporate by reference" information it files
with the SEC, which means that the Seller can disclose important information
to you by referring you to those documents. The information incorporated by
reference is considered to be part of this Prospectus. Information that the
Seller files later with the SEC will automatically update the information in
this Prospectus. In all cases, you should rely on the later information rather
than on any different information included in this Prospectus or the
accompanying Prospectus Supplement. The Seller incorporates by reference any
future annual, monthly and special SEC reports filed by or on behalf of the
Trust until the termination of the offering of the Certificates.
As a recipient of this Prospectus, you may request a copy of any document
the Seller incorporates by reference, except exhibits to the documents (unless
the exhibits are specifically incorporated by reference), at no cost, by
writing or calling the Master Servicer at 7485 New Horizon Way, Frederick,
Maryland 21703, telephone number (301) 846-8881.
93
<PAGE>
INDEX OF SIGNIFICANT DEFINITIONS
TERM PAGE
- ---- ----
15-Year Non-Relocation Loans............................................... 35
1986 Act................................................................... 64
1998 Policy Statement...................................................... 89
Accrual Certificates....................................................... 27
Additional Collateral...................................................... 15
Advances................................................................... 42
ALTA....................................................................... 20
Asset Conservation Act..................................................... 60
Balloon Loan............................................................... 14
Balloon Period............................................................. 15
Bankruptcy Code............................................................ 56
Bankruptcy Commission...................................................... 58
Bankruptcy Loss............................................................ 28
Bankruptcy Loss Amount..................................................... 29
Beneficial Owner........................................................... 24
Book-Entry Certificates.................................................... 7
Buy-Down Fund.............................................................. 14
Buy-Down Loans............................................................. 14
Capitol Life............................................................... 16
Cede....................................................................... 24
CERCLA..................................................................... 58
Certificate Account........................................................ 40
Certificateholder.......................................................... 24
Certificates............................................................... 5
Class...................................................................... 5
Cleanup Costs.............................................................. 59
Code....................................................................... 7
Commission................................................................. 92
Companion Class............................................................ 29
Component.................................................................. 29
Contract Underwriters...................................................... 18
Cooperatives............................................................... 11
Correspondents............................................................. 16
Counterparty............................................................... 11
Credit Score............................................................... 18
Cut-off Date............................................................... 6
DCR........................................................................ 87
Deferred Interest.......................................................... 13
Definitive Certificates.................................................... 24
Delegated Underwriting..................................................... 17
Department................................................................. 86
Depository................................................................. 40
Detailed Information....................................................... 92
Disqualified Organization.................................................. 74
Distribution Date.......................................................... 6
DTC........................................................................ 7
DTC Participants........................................................... 25
Due Date................................................................... 13
Due on Sale................................................................ 60
TERM PAGE
- ---- ----
EDGAR...................................................................... 92
Electing Large Partnership................................................. 74
Eligible Custodial Account................................................. 40
Eligible Investments....................................................... 41
ERISA...................................................................... 85
Excess Bankruptcy Losses................................................... 29
Excess Fraud Losses........................................................ 29
Excess Special Hazard Losses............................................... 28
FDIC....................................................................... 40
FFIEC...................................................................... 89
FHLBB...................................................................... 61
FHLMC...................................................................... 20
FICO Score................................................................. 18
Financial Instrument....................................................... 11
Fitch...................................................................... 87
Fixed Retained Yield....................................................... 27
FNMA....................................................................... 20
Fraud Loss................................................................. 28
Fraud Loss Amount.......................................................... 29
Garn Act................................................................... 61
GEMICO..................................................................... 21
Government Securities...................................................... 63
Graduated Pay Mortgage Loans............................................... 13
Growing Equity Mortgage Loans.............................................. 13
Holder..................................................................... 62
Indirect DTC Participants.................................................. 25
IRA........................................................................ 85
Joint Ventures............................................................. 16
Liquidation Proceeds....................................................... 41
Loan Stores................................................................ 16
Loan-to-Value Ratio........................................................ 19
Mark to Market Regulations................................................. 76
Master Servicer............................................................ 5
Master Servicing Fee....................................................... 27
MERS....................................................................... 49
Monthly Reports............................................................ 92
Moody's.................................................................... 87
Mortgage Interest Rate..................................................... 27
Mortgage Loans............................................................. 11
Mortgage Notes............................................................. 11
Mortgaged Properties....................................................... 11
Mortgages.................................................................. 11
NCUA....................................................................... 89
Net Foreclosure Profits.................................................... 27
Net Mortgage Interest Rate................................................. 27
New Regulations............................................................ 78
Non-Pro Rata Certificate................................................... 65
Non-U.S. Person............................................................ 78
Norwest Bank............................................................... 16
94
<PAGE>
TERM PAGE
- ---- ----
Norwest Corporation........................................................ 15
Norwest Funding............................................................ 15
Norwest Mortgage........................................................... 15
Norwest Mortgage Sale Agreement............................................ 49
OCC........................................................................ 89
OID Regulations............................................................ 65
Other Advances............................................................. 42
OTS........................................................................ 61
PAC........................................................................ 30
PAC I...................................................................... 30
PAC II..................................................................... 30
Partial Liquidation Proceeds............................................... 26
Pass-Through Rate.......................................................... 6
Pass-Through Entity........................................................ 74
Paying Agent............................................................... 42
PCBs....................................................................... 58
Percentage Interest........................................................ 26
Periodic Advances.......................................................... 7
PHMC....................................................................... 16
PHMC Acquisition........................................................... 16
PHMSC...................................................................... 16
Plans...................................................................... 85
Pledged Asset Mortgage Loans............................................... 15
Pool Distribution Amount................................................... 26
Pool Insurers.............................................................. 21
Pooling and Servicing Agreement............................................ 23
Prepayment Assumption...................................................... 66
PTE 83-1................................................................... 88
Rating Agency.............................................................. 8
RCRA....................................................................... 59
Record Date................................................................ 6
Regular Certificateholder.................................................. 65
Regular Certificates....................................................... 24
Regulations................................................................ 86
Relief Act................................................................. 58
Relocation Mortgage Loans.................................................. 35
REMIC...................................................................... 63
REMIC Certificates......................................................... 62
REMIC Pool................................................................. 62
REMIC Regulations.......................................................... 62
Remittance Date............................................................ 41
Reserve Fund............................................................... 32
Residual Certificates...................................................... 24
Residual Holders........................................................... 71
Restricted Group........................................................... 88
Rules...................................................................... 25
S&P........................................................................ 87
SBJPA of 1996.............................................................. 63
Scheduled Principal Balance................................................ 50
TERM PAGE
- ---- ----
SEC........................................................................ 92
Securities Act............................................................. 87
Securities Link(R)......................................................... 92
Seller..................................................................... 15
Senior Certificates........................................................ 6
Series..................................................................... 5
Servicer................................................................... 5
Servicer Custodial Account................................................. 40
Servicing Account.......................................................... 43
Servicing Fee.............................................................. 27
SMMEA...................................................................... 89
Special Hazard Loss........................................................ 28
Special Hazard Loss Amount................................................. 28
Standard Hazard Insurance Policy........................................... 45
Startup Day................................................................ 63
Stripped Certificateholder................................................. 84
Stripped Certificates...................................................... 79
Subclass................................................................... 6
Subordinated Certificates.................................................. 6
Subsidy Account............................................................ 13
Subsidy Loans.............................................................. 13
Subsidy Payments........................................................... 13
Superliens................................................................. 59
Support Class.............................................................. 29
TAC........................................................................ 31
Tiered Payment Mortgage Loans.............................................. 13
TILA Amendment............................................................. 58
Title V.................................................................... 61
Title Option Plus.......................................................... 20
T.O.P. Loans............................................................... 20
Total Loans................................................................ 35
Total Non-Relocation Loans................................................. 35
Treasury Regulations....................................................... 50
Trust...................................................................... 5
Trust Estate............................................................... 5
Trustee.................................................................... 53
Trustee Fee................................................................ 27
U.S. Person................................................................ 75
UCC........................................................................ 55
UGRIC...................................................................... 21
Underlying Servicing Agreement............................................. 5
Underwriter's Exemption.................................................... 86
UST........................................................................ 59
Voting Interests........................................................... 51
Window Period.............................................................. 61
Window Period Loans........................................................ 61
Window Period States....................................................... 61
30-Year Loans.............................................................. 35
30-Year Non-Relocation Loans............................................... 35
95
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses expected to be incurred in connection with the issuance and
distribution of the securities being registered, other than underwriting
compensation, are as set forth below. All such expenses except for the
registration fees are estimated.
<TABLE>
<S> <C>
SEC Registration Fee............................................. $ *
Legal Fees and Expenses.......................................... *
Accounting Fees and Expenses..................................... *
Trustee's Fees and Expenses (including counsel fees)............. *
Printing and Engraving Fees...................................... *
Rating Agency Fees............................................... *
Miscellaneous.................................................... *
-------
Total.......................................................... $ *
=======
</TABLE>
- -------
* To be provided by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a Delaware
corporation may indemnify any persons, including officers and directors, who
are made, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
such corporation), by reason of the fact that such person is or was an officer
or director of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding,
provided such officer or director acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests
and, for criminal proceedings, had no reasonable cause to believe that his
conduct was illegal. A Delaware corporation may indemnify officers and
directors in an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the
corporation. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him against the expenses which such officer or director actually and
reasonably incurred.
The By-laws of Norwest Asset Securities Corporation provide for
indemnification of officers and directors to the full extent permitted by the
Delaware General Corporation Law.
The Pooling and Servicing Agreements for each Series of Certificates provide
either that the Registrant and the partners, directors, officers, employees and
agents of the Registrant, or that the Master Servicer and the partners,
directors, officers, employees and agents of the Master Servicer, will be
entitled to indemnification by the Trust Estate and will be held harmless
against any loss, liability or expense incurred in connection with any legal
action relating to the Pooling and Servicing Agreement or the Certificates,
other than any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or gross negligence in the performance of his or its
duties thereunder or by reason of reckless disregard of his or its obligations
and duties thereunder.
The directors and officers of the Registrant are covered by a directors' and
officers' liability insurance policy maintained by Norwest Corporation for the
benefit of all of its subsidiaries.
II-1
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement incorporated by reference from
Exhibit 1.1 to the Registration Statement on Form S-3 (File No. 333-
02209).
3.1 Certificate of Incorporation of Norwest Asset Securities Corporation
incorporated by reference from Exhibit 3.1 to the Registration
Statement on Form S-3 (File No. 333-02209).
3.2 By-laws of Norwest Asset Securities Corporation incorporated by
reference from Exhibit 3.2 to the Registration Statement on Form S-3
(File No. 333-02209).
4.1 Form of Pooling and Servicing Agreement.
5.1 Opinion of Cadwalader, Wickersham & Taft with respect to certain
matters involving the Certificates.
8.1 Opinion of Cadwalader, Wickersham & Taft as to tax matters.
10.1 Form of Servicing Agreement incorporated by reference from Exhibit
10.1 to the Registration Statement on Form S-3 (File No. 333-02209).
23.1 Consent of Cadwalader, Wickersham & Taft (included as part of
Exhibits 5.1 and 8.1).
24.1 Power of Attorney (included on page II-4 of this Registration
Statement).
</TABLE>
ITEM 17. UNDERTAKINGS.
(a) Undertaking pursuant to Rule 415.
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the Se-
curities Act of 1933;
(ii) to reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggre-
gate, represent a fundamental change in the information set forth in the
Registration Statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) that, for the purpose of determining any liability under the Securi-
ties Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termina-
tion of the offering.
(b) Undertaking in respect of indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for in-
demnification against such liabilities (other than the payment by the Regis-
trant of expenses incurred or paid by a director, officer or controlling person
of the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such officer or controlling person in connection with the secu-
rities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 (including the requirement that the
securities be rated investment grade at the time of sale) and has duly caused
this Form S-3 Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Frederick, State of
Maryland on October 7, 1998.
By: /s/ B. David Bialzak
--------------------------------------
Name: B. David Bialzak
Title:Senior Vice President
II-3
<PAGE>
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James Strother, Robert K. Chapman, B. David
Bialzak and Robert Gorsche, and each of them, his true and lawful attorneys-in-
fact and agents, with full power of substitution and resubstitution, for and in
his name, place and stead, in any and all capacities to sign any or all
amendments (including post-effective amendments) to this Registration Statement
and any or all other documents in connection therewith, and to file the same,
with all exhibits thereto, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as might or could
be done in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or their substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS FORM S-3
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ James Strother President, October 7,
- ---------------------------------- Secretary and 1998
JAMES STROTHER Director
/s/ Robert K. Chapman Executive Vice October 7,
- ---------------------------------- President, Chief 1998
ROBERT K. CHAPMAN Financial Officer
and Chief
Accounting
Officer
/s/ B. David Bialzak Senior Vice October 7,
- ---------------------------------- President and 1998
B. DAVID BIALZAK Director
Director October ,
- ---------------------------------- 1998
ROBERT GORSCHE
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
1.1............ Form of Underwriting Agreement incorporated by reference from
Exhibit 1.1 to the Registration Statement on Form S-3 (File
No. 333-02209).
3.1............ Certificate of Incorporation of Norwest Asset Securities
Corporation incorporated by reference from Exhibit 3.1 to the
Registration Statement on Form S-3 (File No. 333-02209).
3.2............ By-laws of Norwest Asset Securities Corporation incorporated
by reference from Exhibit 3.2 to the Registration Statement on
Form S-3 (File No. 333-02209).
4.1............ Form of Pooling and Servicing Agreement.
5.1............ Opinion of Cadwalader, Wickersham & Taft with respect to
certain matters involving the Certificates.
8.1............ Opinion of Cadwalader, Wickersham & Taft as to tax matters.
10.1............ Form of Servicing Agreement incorporated by reference from
Exhibit 10.1 to the Registration Statement on Form S-3 (File
No. 333-02209).
23.1............ Consent of Cadwalader, Wickersham & Taft (included as part of
Exhibits 5.1 and 8.1).
24.1............ Power of Attorney (included on page II-4 of this Registration
Statement).
</TABLE>
<PAGE>
Exhibit 4.1
-------------------------------------------------------------------
NORWEST ASSET SECURITIES CORPORATION
(Seller)
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Master Servicer)
and
[ ]
(Trustee)
POOLING AND SERVICING AGREEMENT
Dated as of ____, 199
$_________
Mortgage Pass-Through Certificates
Series 199 -
-------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
-----------
Section 1.01. Definitions...................................................1
Section 1.02. Acts of Holders..............................................52
Section 1.03. Effect of Headings and Table of Contents.....................52
Section 1.04. Benefits of Agreement........................................53
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE
-----------------------------------------------
OF THE CERTIFICATES
-------------------
Section 2.01. Conveyance of Mortgage Loans..................................1
Section 2.02. Acceptance by Trustee.........................................2
Section 2.03. Representations and Warranties of the Master Servicer and the
Seller....................................................3
Section 2.04. Execution and Delivery of Certificates.......................10
Section 2.05. Designation of Certificates; Designation of Startup Day and
Latest Possible Maturity Date............................10
ARTICLE III
ADMINISTRATION OF THE TRUST ESTATE: SERVICING OF
------------------------------------------------
THE MORTGAGE LOANS
------------------
Section 3.01. Certificate Account...........................................1
Section 3.02. Permitted Withdrawals from the Certificate Account............2
Section 3.03. Advances by Master Servicer and Trustee.......................4
Section 3.04. Trustee to Cooperate; Release of Owner Mortgage Loan Files....5
Section 3.05. Reports to the Trustee; Annual Compliance Statements..........6
Section 3.06. Title, Management and Disposition of Any REO Mortgage Loan....7
Section 3.07. Amendments to Servicing Agreements, Modification of Standard
Provisions................................................7
Section 3.08. Oversight of Servicing........................................8
Section 3.09. Termination and Substitution of Servicing Agreements.........11
Section 3.10. Application of Net Liquidation Proceeds......................12
Section 3.11. 1934 Act Reports.............................................12
-i-
<PAGE>
ARTICLE IV
DISTRIBUTIONS IN RESPECT OF CERTIFICATES; PAYMENTS
--------------------------------------------------
TO CERTIFICATEHOLDERS; STATEMENTS AND REPORTS
---------------------------------------------
Section 4.01. Distributions.................................................1
Section 4.02. Allocation of Realized Losses.................................8
Section 4.03. Paying Agent.................................................11
Section 4.04. Statements to Certificateholders; Report to the Trustee and
the Seller...............................................12
Section 4.05. Reports to Mortgagors and the Internal Revenue Service.......15
Section 4.06. Calculation of Amounts; Binding Effect of Interpretations and
Actions of Master Servicer...............................15
ARTICLE V
THE CERTIFICATES
----------------
Section 5.01. The Certificates..............................................1
Section 5.02. Registration of Certificates..................................3
Section 5.03. Mutilated, Destroyed, Lost or Stolen Certificates.............6
Section 5.04. Persons Deemed Owners.........................................7
Section 5.05. Access to List of Certificateholders' Names and Addresses.....7
Section 5.06. Maintenance of Office or Agency...............................7
Section 5.07. Definitive Certificates.......................................8
Section 5.08. Notices to Clearing Agency....................................8
ARTICLE VI
THE SELLER AND THE MASTER SERVICER
----------------------------------
Section 6.01. Liability of the Seller and the Master Servicer...............1
Section 6.02. Merger or Consolidation of the Seller or the Master Servicer..1
Section 6.03. Limitation on Liability of the Seller, the Master Servicer and
Others....................................................1
Section 6.04. Resignation of the Master Servicer............................2
Section 6.05. Compensation to the Master Servicer...........................2
Section 6.06. Assignment or Delegation of Duties by Master Servicer.........3
Section 6.07. Indemnification of Trustee and Seller by Master Servicer......3
ARTICLE VII
DEFAULT
-------
Section 7.01. Events of Default.............................................1
Section 7.02. Other Remedies of Trustee.....................................2
Section 7.03. Directions by Certificateholders and Duties of Trustee During
Event of Default..........................................3
-ii-
<PAGE>
Section 7.04. Action upon Certain Failures of the Master Servicer and upon
Event of Default..........................................3
Section 7.05. Trustee to Act; Appointment of Successor......................3
Section 7.06. Notification to Certificateholders............................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 Required to Make Investigation....................2
Section 8.04. Trustee Not Liable for Certificates or Mortgage Loans.........3
Section 8.05. Trustee May Own Certificates..................................3
Section 8.06. The Master Servicer to Pay Fees and Expenses..................3
Section 8.07. Eligibility Requirements......................................4
Section 8.08. Resignation and Removal.......................................4
Section 8.09. Successor.....................................................5
Section 8.10. Merger or Consolidation.......................................5
Section 8.11. Authenticating Agent..........................................6
Section 8.12. Separate Trustees and Co-Trustees.............................7
Section 8.13. Appointment of Custodians.....................................8
Section 8.14. Tax Matters; Compliance with REMIC Provisions.................8
Section 8.15. Monthly Advances.............................................11
ARTICLE IX
TERMINATION
-----------
Section 9.01. Termination upon Purchase by the Seller or Liquidation of All
Mortgage Loans............................................1
Section 9.02. Additional Termination Requirements...........................3
ARTICLE X
MISCELLANEOUS PROVISIONS
------------------------
Section 10.01. Amendment....................................................1
Section 10.02. Recordation of Agreement.....................................3
Section 10.03. Limitation on Rights of Certificateholders...................3
Section 10.04. Governing Law; Jurisdiction..................................4
Section 10.05. Notices......................................................4
Section 10.06. Severability of Provisions...................................4
Section 10.07. Special Notices to Rating Agencies...........................5
Section 10.08. Covenant of Seller...........................................6
-iii-
<PAGE>
Section 10.09. Recharacterization...........................................6
ARTICLE XI
TERMS FOR CERTIFICATES
----------------------
Section 11.01. Class A Fixed Pass-Through Rate..............................1
Section 11.02. Cut-Off Date.................................................1
Section 11.03. Cut-Off Date Aggregate Principal Balance.....................1
Section 11.04. Original Class A Percentage..................................1
Section 11.05. Original Principal Balances of the Classes of Class A
Certificates..............................................1
Section 11.05(a). Original Class A-3 Notional Amount........................2
Section 11.05(b). Original Class A-18 Notional Amount.......................2
-----------------------------------
Section 11.06. Original Class A Non-PO Principal Balance....................2
Section 11.07. Original Subordinated Percentage.............................2
Section 11.08. Original Class B-1 Percentage................................2
Section 11.09. Original Class B-2 Percentage................................2
Section 11.10. Original Class B-3 Percentage................................3
Section 11.11. Original Class B-4 Percentage................................3
Section 11.12. Original Class B-5 Percentage................................3
Section 11.13. Original Class B-6 Percentage................................3
Section 11.14. Original Class B Principal Balance...........................3
Section 11.15. Original Principal Balances of the Classes of Class B
Certificates..............................................3
Section 11.16. Original Class B-1 Fractional Interest.......................3
Section 11.17. Original Class B-2 Fractional Interest.......................4
Section 11.18. Original Class B-3 Fractional Interest.......................4
Section 11.19. Original Class B-4 Fractional Interest.......................4
Section 11.20. Original Class B-5 Fractional Interest.......................4
Section 11.21. Closing Date.................................................4
Section 11.22. Right to Purchase............................................4
Section 11.23. Wire Transfer Eligibility....................................4
Section 11.24. Single Certificate...........................................4
Section 11.25. Servicing Fee Rate...........................................5
Section 11.26. Master Servicing Fee Rate....................................5
-iv-
<PAGE>
EXHIBITS
--------
EXHIBIT A-1 - Form of Face of Class A-1 Certificate
EXHIBIT A-2 - Form of Face of Class A-2 Certificate
EXHIBIT A-3 - Form of Face of Class A-3 Certificate
EXHIBIT A-4 - Form of Face of Class A-4 Certificate
EXHIBIT A-5 - Form of Face of Class A-5 Certificate
EXHIBIT A-6 - Form of Face of Class A-6 Certificate
EXHIBIT A-7 - Form of Face of Class A-7 Certificate
EXHIBIT A-8 - Form of Face of Class A-8 Certificate
EXHIBIT A-9 - Form of Face of Class A-9 Certificate
EXHIBIT A-10 - Form of Face of Class A-10 Certificate
EXHIBIT A-11 - Form of Face of Class A-11 Certificate
EXHIBIT A-12 - Form of Face of Class A-12 Certificate
EXHIBIT A-13 - Form of Face of Class A-13 Certificate
EXHIBIT A-14 - Form of Face of Class A-14 Certificate
EXHIBIT A-15 - Form of Face of Class A-15 Certificate
EXHIBIT A-16 - Form of Face of Class A-16 Certificate
EXHIBIT A-17 - Form of Face of Class A-17 Certificate
EXHIBIT A-18 - Form of Face of Class A-18 Certificate
EXHIBIT A-19 - Form of Face of Class A-19 Certificate
EXHIBIT A-20 - Form of Face of Class A-20 Certificate
EXHIBIT A-PO - Form of Face of Class A-PO Certificate
EXHIBIT A-R - Form of Face of Class A-R Certificate
EXHIBIT A-LR - Form of Face of Class A-LR Certificate
EXHIBIT B-1 - Form of Face of Class B-1 Certificate
EXHIBIT B-2 - Form of Face of Class B-2 Certificate
EXHIBIT B-3 - Form of Face of Class B-3 Certificate
EXHIBIT B-4 - Form of Face of Class B-4 Certificate
EXHIBIT B-5 - Form of Face of Class B-5 Certificate
EXHIBIT B-6 - Form of Face of Class B-6 Certificate
EXHIBIT C - Form of Reverse of Series 199 - Certificates
EXHIBIT D - Reserved
EXHIBIT E - Custodial Agreement
EXHIBIT F-1 - Schedule of Mortgage Loans Serviced by Norwest Mortgage
from locations other than Frederick, Maryland
EXHIBIT F-2 - Schedule of Mortgage Loans Serviced by Norwest Mortgage
in Frederick Maryland
EXHIBIT F-3 - Schedule of Mortgage Loans Serviced by Other Servicers
EXHIBIT G - Request for Release
-v-
<PAGE>
EXHIBIT H - Affidavit Pursuant to Section 860E(e)(4) of the Internal
Revenue Code of 1986, as amended, and for Non-ERISA
Investors
EXHIBIT I - Letter from Transferor of Residual Certificates
EXHIBIT J - Transferee's Letter (Class [A-PO][B-4] [B-5] [B-6]
Certificates)
EXHIBIT K - Transferee's Letter (Class [B-1] [B-2] [B-3] Certificates)
EXHIBIT L - Servicing Agreements
EXHIBIT M - Form of Special Servicing Agreement
-vi-
<PAGE>
This Pooling and Servicing Agreement, dated as of ____, 199 executed by
NORWEST ASSET SECURITIES CORPORATION, as Seller, NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Master Servicer and [ ], as Trustee.
WITNESSETH THAT:
In consideration of the mutual agreements herein contained, the Seller, the
Master Servicer and the Trustee agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions
Whenever used herein, the following words and phrases, unless the context
otherwise requires, shall have the meanings specified in this Article.
Accepted Master Servicing Practices: Accepted Master Servicing Practices
-----------------------------------
shall consist of the customary and usual master servicing practices of prudent
master servicing institutions which service mortgage loans of the same type as
the Mortgage Loans in the jurisdictions in which the related Mortgaged
Properties are located, regardless of the date upon which the related Mortgage
Loans were originated.
Accretion Termination Date: For the (A) Class A-6 Certificates will be
--------------------------
the earlier to occur of (i) the Distribution Date following the Distribution
Date on which the Principal Balances of the Class A-4 and Class A-5 Certificates
have been reduced to zero or (ii) the Cross-Over Date, (B) Class A-7
Certificates will be the earlier to occur of (i) the Distribution Date following
the Distribution Date on which the Principal Balances of the Class A-4, Class A-
5 and Class A-6 Certificates have been reduced to zero or (ii) the Cross-Over
Date, (C) Class A-9 Certificates will be the earlier to occur of (i) the
Distribution Date following the Distribution Date on which Principal Balance of
the Class A-8 Certificates has been reduced to zero or (ii) the Cross-Over Date,
(D) Class A-10 Certificates will be the earlier to occur of (i) the Distribution
Date following the Distribution Date on which the Principal Balances of the
Class A-8 and Class A-9 Certificates have been reduced to zero or (ii) the
Cross-Over Date, (E) Class A-11 Certificates will be the earlier to occur of (i)
the Distribution Date following the Distribution Date on which the Principal
Balances of the Class A-8 and Class A-10 Certificates have been reduced to zero
or (ii) the Cross-Over Date and (F) Class A-16 Certificates will be the earlier
to occur of (i) the Distribution Date following the Distribution Date on which
Principal Balances of the Class A-13, Class A-14 and Class A-15 Certificates
have been reduced to zero or (ii) the Cross-Over Date.
I-I
<PAGE>
Accrual Certificates: The Class A-6 Certificates, Class A-7 Certificates,
--------------------
Class A-9 Certificates, Class A-10 Certificates, Class A-11 Certificates and
Class A-16 Certificates.
Accrual Distribution Amount: As to any Distribution Date prior to the
---------------------------
applicable Accretion Termination Date and any Class of Accrual Certificates, an
amount equal to the sum of (i) the Class A Interest Percentage of such Class of
Accrual Certificates of the Current Class A Interest Distribution Amount and
(ii) the Class A Interest Shortfall Percentage of such Class of Accrual
Certificates of the amount distributed in respect of the Classes of Class A
Certificates pursuant to Paragraph second of Section 4.01(a)(i) on such
Distribution Date. As to any Distribution Date on or after the applicable
Accretion Termination Date, zero.
Adjusted Pool Amount: With respect to any Distribution Date, the Cut-Off
--------------------
Date Aggregate Principal Balance of the Mortgage Loans minus the sum of (i) all
amounts in respect of principal received in respect of the Mortgage Loans
(including, without limitation, amounts received as Monthly Payments, Periodic
Advances, Unscheduled Principal Receipts and Substitution Principal Amounts) and
distributed to Holders of the Certificates on such Distribution Date and all
prior Distribution Dates and (ii) the principal portion of all Realized Losses
(other than Debt Service Reductions) incurred on the Mortgage Loans from the
Cut-Off Date through the end of the month preceding such Distribution Date.
Adjusted Pool Amount (PO Portion): With respect to any Distribution Date,
---------------------------------
the sum of the amounts, calculated as follows, with respect to all Outstanding
Mortgage Loans: the product of (i) the PO Fraction for each such Mortgage Loan
and (ii) the remainder of (A) the Cut-Off Date Principal Balance of such
Mortgage Loan minus (B) the sum of (x) all amounts in respect of principal
received in respect of such Mortgage Loan (including, without limitation,
amounts received as Monthly Payments, Periodic Advances, Unscheduled Principal
Receipts and Substitution Principal Amounts) and distributed to Holders of the
Certificates on such Distribution Date and all prior Distribution Dates and (y)
the principal portion of any Realized Loss (other than a Debt Service Reduction)
incurred on such Mortgage Loan from the Cut-Off Date through the end of the
month preceding such Distribution Date.
Adjusted Principal Balance: As to any Distribution Date and any Class of
--------------------------
Class B Certificates, the greater of (A) zero and (B) (i) the Principal Balance
of such Class with respect to such Distribution Date minus (ii) the Adjustment
Amount for such Distribution Date less the Principal Balances for any Classes of
Class B Certificates with higher numerical designations.
Adjustment Amount: For any Distribution Date, the difference between (A)
-----------------
the sum of the Class A Principal Balance and Class B Principal Balance as of the
related Determination Date and (B) the sum of (i) the sum of the Class A
Principal Balance and Class B Principal Balance as of the Determination Date
succeeding such Distribution Date, (ii) the principal portion of Excess Special
Hazard Losses, Excess Fraud Losses and Excess Bankruptcy Losses allocated to the
Certificates with respect to such Distribution Date and (iii) the aggregate
amount that would have been distributed to all Classes as principal in
accordance with Section 4.01(a)(i) for such Distribution Date without regard to
the provisos in the definitions of Class B-1 Optimal Principal Amount, Class B-2
Optimal Principal Amount, Class B-3 Optimal
I-2
<PAGE>
Principal Amount, Class B-4 Optimal Principal Amount, Class B-5 Optimal
Principal Amount and Class B-6 Optimal Principal Amount.
Aggregate Class A Distribution Amount: As to any Distribution Date, the
-------------------------------------
aggregate amount distributable to the Classes of Class A Certificates pursuant
to Paragraphs first, second, third and fourth of Section 4.01(a)(i) on such
Distribution Date.
Aggregate Class A Unpaid Interest Shortfall: As to any Distribution Date,
-------------------------------------------
an amount equal to the sum of the Class A Unpaid Interest Shortfalls for all the
Classes of Class A Certificates.
Aggregate Current Bankruptcy Losses: With respect to any Distribution
-----------------------------------
Date, the sum of all Bankruptcy Losses incurred on any of the Mortgage Loans in
the month preceding the month of such Distribution Date.
Aggregate Current Fraud Losses: With respect to any Distribution Date, the
------------------------------
sum of all Fraud Losses incurred on any of the Mortgage Loans in the month
preceding the month of such Distribution Date.
Aggregate Current Special Hazard Losses: With respect to any Distribution
---------------------------------------
Date, the sum of all Special Hazard Losses incurred on any of the Mortgage Loans
in the month preceding the month of such Distribution Date.
Aggregate Foreclosure Profits: As to any Distribution Date, the aggregate
-----------------------------
amount of Foreclosure Profits with respect to all of the Mortgage Loans.
Agreement: This Pooling and Servicing Agreement and all amendments and
---------
supplements hereto.
Applicable Unscheduled Principal Receipt Period: With respect to the
-----------------------------------------------
Mortgage Loans serviced by each Servicer and each of Full Unscheduled Principal
Receipts and Partial Unscheduled Principal Receipts, the Unscheduled Principal
Receipt Period specified on Schedule I hereto, as amended from time to time by
the Master Servicer pursuant to Section 10.01(b) hereof.
Authenticating Agent: Any authenticating agent appointed by the Trustee
--------------------
pursuant to Section 8.11. There shall initially be no Authenticating Agent for
the Certificates.
Available Master Servicer Compensation: As to any Distribution Date, the
--------------------------------------
sum of (a) the Master Servicing Fee for such Distribution Date, (b) interest
earned through the business day preceding the applicable Distribution Date on
any Prepayments in Full remitted to the Master Servicer and (c) the aggregate
amount of Month End Interest remitted by the Servicers to the Master Servicer
pursuant to the related Servicing Agreements.
Bankruptcy Code: The Bankruptcy Code of 1978, as amended.
---------------
I-3
<PAGE>
Bankruptcy Loss: With respect to any Mortgage Loan, a Deficient Valuation
---------------
or Debt Service Reduction; provided, however, that a Bankruptcy Loss shall not
-------- -------
be deemed a Bankruptcy Loss hereunder so long as the applicable Servicer has
notified the Master Servicer and the Trustee in writing that such Servicer is
diligently pursuing any remedies that may exist in connection with the
representations and warranties made regarding the related Mortgage Loan and
either (A) the related Mortgage Loan is not in default with regard to payments
due thereunder or (B) delinquent payments of principal and interest under the
related Mortgage Loan and any premiums on any applicable primary hazard
insurance policy and any related escrow payments in respect of such Mortgage
Loan are being advanced on a current basis by such Servicer without giving
effect to any Debt Service Reduction.
Bankruptcy Loss Amount: As of any Distribution Date prior to the first
----------------------
anniversary of the Cut-Off Date, the Bankruptcy Loss Amount will equal $_____
minus the aggregate amount of Bankruptcy Losses allocated solely to the Class B
Certificates in accordance with Section 4.02(a) since the Cut-Off Date. As of
any Distribution Date on or after the first anniversary of the Cut-Off Date, an
amount equal to (1) the lesser of (a) the Bankruptcy Loss Amount calculated as
of the close of business on the Business Day immediately preceding the most
recent anniversary of the Cut-Off Date coinciding with or preceding such
Distribution Date (the "Relevant Anniversary") and (b) such lesser amount which,
as determined on the Relevant Anniversary will not cause any rated Certificates
to be placed on credit review status (other than for possible upgrading) by
either Rating Agency minus (2) the aggregate amount of Bankruptcy Losses
allocated solely to the Class B Certificates in accordance with Section 4.02(a)
since the Relevant Anniversary. On and after the Cross-Over Date the Bankruptcy
Loss Amount shall be zero.
Beneficial Owner: With respect to a Book-Entry Certificate, the Person who
----------------
is the beneficial owner of such Book-Entry Certificate, as reflected on the
books of the Clearing Agency, or on the books of a Person maintaining an account
with such Clearing Agency (directly or as an indirect participant, in accordance
with the rules of such Clearing Agency), as the case may be.
Book-Entry Certificate: Any one of the Class A-__ Certificates, Class A-__
----------------------
Certificates, Class A-__ Certificates, Class A-__ Certificates, Class A-__
Certificates, Class A-__ Certificates, Class A-__ Certificates, Class A-__
Certificates, Class A-__ Certificates, Class A-__ Certificates, Class A-__
Certificates, Class A-__ Certificates, Class A-__ Certificates, Class A-__
Certificates, Class A-__ Certificates, Class A-__ Certificates and Class A-__
Certificates, beneficial ownership and transfers of which shall be evidenced by,
and made through, book entries by the Clearing Agency as described in Section
5.01(b).
Business Day: Any day other than (i) a Saturday or a Sunday, or (ii) a
------------
legal holiday in the City of New York, State of Iowa, State of Maryland, State
of Minnesota or State of North Carolina or (iii) a day on which banking
institutions in the City of New York, or the State of Iowa, State of Maryland,
State of Minnesota or State of North Carolina are authorized or obligated by law
or executive order to be closed.
Certificate: Any one of the Class A Certificates or Class B Certificates.
-----------
I-4
<PAGE>
Certificate Account: The trust account established and maintained by the
-------------------
Master Servicer in the name of the Master Servicer on behalf of the Trustee
pursuant to Section 3.01. The Certificate Account shall be an Eligible Account.
Certificate Register and Certificate Registrar: Respectively, the register
----------------------------------------------
maintained pursuant to and the registrar provided for in Section 5.02. The
initial Certificate Registrar is the Trustee.
Certificateholder or Holder: The Person in whose name a Certificate is
---------------------------
registered in the Certificate Register, except that, solely for the purposes of
the taking of any action under Articles VII or VIII, any Certificate registered
in the name of the Master Servicer, a Servicer or any affiliate thereof shall be
deemed not to be outstanding and the Voting Interest evidenced thereby shall not
be taken into account in determining whether the requisite percentage of
Certificates necessary to effect any such action has been obtained.
Class: All certificates whose form is identical except for variations in
-----
the Percentage Interest evidenced thereby.
Class A Certificate: Any one of the Class A-1 Certificates, Class A-2
-------------------
Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates, Class A-6 Certificates, Class A-7 Certificates, Class A-8
Certificates, Class A-9 Certificates, Class A-10 Certificates, Class A-11
Certificates, Class A-12 Certificates, Class A-13 Certificates, Class A-14
Certificates, Class A-15 Certificates, Class A-16 Certificates, Class A-17
Certificates, Class A-18 Certificates, Class A-19 Certificates, Class A-20
Certificates, Class A-PO Certificates, Class A-R Certificate or Class A-LR
Certificate.
Class A Certificateholder: The registered holder of a Class A Certificate.
-------------------------
Class A Distribution Amount: As to any Distribution Date and any Class of
---------------------------
Class A Certificates (other than the Class A-3, Class A-6, Class A-7, Class A-9,
Class A-10, Class A-11, Class A-12, Class A-16, Class A-18 and Class A-PO
Certificates), the amount distributable to such Class of Class A Certificates
pursuant to Paragraphs first, second and third clause (A) of Section 4.01(a)(i).
As to the Class A-6, Class A-7, Class A-9, Class A-10, Class A-11 and Class A-16
Certificates, (a) as to any Distribution Date prior to the applicable Accretion
Termination Date, the amount distributable to the related Class of Accrual
Certificates pursuant to the provisos in Paragraphs first and second of Section
4.01(a)(i) and Paragraph third clause (A) of Section 4.01(a)(i) and (b) as to
any Distribution Date on or after the applicable Accretion Termination Date, the
amount distributable to the related Class of Accrual Certificates pursuant to
Paragraphs first, second and third clause (A) of Section 4.01(a)(i). As to the
Class A-3 and Class A-18 Certificates, the amount distributable to such Class
pursuant to Paragraphs first and second of Section 4.01(a)(i). As to the Class
A-12 Certificates, the amount distributable to such Class pursuant to Paragraph
third clause (A) of Section 4.01(a)(i). As to any Distribution Date and the
Class A-PO Certificates, the amount distributable to the Class A-PO Certificates
pursuant to Paragraphs third clause (B) and fourth of Section 4.01(a)(i) on such
Distribution Date.
I-5
<PAGE>
Class A Fixed Pass-Through Rate: As to any Distribution Date, the rate per
-------------------------------
annum set forth in Section 11.01.
Class A Interest Accrual Amount: As to any Distribution Date, the sum of
-------------------------------
the Interest Accrual Amounts for the Classes of Class A Certificates with
respect to such Distribution Date.
Class A Interest Percentage: As to any Distribution Date and any Class of
---------------------------
Class A Certificates (other than the Class A-PO Certificates), the percentage
calculated by dividing the Interest Accrual Amount of such Class (determined
without regard to clause (ii) of the definition thereof) by the Class A Interest
Accrual Amount (determined without regard to clause (ii) of the definition of
each Interest Accrual Amount).
Class A Interest Shortfall Amount: As to any Distribution Date and any
---------------------------------
Class of Class A Certificates, any amount by which the Interest Accrual Amount
of such Class with respect to such Distribution Date exceeds the amount
distributed in respect of such Class on such Distribution Date pursuant to
Paragraph first of Section 4.01(a)(i) including, in the case of a Class of
Accrual Certificate prior to the applicable Accretion Termination Date, the
amount included in the Accrual Distribution Amount pursuant to clause (i) of the
definition thereof.
Class A Interest Shortfall Percentage: As to any Distribution Date and any
-------------------------------------
Class of Class A Certificates, the percentage calculated by dividing the Class A
Unpaid Interest Shortfall for such Class by the Aggregate Class A Unpaid
Interest Shortfall determined as of the Business Day preceding the applicable
Distribution Date.
Class A Loss Denominator: As to any Determination Date, an amount equal to
------------------------
the sum of (i) the Principal Balances of the Class A Certificates (other than
the Accrual Certificates and the Class A-PO Certificates) and (ii) with respect
to each Class of Accrual Certificates, the lesser of the Principal Balance of
such Class of Accrual Certificates and the Original Principal Balance of such
Class of Accrual Certificates.
Class A Loss Percentage: As to any Determination Date and any Class of
-----------------------
Class A Certificates (other than the Class A-PO Certificates), the percentage
calculated by dividing the Principal Balance of such Class (or, in the case of a
Class of Accrual Certificates, the Original Principal Balance of such Class, if
lower) by the Class A Loss Denominator (determined without regard to any such
Principal Balance of any Class of Class A Certificates not then outstanding), in
each case determined as of the preceding Determination Date.
Class A Non-PO Optimal Amount: As to any Distribution Date, the sum for
-----------------------------
such Distribution Date of (i) the Class A Interest Accrual Amount, (ii) the
Aggregate Class A Unpaid Interest Shortfall and (iii) the Class A Non-PO Optimal
Principal Amount.
Class A Non-PO Optimal Principal Amount: As to any Distribution Date, an
---------------------------------------
amount equal to the sum, as to each Outstanding Mortgage Loan, of the product of
(x) the Non-PO Fraction with respect to such Mortgage Loan, and (y) the sum of:
I-6
<PAGE>
(i) the Class A Percentage of (A) the principal portion of the
Monthly Payment due on the Due Date occurring in the month of such
Distribution Date on such Mortgage Loan, less (B) if the Bankruptcy Loss
Amount has been reduced to zero, the principal portion of any Debt Service
Reduction with respect to such Mortgage Loan;
(ii) the Class A Prepayment Percentage of all Unscheduled
Principal Receipts that were received by a Servicer with respect to such
Mortgage Loan during the Applicable Unscheduled Principal Receipt Period
relating to such Distribution Date for each applicable type of Unscheduled
Principal Receipt;
(iii) the Class A Prepayment Percentage of the Scheduled Principal
Balance of such Mortgage Loan which, during the month preceding the month
of such Distribution Date, was repurchased by the Seller pursuant to
Section 2.02 or 2.03; and
(iv) the Class A Percentage of the excess of the unpaid principal
balance of such Mortgage Loan substituted for a defective Mortgage Loan
during the month preceding the month in which such Distribution Date occurs
over the unpaid principal balance of such defective Mortgage Loan, less the
amount allocable to the principal portion of any unreimbursed Periodic
Advances previously made by the applicable Servicer, the Master Servicer or
the Trustee in respect of such defective Mortgage Loan.
Class A Non-PO Principal Amount: As to any Distribution Date, the
-------------------------------
aggregate amount distributed in respect of the Classes of Class A Certificates
pursuant to Paragraph third clause (A) of Section 4.01(a)(i).
Class A Non-PO Principal Balance: As of any date, an amount equal to the
--------------------------------
Class A Principal Balance less the Principal Balance of the Class A-PO
Certificates.
Class A Non-PO Principal Distribution Amount: As to any Distribution Date,
--------------------------------------------
the sum of (i) the sum of the applicable Accrual Distribution Amounts, if any,
with respect to such Distribution Date and (ii) the Class A Non-PO Principal
Amount with respect to such Distribution Date.
Class A Pass-Through Rate: [Insert Class A-Pass-Through Rates]. The Class
-------------------------
A-12 and Class A-PO Certificates are not entitled to interest and have no Class
A Pass-Through Rate.
Class A Percentage: As to any Distribution Date occurring on or prior to
------------------
the Cross-Over Date, the lesser of (i) 100% and (ii) the percentage obtained by
dividing the Class A Non-PO Principal Balance (determined as of the
Determination Date preceding such Distribution Date) by the Pool Balance (Non-PO
Portion). As to any Distribution Date occurring subsequent to the Cross-Over
Date, 100% or such lesser percentage which will cause the Class A Non-PO
Principal Balance to decline to zero following the distribution made on such
Distribution Date.
I-7
<PAGE>
Class A Prepayment Percentage: As to any Distribution Date to and
-----------------------------
including the Distribution Date in ____, 100%. As to any Distribution Date
subsequent to ____ to and including the Distribution Date in ____ ____, the
Class A Percentage as of such Distribution Date plus 70% of the Subordinated
Percentage as of such Distribution Date. As to any Distribution Date subsequent
to ____ ____ to and including the Distribution Date in ____ ____ , the Class A
Percentage as of such Distribution Date plus 60% of the Subordinated Percentage
as of such Distribution Date. As to any Distribution Date subsequent to ____
____ to and including the Distribution Date in ____ ____, the Class A Percentage
as of such Distribution Date plus 40% of the Subordinated Percentage as of such
Distribution Date. As to any Distribution Date subsequent to ____ ____ to and
including the Distribution Date in ____ ____, the Class A Percentage as of such
Distribution Date plus 20% of the Subordinated Percentage as of such
Distribution Date. As to any Distribution Date subsequent to ____ ____, the
Class A Percentage as of such Distribution Date. The foregoing is subject to
the following: (i) if the aggregate distribution to Holders of Class A
Certificates on any Distribution Date of the Class A Prepayment Percentage
provided above of (a) Unscheduled Principal Receipts distributable on such
Distribution Date would reduce the Class A Non-PO Principal Balance below zero,
the Class A Prepayment Percentage for such Distribution Date shall be the
percentage necessary to bring the Class A Non-PO Principal Balance to zero and
thereafter the Class A Prepayment Percentage shall be zero and (ii) if the Class
A Percentage as of any Distribution Date is greater than the Original Class A
Percentage, the Class A Prepayment Percentage for such Distribution Date shall
be 100%. Notwithstanding the foregoing, with respect to any Distribution Date
on which the following criteria are not met, the reduction of the Class A
Prepayment Percentage described in the second through sixth sentences of this
definition of Class A Prepayment Percentage shall not be applicable with respect
to such Distribution Date. In such event, the Class A Prepayment Percentage for
such Distribution Date will be determined in accordance with the applicable
provision, as set forth in the first through fifth sentences above, which was
actually used to determine the Class A Prepayment Percentage for the
Distribution Date occurring in the June preceding such Distribution Date (it
being understood that for the purposes of the determination of the Class A
Prepayment Percentage for the current Distribution Date, the current Class A
Percentage and Subordinated Percentage shall be utilized). In order for the
reduction referred to in the second through sixth sentences to be applicable,
with respect to any Distribution Date (a) the average outstanding principal
balance on such Distribution Date and for the preceding five Distribution Dates
on the Mortgage Loans that were delinquent 60 days or more (including for this
purpose any payments due with respect to Mortgage Loans in foreclosure and REO
Mortgage Loans) must be less than 50% of the current Class B Principal Balance
and (b) cumulative Realized Losses shall not exceed (1) 30% of the Original
Class B Principal Balance if such Distribution Date occurs between and including
____ ____ and ____ ____ (2) 35% of the Original Class B Principal Balance if
such Distribution Date occurs between and including ____ ____ and ____ ____, (3)
40% of the Original Class B Principal Balance if such Distribution Date occurs
between and including ____ ____ and ____ ____, (4) 45% of the Original Class B
Principal Balance if such Distribution Date occurs between and including ____
____ and ____ ____, and (5) 50% of the Original Class B Principal Balance if
such Distribution Date occurs during or after ____ ____. With respect to any
Distribution Date on which the Class A Prepayment Percentage is reduced below
the Class A Prepayment Percentage for the prior Distribution Date, the Master
Servicer shall certify to the Trustee, based upon information provided by
I-8
<PAGE>
each Servicer as to the Mortgage Loans serviced by it that the criteria set
forth in the preceding sentence are met.
Class A Principal Balance: As of any date, an amount equal to the sum of
-------------------------
the Principal Balances for the Class A-1 Certificates, Class A-2 Certificates,
Class A-4 Certificates, Class A-5 Certificates, Class A-6 Certificates, Class A-
7 Certificates, Class A-8 Certificates, Class A-9 Certificates, Class A-10
Certificates, Class A-11 Certificates, Class A-12 Certificates, Class A-13
Certificates, Class A-14 Certificates, Class A-15 Certificates, Class A-16
Certificates, Class A-17 Certificates, Class A-19 Certificates, Class A-20
Certificates, Class A-PO Certificates, Class A-R Certificate and Class A-LR
Certificate.
Class A Unpaid Interest Shortfall: As to any Distribution Date and Class
---------------------------------
of Class A Certificates, the amount, if any, by which the aggregate of the Class
A Interest Shortfall Amounts for such Class for prior Distribution Dates is in
excess of the amounts distributed in respect of such Class (or in the case of a
Class of Accrual Certificates prior to the applicable Accretion Termination
Date, the amount included in the Accrual Distribution Amount pursuant to clause
(ii) of the definition thereof) on prior Distribution Dates pursuant to
Paragraph second of Section 4.01(a)(i).
Class A-1 Certificate: Any one of the Certificates executed by the Trustee
---------------------
and authenticated by the Trustee or the Authenticating Agent in substantially
the form set forth in Exhibit A-1 and Exhibit C hereto.
Class A-1 Certificateholder: The registered holder of a Class A-1
---------------------------
Certificate.
Class A-2 Certificate: Any one of the Certificates executed by the Trustee
---------------------
and authenticated by the Trustee or the Authenticating Agent in substantially
the form set forth in Exhibit A-2 and Exhibit C hereto.
Class A-2 Certificateholder: The registered holder of a Class A-2
---------------------------
Certificate.
Class A-3 Certificate: Any one of the Certificates executed by the Trustee
---------------------
and authenticated by the Trustee or the Authenticating Agent in substantially
the form set forth in Exhibit A-3 and Exhibit C hereto.
Class A-3 Certificateholder: The registered holder of a Class A-3
---------------------------
Certificate.
Class A-3 Interest Accrual Amount: As to any Distribution Date, (i) the
---------------------------------
product of (A) 1/12th of the Class A Pass-Through Rate for the Class A-3
Certificates and (B) the Class A-3 Notional Amount as of such Distribution Date
minus (ii) the Class A Interest Percentage of the Class A-3 Certificates of (x)
any Non-Supported Interest Shortfall allocated to the Class A Certificates, (y)
the interest portion of any Excess Special Hazard Losses, Excess Fraud Losses
and Excess Bankruptcy Losses allocated to the Class A Certificates with respect
to such Distribution Date pursuant to Section 4.02(e) and (z) the interest
portion of any Realized Losses (other than Excess Special Hazard Losses, Excess
Fraud Losses and Excess Bankruptcy Losses) allocated to the Class A Certificates
on or after the Cross-Over Date pursuant to Section 4.02(e).
I-9
<PAGE>
Class A-3 Notional Amount: As to any Distribution Date, an amount equal to
-------------------------
______________% of the Principal Balance of the Class A-1 Certificates.
Class A-4 Certificate: Any one of the Certificates executed by the Trustee
---------------------
and authenticated by the Trustee or the Authenticating Agent in substantially
the form set forth in Exhibit A-4 and Exhibit C hereto.
Class A-4 Certificateholder: The registered holder of a Class A-4
---------------------------
Certificate.
Class A-5 Certificate: Any one of the Certificates executed by the Trustee
---------------------
and authenticated by the Trustee or the Authenticating Agent in substantially
the form set forth in Exhibit A-5 and Exhibit C hereto.
Class A-5 Certificateholder: The registered holder of a Class A-5
---------------------------
Certificate.
Class A-6 Certificate: Any one of the Certificates executed by the Trustee
---------------------
and authenticated by the Trustee or the Authenticating Agent in substantially
the form set forth in Exhibit A-6 and Exhibit C hereto.
Class A-6 Certificateholder: The registered holder of a Class A-6
---------------------------
Certificate.
Class A-7 Certificate: Any one of the Certificates executed by the Trustee
---------------------
and authenticated by the Trustee or the Authenticating Agent in substantially
the form set forth in Exhibit A-7 and Exhibit C hereto.
Class A-7 Certificateholder: The registered holder of a Class A-7
---------------------------
Certificate.
Class A-8 Certificate: Any one of the Certificates executed by the Trustee
---------------------
and authenticated by the Trustee or the Authenticating Agent in substantially
the form set forth in Exhibit A-8 and Exhibit C hereto.
Class A-8 Certificateholder: The registered holder of a Class A-8
---------------------------
Certificate.
Class A-9 Certificate: Any one of the Certificates executed by the Trustee
---------------------
and authenticated by the Trustee or the Authenticating Agent in substantially
the form set forth in Exhibit A-9 and Exhibit C hereto.
Class A-9 Certificateholder: The registered holder of a Class A-9
---------------------------
Certificate.
Class A-10 Certificate: Any one of the Certificates executed by the
----------------------
Trustee and authenticated by the Trustee or the Authenticating Agent in
substantially the form set forth in Exhibit A-10 and Exhibit C hereto.
Class A-10 Certificateholder: The registered holder of a Class A-10
----------------------------
Certificate.
Class A-11 Certificate: Any one of the Certificates executed by the
----------------------
Trustee and authenticated by the Trustee or the Authenticating Agent in
substantially the form set forth in Exhibit A-11 and Exhibit C hereto.
I-10
<PAGE>
Class A-11 Certificateholder: The registered holder of a Class A-11
----------------------------
Certificate.
Class A-12 Certificate: Any one of the Certificates executed by the
----------------------
Trustee and authenticated by the Trustee or the Authenticating Agent in
substantially the form set forth in Exhibit A-12 and Exhibit C hereto.
Class A-12 Certificateholder: The registered holder of a Class A-12
----------------------------
Certificate.
Class A-13 Certificate: Any one of the Certificates executed by the
----------------------
Trustee and authenticated by the Trustee or the Authenticating Agent in
substantially the form set forth in Exhibit A-13 and Exhibit C hereto.
Class A-13 Certificateholder: The registered holder of a Class A-13
----------------------------
Certificate.
Class A-14 Certificate: Any one of the Certificates executed by the
----------------------
Trustee and authenticated by the Trustee or the Authenticating Agent in
substantially the form set forth in Exhibit A-14 and Exhibit C hereto.
Class A-14 Certificateholder: The registered holder of a Class A-14
----------------------------
Certificate.
Class A-15 Certificate: Any one of the Certificates executed by the
----------------------
Trustee and authenticated by the Trustee or the Authenticating Agent in
substantially the form set forth in Exhibit A-15 and Exhibit C hereto.
Class A-15 Certificateholder: The registered holder of a Class A-15
----------------------------
Certificate.
Class A-16 Certificate: Any one of the Certificates executed by the
----------------------
Trustee and authenticated by the Trustee or the Authenticating Agent in
substantially the form set forth in Exhibit A-16 and Exhibit C hereto.
Class A-16 Certificateholder: The registered holder of a Class A-16
----------------------------
Certificate.
Class A-17 Certificate. Any one of the Certificates executed by the
----------------------
Trustee and authenticated by the Trustee or the Authenticating Agent in
substantially the form set forth in Exhibit A-17 and Exhibit C hereto.
Class A-17 Certificateholder: The registered holder of a Class A-17
----------------------------
Certificate.
Class A-18 Interest Accrual Amount: As to any Distribution Date, (i) the
----------------------------------
product of (A) 1/12th of the Class A Pass-Through Rate for the Class A-18
Certificates and (B) the Class A-18 Notional Amount as of such Distribution Date
minus (ii) the Class A Interest Percentage of the Class A-18 Certificates of (x)
any Non-Supported Interest Shortfall allocated to the Class A Certificates, (y)
the interest portion of any Excess Special Hazard Losses, Excess Fraud Losses
and Excess Bankruptcy Losses allocated to the Class A Certificates with respect
to such Distribution Date pursuant to Section 4.02(e) and (z) the interest
portion of any Realized Losses (other than Excess Special Hazard Losses, Excess
Fraud Losses and Excess Bankruptcy Losses) allocated to the Class A Certificates
on or after the Cross-Over Date pursuant to Section 4.02(e).
I-11
<PAGE>
Class A-18 Notional Amount: As to any Distribution Date, the Principal
--------------------------
Balance of the Class A-17 Certificates.
Class A-18 Certificate: Any one of the Certificates executed by the
----------------------
Trustee and authenticated by the Trustee or the Authenticating Agent in
substantially the form set forth in Exhibit A-18 and Exhibit C hereto.
Class A-18 Certificateholder: The registered holder of a Class A-18
----------------------------
Certificate.
Class A-19 Certificate: Any one of the Certificates executed by the
----------------------
Trustee and authenticated by the Trustee or the Authenticating Agent in
substantially the form set forth in Exhibit A-19 and Exhibit C hereto.
Class A-19 Certificateholder: The registered holder of a Class A-19
----------------------------
Certificate.
Class A-20 Certificate: Any one of the Certificates executed by the
----------------------
Trustee and authenticated by the Trustee or the Authenticating Agent in
substantially the form set forth in Exhibit A-20 and Exhibit C hereto.
Class A-20 Certificateholder: The registered holder of a Class A-20
----------------------------
Certificate.
Class A-L1 Interest: A regular interest in the Lower-Tier REMIC which is
-------------------
held as an asset of the Upper-Tier REMIC and is entitled to monthly
distributions as provided in Section 4.01(a)(ii) hereof.
Class A-L2 Interest: A regular interest in the Lower-Tier REMIC which is
-------------------
held as an asset of the Upper-Tier REMIC and is entitled to monthly
distributions as provided in Section 4.01(a)(ii) hereof.
Class A-L4 Interest: A regular interest in the Lower-Tier REMIC which is
-------------------
held as an asset of the Upper-Tier REMIC and is entitled to monthly
distributions as provided in Section 4.01(a)(ii) hereof.
Class A-L12 Interest: A regular interest in the Lower-Tier REMIC which is
--------------------
held as an asset of the Upper-Tier REMIC and is entitled to monthly
distributions as provided in Section 4.01(a)(ii) hereof.
Class A-L14 Interest: A regular interest in the Lower-Tier REMIC which is
--------------------
held as an asset of the Upper-Tier REMIC and is entitled to monthly
distributions as provided in Section 4.01(a)(ii) hereof.
Class A-L15 Interest: A regular interest in the Lower-Tier REMIC which is
--------------------
held as an asset of the Upper-Tier REMIC and is entitled to monthly
distributions as provided in Section 4.01(a)(ii) hereof.
Class A-L17 Interest: A regular interest in the Lower-Tier REMIC which is
--------------------
held as an asset of the Upper-Tier REMIC and is entitled to monthly
distributions as provided in Section 4.01(a)(ii) hereof.
I-12
<PAGE>
Class A-L19 Interest: A regular interest in the Lower-Tier REMIC which is
--------------------
held as an asset of the Upper-Tier REMIC and is entitled to monthly
distributions as provided in Section 4.01(a)(ii) hereof.
Class A-LPO Interest: A regular interest in the Lower-Tier REMIC which is
--------------------
held as an asset of the Upper-Tier REMIC and is entitled to monthly
distributions as provided in Section 4.01(a)(ii) hereof.
Class A-LR Certificate: The Certificate executed by the Trustee and
----------------------
authenticated by the Trustee or the Authenticating Agent in substantially the
form set forth in Exhibit A-LR and Exhibit D hereto.
Class A-LR Certificateholder: The registered holder of the Class A-LR
----------------------------
Certificate.
Class A-LUR Interest: A regular interest in the Lower-Tier REMIC which is
--------------------
held as an asset of the Upper-Tier REMIC and is entitled to monthly
distributions as provided in Section 4.01(a)(ii) hereof.
Class A-PO Certificate: Any one of the Certificates executed by the
----------------------
Trustee and authenticated by the Trustee or the Authenticating Agent in
substantially the form set forth in Exhibit A-PO and Exhibit C hereto.
Class A-PO Certificateholder: The registered holder of a Class A-PO
----------------------------
Certificate.
Class A-PO Deferred Amount: For any Distribution Date prior to the Cross-
--------------------------
Over Date, the difference between (A) the sum of (x) the amount by which the sum
of the Class A-PO Optimal Principal Amounts for all prior Distribution Dates
exceeded the amounts distributed on the Class A-PO Certificates on such prior
Distribution Dates pursuant to Paragraph third clause (B) of Section 4.01(a)(i)
and (y) the sum of the product for each Discount Mortgage Loan which became a
Liquidated Loan at any time on or prior to the last day of the applicable
Unscheduled Principal Receipt Period for the current Distribution Date of (a)
the PO Fraction for such Discount Mortgage Loan and (b) an amount equal to the
principal portion of Realized Losses (other than Bankruptcy Losses due to Debt
Service Reductions) incurred with respect to such Mortgage Loan other than
Excess Special Hazard Losses, Excess Fraud Losses and Excess Bankruptcy Losses
and (B) amounts distributed on the Class A-PO Certificates on prior Distribution
Dates pursuant to Paragraph fourth of Section 4.01(a)(i). On and after the
Cross-Over Date, the Class A-PO Deferred Amount will be zero. No interest will
accrue on any Class A-PO Deferred Amount.
Class A-PO Optimal Principal Amount: As to any Distribution Date, an
------------------------------------
amount equal to the sum as to each Outstanding Mortgage Loan, of the product of
(x) the PO Fraction with respect to such Mortgage Loan and (y) the sum of:
(i) (A) the principal portion of the Monthly Payment due on the
Due Date occurring in the month of such Distribution Date on such Mortgage
Loan, less (B) if the Bankruptcy Loss Amount has been reduced to zero, the
principal portion of any Debt Service Reduction with respect to such
Mortgage Loan;
I-13
<PAGE>
(ii) all Unscheduled Principal Receipts that were received by a
Servicer with respect to such Mortgage Loan during the Applicable
Unscheduled Principal Receipt Period relating to such Distribution Date for
each applicable type of Unscheduled Principal Receipt;
(iii) the Scheduled Principal Balance of each Mortgage Loan that
was repurchased by the Seller during such preceding month pursuant to
Section 2.02 or 2.03;
(iv) the excess of the unpaid principal balance of such Mortgage
Loan substituted for a defective Mortgage Loan during the month preceding
the month in which such Distribution Date occurs over the unpaid principal
balance of such defective Mortgage Loan, less the amount allocable to the
principal portion of any unreimbursed Periodic Advances previously made by
the applicable Servicer, the Master Servicer or the Trustee in respect of
such defective Mortgage Loan.
Class A-R Certificate: The Certificate executed by the Trustee and
---------------------
authenticated by the Trustee or the Authenticating Agent in substantially the
form set forth in Exhibit A-R and Exhibit C hereto.
Class A-R Certificateholder: The registered holder of the Class A-R
---------------------------
Certificate.
Class B Certificate: Any one of the Class B-1 Certificates, Class B-2
-------------------
Certificates, Class B-3 Certificates, Class B-4 Certificates, Class B-5
Certificates or Class B-6 Certificates.
Class B Certificateholder: The registered holder of a Class B Certificate.
-------------------------
Class B Distribution Amount: Any of the Class B-1, Class B-2, Class B-3,
---------------------------
Class B-4, Class B-5 or Class B-6 Distribution Amounts.
Class B Interest Accrual Amount: As to any Distribution Date, the sum of
-------------------------------
the Interest Accrual Amounts for the Classes of Class B Certificates with
respect to such Distribution Date.
Class B Interest Percentage: As to any Distribution Date and any Class of
---------------------------
Class B Certificates, the percentage calculated by dividing the Interest Accrual
Amount of such Class (determined without regard to clause (ii) of the definition
thereof) by the Class B Interest Accrual Amount (determined without regard to
clause (ii) of the definition of each Interest Accrual Amount).
Class B Interest Shortfall Amount: Any of the Class B-1 Interest Shortfall
---------------------------------
Amount, Class B-2 Interest Shortfall Amount, Class B-3 Interest Shortfall
Amount, Class B-4 Interest Shortfall Amount, Class B-5 Interest Shortfall Amount
or Class B-6 Interest Shortfall Amount.
Class B Loss Percentage: As to any Determination Date and any Class of
-----------------------
Class B Certificates then outstanding, the percentage calculated by dividing the
Principal Balance of such Class B by the Class B Principal Balance (determined
without regard to any Principal
I-14
<PAGE>
Balance of any Class of Class B Certificates not then outstanding), in each case
determined as of the preceding Determination Date.
Class B Pass-Through Rate: As to any Distribution Date, _______% per
-------------------------
annum.
Class B Percentage: Any one of the Class B-1 Percentage, Class B-2
------------------
Percentage, Class B-3 Percentage, Class B-4 Percentage, Class B-5 Percentage or
Class B-6 Percentage.
Class B Prepayment Percentage: Any of the Class B-1 Prepayment Percentage,
-----------------------------
Class B-2 Prepayment Percentage, Class B-3 Prepayment Percentage, Class B-4
Prepayment Percentage, Class B-5 Prepayment Percentage or Class B-6 Prepayment
Percentage.
Class B Principal Balance: As of any date, an amount equal to the sum of
-------------------------
the Class B-1 Principal Balance, Class B-2 Principal Balance, Class B-3
Principal Balance, Class B-4 Principal Balance, Class B-5 Principal Balance and
Class B-6 Principal Balance.
Class B Unpaid Interest Shortfall: Any of the Class B-1 Unpaid Interest
---------------------------------
Shortfall, Class B-2 Unpaid Interest Shortfall, Class B-3 Unpaid Interest
Shortfall, Class B-4 Unpaid Interest Shortfall, Class B-5 Unpaid Interest
Shortfall or Class B-6 Unpaid Interest Shortfall.
Class B-1 Certificate: Any one of the Certificates executed by the Trustee
---------------------
and authenticated by the Trustee or the Authenticating Agent in substantially
the form set forth in Exhibit B-1 and Exhibit C hereto.
Class B-1 Certificateholder: The registered holder of a Class B-1
---------------------------
Certificate.
Class B-1 Distribution Amount: As to any Distribution Date, any amount
-----------------------------
distributable to the Holders of the Class B-1 Certificates pursuant to
Paragraphs fifth, sixth and seventh of Section 4.01(a)(i).
Class B-1 Interest Shortfall Amount: As to any Distribution Date, any
-----------------------------------
amount by which the Interest Accrual Amount of the Class B-1 Certificates with
respect to such Distribution Date exceeds the amount distributed in respect of
the Class B-1 Certificates on such Distribution Date pursuant to Paragraph fifth
of Section 4.01(a)(i).
Class B-1 Optimal Principal Amount: As to any Distribution Date, an amount
----------------------------------
equal to the sum, as to each Outstanding Mortgage Loan, of the product of (x)
the Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of:
(i) the Class B-1 Percentage of (A) the principal portion of the
Monthly Payment due on the Due Date occurring in the month of such
Distribution Date on such Mortgage Loan, less (B) if the Bankruptcy Loss
Amount has been reduced to zero, the principal portion of any Debt Service
Reduction with respect to such Mortgage Loan;
(ii) the Class B-1 Prepayment Percentage of all Unscheduled
Principal Receipts that were received by a Servicer with respect to such
Mortgage Loan during
I-15
<PAGE>
the Applicable Unscheduled Principal Receipt Period relating to such
Distribution Date for each applicable type of Unscheduled Principal
Receipt;
(iii) the Class B-1 Prepayment Percentage of the Scheduled
Principal Balance of such Mortgage Loan which, during the month preceding
the month of such Distribution Date, was repurchased by the Seller pursuant
to Section 2.02 or 2.03; and
(iv) the Class B-1 Percentage of the excess of the unpaid principal
balance of such Mortgage Loan substituted for a defective Mortgage Loan
during the month preceding the month in which such Distribution Date occurs
over the unpaid principal balance of such defective Mortgage Loan, less the
amount allocable to the principal portion of any unreimbursed Periodic
Advances previously made by the applicable Servicer, the Master Servicer or
the Trustee in respect of such defective Mortgage Loan;
provided, however, that if an Optimal Adjustment Event occurs with respect to
- -------- -------
such Class and such Distribution Date, the Class B-1 Optimal Principal Amount
will equal the lesser of (A) the Class B-1 Optimal Principal Amount calculated
as described in the preceding provisions and (B) the Adjusted Principal Balance
for the Class B-1 Certificates.
Class B-1 Percentage: As to any Distribution Date, the percentage
--------------------
calculated by multiplying the Subordinated Percentage by either (i) if any Class
B Certificates (other than the Class B-1 Certificates) are eligible to receive
principal distributions for such Distribution Date in accordance with Section
4.01(d), a fraction, the numerator of which is the Class B-1 Principal Balance
(determined as of the Determination Date preceding such Distribution Date) and
the denominator of which is the sum of the Principal Balances of the Classes of
Class B Certificates eligible to receive principal distributions for such
Distribution Date in accordance with the provisions of Section 4.01(d) or (ii)
except as set forth in Section 4.01(d)(ii), in the event that the Class B
Certificates (other than the Class B-1 Certificates) are not eligible to receive
distributions of principal in accordance with Section 4.01(d)(i), one.
Class B-1 Prepayment Percentage: As to any Distribution Date, the
-------------------------------
percentage calculated by multiplying the Subordinated Prepayment Percentage by
either (i) if any Class B Certificates (other than the Class B-1 Certificates)
are eligible to receive principal distributions for such Distribution Date in
accordance with Section 4.01(d), a fraction, the numerator of which is the Class
B-1 Principal Balance (determined as of the Determination Date preceding such
Distribution Date) and the denominator of which is the sum of the Principal
Balances of the Classes of Class B Certificates eligible to receive principal
distributions for such Distribution Date in accordance with the provisions of
Section 4.01(d) or (ii) except as set forth in Section 4.01(d)(ii), in the event
that the Class B Certificates (other than the Class B-1 Certificates) are not
eligible to receive distributions of principal in accordance with Section
4.01(d)(i), one.
Class B-1 Principal Balance: As to the first Determination Date, the
---------------------------
Original Class B-1 Principal Balance. As of any subsequent Determination Date,
the lesser of (i) the Original
I-16
<PAGE>
Class B-1 Principal Balance less the sum of (a) all amounts previously
distributed in respect of the Class B-1 Certificates on prior Distribution Dates
(A) pursuant to Paragraph seventh of Section 4.01(a)(i) and (B) as a result of a
Principal Adjustment and (b) the Realized Losses allocated through such
Determination Date to the Class B-1 Certificates pursuant to Section 4.02(b) and
(ii) the Adjusted Pool Amount as of the preceding Distribution Date less the
Class A Principal Balance as of such Determination Date.
Class B-1 Unpaid Interest Shortfall: As to any Distribution Date, the
-----------------------------------
amount, if any, by which the aggregate of the Class B-1 Interest Shortfall
Amounts for prior Distribution Dates is in excess of the amounts distributed in
respect of the Class B-1 Certificates on prior Distribution Dates pursuant to
Paragraph sixth of Section 4.01(a).
Class B-2 Certificate: Any one of the Certificates executed by the Trustee
---------------------
and authenticated by the Trustee or the Authenticating Agent in substantially
the form set forth in Exhibit B-2 and Exhibit C hereto.
Class B-2 Certificateholder: The registered holder of a Class B-2
---------------------------
Certificate.
Class B-2 Distribution Amount: As to any Distribution Date, any amount
-----------------------------
distributable to the Holders of the Class B-2 Certificates pursuant to
Paragraphs eighth, ninth and tenth of Section 4.01(a)(i).
Class B-2 Interest Shortfall Amount: As to any Distribution Date, any
-----------------------------------
amount by which the Interest Accrual Amount of the Class B-2 Certificates with
respect to such Distribution Date exceeds the amount distributed in respect of
the Class B-2 Certificates on such Distribution Date pursuant to Paragraph
eighth of Section 4.01(a)(i).
Class B-2 Optimal Principal Amount: As to any Distribution Date, an amount
----------------------------------
equal to the sum, as to each Outstanding Mortgage Loan, of the product of (x)
the Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of:
(i) the Class B-2 Percentage of (A) the principal portion of the
Monthly Payment due on the Due Date occurring in the month of such
Distribution Date on such Mortgage Loan, less (B) if the Bankruptcy Loss
Amount has been reduced to zero, the principal portion of any Debt Service
Reduction with respect to such Mortgage Loan;
(ii) the Class B-2 Prepayment Percentage of all Unscheduled
Principal Receipts that were received by a Servicer with respect to such
Mortgage Loan during the Applicable Unscheduled Principal Receipt Period
relating to such Distribution Date for each applicable type of Unscheduled
Principal Receipt;
(iii) the Class B-2 Prepayment Percentage of the Scheduled
Principal Balance of such Mortgage Loan which, during the month preceding
the month of such Distribution Date, was repurchased by the Seller pursuant
to Section 2.02 or 2.03; and
(iv) the Class B-2 Percentage of the excess of the unpaid principal
balance of such Mortgage Loan substituted for a defective Mortgage Loan
during the month
I-17
<PAGE>
preceding the month in which such Distribution Date occurs over the unpaid
principal balance of such defective Mortgage Loan, less the amount
allocable to the principal portion of any unreimbursed Periodic Advances
previously made by the applicable Servicer, the Master Servicer or the
Trustee in respect of such defective Mortgage Loan;
provided, however, that if an Optimal Adjustment Event occurs with respect to
- -------- -------
such Class and such Distribution Date, the Class B-2 Optimal Principal Amount
will equal the lesser of (A) the Class B-2 Optimal Principal Amount calculated
as described in the preceding provisions and (B) the Adjusted Principal Balance
for the Class B-2 Certificates.
Class B-2 Percentage: As to any Distribution Date, except as set forth in
--------------------
the next sentence, the percentage calculated by multiplying (i) the Subordinated
Percentage by (ii) a fraction, the numerator of which is the Class B-2 Principal
Balance (determined as of the Determination Date preceding such Distribution
Date) and the denominator of which is the sum of the Principal Balances of the
Classes of Class B Certificates eligible to receive principal distributions for
such Distribution Date in accordance with the provisions of Section 4.01(d).
Except as set forth in Section 4.01(d)(ii), in the event that the Class B-2
Certificates are not eligible to receive distributions of principal in
accordance with Section 4.01(d)(i), the Class B-2 Percentage for such
Distribution Date will be zero.
Class B-2 Prepayment Percentage: As to any Distribution Date, except as
-------------------------------
set forth in the next sentence, the percentage calculated by multiplying (i) the
Subordinated Prepayment Percentage by (ii) a fraction, the numerator of which is
the Class B-2 Principal Balance (determined as of the Determination Date
preceding such Distribution Date) and the denominator of which is the sum of the
Principal Balances of the Classes of Class B Certificates eligible to receive
principal distributions for such Distribution Date in accordance with the
provisions of Section 4.01(d). Except as set forth in Section 4.01(d)(ii), in
the event that the Class B-2 Certificates are not eligible to receive
distributions of principal in accordance with Section 4.01(d)(i), the Class B-2
Prepayment Percentage for such Distribution Date will be zero.
Class B-2 Principal Balance: As to the first Determination Date, the
---------------------------
Original Class B-2 Principal Balance. As of any subsequent Determination Date,
the lesser of (i) the Original Class B-2 Principal Balance less the sum of (a)
all amounts previously distributed in respect of the Class B-2 Certificates on
prior Distribution Dates (A) pursuant to Paragraph tenth of Section 4.01(a)(i)
and (B) as a result of a Principal Adjustment and (b) the Realized Losses
allocated through such Determination Date to the Class B-2 Certificates pursuant
to Section 4.02(b) and (ii) the Adjusted Pool Amount as of the preceding
Distribution Date less the sum of the Class A Principal Balance and the Class B-
1 Principal Balance as of such Determination Date.
Class B-2 Unpaid Interest Shortfall: As to any Distribution Date, the
-----------------------------------
amount, if any, by which the aggregate of the Class B-2 Interest Shortfall
Amounts for prior Distribution Dates is in excess of the amounts distributed in
respect of the Class B-2 Certificates on prior Distribution Dates pursuant to
Paragraph ninth of Section 4.01(a)(i).
I-18
<PAGE>
Class B-3 Certificate: Any one of the Certificates executed by the Trustee
---------------------
and authenticated by the Trustee or the Authenticating Agent in substantially
the form set forth in Exhibit B-3 and Exhibit C hereto.
Class B-3 Certificateholder: The registered holder of a Class B-3
---------------------------
Certificate.
Class B-3 Distribution Amount: As to any Distribution Date, any amount
-----------------------------
distributable to the Holders of the Class B-3 Certificates pursuant to
Paragraphs eleventh, twelfth and thirteenth of Section 4.01(a)(i).
Class B-3 Interest Shortfall Amount: As to any Distribution Date, any
-----------------------------------
amount by which the Interest Accrual Amount of the Class B-3 Certificates with
respect to such Distribution Date exceeds the amount distributed in respect of
the Class B-3 Certificates on such Distribution Date pursuant to Paragraph
eleventh of Section 4.01(a)(i).
Class B-3 Optimal Principal Amount: As to any Distribution Date, an amount
----------------------------------
equal to the sum, as to each Outstanding Mortgage Loan, of the product of (x)
the Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of:
(i) the Class B-3 Percentage of (A) the principal portion of the
Monthly Payment due on the Due Date occurring in the month of such
Distribution Date on such Mortgage Loan, less (B) if the Bankruptcy Loss
Amount has been reduced to zero, the principal portion of any Debt Service
Reduction with respect to such Mortgage Loan;
(ii) the Class B-3 Prepayment Percentage of all Unscheduled
Principal Receipts that were received by a Servicer with respect to such
Mortgage Loan during the Applicable Unscheduled Principal Receipt Period
relating to such Distribution Date for each applicable type of Unscheduled
Principal Receipt;
(iii) the Class B-3 Prepayment Percentage of the Scheduled
Principal Balance of such Mortgage Loan which, during the month preceding
the month of such Distribution Date, was repurchased by the Seller pursuant
to Section 2.02 or 2.03; and
(iv) the Class B-3 Percentage of the excess of the unpaid principal
balance of such Mortgage Loan substituted for a defective Mortgage Loan
during the month preceding the month in which such Distribution Date occurs
over the unpaid principal balance of such defective Mortgage Loan, less the
amount allocable to the principal portion of any unreimbursed Periodic
Advances previously made by the applicable Servicer, the Master Servicer or
the Trustee in respect of such defective Mortgage Loan;
provided, however, that if an Optimal Adjustment Event occurs with respect to
- -------- -------
such Class and such Distribution Date, the Class B-3 Optimal Principal Amount
will equal the lesser of (A) the Class B-3 Optimal Principal Amount calculated
as described in the preceding provisions and (B) the Adjusted Principal Balance
for the Class B-3 Certificates.
I-19
<PAGE>
Class B-3 Percentage: As to any Distribution Date, except as set forth in
--------------------
the next sentence, the percentage calculated by multiplying (i) the Subordinated
Percentage by (ii) a fraction, the numerator of which is the Class B-3 Principal
Balance (determined as of the Determination Date preceding such Distribution
Date) and the denominator of which is the sum of the Principal Balances of the
Classes of Class B Certificates eligible to receive principal distributions for
such Distribution Date in accordance with the provisions of Section 4.01(d).
Except as set forth in Section 4.01(d)(ii), in the event that the Class B-3
Certificates are not eligible to receive distributions of principal in
accordance with Section 4.01(d)(i), the Class B-3 Percentage for such
Distribution Date will be zero.
Class B-3 Prepayment Percentage: As to any Distribution Date, except as
-------------------------------
set forth in the next sentence, the percentage calculated by multiplying (i) the
Subordinated Prepayment Percentage by (ii) a fraction, the numerator of which is
the Class B-3 Principal Balance (determined as of the Determination Date
preceding such Distribution Date) and the denominator of which is the sum of the
Principal Balances of the Classes of Class B Certificates eligible to receive
principal distributions for such Distribution Date in accordance with the
provisions of Section 4.01(d). Except as set forth in Section 4.01(d)(ii), in
the event that the Class B-3 Certificates are not eligible to receive
distributions of principal in accordance with Section 4.01(d)(i), the Class B-3
Prepayment Percentage for such Distribution Date will be zero.
Class B-3 Principal Balance: As to the first Determination Date, the
---------------------------
Original Class B-3 Principal Balance. As of any subsequent Determination Date,
the lesser of (i) the Original Class B-3 Principal Balance less the sum of (a)
all amounts previously distributed in respect of the Class B-3 Certificates on
prior Distribution Dates (A) pursuant to Paragraph thirteenth of Section
4.01(a)(i) and (B) as a result of a Principal Adjustment and (b) the Realized
Losses allocated through such Determination Date to the Class B-3 Certificates
pursuant to Section 4.02(b) and (ii) the Adjusted Pool Amount as of the
preceding Distribution Date less the sum of the Class A Principal Balance, the
Class B-1 Principal Balance and the Class B-2 Principal Balance as of such
Determination Date.
Class B-3 Unpaid Interest Shortfall: As to any Distribution Date, the
-----------------------------------
amount, if any, by which the aggregate of the Class B-3 Interest Shortfall
Amounts for prior Distribution Dates is in excess of the amounts distributed in
respect of the Class B-3 Certificates on prior Distribution Dates pursuant to
Paragraph twelfth of Section 4.01(a)(i).
Class B-4 Certificate: Any one of the Certificates executed by the Trustee
---------------------
and authenticated by the Trustee or the Authenticating Agent in substantially
the form set forth in Exhibit B-4 and Exhibit C hereto.
Class B-4 Certificateholder: The registered holder of a Class B-4
---------------------------
Certificate.
Class B-4 Distribution Amount: As to any Distribution Date, any amount
-----------------------------
distributable to the Holders of the Class B-4 Certificates pursuant to
Paragraphs fourteenth, fifteenth, and sixteenth of Section 4.01(a)(i).
I-20
<PAGE>
Class B-4 Interest Shortfall Amount: As to any Distribution Date, any
-----------------------------------
amount by which the Interest Accrual Amount of the Class B-4 Certificates with
respect to such Distribution Date exceeds the amount distributed in respect of
the Class B-4 Certificates on such Distribution Date pursuant to Paragraph
fourteenth of Section 4.01(a)(i).
Class B-4 Optimal Principal Amount: As to any Distribution Date, an amount
----------------------------------
equal to the sum, as to each Outstanding Mortgage Loan, of the product of (x)
the Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of:
(i) the Class B-4 Percentage of (A) the principal portion of the
Monthly Payment due on the Due Date occurring in the month of such
Distribution Date on such Mortgage Loan, less (B) if the Bankruptcy Loss
Amount has been reduced to zero, the principal portion of any Debt Service
Reduction with respect to such Mortgage Loan;
(ii) the Class B-4 Prepayment Percentage of all Unscheduled
Principal Receipts that were received by a Servicer with respect to such
Mortgage Loan during the Applicable Unscheduled Principal Receipt Period
relating to such Distribution Date for each applicable type of Unscheduled
Principal Receipt;
(iii) the Class B-4 Prepayment Percentage of the Scheduled
Principal Balance of such Mortgage Loan which, during the month preceding
the month of such Distribution Date, was repurchased by the Seller pursuant
to Section 2.02 or 2.03; and
(iv) the Class B-4 Percentage of the excess of the unpaid
principal balance of such Mortgage Loan substituted for a defective
Mortgage Loan during the month preceding the month in which such
Distribution Date occurs over the unpaid principal balance of such
defective Mortgage Loan, less the amount allocable to the principal portion
of any unreimbursed Periodic Advances previously made by the applicable
Servicer, the Master Servicer or the Trustee in respect of such defective
Mortgage Loan;
provided, however, that if an Optimal Adjustment Event occurs with respect to
- -------- -------
such Class and such Distribution Date, the Class B-4 Optimal Principal Amount
will equal the lesser of (A) the Class B-4 Optimal Principal Amount calculated
as described in the preceding provisions and (B) the Adjusted Principal Balance
for the Class B-4 Certificates.
Class B-4 Percentage: As to any Distribution Date, except as set forth in
--------------------
the next sentence, the percentage calculated by multiplying (i) the Subordinated
Percentage by (ii) a fraction, the numerator of which is the Class B-4 Principal
Balance (determined as of the Determination Date preceding such Distribution
Date) and the denominator of which is the sum of the Principal Balances of the
Classes of Class B Certificates eligible to receive principal distributions for
such Distribution Date in accordance with the provisions of Section 4.01(d).
Except as set forth in Section 4.01(d)(ii), in the event that the Class B-4
Certificates are not eligible to receive distributions of principal in
accordance with Section 4.01(d)(i), the Class B-4 Percentage for such
Distribution Date will be zero.
I-21
<PAGE>
Class B-4 Prepayment Percentage: As to any Distribution Date, except as
-------------------------------
set forth in the next sentence, the percentage calculated by multiplying (i) the
Subordinated Prepayment Percentage by (ii) a fraction, the numerator of which is
the Class B-4 Principal Balance (determined as of the Determination Date
preceding such Distribution Date) and the denominator of which is the sum of the
Principal Balances of the Classes of Class B Certificates eligible to receive
principal distributions for such Distribution Date in accordance with the
provisions of Section 4.01(d). Except as set forth in Section 4.01(d)(ii), in
the event that the Class B-4 Certificates are not eligible to receive
distributions of principal in accordance with Section 4.01(d)(i), the Class B-4
Prepayment Percentage for such Distribution Date will be zero.
Class B-4 Principal Balance: As to the first Determination Date, the
---------------------------
Original Class B-4 Principal Balance. As of any subsequent Determination Date,
the lesser of (i) the Original Class B-4 Principal Balance less the sum of (a)
all amounts previously distributed in respect of the Class B-4 Certificates on
prior Distribution Dates (A) pursuant to Paragraph sixteenth of Section
4.01(a)(i) and (B) as a result of a Principal Adjustment and (b) the Realized
Losses allocated through such Determination Date to the Class B-4 Certificates
pursuant to Section 4.02(b) and (ii) the Adjusted Pool Amount as of the
preceding Distribution Date less the sum of the Class A Principal Balance, the
Class B-1 Principal Balance, the Class B-2 Principal Balance and the Class B-3
Principal Balance as of such Determination Date.
Class B-4 Unpaid Interest Shortfall: As to any Distribution Date, the
-----------------------------------
amount, if any, by which the aggregate of the Class B-4 Interest Shortfall
Amounts for prior Distribution Dates is in excess of the amounts distributed in
respect of the Class B-4 Certificates on prior Distribution Dates pursuant to
Paragraph fifteenth of Section 4.01(a)(i).
Class B-5 Certificate: Any one of the Certificates executed by the Trustee
---------------------
and authenticated by the Trustee or the Authenticating Agent in substantially
the form set forth in Exhibit B-5 and Exhibit C hereto.
Class B-5 Certificateholder: The registered holder of a Class B-5
---------------------------
Certificate.
Class B-5 Distribution Amount: As to any Distribution Date, any amount
-----------------------------
distributable to the Holders of the Class B-5 Certificates pursuant to
Paragraphs seventeenth, eighteenth, and nineteenth of Section 4.01(a)(i).
Class B-5 Interest Shortfall Amount: As to any Distribution Date, any
-----------------------------------
amount by which the Interest Accrual Amount of the Class B-5 Certificates with
respect to such Distribution Date exceeds the amount distributed in respect of
the Class B-5 Certificates on such Distribution Date pursuant to Paragraph
seventeenth of Section 4.01(a)(i).
Class B-5 Optimal Principal Amount: As to any Distribution Date, an amount
----------------------------------
equal to the sum, as to each Outstanding Mortgage Loan, of the product of (x)
the Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of:
(i) the Class B-5 Percentage of (A) the principal portion of the
Monthly Payment due on the Due Date occurring in the month of such
Distribution Date on such
I-22
<PAGE>
Mortgage Loan, less (B) if the Bankruptcy Loss Amount has been reduced to
zero, the principal portion of any Debt Service Reduction with respect to
such Mortgage Loan;
(ii) the Class B-5 Prepayment Percentage of all Unscheduled
Principal Receipts that were received by a Servicer with respect to such
Mortgage Loan during the Applicable Unscheduled Principal Receipt Period
relating to such Distribution Date for each applicable type of Unscheduled
Principal Receipt;
(iii) the Class B-5 Prepayment Percentage of the Scheduled
Principal Balance of such Mortgage Loan which, during the month preceding
the month of such Distribution Date, was repurchased by the Seller pursuant
to Section 2.02 or 2.03; and
(iv) the Class B-5 Percentage of the excess of the unpaid
principal balance of such Mortgage Loan substituted for a defective
Mortgage Loan during the month preceding the month in which such
Distribution Date occurs over the unpaid principal balance of such
defective Mortgage Loan, less the amount allocable to the principal portion
of any unreimbursed Periodic Advances previously made by the applicable
Servicer, the Master Servicer or the Trustee in respect of such defective
Mortgage Loan;
provided, however, that if an Optimal Adjustment Event occurs with respect to
- -------- -------
such Class and such Distribution Date, the Class B-5 Optimal Principal Amount
will equal the lesser of (A) the Class B-5 Optimal Principal Amount calculated
as described in the preceding provisions and (B) the Adjusted Principal Balance
for the Class B-5 Certificates.
Class B-5 Percentage: As to any Distribution Date, except as set forth in
--------------------
the next sentence, the percentage calculated by multiplying (i) the Subordinated
Percentage by (ii) a fraction, the numerator of which is the Class B-5 Principal
Balance (determined as of the Determination Date preceding such Distribution
Date) and the denominator of which is the sum of the Principal Balances of the
Classes of Class B Certificates eligible to receive principal distributions for
such Distribution Date in accordance with the provisions of Section 4.01(d).
Except as set forth in Section 4.01(d)(ii), in the event that the Class B-5
Certificates are not eligible to receive distributions of principal in
accordance with Section 4.01(d)(i), the Class B-5 Percentage for such
Distribution Date will be zero.
Class B-5 Prepayment Percentage: As to any Distribution Date, except as
-------------------------------
set forth in the next sentence, the percentage calculated by multiplying (i) the
Subordinated Prepayment Percentage by (ii) a fraction, the numerator of which is
the Class B-5 Principal Balance (determined as of the Determination Date
preceding such Distribution Date) and the denominator of which is the sum of the
Principal Balances of the Classes of Class B Certificates eligible to receive
principal distributions for such Distribution Date in accordance with the
provisions of Section 4.01(d). Except as set forth in Section 4.01(d)(ii), in
the event that the Class B-5 Certificates are not eligible to receive
distributions of principal in accordance with Section 4.01(d)(i), the Class B-5
Prepayment Percentage for such Distribution Date will be zero.
I-23
<PAGE>
Class B-5 Principal Balance: As to the first Determination Date, the
---------------------------
Original Class B-5 Principal Balance. As of any subsequent Determination Date,
the lesser of (i) the Original Class B-5 Principal Balance less the sum of (a)
all amounts previously distributed in respect of the Class B-5 Certificates on
prior Distribution Dates (A) pursuant to Paragraph nineteenth of Section
4.01(a)(i) and (B) as a result of a Principal Adjustment and (b) the Realized
Losses allocated through such Determination Date to the Class B-5 Certificates
pursuant to Section 4.02(b) and (ii) the Adjusted Pool Amount as of the
preceding Distribution Date less the sum of the Class A Principal Balance, the
Class B-1 Principal Balance, the Class B-2 Principal Balance, the Class B-3
Principal Balance and the Class B-4 Principal Balance as of such Determination
Date.
Class B-5 Unpaid Interest Shortfall: As to any Distribution Date, the
-----------------------------------
amount, if any, by which the aggregate of the Class B-5 Interest Shortfall
Amounts for prior Distribution Dates is in excess of the amounts distributed in
respect of the Class B-5 Certificates on prior Distribution Dates pursuant to
Paragraph eighteenth of Section 4.01(a)(i).
Class B-6 Certificate: Any one of the Certificates executed by the Trustee
---------------------
and authenticated by the Trustee or the Authenticating Agent in substantially
the form set forth in Exhibit B-6 and Exhibit C hereto.
Class B-6 Certificateholder: The registered holder of a Class B-6
---------------------------
Certificate.
Class B-6 Distribution Amount: As to any Distribution Date, any amount
-----------------------------
distributable to the Holders of the Class B-6 Certificates pursuant to
Paragraphs twentieth, twenty-first and twenty-second of Section 4.01(a)(i).
Class B-6 Interest Shortfall Amount: As to any Distribution Date, any
-----------------------------------
amount by which the Interest Accrual Amount of the Class B-6 Certificates with
respect to such Distribution Date exceeds the amount distributed in respect of
the Class B-6 Certificates on such Distribution Date pursuant to Paragraph
twentieth of Section 4.01(a)(i).
Class B-6 Optimal Principal Amount: As to any Distribution Date, an amount
----------------------------------
equal to the sum, as to each Outstanding Mortgage Loan, of the product of (x)
the Non-PO Fraction with respect to such Mortgage Loan and (y) the sum of:
(i) the Class B-6 Percentage of (A) the principal portion of the
Monthly Payment due on the Due Date occurring in the month of such
Distribution Date on such Mortgage Loan, less (B) if the Bankruptcy Loss
Amount has been reduced to zero, the principal portion of any Debt Service
Reduction with respect to such Mortgage Loan;
(ii) the Class B-6 Prepayment Percentage of all Unscheduled
Principal Receipts that were received by a Servicer with respect to such
Mortgage Loan during the Applicable Unscheduled Principal Receipt Period
relating to such Distribution Date for each applicable type of Unscheduled
Principal Receipt;
I-24
<PAGE>
(iii) the Class B-6 Prepayment Percentage of the Scheduled
Principal Balance of such Mortgage Loan which, during the month preceding
the month of such Distribution Date, was repurchased by the Seller pursuant
to Section 2.02 or 2.03; and
(iv) the Class B-6 Percentage of the excess of the unpaid
principal balance of such Mortgage Loan substituted for a defective
Mortgage Loan during the month preceding the month in which such
Distribution Date occurs over the unpaid principal balance of such
defective Mortgage Loan, less the amount allocable to the principal portion
of any unreimbursed Periodic Advances previously made by the applicable
Servicer, the Master Servicer or the Trustee in respect of such defective
Mortgage Loan;
provided, however, that if an Optimal Adjustment Event occurs with respect to
- -------- -------
such Class and such Distribution Date, the Class B-6 Optimal Principal Amount
will equal the lesser of (A) the Class B-6 Optimal Principal Amount calculated
as described in the preceding provisions and (B) the Adjusted Principal Balance
for the Class B-6 Certificates.
Class B-6 Percentage: As to any Distribution Date, except as set forth in
--------------------
the next sentence, the percentage calculated by multiplying (i) the Subordinated
Percentage by (ii) a fraction, the numerator of which is the Class B-6 Principal
Balance (determined as of the Determination Date preceding such Distribution
Date) and the denominator of which is the sum of the Principal Balances of the
Classes of Class B Certificates eligible to receive principal distributions for
such Distribution Date in accordance with the provisions of Section 4.01(d).
Except as set forth in Section 4.01(d)(ii), in the event that the Class B-6
Certificates are not eligible to receive distributions of principal in
accordance with the provisions of Section 4.01(d)(i), the Class B-6 Percentage
for such Distribution Date will be zero.
Class B-6 Prepayment Percentage: As to any Distribution Date, except as
-------------------------------
set forth in the next sentence, the percentage calculated by multiplying (i) the
Subordinated Prepayment Percentage by (ii) a fraction, the numerator of which is
the Class B-6 Principal Balance (determined as of the Determination Date
preceding such Distribution Date) and the denominator of which is the sum of the
Principal Balances of the Classes of Class B Certificates eligible to receive
principal distributions for such Distribution Date in accordance with the
provisions of Section 4.01(d). Except as set forth in Section 4.01(d)(ii), in
the event that the Class B-6 Certificates are not eligible to receive
distributions of principal in accordance with the provisions of Section
4.01(d)(i), the Class B-6 Prepayment Percentage for such Distribution Date will
be zero.
Class B-6 Principal Balance: As to the first Determination Date, the
---------------------------
Original Class B-6 Principal Balance. As of any subsequent Determination Date,
the lesser of (i) the Original Class B-6 Principal Balance less the sum of (a)
all amounts previously distributed in respect of the Class B-6 Certificates on
prior Distribution Dates pursuant to Paragraph twenty-second of Section
4.01(a)(i) and (b) the Realized Losses allocated through such Determination Date
to the Class B-6 Certificates pursuant to Section 4.02(b) and (ii) the Adjusted
Pool Amount as of the preceding Distribution Date less the Class A Principal
Balance, the Class B-1 Principal
I-25
<PAGE>
Balance, the Class B-2 Principal Balance, the Class B-3 Principal Balance, the
Class B-4 Principal Balance and the Class B-5 Principal Balance as of such
Determination Date.
Class B-6 Unpaid Interest Shortfall: As to any Distribution Date, the
-----------------------------------
amount, if any, by which the aggregate of the Class B-6 Interest Shortfall
Amounts for prior Distribution Dates is in excess of the amounts distributed in
respect of the Class B-6 Certificates on prior Distribution Dates pursuant to
Paragraph twenty-first of Section 4.01(a)(i).
Class B-L1 Interest: A regular interest in the Lower-Tier REMIC which is
-------------------
held as an asset of the Upper-Tier REMIC and is entitled to monthly
distributions as provided in Section 4.01(a)(ii) hereof.
Class B-L2 Interest: A regular interest in the Lower-Tier REMIC which is
-------------------
held as an asset of the Upper-Tier REMIC and is entitled to monthly
distributions as provided in Section 4.01(a)(ii) hereof.
Class B-L3 Interest: A regular interest in the Lower-Tier REMIC which is
-------------------
held as an asset of the Upper-Tier REMIC and is entitled to monthly
distributions as provided in Section 4.01(a)(ii) hereof.
Class B-L4 Interest: A regular interest in the Lower-Tier REMIC which is
-------------------
held as an asset of the Upper-Tier REMIC and is entitled to monthly
distributions as provided in Section 4.01(a)(ii) hereof.
Class B-L5 Interest: A regular interest in the Lower-Tier REMIC which is
-------------------
held as an asset of the Upper-Tier REMIC and is entitled to monthly
distributions as provided in Section 4.01(a)(ii) hereof.
Class B-L6 Interest: A regular interest in the Lower-Tier REMIC which is
-------------------
held as an asset of the Upper-Tier REMIC and is entitled to monthly
distributions as provided in Section 4.01(a)(ii) hereof.
Clearing Agency: An organization registered as a "clearing agency"
---------------
pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. The
initial Clearing Agency shall be The Depository Trust Company.
Clearing Agency Indirect Participant: A broker, dealer, bank, financial
------------------------------------
institution or other Person that clears securities transactions through or
maintains a custodial relationship with a Clearing Agency Participant, either
directly or indirectly.
Clearing Agency Participant: A broker, dealer, bank, financial institution
---------------------------
or other Person for whom a Clearing Agency effects book-entry transfers of
securities deposited with the Clearing Agency.
Closing Date: The date of initial issuance of the Certificates, as set
------------
forth in Section 11.21.
I-26
<PAGE>
Code: The Internal Revenue Code of 1986, as it may be amended from time to
----
time, any successor statutes thereto, and applicable U.S. Department of the
Treasury temporary or final regulations promulgated thereunder.
Compensating Interest: As to any Distribution Date, the lesser of (a) the
---------------------
product of (i) 1/12th of 0.20% and (ii) the Pool Scheduled Principal Balance for
such Distribution Date and (b) the Available Master Servicing Compensation for
such Distribution Date.
Co-op Shares: Shares issued by private non-profit housing corporations.
------------
Corporate Trust Office: The principal office of the Trustee at which at
----------------------
any particular time its corporate trust business shall be administered, which
office, with respect to the Trustee, at the date of the execution of this
instrument is located at [ ].
Corresponding Upper-Tier Class or Classes: As to the following
-----------------------------------------
Uncertificated Lower-Tier Interests, the Corresponding Upper-Tier Class or
Classes, as follows:
Uncertificated Lower-Tier Interest Corresponding Upper-Tier Class or Classes
- ---------------------------------- -----------------------------------------
[Insert Uncertificated Lower-Tier [Insert Corresponding Upper Tier Class or
Interest] Classes]
Cross-Over Date: The Distribution Date preceding the first Distribution
---------------
Date on which the Class A Percentage (determined pursuant to clause (ii) of the
definition thereof) equals or exceeds 100%.
Cross-Over Date Interest Shortfall: With respect to any Distribution Date
----------------------------------
that occurs on or after the Cross-Over Date with respect to any Unscheduled
Principal Receipt (other than a Prepayment in Full):
(A) in the case where the Applicable Unscheduled Principal Receipt
Period is the Mid-Month Receipt Period and such Unscheduled
Principal Receipt is received by the Servicer on or after the
Determination Date in the month preceding the month of such
Distribution Date but prior to the first day of the month of
such Distribution Date, the amount of interest that would have
accrued at the Net Mortgage Interest Rate on the amount of such
Unscheduled Principal Receipt from the day of its receipt or, if
earlier, its application by the Servicer through the last day of
the month preceding the month of such Distribution Date; and
(B) in the case where the Applicable Unscheduled Principal Receipt
Period is the Prior Month Receipt Period and such Unscheduled
Principal Receipt is received by the Servicer during the month
preceding the month of such Distribution Date, the amount of
interest that would have accrued at the Net Mortgage Interest
Rate on the amount of such Unscheduled Principal Receipt from
the day of its receipt or, if earlier, its application by the
I-27
<PAGE>
Servicer through the last day of the month in which such
Unscheduled Principal Receipt is received.
Current Class A Interest Distribution Amount: As to any Distribution Date,
--------------------------------------------
the amount distributed in respect of the Classes of Class A Certificates
pursuant to Paragraph first of Section 4.01(a)(i) on such Distribution Date.
Current Class B Interest Distribution Amount: As to any Distribution Date,
--------------------------------------------
the amount distributed in respect of the Classes of Class B Certificates
pursuant to Paragraphs fifth, eighth, eleventh, fourteenth, seventeenth and
twentieth of Section 4.01(a)(i) on such Distribution Date.
Current Class B-1 Fractional Interest: As to any Distribution Date
-------------------------------------
subsequent to the first Distribution Date, the percentage obtained by dividing
the sum of the Principal Balances of the Class B-2, Class B-3, Class B-4, Class
B-5 and Class B-6 Certificates by the sum of the Class A Non-PO Principal
Balance and the Class B Principal Balance. As to the first Distribution Date,
the Original Class B-1 Fractional Interest.
Current Class B-2 Fractional Interest: As to any Distribution Date
-------------------------------------
subsequent to the first Distribution Date, the percentage obtained by dividing
the sum of the Principal Balances of the Class B-3, Class B-4, Class B-5 and
Class B-6 Certificates by the sum of the Class A Non-PO Principal Balance and
the Class B Principal Balance. As to the first Distribution Date, the Original
Class B-2 Fractional Interest.
Current Class B-3 Fractional Interest: As to any Distribution Date
-------------------------------------
subsequent to the first Distribution Date, the percentage obtained by dividing
the sum of the Principal Balances of the Class B-4, Class B-5 and Class B-6
Certificates by the sum of the Class A Non-PO Principal Balance and the Class B
Principal Balance. As to the first Distribution Date, the Original Class B-3
Fractional Interest.
Current Class B-4 Fractional Interest: As to any Distribution Date
-------------------------------------
subsequent to the first Distribution Date, the percentage obtained by dividing
the sum of the Principal Balances of the Class B-5 and Class B-6 Certificates by
the sum of the Class A Non-PO Principal Balance and the Class B Principal
Balance. As to the first Distribution Date, the Original Class B-4 Fractional
Interest.
Current Class B-5 Fractional Interest: As to any Distribution Date
-------------------------------------
subsequent to the first Distribution Date, the percentage obtained by dividing
the Principal Balance of the Class B-6 Certificates by the sum of the Class A
Non-PO Principal Balance and the Class B Principal Balance. As to the first
Distribution Date, the Original Class B-5 Fractional Interest.
Curtailment: Any Principal Prepayment made by a Mortgagor which is not a
-----------
Prepayment in Full.
Custodial Agreement: The Custodial Agreement, if any, from time to time in
-------------------
effect between the Custodian named therein, the Seller, the Master Servicer and
the Trustee, substantially in the form of Exhibit E hereto, as the same may be
amended or modified from time to time in accordance with the terms thereof.
I-28
<PAGE>
Custodial P&I Account: The Custodial P&I Account, as defined in each of
---------------------
the Servicing Agreements, with respect to the Mortgage Loans. In determining
whether the Custodial P&I Account under any Servicing Agreement is "acceptable"
to the Master Servicer (as may be required by the definition of "Eligible
Account" contained in the Servicing Agreements), the Master Servicer shall
require that any such account shall be acceptable to each of the Rating
Agencies.
Custodian: Initially, the Trustee, and thereafter the Custodian, if any,
---------
hereafter appointed by the Trustee pursuant to Section 8.13, or its successor in
interest under the Custodial Agreement. The Custodian may (but need not) be the
Trustee, or any Person directly or indirectly controlling or controlled by or
under common control of the Trustee. Neither a Servicer, nor the Seller nor the
Master Servicer nor any Person directly or indirectly controlling or controlled
by or under common control with any such Person may be appointed Custodian.
Cut-Off Date: The first day of the month of initial issuance of the
------------
Certificates as set forth in Section 11.02.
Cut-Off Date Aggregate Principal Balance: The aggregate of the Cut-Off
----------------------------------------
Date Principal Balances of the Mortgage Loans is as set forth in Section 11.03.
Cut-Off Date Principal Balance: As to each Mortgage Loan, its unpaid
------------------------------
principal balance as of the close of business on the Cut-Off Date (but without
giving effect to any Unscheduled Principal Receipts received or applied on the
Cut-Off Date), reduced by all payments of principal due on or before the Cut-Off
Date and not paid, and increased by scheduled monthly payments of principal due
after the Cut-Off Date but received by the related Servicer on or before the
Cut-Off Date.
Debt Service Reduction: With respect to any Mortgage Loan, a reduction in
----------------------
the scheduled Monthly Payment for such Mortgage Loan by a court of competent
jurisdiction in a proceeding under the Bankruptcy Code, except such a reduction
constituting a Deficient Valuation.
Deficient Valuation: With respect to any Mortgage Loan, a valuation by a
-------------------
court of competent jurisdiction of the Mortgaged Property in an amount less than
the then-outstanding indebtedness under the Mortgage Loan, or any reduction in
the amount of principal to be paid in connection with any scheduled Monthly
Payment that results in a permanent forgiveness of principal, which valuation or
reduction results from a proceeding under the Bankruptcy Code.
Definitive Certificates: As defined in Section 5.01(b).
-----------------------
Denomination: The amount, if any, specified on the face of each Certificate
------------
(other than the Class A-3 and Class A-18 Certificates) representing the
principal portion of the Cut-Off Date Aggregate Principal Balance evidenced by
such Certificate. As to the Class A-3 Certificates, the amount specified on the
face of such Certificate representing the portion of the Original Class A-3
Notional Amount. As to the Class A-18 Certificates, the amount specified
I-29
<PAGE>
on the face of such Certificate representing the portion of the Original Class
A-18 Notional Amount.
Determination Date: The 17th day of the month in which the related
------------------
Distribution Date occurs, or if such 17th day is not a Business Day, the
Business Day preceding such 17th day.
Discount Mortgage Loan: A Mortgage Loan with a Net Mortgage Interest Rate
----------------------
of less than ____%.
Distribution Date: The 25th day of any month, beginning in the month
-----------------
following the month of initial issuance of the Certificates, or if such 25th day
is not a Business Day, the Business Day following such 25th day.
Due Date: With respect to any Mortgage Loan, the day of the month in which
--------
the Monthly Payment on such Mortgage Loan is scheduled to be paid.
Eligible Account: One or more accounts (i) that are maintained with a
----------------
depository institution (which may be the Master Servicer) whose long-term debt
obligations (or, in the case of a depository institution which is part of a
holding company structure, the long-term debt obligations of such parent holding
company) at the time of deposit therein are rated at least "AA" (or the
equivalent) by each of the Rating Agencies, (ii) the deposits in which are fully
insured by the FDIC through either the Bank Insurance Fund or the Savings
Association Insurance Fund, (iii) the deposits in which are insured by the FDIC
through either the Bank Insurance Fund or the Savings Association Insurance Fund
(to the limit established by the FDIC) and the uninsured deposits in which
accounts are otherwise secured, as evidenced by an Opinion of Counsel delivered
to the Trustee, such that the Trustee, on behalf of the Certificateholders has a
claim with respect to the funds in such accounts or a perfected first security
interest against any collateral securing such funds that is superior to claims
of any other depositors or creditors of the depository institution with which
such accounts are maintained, (iv) that are trust accounts maintained with the
trust department of a federal or state chartered depository institution or trust
company acting in its fiduciary capacity or (v) such other account that is
acceptable to each of the Rating Agencies and would not cause the Trust Estate
to fail to qualify as two separate REMICs or result in the imposition of any
federal tax on either of the Upper-Tier REMIC or the Lower-Tier REMIC.
Eligible Investments: At any time, any one or more of the following
--------------------
obligations and securities which shall mature not later than the Business Day
preceding the Distribution Date next succeeding the date of such investment,
provided that such investments continue to qualify as "cash flow investments" as
defined in Code Section 860G(a)(6):
(i) obligations of the United States of America or any agency
thereof, provided such obligations are backed by the full faith and credit
of the United States of America;
(ii) general obligations of or obligations guaranteed by any state
of the United States of America or the District of Columbia receiving the
highest short-term or highest long-term rating of each Rating Agency, or
such lower rating as would not
I-30
<PAGE>
result in the downgrading or withdrawal of the rating then assigned to any
of the Certificates by either Rating Agency or result in any of such rated
Certificates being placed on credit review status (other than for possible
upgrading) by either Rating Agency;
(iii) commercial or finance company paper which is then rated in
the highest long-term commercial or finance company paper rating category
of each Rating Agency or the highest short-term rating category of each
Rating Agency, or such lower rating category as would not result in the
downgrading or withdrawal of the rating then assigned to any of the
Certificates by either Rating Agency or result in any of such rated
Certificates being placed on credit review status (other than for possible
upgrading) by either Rating Agency;
(iv) certificates of deposit, demand or time deposits, federal
funds or banker's acceptances issued by any depository institution or trust
company incorporated under the laws of the United States or of any state
thereof and subject to supervision and examination by federal and/or state
banking authorities, provided that the commercial paper and/or debt
obligations of such depository institution or trust company (or in the case
of the principal depository institution in a holding company system, the
commercial paper or debt obligations of such holding company) are then
rated in the highest short-term or the highest long-term rating category
for such securities of each of the Rating Agencies, or such lower rating
categories as would not result in the downgrading or withdrawal of the
rating then assigned to any of the Certificates by either Rating Agency or
result in any of such rated Certificates being placed on credit review
status (other than for possible upgrading) by either Rating Agency;
(v) guaranteed reinvestment agreements issued by any bank,
insurance company or other corporation acceptable to each Rating Agency at
the time of the issuance of such agreements;
(vi) repurchase agreements on obligations with respect to any
security described in clauses (i) or (ii) above or any other security
issued or guaranteed by an agency or instrumentality of the United States
of America, in either case entered into with a depository institution or
trust company (acting as principal) described in (iv) above;
(vii) securities (other than stripped bonds or stripped coupon
securities) bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States of America or
any state thereof which, at the time of such investment or contractual
commitment providing for such investment, are then rated in the highest
short-term or the highest long-term rating category by each Rating Agency,
or in such lower rating category as would not result in the downgrading or
withdrawal of the rating then assigned to any of the Certificates by either
Rating Agency or result in any of such rated Certificates being placed on
credit review status (other than for possible upgrading) by either Rating
Agency; and
I-31
<PAGE>
(viii) such other investments acceptable to each Rating Agency as
would not result in the downgrading of the rating then assigned to the
Certificates by either Rating Agency or result in any of such rated
Certificates being placed on credit review status (other than for possible
upgrading) by either Rating Agency.
In no event shall an instrument be an Eligible Investment if such
instrument evidences either (i) a right to receive only interest payments with
respect to the obligations underlying such instrument, or (ii) both principal
and interest payments derived from obligations underlying such instrument and
the interest and principal payments with respect to such instrument provide a
yield to maturity at the date of investment of greater than 120% of the yield to
maturity at par of such underlying obligations.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
-----
ERISA Prohibited Holder: As defined in Section 5.02(d).
-----------------------
Errors and Omissions Policy: As defined in each of the Servicing
---------------------------
Agreements.
Event of Default: Any of the events specified in Section 7.01.
----------------
Excess Bankruptcy Loss: With respect to any Distribution Date and any
----------------------
Mortgage Loan as to which a Bankruptcy Loss is realized in the month preceding
the month of such Distribution Date, (i) if the Aggregate Current Bankruptcy
Losses with respect to such Distribution Date exceed the then-applicable
Bankruptcy Loss Amount, then the portion of such Bankruptcy Loss represented by
the ratio of (a) the excess of the Aggregate Current Bankruptcy Losses over the
then-applicable Bankruptcy Loss Amount, divided by (b) the Aggregate Current
Bankruptcy Losses or (ii) if the Aggregate Current Bankruptcy Losses with
respect to such Distribution Date are less than or equal to the then-applicable
Bankruptcy Loss Amount, then zero. In addition, any Bankruptcy Loss occurring
with respect to a Mortgage Loan on or after the Cross-Over Date will be an
Excess Bankruptcy Loss.
Excess Fraud Loss: With respect to any Distribution Date and any Mortgage
-----------------
Loan as to which a Fraud Loss is realized in the month preceding the month of
such Distribution Date, (i) if the Aggregate Current Fraud Losses with respect
to such Distribution Date exceed the then-applicable Fraud Loss Amount, then the
portion of such Fraud Loss represented by the ratio of (a) the excess of the
Aggregate Current Fraud Losses over the then-applicable Fraud Loss Amount,
divided by (b) the Aggregate Current Fraud Losses, or (ii) if the Aggregate
Current Fraud Losses with respect to such Distribution Date are less than or
equal to the then-applicable Fraud Loss Amount, then zero. In addition, any
Fraud Loss occurring with respect to a Mortgage Loan on or after the Cross-Over
Date will be an Excess Fraud Loss.
Excess Special Hazard Loss: With respect to any Distribution Date and any
--------------------------
Mortgage Loan as to which a Special Hazard Loss is realized in the month
preceding the month of such Distribution Date, (i) if the Aggregate Current
Special Hazard Losses with respect to such Distribution Date exceed the then-
applicable Special Hazard Loss Amount, then the portion of such Special Hazard
Loss represented by the ratio of (a) the excess of the Aggregate Current Special
Hazard Losses over the then-applicable Special Hazard Loss Amount, divided by
I-32
<PAGE>
(b) the Aggregate Current Special Hazard Losses, or (ii) if the Aggregate
Current Special Hazard Losses with respect to such Distribution Date are less
than or equal to the then-applicable Special Hazard Loss Amount, then zero. In
addition, any Special Hazard Loss occurring with respect to a Mortgage Loan on
or after the Cross-Over Date will be an Excess Special Hazard Loss.
Exhibit F-1 Mortgage Loan: Any of the Mortgage Loans identified in Exhibit
-------------------------
F-1 hereto, as such Exhibit may be amended from time to time in connection with
a substitution pursuant to Section 2.02, which Mortgage Loan is serviced under
the Norwest Servicing Agreement.
Exhibit F-2 Mortgage Loan: Any of the Mortgage Loans identified in Exhibit
-------------------------
F-2 hereto, as such Exhibit may be amended from time to time in connection with
a substitution pursuant to Section 2.02, which Mortgage Loan is serviced under
the Norwest Servicing Agreement.
Exhibit F-3 Mortgage Loan: Any of the Mortgage Loans identified in Exhibit
-------------------------
F-3 hereto, as such Exhibit may be amended from time to time in connection with
a substitution pursuant to Section 2.02, which Mortgage Loan is serviced under
an Other Servicing Agreement.
FDIC: The Federal Deposit Insurance Corporation or any successor thereto.
----
FHLMC: The Federal Home Loan Mortgage Corporation or any successor
-----
thereto.
Fidelity Bond: As defined in each of the Servicing Agreements.
-------------
Final Distribution Date: The Distribution Date on which the final
-----------------------
distribution in respect of the Certificates is made pursuant to Section 9.01.
Final Scheduled Maturity Date: The Final Scheduled Maturity Date 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, Class A-10, Class A-11, Class A-12, Class A-13, Class A-
14, Class A-15, Class A-16, Class A-17, Class A-18, Class A-19, Class A-20,
Class A-PO, Class A-R, Class A-LR, Class B-1, Class B-2, Class B-3, Class B-4,
Class B-5 and Class B-6 Certificates is ____ __, ____ which corresponds to the
"latest possible maturity date" for purposes of Section 860G(a)(1) of the
Internal Revenue Code of 1986, as amended.
Fixed Retained Yield: The fixed percentage of interest on each Mortgage
--------------------
Loan with a Mortgage Interest Rate greater than the sum of (a) ____%, (b) the
Servicing Fee Rate and (c) the Master Servicing Fee Rate, which will be
determined on a loan by loan basis and will equal the Mortgage Interest Rate on
each Mortgage Loan minus the sum of (a), (b) and (c), which is not assigned to
and not part of the Trust Estate.
Fixed Retained Yield Rate: With respect to each Mortgage Loan, a per annum
-------------------------
rate equal to the greater of (a) zero and (b) the Mortgage Interest Rate on such
Mortgage Loan
I-33
<PAGE>
minus the sum of (i) ____%, (ii) the Servicing Fee Rate and (iii) the Master
Servicing Fee Rate.
FNMA: Fannie Mae or any successor thereto.
----
Foreclosure Profits: As to any Distribution Date, the excess, if any, of
-------------------
(i) Net Liquidation Proceeds in respect of each Mortgage Loan that became a
Liquidated Loan during the Applicable Unscheduled Principal Receipt Period with
respect to Full Unscheduled Principal Receipts for such Distribution Date over
(ii) the sum of the unpaid principal balance of each such Liquidated Loan plus
accrued and unpaid interest at the applicable Mortgage Interest Rate on the
unpaid principal balance thereof from the Due Date to which interest was last
paid by the Mortgagor (or, in the case of a Liquidated Loan that had been an REO
Mortgage Loan, from the Due Date to which interest was last deemed to have been
paid) to the first day of the month in which such Distribution Date occurs.
Fraud Loss: A Liquidated Loan Loss as to which there was fraud in the
----------
origination of such Mortgage Loan.
Fraud Loss Amount: As of any Distribution Date after the Cut-Off Date an
-----------------
amount equal to: (X) prior to the first anniversary of the Cut-Off Date an
amount equal to $______ minus the aggregate amount of Fraud Losses allocated
solely to the Class B Certificates in accordance with Section 4.02(a) since the
Cut-Off Date, and (Y) from the first through fifth anniversary of the Cut-Off
Date, an amount equal to (1) the lesser of (a) the Fraud Loss Amount as of the
most recent anniversary of the Cut-Off Date and (b) 1.00% of the aggregate
outstanding principal balance of all of the Mortgage Loans as of the most recent
anniversary of the Cut-Off Date minus (2) the Fraud Losses allocated solely to
the Class B Certificates in accordance with Section 4.02(a) since the most
recent anniversary of the Cut-Off Date. On and after the Cross-Over Date or
after the fifth anniversary of the Cut-Off Date the Fraud Loss Amount shall be
zero.
Full Unscheduled Principal Receipt: Any Unscheduled Principal Receipt with
----------------------------------
respect to a Mortgage Loan (i) in the amount of the outstanding principal
balance of such Mortgage Loan and resulting in the full satisfaction of such
Mortgage Loan or (ii) representing Liquidation Proceeds other than Partial
Liquidation Proceeds.
Holder: See "Certificateholder."
------
Independent: When used with respect to any specified Person, such Person
-----------
who (i) is in fact independent of the Seller, the Master Servicer and any
Servicer, (ii) does not have any direct financial interest or any material
indirect financial interest in the Seller or the Master Servicer or any Servicer
or in an affiliate of either, and (iii) is not connected with the Seller, the
Master Servicer or any Servicer as an officer, employee, promoter, underwriter,
trustee, partner, director or person performing similar functions.
Insurance Policy: Any insurance or performance bond relating to a Mortgage
----------------
Loan or the Mortgage Loans, including any hazard insurance, special hazard
insurance, flood insurance, primary mortgage insurance, mortgagor bankruptcy
bond or title insurance.
I-34
<PAGE>
Insurance Proceeds: Proceeds paid by any insurer pursuant to any Insurance
------------------
Policy covering a Mortgage Loan.
Insured Expenses: Expenses covered by any Insurance Policy covering a
----------------
Mortgage Loan.
Interest Accrual Amount: As to any Distribution Date and any Class of
-----------------------
Class A Certificates (other than the Class A-3, Class A-12, Class A-18 and Class
A-PO Certificates), (a) the product of (i) 1/12th of the Class A Pass-Through
Rate for such Class and (ii) the Principal Balance of such Class as of the
Determination Date preceding such Distribution Date minus (b) the Class A
Interest Percentage of such Class of (i) any Non-Supported Interest Shortfall
allocated to the Class A Certificates with respect to such Distribution Date,
(ii) the interest portion of any Excess Special Hazard Losses, Excess Fraud
Losses and Excess Bankruptcy Losses allocated to the Class A Certificates with
respect to such Distribution Date pursuant to Section 4.02(e) and (iii) the
interest portion of any Realized Losses (other than Excess Special Hazard
Losses, Excess Fraud Losses and Excess Bankruptcy Losses) allocated to the Class
A Certificates on or after the Cross-Over Date pursuant to Section 4.02(e). As
to any Distribution Date and the Class A-3 Certificates, the Class A-3 Interest
Accrual Amount. As to any Distribution Date and the Class A-18 Certificates,
the Class A-18 Interest Accrual Amount. The Class A-12 and Class A-PO
Certificates have no Interest Accrual Amount.
As to any Distribution Date and any Class of Class B Certificates, an
amount equal to (i) the product of 1/12th of the Class B Pass-Through Rate and
the Principal Balance of such Class as of the Determination Date preceding such
Distribution Date minus (ii) the Class B Interest Percentage of such Class of
(x) any Non-Supported Interest Shortfall allocated to the Class B Certificates
with respect to such Distribution Date and (y) the interest portion of any
Excess Special Hazard Losses, Excess Fraud Losses and Excess Bankruptcy Losses
allocated to the Class B Certificates with respect to such Distribution Date
pursuant to Section 4.02(e).
Liquidated Loan: A Mortgage Loan with respect to which the related
---------------
Mortgaged Property has been acquired, liquidated or foreclosed and with respect
to which the applicable Servicer determines that all Liquidation Proceeds which
it expects to recover have been recovered.
Liquidated Loan Loss: With respect to any Distribution Date, the aggregate
--------------------
of the amount of losses with respect to each Mortgage Loan which became a
Liquidated Loan during the Applicable Unscheduled Principal Receipt Period with
respect to Full Unscheduled Principal Receipts for such Distribution Date, equal
to the excess of (i) the unpaid principal balance of each such Liquidated Loan,
plus accrued interest thereon in accordance with the amortization schedule at
the time applicable thereto at the applicable Net Mortgage Interest Rate from
the Due Date as to which interest was last paid with respect thereto through the
last day of the month preceding the month in which such Distribution Date
occurs, over (ii) Net Liquidation Proceeds with respect to such Liquidated Loan.
Liquidation Expenses: Expenses incurred by a Servicer in connection with
--------------------
the liquidation of any defaulted Mortgage Loan or property acquired in respect
thereof (including, without limitation, legal fees and expenses, committee or
referee fees, and, if applicable,
I-35
<PAGE>
brokerage commissions and conveyance taxes), any unreimbursed advances expended
by such Servicer pursuant to its Servicing Agreement or the Master Servicer or
Trustee pursuant hereto respecting the related Mortgage Loan, including any
unreimbursed advances for real property taxes or for property restoration or
preservation of the related Mortgaged Property. Liquidation Expenses shall not
include any previously incurred expenses in respect of an REO Mortgage Loan
which have been netted against related REO Proceeds.
Liquidation Proceeds: Amounts received by a Servicer (including Insurance
--------------------
Proceeds) in connection with the liquidation of defaulted Mortgage Loans or
property acquired in respect thereof, whether through foreclosure, sale or
otherwise, including payments in connection with such Mortgage Loans received
from the Mortgagor, other than amounts required to be paid to the Mortgagor
pursuant to the terms of the applicable Mortgage or to be applied otherwise
pursuant to law.
Loan-to-Value Ratio: The ratio, expressed as a percentage, the numerator
-------------------
of which is the principal balance of a particular Mortgage Loan at origination
and the denominator of which is the lesser of (x) the appraised value of the
related Mortgaged Property determined in the appraisal used by the originator at
the time of origination of such Mortgage Loan, and (y) if the Mortgage is
originated in connection with a sale of the Mortgaged Property, the sale price
for such Mortgaged Property.
Lower-Tier Distribution Amount: As defined in Section 4.01(a)(ii).
------------------------------
Lower-Tier REMIC: One of two separate REMICs comprising the Trust Estate,
----------------
the assets of which consist of the Mortgage Loans (other than Fixed Retained
Yield), such amounts as shall from time to time be held in the Certificate
Account (other than Fixed Retained Yield), the insurance policies, if any,
relating to a Mortgage Loan and property which secured a Mortgage Loan and which
has been acquired by foreclosure or deed in lieu of foreclosure.
Master Servicer: Norwest Bank Minnesota, National Association, or its
---------------
successor in interest.
Master Servicing Fee: With respect to any Mortgage Loan and any
--------------------
Distribution Date, the fee payable monthly to the Master Servicer pursuant to
Section 6.05 equal to a fixed percentage (expressed as a per annum rate) of the
unpaid principal balance of such Mortgage Loan.
Master Servicing Fee Rate: As set forth in Section 11.26.
-------------------------
Mid-Month Receipt Period: With respect to each Distribution Date, the one
------------------------
month period beginning on the Determination Date (or, in the case of the first
Distribution Date, from and including the Cut-Off-Date) occurring in the
calendar month preceding the month in which such Distribution Date occurs and
ending on the day preceding the Determination Date immediately preceding such
Distribution Date.
Monthly Payment: As to any Mortgage Loan (including any REO Mortgage Loan)
---------------
and any Due Date, the payment of principal and interest due thereon in
accordance with the
I-36
<PAGE>
amortization schedule at the time applicable thereto (after adjustment for any
Curtailments and Deficient Valuations occurring prior to such Due Date but
before any adjustment to such amortization schedule, other than for Deficient
Valuations, by reason of any bankruptcy or similar proceeding or any moratorium
or similar waiver or grace period).
Month End Interest: As defined in each Servicing Agreement.
------------------
Mortgage: The mortgage, deed of trust or other instrument creating a first
--------
lien on Mortgaged Property securing a Mortgage Note together with any Mortgage
Loan Rider, if applicable.
Mortgage Interest Rate: As to any Mortgage Loan, the per annum rate at
----------------------
which interest accrues on the unpaid principal balance thereof as set forth in
the related Mortgage Note, which rate is as indicated on the Mortgage Loan
Schedule.
Mortgage Loan Rider: The standard FNMA/FHLMC riders to the Mortgage Note
-------------------
and/or Mortgage riders required when the Mortgaged Property is a condominium
unit or a unit in a planned unit development.
Mortgage Loan Schedule: The list of the Mortgage Loans transferred to the
----------------------
Trustee on the Closing Date as part of the Trust Estate and attached hereto as
Exhibits F-1, F-2 and F-3, which list may be amended following the Closing Date
upon conveyance of a Substitute Mortgage Loan pursuant to Section 2.02 or 2.03
and which list shall set forth at a minimum the following information of the
close of business on the Cut-Off Date (or, with respect to Substitute Mortgage
Loans, as of the close of business on the day of substitution) as to each
Mortgage Loan:
(i) the Mortgage Loan identifying number;
(ii) the city, state and zip code of the Mortgaged Property;
(iii) the type of property;
(iv) the Mortgage Interest Rate;
(v) the Net Mortgage Interest Rate;
(vi) the Monthly Payment;
(vii) the original number of months to maturity;
(viii) the scheduled maturity date;
(ix) the Cut-Off Date Principal Balance;
(x) the Loan-to-Value Ratio at origination;
(xi) whether such Mortgage Loan is a Subsidy Loan;
I-37
<PAGE>
(xii) whether such Mortgage Loan is covered by primary mortgage
insurance;
(xiii) the Servicing Fee Rate;
(xiv) whether such Mortgage Loan is a T.O.P. Mortgage Loan;
(xv) the Master Servicing Fee;
(xvi) Fixed Retained Yield, if applicable; and
(xvii) for each Exhibit F-3 Mortgage Loan, the name of the Servicer
with respect thereto.
Such schedule may consist of multiple reports that collectively set forth
all of the information required.
Mortgage Loans: Each of the mortgage loans transferred and assigned to the
--------------
Trustee on the Closing Date pursuant to Section 2.01 and any mortgage loans
substituted therefor pursuant to Section 2.02 or 2.03, in each case as from time
to time are included in the Trust Estate as identified in the Mortgage Loan
Schedule.
Mortgage Note: The note or other evidence of indebtedness evidencing the
-------------
indebtedness of a Mortgagor under a Mortgage Loan together with any related
Mortgage Loan Riders, if applicable.
Mortgaged Property: The property subject to a Mortgage, which may include
------------------
Co-op Shares or residential long-term leases.
Mortgagor: The obligor on a Mortgage Note.
---------
Net Foreclosure Profits: As to any Distribution Date, the amount, if any,
-----------------------
by which (i) Aggregate Foreclosure Profits with respect to such Distribution
Date exceed (ii) Liquidated Loan Losses with respect to such Distribution Date.
Net Liquidation Proceeds: As to any defaulted Mortgage Loan, Liquidation
------------------------
Proceeds net of Liquidation Expenses.
Net Mortgage Interest Rate: With respect to each Mortgage Loan, a rate
--------------------------
equal to (i) the Mortgage Interest Rate on such Mortgage Loan minus (ii) the sum
of (a) the Servicing Fee Rate, as set forth in Section 11.25 with respect to
such Mortgage Loan, (b) the Master Servicing Fee Rate, as set forth in Section
11.26 with respect to such Mortgage Loan and (c) the Fixed Retained Yield Rate,
if any, with respect to such Mortgage Loan. Any regular monthly computation of
interest at such rate shall be based upon annual interest at such rate on the
applicable amount divided by twelve.
Net REO Proceeds: As to any REO Mortgage Loan, REO Proceeds net of any
----------------
related expenses of the Servicer.
I-38
<PAGE>
Non-permitted Foreign Holder: As defined in Section 5.02(d).
----------------------------
Non-PO Fraction: With respect to any Mortgage Loan, the lesser of (i) 1.00
---------------
and (ii) the quotient obtained by dividing the Net Mortgage Interest Rate for
such Mortgage Loan by ____%.
Nonrecoverable Advance: Any portion of a Periodic Advance previously made
----------------------
or proposed to be made in respect of a Mortgage Loan which has not been
previously reimbursed to the Servicer, the Master Servicer or the Trustee, as
the case may be, and which the Servicer, the Master Servicer or the Trustee
determines will not, or in the case of a proposed Periodic Advance would not, be
ultimately recoverable from Liquidation Proceeds or other recoveries in respect
of the related Mortgage Loan. The determination by the Servicer, the Master
Servicer or the Trustee (i) that it has made a Nonrecoverable Advance or (ii)
that any proposed Periodic Advance, if made, would constitute a Nonrecoverable
Advance, shall be evidenced by an Officer's Certificate of the Servicer
delivered to the Master Servicer for redelivery to the Trustee or, in the case
of a Master Servicer determination, an Officer's Certificate of the Master
Servicer delivered to the Trustee, in each case detailing the reasons for such
determination.
Non-Supported Interest Shortfall: With respect to any Distribution Date,
--------------------------------
the excess, if any, of the aggregate Prepayment Interest Shortfall on the
Mortgage Loans over the aggregate Compensating Interest with respect to such
Distribution Date. With respect to each Distribution Date occurring on or after
the Cross-Over Date, the Non-Supported Interest Shortfall determined pursuant to
the preceding sentence will be increased by the amount of any Cross-Over Date
Interest Shortfall for such Distribution Date. Any Non-Supported Interest
Shortfall will be allocated to (a) the Class A Certificates according to the
percentage obtained by dividing the Class A Non-PO Principal Balance by the sum
of the Class A Non-PO Principal Balance and the Class B Principal Balance and
(b) the Class B Certificates according to the percentage obtained by dividing
the Class B Principal Balance by the sum of the Class A Non-PO Principal Balance
and the Class B Principal Balance.
Non-U.S. Person: As defined in Section 4.01(g).
---------------
Norwest Mortgage: Norwest Mortgage, Inc., or its successor in interest.
----------------
Norwest Mortgage Correspondents: The entities listed on the Mortgage Loan
-------------------------------
Schedule, from which Norwest Mortgage purchased the Mortgage Loans.
Norwest Servicing Agreement: The Servicing Agreement providing for the
---------------------------
servicing of the Exhibit F-1 Mortgage Loans and Exhibit F-2 Mortgage Loans
initially by Norwest Mortgage.
Officers' Certificate: With respect to any Person, a certificate signed by
---------------------
the Chairman of the Board, the President or a Vice President, and by the
Treasurer, the Secretary or one of the Assistant Treasurers or Assistant
Secretaries of such Person (or, in the case of a Person which is not a
corporation, signed by the person or persons having like responsibilities), and
delivered to the Trustee.
I-39
<PAGE>
Opinion of Counsel: A written opinion of counsel, who may be outside or
------------------
salaried counsel for the Seller, a Servicer or the Master Servicer, or any
affiliate of the Seller, a Servicer or the Master Servicer, acceptable to the
Trustee if such opinion is to be delivered to the Trustee; provided, however,
-------- -------
that with respect to REMIC matters, matters relating to the determination of
Eligible Accounts or matters relating to transfers of Certificates, such counsel
shall be Independent.
Optimal Adjustment Event: With respect to any Class of Class B
------------------------
Certificates and any Distribution Date, an Optimal Adjustment Event will occur
with respect to such Class if: (i) the Principal Balance of such Class on the
Determination Date succeeding such Distribution Date would have been reduced to
zero (regardless of whether such Principal Balance was reduced to zero as a
result of principal distribution or the allocation of Realized Losses) and (ii)
(a) the Principal Balance of any Class of Class A Certificates would be subject
to further reduction as a result of the third or fifth sentences of the
definition of Principal Balance or (b) the Principal Balance of a Class of Class
B Certificates with a lower numerical designation would be reduced with respect
to such Distribution Date as a result of the application of clause (ii) of the
definition of Class B-1 Principal Balance, Class B-2 Principal Balance, Class B-
3 Principal Balance, Class B-4 Principal Balance, Class B-5 Principal Balance or
Class B-6 Principal Balance.
Original Class A Percentage: The Class A Percentage as of the Cut-Off
---------------------------
Date, as set forth in Section 11.04.
Original Class A Non-PO Principal Balance: The sum of the Original
-----------------------------------------
Principal Balances of the Class A-1, Class A-2, Class A-4, Class A-5, Class A-6,
Class A-7, Class A-8, Class A-9, Class A-10, Class A-11, Class A-12, Class A-13,
Class A-14, Class A-15, Class A-16, Class A-17, Class A-19, Class A-20, Class A-
R and Class A-LR Certificates, as set forth in Section 11.06.
Original Class A-3 Notional Amount: The Original Class A-3 Notional
----------------------------------
Amount, as set forth in Section 11.05(a).
Original Class A-18 Notional Amount: The Original Class A-18 Notional
-----------------------------------
Amount, as set forth in Section 11.05(b).
Original Class B Principal Balance: The sum of the Original Class B-1
----------------------------------
Principal Balance, Original Class B-2 Principal Balance, Original Class B-3
Principal Balance, Original Class B-4 Principal Balance, Original Class B-5
Principal Balance and Original Class B-6 Principal Balance, as set forth in
Section 11.14.
Original Class B-1 Fractional Interest: As to the first Distribution Date,
--------------------------------------
the percentage obtained by dividing the sum of the Original Class B-2 Principal
Balance, the Original Class B-3 Principal Balance, the Original Class B-4
Principal Balance, Original Class B-5 Principal Balance and the Original Class
B-6 Principal Balance by the sum of the Original Class A Non-PO Principal
Balance and the Original Class B Principal Balance. The Original Class B-1
Fractional Interest is specified in Section 11.16.
I-40
<PAGE>
Original Class B-2 Fractional Interest: As to the first Distribution Date,
--------------------------------------
the percentage obtained by dividing the sum of the Original Class B-3 Principal
Balance, the Original Class B-4 Principal Balance, Original Class B-5 Principal
Balance and the Original Class B-6 Principal Balance by the sum of the Original
Class A Non-PO Principal Balance and the Original Class B Principal Balance.
The Original Class B-2 Fractional Interest is specified in Section 11.17.
Original Class B-3 Fractional Interest: As to the first Distribution Date,
--------------------------------------
the percentage obtained by dividing the sum of the Original Class B-4 Principal
Balance, the Original Class B-5 Principal Balance and the Original Class B-6
Principal Balance by the sum of the Original Class A Non-PO Principal Balance
and the Original Class B Principal Balance. The Original Class B-3 Fractional
Interest is specified in Section 11.18.
Original Class B-4 Fractional Interest: As to the first Distribution Date,
--------------------------------------
the percentage obtained by dividing the sum of the Original Class B-5 Principal
Balance and the Original Class B-6 Principal Balance by the sum of the Original
Class A Non-PO Principal Balance and the Original Class B Principal Balance.
The Original Class B-4 Fractional Interest is specified in Section 11.19.
Original Class B-5 Fractional Interest: As to the first Distribution Date,
--------------------------------------
the percentage obtained by dividing the Original Class B-6 Principal Balance by
the sum of the Original Class A Non-PO Principal Balance and the Original Class
B Principal Balance. The Original Class B-5 Fractional Interest is specified in
Section 11.20.
Original Class B-1 Percentage: The Class B-1 Percentage as of the Cut-Off
-----------------------------
Date, as set forth in Section 11.08.
Original Class B-2 Percentage: The Class B-2 Percentage as of the Cut-Off
-----------------------------
Date, as set forth in Section 11.09.
Original Class B-3 Percentage: The Class B-3 Percentage as of the Cut-Off
-----------------------------
Date, as set forth in Section 11.10.
Original Class B-4 Percentage: The Class B-4 Percentage as of the Cut-Off
-----------------------------
Date, as set forth in Section 11.11.
Original Class B-5 Percentage: The Class B-5 Percentage as of the Cut-Off
-----------------------------
Date, as set forth in Section 11.12.
Original Class B-6 Percentage: The Class B-6 Percentage as of the Cut-Off
-----------------------------
Date, as set forth in Section 11.13.
Original Class B-1 Principal Balance: The Class B-1 Principal Balance as
------------------------------------
of the Cut-Off Date, as set forth in Section 11.15.
Original Class B-2 Principal Balance: The Class B-2 Principal Balance as
------------------------------------
of the Cut-Off Date, as set forth in Section 11.15.
I-41
<PAGE>
Original Class B-3 Principal Balance: The Class B-3 Principal Balance as
------------------------------------
of the Cut-Off Date, as set forth in Section 11.15.
Original Class B-4 Principal Balance: The Class B-4 Principal Balance as
------------------------------------
of the Cut-Off Date, as set forth in Section 11.15.
Original Class B-5 Principal Balance: The Class B-5 Principal Balance as
------------------------------------
of the Cut-Off Date, as set forth in Section 11.15.
Original Class B-6 Principal Balance: The Class B-6 Principal Balance as
------------------------------------
of the Cut-Off Date, as set forth in Section 11.15.
Original Principal Balance: Any of the Original Principal Balances of the
--------------------------
Classes of Class A Certificates as set forth in Section 11.05; the Original
Class B-1 Principal Balance, Original Class B-2 Principal Balance, Original
Class B-3 Principal Balance, Original Class B-4 Principal Balance, Original
Class B-5 Principal Balance or Original Class B-6 Principal Balance as set forth
in Section 11.15.
Original Subordinated Percentage: The Subordinated Percentage as of the
--------------------------------
Cut-Off Date, as set forth in Section 11.07.
Other Servicer: Any of the Servicers other than Norwest Mortgage.
--------------
Other Servicing Agreements: The Servicing Agreements other than the
--------------------------
Norwest Servicing Agreement.
Outstanding Mortgage Loan: As to any Due Date, a Mortgage Loan (including
-------------------------
an REO Mortgage Loan) which was not the subject of a Full Unscheduled Principal
Receipt prior to such Due Date and which was not repurchased by the Seller prior
to such Due Date pursuant to Section 2.02 or 2.03.
Owner Mortgage Loan File: A file maintained by the Trustee (or the
------------------------
Custodian, if any) for each Mortgage Loan that contains the documents specified
in the Servicing Agreements under their respective "Owner Mortgage Loan File"
definition or similar definition and/or other provisions requiring delivery of
specified documents to the owner of the Mortgage Loan in connection with the
purchase thereof, and any additional documents required to be added to the Owner
Mortgage Loan File pursuant to this Agreement.
PAC Certificates: The Class A-1 Certificates and Class A-2 Certificates.
----------------
PAC Principal Amount: As defined in Section 4.01(b).
--------------------
Partial Liquidation Proceeds: Liquidation Proceeds received by a Servicer
----------------------------
prior to the month in which the related Mortgage Loan became a Liquidated Loan.
Partial Unscheduled Principal Receipt: An Unscheduled Principal Receipt
-------------------------------------
which is not a Full Unscheduled Principal Receipt.
I-42
<PAGE>
Paying Agent: The Person authorized on behalf of the Trustee, as agent for
------------
the Master Servicer, to make distributions to Certificateholders with respect to
the Certificates and to forward to Certificateholders the periodic and annual
statements required by Section 4.04. The Paying Agent may be any Person
directly or indirectly controlling or controlled by or under common control with
the Master Servicer and may be the Trustee. The initial Paying Agent is
appointed in Section 4.03(a).
Payment Account: The account maintained pursuant to Section 4.03(b).
---------------
Percentage Interest: With respect to a Class A Certificate (other than
-------------------
Class A-3 and Class A-18 Certificates), the undivided percentage interest
obtained by dividing the original principal balance of such Certificate by the
aggregate original principal balance of all Certificates of such Class of Class
A Certificates. With respect to a Class A-3 Certificate, the undivided
percentage interest obtained by dividing the Original Class A-3 Notional Amount
evidenced by such Certificate by the aggregate Original Class A-3 Notional
Amount. With respect to a Class A-18 Certificate, the undivided percentage
interest obtained by dividing the Original Class A-18 Notional Amount evidenced
by such Certificate by the aggregate Original Class A-18 Notional Amount. With
respect to a Class B Certificate, the undivided percentage interest obtained by
dividing the original principal balance of such Certificate by the aggregate
original principal balance of all Certificates of such Class of Class B
Certificates.
Periodic Advance: The aggregate of the advances required to be made by a
----------------
Servicer on any Distribution Date pursuant to its Servicing Agreement or by the
Master Servicer or the Trustee hereunder, the amount of any such advances being
equal to the total of all Monthly Payments (adjusted, in each case (i) in
respect of interest, to the applicable Mortgage Interest Rate less the
applicable Servicing Fee in the case of Periodic Advances made by a Servicer and
to the applicable Net Mortgage Interest Rate in the case of Periodic Advances
made by the Master Servicer or Trustee and (ii) by the amount of any related
Debt Service Reductions or reductions in the amount of interest collectable from
the Mortgagor pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended, or similar legislation or regulations then in effect) on the
Mortgage Loans, that (x) were delinquent as of the close of business on the
related Determination Date, (y) were not the subject of a previous Periodic
Advance by such Servicer or of a Periodic Advance by the Master Servicer or the
Trustee, as the case may be and (z) have not been determined by the Master
Servicer, such Servicer or Trustee to be Nonrecoverable Advances.
Person: Any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Plan: As defined in Section 5.02(c).
----
PO Fraction: With respect to any Discount Mortgage Loan, the difference
-----------
between 1.0 and the Non-PO Fraction for such Mortgage Loan; with respect to any
other Mortgage Loan, zero.
I-43
<PAGE>
Pool Balance (Non-PO Portion): As of any Distribution Date, the sum of the
-----------------------------
amounts for each Mortgage Loan that is an Outstanding Mortgage Loan of the
product of (i) the Non-PO Fraction for such Mortgage Loan and (ii) the Scheduled
Principal Balance of such Mortgage Loan.
Pool Balance (PO Portion): As of any Distribution Date, the sum of the
-------------------------
amounts for each Mortgage Loan that is an Outstanding Mortgage Loan of the
product of (i) the PO Fraction for such Mortgage Loan and (ii) the Scheduled
Principal Balance of such Mortgage Loan.
Pool Distribution Amount: As of any Distribution Date, the funds eligible
------------------------
for distribution to the Holders of the Certificates on such Distribution Date,
which shall be the sum of (i) all previously undistributed payments or other
receipts on account of principal and interest on or in respect of the Mortgage
Loans (including, without limitation, the proceeds of any repurchase of a
Mortgage Loan by the Seller and any Substitution Principal Amount) received by
the Master Servicer with respect to the applicable Remittance Date in the month
of such Distribution Date and any Unscheduled Principal Receipts received by the
Master Servicer on or prior to the Business Day preceding such Distribution
Date, (ii) all Periodic Advances made by a Servicer pursuant to the related
Servicing Agreement or Periodic Advances made by the Master Servicer or the
Trustee pursuant to Section 3.03 and (iii) all other amounts required to be
placed in the Certificate Account by the Servicer on or before the applicable
Remittance Date or by the Master Servicer or the Trustee on or prior to the
Distribution Date, but excluding the following:
(a) amounts received as late payments of principal or interest
and respecting which the Master Servicer or the Trustee has made one or
more unreimbursed Periodic Advances;
(b) the portion of Liquidation Proceeds used to reimburse any
unreimbursed Periodic Advances by the Master Servicer or the Trustee;
(c) those portions of each payment of interest on a particular
Mortgage Loan which represent (i) the Fixed Retained Yield, if any, (ii)
the applicable Servicing Fee and (iii) the Master Servicing Fee;
(d) all amounts representing scheduled payments of principal
and interest due after the Due Date occurring in the month in which such
Distribution Date occurs;
(e) all Unscheduled Principal Receipts received by the
Servicers after the Applicable Unscheduled Principal Receipt Period
relating to the Distribution Date for the applicable type of Unscheduled
Principal Receipt, and all related payments of interest on such amounts;
(f) all repurchase proceeds with respect to Mortgage Loans
repurchased by the Seller pursuant to Section 2.02 or 2.03 on or following
the Due Date in the month in which such Distribution Date occurs and the
difference between the unpaid principal balance of such Mortgage Loan
substituted for a defective Mortgage Loan during the
I-44
<PAGE>
month preceding the month in which such Distribution Date occurs and the
unpaid principal balance of such defective Mortgage Loan;
(g) that portion of Liquidation Proceeds and REO Proceeds which
represents any unpaid Servicing Fee or Master Servicing Fee;
(h) all income from Eligible Investments that is held in the
Certificate Account for the account of the Master Servicer;
(i) all other amounts permitted to be withdrawn from the
Certificate Account in respect of the Mortgage Loans, to the extent not
covered by clauses (a) through (h) above, or not required to be deposited
in the Certificate Account under this Agreement;
(j) Net Foreclosure Profits;
(k) Month End Interest; and
(l) the amount of any Recoveries in respect of principal which
had previously been allocated as a loss to one or more Classes of the Class
A or Class B Certificates pursuant to Section 4.02 other than Recoveries
covered by the last sentence of Section 4.02(d).
Pool Scheduled Principal Balance: As to any Distribution Date, the
--------------------------------
aggregate Scheduled Principal Balances of all Mortgage Loans that were
Outstanding Mortgage Loans on the Due Date in the month preceding the month of
such Distribution Date.
Premium Mortgage Loan: A Mortgage Loan with a Net Mortgage Interest Rate
---------------------
of ____% or greater.
Prepayment In Full: With respect to any Mortgage Loan, a Mortgagor payment
------------------
consisting of a Principal Prepayment in the amount of the outstanding principal
balance of such loan and resulting in the full satisfaction of such obligation.
Prepayment Interest Shortfall: On any Distribution Date, the amount of
-----------------------------
interest, if any, that would have accrued on any Mortgage Loan which was the
subject of a Prepayment in Full at the Net Mortgage Interest Rate for such
Mortgage Loan from the date of its Prepayment in Full (but in the case of a
Prepayment in Full where the Applicable Unscheduled Principal Receipt Period is
the Mid-Month Receipt Period, only if the date of the Prepayment in Full is on
or after the Determination Date in the month prior to the month of such
Distribution Date and prior to the first day of the month of such Distribution
Date) through the last day of the month prior to the month of such Distribution
Date.
Principal Accretion Amount: With respect to any Class of Accrual
--------------------------
Certificates and as to any Distribution Date prior to the applicable Accretion
Termination Date, an amount with respect to such Class equal to the sum of the
amounts calculated pursuant to clauses (i) and (ii) of the definition of Accrual
Distribution Amount with respect to such Distribution Date.
I-45
<PAGE>
Principal Adjustment: In the event that the Class B-1 Optimal Principal
--------------------
Amount, Class B-2 Optimal Principal Amount, Class B-3 Optimal Principal Amount,
Class B-4 Optimal Principal Amount, Class B-5 Optimal Principal Amount or Class
B-6 Optimal Principal Amount is calculated in accordance with the proviso in
such definition with respect to any Distribution Date, the Principal Adjustment
for such Class of Class B Certificates shall equal the difference between (i)
the amount that would have been distributed to such Class as principal in
accordance with Section 4.01(a) for such Distribution Date, calculated without
regard to such proviso and assuming there are no Principal Adjustments for such
Distribution Date and (ii) the Adjusted Principal Balance for such Class.
Principal Balance: As of the first Determination Date and as to any Class
-----------------
of Class A Certificates (other than the Class A-3 and Class A-18 Certificates),
the Original Principal Balance of such Class. As of any subsequent
Determination Date prior to the Cross-Over Date and as to any Class of Class A
Certificates (other than the Class A-3, Class A-18 and Class A-PO Certificates),
the Original Principal Balance of such Class (increased in the case of a Class
of Accrual Certificates by the Principal Accretion Amounts with respect to prior
Distribution Dates for such Class of Accrual Certificates) less the sum of (a)
all amounts previously distributed in respect of such Class on prior
Distribution Dates (i) pursuant to Paragraph third clause (A) of Section
4.01(a), (ii) as a result of a Principal Adjustment and (iii), if applicable,
from the Accrual Distribution Amounts for such prior Distribution Dates and (b)
the Realized Losses allocated through such Determination Date to such Class
pursuant to Section 4.02(b). After the Cross-Over Date, each such Principal
Balance will also be reduced on each Determination Date by an amount equal to
the product of the Class A Loss Percentage of such Class and the excess, if any,
of (i) the Class A Non-PO Principal Balance as of such Determination Date
without regard to this sentence over (ii) the difference between (A) the
Adjusted Pool Amount for the preceding Distribution Date and (B) the Adjusted
Pool Amount (PO Portion) for the preceding Distribution Date.
The Class A-3 and Class A-18 Certificates are interest-only Certificates
and have no Principal Balances.
As of any subsequent Determination Date prior to the Cross-Over Date and as
to the Class A-PO Certificates, the Original Principal Balance of such Class
less the sum of (a) all amounts previously distributed in respect of the Class
A-PO Certificates on prior Distribution Dates pursuant to Paragraphs third
clause (B) and fourth of Section 4.01(a) and (b) the Realized Losses allocated
through such Determination Date to the Class A-PO Certificates pursuant to
Section 4.02(b). After the Cross-Over Date, such Principal Balance will also be
reduced on each Determination Date by an amount equal to the difference, if any,
between such Principal Balance as of such Determination Date without regard to
this sentence and the Adjusted Pool Amount (PO Portion) for the preceding
Distribution Date.
As to the Class B Certificates, the Class B-1 Principal Balance, Class B-2
Principal Balance, Class B-3 Principal Balance, Class B-4 Principal Balance,
Class B-5 Principal Balance and Class B-6 Principal Balance, respectively.
I-46
<PAGE>
Principal Prepayment: Any Mortgagor payment on a Mortgage Loan which is
--------------------
received in advance of its Due Date and is not accompanied by an amount
representing scheduled interest for any period subsequent to the date of
prepayment.
Prior Month Receipt Period: With respect to each Distribution Date, the
--------------------------
calendar month preceding the month in which such Distribution Date occurs.
Prohibited Transaction Tax: Any tax imposed under Section 860F of the
--------------------------
Code.
Prudent Servicing Practices: The standard of care set forth in each
---------------------------
Servicing Agreement.
Rating Agency: Any nationally recognized statistical credit rating agency,
-------------
or its successor, that rated one or more Classes of the Certificates at the
request of the Seller at the time of the initial issuance of the Certificates.
The Rating Agencies for the Class A Certificates and Class B-1 Certificates are
___ and ___. The Rating Agency for the Class B-2, Class B-3, Class B-4 and
Class B-5 Certificates is ___. If any such agency or a successor is no longer
in existence, "Rating Agency" shall be such statistical credit rating agency, or
other comparable Person, designated by the Seller, notice of which designation
shall be given to the Trustee and the Master Servicer. References herein to the
highest short-term rating category of a Rating Agency shall mean ___ in the case
of ___, ___ in the case of ___ and in the case of any other Rating Agency shall
mean its equivalent of such ratings. References herein to the highest long-term
rating categories of a Rating Agency shall mean AAA, and in the case of any
other Rating Agency shall mean its equivalent of such rating without any plus or
minus.
Realized Losses: With respect to any Distribution Date, (i) Liquidated
---------------
Loan Losses (including Special Hazard Losses and Fraud Losses) and (ii)
Bankruptcy Losses incurred in the month preceding the month of such Distribution
Date.
Record Date: The last Business Day of the month preceding the month of the
-----------
related Distribution Date.
Recovery: Any amount received on a Mortgage Loan subsequent to such
--------
Mortgage Loan being determined to be a Liquidated Loan.
Relevant Anniversary: See "Bankruptcy Loss Amount."
--------------------
REMIC: A "real estate mortgage investment conduit" as defined in Code
-----
Section 860D.
REMIC Provisions: Provisions of the federal income tax law relating to
----------------
REMICs, which appear at Sections 860A through 860G of Part IV of Subchapter M of
Chapter 1 of Subtitle A of the Code, and related provisions, and U.S. Department
of the Treasury temporary, proposed or final regulations promulgated thereunder,
as the foregoing are in effect (or with respect to proposed regulations, are
proposed to be in effect) from time to time.
Remittance Date: As defined in each of the Servicing Agreements.
---------------
I-47
<PAGE>
REO Mortgage Loan: Any Mortgage Loan which is not a Liquidated Loan and as
-----------------
to which the indebtedness evidenced by the related Mortgage Note is discharged
and the related Mortgaged Property is held as part of the Trust Estate.
REO Proceeds: Proceeds received in respect of any REO Mortgage Loan
------------
(including, without limitation, proceeds from the rental of the related
Mortgaged Property).
Request for Release: A request for release in substantially the form
-------------------
attached as Exhibit G hereto.
Responsible Officer: When used with respect to the Trustee, the Chairman
-------------------
or Vice-Chairman of the Board of Directors or Trustees, the Chairman or Vice-
Chairman of the Executive or Standing Committee of the Board of Directors or
Trustees, the President, the Chairman of the Committee on Trust Matters, any
Vice President, the Secretary, any Assistant Secretary, the Treasurer, any
Assistant Treasurer, the Cashier, any Assistant Cashier, any Trust Officer or
Assistant Trust Officer, the Controller and any Assistant Controller or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above-designated officers and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject.
Rule 144A: Rule 144A promulgated under the Securities Act of 1933, as
---------
amended.
Scheduled Principal Balance: As to any Mortgage Loan and Distribution
---------------------------
Date, the principal balance of such Mortgage Loan as of the Due Date in the
month preceding the month of such Distribution Date as specified in the
amortization schedule at the time relating thereto (before any adjustment to
such amortization schedule by reason of any bankruptcy (other than Deficient
Valuations) or similar proceeding or any moratorium or similar waiver or grace
period) after giving effect to (A) Unscheduled Principal Receipts received or
applied by the applicable Servicer during the related Unscheduled Principal
Receipt Period for each applicable type of Unscheduled Principal Receipt related
to the Distribution Date occurring in the month preceding such Distribution
Date, (B) Deficient Valuations incurred prior to such Due Date and (C) the
payment of principal due on such Due Date and irrespective of any delinquency in
payment by the related Mortgagor. Accordingly, the Scheduled Principal Balance
of a Mortgage Loan which becomes a Liquidated Loan at any time through the last
day of such related Unscheduled Principal Receipt Period shall be zero.
Seller: Norwest Asset Securities Corporation, or its successor in interest.
------
Senior Optimal Amount: As to any Distribution Date, the sum for such
---------------------
Distribution Date of (a) the Class A Non-PO Optimal Amount and (b) the Class A-
PO Optimal Principal Amount.
Servicer Mortgage Loan File: As defined in each of the Servicing
---------------------------
Agreements.
Servicers: [Insert Servicers]
---------
I-48
<PAGE>
Servicing Agreements: Each of the Servicing Agreements executed with
--------------------
respect to a portion of the Mortgage Loans by one of the Servicers, which
agreements are attached hereto, collectively, as Exhibit L.
Servicing Fee: With respect to any Servicer, as defined in its Servicing
-------------
Agreement.
Servicing Fee Rate: With respect to a Mortgage Loan, as set forth in
------------------
Section 11.25.
Servicing Officer: Any officer of a Servicer involved in, or responsible
-----------------
for, the administration and servicing of the Mortgage Loans.
Similar Law: As defined in Section 5.02(c).
-----------
Single Certificate: A Certificate of any Class that evidences the smallest
------------------
permissible Denomination for such Class, as set forth in Section 11.24.
Special Hazard Loss: (i) A Liquidated Loan Loss suffered by a Mortgaged
-------------------
Property on account of direct physical loss, exclusive of (a) any loss covered
by a hazard policy or a flood insurance policy maintained in respect of such
Mortgaged Property pursuant to a Servicing Agreement and (b) any loss caused by
or resulting from:
(1) normal wear and tear;
(2) infidelity, conversion or other dishonest act on the part of
the Trustee or the Servicer or any of their agents or
employees; or
(3) errors in design, faulty workmanship or faulty materials,
unless the collapse of the property or a part thereof ensues;
or (ii) any Liquidated Loan Loss suffered by the Trust Estate arising from or
related to the presence or suspected presence of hazardous wastes or hazardous
substances on a Mortgaged Property unless such loss to a Mortgaged Property is
covered by a hazard policy or a flood insurance policy maintained in respect of
such Mortgaged Property pursuant to the Servicing Agreement.
Special Hazard Loss Amount: As of any Distribution Date, an amount equal
--------------------------
to $_______ minus the sum of (i) the aggregate amount of Special Hazard Losses
allocated solely to the Class B Certificates in accordance with Section 4.02(a)
and (ii) the Special Hazard Adjustment Amount (as defined below) as most
recently calculated. For each anniversary of the Cut-Off Date, the Special
Hazard Adjustment Amount shall be calculated and shall be equal to the amount,
if any, by which the amount calculated in accordance with the preceding sentence
(without giving effect to the deduction of the Special Hazard Adjustment Amount
for such anniversary) exceeds the greater of (A) the product of the Special
Hazard Percentage for such anniversary multiplied by the outstanding principal
balance of all the Mortgage Loans on the Distribution Date immediately preceding
such anniversary, (B) twice the outstanding principal balance of the Mortgage
Loan in the Trust Estate which has the largest outstanding principal balance on
the Distribution Date immediately preceding such anniversary and (C) that
I-49
<PAGE>
which is necessary to maintain the original ratings on the Certificates as
evidenced by letters to that effect delivered by Rating Agencies to the Master
Servicer and the Trustee. On and after the Cross-Over Date, the Special Hazard
Loss Amount shall be zero.
Special Hazard Percentage: As of each anniversary of the Cut-Off Date, the
-------------------------
greater of (i) 1.00% and (ii) the largest percentage obtained by dividing the
aggregate outstanding principal balance (as of the immediately preceding
Distribution Date) of the Mortgage Loans secured by Mortgaged Properties located
in a single, five-digit zip code area in the State of California by the
outstanding principal balance of all the Mortgage Loans as of the immediately
preceding Distribution Date.
Startup Day: As defined in Section 2.05.
-----------
Subordinated Percentage: As to any Distribution Date, the percentage which
-----------------------
is the difference between 100% and the Class A Percentage for such date.
Subordinated Prepayment Percentage: As to any Distribution Date, the
----------------------------------
percentage which is the difference between 100% and the Class A Prepayment
Percentage for such date.
Subsidy Loan: Any Mortgage Loan subject to a temporary interest subsidy
------------
agreement pursuant to which the monthly interest payments made by the related
Mortgagor will be less than the scheduled monthly interest payments on such
Mortgage Loan, with the resulting difference in interest payments being provided
by the employer of the Mortgagor. Each Subsidy Loan will be identified as such
in the Mortgage Loan Schedule.
Substitute Mortgage Loan: As defined in Section 2.02.
------------------------
Substitution Principal Amount: With respect to any Mortgage Loan
-----------------------------
substituted in accordance with Section 2.02 or pursuant to Section 2.03, the
excess of (x) the unpaid principal balance of the Mortgage Loan which is
substituted for over (y) the unpaid principal balance of the Substitute Mortgage
Loan, each balance being determined as of the date of substitution.
T.O.P. Mortgage Loan: Any Mortgage Loan that was originated by Norwest
--------------------
Mortgage or an affiliate thereof in connection with the "Title Option Plus"
program and which is not covered by a title insurance policy. Each T.O.P.
Mortgage Loan shall be identified as such in the Mortgage Loan Schedule.
Trust Estate: The corpus of the trust created by this Agreement,
------------
consisting of the Mortgage Loans (other than any Fixed Retained Yield), such
amounts as may be held from time to time in the Certificate Account (other than
any Fixed Retained Yield), and the rights of the Trustee, to receive the
proceeds of all insurance policies and performance bonds, if any, required to be
maintained hereunder or under the related Servicing Agreement, property which
secured a Mortgage Loan and which has been acquired by foreclosure or deed in
lieu of foreclosure.
I-50
<PAGE>
Trustee: [ ], a national banking association, or any
-------
successor Trustee appointed as herein provided.
Unpaid Interest Shortfalls: Each of the Class A Unpaid Interest
--------------------------
Shortfalls, the Class B-1 Unpaid Interest Shortfall, the Class B-2 Unpaid
Interest Shortfall, the Class B-3 Unpaid Interest Shortfall, the Class B-4
Unpaid Interest Shortfall, the Class B-5 Unpaid Interest Shortfall and the Class
B-6 Unpaid Interest Shortfall.
Unscheduled Principal Receipt: Any Principal Prepayment or other recovery
-----------------------------
of principal on a Mortgage Loan, including, without limitation, Liquidation
Proceeds, Net REO Proceeds and proceeds received from any condemnation award or
proceeds in lieu of condemnation other than that portion of such proceeds
released to the Mortgagor in accordance with the terms of the Mortgage or
Prudent Servicing Practices, but excluding any Net Foreclosure Profits and
proceeds of a repurchase of a Mortgage Loan by the Seller and any Substitution
Principal Amounts. Except as set forth in the last sentence of Section 4.02(d),
a Recovery shall not be treated as an Unscheduled Principal Receipt.
Unscheduled Principal Receipt Period: Either a Mid-Month Receipt Period or
------------------------------------
a Prior Month Receipt Period.
Upper-Tier Certificate: Any one of the Class A Certificates (other than
----------------------
the Class A-LR Certificate) and the Class B Certificates.
Upper-Tier Certificate Account: The trust account established and
------------------------------
maintained pursuant to Section 4.01(e).
Upper-Tier REMIC: One of the two separate REMICs comprising the Trust
----------------
Estate, the assets of which consist of the Uncertificated Lower-Tier Interests
and such amounts as shall from time to time be held in the Upper-Tier
Certificate Account.
U.S. Person: As defined in Section 4.01(g).
-----------
Voting Interest: With respect to any provisions hereof providing for the
---------------
action, consent or approval of the Holders of all Certificates evidencing
specified Voting Interests in the Trust Estate, the Class A-3 and Class A-18
Certificates will each be entitled to 1% of the aggregate Voting Interest
represented by all Certificates and each remaining Class of Certificates will be
entitled to a pro rata portion of the remaining Voting Interest equal to the
ratio obtained by dividing the Principal Balance of such Class by the sum of the
Class A Principal Balance and the Class B Principal Balance. Each
Certificateholder of a Class will have a Voting Interest equal to the product of
the Voting Interest to which such Class is collectively entitled and the
Percentage Interest in such Class represented by such Holder's Certificates.
With respect to any provisions hereof providing for action, consent or approval
of each Class of Certificates or specified Classes of Certificates, each
Certificateholder of a Class will have a Voting Interest in such Class equal to
such Holder's Percentage Interest in such Class.
Weighted Average Net Mortgage Interest Rate: As to any Distribution Date,
-------------------------------------------
a rate per annum equal to the average, expressed as a percentage of the Net
Mortgage Interest Rates of
I-51
<PAGE>
all Mortgage Loans that were Outstanding Mortgage Loans as of the Due Date in
the month preceding the month of such Distribution Date, weighted on the basis
of the respective Scheduled Principal Balances of such Mortgage Loans.
Section 1.02. Acts of Holders.
---------------
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by an agent duly appointed in writing.
Except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee.
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, if made in the manner provided in this Section 1.02. The
Trustee shall promptly notify the Master Servicer in writing of the receipt of
any such instrument or writing.
(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 a
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. When 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 or her
authority. The fact and date of the execution of any such instrument or
writing, or the authority of the individual executing the same, may also be
proved in any other manner which the Trustee deems sufficient.
(c) The ownership of Certificates (whether or not such Certificates shall
be overdue and notwithstanding any notation of ownership or other writing
thereon made by anyone other than the Trustee and the Authenticating Agent)
shall be proved by the Certificate Register, and neither the Trustee, the Seller
nor the Master Servicer shall be affected by any notice to the contrary.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action of the Holder of any Certificate shall bind every future Holder
of the same 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, the
Seller or the Master Servicer in reliance thereon, whether or not notation of
such action is made upon such Certificate.
Section 1.03. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings in this Agreement and the Table of
Contents are for convenience of reference only and shall not affect the
interpretation or construction of this Agreement.
I-52
<PAGE>
Section 1.04. Benefits of Agreement.
---------------------
Nothing in this Agreement or in the Certificates, express or implied, shall
give to any Person, other than the parties to this Agreement and their
successors hereunder and the Holders of the Certificates any benefit or any
legal or equitable right, power, remedy or claim under this Agreement.
I-53
<PAGE>
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF THE CERTIFICATES
Section 2.01. Conveyance of Mortgage Loans.
----------------------------
The Seller, concurrently with the execution and delivery hereof, does
hereby assign to the Trustee, without recourse all the right, title and interest
of the Seller in and to (a) the Trust Estate, including all interest (other than
the portion, if any, representing the Fixed Retained Yield) and principal
received by the Seller on or with respect to the Mortgage Loans after the Cut-
Off Date (and including scheduled payments of principal and interest due after
the Cut-Off Date but received by the Seller on or before the Cut-Off Date and
Unscheduled Principal Receipts received or applied on the Cut-Off Date, but not
including payments of principal and interest due on the Mortgage Loans on or
before the Cut-Off Date), (b) the Insurance Policies, (c) the obligations of the
Servicers under the Servicing Agreements with respect to the Mortgage Loans and
(d) proceeds of all the foregoing.
In connection with such assignment, the Seller shall, with respect to each
Mortgage Loan, deliver, or cause to be delivered, to the Trustee, as initial
Custodian, on or before the Closing Date, an Owner Mortgage Loan File. If any
Mortgage or an assignment of a Mortgage to the Trustee or any prior assignment
is in the process of being recorded on the Closing Date, the Seller shall
deliver a copy thereof, certified by Norwest Mortgage or the applicable Norwest
Mortgage Correspondent to be a true and complete copy of the document sent for
recording, and the Seller shall use its best efforts to cause each such original
recorded document or certified copy thereof to be delivered to the Trustee
promptly following its recordation, but in no event later than one (1) year
following the Closing Date. The Seller shall also cause to be delivered to the
Trustee any other original mortgage loan document to be included in the Owner
Mortgage Loan File if a copy thereof has been delivered. The Seller shall pay
from its own funds, without any right of reimbursement therefor, the amount of
any costs, liabilities and expenses incurred by the Trust Estate by reason of
the failure of the Seller to cause to be delivered to the Trustee within one (1)
year following the Closing Date any original Mortgage or assignment of a
Mortgage not delivered to the Trustee on the Closing Date.
In lieu of recording an assignment of any Mortgage the Seller may, to the
extent set forth in the applicable Servicing Agreement, deliver or cause to be
delivered to the Trustee the assignment of the Mortgage Loan from the Seller to
the Trustee in a form suitable for recordation, together with an Opinion of
Counsel to the effect that recording is not required to protect the Trustee's
right, title and interest in and to the related Mortgage Loan or, in case a
court should recharacterize the sale of the Mortgage Loans as a financing, to
perfect a first priority security interest in favor of the Trustee in the
related Mortgage Loan. In the event that the Master Servicer receives notice
that recording is required to protect the right, title and interest of the
Trustee in and to any such Mortgage Loan for which recordation of an
II-1
<PAGE>
assignment has not previously been required, the Master Servicer shall promptly
notify the Trustee and the Trustee shall within five Business Days (or such
other reasonable period of time mutually agreed upon by the Master Servicer and
the Trustee) of its receipt of such notice deliver each previously unrecorded
assignment to the related Servicer for recordation.
Section 2.02. Acceptance by Trustee.
---------------------
The Trustee acknowledges receipt of the Mortgage Notes, the Mortgages, the
assignments and other documents required to be delivered on the Closing Date
pursuant to Section 2.01 above and declares that it holds and will hold such
documents and the other documents constituting a part of the Owner Mortgage Loan
Files delivered to it in trust, upon the trusts herein set forth, for the use
and benefit of all present and future Certificateholders. The Trustee agrees,
for the benefit of Certificateholders, to review each Owner Mortgage Loan File
within 45 days after execution of this Agreement in order to ascertain that all
required documents set forth in Section 2.01 have been executed and received and
appear regular on their face, and that such documents relate to the Mortgage
Loans identified in the Mortgage Loan Schedule, and in so doing the Trustee may
rely on the purported due execution and genuineness of any such document and on
the purported genuineness of any signature thereon. If within such 45 day
period the Trustee finds any document constituting a part of an Owner Mortgage
Loan File not to have been executed or received or to be unrelated to the
Mortgage Loans identified in the Mortgage Loan Schedule or not to appear regular
on its face, the Trustee shall promptly (and in no event more than 30 days after
the discovery of such defect) notify the Seller, which shall have a period of 60
days after the date of such notice within which to correct or cure any such
defect. The Seller hereby covenants and agrees that, if any material defect is
not so corrected or cured, the Seller will, not later than 60 days after the
Trustee's notice to it referred to above respecting such defect, either (i)
repurchase the related Mortgage Loan or any property acquired in respect thereof
from the Trust Estate at a price equal to (a) 100% of the unpaid principal
balance of such Mortgage Loan plus (b) accrued interest at the Mortgage Interest
Rate, less any Fixed Retained Yield, through the last day of the month in which
such repurchase takes place or (ii) if within two years of the Startup Day, or
such other period permitted by the REMIC Provisions, substitute for any Mortgage
Loan to which such material defect relates, a new mortgage loan (a "Substitute
Mortgage Loan") having such characteristics so that the representations and
warranties of the Seller set forth in Section 2.03(b) hereof (other than Section
2.03(b)(i)) would not have been incorrect had such Substitute Mortgage Loan
originally been a Mortgage Loan. In no event shall any Substitute Mortgage Loan
have an unpaid principal balance, as of the date of substitution, greater than
the Scheduled Principal Balance (reduced by the scheduled payment of principal
due on the Due Date in the month of substitution) of the Mortgage Loan for which
it is substituted. In addition, such Substitute Mortgage Loan shall have a Loan-
to-Value Ratio less than or equal to and a Mortgage Interest Rate equal to that
of the Mortgage Loan for which it is substituted.
In the case of a repurchased Mortgage Loan or property, the purchase price
shall be deposited by the Seller in the Certificate Account maintained by the
Master Servicer pursuant to Section 3.01. In the case of a Substitute Mortgage
Loan, the Owner Mortgage Loan File relating thereto shall be delivered to the
Trustee and the Substitution Principal Amount, together with (i) interest on
such Substitution Principal Amount at the applicable Net Mortgage
II-2
<PAGE>
Interest Rate to the following Due Date of such Mortgage Loan which is being
substituted for and (ii) an amount equal to the aggregate amount of unreimbursed
Periodic Advances in respect of interest previously made by the Servicer, the
Master Servicer or the Trustee with respect to such Mortgage Loan, shall be
deposited in the Certificate Account. The Monthly Payment on the Substitute
Mortgage Loan for the Due Date in the month of substitution shall not be part of
the Trust Estate. Upon receipt by the Trustee of written notification of any
such deposit signed by an officer of the Seller, or the new Owner Mortgage Loan
File, as the case may be, the Trustee shall release to the Seller the related
Owner Mortgage Loan File and shall execute and deliver such instrument of
transfer or assignment, in each case without recourse, as shall be necessary to
vest in the Seller legal and beneficial ownership of such substituted or
repurchased Mortgage Loan or property. It is understood and agreed that the
obligation of the Seller to substitute a new Mortgage Loan for or repurchase any
Mortgage Loan or property as to which such a material defect in a constituent
document exists shall constitute the sole remedy respecting such defect
available to the Certificateholders or the Trustee on behalf of the
Certificateholders. The failure of the Trustee to give any notice contemplated
herein within forty-five (45) days after the execution of this Agreement shall
not affect or relieve the Seller's obligation to repurchase any Mortgage Loan
pursuant to this Section 2.02.
The Trustee may, concurrently with the execution and delivery hereof or at
any time thereafter, enter into a Custodial Agreement substantially in the form
of Exhibit E hereto pursuant to which the Trustee appoints a Custodian to hold
the Mortgage Notes, the Mortgages, the assignments and other documents related
to the Mortgage Loans received by the Trustee in trust for the benefit of all
present and future Certificateholders, which may provide, among other things,
that the Custodian shall conduct the review of such documents required under the
first paragraph of this Section 2.02.
Section 2.03. Representations and Warranties of the Master Servicer and
---------------------------------------------------------
the Seller.
----------
(a) The Master Servicer hereby represents and warrants to the Trustee for
the benefit of Certificateholders that, as of the date of execution of this
Agreement:
(i) The Master Servicer is a national banking association duly
chartered and validly existing in good standing under the laws of the
United States;
(ii) The execution and delivery of this Agreement by the Master
Servicer and its performance and compliance with the terms of this
Agreement will not violate the Master Servicer's corporate charter 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
of, any material contract, agreement or other instrument to which the
Master Servicer is a party or which may be applicable to the Master
Servicer or any of its assets;
(iii) This Agreement, assuming due authorization, execution and
delivery by the Trustee and the Seller, constitutes a valid, legal and
binding obligation of the Master Servicer, enforceable against it in
accordance with the terms hereof subject to
II-3
<PAGE>
applicable bankruptcy, insolvency, reorganization, moratorium and other
laws affecting the enforcement of creditors' rights generally and to
general principles of equity, regardless of whether such enforcement is
considered in a proceeding in equity or at law;
(iv) The Master Servicer is not in default with respect to any
order or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency, which default might have
consequences that would materially and adversely affect the condition
(financial or other) or operations of the Master Servicer or its properties
or might have consequences that would affect its performance hereunder; and
(v) No litigation is pending or, to the best of the Master
Servicer's knowledge, threatened against the Master Servicer which would
prohibit its entering into this Agreement or performing its obligations
under this Agreement.
It is understood and agreed that the representations and warranties set
forth in this Section 2.03(a) shall survive delivery of the respective Owner
Mortgage Loan Files to the Trustee or the Custodian.
(b) The Seller hereby represents and warrants to the Trustee for the
benefit of Certificateholders that, as of the date of execution of this
Agreement, with respect to the Mortgage Loans, or each Mortgage Loan, as the
case may be:
(i) The information set forth in the Mortgage Loan Schedule was
true and correct in all material respects at the date or dates respecting
which such information is furnished as specified in the Mortgage Loan
Schedule;
(ii) Immediately prior to the transfer and assignment contemplated
herein, the Seller was the sole owner and holder of the Mortgage Loan free
and clear of any and all liens, pledges, charges or security interests of
any nature and has full right and authority to sell and assign the same;
(iii) The Mortgage is a valid, subsisting and enforceable first
lien on the property therein described, and the Mortgaged Property is free
and clear of all encumbrances and liens having priority over the first lien
of the Mortgage except for liens for real estate taxes and special
assessments not yet due and payable and liens or interests arising under or
as a result of any federal, state or local law, regulation or ordinance
relating to hazardous wastes or hazardous substances, and, if the related
Mortgaged Property is a condominium unit, any lien for common charges
permitted by statute or homeowners association fees; and if the Mortgaged
Property consists of shares of a cooperative housing corporation, any lien
for amounts due to the cooperative housing corporation for unpaid
assessments or charges or any lien of any assignment of rents or
maintenance expenses secured by the real property owned by the cooperative
housing corporation; and any security agreement, chattel mortgage or
equivalent document related to, and delivered to the Trustee or to the
Custodian with,
II-4
<PAGE>
any Mortgage establishes in the Seller a valid and subsisting first lien on
the property described therein and the Seller has full right to sell and
assign the same to the Trustee;
(iv) Neither the Seller nor any prior holder of the Mortgage or
the related Mortgage Note has modified the Mortgage or the related Mortgage
Note in any material respect, satisfied, canceled or subordinated the
Mortgage in whole or in part, released the Mortgaged Property in whole or
in part from the lien of the Mortgage, or executed any instrument of
release, cancellation, modification or satisfaction, except in each case as
is reflected in an agreement delivered to the Trustee or the Custodian
pursuant to Section 2.01;
(v) All taxes, governmental assessments, insurance premiums, and
water, sewer and municipal charges, which previously became due and owing
have been paid, or an escrow of funds has been established, to the extent
permitted by law, in an amount sufficient to pay for every such item which
remains unpaid; and the Seller has not advanced funds, or received any
advance of funds by a party other than the Mortgagor, directly or
indirectly (except pursuant to any Subsidy Loan arrangement) 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 Loan proceeds, whichever is later, to the day which precedes by
thirty days the first Due Date under the related Mortgage Note;
(vi) The Mortgaged Property is undamaged by water, fire,
earthquake, earth movement other than earthquake, windstorm, flood, tornado
or similar casualty (excluding casualty from the presence of hazardous
wastes or hazardous substances, as to which the Seller makes no
representations), 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 and to the best of the Seller's knowledge, there is
no proceeding pending or threatened for the total or partial condemnation
of the Mortgaged Property;
(vii) The Mortgaged Property is free and clear of all mechanics'
and materialmen's liens or liens in the nature thereof; provided, however,
-------- -------
that this warranty shall be deemed not to have been made at the time of the
initial issuance of the Certificates if a title policy affording, in
substance, the same protection afforded by this warranty is furnished to
the Trustee by the Seller;
(viii) Except for Mortgage Loans secured by Co-op Shares and
Mortgage Loans secured by residential long-term leases, the Mortgaged
Property consists of a fee simple estate in real property; all of the
improvements which are included for the purpose of determining the
appraised 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 (unless insured
against under the related title insurance policy); and to the best of the
Seller's knowledge, the Mortgaged Property and all improvements thereon
comply with all requirements of any applicable zoning and subdivision laws
and ordinances;
II-5
<PAGE>
(ix) The Mortgage Loan meets, or is exempt from, applicable state
or federal laws, regulations and other requirements, pertaining to usury,
and the Mortgage Loan is not usurious;
(x) To the best of the Seller's knowledge, 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;
(xi) All payments required to be made up to the Due Date
immediately preceding the Cut-Off Date for such Mortgage Loan under the
terms of the related Mortgage Note have been made and no Mortgage Loan had
more than one delinquency in the 12 months preceding the Cut-Off Date;
(xii) The Mortgage Note, the related Mortgage and other agreements
executed in connection therewith 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 or other similar laws affecting the enforcement
of creditors' rights generally and by general equity principles (regardless
of whether such enforcement is considered in a proceeding in equity or at
law); and, to the best of the Seller's knowledge, all parties to the
Mortgage Note and the Mortgage had legal capacity to execute the Mortgage
Note and the Mortgage and each Mortgage Note and Mortgage has been duly and
properly executed by the Mortgagor;
(xiii) Any and all requirements of any federal, state or local law
with respect to the origination of the Mortgage Loans including, without
limitation, truth-in-lending, real estate settlement procedures, consumer
credit protection, equal credit opportunity or disclosure laws applicable
to the Mortgage Loans have been complied with;
(xiv) The proceeds of the Mortgage Loans 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
(except for escrow funds for exterior items which could not be completed
due to weather and escrow funds for the completion of swimming pools); and
all costs, fees and expenses incurred in making, closing or recording the
Mortgage Loan have been paid, except recording fees with respect to
Mortgages not recorded as of the Closing Date;
(xv) The Mortgage Loan (except (A) any Mortgage Loan identified on
the Mortgage Loan Schedule as a T.O.P. Mortgage Loan and (B) any Mortgage
Loan secured by a Mortgaged Property located in any jurisdiction, as to
which an opinion of counsel of the type customarily rendered in such
jurisdiction in lieu of title insurance is instead received) is covered by
an American Land Title Association mortgagee title insurance policy or
other generally acceptable form of policy or insurance acceptable to FNMA
or FHLMC, issued by a title insurer acceptable to FNMA or FHLMC insuring
II-6
<PAGE>
the originator, its successors and assigns, as to the first priority lien
of the Mortgage in the original principal amount of the Mortgage Loan and
subject only to (A) the lien of current real property taxes and assessments
not yet due and payable, (B) covenants, conditions and restrictions, rights
of way, easements and other matters of public record as of the date of
recording of such Mortgage acceptable to mortgage lending institutions in
the area in which the Mortgaged Property is located or specifically
referred to in the appraisal performed in connection with the origination
of the related Mortgage Loan, (C) liens created pursuant to any federal,
state or local law, regulation or ordinance affording liens for the costs
of clean-up of hazardous substances or hazardous wastes or for other
environmental protection purposes and (D) such other matters to which like
properties are commonly subject which do not individually, or in the
aggregate, materially interfere with the benefits of the security intended
to be provided by the Mortgage; the Seller is the sole insured of such
mortgagee title insurance policy, the assignment to the Trustee, of the
Seller's interest in such mortgagee title insurance policy does not require
any consent of or notification to the insurer which has not been obtained
or made, such mortgagee 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, no claims have been made under such mortgagee title insurance
policy, and no prior holder of the related Mortgage, including the Seller,
has done, by act or omission, anything which would impair the coverage of
such mortgagee title insurance policy;
(xvi) The Mortgaged Property securing each Mortgage Loan is
insured by an insurer acceptable to FNMA or FHLMC against loss by fire and
such hazards as are covered under a standard extended coverage endorsement,
in an amount which is not less than the lesser of 100% of the insurable
value of the Mortgaged Property and the outstanding principal balance of
the Mortgage Loan, but in no event less than the minimum amount necessary
to fully compensate for any damage or loss on a replacement cost basis; if
the Mortgaged Property is a condominium unit, it is included under the
coverage afforded by a blanket policy for the project; if upon origination
of the Mortgage Loan, the improvements on the Mortgaged Property were in an
area identified in the Federal Register by the Federal Emergency Management
Agency as having special flood hazards, a flood insurance policy meeting
the requirements of the current guidelines of the Federal Insurance
Administration is in effect with a generally acceptable insurance carrier,
in an amount representing coverage not less than the least of (A) the
outstanding principal balance of the Mortgage Loan, (B) the full insurable
value of the Mortgaged Property and (C) the maximum amount of insurance
which was available under the National Flood Insurance Act of 1968, as
amended; and each Mortgage obligates the Mortgagor thereunder to maintain
all such insurance at the Mortgagor's cost and expense;
(xvii) To the best of the Seller's knowledge, there is no default,
breach, violation or event of acceleration existing under the Mortgage or
the related Mortgage Note and no event which, with the passage of time or
with notice and the expiration of any grace or cure period, would
constitute a default, breach, violation or event of acceleration; the
Seller has not waived any default, breach, violation or event of
II-7
<PAGE>
acceleration; and no foreclosure action is currently threatened or has
been commenced with respect to the Mortgage Loan;
(xviii) No Mortgage Note or Mortgage is 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
Mortgage, or the exercise of any right thereunder, render the Mortgage Note
or Mortgage unenforceable, in whole or in part, or subject it 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;
(xix) Each Mortgage Note is payable in monthly payments,
resulting in complete amortization of the Mortgage Loan over a term of not
more than [ ] months;
(xx) Each Mortgage contains customary and enforceable provisions
such as to render the rights and remedies of the holder thereof adequate
for the realization against the Mortgaged Property of the benefits of the
security, including realization by judicial foreclosure (subject to any
limitation arising from any bankruptcy, insolvency or other law for the
relief of debtors), and there is no homestead or other exemption available
to the Mortgagor which would interfere with such right of foreclosure;
(xxi) To the best of the Seller's knowledge, no Mortgagor is a
debtor in any state or federal bankruptcy or insolvency proceeding;
(xxii) Each Mortgaged Property is located in the United States and
consists of a one- to four-unit residential property, which may include a
detached home, townhouse, condominium unit or a unit in a planned unit
development or, in the case of Mortgage Loans secured by Co-op Shares,
leases or occupancy agreements;
(xxiii) The Mortgage Loan is a "qualified mortgage" within the
meaning of Section 860G(a)(3) of the Code;
(xxiv) With respect to each Mortgage where a lost note affidavit
has been delivered to the Trustee in place of the related Mortgage Note,
the related Mortgage Note is no longer in existence;
(xxv) In the event that the Mortgagor is an inter vivos "living"
trust, (i) such trust is in compliance with FNMA or FHLMC standards for
inter vivos trusts and (ii) holding title to the Mortgaged Property in such
trust will not diminish any rights as a creditor including the right to
full title to the Mortgaged Property in the event foreclosure proceedings
are initiated; and
(xxvi) If the Mortgage Loan is secured by a long-term residential
lease, (1) the lessor under the lease holds a fee simple interest in the
land; (2) the terms of such lease expressly permit the mortgaging of the
leasehold estate, the assignment of the lease without the lessor's consent
and the acquisition by the holder of the Mortgage of the rights of the
lessee upon foreclosure or assignment in lieu of foreclosure or provide the
II-8
<PAGE>
holder of the Mortgage with substantially similar protections; (3) the
terms of such lease do not (a) allow the termination thereof upon the
lessee's default without the holder of the Mortgage being entitled to
receive written notice of, and opportunity to cure, such default, (b) allow
the termination of the lease in the event of damage or destruction as long
as the Mortgage is in existence, (c) prohibit the holder of the Mortgage
from being insured (or receiving proceeds of insurance) under the hazard
insurance policy or policies relating to the Mortgaged Property or (d)
permit any increase in rent other than pre-established increases set forth
in the lease; (4) the original term of such lease is not less than 15
years; (5) the term of such lease does not terminate earlier than five
years after the maturity date of the Mortgage Note; and (6) the Mortgaged
Property is located in a jurisdiction in which the use of leasehold estates
in transferring ownership in residential properties is a widely accepted
practice.
Notwithstanding the foregoing, no representations or warranties are made by
the Seller as to the environmental condition of any Mortgaged Property; the
absence, presence or effect of hazardous wastes or hazardous substances on any
Mortgaged Property; any casualty resulting from the presence or effect of
hazardous wastes or hazardous substances on, near or emanating from any
Mortgaged Property; the impact on Certificateholders of any environmental
condition or presence of any hazardous substance on or near any Mortgaged
Property; or the compliance of any Mortgaged Property with any environmental
laws, nor is any agent, person or entity otherwise affiliated with the Seller
authorized or able to make any such representation, warranty or assumption of
liability relative to any Mortgaged Property. In addition, no representations
or warranties are made by the Seller with respect to the absence or effect of
fraud in the origination of any Mortgage Loan.
It is understood and agreed that the representations and warranties set
forth in this Section 2.03(b) shall survive delivery of the respective Owner
Mortgage Loan Files to the Trustee and shall inure to the benefit of the Trustee
notwithstanding any restrictive or qualified endorsement or assignment.
(c) Upon discovery by either the Seller, the Master Servicer, the Trustee
or the Custodian that any of the representations and warranties made in
subsection (b) above is not accurate (referred to herein as a "breach") and that
such breach materially and adversely affects the interests of the
Certificateholders in the related Mortgage Loan, the party discovering such
breach shall give prompt written notice to the other parties (any Custodian
being so obligated under a Custodial Agreement). Within 60 days of the earlier
of its discovery or its receipt of notice of any such breach, the Seller shall
cure such breach in all material respects or shall either (i) repurchase the
Mortgage Loan or any property acquired in respect thereof from the Trust Estate
at a price equal to (A) 100% of the unpaid principal balance of such Mortgage
Loan plus (B) accrued interest at the Net Mortgage Interest Rate for such
Mortgage Loan through the last day of the month in which such repurchase took
place or (ii) if within two years of the Startup Day, or such other period
permitted by the REMIC Provisions, substitute for such Mortgage Loan in the
manner described in Section 2.02. The purchase price of any repurchase
described in this paragraph and the Substitution Principal Amount, if any, plus
accrued interest thereon and the other amounts referred to in Section 2.02,
shall be deposited in the Certificate Account. It is understood and agreed that
II-9
<PAGE>
the obligation of the Seller to repurchase or substitute for any Mortgage Loan
or property as to which such a breach has occurred and is continuing shall
constitute the sole remedy respecting such breach available to
Certificateholders or the Trustee on behalf of Certificateholders, and such
obligation shall survive until termination of the Trust Estate hereunder.
Section 2.04. Execution and Delivery of Certificates.
--------------------------------------
The Trustee acknowledges the assignment to it of the Mortgage Loans and the
delivery of the Owner Mortgage Loan Files to it, and, concurrently with such
delivery, (i) acknowledges the issuance of and hereby declares that it holds the
Uncertificated Lower-Tier Interests on behalf of the Upper-Tier REMIC and
Certificateholders and (ii) has executed and delivered to or upon the order of
the Seller, in exchange for the Mortgage Loans and Uncertificated Lower-Tier
Interests together with all other assets included in the definition of "Trust
Estate", receipt of which is hereby acknowledged, Certificates in authorized
denominations which, together with the Uncertificated Lower-Tier Interests,
evidence ownership of the entire Trust Estate.
Section 2.05. Designation of Certificates; Designation of
Startup Day and Latest Possible Maturity Date.
---------------------------------------------
The Seller hereby designates the Classes of Class A Certificates (other
than the Class A-R and Class A-LR Certificates) and the Classes of Class B
Certificates as classes of "regular interests" and the Class A-R Certificate as
the single class of "residual interest" in the Upper-Tier REMIC for the purposes
of Code Sections 860G(a)(1) and 860G(a)(2), respectively. The Seller hereby
further designates the Class A-L1 Interest, Class A-L2 Interest, Class A-L4
Interest, Class A-L12 Interest, Class A-L14 Interest, Class A-L15 Interest,
Class A-L17 Interest, Class A-LPO Interest, Class A-LUR Interest, Class B-L1
Interest, Class B-L2 Interest, Class B-L3 Interest, Class B-L4 Interest, Class
B-L5 Interest and Class B-L6 Interest as classes of "regular interests" and the
Class A-LR Certificate as the single class of "residual interest" in the Lower-
Tier REMIC for the purposes of Code Sections 860G(a)(1) and 860G(a)(2),
respectively. The Closing Date is hereby designated as the "Startup Day" of each
of the Upper-Tier REMIC and Lower-Tier REMIC within the meaning of Code Section
860G(a)(9). The "latest possible maturity date" of the regular interests in the
Upper-Tier REMIC and Lower-Tier REMIC is ____________ for purposes of Code
Section 860G(a)(1).
II-10
<PAGE>
ARTICLE III
ADMINISTRATION OF THE TRUST ESTATE: SERVICING
OF THE MORTGAGE LOANS
Section 3.01. Certificate Account.
-------------------
(a) The Master Servicer shall establish and maintain a Certificate
Account for the deposit of funds received by the Master Servicer with respect to
the Mortgage Loans serviced by each Servicer pursuant to each of the Servicing
Agreements. Such account shall be maintained as an Eligible Account. The Master
Servicer shall give notice to each Servicer and the Seller of the location of
the Certificate Account and of any change in the location thereof.
(b) The Master Servicer shall deposit into the Certificate Account on
the day of receipt thereof all amounts received by it from any Servicer pursuant
to any of the Servicing Agreements, and shall, in addition, deposit into the
Certificate Account the following amounts, in the case of amounts specified in
clause (i), not later than the Distribution Date on which such amounts are
required to be distributed to Certificateholders and, in the case of the amounts
specified in clause (ii), not later than the Business Day next following the day
of receipt and posting by the Master Servicer:
(i) Periodic Advances pursuant to Section 3.03(a) made by the
Master Servicer or the Trustee, if any and any amounts deemed received by
the Master Servicer pursuant to Section 3.01(d); and
(ii) in the case of any Mortgage Loan that is repurchased by the
Seller pursuant to Section 2.02 or 2.03 or that is auctioned by the Master
Servicer pursuant to Section 3.08 or purchased by the Master Servicer
pursuant to Section 3.08 or 9.01, the purchase price therefor or, where
applicable, any Substitution Principal Amount and any amounts received in
respect of the interest portion of unreimbursed Periodic Advances.
(c) The Master Servicer shall cause the funds in the Certificate
Account to be invested in Eligible Investments. No such Eligible Investments
will be sold or disposed of at a gain prior to maturity unless the Master
Servicer has received an Opinion of Counsel or other evidence satisfactory to it
that such sale or disposition will not cause the Trust Estate to be subject to
Prohibited Transactions Tax, otherwise subject the Trust Estate to tax, or cause
either of the Upper-Tier REMIC or the Lower-Tier REMIC to fail to qualify as a
REMIC while any Certificates are outstanding. Any amounts deposited in the
Certificate Account prior to the Distribution Date shall be invested for the
account of the Master Servicer and any investment income thereon shall be
additional compensation to the Master Servicer for services rendered under this
Agreement. The amount of any losses incurred in respect of any such investments
shall be deposited in the Certificate Account by the Master Servicer out of its
own funds immediately as realized.
III-1
<PAGE>
(d) For purposes of this Agreement, the Master Servicer will be deemed
to have received from a Servicer on the applicable Remittance Date for such
funds all amounts deposited by such Servicer into the Custodial Account for P&I
maintained in accordance with the applicable Servicing Agreement, if such
Custodial Account for P&I is not an Eligible Account as defined in this
Agreement, to the extent such amounts are not actually received by the Master
Servicer on such Remittance Date as a result of the bankruptcy, insolvency,
receivership or other financial distress of the depository institution in which
such Custodial Account for P&I is being held. To the extent that amounts so
deemed to have been received by the Master Servicer are subsequently remitted to
the Master Servicer, the Master Servicer shall be entitled to retain such
amounts.
Section 3.02. Permitted Withdrawals from the Certificate Account.
--------------------------------------------------
(a) The Master Servicer may, from time to time, make withdrawals from
the Certificate Account for the following purposes (limited, in the case of
Servicer reimbursements, to cases where funds in the respective Custodial P&I
Account are not sufficient therefor):
(i) to reimburse the Master Servicer, the Trustee or any
Servicer for Periodic Advances made by the Master Servicer or the Trustee
pursuant to Section 3.03(a) or any Servicer pursuant to any Servicing
Agreement with respect to previous Distribution Dates, such right to
reimbursement pursuant to this subclause (i) being limited to amounts
received on or in respect of particular Mortgage Loans (including, for this
purpose, Liquidation Proceeds, REO Proceeds and proceeds from the purchase,
sale, repurchase or substitution of Mortgage Loans pursuant to Sections
2.02, 2.03, 3.08 or 9.01) respecting which any such Periodic Advance was
made;
(ii) to reimburse any Servicer, the Master Servicer or the
Trustee for any Periodic Advances determined in good faith to have become
Nonrecoverable Advances provided, however, that any portion of
Nonrecoverable Advances representing Fixed Retained Yield shall be
reimbursable only from amounts constituting Fixed Retained Yield and not
from the assets of the Trust Estate;
(iii) to reimburse the Master Servicer or any Servicer from
Liquidation Proceeds for Liquidation Expenses and for amounts expended by
the Master Servicer or any Servicer pursuant hereto or to any Servicing
Agreement, respectively, in good faith in connection with the restoration
of damaged property or for foreclosure expenses;
(iv) from any Mortgagor payment on account of interest or other
recovery (including Net REO Proceeds) with respect to a particular Mortgage
Loan, to pay the Master Servicing Fee with respect to such Mortgage Loan to
the Master Servicer;
(v) to reimburse the Master Servicer, any Servicer or the
Trustee (or, in certain cases, the Seller) for expenses incurred by it
(including taxes paid on behalf of the Trust Estate) and recoverable by or
reimbursable to it pursuant to Section 3.03(c), 3.03(d) or 6.03 or the
second sentence of Section 8.14(a) or pursuant to such Servicer's
III-2
<PAGE>
Servicing Agreement, provided such expenses are "unanticipated" within the
meaning of the REMIC Provisions;
(vi) to pay to the Seller or other purchaser with respect to each
Mortgage Loan or property acquired in respect thereof that has been
repurchased or replaced pursuant to Section 2.02 or 2.03 or auctioned
pursuant to Section 3.08 or to pay to the Master Servicer with respect to
each Mortgage Loan or property acquired in respect thereof that has been
purchased pursuant to Section 3.08 or 9.01, all amounts received thereon
and not required to be distributed as of the date on which the related
repurchase or purchase price or Scheduled Principal Balance was determined;
(vii) to remit funds to the Paying Agent in the amounts and in the
manner provided for herein;
(viii) to pay to the Master Servicer any interest earned on or
investment income with respect to funds in the Certificate Account;
(ix) to pay to the Master Servicer or any Servicer out of
Liquidation Proceeds allocable to interest the amount of any unpaid Master
Servicing Fee or Servicing Fee (as adjusted pursuant to the related
Servicing Agreement) and any unpaid assumption fees, late payment charges
or other Mortgagor charges on the related Mortgage Loan;
(x) to withdraw from the Certificate Account any amount
deposited in the Certificate Account that was not required to be deposited
therein;
(xi) to clear and terminate the Certificate Account pursuant to
Section 9.01; and
(xii) to pay to Norwest Mortgage from any Mortgagor payment on
account of interest or other recovery (including Net REO Proceeds) with
respect to a particular Mortgage Loan, the Fixed Retained Yield, if any,
with respect to such Mortgage Loan; provided, however, that with respect to
any payment of interest received by the Master Servicer in respect of a
Mortgage Loan (whether paid by the Mortgagor or received as Liquidation
Proceeds, Insurance Proceeds or otherwise) which is less than the full
amount of interest then due with respect to such Mortgage Loan, only that
portion of such payment of interest that bears the same relationship to the
total amount of such payment of interest as the Fixed Retained Yield Rate,
if any, in respect of such Mortgage Loan bears to the Mortgage Interest
Rate shall be allocated to the Fixed Retained Yield with respect thereto.
(b) The Master Servicer shall keep and maintain separate accounting, on
a Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
payment to and withdrawal from the Certificate Account.
III-3
<PAGE>
Section 3.03. Advances by Master Servicer and Trustee
---------------------------------------
(a) In the event an Other Servicer fails to make any required Periodic
Advances of principal and interest on a Mortgage Loan as required by the related
Other Servicing Agreement prior to the Distribution Date occurring in the month
during which such Periodic Advance is due, the Master Servicer shall make
Periodic Advances to the extent provided hereby. In addition, if under the
terms of an Other Servicing Agreement, the applicable Servicer is not required
to make Periodic Advances on a Mortgage Loan or REO Mortgage Loan through the
liquidation of such Mortgage Loan or REO Mortgage Loan, the Master Servicer to
the extent provided hereby shall make the Periodic Advances thereon during the
period the Servicer is not obligated to do so. In the event Norwest Mortgage
fails to make any required Periodic Advances of principal and interest on a
Mortgage Loan as required by the Norwest Servicing Agreement prior to the
Distribution Date occurring in the month during which such Periodic Advance is
due, the Trustee shall, to the extent required by Section 8.15, make such
Periodic Advance to the extent provided hereby, provided that the Trustee has
previously received the certificate of the Master Servicer described in the
following sentence. The Master Servicer shall certify to the Trustee with
respect to any such Distribution Date (i) the amount of Periodic Advances
required of Norwest Mortgage or such Other Servicer, as the case may be, (ii)
the amount actually advanced by Norwest Mortgage or such Other Servicer, (iii)
the amount that the Trustee or Master Servicer is required to advance hereunder
and (iv) whether the Master Servicer has determined that it reasonably believes
that such Periodic Advance is a Nonrecoverable Advance. Amounts advanced by the
Trustee or Master Servicer shall be deposited in the Certificate Account on the
related Distribution Date. Notwithstanding the foregoing, neither the Master
Servicer nor the Trustee will be obligated to make a Periodic Advance that it
reasonably believes to be a Nonrecoverable Advance. The Trustee may
conclusively rely for any determination to be made by it hereunder upon the
determination of the Master Servicer as set forth in its certificate.
(b) To the extent an Other Servicer fails to make an advance on account
of the taxes or insurance premiums with respect to a Mortgage Loan required
pursuant to the related Other Servicing Agreement, the Master Servicer shall, if
the Master Servicer knows of such failure of the Servicer, advance such funds
and take such steps as are necessary to pay such taxes or insurance premiums. To
the extent Norwest Mortgage fails to make an advance on account of the taxes or
insurance premiums with respect to a Mortgage Loan required pursuant to the
Norwest Servicing Agreement, the Master Servicer shall, if the Master Servicer
knows of such failure of Norwest Mortgage, certify to the Trustee that such
failure has occurred. Upon receipt of such certification, the Trustee shall
advance such funds and take such steps as are necessary to pay such taxes or
insurance premiums.
(c) The Master Servicer and the Trustee shall each be entitled to be
reimbursed from the Certificate Account for any Periodic Advance made by it
under Section 3.03(a) to the extent described in Section 3.02(a)(i) and (a)(ii).
The Master Servicer and the Trustee shall be entitled to be reimbursed pursuant
to Section 3.02(a)(v) for any advance by it pursuant to Section 3.03(b). The
Master Servicer shall diligently pursue restoration of such amount to the
Certificate Account from the related Servicer. The Master Servicer shall, to the
extent it has not already done so, upon the request of the Trustee, withdraw
from the Certificate Account
III-4
<PAGE>
and remit to the Trustee any amounts to which the Trustee is entitled as
reimbursement pursuant to Section 3.02 (a)(i), (ii) and (v).
(d) Except as provided in Section 3.03(a) and (b), neither the Master
Servicer nor the Trustee shall be required to pay or advance any amount which
any Servicer was required, but failed, to deposit in the Certificate Account.
Section 3.04. Trustee to Cooperate;
Release of Owner Mortgage Loan Files
------------------------------------
Upon the receipt by the Master Servicer of a Request for Release in
connection with the deposit by a Servicer into the Certificate Account of the
proceeds from a Liquidated Loan or of a Prepayment in Full, the Master Servicer
shall confirm to the Trustee that all amounts required to be remitted to the
Certificate Account in connection with such Mortgage Loan have been so
deposited, and shall deliver such Request for Release to the Trustee. The
Trustee shall, within five Business Days of its receipt of such a Request for
Release, release the related Owner Mortgage Loan File to the Master Servicer or
such Servicer, as requested by the Master Servicer. No expenses incurred in
connection with any instrument of satisfaction or deed of reconveyance shall be
chargeable to the Certificate Account.
From time to time and as appropriate for the servicing or foreclosure of
any Mortgage Loan, including but not limited to, collection under any insurance
policies, or to effect a partial release of any Mortgaged Property from the lien
of the Mortgage, the Servicer of such Mortgage Loan shall deliver to the Master
Servicer a Request for Release. Upon the Master Servicer's receipt of any such
Request for Release, the Master Servicer shall promptly forward such request to
the Trustee and the Trustee shall, within five Business Days, release the
related Owner Mortgage Loan File to the Master Servicer or such Servicer, as
requested by the Master Servicer. Any such Request for Release shall obligate
the Master Servicer or such Servicer, as the case may be, to return each and
every document previously requested from the Owner Mortgage Loan File to the
Trustee by the twenty-first day following the release thereof, unless (i) the
Mortgage Loan has been liquidated and the Liquidation Proceeds relating to the
Mortgage Loan have been deposited in the Certificate Account or (ii) the Owner
Mortgage Loan 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 Master
Servicer has delivered to the Trustee a certificate of the Master Servicer or
such Servicer certifying as to the name and address of the Person to which such
Owner Mortgage Loan File or such document was delivered and the purpose or
purposes of such delivery. Upon receipt of an Officer's Certificate of the
Master Servicer or such Servicer 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 Certificate Account have
been so deposited, or that such Mortgage Loan has become an REO Mortgage Loan,
the Request for Release shall be released by the Trustee to the Master Servicer
or such Servicer, as appropriate.
III-5
<PAGE>
Upon written certification of the Master Servicer or the Servicer of a
Mortgage Loan, the Trustee shall execute and deliver to the Master Servicer or
such Servicer, as directed by the Master Servicer, 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 proceeding
or trustee's sale.
Section 3.05. Reports to the Trustee; Annual Compliance Statements.
----------------------------------------------------
(a) Not later than 15 days after each Distribution Date, the Master
Servicer shall deliver to the Trustee a statement setting forth the status of
the Certificate Account as of the close of business on such Distribution Date
stating that all distributions required to be made by the Master Servicer under
this Agreement have been made (or, if any required distribution has not been
made by the Master Servicer, specifying the nature and status thereof) and
showing, for the period covered by such statement, the aggregate amount of
deposits into and withdrawals from such account for each category of deposit and
withdrawal specified in Sections 3.01 and 3.02. Such statement may be in the
form of the then current FNMA monthly accounting report for its Guaranteed
Mortgage Pass-Through Program with appropriate additions and changes, and shall
also include information as to the aggregate unpaid principal balance of all of
the Mortgage Loans as of the close of business as of the last day of the
calendar month immediately preceding such Distribution Date. Copies of such
statement shall be provided by the Trustee to any Certificateholder upon written
request, provided such statement is delivered, or caused to be delivered, by the
Master Servicer to the Trustee.
(b) The Master Servicer shall deliver to the Trustee on or before
April 30 of each year, a certificate signed by an officer of the Master
Servicer, certifying that (i) such officer has reviewed the activities of the
Master Servicer during the preceding calendar year or portion thereof and its
performance under this agreement and (ii) to the best of such officer's
knowledge, based on such review, the Master Servicer has performed and fulfilled
its duties, responsibilities and obligations under this agreement in all
material respects throughout such year, or, if there has been a default in the
fulfillment of any such duties, responsibilities or obligations, specifying each
such default known to such officer and the nature and status thereof, and, (iii)
(A) the Master Servicer has received from each Servicer any financial
statements, officer's certificates, accountant's statements or other information
required to be provided to the Master Servicer pursuant to the related Servicing
Agreement and (B) to the best of such officer's knowledge, based on a review of
the information provided to the Master Servicer by each Servicer as described in
(iii)(A) above, each Servicer has performed and fulfilled its duties,
responsibilities and obligations under the related Servicing Agreement in all
material respects throughout such year, or, if there has been a default in the
fulfillment of any
III-6
<PAGE>
such duties, responsibilities or obligations, specifying each such default known
to such officer and the nature and status thereof. Copies of such officers'
certificate shall be provided by the Trustee to any Certificateholder upon
written request provided such certificate is delivered, or caused to be
delivered, by the Master Servicer to the Trustee.
Section 3.06. Title, Management and Disposition of Any REO Mortgage Loan.
----------------------------------------------------------
The Master Servicer shall ensure that each REO Mortgage Loan is
administered by the related Servicer at all times so that it qualifies as
"foreclosure property" under the REMIC Provisions and that it does not earn any
"net income from foreclosure property" which is subject to tax under the REMIC
Provisions. In the event that a Servicer is unable to dispose of any REO
Mortgage Loan within the period mandated by each of the Servicing Agreements,
the Master Servicer shall monitor such Servicer to verify that such REO Mortgage
Loan is auctioned to the highest bidder within the period so specified. In the
event of any such sale of REO Mortgage Loan, the Trustee shall, at the written
request of the Master Servicer and upon being supported with appropriate forms
therefor, within five Business Days of the deposit by the Master Servicer of the
proceeds of such sale or auction into the Certificate Account, release or cause
to be released to the entity identified by the Master Servicer the related Owner
Mortgage Loan File and Servicer Mortgage Loan File and shall execute and deliver
such instruments of transfer or assignment, in each case without recourse, as
shall be necessary to vest in the auction purchaser title to the REO Mortgage
Loan and the Trustee shall have no further responsibility with regard to such
Owner Mortgage Loan File or Servicer Mortgage Loan File. Neither the Trustee,
the Master Servicer nor any Servicer, acting on behalf of the Trust Estate,
shall provide financing from the Trust Estate to any purchaser of an REO
Mortgage Loan.
Section 3.07. Amendments to Servicing Agreements,
Modification of Standard Provisions.
-----------------------------------
(a) Subject to the prior written consent of the Trustee pursuant to
Section 3.07(b), the Master Servicer from time to time may, to the extent
permitted by the applicable Servicing Agreement, make such modifications and
amendments to such Servicing Agreement as the Master Servicer deems necessary or
appropriate to confirm or carry out more fully the intent and purpose of such
Servicing Agreement and the duties, responsibilities and obligations to be
performed by the Servicer thereunder. Such modifications may only be made if
they are consistent with the REMIC Provisions, as evidenced by an Opinion of
Counsel. Prior to the issuance of any modification or amendment, the Master
Servicer shall deliver to the Trustee such Opinion of Counsel and an Officer's
Certificate setting forth (i) the provision that is to be modified or amended,
(ii) the modification or amendment that the Master Servicer desires to issue and
(iii) the reason or reasons for such proposed amendment or modification.
(b) The Trustee shall consent to any amendment or supplement to a
Servicing Agreement proposed by the Master Servicer pursuant to Section 3.07(a),
which consent and amendment shall not require the consent of any
Certificateholder if it is (i) for the purpose of curing any mistake or
ambiguity or to further effect or protect the rights of the Certificateholders
or (ii) for any other purpose, provided such amendment or supplement for
III-7
<PAGE>
such other purpose cannot reasonably be expected to adversely affect
Certificateholders. The lack of reasonable expectation of an adverse effect on
Certificateholders may be established through the delivery to the Trustee of (i)
an Opinion of Counsel to such effect or (ii) written notification from each
Rating Agency to the effect that such amendment or supplement will not result in
reduction of the current rating assigned by that Rating Agency to the
Certificates. Notwithstanding the two immediately preceding sentences, the
Trustee may, in its discretion, decline to enter into or consent to any such
supplement or amendment if its own rights, duties or immunities shall be
adversely affected.
(c)(i) Notwithstanding anything to the contrary in this Section 3.07, the
Master Servicer from time to time may, without the consent of any
Certificateholder or the Trustee, enter into an amendment (A) to an Other
Servicing Agreement for the purpose of (i) eliminating or reducing Month End
Interest and (ii) providing for the remittance of Full Unscheduled Principal
Receipts by the applicable Servicer to the Master Servicer not later than the
24th day of each month (or if such day is not a Business Day, on the previous
Business Day) or (B) to the Norwest Servicing Agreement for the purpose of
changing the applicable Remittance Date to the 18th day of each month (or if
such day is not a Business Day, on the previous Business Day).
(ii) The Master Servicer may direct Norwest Mortgage to enter into an
amendment to the Norwest Servicing Agreement for the purposes described in
Sections 3.07(c)(i)(B) and 10.01(b)(iii).
Section 3.08. Oversight of Servicing.
----------------------
The Master Servicer shall supervise, monitor and oversee the servicing of
the Mortgage Loans by each Servicer and the performance by each Servicer of all
services, duties, responsibilities and obligations that are to be observed or
performed by the Servicer under its respective Servicing Agreement. In
performing its obligations hereunder, the Master Servicer shall act in a manner
consistent with Accepted Master Servicing Practices and with the Trustee's and
the Certificateholders' reliance on the Master Servicer, and in a manner
consistent with the terms and provisions of any insurance policy required to be
maintained by the Master Servicer or any Servicer pursuant to this Agreement or
any Servicing Agreement. The Master Servicer acknowledges that prior to taking
certain actions required to service the Mortgage Loans, each Servicing Agreement
provides that the Servicer thereunder must notify, consult with, obtain the
consent of or otherwise follow the instructions of the Master Servicer. The
Master Servicer is also given authority to waive compliance by a Servicer with
certain provisions of its Servicing Agreement. In each such instance, the Master
Servicer shall promptly instruct such Servicer or otherwise respond to such
Servicer's request. In no event will the Master Servicer instruct such Servicer
to take any action, give any consent to action by such Servicer or waive
compliance by such Servicer with any provision of such Servicer's Servicing
Agreement if any resulting action or failure to act would be inconsistent with
the requirements of the Rating Agencies that rated the Certificates or would
otherwise have an adverse effect on the Certificateholders. Any such action or
failure to act shall be deemed to have an adverse effect on the
Certificateholders if such action or failure to act either results in (i) the
downgrading of the rating assigned by any Rating Agency to the Certificates,
(ii) the
III-8
<PAGE>
loss by the Upper-Tier REMIC or the Lower-Tier REMIC of REMIC status for federal
income tax purposes or (iii) the imposition of any Prohibited Transaction Tax or
any federal taxes on either the Upper-Tier REMIC, the Lower-Tier REMIC or the
Trust Estate. The Master Servicer shall have full power and authority in its
sole discretion to take any action with respect to the Trust Estate as may be
necessary or advisable to avoid the circumstances specified including clause
(ii) or (iii) of the preceding sentence.
For the purposes of determining whether any modification of a Mortgage Loan
shall be permitted by the Trustee or the Master Servicer, such modification
shall be construed as a substitution of the modified Mortgage Loan for the
Mortgage Loan originally deposited in the Trust Estate if it would be a
"significant modification" within the meaning of Section 1.860G-2(b) of the
regulations of the U.S. Department of the Treasury. No modification shall be
approved unless (i) the modified Mortgage Loan would qualify as a Substitute
Mortgage Loan under Section 2.02 and (ii) with respect to any modification that
occurs more than three months after the Closing Date and is not the result of a
default or a reasonably foreseeable default under the Mortgage Loan, there is
delivered to the Trustee an Opinion of Counsel (at the expense of the party
seeking to modify the Mortgage Loan) to the effect that such modification would
not be treated as giving rise to a new debt instrument for federal income tax
purposes as described in the preceding sentence.
During the term of this Agreement, the Master Servicer shall consult fully
with each Servicer as may be necessary from time to time to perform and carry
out the Master Servicer's obligations hereunder and otherwise exercise
reasonable efforts to encourage such Servicer to perform and observe the
covenants, obligations and conditions to be performed or observed by it under
its Servicing Agreement.
The relationship of the Master Servicer to the Trustee under this Agreement
is intended by the parties to be that of an independent contractor and not that
of a joint venturer, partner or agent.
The Master Servicer shall administer the Trust Estate on behalf of the
Trustee and shall have full power and authority, acting alone or (subject to
Section 6.06) through one or more subcontractors, to do any and all things in
connection with such administration which it may deem necessary or desirable.
Upon the execution and delivery of this Agreement, and from time to time as may
be required thereafter, the Trustee shall furnish the Master Servicer or its
subcontractors with any powers of attorney and such other documents as may be
necessary or appropriate to enable the Master Servicer to carry out its
administrative duties hereunder.
The Seller shall be entitled to repurchase at its option any defaulted
Mortgage Loan or any Mortgage Loan as to which default is reasonably foreseeable
from the Trust Estate if, in the Seller's judgment, the default is not likely to
be cured by the Mortgagor. The purchase price for any such Mortgage Loan shall
be 100% of the unpaid principal balance of such Mortgage Loan plus accrued
interest thereon at the Mortgage Interest Rate for such Mortgage Loan, through
the last day of the month in which such repurchase occurs. Upon the receipt of
such purchase price, the Master Servicer shall provide to the Trustee the
certification required
III-9
<PAGE>
by Section 3.04 and the Trustee and the Custodian, if any, shall promptly
release to the Seller the Owner Mortgage Loan File relating to the Mortgage Loan
being repurchased.
In the event that (i) the Master Servicer determines at any time that,
notwithstanding the representations and warranties set forth in Section 2.03(b),
any Mortgage Loan is not a "qualified mortgage" within the meaning of Section
860G of the Code and (ii) the Master Servicer is unable to enforce the
obligation of the Seller to purchase such Mortgage Loan pursuant to Section 2.02
within two months of such determination, the Master Servicer shall cause such
Mortgage Loan to be auctioned to the highest bidder and sold out of the Trust
Estate no later than the date 90 days after such determination. In the event of
any such sale of a Mortgage Loan, the Trustee shall, at the written request of
the Master Servicer and upon being supported with appropriate forms therefor,
within five Business Days of the deposit by the Master Servicer of the proceeds
of such auction into the Certificate Account, release or cause to be released to
the entity identified by the Master Servicer the related Owner Mortgage Loan
File and Servicer Mortgage Loan File and shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as shall
be necessary to vest in the auction purchaser title to the Mortgage Loan and the
Trustee shall have no further responsibility with regard to such Owner Mortgage
Loan File or Servicer Mortgage Loan File. Neither the Trustee, the Master
Servicer nor any Servicer, acting on behalf of the Trustee, shall provide
financing from the Trust Estate to any purchaser of a Mortgage Loan.
The Master Servicer, on behalf of the Trustee, shall, pursuant to the
Servicing Agreements, object to the foreclosure upon, or other related
conversion of the ownership of, any Mortgaged Property by the related Servicer
if (i) the Master Servicer believes such Mortgaged Property may be contaminated
with or affected by hazardous wastes or hazardous substances or (ii) such
Servicer does not agree to administer such Mortgaged Property, once the related
Mortgage Loan becomes an REO Mortgage Loan, in a manner which would not result
in a federal tax being imposed upon the Trust Estate or the Upper-Tier REMIC or
Lower-Tier REMIC.
The Master Servicer may enter into a special servicing agreement with an
unaffiliated holder of 100% Percentage Interest of a Class of Class B
Certificates or a holder of a class of securities representing interests in the
Class B Certificates and/or other subordinated mortgage pass-through
certificates, such agreement to be substantially in the form of Exhibit M hereto
or subject to each Rating Agency's acknowledgment that the ratings of the
Certificates in effect immediately prior to the entering into of such agreement
would not be qualified, downgraded or withdrawn and the Certificates would not
be placed on credit review status (except for possible upgrading) as a result of
such agreement. Any such agreement may contain provisions whereby such holder
may instruct the Master Servicer to instruct a Servicer to the extent provided
in the applicable Servicing Agreement to commence or delay foreclosure
proceedings with respect to delinquent Mortgage Loans and will contain
provisions for the deposit of cash by the holder that would be available for
distribution to Certificateholders if Liquidation Proceeds are less than they
otherwise may have been had the Servicer acted in accordance with its normal
procedures.
III-10
<PAGE>
Section 3.09. Termination and Substitution of Servicing Agreements.
----------------------------------------------------
Upon the occurrence of any event for which a Servicer may be terminated
pursuant to its Servicing Agreement, the Master Servicer shall promptly deliver
to the Seller and the Trustee an Officer's Certificate certifying that an event
has occurred which may justify termination of such Servicing Agreement,
describing the circumstances surrounding such event and recommending what action
should be taken by the Trustee with respect to such Servicer. If the Master
Servicer recommends that such Servicing Agreement be terminated, the Master
Servicer's certification must state that the breach is material and not merely
technical in nature. Upon written direction of the Master Servicer, based upon
such certification, the Trustee shall promptly terminate such Servicing
Agreement. Notwithstanding the foregoing, in the event that (i) Norwest Mortgage
fails to make any advance, as a consequence of which the Trustee is obligated to
make an advance pursuant to Section 3.03 and (ii) the Trustee provides Norwest
Mortgage written notice of the failure to make such advance and such failure
shall continue unremedied for a period of 15 days after receipt of such notice,
the Trustee shall terminate the Norwest Servicing Agreement without the
recommendation of the Master Servicer. The Master Servicer shall indemnify the
Trustee and hold it harmless from and against any and all claims, liabilities,
costs and expenses (including, without limitation, reasonable attorneys' fees)
arising out of, or assessed against the Trustee in connection with termination
of such Servicing Agreement at the direction of the Master Servicer. If the
Trustee terminates such Servicing Agreement, the Trustee may enter into a
substitute Servicing Agreement with the Master Servicer or, at the Master
Servicer's nomination, with another mortgage loan service company acceptable to
the Trustee, the Master Servicer and each Rating Agency under which the Master
Servicer or such substitute servicer, as the case may be, shall assume, satisfy,
perform and carry out all liabilities, duties, responsibilities and obligations
that are to be, or otherwise were to have been, satisfied, performed and carried
out by such Servicer under such terminated Servicing Agreement. Until such time
as the Trustee enters into a substitute servicing agreement with respect to the
Mortgage Loans previously serviced by such Servicer, the Master Servicer shall
assume, satisfy, perform and carry out all obligations which otherwise were to
have been satisfied, performed and carried out by such Servicer under its
terminated Servicing Agreement. However, in no event shall the Master Servicer
be deemed to have assumed the obligations of a Servicer to advance payments of
principal and interest on a delinquent Mortgage Loan in excess of the Master
Servicer's independent Periodic Advance obligation under Section 3.03 of this
Agreement. As compensation for the Master Servicer of any servicing obligations
fulfilled or assumed by the Master Servicer, the Master Servicer shall be
entitled to any servicing compensation to which a Servicer would have been
entitled if the Servicing Agreement with such Servicer had not been terminated.
Section 3.10. Application of Net Liquidation Proceeds.
---------------------------------------
For all purposes under this agreement, Net Liquidation Proceeds received
from a Servicer shall be allocated first to accrued and unpaid interest on the
related Mortgage Loan and then to the unpaid principal balance thereof.
III-11
<PAGE>
Section 3.11. 1934 Act Reports
----------------
The Master Servicer shall, on behalf of the Seller, make all filings
required to be made by the Seller with respect to the Class A Certificates
(other than the Class A-PO Certificates) and the Class B-1, Class B-2 and Class
B-3 Certificates pursuant to the Securities Exchange Act of 1934, as amended.
III-12
<PAGE>
ARTICLE IV
DISTRIBUTIONS IN RESPECT OF CERTIFICATES;
PAYMENTS TO CERTIFICATEHOLDERS;
STATEMENTS AND REPORTS
Section 4.01. Distributions
-------------
(a)(i) On each Distribution Date, the Pool Distribution Amount will be
applied in the following amounts, to the extent the Pool Distribution Amount is
sufficient therefor, in the manner and in the order of priority as follows:
first, to the Classes of Class A Certificates, pro rata, based upon their
respective Interest Accrual Amounts, in an aggregate amount up to the sum of the
Class A Interest Accrual Amount with respect to such Distribution Date; provided
that prior to the applicable Accretion Termination Date, an amount equal to the
amount that would otherwise be distributable in respect of interest to each
Class of Accrual Certificates pursuant to this provision will instead be
distributed in reduction of the Principal Balances of certain Classes of Class A
Certificates, in each case in accordance with Section 4.01(b);
second, to the Classes of Class A Certificates, pro rata, based upon their
respective Class A Unpaid Interest Shortfalls, in an aggregate amount up to the
Aggregate Class A Unpaid Interest Shortfall; provided that prior to the
applicable Accretion Termination Date, an amount equal to the amount that would
otherwise be distributable in respect of unpaid interest shortfalls to each
Class of Accrual Certificates pursuant to this provision will instead be
distributed in reduction of the Principal Balances of certain Classes of Class A
Certificates, in each case in accordance with Section 4.01(b);
third, concurrently, to the Class A Certificates (other than the Class A-PO
Certificates) and the Class A-PO Certificates, pro rata, based on their
respective Class A Non-PO Optimal Principal Amount and Class A-PO Optimal
Principal Amount, (A) to the Classes of Class A Certificates (other than the
Class A-PO Certificates), in an aggregate amount up to the Class A Non-PO
Optimal Principal Amount, such distribution to be allocated among such Classes
in accordance with Section 4.01(b) or Section 4.01(c), as applicable, and (B) to
the Class A-PO Certificates in an amount up to the Class A-PO Optimal Principal
Amount;
fourth, to the Class A-PO Certificates in an amount up to the Class A-PO
Deferred Amount from amounts otherwise distributable (without regard to this
Paragraph fourth) first to the Class B-6 Certificates pursuant to Paragraph
twenty-second, below, second to the Class B-5 Certificates pursuant to Paragraph
nineteenth, below, third to the Class B-4 Certificates pursuant to Paragraph
sixteenth, below, fourth to the Class B-3 Certificates pursuant to Paragraph
thirteenth, below, fifth to the Class B-2 Certificates pursuant to Paragraph
tenth below, and sixth to the Class B-1 Certificates pursuant to Paragraph
seventh below;
IV-1
<PAGE>
fifth, to the Class B-1 Certificates in an amount up to the Interest
Accrual Amount for the Class B-1 Certificates with respect to such Distribution
Date;
sixth, to the Class B-1 Certificates in an amount up to the Class B-1
Unpaid Interest Shortfall;
seventh, to the Class B-1 Certificates in an amount up to the Class B-1
Optimal Principal Amount; provided, however, that the amount distributable to
the Class B-1 Certificates pursuant to this Paragraph seventh will be reduced by
the amount, if any, that would have been distributable to the Class B-1
Certificates hereunder used to pay the Class A-PO Deferred Amount as provided in
Paragraph fourth above;
eighth, to the Class B-2 Certificates in an amount up to the Interest
Accrual Amount for the Class B-2 Certificates with respect to such Distribution
Date;
ninth, to the Class B-2 Certificates in an amount up to the Class B-2
Unpaid Interest Shortfall;
tenth, to the Class B-2 Certificates in an amount up to the Class B-2
Optimal Principal Amount; provided, however, that the amount distributable to
the Class B-2 Certificates pursuant to this Paragraph tenth will be reduced by
the amount, if any, that would have been distributable to the Class B-2
Certificates hereunder used to pay the Class A-PO Deferred Amount as provided in
Paragraph fourth above;
eleventh, to the Class B-3 Certificates in an amount up to the Interest
Accrual Amount for the Class B-3 Certificates with respect to such Distribution
Date;
twelfth, to the Class B-3 Certificates in an amount up to the Class B-3
Unpaid Interest Shortfall;
thirteenth, to the Class B-3 Certificates in an amount up to the Class B-3
Optimal Principal Amount; provided, however, that the amount distributable to
the Class B-3 Certificates pursuant to this Paragraph thirteenth will be reduced
by the amount, if any, that would have been distributable to the Class B-3
Certificates hereunder used to pay the Class A-PO Deferred Amount as provided in
Paragraph fourth above;
fourteenth, to the Class B-4 Certificates in an amount up to the Interest
Accrual Amount for the Class B-4 Certificates with respect to such Distribution
Date;
fifteenth, to the Class B-4 Certificates in an amount up to the Class B-4
Unpaid Interest Shortfall;
sixteenth, to the Class B-4 Certificates in an amount up to the Class B-4
Optimal Principal Amount; provided, however, that the amount distributable to
the Class B-4 Certificates pursuant to this Paragraph sixteenth will be reduced
by the amount, if any, that would have been distributable to the Class B-4
Certificates hereunder used to pay the Class A-PO Deferred Amount as provided in
Paragraph fourth above;
IV-2
<PAGE>
seventeenth, to the Class B-5 Certificates in an amount up to the Interest
Accrual Amount for the Class B-5 Certificates with respect to such Distribution
Date;
eighteenth, to the Class B-5 Certificates in an amount up to the Class B-5
Unpaid Interest Shortfall;
nineteenth, to the Class B-5 Certificates in an amount up to the Class B-5
Optimal Principal Amount; provided, however, that the amount distributable to
the Class B-5 Certificates pursuant to this Paragraph nineteenth will be reduced
by the amount, if any, that would have been distributable to the Class B-5
Certificates hereunder used to pay the Class A-PO Deferred Amount as provided in
Paragraph fourth above;
twentieth, to the Class B-6 Certificates in an amount up to the Interest
Accrual Amount for the Class B-6 Certificates with respect to such Distribution
Date;
twenty-first, to the Class B-6 Certificates in an amount up to the Class B-
6 Unpaid Interest Shortfall;
twenty-second, to the Class B-6 Certificates in an amount up to the Class
B-6 Optimal Principal Amount; provided, however, that the amount distributable
to the Class B-6 Certificates pursuant to this Paragraph twenty-second will be
reduced by the amount, if any, that would have been distributable to the Class
B-6 Certificates hereunder used to pay the Class A-PO Deferred Amount as
provided in Paragraph fourth above; and
twenty-third, to the Holder of the Class A-R Certificate, any amounts
remaining in the Upper-Tier Certificate Account, and to the Holder of the Class
A-LR Certificate, any amounts remaining in the Payment Account.
Notwithstanding the foregoing, after the Principal Balance or notional
amount of any Class (other than the Class A-R or Class A-LR Certificates) has
been reduced to zero, such Class will be entitled to no further distributions of
principal or interest (including, without limitation, any Unpaid Interest
Shortfalls).
In addition, Net Foreclosure Profits, if any, with respect to such
Distribution Date minus any portion thereof payable to a Servicer pursuant to
Section 3.02(ix) hereof shall be distributed to the Holder of the Class A-LR
Certificate.
With respect to any Distribution Date, the amount of the Principal
Adjustment, if any, attributable to any Class of Class B Certificates will be
allocated to the Classes of Class A Certificates (other than the Class A-3,
Class A-18 and Class A-PO Certificates) and any Class of Class B Certificates
with a lower numerical designation pro rata based on their Principal Balances.
(ii) Distributions on the Uncertificated Lower-Tier Interests. On each
Distribution Date, each Uncertificated Lower-Tier Interest shall receive
distributions in respect of principal in an amount equal to the amount of
principal distributed to its respective Corresponding Upper-Tier Class or
Classes as provided herein. On each Distribution Date, each
IV-3
<PAGE>
Uncertificated Lower-Tier Interest shall receive distributions in respect of
interest (or, in the case of the Class A-L12 Interest (with respect to the Class
A-16 Certificates) and Class A-L4 Interest (with respect to the Class A-6, Class
A-7, Class A-9, Class A-10 and Class A-11 Certificates) as described below shall
have such amounts added to their principal balances) in an amount equal to the
Interest Accrual Amounts and Unpaid Interest Shortfalls, as the case may be, in
respect of its Corresponding Upper-Tier Class or Classes, in each case to the
extent actually distributed (or, in the case of a Class of Accrual Certificates,
added to their Principal Balance) thereon. Such amounts distributed to the
Uncertificated Lower-Tier Interests in respect of principal and interest with
respect to any Distribution Date are referred to herein collectively as the
"Lower-Tier Distribution Amount."
As of any date, the principal balance of each Uncertificated Lower-Tier
Interest equals the Principal Balances of the respective Corresponding Upper-
Tier Class or Classes. The initial principal balance of each Uncertificated
Lower-Tier Interest equals the Original Principal Balances of the respective
Corresponding Upper-Tier Class or Classes.
The pass-through rate with respect to the Class A-L1 Interest, Class A-L2
Interest, Class B-L1 Interest, Class BL-2 Interest, Class BL-3 Interest, Class
BL-4 Interest, Class BL-5 Interest and Class BL-6 Interest shall be ____% per
annum. The pass-through rate with respect to the Class A-L4 Interest shall be
____% per annum. The pass-through rate with respect to the Class A-L14 Interest
shall be ____% per annum. The pass-through rate with respect to the Class A-L15
Interest shall be ____% per annum. The pass-through rate with respect to the
Class A-L17 Interest shall be ____% per annum. The Class A-L12 Interest and
Class A-LPO Interest are principal-only interests and are not entitled to
distributions of interest. Any Non-Supported Interest Shortfalls will be
allocated to each Uncertificated Lower-Tier Interest in the same relative
proportions as interest is allocated to such Uncertificated Lower-Tier Interest.
(b) The Class A-3 and Class A-18 Certificates are interest-only
Certificates and are not entitled to distributions in respect of principal.
On each Distribution Date occurring prior to the Cross-Over Date, the Class
A Non-PO Principal Distribution Amount will be allocated among and distributed
in reduction of the Principal Balances of the Classes of Class A Certificates
(other than the Class A-PO Certificates) in accordance with the following
priorities.
[Insert Distribution Priorities]
As used above, the "PAC Principal Amount" for any Distribution Date and for
any Class of PAC Certificates means the amount, if any, that would reduce the
Principal Balance of such Class to the percentage of its Original Principal
Balance shown in the tables set forth below with respect to such Distribution
Date.
The following tables set forth for each Distribution Date the planned
Principal Balances for the PAC Certificates expressed as a percentage of the
Original Principal Balance of such Class.
IV-4
<PAGE>
Planned Principal Balances
as Percentages of Initial Principal Balance
Class A-1 Certificates
<TABLE>
<CAPTION>
Percentage of Percentage of Percentage of
Initial Initial Initial
Distribution Date Principal Balance Distribution Date Principal Balance Distribution Date Principal Balance
- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
</TABLE>
Class A-2 Certificates
<TABLE>
<CAPTION>
Percentage of Percentage of Percentage of
Initial Initial Initial
Distribution Date Principal Balance Distribution Date Principal Balance Distribution Date Principal Balance
- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
</TABLE>
(c) Notwithstanding the foregoing, on each Distribution Date occurring
on or subsequent to the Cross-Over Date, the Class A Non-PO Principal
Distribution Amount shall be distributed among the Classes of Class A
Certificates (other than the Class A-PO Certificates) pro rata in accordance
with their outstanding Principal Balances without regard to either the
proportions or the priorities set forth in Section 4.01(b).
(d) (i) For purposes of determining whether the Classes of Class B
Certificates are eligible to receive distributions of principal with respect to
any Distribution Date, the following tests shall apply:
IV-5
<PAGE>
(A) if the Current Class B-1 Fractional Interest is less than the
Original Class B-1 Fractional Interest and the Class B-1 Principal Balance
is greater than zero, the Class B-2, Class B-3, Class B-4, Class B-5 and
Class B-6 Certificates shall not be eligible to receive distributions of
principal; or
(B) if the Current Class B-2 Fractional Interest is less than the
Original Class B-2 Fractional Interest and the Class B-2 Principal Balance
is greater than zero, the Class B-3, Class B-4, Class B-5 and Class B-6
Certificates shall not be eligible to receive distributions of principal;
or
(C) if the Current Class B-3 Fractional Interest is less than the
Original Class B-3 Fractional Interest and the Class B-3 Principal Balance
is greater than zero, the Class B-4, Class B-5 and Class B-6 Certificates
shall not be eligible to receive distributions of principal; or
(D) if the Current Class B-4 Fractional Interest is less than the
Original Class B-4 Fractional Interest and the Class B-4 Principal Balance
is greater than zero, the Class B-5 and Class B-6 Certificates shall not be
eligible to receive distributions of principal; or
(E) if the Current Class B-5 Fractional Interest is less than the
Original Class B-5 Fractional Interest and the Class B-5 Principal Balance
is greater than zero, the Class B-6 Certificates shall not be eligible to
receive distributions of principal.
(ii) Notwithstanding the foregoing, if on any Distribution Date the
aggregate distributions to Holders of the Classes of Class B Certificates
entitled to receive distributions of principal would reduce the Principal
Balances of the Classes of Class B Certificates entitled to receive
distributions of principal below zero, first the Class B Prepayment Percentage
of any affected Class of Class B Certificates for such Distribution Date
beginning with the affected Class with the lowest numerical Class designation
and then, if necessary, the Class B Percentage of such Class of the Class B
Certificates for such Distribution Date shall be reduced to the respective
percentages necessary to bring the Principal Balance of such Class of Class B
Certificates to zero. The Class B Prepayment Percentages and the Class B
Percentages of the remaining Classes of Class B Certificates will be recomputed
substituting for the Subordinated Prepayment Percentage and Subordinated
Percentage in such computations the difference between (A) the Subordinated
Prepayment Percentage or Subordinated Percentage, as the case may be, and (B)
the percentages determined in accordance with the preceding sentence necessary
to bring the Principal Balances of the affected Classes of Class B Certificates
to zero; provided, however, that if the Principal Balances of all the Classes of
Class B Certificates eligible to receive distributions of principal shall be
reduced to zero on such Distribution Date, the Class B Prepayment Percentage and
the Class B Percentage of the Class of Class B Certificates with the lowest
numerical Class designation which would otherwise be ineligible to receive
distributions of principal in accordance with this Section shall equal the
remainder of the Subordinated Prepayment Percentage for
IV-6
<PAGE>
such Distribution Date minus the sum of the Class B Prepayment Percentages of
the Classes of Class B Certificates having lower numerical Class designations,
if any, and the remainder of the Subordinated Percentage for such Distribution
Date minus the sum of the Class B Percentages of the Classes of Class B
Certificates having lower numerical Class designations, if any, respectively.
Any entitlement of any Class of Class B Certificates to principal payments
solely pursuant to this clause (ii) shall not cause such Class to be regarded as
being eligible to receive principal distributions for the purpose of applying
the definition of its Class B Percentage or Class B Prepayment Percentage.
(e) The Trustee shall establish and maintain the Upper-Tier Certificate
Account, which shall be a separate trust account and an Eligible Account. On
each Distribution Date other than the Final Distribution Date (if such Final
Distribution Date is in connection with a purchase of the assets of the Trust
Estate by the Seller), the Paying Agent shall, on behalf of the Master Servicer,
from funds available on deposit in the Payment Account, (i) deposit, in
immediately available funds, by wire transfer or otherwise, into the Upper-Tier
Certificate Account the Lower-Tier Distribution Amount and (ii) distribute to
the Class A-LR Certificateholder (other than as provided in Section 9.01
respecting the final distribution to Certificateholders) by check mailed to such
Holder at the address of such Holder appearing in the Certificate Register, the
Class A Distribution Amount with respect to the Class A-LR Certificate and all
other amounts distributable to the Class A-LR Certificate. The Trustee may
clear and terminate the Upper-Tier Certificate Account pursuant to Section 9.01.
(f) On each Distribution Date other than the Final Distribution Date (if
such Final Distribution Date is in connection with a purchase of the assets of
the Trust Estate by the Seller), the Paying Agent shall, on behalf of the Master
Servicer, from funds remitted to it by the Master Servicer, distribute to each
Certificateholder of record (other than the Class A-LR Certificateholder) on the
preceding Record Date (other than as provided in Section 9.01 respecting the
final distribution to Certificateholders or in the last paragraph of this
Section 4.01(f) respecting the final distribution in respect of any Class)
either in immediately available funds by wire transfer to the account of such
Certificateholder at a bank or other entity having appropriate facilities
therefor, if such Certificateholder holds Certificates having a Denomination at
least equal to that specified in Section 11.24, and has so notified the Master
Servicer or, if applicable, the Paying Agent at least seven Business Days prior
to the Distribution Date or, if such Holder holds Certificates having, in the
aggregate, a Denomination less than the requisite minimum Denomination or if
such Holder holds the Class A-R Certificate or has not so notified the Paying
Agent, by check mailed to such Holder at the address of such Holder appearing in
the Certificate Register, such Holder's share of the Class A Distribution Amount
with respect to each Class of Class A Certificates and the Class B Distribution
Amount with respect to each such Class of Class B Certificates.
In the event that, on any Distribution Date prior to the Final Distribution
Date, the Principal Balance of any Class of Class A Certificates (other than the
Class A-3, Class A-18, Class A-R or Class A-LR Certificates) or the Principal
Balance of any Class of Class B Certificates would be reduced to zero, in the
case of the Class A-3 Certificates, the Class A-3 Notional Amount would be
reduced to zero, in the case of the Class A-18 Certificates, the Class A-18
Notional Amount would be reduced to zero, the Master Servicer shall, as soon as
practicable after the Determination Date relating to such Distribution Date,
send a notice to the Trustee. The Trustee will then send a notice to each
Certificateholder of such Class with a
IV-7
<PAGE>
copy to the Certificate Registrar, specifying that the final distribution with
respect to such Class will be made on such Distribution Date only upon the
presentation and surrender of such Certificateholder's Certificates at the
office or agency of the Trustee therein specified; provided, however, that the
-------- -------
failure to give such notice will not entitle a Certificateholder to any interest
beyond the interest payable with respect to such Distribution Date in accordance
with Section 4.01(a)(i).
(g) The Paying Agent (or if no Paying Agent is appointed by the Master
Servicer, the Master Servicer) shall withhold or cause to be withheld such
amounts as may be required by the Code (giving full effect to any exemptions
from withholding and related certifications required to be furnished by
Certificateholders and any reductions to withholding by virtue of any bilateral
tax treaties and any applicable certification required to be furnished by
Certificateholders with respect thereto) from distributions to be made to
Persons other than U.S. Persons ("Non-U.S. Persons"). Amounts withheld pursuant
to this Section 4.01(g) shall be treated as having been distributed to the
related Certificateholder for all purposes of this Agreement. For the purposes
of this paragraph, a "U.S. Person" is a citizen or resident of the United
States, a corporation, partnership (except to the extent provided in applicable
Treasury regulations) or other entity created or organized in or under the laws
of the United States or any political subdivision thereof, an estate that is
subject to United States federal income tax regardless of the source of its
income or a trust if a court within the United States is able to exercise
primary supervision over the administration of such trust, and one or more such
U.S. Persons have the authority to control all substantial decisions of such
trust (or, to the extent provided in applicable Treasury regulations, certain
trusts in existence on August 20, 1996 which are eligible to elect to be treated
as U.S. Persons).
Section 4.02. Allocation of Realized Losses.
-----------------------------
(a) With respect to any Distribution Date, the principal portion of
Realized Losses (other than Debt Service Reductions, Excess Special Hazard
Losses, Excess Fraud Losses and Excess Bankruptcy Losses) will be allocated as
follows:
first, to the Class B-6 Certificates until the Class B-6 Principal Balance
has been reduced to zero;
second, to the Class B-5 Certificates until the Class B-5 Principal Balance
has been reduced to zero;
third, to the Class B-4 Certificates until the Class B-4 Principal Balance
has been reduced to zero;
fourth, to the Class B-3 Certificates until the Class B-3 Principal Balance
has been reduced to zero;
fifth, to the Class B-2 Certificates until the Class B-2 Principal Balance
has been reduced to zero;
IV-8
<PAGE>
Mortgage Loan by the Seller pursuant to Section 2.02 or 2.03, or (ii) represents
in whole or part funds which the applicable Servicer had received in respect of
a Liquidated Loan but failed to remit to the Certificate Account on or prior to
the Business Day preceding the Distribution Date following the Applicable
Unscheduled Principal Receipt Period in which the Mortgage Loan became a
Liquidated Loan, such Recovery may, at the sole discretion of the Master
Servicer, be treated as a repurchase or an Unscheduled Principal Receipt with
respect to such Mortgage Loan, as the case may be, the Realized Loss previously
recognized may be reversed and treated for all subsequent purposes as if it had
never occurred and the Master Servicer may make such adjustments to interest or
principal distributions on the Certificates and to the principal balances of the
Certificates as the Master Servicer in its good faith judgment and sole
discretion deems necessary or desirable to effectuate the reversal of the
Realized Loss and the treatment of such amount as a repurchase or as an
Unscheduled Principal Receipt, as the case may be; provided that such actions do
not result in the aggregate distributions made in respect of each Class of
Certificates whose principal balances were previously reduced as a result of
such Realized Loss being less than such Class would have received if such
Recovery had been deposited in the Certificate Account on or prior to the
Business Day preceding the Distribution Date following the Applicable
Unscheduled Principal Receipt Period in which the Mortgage Loan became a
Liquidated Loan.
(e) The interest portion of Excess Special Hazard Losses, Excess Fraud
Losses and Excess Bankruptcy Losses shall be allocated between (i) the Class A
Certificates and (ii) the Class B Certificates, pro rata based on the Class A
Interest Accrual Amount and the Class B Interest Accrual Amount for the related
Distribution Date, without regard to any reduction pursuant to this sentence.
Any such loss allocated to the Class A Certificates shall be allocated among the
outstanding Classes of Class A Certificates based on their Class A Interest
Percentages. Any such loss allocated to the Class B Certificates will be
allocated among the outstanding Classes of Class B Certificates based on their
Class B Interest Percentages. In addition, after the Class B Principal Balance
has been reduced to zero, the interest portion of Realized Losses (other than
Excess Special Hazard Losses, Excess Fraud Losses and Excess Bankruptcy Losses)
will be allocated among the outstanding Classes of Class A Certificates based on
their Class A Interest Percentages.
(f) Realized Losses allocated in accordance with this Section 4.02 will be
allocated on the Determination Date in the second month following the month in
which such loss was incurred with respect to the preceding Distribution Date.
(g) With respect to any Distribution Date, the principal portion of
Realized Losses and recoveries attributable to previously allocated Realized
Losses allocated pursuant to this Section 4.02 will be allocated to each
Uncertificated Lower-Tier Interest in an amount equal to the amount allocated to
its respective Corresponding Upper-Tier Class or Classes as provided above.
With respect to any Distribution Date, the interest portion of Realized
Losses allocated pursuant to this Section 4.02 will be allocated to each
Uncertificated Lower-Tier Interest in the same relative proportions as interest
is allocated to such Uncertificated Lower-Tier Interest.
IV-10
<PAGE>
Section 4.03. Paying Agent.
------------
(a) The Master Servicer hereby appoints the Trustee as initial Paying Agent
to make distributions to Certificateholders and to forward to Certificateholders
the periodic statements and the annual statements required by Section 4.04 as
agent of the Master Servicer.
The Master Servicer may, at any time, remove or replace the Paying Agent.
The Master Servicer shall cause any Paying Agent that is not the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
agrees with the Trustee that such Paying Agent shall:
(i) hold all amounts remitted to it by the Master Servicer for
distribution to Certificateholders in trust for the benefit of
Certificateholders until such amounts are distributed to Certificateholders
or otherwise disposed of as herein provided;
(ii) give the Trustee notice of any default by the Master Servicer
in remitting any required amount; and
(iii) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all
amounts held in trust by such Paying Agent.
(b) The Paying Agent shall establish and maintain a Payment Account,
which shall be a separate trust account and an Eligible Account, in which the
Master Servicer shall cause to be deposited from funds in the Certificate
Account or, to the extent required hereunder, from its own funds (i) at or
before 10:00 a.m., New York time, on the Business Day preceding each
Distribution Date, by wire transfer of immediately available funds, any Periodic
Advance for such Distribution Date, pursuant to Section 3.03 and (ii) at or
before 10:00 a.m., New York time, on the Business Day preceding each
Distribution Date, by wire transfer of immediately available funds, (a) an
amount equal to the Pool Distribution Amount, (b) Net Foreclosure Profits, if
any, with respect to such Distribution Date and (c) the amount of any recovery
in respect of a Realized Loss. The Master Servicer may cause the Paying Agent to
invest the funds in the Payment Account. Any such investment shall be in
Eligible Investments, which shall mature not later than the Business Day
preceding the related Distribution Date (unless the Eligible Investments are
obligations of the Trustee, in which case such Eligible Investments shall mature
not later than the Distribution Date), and shall not be sold or disposed of
prior to maturity. All income and gain realized from any such investment shall
be for the benefit of the Master Servicer and shall be subject to its withdrawal
or order from time to time. The amount of any losses incurred in respect of any
such investments shall be deposited in the Payment Account by the Master
Servicer out of its own funds immediately as realized. The Paying Agent may
withdraw from the Payment Account any amount deposited in the Payment Account
that was not required to be deposited therein and may clear and terminate the
Payment Account pursuant to Section 9.01.
IV-11
<PAGE>
Section 4.04. Statements to Certificateholders;
Report to the Trustee and the Seller.
------------------------------------
Concurrently with each distribution pursuant to Section 4.01(f), the Master
Servicer, or the Paying Agent appointed by the Master Servicer (upon receipt of
such statement from the Master Servicer), shall forward or cause to be forwarded
by mail to each Holder of a Certificate, the Seller a statement setting forth:
(i) the amount of such distribution to Holders of each Class of
Class A Certificates allocable to principal, separately identifying the
aggregate amount of any Unscheduled Principal Receipts included therein;
(ii) (a) the amount of such distribution to Holders of each Class
of Class A Certificates allocable to interest, (b) the amount of the
Current Class A Interest Distribution Amount allocated to each Class of
Class A Certificates, (c) any Class A Interest Shortfall Amounts arising
with respect to such Distribution Date and any remaining Class A Unpaid
Interest Shortfall with respect to each Class after giving effect to such
distribution, (d) the amount of any Non-Supported Interest Shortfall
allocated to each Class of Class A Certificates for such Distribution Date
and (e) the interest portion of Excess Special Hazard Losses, Excess Fraud
Losses and Excess Bankruptcy Losses allocated to each Class for such
Distribution Date ;
(iii) the amount of such distribution to Holders of each Class of
Class B Certificates allocable to principal, separately identifying the
aggregate amount of any Unscheduled Principal Receipts included therein;
(iv) (a) the amount of such distribution to Holders of each Class
of Class B Certificates allocable to interest, (b) the amount of the
Current Class B Interest Distribution Amount allocated to each Class of
Class B Certificates, (c) any Class B Interest Shortfall Amounts arising
with respect to such Distribution Date and any remaining Class B Unpaid
Interest Shortfall with respect to each Class B of Class B Certificates
after giving effect to such distribution, (d) the amount of any Non-
Supported Interest Shortfall allocated to each Class of Class B
Certificates for such Distribution Date, and (e) the interest portion of
Excess Special Hazard Losses, Excess Fraud Losses and Excess Bankruptcy
Losses allocated to each Class of Class B Certificates for such
Distribution Date;
(v) the amount of any Periodic Advance by any Servicer, the Master
Servicer or the Trustee pursuant to the Servicing Agreements or this
Agreement;
(vi) the number of Mortgage Loans outstanding as of the preceding
Determination Date;
(vii) the Class A Principal Balance, the Principal Balance of each
Class of Class A Certificates, the Class B Principal Balance and the
Principal Balance of each Class of Class B Certificates as of the following
Determination Date after giving effect
IV-12
<PAGE>
to the distributions of principal made, and the principal portion of
Realized Losses, if any, allocated with respect to such Distribution Date;
(viii) the Adjusted Pool Amount, the Adjusted Pool Amount (PO
Portion), the Pool Scheduled Principal Balance of the Mortgage Loans for
such Distribution Date and the aggregate Scheduled Principal Balance of the
Discount Mortgage Loans for such Distribution Date;
(ix) the aggregate Scheduled Principal Balances of the Mortgage
Loans serviced by Norwest Mortgage and, collectively, by the Other
Servicers as of such Distribution Date;
(x) the Class A Percentage for the following Distribution Date
(without giving effect to Unscheduled Principal Receipts received after the
Applicable Unscheduled Principal Receipt Period for the current
Distribution Date which are applied by a Servicer during such Applicable
Unscheduled Principal Receipt Period);
(xi) the Class A Prepayment Percentage for the following
Distribution Date (without giving effect to Unscheduled Principal Receipts
received after the Applicable Unscheduled Principal Receipt Period for the
current Distribution Date which are applied by a Servicer during such
Applicable Unscheduled Principal Receipt Period);
(xii) the Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and
Class B-6 Percentages for the following Distribution Date (without giving
effect to Unscheduled Principal Receipts received after the Applicable
Unscheduled Principal Receipt Period for the current Distribution Date
which are applied by a Servicer during such Applicable Unscheduled
Principal Receipt Period);
(xiii) the Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and
Class B-6 Prepayment Percentages for the following Distribution Date
(without giving effect to Unscheduled Principal Receipts received after the
Applicable Unscheduled Principal Receipt Period for the current
Distribution Date which are applied by a Servicer during such Applicable
Unscheduled Principal Receipt Period);
(xiv) the number and aggregate principal balances of Mortgage Loans
delinquent (a) one month, (b) two months and (c) three months or more;
(xv) the number and aggregate principal balances of the Mortgage
Loans in foreclosure as of the preceding Determination Date;
(xvi) the book value of any real estate acquired through
foreclosure or grant of a deed in lieu of foreclosure;
(xvii) the amount of the remaining Special Hazard Loss Amount,
Fraud Loss Amount and Bankruptcy Loss Amount as of the close of business on
such Distribution Date;
IV-13
<PAGE>
(xviii) the principal and interest portions of Realized Losses
allocated as of such Distribution Date and the amount of such Realized
Losses constituting Excess Special Hazard Losses, Excess Fraud Losses or
Excess Bankruptcy Losses;
(xix) the aggregate amount of Bankruptcy Losses allocated to each
Class of Class B Certificates in accordance with Section 4.02(a) since the
Relevant Anniversary;
(xx) the amount by which the Principal Balance of each Class of
Class B Certificates has been reduced as a result of Realized Losses
allocated as of such Distribution Date;
(xxi) the unpaid principal balance of any Mortgage Loan as to
which the Servicer of such Mortgage Loan has determined not to foreclose
because it believes the related Mortgaged Property may be contaminated with
or affected by hazardous wastes or hazardous substances;
(xxii) the amount of the aggregate Servicing Fees and Master
Servicing Fees paid (and not previously reported) with respect to the
related Distribution Date and the amount by which the aggregate Available
Master Servicer Compensation has been reduced by the Prepayment Interest
Shortfall for the related Distribution Date;
(xxiii) in the case of the Class A-3 Certificates, the Class A-3
Notional Amount, if any;
(xxiv) in the case of the Class A-18 Certificates, the Class A-18
Notional Amount, if any; and
(xxv) the Class A-PO Deferred Amount, if any; and
(xxvi) such other customary information as the Master Servicer
deems necessary or desirable to enable Certificateholders to prepare their
tax returns;
and shall deliver a copy of each type of statement to the Trustee, who shall
provide copies thereof to Persons making written request therefor at the
Corporate Trust Office.
In the case of information furnished with respect to a Class of Class A
Certificates pursuant to clauses (i) and (ii) above and with respect to a Class
of Class B Certificates pursuant to clauses (iii) and (iv) above, the amounts
shall be expressed as a dollar amount per Class A or Class B Certificate (other
than the Class A-R and Class A-LR Certificates) with a $______ Denomination, and
as a dollar amount per Class A-R and Class A-LR Certificate with a $____
Denomination.
Within a reasonable period of time after the end of each calendar year, the
Master Servicer shall furnish or cause to be furnished to each Person who at any
time during the calendar year was the Holder of a Certificate a statement
containing the information set forth in clauses (i) and (ii)(a) above in the
case of a Class A Certificateholder and the information set forth in clauses
(iii) and (iv)(a) above in the case of a Class B Certificateholder aggregated
for such calendar year or applicable portion thereof during which such Person
was a
IV-14
<PAGE>
Certificateholder. Such obligation of the Master Servicer shall be deemed
to have been satisfied to the extent that substantially comparable information
shall be provided by the Master Servicer pursuant to any requirements of the
Code from time to time in force.
Prior to the close of business on the third Business Day preceding each
Distribution Date, the Master Servicer shall furnish a statement to the Trustee,
any Paying Agent and the Seller (the information in such statement to be made
available to Certificateholders by the Master Servicer on written request)
setting forth the Class A Distribution Amount with respect to each Class of
Class A Certificates and the Class B Distribution Amount with respect to each
Class of Class B Certificates. The determination by the Master Servicer of such
amounts shall, in the absence of obvious error, be presumptively deemed to be
correct for all purposes hereunder and the Trustee and the Paying Agent shall be
protected in relying upon the same without any independent check or
verification.
In addition to the reports required pursuant to this Section 4.04, the
Master Servicer shall make available upon request to each Holder and each
proposed transferee of a Class A-PO, Class B-4, Class B-5 or Class B-6
Certificate such additional information, if any, as may be required to permit
the proposed transfer to be effected pursuant to Rule 144A.
Section 4.05. Reports to Mortgagors and the Internal Revenue Service.
------------------------------------------------------
The Master Servicer shall, in each year beginning after the Cut-Off Date,
make the reports of foreclosures and abandonments of any Mortgaged Property as
required by Code Section 6050J. In order to facilitate this reporting process,
the Master Servicer shall request that each Servicer, on or before January 15th
of each year, shall provide to the Internal Revenue Service, with copies to the
Master Servicer, reports relating to each instance occurring during the previous
calendar year in which such Servicer (i) on behalf of the Trustee acquires an
interest in a Mortgaged Property through foreclosure or other comparable
conversion in full or partial satisfaction of a Mortgage Loan serviced by such
Servicer, or (ii) knows or has reason to know that a Mortgaged Property has been
abandoned. Reports from the Servicers shall be in form and substance sufficient
to meet the reporting requirements imposed by Code Section 6050J. In addition,
each Servicer shall provide the Master Servicer with sufficient information to
allow the Master Servicer to, for each year ending after the Cut-Off Date,
provide, or cause to be provided, to the Internal Revenue Service and the
Mortgagors such information as is required under Code Sections 6050H (regarding
payment of interest) and 6050P (regarding cancellation of indebtedness).
Section 4.06. Calculation of Amounts; Binding Effect of Interpretations
---------------------------------------------------------
and Actions of Master Servicer.
------------------------------
The Master Servicer will compute the amount of all distributions to be made
on the Certificates and all losses to be allocated to the Certificates. In the
event that the Master Servicer concludes that any ambiguity or uncertainty
exists in any provisions of this Agreement relating to distributions to be made
on the Certificates or the allocation of losses to the Certificates, the
interpretation of such provisions and any actions taken by the Master Servicer
in good faith to implement such interpretation shall be binding upon
Certificateholders.
IV-15
<PAGE>
ARTICLE V
THE CERTIFICATES
Section 5.01. The Certificates.
----------------
(a) The Class A and Class B Certificates shall be issued only in minimum
Denominations of a Single Certificate and, except for the Class A-3, Class A-18,
Class A-PO, Class A-R and Class A-LR Certificates, integral multiples of $_____
in excess thereof (except, if necessary, for one Certificate of each Class
(other than the Class A-3, Class A-18, Class A-PO, Class A-R and Class A-LR
Certificates) that evidences one Single Certificate plus such additional
principal portion or notional amount as is required in order for all
Certificates of such Class to equal the aggregate Original Principal Balance or
notional amount of such Class, as the case may be), and shall be substantially
in the respective forms set forth as Exhibits A-1, A-2, A-3, A-4, A-5, A-6, A-7,
A-8, A-9, A-10, A-11, A-12, A-13, A-14, A-15, A-16, A-17, A-18, A-19, A-20, A-
PO, A-R, A-LR, B-1, B-2, B-3, B-4, B-5, B-6, and C (reverse side of
Certificates) hereto. On original issue the Certificates shall be executed and
delivered by the Trustee to or upon the order of the Seller upon receipt by the
Trustee or the Custodian of the documents specified in Section 2.01. The
aggregate principal portion (or notional amount) evidenced by the Class A and
Class B Certificates shall be the sum of the amounts specifically set forth in
the respective Certificates. The Certificates shall be executed by manual or
facsimile signature on behalf of the Trustee by any Responsible Officer thereof.
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 manually countersigned by a Responsible Officer of the Trustee, or unless
there appears on such Certificate a certificate of authentication executed by
the Authenticating Agent by manual signature, and such countersignature or
certificate upon a Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication.
Until such time as Definitive Certificates are issued pursuant to Section
5.07, each Book-Entry Certificate shall bear the following legend:
"Unless this certificate is presented by an authorized representative of
[the Clearing Agency] to the Trustee or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
[the Clearing Agency] or such other name as requested by an authorized
representative of [the Clearing Agency] and any payment is made to [the Clearing
Agency], any transfer, pledge or other use hereof for value or otherwise by or
to any person is wrongful since the registered owner hereof, [the Clearing
Agency], has an interest herein."
V-1
<PAGE>
(b) Upon original issuance, the Book-Entry Certificates shall be issued
in the form of one or more typewritten certificates, to be delivered to The
Depository Trust Company, the initial Clearing Agency, by, or on behalf of, the
Seller. Such Certificates shall initially be registered in the Certificate
Register in the name of the nominee of the initial Clearing Agency, and no
Beneficial Owner will receive a definitive certificate representing such
Beneficial Owner's interest in the Book-Entry Certificates, except as provided
in Section 5.07. Unless and until definitive, fully registered certificates
("Definitive Certificates") have been issued to Beneficial Owners pursuant to
Section 5.07:
(i) the provisions of this Section 5.01(b) shall be in full force
and effect;
(ii) the Seller, the Master Servicer, the Certificate Registrar
and the Trustee may deal with the Clearing Agency for all purposes
(including the making of distributions on the Book-Entry Certificates and
the taking of actions by the Holders of Book-Entry Certificates) as the
authorized representative of the Beneficial Owners;
(iii) to the extent that the provisions of this Section 5.01(b)
conflict with any other provisions of this Agreement, the provisions of
this Section 5.01(b) shall control;
(iv) the rights of Beneficial Owners shall be exercised only
through the Clearing Agency and shall be limited to those established by
law, the rules, regulations and procedures of the Clearing Agency and
agreements between such Beneficial Owners and the Clearing Agency and/or
the Clearing Agency Participants, and all references in this Agreement to
actions by Certificateholders shall, with respect to the Book-Entry
Certificates, refer to actions taken by the Clearing Agency upon
instructions from the Clearing Agency Participants, and all references in
this Agreement to distributions, notices, reports and statements to
Certificateholders shall, with respect to the Book-Entry Certificates,
refer to distributions, notices, reports and statements to the Clearing
Agency or its nominee, as registered holder of the Book-Entry Certificates,
as the case may be, for distribution to Beneficial Owners in accordance
with the procedures of the Clearing Agency; and
(v) the initial Clearing Agency will make book-entry transfers
among the Clearing Agency Participants and receive and transmit
distributions of principal and interest on the Certificates to the Clearing
Agency Participants, for distribution by such Clearing Agency Participants
to the Beneficial Owners or their nominees.
For purposes of any provision of this Agreement requiring or permitting
actions with the consent of, or at the direction of, Holders of Book-Entry
Certificates evidencing specified Voting Interests, such direction or consent
shall be given by Beneficial Owners having the requisite Voting Interests,
acting through the Clearing Agency.
Unless and until Definitive Certificates have been issued to Beneficial
Owners pursuant to Section 5.07, copies of the reports or statements referred to
in Section 4.04 shall be available to Beneficial Owners upon written request to
the Trustee at the Corporate Trust Office.
V-2
<PAGE>
Section 5.02. Registration of Certificates.
----------------------------
(a) The Trustee shall cause to be kept at one of the offices or agencies to
be maintained in accordance with the provisions of Section 5.06 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 Trustee shall act as, or
shall appoint, a Certificate Registrar for the purpose of registering
Certificates and transfers and exchanges of Certificates as herein provided.
Upon surrender for registration of transfer of any Certificate at any
office or agency maintained for such purpose pursuant to Section 5.06 (and
subject to the provisions of this Section 5.02) the Trustee shall execute, and
shall date, authenticate (or cause the Authenticating Agent to authenticate) and
deliver, in the name of the designated transferee or transferees, one or more
new Certificates of a like aggregate principal portion or Percentage Interest
and of the same Class.
At the option of the Certificateholders, Certificates may be exchanged for
other Certificates of authorized Denominations of a like aggregate principal
portion or Percentage Interest and of the same Class upon surrender of the
Certificates to be exchanged at any such office or agency. Whenever any
Certificates are so surrendered for exchange, the Trustee shall execute, and
shall date, authenticate (or cause the Authenticating Agent to 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 Certificate Registrar or the Trustee) be
duly endorsed by, or be accompanied by a written instrument of transfer in form
satisfactory to the Certificate Registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing.
No service charge shall be made for any transfer or exchange of
Certificates, but the Trustee or the Certificate Registrar may require payment
of a sum sufficient to cover any tax or governmental charge that may be imposed
in connection with any transfer or exchange of Certificates.
All Certificates surrendered for transfer and exchange shall be canceled by
the Certificate Registrar, the Trustee or the Authenticating Agent in accordance
with their standard procedures.
(b) No transfer of a Class A-PO, Class B-4, Class B-5 or Class B-6
Certificate shall be made unless the registration requirements of the Securities
Act of 1933, as amended, and any applicable State securities laws are complied
with, or such transfer is exempt from the registration requirements under said
Act and laws. In the event that a transfer is to be made in reliance upon an
exemption from said Act or laws, (i) unless such transfer is made in reliance on
Rule 144A, the Trustee or the Seller may, if such transfer is to be made within
three years after the later of (i) the date of the initial sale of Certificates
or (ii) the last date on which the Seller or any affiliate thereof was a Holder
of the Certificates proposed to be transferred, require a Class A-PO, Class B-4,
Class B-5 or Class B-6 Certificateholder to deliver a written Opinion of Counsel
acceptable to and in form and substance satisfactory to the Trustee and the
V-3
<PAGE>
Seller, to the effect that such transfer may be made pursuant to an exemption,
describing the applicable exemption and the basis therefor, from said Act and
laws or is being made pursuant to said Act and laws, which Opinion of Counsel
shall not be an expense of the Trustee, the Seller or the Master Servicer, and
(ii) the Trustee shall require the transferee (other than an affiliate of the
Seller on the Closing Date) to execute an investment letter in the form of
Exhibit J hereto certifying to the Seller and the Trustee the facts surrounding
such transfer, which investment letter shall not be an expense of the Trustee,
the Seller or the Master Servicer. The Holder of a Class A-PO, Class B-4, Class
B-5 or Class B-6 Certificate desiring to effect such transfer shall, and does
hereby agree to, indemnify the Trustee, the Seller, the Master Servicer and any
Paying Agent acting on behalf of the Trustee against any liability that may
result if the transfer is not so exempt or is not made in accordance with such
federal and state laws. Neither the Seller nor the Trustee is under an
obligation to register the Class A-PO, Class B-4, Class B-5 or Class B-6
Certificates under said Act or any other securities law.
(c) No transfer of a Class A-PO or Class B Certificate shall be made (other
than the transfer of the Class A-PO Certificates to an affiliate of the Seller
on the Closing Date) unless the Trustee shall have received (i) a representation
letter from the transferee in the form of Exhibit J hereto, in the case of a
Class A-PO, Class B-4, Class B-5 or Class B-6 Certificate, or in the form of
Exhibit K hereto, in the case of a Class B-1, Class B-2 or Class B-3
Certificate, to the effect that either (a) such transferee is not an employee
benefit plan or other retirement arrangement subject to Title I of ERISA or Code
Section 4975, or a governmental plan, as defined in Section 3(32) of ERISA,
subject to any federal, state or local law ("Similar Law") which is to a
material extent similar to the foregoing provisions of ERISA or the Code
(collectively, a "Plan") and is not a person acting on behalf of or using the
assets of any such Plan, which representation letter shall not be an expense of
the Trustee, the Seller or the Master Servicer or (b) with respect to the Class
B Certificates only, if such transferee is an insurance company, (A) the source
of funds used to purchase the Class B Certificate is an "insurance company
general account" (as such term is defined in Section V(e) of Prohibited
Transaction Class Exemption 95-60 ("PTE 95-60"), 60 Fed. Reg. 35925 (July 12,
1995)), (B) there is no Plan with respect to which the amount of such general
account's reserves and liabilities for the contract(s) held by or on behalf of
such Plan and all other Plans maintained by the same employer (or affiliate
thereof as defined in Section V(a)(1) of PTE 95-60) or by the same employee
organization exceeds 10% of the total of all reserves and liabilities of such
general account (as such amounts are determined under Section I(a) of PTE 95-60)
at the date of acquisition and (C) the purchase and holding of such Class B
Certificates are covered by Sections I and III of PTE 95-60 or (ii) in the case
of any such Class A-PO or Class B Certificate presented for registration in the
name of a Plan, or a trustee of any such Plan, (A) an Opinion of Counsel
satisfactory to the Trustee and the Seller to the effect that the purchase or
holding of such Class A-PO or Class B Certificate will not result in the assets
of the Trust Estate being deemed to be "plan assets" and subject to the
prohibited transaction provisions of ERISA, the Code or Similar Law and will not
subject the Trustee, the Seller or the Master Servicer to any obligation in
addition to those undertaken in this Agreement, which Opinion of Counsel shall
not be an expense of the Trustee, the Seller or the Master Servicer and (B) such
other opinions of counsel, officer's certificates and agreements as the Seller
or the Master Servicer may require in connection with such transfer, which
opinions of counsel,
V-4
<PAGE>
officers' certificates and agreements shall not be an expense of the Trustee,
the Seller or the Master Servicer. The Class A-PO and Class B Certificates shall
bear a legend referring to the foregoing restrictions contained in this
paragraph.
(d) No legal or beneficial interest in all or any portion of the Class A-R
or Class A-LR Certificate may be transferred directly or indirectly to a
"disqualified organization" within the meaning of Code Section 860E(e)(5) or an
agent of a disqualified organization (including a broker, nominee, or
middleman), to a Plan or a Person acting on behalf of or investing the assets of
a Plan (such Plan or Person, an "ERISA Prohibited Holder") or to an individual,
corporation, partnership or other person unless such transferee (i) is not a
Non-U.S. Person or (ii) is a Non-U.S. Person that holds the Class A-R or Class
A-LR Certificate in connection with the conduct of a trade or business within
the United States and has furnished the transferor and the Trustee with an
effective Internal Revenue Service Form 4224 or (iii) is a Non-U.S. Person that
has delivered to both the transferor and the Trustee an opinion of a nationally
recognized tax counsel to the effect that the transfer of the Class A-R or Class
A-LR Certificate to it is in accordance with the requirements of the Code and
the regulations promulgated thereunder and that such transfer of the Class A-R
or Class A-LR Certificate will not be disregarded for federal income tax
purposes (any such person who is not covered by clauses (i), (ii) or (iii) above
being referred to herein as a "Non-permitted Foreign Holder"), and any such
purported transfer shall be void and have no effect. The Trustee shall not
execute, and shall not authenticate (or cause the Authenticating Agent to
authenticate) and deliver, a new Class A-R or Class A-LR Certificate in
connection with any such transfer to a disqualified organization or agent
thereof (including a broker, nominee or middleman), an ERISA Prohibited Holder
or a Non-permitted Foreign Holder, and neither the Certificate Registrar nor the
Trustee shall accept a surrender for transfer or registration of transfer, or
register the transfer of, the Class A-R or Class A-LR Certificate, unless the
transferor shall have provided to the Trustee an affidavit, substantially in the
form attached as Exhibit H hereto, signed by the transferee, to the effect that
the transferee is not such a disqualified organization, an agent (including a
broker, nominee, or middleman) for any entity as to which the transferee has not
received a substantially similar affidavit, an ERISA Prohibited Holder or a Non-
permitted Foreign Holder, which affidavit shall contain the consent of the
transferee to any such amendments of this Agreement as may be required to
further effectuate the foregoing restrictions on transfer of the Class A-R or
Class A-LR Certificate to disqualified organizations, ERISA Prohibited Holders
or Non-permitted Foreign Holders. Such affidavit shall also contain the
statement of the transferee that (i) the transferee has historically paid its
debts as they have come due and intends to do so in the future, (ii) the
transferee understands that it may incur liabilities in excess of cash flows
generated by the residual interest, (iii) the transferee intends to pay taxes
associated with holding the residual interest as they become due and (iv) the
transferee will not transfer the Class A-R or Class A-LR Certificate to any
Person who does not provide an affidavit substantially in the form attached as
Exhibit H hereto.
The affidavit described in the preceding paragraph, if not executed in
connection with the initial issuance of the Class A-R or Class A-LR Certificate,
shall be accompanied by a written statement in the form attached as Exhibit I
hereto, signed by the transferor, to the effect that as of the time of the
transfer, the transferor has no actual knowledge that the
V-5
<PAGE>
transferee is a disqualified organization, ERISA Prohibited Holder or Non-
permitted Foreign Holder, and has no knowledge or reason to know that the
statements made by the transferee with respect to clauses (i) and (iii) of the
last sentence of the preceding paragraph are not true. The Class A-R and Class
A-LR Certificates shall bear a legend referring to the foregoing restrictions
contained in this paragraph and the preceding paragraph.
Upon notice to the Master Servicer that any legal or beneficial interest in
any portion of the Class A-R or Class A-LR Certificate has been transferred,
directly or indirectly, to a disqualified organization or agent thereof
(including a broker, nominee, or middleman) in contravention of the foregoing
restrictions, (i) such transferee shall be deemed to hold the Class A-R or Class
A-LR Certificate in constructive trust for the last transferor who was not a
disqualified organization or agent thereof, and such transferor shall be
restored as the owner of such Class A-R or Class A-LR Certificate as completely
as if such transfer had never occurred, provided that the Master Servicer may,
but is not required to, recover any distributions made to such transferee with
respect to the Class A-R or Class A-LR Certificate, and (ii) the Master Servicer
agrees to furnish to the Internal Revenue Service and to any transferor of the
Class A-R or Class A-LR Certificate or such agent (within 60 days of the request
therefor by the transferor or agent) such information necessary to the
application of Code Section 860E(e) as may be required by the Code, including
but not limited to the present value of the total anticipated excess inclusions
with respect to the Class A-R or Class A-LR Certificate (or portion thereof) for
periods after such transfer. At the election of the Master Servicer, the cost to
the Master Servicer of computing and furnishing such information may be charged
to the transferor or such agent referred to above; however, the Master Servicer
shall in no event be excused from furnishing such information.
Section 5.03. Mutilated, Destroyed, Lost or Stolen Certificates.
-------------------------------------------------
If (i) any mutilated Certificate is surrendered to the Trustee or the
Authenticating Agent, or the Trustee or the Authenticating Agent receives
evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (ii) there is delivered to the Trustee or the Authenticating
Agent such security or indemnity as may be required by them to hold each of them
harmless, then, in the absence of notice to the Trustee or the Authenticating
Agent that such Certificate has been acquired by a bona fide purchaser, the
Trustee shall execute and authenticate (or cause the Authenticating Agent to
authenticate) and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like tenor and
principal portion or Percentage Interest and of the same Class. Upon the
issuance of any new Certificate under this Section, the Trustee or the
Certificate Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and any
other expense (including the fees and expenses of the Trustee or the
Authenticating Agent) in connection therewith. Any duplicate Certificate issued
pursuant to this Section shall constitute complete and indefeasible evidence of
ownership in the Trust Estate, as if originally issued, whether or not the lost,
stolen, or destroyed Certificate shall be found at any time.
V-6
<PAGE>
Section 5.04. Persons Deemed Owners.
---------------------
Prior to the due presentation of a Certificate for registration of
transfer, the Seller, the Master Servicer, the Trustee, the Certificate
Registrar and any agent of the Seller, the Master Servicer, the Trustee or the
Certificate Registrar may treat the Person in whose name any Certificate is
registered as the owner of such Certificate for the purpose of receiving
distributions pursuant to Section 4.01, and for all other purposes whatsoever,
and neither the Seller, the Master Servicer, the Trustee, the Certificate
Registrar nor any agent of the Seller, the Master Servicer, the Trustee or the
Certificate Registrar shall be affected by notice to the contrary.
Section 5.05. Access to List of Certificateholders' Names and Addresses.
---------------------------------------------------------
(a) If the Trustee is not acting as Certificate Registrar, the
Certificate Registrar shall furnish or cause to be furnished to the Trustee,
within 15 days after receipt by the Certificate Registrar of a request by the
Trustee in writing, a list, in such form as the Trustee may reasonably require,
of the names and addresses of the Certificateholders of each Class as of the
most recent Record Date.
(b) If five or more Certificateholders (hereinafter referred to as
"applicants") apply in writing to the Trustee, and such application states that
the applicants desire to communicate with other Certificateholders with respect
to their rights under this Agreement or under the Certificates and is
accompanied by a copy of the communication which such applicants propose to
transmit, then the Trustee shall, within five Business Days following the
receipt of such application, afford such applicants access during normal
business hours to the most recent list of Certificateholders held by the
Trustee. If such a list is as of the date more than 90 days prior to the date
of receipt of such applicants' request and the Trustee is not the Certificate
Registrar, the Trustee shall promptly request from the Certificate Registrar a
current list as provided in paragraph (a) hereof, and shall afford such
applicants access to such list promptly upon receipt.
(c) Every Certificateholder, by receiving and holding a Certificate,
agrees with the Seller, the Master Servicer, the Certificate Registrar and the
Trustee that neither the Seller, the Master Servicer, the Certificate Registrar
nor the Trustee shall be held accountable by reason of the disclosure of any
such information as to the names, addresses and Percentage Interests of the
Certificateholders hereunder, regardless of the source from which such
information was delivered.
Section 5.06. Maintenance of Office or Agency.
-------------------------------
The Trustee will maintain, at its expense, an office or agency where
Certificates may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Certificate Registrar in respect of the
Certificates and this Agreement may be served. The Trustee initially designates
the Corporate Trust Office and the principal corporate trust office of the
Authenticating Agent, if any, as its offices and agencies for said purposes.
V-7
<PAGE>
Section 5.07. Definitive Certificates.
-----------------------
If (i)(A) the Master Servicer advises the Trustee in writing that the
Clearing Agency is no longer willing or able properly to discharge its
responsibilities as depository with respect to the Book-Entry Certificates, and
(B) the Master Servicer is unable to locate a qualified successor, (ii) the
Master Servicer, at its option, advises the Trustee in writing that it elects to
terminate the book-entry system through the Clearing Agency or (iii) after the
occurrence of dismissal or resignation of the Master Servicer, Beneficial Owners
representing aggregate Voting Interests of not less than 51% of the aggregate
Voting Interests of each outstanding Class of Book-Entry Certificates advise the
Trustee through the Clearing Agency and Clearing Agency Participants in writing
that the continuation of a book-entry system through the Clearing Agency is no
longer in the best interests of the Beneficial Owners, the Trustee shall notify
the Beneficial Owners, through the Clearing Agency, of the occurrence of any
such event and of the availability of Definitive Certificates to Beneficial
Owners requesting the same. Upon surrender to the Trustee by the Clearing
Agency of the Certificates held of record by its nominee, accompanied by
reregistration instructions and directions to execute and authenticate new
Certificates from the Master Servicer, the Trustee shall execute and
authenticate Definitive Certificates for delivery at its Corporate Trust Office.
The Master Servicer shall arrange for, and will bear all costs of, the printing
and issuance of such Definitive Certificates. Neither the Seller, the Master
Servicer nor the Trustee shall be liable for any delay in delivery of such
instructions by the Clearing Agency and may conclusively rely on, and shall be
protected in relying on, such instructions.
Section 5.08. Notices to Clearing Agency.
--------------------------
Whenever notice or other communication to the Holders of Book-Entry
Certificates is required under this Agreement, unless and until Definitive
Certificates shall have been issued to Beneficial Owners pursuant to Section
5.07, the Trustee shall give all such notices and communications specified
herein to be given to Holders of Book-Entry Certificates to the Clearing Agency.
V-8
<PAGE>
ARTICLE VI
THE SELLER AND THE MASTER SERVICER
Section 6.01. Liability of the Seller and the Master Servicer.
-----------------------------------------------
The Seller and the Master Servicer shall each be liable in accordance
herewith only to the extent of the obligations specifically imposed by this
Agreement and undertaken hereunder by the Seller and the Master Servicer.
Section 6.02. Merger or Consolidation of the Seller or the Master
---------------------------------------------------
Servicer.
--------
Subject to the following paragraph, the Seller and the Master Servicer each
will keep in full effect its existence, rights and franchises as a corporation
under the laws of the jurisdiction of its incorporation, and will obtain and
preserve its qualification to do business as a foreign corporation in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Agreement, the Certificates or any of the
Mortgage Loans and to perform its respective duties under this Agreement.
The Seller or the Master Servicer may be merged or consolidated with or
into any Person, or transfer all or substantially all of its assets to any
Person, in which case any Person resulting from any merger or consolidation to
which the Seller or Master Servicer shall be a party, or any Person succeeding
to the business of the Seller or Master Servicer, shall be the successor of the
Seller or Master Servicer 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, in the case of
-------- -------
the Master Servicer, any such successor or resulting Person shall be qualified
to service mortgage loans for FNMA or FHLMC.
Section 6.03. Limitation on Liability of the Seller, the Master Servicer
----------------------------------------------------------
and Others.
- ----------
Neither the Seller nor the Master Servicer nor any subcontractor nor any of
the partners, directors, officers, employees or agents of any of them shall be
under any liability to the Trust Estate or the Certificateholders and all such
Persons shall be held harmless for any action taken or for refraining from the
taking of any action in good faith pursuant to this Agreement, or for errors in
judgment; provided, however, that this provision shall not protect any such
-------- -------
Person against any breach of warranties or representations made herein or
against any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties or by
reason of reckless disregard of obligations and duties hereunder. The Seller,
the Master Servicer, any subcontractor, and any partner, director, officer,
employee or agent of any of them shall be entitled to indemnification by the
Trust Estate and will be held harmless against any loss, liability or expense
incurred in connection with any legal action relating to this Agreement or the
Certificates, other than any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or gross negligence in the performance of his or
its duties hereunder or by reason of reckless disregard
VI-1
<PAGE>
of his or its obligations and duties hereunder. The Seller, the Master Servicer
and any of the directors, officers, employees or agents of either 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. Neither
the Seller nor the Master Servicer shall be under any obligation to appear in,
prosecute or defend any legal action unless such action is related to its
respective duties under this Agreement and which in its opinion does not involve
it in any expense or liability; provided, however, that the Seller or the Master
-------- -------
Servicer may 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 hereunder if
the Certificateholders offer to the Seller or the Master Servicer, as the case
may be, reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby. In such event, the legal
expenses and costs of such action and any liability resulting therefrom shall be
expenses, costs and liabilities of the Trust Estate, and the Seller or the
Master Servicer shall be entitled to be reimbursed therefor out of the
Certificate Account, and such amounts shall, on the following Distribution Date
or Distribution Dates, be allocated in reduction of distributions on the Class A
and Class B Certificates in the same manner as Realized Losses are allocated
pursuant to Section 4.02(a).
Section 6.04. Resignation of the Master Servicer.
----------------------------------
The Master Servicer shall not resign from the obligations and duties hereby
imposed on it except upon determination that its duties hereunder are no longer
permissible under applicable law or are in material conflict by reason of
applicable law with any other activities carried on by it. Any such
determination permitting the resignation of the Master Servicer shall be
evidenced by an Opinion of Counsel to such effect delivered to the Trustee. No
such resignation shall become effective until the Trustee or a successor
servicer shall have assumed the Master Servicer's responsibilities, duties,
liabilities and obligations hereunder.
Section 6.05. Compensation to the Master Servicer.
-----------------------------------
The Master Servicer shall be entitled to receive a monthly fee equal to the
Master Servicing Fee, as compensation for services rendered by the Master
Servicer under this Agreement. The Master Servicer also will be entitled to any
late reporting fees paid by a Servicer pursuant to its Servicing Agreement and
any investment income on funds on deposit in the Certificate Account as
additional compensation.
Section 6.06. Assignment or Delegation of Duties by Master Servicer.
-----------------------------------------------------
The Master Servicer shall not assign or transfer any of its rights,
benefits or privileges under this Agreement to any other Person, or 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 Master Servicer
without the prior written consent of the Trustee, and any agreement, instrument
or act purporting to effect any such assignment, transfer, delegation or
appointment shall be void. Notwithstanding the foregoing, the Master Servicer
shall have the right without the prior written consent of the Trustee (i) to
assign its rights and delegate its duties and obligations hereunder; provided,
--------
however, that (a) the purchaser or transferee
- -------
VI-2
<PAGE>
accepting such assignment or delegation is qualified to service mortgage loans
for FNMA or FHLMC, is satisfactory to the Trustee, in the exercise of its
reasonable judgment, and executes and delivers to the Trustee an agreement, in
form and substance reasonably satisfactory to the Trustee, which contains an
assumption by such purchaser or transferee of the due and punctual performance
and observance of each covenant and condition to be performed or observed by the
Master Servicer hereunder from and after the date of such agreement; and (b)
each applicable Rating Agency's rating of any Certificates in effect immediately
prior to such assignment, sale or transfer is not reasonably likely to be
qualified, downgraded or withdrawn as a result of such assignment, sale or
transfer and the Certificates are not reasonably likely to be placed on credit
review status by any such Rating Agency; and (ii) to delegate to, subcontract
with, authorize, or appoint an affiliate of the Master Servicer to perform and
carry out any duties, covenants or obligations to be performed and carried out
by the Master Servicer under this Agreement and hereby agrees so to delegate,
subcontract, authorize or appoint to an affiliate of the Master Servicer any
duties, covenants or obligations to be performed and carried out by the Master
Servicer to the extent that such duties, covenants or obligations are to be
performed in any state or states in which the Master Servicer is not authorized
to do business as a foreign corporation but in which the affiliate is so
authorized. In no case, however, shall any permitted assignment and delegation
relieve the Master Servicer of any liability to the Trustee or the Seller under
this Agreement, incurred by it prior to the time that the conditions contained
in clause (i) above are met.
Section 6.07. Indemnification of Trustee and Seller by Master Servicer.
--------------------------------------------------------
The Master Servicer shall indemnify and hold harmless the Trustee and the
Seller and any director, officer or agent thereof against any loss, liability or
expense, including reasonable attorney's fees, arising out of, in connection
with or incurred by reason of willful misfeasance, bad faith or negligence in
the performance of duties of the Master Servicer under this Agreement or by
reason of reckless disregard of its obligations and duties under this Agreement.
Any payment pursuant to this Section made by the Master Servicer to the Trustee
or the Seller shall be from such entity's own funds, without reimbursement
therefor. The provisions of this Section 6.07 shall survive the termination of
this Agreement.
VI-3
<PAGE>
ARTICLE VII
DEFAULT
Section 7.01. Events of Default.
-----------------
In case one or more of the following Events of Default by the Master
Servicer shall occur and be continuing, that is to say:
(i) any failure by the Master Servicer (a) to remit any funds to
the Paying Agent as required by Section 4.03 or (b) to distribute or cause
to be distributed to Certificateholders any payment required to be made by
the Master Servicer under the terms of this Agreement which, in either
case, continues unremedied for a period of three business days after the
date upon which written notice of such failure, requiring the same to be
remedied, shall have been given to the Master Servicer by the Trustee or to
the Master Servicer and the Trustee by the holders of Certificates
evidencing in the aggregate not less than 25% of the aggregate Voting
Interest represented by all Certificates; or
(ii) any failure on the part of the Master Servicer duly to
observe or perform in any material respect any other of the covenants or
agreements on the part of the Master Servicer in the Certificates or in
this Agreement which continues unremedied for a period of 60 days after the
date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Master Servicer by the Trustee, or
to the Master Servicer and the Trustee by the holders of Certificates
evidencing in the aggregate not less than 25% of the aggregate Voting
Interest represented by all Certificates; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a
trustee, conservator, receiver or liquidator in any bankruptcy, insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against the Master Servicer and such decree or order
shall have remained in force undischarged and unstayed for a period of 60
days; or
(iv) the Master Servicer shall consent to the appointment of a
trustee, conservator, receiver or liquidator or liquidating committee in
any bankruptcy, insolvency, readjustment of debt, marshaling of assets and
liabilities, voluntary liquidation or similar proceedings of or relating to
the Master Servicer, or of or relating to all or substantially all of its
property; or
(v) the Master 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, bankruptcy or reorganization
statute, make an assignment for the benefit of its creditors or voluntarily
suspend payment of its obligations;
VII-1
<PAGE>
(vi) the Master Servicer shall be dissolved, or shall dispose of
all or substantially all of its assets; or consolidate with or merge into
another entity or shall permit another entity to consolidate or merge into
it, such that the resulting entity does not meet the criteria for a
successor servicer, as specified in Section 6.02 hereof; or
(vii) the Master Servicer and any subservicer appointed by it
becomes ineligible to service for both FNMA and FHMLC, which ineligibility
continues unremedied for a period of 90 days.
then, and in each and every such case, subject to applicable law, so long as an
Event of Default shall not have been remedied, either the Trustee or the holders
of Certificates evidencing in the aggregate not less than 66 2/3% of the
aggregate Voting Interest represented by all Certificates, by notice in writing
to the Master Servicer (and to the Trustee if given by the Certificateholders)
may terminate all of the rights and obligations of the Master Servicer under
this Agreement and in and to the Mortgage Loans, but without prejudice to any
rights which the Master Servicer may have to the aggregate Master Servicing Fees
due prior to the date of transfer of the Master Servicer's responsibilities
hereunder, reimbursement of expenses to the extent permitted by this Agreement,
Periodic Advances and other advances of its own funds. Upon receipt by the
Master Servicer of such written notice, all authority and power of the Master
Servicer under this Agreement, whether with respect to the Certificates or the
Mortgage Loans or otherwise, shall pass to and be vested in the Trustee pursuant
to and under this Section, subject to the provisions of Section 7.05; and,
without limitation, the Trustee is hereby authorized and empowered to execute
and deliver, on behalf of the Master Servicer, as attorney-in-fact or otherwise,
any and all documents and other instruments, and to do or accomplish all other
acts or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement or assignment of
the Mortgage Loans and related documents or otherwise. The Master Servicer
agrees to cooperate with the Trustee in effecting the termination of the Master
Servicer's responsibilities and rights hereunder and shall promptly provide the
Trustee all documents and records reasonably requested by it to enable it to
assume the Master Servicer's functions hereunder and shall promptly also
transfer to the Trustee all amounts which then have been or should have been
deposited in the Certificate Account by the Master Servicer or which are
thereafter received by the Master Servicer with respect to the Mortgage Loans.
Section 7.02. Other Remedies of Trustee.
-------------------------
During the continuance of any Event of Default, so long as such Event of
Default shall not have been remedied, the Trustee, in addition to the rights
specified in Section 7.01, shall have the right, in its own name as trustee of
an express trust, 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 filing of proofs of claim and debt in connection
therewith). Except as otherwise expressly provided in this Agreement, 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
VII-2
<PAGE>
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 Event of Default.
Section 7.03. Directions by Certificateholders and
Duties of Trustee During Event of Default.
-----------------------------------------
During the continuance of any Event of Default, Holders of Certificates
evidencing in the aggregate not less than 25% of the aggregate Voting Interest
represented by all Certificates may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee, under this Agreement; provided,
--------
however, that the Trustee shall be under no obligation to pursue any such
- -------
remedy, or to exercise any of the trusts or powers vested in it by this
agreement (including, without limitation, (i) the conducting or defending of any
administrative action or litigation hereunder or in relation hereto and (ii) the
terminating of the Master Servicer from its rights and duties as servicer
hereunder) at the request, order or direction of any of the Certificateholders,
unless such Certificateholders shall have offered to the Trustee reasonable
security or indemnity against the cost, expenses and liabilities which may be
incurred therein or thereby and, provided further, that, subject to the
provisions of Section 8.01, the Trustee shall have the right to decline to
follow any such direction if the Trustee, in accordance with an Opinion of
Counsel, determines that the action or proceeding so directed may not lawfully
be taken or if the Trustee in good faith determines that the action or
proceeding so directed would involve it in personal liability or be unjustly
prejudicial to the nonassenting Certificateholders.
Section 7.04. Action upon Certain Failures of the
Master Servicer and upon Event of Default.
-----------------------------------------
In the event that the Trustee shall have knowledge of any failure of the
Master Servicer specified in Section 7.01(i) or (ii) which would become an Event
of Default upon the Master Servicer's failure to remedy the same after notice,
the Trustee may, but need not if the Trustee deems it not in the
Certificateholders' best interest, give notice thereof to the Master Servicer.
For all purposes of this Agreement, in the absence of actual knowledge by a
corporate trust officer of the Trustee, the Trustee shall not be deemed to have
knowledge of any failure of the Master Servicer as specified in Section 7.01(i)
and (ii) or any Event of Default unless notified thereof in writing by the
Master Servicer or by a Certificateholder.
Section 7.05. Trustee to Act; Appointment of Successor.
----------------------------------------
When the Master Servicer receives notice of termination pursuant to Section
7.01 or the Trustee receives the resignation of the Master Servicer evidenced by
an Opinion of Counsel pursuant to Section 6.04, the Trustee shall be the
successor in all respects to the Master Servicer in its capacity as master
servicer under this Agreement and the transactions set forth or provided for
herein and shall have the rights and powers and be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Master
Servicer by the terms and provisions hereof and in its capacity as such
successor shall have the same limitation of liability herein granted to the
Master Servicer. In the event that the Trustee is succeeding to the Master
Servicer as the Master Servicer, as compensation therefor, the Trustee shall be
VII-3
<PAGE>
entitled to receive monthly such portion of the Master Servicing Fee, together
with such other servicing compensation as is agreed to at such time by the
Trustee and the Master Servicer, but in no event more than 25% thereof until the
date of final cessation of the Master Servicer's servicing activities hereunder.
Notwithstanding the above, the Trustee may, if it shall be unwilling to so act,
or shall, if it is unable to so act or to obtain a qualifying bid as described
below, appoint, or petition a court of competent jurisdiction to appoint, any
housing and home finance institution, bank or mortgage servicing institution
having a net worth of not less than $10,000,000 and meeting such other standards
for a successor servicer as are set forth herein, as the successor to the Master
Servicer hereunder in the assumption of all or any part of the responsibilities,
duties or liabilities of the Master Servicer hereunder; provided, however, that
-------- -------
until such a successor master servicer is appointed and has assumed the
responsibilities, duties and liabilities of the Master Servicer hereunder, the
Trustee shall continue as the successor to the Master Servicer as provided
above. The compensation of any successor master servicer so appointed shall not
exceed the compensation specified in Section 6.05 hereof. In the event the
Trustee is required to solicit bids as provided above, the Trustee shall
solicit, by public announcement, bids from housing and home finance
institutions, banks and mortgage servicing institutions meeting the
qualifications set forth in the preceding sentence for the purchase of the
master servicing functions. Such public announcement shall specify that the
successor master servicer shall be entitled to the full amount of the Master
Servicing Fee as compensation together with the other servicing compensation in
the form of late reporting fees or otherwise as provided in Section 6.05.
Within 30 days after any such public announcement, the Trustee shall negotiate
and effect the sale, transfer and assignment of the master servicing rights and
responsibilities hereunder to the qualified party submitting the highest
qualifying bid. The Trustee shall deduct all costs and expenses of any public
announcement and of any sale, transfer and assignment of the servicing rights
and responsibilities hereunder from any sum received by the Trustee from the
successor to the Master Servicer in respect of such sale, transfer and
assignment. After such deductions, the remainder of such sum shall be paid by
the Trustee to the Master Servicer at the time of such sale, transfer and
assignment to the Master Servicer's successor. The Trustee and such successor
shall take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession. The Master Servicer agrees to cooperate with
the Trustee and any successor servicer in effecting the termination of the
Master Servicer's servicing responsibilities and rights hereunder and shall
promptly provide the Trustee or such successor master servicer, as applicable,
all documents and records reasonably requested by it to enable it to assume the
Master Servicer's function hereunder and shall promptly also transfer to the
Trustee or such successor master servicer, as applicable, all amounts which then
have been or should have been deposited in the Certificate Account by the Master
Servicer or which are thereafter received by the Master Servicer with respect to
the Mortgage Loans. Neither the Trustee nor any other successor master servicer
shall be deemed to be in default hereunder by reason of any failure to make, or
any delay in making, any distribution hereunder or any portion thereof caused by
(i) the failure of the Master Servicer to deliver, or any delay in delivering,
cash, documents or records to it, or (ii) restrictions imposed by any regulatory
authority having jurisdiction over the Master Servicer. Notwithstanding
anything to the contrary contained in Section 7.01 above or this Section 7.05,
the Master Servicer shall retain all of its rights and responsibilities
hereunder, and no successor (including the Trustee) shall succeed thereto, if
the assumption thereof by such successor would cause the rating assigned to any
Certificates to be revoked, downgraded
VII-4
<PAGE>
or placed on credit review status (other than for possible upgrading) by either
Rating Agency and the retention thereof by the Master Servicer would avert such
revocation, downgrading or review.
Section 7.06. Notification to Certificateholders.
----------------------------------
Upon any termination of the Master Servicer or appointment of a successor
master servicer, in each case as provided herein, the Trustee shall give prompt
written notice thereof to Certificateholders at their respective addresses
appearing in the Certificate Register. The Trustee shall also, within 45 days
after the occurrence of any Event of Default known to the Trustee, give written
notice thereof to Certificateholders at their respective addresses appearing in
the Certificate Register, unless such Event of Default shall have been cured or
waived within said 45 day period.
VII-5
<PAGE>
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.01. Duties of Trustee
-----------------
The Trustee, prior to the occurrence of an Event of Default and after the
curing of all Events of Default which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth in this
Agreement. In case an Event of Default has occurred (which has not been cured),
the Trustee, subject to the provisions of Sections 7.01, 7.03, 7.04 and 7.05,
shall exercise such of the rights and powers vested in it by this Agreement, and
use the same degree of care and skill in its exercise as a prudent investor
would exercise or use under the circumstances in the conduct of such investor's
own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee, which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they are in
the form required by this Agreement; provided, however, that the Trustee shall
-------- -------
not be responsible for the accuracy or content of any certificate, statement,
instrument, report, notice or other document furnished by the Master Servicer or
the Servicers pursuant to Articles III, IV and IX.
No provision of this Agreement shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct; provided, however, that:
-------- -------
(i) Prior to the occurrence of an Event of Default and after the
curing of all such Events of Default which may have occurred, the duties
and obligations of the Trustee shall be determined solely by the express
provisions of this Agreement, the Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set
forth in this Agreement, no implied covenants or obligations shall be read
into this Agreement against the Trustee and, in the absence of bad faith on
the part of the Trustee, the Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the Trustee, and conforming
to the requirements of this Agreement;
(ii) The Trustee shall not be personally liable with respect to
any action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of holders of Certificates which evidence in
the aggregate not less than 25% of the Voting Interest represented by all
Certificates relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this Agreement; and
(iii) The Trustee shall not be liable for any error of judgment
made in good faith by any of its respective Responsible Officers, unless it
shall be proved that the
VIII-1
<PAGE>
Trustee or such Responsible Officer, as the case may be, was negligent in
ascertaining the pertinent facts.
None of the provisions contained in this Agreement shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties hereunder or in the exercise
of any of its rights or powers if there is reasonable ground for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
Section 8.02. Certain Matters Affecting the Trustee.
-------------------------------------
Except as otherwise provided in Section 8.01:
(i) The Trustee may rely 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 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 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; and
(iv) 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.
Section 8.03. Trustee Not Required to Make Investigation.
------------------------------------------
Prior to the occurrence of an Event of Default hereunder and after the
curing of all Events of Default which may have occurred, the Trustee shall not
be bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond, Mortgage, Mortgage Note or other paper
or document (provided the same appears regular on its face), unless requested in
writing to do so by holders of Certificates evidencing in the aggregate not less
than 51% of the Voting Interest represented by all Certificates; provided,
--------
however, that if the payment within a reasonable time to the Trustee of the
- -------
costs, expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to the
Trustee by the security afforded to it by the terms of this Agreement, the
Trustee may require reasonable indemnity against such expense or liability as a
condition to so proceeding. The reasonable expense of every such investigation
shall be paid by the Master Servicer or, if paid by the Trustee or the Trustee,
shall be repaid by the Master Servicer upon demand.
VIII-2
<PAGE>
Section 8.04. Trustee Not Liable for Certificates or Mortgage Loans
-----------------------------------------------------
The recitals contained herein and in the Certificates (other than the
certificate of authentication on the Certificates) shall be taken as the
statements of the Seller, and the Trustee assumes no responsibility as to the
correctness of the same. The Trustee makes no representation for the
correctness of the same. The Trustee makes no representation as to the validity
or sufficiency of this Agreement or of the Certificates or of any Mortgage Loan
or related document. Subject to Section 2.04, the Trustee shall not be
accountable for the use or application by the Seller of any of the Certificates
or of the proceeds of such Certificates, or for the use or application of any
funds paid to the Master Servicer in respect of the Mortgage Loans deposited
into the Certificate Account by the Master Servicer or, in its capacity as
trustee, for investment of any such amounts.
Section 8.05. Trustee May Own Certificates
----------------------------
The Trustee and any agent thereof, in its individual or any other capacity,
may become the owner or pledgee of Certificates with the same rights it would
have if it were not Trustee or such agent.
Section 8.06. The Master Servicer to Pay Fees and Expenses
--------------------------------------------
The Master Servicer covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to receive, reasonable compensation
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by it
in the execution of the trusts hereby created and in the exercise and
performance of any of the powers and duties hereunder of the Trustee and the
Master Servicer will pay or reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by it 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) except any such expense, disbursement,
or advance as may arise from its negligence or bad faith.
Section 8.07. Eligibility Requirements
------------------------
The Trustee hereunder shall at all times (i) be a corporation or
association having its principal office in a state and city acceptable to the
Seller, organized and doing business under the laws of such state or the United
States of America, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000, or shall
be a member of a bank holding system, the aggregate combined capital and surplus
of which is at least $50,000,000, provided that its separate capital and surplus
shall at all times be at least the amount specified in Section 310(a)(2) of the
Trust Indenture Act of 1939, (ii) be subject to supervision or examination by
federal or state authority and (iii) have a credit rating or be otherwise
acceptable to the Rating Agencies such that neither of the Rating Agencies would
reduce their respective then current ratings of the Certificates (or have
provided such security from time to time as is sufficient to avoid such
reduction) as evidenced in writing by each Rating Agency. If such corporation
or association publishes reports of condition at least annually, pursuant to law
or to the requirements of the aforesaid supervising or examining
VIII-3
<PAGE>
authority, then for the purposes of this Section the combined capital and
surplus of such corporation or association shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, such entity shall resign
immediately in the manner and with the effect specified in Section 8.08.
Section 8.08. Resignation and Removal
-----------------------
The Trustee may at any time resign and be discharged from the trust hereby
created by giving written notice of resignation to the Master Servicer, such
resignation to be effective upon the appointment of a successor trustee. Upon
receiving such notice of resignation, the Master Servicer shall promptly appoint
a successor trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning entity and one copy to its
successor. If no successor trustee shall have been appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 8.07 and shall fail to resign after written request
for its resignation by the Master Servicer, or if at any time the Trustee shall
become incapable of acting, or an order for relief shall have been entered in
any bankruptcy or insolvency proceeding with respect to such entity, or a
receiver of such entity or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of the property or
affairs of the Trustee for the purpose of rehabilitation, conversion or
liquidation, or the Master Servicer shall deem it necessary in order to change
the situs of the Trust Estate for state tax reasons, then the Master Servicer
shall remove the Trustee and appoint a successor trustee by written instrument,
in duplicate, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee.
The Holders of Certificates evidencing in the aggregate not less than 51%
of the Voting Interests represented by all Certificates (except that any
Certificate registered in the name of the Seller, the Master Servicer or any
affiliate thereof will not be taken into account in determining whether the
requisite Voting Interests has been obtained) may 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 authorized, one complete
set of which instruments shall be delivered to the Master Servicer, one complete
set of which shall be delivered to the entity or entities so removed and one
complete set of which shall be delivered to the successor so appointed.
Any resignation or removal of the Trustee and appointment of a successor
pursuant to any of the provisions of this Section shall become effective upon
acceptance of appointment by the successor as provided in Section 8.09.
Section 8.09. Successor
---------
Any successor trustee appointed as provided in Section 8.08 shall execute,
acknowledge and deliver to the Master Servicer and to its predecessor trustee an
instrument accepting such
VIII-4
<PAGE>
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective, and such successor, without any
further act, deed or reconveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with like
effect as if originally named as trustee herein. The predecessor trustee shall
deliver to its successor all Owner Mortgage Loan Files and related documents and
statements held by it hereunder (other than any Owner Mortgage Loan Files at the
time held by a Custodian, which Custodian shall become the agent of any
successor trustee hereunder), and the Seller, the Master Servicer and the
predecessor entity 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 shall accept appointment as provided in this Section
unless at the time of such acceptance such successor shall be eligible under the
provisions of Section 8.07
Upon acceptance of appointment by a successor as provided in this Section,
the Master Servicer shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates at their addresses as shown in the
Certificate Register. If the Master Servicer fails to mail such notice within
ten days after acceptance of the successor trustee, the successor trustee shall
cause such notice to be mailed at the expense of the Master Servicer.
Section 8.10. Merger or Consolidation
-----------------------
Any Person into which the Trustee may be merged or converted or with which
it may be consolidated, to which it may sell or transfer its corporate trust
business and assets as a whole or substantially as a whole or any Person
resulting from any merger, sale, transfer, conversion or consolidation to which
the Trustee shall be a party, or any Person succeeding to the business of such
entity, shall be the successor of the Trustee hereunder; provided, however, that
-------- -------
(i) such Person shall be eligible under the provisions of Section 8.07, 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, and (ii)
the Trustee shall deliver an Opinion of Counsel to the Seller and the Master
Servicer to the effect that such merger, consolidation, sale or transfer will
not subject either the Upper-Tier REMIC or the Lower-Tier REMIC to federal,
state or local tax or cause either the Upper-Tier REMIC or the Lower-Tier REMIC
to fail to qualify as a REMIC, which Opinion of Counsel shall be at the sole
expense of the Trustee.
Section 8.11. Authenticating Agent
--------------------
The Trustee may appoint an Authenticating Agent, which shall be authorized
to act on behalf of the Trustee in authenticating Certificates. Wherever
reference is made in this Agreement to the authentication of Certificates by the
Trustee or the Trustee's countersignature, such reference shall be deemed to
include authentication on behalf of the Trustee by the Authenticating Agent and
a certificate of authentication executed on behalf of the Trustee by the
Authenticating Agent. The Authenticating Agent must be acceptable to the Seller
and the Master Servicer and must be a corporation organized and doing business
under the laws of the United States of America or of any state, having a
principal office and place of business in a state and city acceptable to the
Seller and the Master Servicer, having a combined
VIII-5
<PAGE>
capital and surplus of at least $15,000,000, authorized under such laws to do a
trust business and subject to supervision or examination by federal or state
authorities.
Any corporation into which the Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency business
of the Authenticating Agent, shall be the Authenticating Agent without the
execution or filing of any paper or any further act on the part of the Trustee
or the Authenticating Agent.
The Authenticating Agent may at any time resign by giving at least 30 days'
advance written notice of resignation to the Trustee, the Seller and the Master
Servicer. The Trustee may at any time terminate the agency of the
Authenticating Agent by giving written notice thereof to the Authenticating
Agent, the Seller and the Master Servicer. Upon receiving a notice of
resignation or upon such a termination, or in case at any time the
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 8.11, the Trustee promptly shall appoint a successor
Authenticating Agent, which shall be acceptable to the Master Servicer, and
shall give written notice of such appointment to the Seller, and shall mail
notice of such appointment to all Certificateholders. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers, duties and responsibilities of its
predecessor hereunder, with like effect as if originally named as Authenticating
Agent herein. No successor Authenticating Agent shall be appointed unless
eligible under the provisions of this Section 8.11.
The Authenticating Agent shall have no responsibility or liability for any
action taken by it as such at the direction of the Trustee. Any reasonable
compensation paid to the Authenticating Agent shall be a reimbursable expense
under Section 8.06.
Section 8.12. Separate Trustees and Co-Trustees
---------------------------------
The Trustee shall have the power from time to time to appoint one or more
persons or corporations to act either as co-trustees jointly with the Trustee,
or as separate trustees, for the purpose of holding title to, foreclosing or
otherwise taking action with respect to any Mortgage Loan outside the state
where the Trustee has its principal place of business, where such separate
trustee or co-trustee is necessary or advisable (or the Trustee is advised by
the Master Servicer that such separate trustee or co-trustee is necessary or
advisable) under the laws of any state in which a Mortgaged Property is located
or for the purpose of otherwise conforming to any legal requirement, restriction
or condition in any state in which a Mortgaged Property is located or in any
state in which any portion of the Trust Estate is located. The Master Servicer
shall advise the Trustee when, in its good faith opinion, a separate trustee or
co-trustee is necessary or advisable as aforesaid. The separate trustees or co-
trustees so appointed shall be trustees for the benefit of all of the
Certificateholders and shall have such powers, rights and remedies as shall be
specified in the instrument of appointment; provided, however, that no such
-------- -------
appointment shall, or shall be deemed to, constitute the appointee an agent of
the Trustee. The Seller and the Master Servicer shall join in any such
appointment, but such joining shall not be necessary for the effectiveness of
such appointment.
VIII-6
<PAGE>
Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all powers, duties, obligations and rights conferred upon the
Trustee, in respect of the receipt, custody and payment of moneys shall be
exercised solely by the Trustee;
(ii) all other 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 (whether as Trustee
hereunder or as successor to the Master Servicer hereunder) the Trustee
shall be incompetent or unqualified to perform such act or acts, in which
event such rights, powers, duties and obligations (including the holding of
title to the Trust Estate or any portion thereof in any such jurisdiction)
shall be exercised and performed by such separate trustee or co-trustee;
(iii) no separate trustee or co-trustee hereunder shall be
personally liable by reason of any act or omission of any other separate
trustee or co-trustee hereunder; and
(iv) the Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee so appointed by it, if such
resignation or removal does not violate the other terms of this Agreement.
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, co-trustee, or custodian shall refer to this Agreement and the
conditions of this Article. 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 furnished to the Trustee.
Any separate trustee, co-trustee, or custodian 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.
No separate trustee or co-trustee hereunder shall be required to meet the
terms of eligibility as a successor trustee under Section 8.07 hereunder and no
notice to Certificateholders of the appointment thereof shall be required under
Section 8.09 hereof.
The Trustee agrees to instruct its co-trustees, if any, to the extent
necessary to fulfill such entity's obligations hereunder.
VIII-7
<PAGE>
The Master Servicer shall pay the reasonable compensation of the co-
trustees to the extent, and in accordance with the standards, specified in
Section 8.06 hereof.
Section 8.13. Appointment of Custodians
-------------------------
The Trustee may at any time on or after the Closing Date, with the consent
of the Master Servicer and the Seller, appoint one or more Custodians to hold
all or a portion of the Owner Mortgage Loan Files as agent for the Trustee, by
entering into a Custodial Agreement. Subject to this Article VIII, the Trustee
agrees to comply with the terms of each Custodial Agreement and to enforce the
terms and provisions thereof against the Custodian for the benefit of the
Certificateholders. Each Custodian shall be a depository institution subject to
supervision by federal or state authority, shall have a combined capital and
surplus of at least $10,000,000 and shall be qualified to do business in the
jurisdiction in which it holds any Owner Mortgage Loan File. Each Custodial
Agreement may be amended only as provided in Section 10.01(a).
Section 8.14. Tax Matters; Compliance with REMIC Provisions
---------------------------------------------
(a) Each of the Trustee and the Master Servicer covenants and agrees that
it shall perform its duties hereunder in a manner consistent with the REMIC
Provisions and shall not knowingly take any action or fail to take any action
that would (i) affect the determination of the Trust Estate's status as two
separate REMICs; or (ii) cause the imposition of any federal, state or local
income, prohibited transaction, contribution or other tax on either the Upper-
Tier REMIC, the Lower-Tier REMIC or the Trust Estate. The Master Servicer, or,
in the case of any tax return or other action required by law to be performed
directly by the Trustee, the Trustee, shall (i) prepare or cause to be prepared,
timely cause to be signed by the Trustee and file or cause to be filed annual
federal and applicable state and local income tax returns for each of the Upper-
Tier REMIC and the Lower-Tier REMIC using a calendar year as the taxable year
and the accrual method of accounting; (ii) in the first such federal tax
returns, make, or cause to be made, elections satisfying the requirements of the
REMIC Provisions, on behalf of the Trust Estate, to treat each of the Upper-Tier
REMIC and the Lower-Tier REMIC as a REMIC; (iii) prepare, execute and forward,
or cause to be prepared, executed and forwarded, to the Certificateholders all
information reports or tax returns required with respect to the Trust Estate, as
and when 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" and "market discount" as defined in the Code based
upon the issue prices, prepayment assumption and cash flows provided by the
Seller to the Trustee and calculated on a monthly basis by using the issue
prices of the Certificates; (iv) make available information necessary for the
application of any tax imposed on transferors of residual interests to
"disqualified organizations" (as defined in the REMIC Provisions); (v) file
Forms SS-4 and 8811 and respond to inquiries by Certificateholders or their
nominees concerning information returns, reports or tax returns; (vi) maintain
(or cause to be maintained by the Servicers) such records relating to the Upper-
Tier REMIC and the Lower-Tier REMIC, including but not limited to the income,
expenses, individual Mortgage Loans (including REO Mortgage Loans, other assets
and liabilities of
VIII-8
<PAGE>
each REMIC, and the fair market value and adjusted basis of the property of each
REMIC determined at such intervals as may be required by the Code, as may be
necessary to prepare the foregoing returns or information reports; (vii)
exercise reasonable care not to allow the creation of any "interests" in either
the Upper-Tier REMIC or the Lower-Tier REMIC within the meaning of Code Section
860D(a)(2) other than the interests in the Upper-Tier REMIC represented by 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, Class A-11, Class A-12, Class A-13, Class A-
14, Class A-15, Class A-16, Class A-17, Class A-18, Class A-19, Class A-20,
Class A-PO and Class A-R Certificates, the Class B-1, Class B-2, Class B-3,
Class B-4, Class B-5 and Class B-6 Certificates and the interests in the Lower-
Tier REMIC represented by the Class A-L1, Class A-L2, Class A-L4, Class A-L12,
Class A-L14, Class A-L15, Class A-L17, Class A-LPO, Class A-LUR, Class B-L1,
Class B-L2, Class B-L3, Class B-L4, Class B-L5 and Class B-L6 Interests and the
Class A-LR Certificate; (viii) exercise reasonable care not to allow the
occurrence of any "prohibited transactions" within the meaning of Code Section
860F(a), unless the Master Servicer shall have provided an Opinion of Counsel to
the Trustee that such occurrence would not (a) result in a taxable gain, (b)
otherwise subject either the Upper-Tier REMIC or Lower-Tier REMIC or the Trust
Estate to tax or (c) cause the Trust Estate to fail to qualify as two separate
REMICs; (ix) exercise reasonable care not to allow either the Upper-Tier REMIC
or the Lower-Tier REMIC to receive income from the performance of services or
from assets not permitted under the REMIC Provisions to be held by a REMIC; (x)
pay (on behalf of the Upper-Tier REMIC or the Lower-Tier REMIC) the amount of
any federal income tax, including, without limitation, prohibited transaction
taxes, taxes on net income from foreclosure property, and taxes on certain
contributions to a REMIC after the Startup Day, imposed on the Upper-Tier REMIC
or Lower-Tier REMIC, as the case may be, when and as the same shall be due and
payable (but such obligation shall not prevent the Master Servicer or any other
appropriate Person from contesting any such tax in appropriate proceedings and
shall not prevent the Master Servicer from withholding or depositing payment of
such tax, if permitted by law, pending the outcome of such proceedings); and
(xi) if required or permitted by the Code and applicable law, act as "tax
matters person" for the Upper-Tier REMIC or the Lower-Tier REMIC within the
meaning of Treasury Regulations Section 1.860F-4(d), and the Master Servicer is
hereby designated as agent of the Class A-R and Class A-LR Certificateholders
for such purpose (or if the Master Servicer is not so permitted, the Holders of
the Class A-R and Class A-LR Certificates shall be tax matters persons in
accordance with the REMIC Provisions). The Master Servicer shall be entitled to
be reimbursed pursuant to Section 3.02 for any taxes paid by it pursuant to
clause (x) of the preceding sentence, except to the extent that such taxes are
imposed as a result of the bad faith, willful misfeasance or gross negligence of
the Master Servicer in the performance of its obligations hereunder. The
Trustee's sole duties with respect to the Upper-Tier REMIC and Lower Tier REMIC
are to sign the tax returns referred to in clause (i) of the second preceding
sentence and to comply with written directions from the Master Servicer or the
Trustee.
In order to enable the Master Servicer or the Trustee, as the case may
be, to perform its duties as set forth above, the Seller shall provide, or cause
to be provided, to the Master Servicer within ten days after the Closing Date
all information or data that the Master Servicer determines to be relevant for
tax purposes to the valuations and offering prices of the Certificates,
including, without limitation, the price, yield, prepayment assumption and
VIII-9
<PAGE>
projected cash flows of each Class of Certificates and the Mortgage Loans in the
aggregate. Thereafter, the Seller shall provide to the Master Servicer or the
Trustee, as the case may be, promptly upon request therefor, any such additional
information or data that the Master Servicer or the Trustee, as the case may be,
may from time to time, request in order to enable the Master Servicer to perform
its duties as set forth above. The Seller hereby indemnifies the Master
Servicer or the Trustee, as the case may be, for any losses, liabilities,
damages, claims or expenses of the Master Servicer or the Trustee arising from
any errors or miscalculations by the Master Servicer or the Trustee pursuant to
this Section that result from any failure of the Seller to provide, or to cause
to be provided, accurate information or data to the Master Servicer or the
Trustee, as the case may be, on a timely basis. The Master Servicer hereby
indemnifies the Seller and the Trustee for any losses, liabilities, damages,
claims or expenses of the Seller or the Trustee arising from the Master
Servicer's willful misfeasance, bad faith or gross negligence in preparing any
of the federal, state and local tax returns of the Upper-Tier REMIC and Lower-
Tier REMIC as described above. In the event that the Trustee prepares any of the
federal, state and local tax returns of the Upper-Tier REMIC or Lower-Tier REMIC
as described above, the Trustee hereby indemnifies the Seller and the Master
Servicer for any losses, liabilities, damages, claims or expenses of the Seller
or the Master Servicer arising from the Trustee's willful misfeasance, bad faith
or negligence in connection with such preparation.
(b) Notwithstanding anything in this Agreement to the contrary, each of the
Master Servicer and the Trustee shall pay from its own funds, without any right
of reimbursement therefor, the amount of any costs, liabilities and expenses
incurred by the Trust Estate (including, without limitation, any and all
federal, state or local taxes, including taxes imposed on "prohibited
transactions" within the meaning of the REMIC Provisions) if and to the extent
that such costs, liabilities and expenses arise from a failure of the Master
Servicer or the Trustee to perform its obligations under this Section 8.14.
Section 8.15. Monthly Advances
----------------
In the event that Norwest Mortgage fails to make a Periodic Advance
required to be made pursuant to the Norwest Servicing Agreement on or before the
Distribution Date, the Trustee shall make a Periodic Advance as required by
Section 3.03 hereof; provided, however, the Trustee shall not be required to
-------- -------
make such Periodic Advances if prohibited by law or if it determines that such
Periodic Advance would be a Nonrecoverable Advance. With respect to those
Periodic Advances which should have been made by Norwest Mortgage, the Trustee
shall be entitled, pursuant to Section 3.02(a)(i), (ii) or (v) hereof, to be
reimbursed from the Certificate Account for Periodic Advances and Nonrecoverable
Advances made by it.
VIII-10
<PAGE>
ARTICLE IX
TERMINATION
Section 9.01. Termination upon Purchase by the
Seller or Liquidation of All Mortgage Loans.
-------------------------------------------
Subject to Section 9.02, the respective obligations and responsibilities of
the Seller, the Master Servicer and the Trustee created hereby (other than the
obligation of the Trustee to make certain payments after the Final Distribution
Date to Certificateholders and the obligation of the Master Servicer to send
certain notices as hereinafter set forth and the tax reporting obligations under
Sections 4.05 and 8.14 hereof) shall terminate upon the last action required to
be taken by the Trustee on the Final Distribution Date pursuant to this Article
IX following the earlier of (i) the purchase by the Seller of all Mortgage Loans
and all property acquired in respect of any Mortgage Loan remaining in the Trust
Estate at a price equal to the sum of (x) 100% of the unpaid principal balance
of each Mortgage Loan (other than any REO Mortgage Loan) as of the Final
Distribution Date, and (y) the fair market value of the Mortgaged Property
related to any REO Mortgage Loan (as determined by the Master Servicer as of the
close of business on the third Business Day next preceding the date upon which
notice of any such termination is furnished to Certificateholders pursuant to
the third paragraph of this Section 9.01), plus any accrued and unpaid interest
through the last day of the month preceding the month of such purchase at the
applicable Mortgage Interest Rate less any Fixed Retained Yield on each Mortgage
Loan (including any REO Mortgage Loan) and (ii) the final payment or other
liquidation (or any advance with respect thereto) of the last Mortgage Loan
remaining in the Trust Estate (including for this purpose the discharge of any
Mortgagor under a defaulted Mortgage Loan on which a Servicer is not obligated
to foreclose due to environmental impairment) or the disposition of all property
acquired upon foreclosure or deed in lieu of foreclosure of any Mortgage Loan;
provided, however, that in no event shall the trust created hereby continue
- -------- -------
beyond the expiration of 21 years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the late ambassador of the United States to
the Court of St. James, living on the date hereof.
The right of the Seller to purchase all the assets of the Trust Estate
pursuant to clause (i) of the preceding paragraph are subject to Section 9.02
and conditioned upon the Pool Scheduled Principal Balance of the Mortgage Loans
as of the Final Distribution Date being less than the amount set forth in
Section 11.22. In the case of any purchase by the Seller pursuant to said
clause (i), the Seller shall provide to the Trustee the certification required
by Section 3.04 and the Trustee and the Custodian shall, promptly following
payment of the purchase price, release to the Seller the Owner Mortgage Loan
Files pertaining to the Mortgage Loans being purchased.
Notice of any termination, specifying the Final Distribution Date (which
shall be a date that would otherwise be a Distribution Date) upon which the
Certificateholders may surrender their Certificates to the Trustee for payment
of the final distribution and cancellation, shall be
IX-1
<PAGE>
given promptly by the Master Servicer (if it is exercising its right to purchase
the assets of the Trust Estate) or by the Trustee (in any other case) by letter
to Certificateholders mailed not earlier than the 15th day of the month
preceding the month of such final distribution and not later than the twentieth
day of the month of such final distribution specifying (A) the Final
Distribution Date upon which final payment of the Certificates will be made upon
presentation and surrender of Certificates at the office or agency of the
Trustee therein designated, (B) the amount of any such final payment and (C)
that the Record Date otherwise applicable to such Distribution Date is not
applicable, payments being made (except in the case of any Class A Certificate
surrendered on a prior Distribution Date pursuant to Section 4.01) only upon
presentation and surrender of the Certificates at the office or agency of the
Trustee therein specified. If the Master Servicer is obligated to give notice to
Certificateholders as aforesaid, it shall give such notice to the Trustee and
the Certificate Registrar at the time such notice is given to
Certificateholders. In the event such notice is given by the Master Servicer,
the Master Servicer shall deposit in the Certificate Account on or before the
Final Distribution Date in immediately available funds an amount equal to the
purchase price for the assets of the Trust Estate computed as above provided.
Failure to give notice of termination as described herein shall not entitle a
Certificateholder to any interest beyond the interest payable on the Final
Distribution Date.
Upon presentation and surrender of the Certificates, the Trustee shall
cause to be distributed to Certificateholders on the Final Distribution Date in
proportion to their respective Percentage Interests an amount equal to (i) as to
the Classes of Class A Certificates, the respective Principal Balance together
with any related Class A Unpaid Interest Shortfall and one month's interest in
an amount equal to the respective Interest Accrual Amount, (ii) as to the
Classes of Class B Certificates, the respective Principal Balance together with
any related Class B Unpaid Interest Shortfall and one month's interest in an
amount equal to the respective Interest Accrual Amount and (iii) as to the Class
A-R and Class A-LR Certificates, the amounts, if any, which remain on deposit in
the Upper-Tier Certificate Account and the Certificate Account, respectively
(other than amounts retained to meet claims) after application pursuant to
clauses (i), (ii) and (iii) above and payment to the Master Servicer of any
amounts it is entitled as reimbursement or otherwise hereunder. Such amount
shall be distributed in respect of interest and principal in respect of the
Uncertificated Lower-Tier Interests in the same amounts as distributed to their
Corresponding Upper-Tier Class or Classes in the manner specified in Section
4.01(a)(ii). Notwithstanding the foregoing, if the price paid pursuant to
clause (i) of the first paragraph of this Section 9.01, after reimbursement to
the Servicers, the Master Servicer and the Trustee of any Periodic Advances, is
insufficient to pay in full the amounts set forth in clauses (i), (ii) and (iii)
of this paragraph, then any shortfall in the amount available for distribution
to Certificateholders shall be allocated in reduction of the amounts otherwise
distributable on the Final Distribution Date in the same manner as Realized
Losses are allocated pursuant to Sections 4.02(b) and 4.02(g) hereof. Such
distribution on the Final Distribution Date shall be in lieu of the distribution
otherwise required to be made on such Distribution Date in respect of each Class
of Certificates.
In the event that all of the Certificateholders shall not surrender their
Certificates for final payment and cancellation within three months following
the Final Distribution Date, the Trustee shall on such date cause all funds, if
any, in the Certificate Account not distributed in
IX-2
<PAGE>
final distribution to Certificateholders to be withdrawn therefrom and credited
to the remaining Certificateholders by depositing such funds in a separate
escrow account for the benefit of such Certificateholders, and the Master
Servicer (if it exercised its right to purchase the assets of the Trust Estate)
or the Trustee (in any other case) shall give a second written notice to the
remaining Certificateholders to surrender their Certificates for cancellation
and receive the final distribution with respect thereto. If within three months
after the second notice all the Certificates shall not have been surrendered for
cancellation, the Trustee may take appropriate steps, or may appoint an agent to
take appropriate steps, to contact the remaining Certificateholders concerning
surrender of their Certificates, and the cost thereof shall be paid out of the
funds on deposit in such escrow account.
Section 9.02. Additional Termination Requirements.
-----------------------------------
In the event of a termination of the Trust Estate upon the exercise by the
Seller of its purchase option as provided in Section 9.01, the Trust Estate
shall be terminated in accordance with the following additional requirements,
unless the Trustee has received an Opinion of Counsel to the effect that any
other manner of termination (i) will constitute a "qualified liquidation" of the
Trust Estate within the meaning of Code Section 860F(a)(4)(A) and (ii) will not
subject either the Upper-Tier REMIC or the Lower-Tier REMIC to federal tax or
cause the Trust Estate to fail to qualify as two separate REMICs at any time
that any Certificates are outstanding:
(i) The notice given by the Master Servicer under Section 9.01
shall provide that such notice constitutes the adoption of a plan of
complete liquidation of the Upper-Tier REMIC and Lower-Tier REMIC as of the
date of such notice (or, if earlier, the date on which the first such
notice is mailed to Certificateholders). The Master Servicer shall also
specify such date in a statement attached to the final tax returns of the
Upper-Tier REMIC and Lower-Tier REMIC; and
(ii) At or after the time of adoption of such a plan of complete
liquidation and at or prior to the Final Distribution Date, the Trustee
shall sell all of the assets of the Trust Estate to the Seller for cash at
the purchase price specified in Section 9.01 and shall distribute such cash
within 90 days of such adoption in the manner specified in Section 9.01.
IX-3
<PAGE>
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01. Amendment.
---------
(a) This Agreement or any Custodial Agreement may be amended from time to
time by the Seller, the Master Servicer and the Trustee, without the consent of
any of the Certificateholders, (i) to cure any ambiguity or mistake, (ii) to
correct or supplement any provisions herein or therein which may be inconsistent
with any other provisions herein or therein, (iii) to modify, eliminate or add
to any of its provisions to such extent as shall be necessary to maintain the
qualification of the Trust Estate as two separate REMICs at all times that any
Certificates are outstanding or to avoid or minimize the risk of the imposition
of any federal tax on the Trust Estate, the Upper-Tier REMIC or the Lower-Tier
REMIC pursuant to the Code that would be a claim against the Trust Estate,
provided that (a) the Trustee has received an Opinion of Counsel to the effect
that such action is necessary or desirable to maintain such qualification or to
avoid or minimize the risk of the imposition of any such tax and (b) such action
shall not, as evidenced by such Opinion of Counsel, adversely affect in any
material respect the interests of any Certificateholder, (iv) to change the
timing and/or nature of deposits into the Upper-Tier Certificate Account and
Certificate Account provided that (a) such change shall not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the interests of
any Certificateholder and (b) such change shall not adversely affect the then-
current rating of the Certificates as evidenced by a letter from each Rating
Agency to such effect, (v) to modify, eliminate or add to the provisions of
Section 5.02 or any other provisions hereof restricting transfer of the
Certificates, provided that the Master Servicer for purposes of Section 5.02 has
determined in its sole discretion that any such modifications to this Agreement
will neither adversely affect the rating on the Certificates nor give rise to a
risk that either the Upper-Tier REMIC or the Lower-Tier REMIC or any of the
Certificateholders will be subject to a tax caused by a transfer to a non-
permitted transferee and (vi) to make any other provisions with respect to
matters or questions arising under this Agreement or such Custodial Agreement
which shall not be materially inconsistent with the provisions of this
Agreement, provided that such action shall not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any
Certificateholder.
This Agreement or any Custodial Agreement may also be amended from time to
time by the Seller, the Master Servicer and the Trustee and the Holders of
Certificates evidencing in the aggregate not less than 66-2/3% of the aggregate
Voting Interests of each Class of Certificates affected thereby for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or such Custodial Agreement or of modifying in any
manner the rights of the Holders of Certificates of such Class; provided,
--------
however, that no such amendment shall (i) reduce in any manner the amount of, or
- -------
delay the timing of, payments received on Mortgage Loans which are required to
be distributed on any Certificate without the consent of the Holder of such
Certificate, (ii) adversely affect in any material respect the interest of the
Holders of Certificates of any Class in a manner other than
X-1
<PAGE>
as described in clause (i) hereof without the consent of Holders of Certificates
of such Class evidencing, as to such Class, Voting Interests aggregating not
less than 66-2/3% or (iii) reduce the aforesaid percentage of Certificates of
any Class the Holders of which are required to consent to any such amendment,
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 Opinion of Counsel to the effect that such amendment will not
subject either the Upper-Tier REMIC or the Lower-Tier REMIC to tax or cause
either the Upper-Tier REMIC or the Lower-Tier REMIC to fail to qualify as a
REMIC at any time that any Certificates are outstanding.
Promptly after the execution of any amendment requiring the consent of
Certificateholders, the Trustee shall furnish written notification of the
substance of such amendment to each Certificateholder.
It shall not be necessary for the consent of Certificateholders under this
Section 10.01(a) to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe.
(b) Notwithstanding any contrary provision of this Agreement, the Master
Servicer may, from time to time, amend Schedule I hereto without the consent of
any Certificateholder or the Trustee; provided, however, (i) that such amendment
-------- -------
does not conflict with any provisions of the related Servicing Agreement, (ii)
that the related Servicing Agreement provides for the remittance of each type of
Unscheduled Principal Receipts received by such Servicer during the Applicable
Unscheduled Principal Receipt Period (as so amended) related to each
Distribution Date to the Master Servicer no later than the 24th day of the month
in which such Distribution Date occurs and (iii) that such amendment is for the
purpose of:
(i) changing the Applicable Unscheduled Principal Receipt Period for
Exhibit F-1 Mortgage Loans to a Mid-Month Receipt Period with
respect to all Unscheduled Principal Receipts; or
(ii) changing the Applicable Unscheduled Principal Receipt Period for
all Mortgage Loans serviced by any Servicer to a Mid-Month
Receipt Period with respect to Full Unscheduled Principal
Receipts and to a Prior Month Receipt Period with respect to
Partial Unscheduled Principal Receipts.
A copy of any amendment to Schedule I pursuant to this Section 10.01(b)
shall be promptly forwarded to the Trustee.
X-2
<PAGE>
Section 10.02. Recordation of Agreement.
------------------------
This Agreement (or an abstract hereof, if acceptable to the applicable
recording office) is subject to recordation in all appropriate public offices
for real property records in all the towns or other comparable jurisdictions in
which any or all of the Mortgaged Properties are situated, and in any other
appropriate public office or elsewhere, such recordation to be effected by the
Master Servicer and at its expense on direction by the Trustee, but only upon
direction accompanied by an Opinion of Counsel to the effect that such
recordation materially and beneficially affects the interests of the
Certificateholders.
For the purpose of facilitating the recordation of this Agreement as herein
provided and for other purposes, this Agreement may be executed simultaneously
in any number of counterparts, each of which counterparts shall be deemed to be
an original, and such counterparts shall constitute but one and the same
instrument.
Section 10.03. Limitation on Rights of Certificateholders.
------------------------------------------
The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the Trust Estate, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or
take any action or proceeding in any court for a partition or winding up of the
Trust Estate, nor otherwise affect the rights, obligations and liabilities of
the parties hereto or any of them.
Except as otherwise expressly provided herein, no Certificateholder, solely
by virtue of its status as a Certificateholder, shall have any right to vote or
in any manner otherwise control the operation and management of the Trust
Estate, 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, solely by virtue of its status as Certificateholder,
shall have any right by virtue or by availing 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 evidencing
not less than 25% of the Voting Interest represented by all Certificates shall
have made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the cost, expenses
and liabilities to be incurred therein or thereby, and the Trustee, for 60 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding; it being
understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Holders of Certificates shall have any right in any manner whatever
by virtue or by availing of any provision of this Agreement to affect, disturb
or prejudice the rights of the Holders of any other of such Certificates, or to
X-3
<PAGE>
obtain or seek to obtain priority over or preference to any other such Holder,
or to enforce any right under this Agreement, except in the manner herein
provided and for the 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 10.04. Governing Law; Jurisdiction.
---------------------------
This Agreement shall be construed in accordance with the laws of the State
of New York (without regard to conflicts of laws principles), and the
obligations, rights and remedies of the parties hereunder shall be determined in
accordance with such laws.
Section 10.05. Notices.
-------
All demands, notices and communications hereunder shall be in writing and
shall be deemed to have been duly given if personally delivered at or mailed by
certified or registered mail, return receipt requested (i) in the case of the
Seller, to Norwest Asset Securities Corporation, 7485 New Horizon Way,
Frederick, Maryland 21703, Attention: Chief Executive Officer, or such other
address as may hereafter be furnished to the Master Servicer and the Trustee in
writing by the Seller, (ii) in the case of the Master Servicer, to Norwest Bank
Minnesota, National Association, 7485 New Horizon Way, Frederick, Maryland
21703, Attention: Vice President or such other address as may hereafter be
furnished to the Seller and the Trustee in writing by the Master Servicer and
(iii) in the case of the Trustee, to the Corporate Trust Office, or such other
address as may hereafter be furnished to the Seller and the Master Servicer in
writing by the Trustee or the Trustee, in each case Attention: Corporate Trust
Department. Any notice required or permitted to be mailed to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice mailed
or transmitted within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or not the addressee
receives such notice, provided, however, that any demand, notice or
-------- -------
communication to or upon the Seller, the Master Servicer, or the Trustee shall
not be effective until received.
For all purposes of this Agreement, in the absence of actual knowledge by
an officer of the Master Servicer, the Master Servicer shall not be deemed to
have knowledge of any act or failure to act of any Servicer unless notified
thereof in writing by the Trustee, such Servicer or a Certificateholder.
Section 10.06. 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.
X-4
<PAGE>
Section 10.07. Special Notices to Rating Agencies.
----------------------------------
(a) The Trustee shall give prompt notice to each Rating Agency of the
occurrence of any of the following events of which it has notice:
(i) any amendment to this Agreement pursuant to Section 10.01(a);
(ii) any sale or transfer of the Class B Certificates pursuant to
Section 5.02 to an affiliate of the Seller;
(iii) any assignment by the Master Servicer of its rights and
delegation of its duties pursuant to Section 6.06;
(iv) any resignation of the Master Servicer pursuant to Section
6.04;
(v) the occurrence of any of the Events of Default described in
Section 7.01;
(vi) any notice of termination given to the Master Servicer pursuant
to Section 7.01;
(vii) the appointment of any successor to the Master Servicer
pursuant to Section 7.05; or
(viii) the making of a final payment pursuant to Section 9.01.
(b) The Master Servicer shall give prompt notice to each Rating Agency of
the occurrence of any of the following events:
(i) the appointment of a Custodian pursuant to Section 2.02;
(ii) the resignation or removal of the Trustee pursuant to Section
8.08;
(iii) the appointment of a successor trustee pursuant to Section
8.09; or
(iv) the sale, transfer or other disposition in a single transaction
of 50% or more of the equity interests in the Master Servicer.
(c) The Master Servicer shall deliver to each Rating Agency:
(i) reports prepared pursuant to Section 3.05; and
(ii) statements prepared pursuant to Section 4.04.
Section 10.08. Covenant of Seller.
------------------
The Seller shall not amend Article Third of its Certificate of
Incorporation without the prior written consent of each Rating Agency rating the
Certificates.
X-5
<PAGE>
Section 10.09. Recharacterization.
------------------
The Parties intend the conveyance by the Seller to the Trustee of all of
its right, title and interest in and to the Mortgage Loans pursuant to this
Agreement to constitute a purchase and sale and not a loan. Notwithstanding the
foregoing, to the extent that such conveyance is held not to constitute a sale
under applicable law, it is intended that this Agreement shall constitute a
security agreement under applicable law and that the Seller shall be deemed to
have granted to the Trustee a first priority security interest in all of the
Seller's right, title and interest in and to the Mortgage Loans.
X-6
<PAGE>
ARTICLE XI
TERMS FOR CERTIFICATES
Section 11.01. Class A Fixed Pass-Through Rate.
-------------------------------
The Class A Fixed Pass-Through Rate is _____% per annum.
Section 11.02. Cut-Off Date.
------------
The Cut-Off Date for the Certificates is ____, 199 .
Section 11.03. Cut-Off Date Aggregate Principal Balance.
----------------------------------------
The Cut-Off Date Aggregate Principal Balance is $________________.
Section 11.04. Original Class A Percentage.
---------------------------
The Original Class A Percentage is _____________%
Section 11.05. Original Principal Balances of the Classes of Class A
-----------------------------------------------------
Certificates.
------------
As to the following Classes of Class A Certificates, the Principal Balance
of such Class as of the Cut-Off Date, as follows:
Original
Class Principal Balance
----- -----------------
Class A-1 $
Class A-2 $
Class A-4 $
Class A-5 $
Class A-6 $
Class A-7 $
Class A-8 $
Class A-9 $
Class A-10 $
Class A-11 $
Class A-12 &
Class A-13 $
Class A-14 &
Class A-15 $
Class A-16 $
Class A-17 $
Class A-19 $
XI-1
<PAGE>
Original
Class Principal Balance
----- -----------------
Class A-20 $
Class A-PO $
Class A-R $
Class A-LR $
Section 11.05(a). Original Class A-3 Notional Amount.
----------------------------------
The Original Class A-3 Notional Amount is $__________.
Section 11.05(b). Original Class A-18 Notional Amount.
-----------------------------------
The Original Class A-18 Notional Amount is $________________.
Section 11.06. Original Class A Non-PO Principal Balance.
-----------------------------------------
The Original Class A Non-PO Principal Balance is $____________.
Section 11.07. Original Subordinated Percentage.
--------------------------------
The Original Subordinated Percentage is ____________%
Section 11.08. Original Class B-1 Percentage.
-----------------------------
The Original Class B-1 Percentage is _____________%.
Section 11.09. Original Class B-2 Percentage.
-----------------------------
The Original Class B-2 Percentage is ____________%.
Section 11.10. Original Class B-3 Percentage.
-----------------------------
The Original Class B-3 Percentage is ______________%.
Section 11.11. Original Class B-4 Percentage.
-----------------------------
The Original Class B-4 Percentage is _____________%.
Section 11.12. Original Class B-5 Percentage.
-----------------------------
The Original Class B-5 Percentage is ______________%.
Section 11.13. Original Class B-6 Percentage.
-----------------------------
The Original Class B-6 Percentage is _______________%.
XI-2
<PAGE>
Section 11.14. Original Class B Principal Balance
----------------------------------
The Original Class B Principal Balance is $______________.
Section 11.15. Original Principal Balances of the Classes of Class B
-----------------------------------------------------
Certificates.
------------
As to the following Classes of Class B Certificate, the Principal Balance
of such Class as of the Cut-Off Date, is as follows:
Original
Class Principal Balance
----- -----------------
Class B-1 $
Class B-2 $
Class B-3 $
Class B-4 $
Class B-5 $
$
Section 11.16. Original Class B-1 Fractional Interest.
--------------------------------------
The Original Class B-1 Fractional Interest is ___________%.
Section 11.17. Original Class B-2 Fractional Interest.
The Original Class B-2 Fractional Interest is ________________%.
Section 11.18. Original Class B-3 Fractional Interest.
--------------------------------------
The Original Class B-3 Fractional Interest is _________________%.
Section 11.19. Original Class B-4 Fractional Interest.
--------------------------------------
The Original Class B-4 Fractional Interest is _________________%.
Section 11.20. Original Class B-5 Fractional Interest.
--------------------------------------
The Original Class B-5 Fractional Interest is __________________%.
Section 11.21. Closing Date.
------------
The Closing Date is ____, 199.
Section 11.22. Right to Purchase.
-----------------
The right of the Seller to purchase all of the Mortgage Loans pursuant to
Section 9.01 hereof shall be conditioned upon the Pool Scheduled Principal
Balance of the Mortgage Loans
XI-3
<PAGE>
being less than $____________ (10% of the Cut-Off Date Aggregate Principal
Balance) at the time of any such purchase.
Section 11.23. Wire Transfer Eligibility.
-------------------------
With respect to the Class A (other than the Class A-3, Class A-18, Class A-
PO, Class A-R and Class A-LR Certificates) and the Class B Certificates, the
minimum Denomination eligible for wire transfer on each Distribution Date is
$500,000. With respect to the Class A-3, Class A-18 and Class A-PO Certificates,
the minimum Denomination eligible for wire transfer on each Distribution Date is
100% Percentage Interest. The Class A-R and Class A-LR Certificates are not
eligible for wire transfer.
Section 11.24. Single Certificate.
------------------
A Single Certificate for each Class of Class A Certificates (other than the
Class A-3, Class A-17, Class A-18, Class A-20, Class A-PO, Class A-R and Class
A-LR Certificates) and each Class of the Class B Certificates (other than the
Class B-4, Class B-5 and Class B-6 Certificates) represents a $________
Denomination. A Single Certificate for the Class A-R and Class A-LR
Certificates represents a $___ Denomination. A Single Certificate for the Class
B-4, Class B-5 and Class B-6 Certificates represents a $________ Denomination.
A Single Certificate for the Class A-3 Certificates represents a $_________
Denomination. A Single Certificate for the Class A-17 Certificates represents a
$__________ Denomination. A Single Certificate for the Class A-18 Certificates
represents a $__________ Denomination. A Single Certificate for the Class A-20
Certificates represents a $_____________ Denomination. A Single Certificate for
the Class A-PO Certificates represents a $__________ Denomination.
Section 11.25. Servicing Fee Rate.
------------------
The rate used to calculate the Servicing Fee is equal to such rate as is
set forth on the Mortgage Loan Schedule with respect to a Mortgage Loan.
Section 11.26. Master Servicing Fee Rate.
-------------------------
The rate used to calculate the Master Servicing Fee for each Mortgage Loan
is _____% per annum.
XI-4
<PAGE>
IN WITNESS WHEREOF, the Seller, the Master 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.
NORWEST ASSET SECURITIES CORPORATION
as Seller
By:
------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
as Master Servicer
By:
------------------------------------
Name:
Title:
[ ]
as Trustee
By:
------------------------------------
Name:
Title:
Attest:
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
<PAGE>
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
On this day of ____, 199 , before me, a notary public in and for
the State of New York, personally appeared [ ], known to me who,
being by me duly sworn, did depose and say that he resides at McLean, Virginia;
that he is a Vice President of Norwest Asset Securities Corporation, a Delaware
corporation, one of the parties that executed the foregoing instrument; and that
he signed his name thereto by order of the Board of Directors of said
corporation.
- --------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
On this day of ____, 199 , before me, a notary public in and for
the State of New York, personally appeared ________, known to me who, being by
me duly sworn, did depose and say that she resides at Frederick, Maryland; that
she is a Vice President of Norwest Bank Minnesota, National Association, a
national banking association, one of the parties that executed the foregoing
instrument; and that she signed her name thereto by order of the Board of
Directors of said corporation.
- -------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
STATE OF [ ]
ss.:
COUNTY OF )
On this day of ____, 199 , before me, a notary public in and for
the State of [ ], personally appeared ___________________, known to
me who, being by me duly sworn, did depose and say that s/he resides at
_________________, [ ]; that s/he is a ____________________ of [
], a national banking association, one of the parties that executed the
foregoing instrument; and that s/he signed his/her name thereto by order of the
Board of Directors of said corporation.
- -------------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
STATE OF NORTH CAROLINA )
ss.:
COUNTY OF )
On this day of ____, 199 , before me, a notary public in and for
the State of North Carolina, personally appeared _____________________, known to
me who, being by me duly sworn, did depose and say that he resides at
__________________, North Carolina; that he is a _____________________ of First
Union National Bank, a national banking association, one of the parties that
executed the foregoing instrument; and that s/he signed his name thereto by
order of the Board of Directors of said corporation.
- ----------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
SCHEDULE I
Norwest Asset Securities Corporation, Mortgage Pass-Through Certificates, Series
199 -
Applicable Unscheduled Principal Receipt Period
Full Unscheduled Partial Unscheduled
Servicer Principal Receipts Principal Receipts
-------------------------- ------------------ ------------------
<PAGE>
EXHIBIT A-1
[FORM OF FACE OF CLASS A-1 CERTIFICATE]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - CLASS A-1
evidencing an interest in a pool of fixed
interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to
four-family residential mortgage loans, which may
include loans secured by shares issued by
cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS
CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
<PAGE>
THIS CERTIFIES THAT ___________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class A-1 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans"), formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for the Class A-1 Certificates required to be distributed to
Holders of the Class A-1 Certificates on such Distribution Date, subject to
adjustment in certain events as specified in the Agreement. Distributions in
reduction of the Principal Balance of certain Classes of Class A Certificates
may not commence on the first Distribution Date specified above. Distributions
of principal will be allocated among the Classes of Class A Certificates in
accordance with the provisions of the Agreement. The pass-through rate on the
Class A-1 Certificates applicable to each Distribution Date will be % per
annum. The amount of interest which accrues on this Certificate in any month
will be subject to reduction with respect to any Non-Supported Interest
Shortfall and the interest portion of certain Realized Losses allocated to the
Class A-1 Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this Certificate will be made after due notice of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency specified by the Trustee for that purpose in
the notice of final distribution.
A-1-2
<PAGE>
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-1-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By ____________________________
Authorized Officer
Countersigned:
[Trustee],
Trustee
By ________________________
Authorized Officer
A-1-4
<PAGE>
EXHIBIT A-2
[FORM OF FACE OF CLASS A-2 CERTIFICATE]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - CLASS A-2
evidencing an interest in a pool of fixed
interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to
four-family residential mortgage loans, which may
include loans secured by shares issued by
cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS
CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
<PAGE>
THIS CERTIFIES THAT ___________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class A-2 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans"), formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for the Class A-2 Certificates required to be distributed to
Holders of the Class A-2 Certificates on such Distribution Date, subject to
adjustment in certain events as specified in the Agreement. Distributions in
reduction of the Principal Balance of certain Classes of Class A Certificates
may not commence on the first Distribution Date specified above. Distributions
of principal will be allocated among the Classes of Class A Certificates in
accordance with the provisions of the Agreement. The pass-through rate on the
Class A-2 Certificates applicable to each Distribution Date will be % per
annum. The amount of interest which accrues on this Certificate in any month
will be subject to reduction with respect to any Non-Supported Interest
Shortfall and the interest portion of certain Realized Losses allocated to the
Class A-2 Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this Certificate will be made after due notice of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency specified by the Trustee for that purpose in
the notice of final distribution.
A-2-2
<PAGE>
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-2-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By____________________________
Authorized Officer
Countersigned:
[Trustee],
Trustee
By ________________________
Authorized Officer
A-2-4
<PAGE>
EXHIBIT A-3
[FORM OF FACE OF CLASS A-3 CERTIFICATE]
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - CLASS A-3
evidencing an interest in a pool of fixed
interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to
four-family residential mortgage loans, which may
include loans secured by shares issued by
cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
THE NOTIONAL AMOUNT OF THIS CERTIFICATE WILL BE REDUCED IN THE MANNER
DESCRIBED IN THE POOLING AND SERVICING AGREEMENT. ACCORDINGLY, THE OUTSTANDING
NOTIONAL AMOUNT OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL
NOTIONAL AMOUNT REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $ (Initial Class A-3
by this Certificate: % Notional Amount)
Final Scheduled Maturity Date:
<PAGE>
THIS CERTIFIES THAT ___________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class A-3 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans"), formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for the Class A-3 Certificates required to be distributed to
Holders of the Class A-3 Certificates on such Distribution Date, subject to
adjustment in certain events as specified in the Agreement. The Class A-3
Certificates are not entitled to distributions in respect of principal.
Interest will accrue on the Class A-3 Certificates each month in an amount equal
to the product of (i) 1/12th of % and (ii) the Class A-3 Notional Amount as
of the related Distribution Date. The amount of interest which accrues on this
Certificate in any month will be subject to reduction with respect to any Non-
Supported Interest Shortfall and the interest portion of certain Realized Losses
allocated to the Class A-3 Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency specified
by the Trustee for that purpose in the notice of final distribution.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
A-3-2
<PAGE>
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-3-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By____________________________
Authorized Officer
Countersigned:
[Trustee],
Trustee
By ________________________
Authorized Officer
A-3-4
<PAGE>
EXHIBIT A-4
[FORM OF FACE OF CLASS A-4 CERTIFICATE]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - CLASS A-4
evidencing an interest in a pool of fixed
interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to
four-family residential mortgage loans, which may
include loans secured by shares issued by
cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS
CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
<PAGE>
THIS CERTIFIES THAT ___________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class A-4 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans"), formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for the Class A-4 Certificates required to be distributed to
Holders of the Class A-4 Certificates on such Distribution Date, subject to
adjustment in certain events as specified in the Agreement. Distributions in
reduction of the Principal Balance of certain Classes of Class A Certificates
may not commence on the first Distribution Date specified above. Distributions
of principal will be allocated among the Classes of Class A Certificates in
accordance with the provisions of the Agreement. The pass-through rate on the
Class A-4 Certificates applicable to each Distribution Date will be % per
annum. The amount of interest which accrues on this Certificate in any month
will be subject to reduction with respect to any Non-Supported Interest
Shortfall and the interest portion of certain Realized Losses allocated to the
Class A-4 Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this Certificate will be made after due notice of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency specified by the Trustee for that purpose in
the notice of final distribution.
A-4-2
<PAGE>
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-4-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By____________________________
Authorized Officer
Countersigned:
[Trustee],
Trustee
By ________________________
Authorized Officer
A-4-4
<PAGE>
EXHIBIT A-5
[FORM OF FACE OF CLASS A-5 CERTIFICATE]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - CLASS A-5
evidencing an interest in a pool of fixed
interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to
four-family residential mortgage loans, which may
include loans secured by shares issued by
cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS
CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination $
by this Certificate: %
Final Scheduled Maturity Date:
<PAGE>
THIS CERTIFIES THAT ___________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class A-5 Certificate with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans"), formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for the Class A-5 Certificates required to be distributed to
Holders of the Class A-5 Certificates on such Distribution Date, subject to
adjustment in certain events as specified in the Agreement. Distributions in
reduction of the Principal Balance of certain Classes of Class A Certificates
may not commence on the first Distribution Date specified above. Distributions
of principal will be allocated among the Classes of Class A Certificates in
accordance with the provisions of the Agreement. The pass-through rate on the
Class A-5 Certificates applicable to each Distribution Date will be % per
annum. The amount of interest which accrues on this Certificate in any month
will be subject to reduction with respect to any Non-Supported Interest
Shortfall and the interest portion of certain Realized Losses allocated to the
Class A-5 Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this Certificate will be made after due notice of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency specified by the Trustee for that purpose in
the notice of final distribution.
A-5-2
<PAGE>
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-5-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By ____________________________
Authorized Officer
Countersigned:
[Trustee],
Trustee
By ________________________
Authorized Officer
A-5-4
<PAGE>
EXHIBIT A-6
[FORM OF FACE OF CLASS A-6 CERTIFICATE]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - CLASS A-6
evidencing an interest in a pool of fixed
interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to
four-family residential mortgage loans, which may
include loans secured by shares issued by
cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
UNTIL THE APPLICABLE ACCRETION TERMINATION DATE, THE INTEREST THAT
ACCRUES ON THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL NOT BE PAYABLE.
BECAUSE SUCH UNPAID INTEREST IS ADDED TO THE PRINCIPAL BALANCE OF THIS
CERTIFICATE AND BECAUSE DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE WILL
BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT (AS DEFINED HEREIN), THE
OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE MORE OR
LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
<PAGE>
THIS CERTIFIES THAT ___________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class A-6 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans"), formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for the Class A-6 Certificates required to be distributed to
Holders of the Class A-6 Certificates on such Distribution Date, subject to
adjustment in certain events as specified in the Agreement. Distributions in
reduction of the Principal Balance of certain Classes of Class A Certificates
may not commence on the first Distribution Date specified above. Distributions
of principal will be allocated among the Classes of Class A Certificates in
accordance with the provisions of the Agreement. The pass-through rate on the
Class A-6 Certificates applicable to each Distribution Date will be % per
annum. Prior to the applicable Accretion Termination Date, no distribution of
interest on this Certificate will be made. Prior to the applicable Accretion
Termination Date, interest otherwise available for distribution on this
Certificate will be added to the Principal Balance of the Class A-6 Certificates
on each Distribution Date. The amount of interest which accrues on this
Certificate in any month will be subject to reduction with respect to any Non-
Supported Interest Shortfall and the interest portion of certain Realized Losses
allocated to the Class A-6 Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this
A-6-2
<PAGE>
Certificate will be made after due notice of the pendency of such distribution
and only upon presentation and surrender of this Certificate at the office or
agency specified by the Trustee for that purpose in the notice of final
distribution.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-6-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By ____________________________
Authorized Officer
Countersigned:
[Trustee],
Trustee
By ________________________
Authorized Officer
A-6-4
<PAGE>
EXHIBIT A-7
[FORM OF FACE OF CLASS A-7 CERTIFICATE]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - CLASS A-7
evidencing an interest in a pool of fixed
interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to
four-family residential mortgage loans, which may
include loans secured by shares issued by
cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
UNTIL THE APPLICABLE ACCRETION TERMINATION DATE, THE INTEREST THAT
ACCRUES ON THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL NOT BE PAYABLE.
BECAUSE SUCH UNPAID INTEREST IS ADDED TO THE PRINCIPAL BALANCE OF THIS
CERTIFICATE AND BECAUSE DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE WILL
BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT (AS DEFINED HEREIN), THE
OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE MORE OR
LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
<PAGE>
THIS CERTIFIES THAT ___________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class A-7 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans"), formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for the Class A-7 Certificates required to be distributed to
Holders of the Class A-7 Certificates on such Distribution Date, subject to
adjustment in certain events as specified in the Agreement. Distributions in
reduction of the Principal Balance of certain Classes of Class A Certificates
may not commence on the first Distribution Date specified above. Distributions
of principal will be allocated among the Classes of Class A Certificates in
accordance with the provisions of the Agreement. The pass-through rate on the
Class A-7 Certificates applicable to each Distribution Date will be % per
annum. Prior to the applicable Accretion Termination Date, no distribution of
interest on this Certificate will be made. Prior to the applicable Accretion
Termination Date, interest otherwise available for distribution on this
Certificate will be added to the Principal Balance of the Class A-7 Certificates
on each Distribution Date. The amount of interest which accrues on this
Certificate in any month will be subject to reduction with respect to any Non-
Supported Interest Shortfall and the interest portion of certain Realized Losses
allocated to the Class A-7 Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this
A-7-2
<PAGE>
Certificate will be made after due notice of the pendency of such distribution
and only upon presentation and surrender of this Certificate at the office or
agency specified by the Trustee for that purpose in the notice of final
distribution.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-7-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By ____________________________
Authorized Officer
Countersigned:
[Trustee],
Trustee
By ________________________
Authorized Officer
A-7-4
<PAGE>
EXHIBIT A-8
[FORM OF FACE OF CLASS A-8 CERTIFICATE]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - CLASS A-8
evidencing an interest in a pool of fixed
interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to
four-family residential mortgage loans, which may
include loans secured by shares issued by
cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS
CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
<PAGE>
THIS CERTIFIES THAT ___________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class A-8 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans"), formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for the Class A-8 Certificates required to be distributed to
Holders of the Class A-8 Certificates on such Distribution Date, subject to
adjustment in certain events as specified in the Agreement. Distributions in
reduction of the Principal Balance of certain Classes of Class A Certificates
may not commence on the first Distribution Date specified above. Distributions
of principal will be allocated among the Classes of Class A Certificates in
accordance with the provisions of the Agreement. The pass-through rate on the
Class A-8 Certificates applicable to each Distribution Date will be % per
annum. The amount of interest which accrues on this Certificate in any month
will be subject to reduction with respect to any Non-Supported Interest
Shortfall and the interest portion of certain Realized Losses allocated to the
Class A-8 Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this Certificate will be made after due notice of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency specified by the Trustee for that purpose in
the notice of final distribution.
A-8-2
<PAGE>
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-8-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By ____________________________
Authorized Officer
Countersigned:
[Trustee],
Trustee
By ________________________
Authorized Officer
A-8-4
<PAGE>
EXHIBIT A-9
[FORM OF FACE OF CLASS A-9 CERTIFICATE]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - CLASS A-9
evidencing an interest in a pool of fixed
interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to
four-family residential mortgage loans, which may
include loans secured by shares issued by
cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
UNTIL THE APPLICABLE ACCRETION TERMINATION DATE, THE INTEREST THAT
ACCRUES ON THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL NOT BE PAYABLE.
BECAUSE SUCH UNPAID INTEREST IS ADDED TO THE PRINCIPAL BALANCE OF THIS
CERTIFICATE AND BECAUSE DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE WILL
BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT (AS DEFINED HEREIN), THE
OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE MORE OR
LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
<PAGE>
THIS CERTIFIES THAT ___________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class A-9 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans"), formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for the Class A-9 Certificates required to be distributed to
Holders of the Class A-9 Certificates on such Distribution Date, subject to
adjustment in certain events as specified in the Agreement. Distributions in
reduction of the Principal Balance of certain Classes of Class A Certificates
may not commence on the first Distribution Date specified above. Distributions
of principal will be allocated among the Classes of Class A Certificates in
accordance with the provisions of the Agreement. The pass-through rate on the
Class A-9 Certificates applicable to each Distribution Date will be % per
annum. Prior to the applicable Accretion Termination Date, no distribution of
interest on this Certificate will be made. Prior to the applicable Accretion
Termination Date, interest otherwise available for distribution on this
Certificate will be added to the Principal Balance of the Class A-9 Certificates
on each Distribution Date. The amount of interest which accrues on this
Certificate in any month will be subject to reduction with respect to any Non-
Supported Interest Shortfall and the interest portion of certain Realized Losses
allocated to the Class A-9 Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this
A-9-2
<PAGE>
Certificate will be made after due notice of the pendency of such distribution
and only upon presentation and surrender of this Certificate at the office or
agency specified by the Trustee for that purpose in the notice of final
distribution.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-9-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By ____________________________
Authorized Officer
Countersigned:
[Trustee],
Trustee
By ________________________
Authorized Officer
A-9-4
<PAGE>
EXHIBIT A-10
[FORM OF FACE OF CLASS A-10 CERTIFICATE]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - CLASS A-10
evidencing an interest in a pool of fixed
interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to
four-family residential mortgage loans, which may
include loans secured by shares issued by
cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
UNTIL THE APPLICABLE ACCRETION TERMINATION DATE, THE INTEREST THAT
ACCRUES ON THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL NOT BE PAYABLE.
BECAUSE SUCH UNPAID INTEREST IS ADDED TO THE PRINCIPAL BALANCE OF THIS
CERTIFICATE AND BECAUSE DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE WILL
BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT (AS DEFINED HEREIN), THE
OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE MORE OR
LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
<PAGE>
THIS CERTIFIES THAT ___________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class A-10 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans"), formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for the Class A-10 Certificates required to be distributed
to Holders of the Class A-10 Certificates on such Distribution Date, subject to
adjustment in certain events as specified in the Agreement. Distributions in
reduction of the Principal Balance of certain Classes of Class A Certificates
may not commence on the first Distribution Date specified above. Distributions
of principal will be allocated among the Classes of Class A Certificates in
accordance with the provisions of the Agreement. The pass-through rate on the
Class A-10 Certificates applicable to each Distribution Date will be % per
annum. Prior to the applicable Accretion Termination Date, no distribution of
interest on this Certificate will be made. Prior to the applicable Accretion
Termination Date, interest otherwise available for distribution on this
Certificate will be added to the Principal Balance of the Class A-10
Certificates on each Distribution Date. The amount of interest which accrues on
this Certificate in any month will be subject to reduction with respect to any
Non-Supported Interest Shortfall and the interest portion of certain Realized
Losses allocated to the Class A-10 Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this
A-10-2
<PAGE>
Certificate will be made after due notice of the pendency of such distribution
and only upon presentation and surrender of this Certificate at the office or
agency specified by the Trustee for that purpose in the notice of final
distribution.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-10-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By ____________________________
Authorized Officer
Countersigned:
[Trustee],
Trustee
By ________________________
Authorized Officer
A-10-4
<PAGE>
EXHIBIT A-11
[FORM OF FACE OF CLASS A-11 CERTIFICATE]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - CLASS A-11
evidencing an interest in a pool of fixed
interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to
four-family residential mortgage loans, which may
include loans secured by shares issued by
cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
UNTIL THE APPLICABLE ACCRETION TERMINATION DATE, THE INTEREST THAT
ACCRUES ON THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL NOT BE PAYABLE.
BECAUSE SUCH UNPAID INTEREST IS ADDED TO THE PRINCIPAL BALANCE OF THIS
CERTIFICATE AND BECAUSE DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE WILL
BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT (AS DEFINED HEREIN), THE
OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE MORE OR
LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
<PAGE>
THIS CERTIFIES THAT ___________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class A-11 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans"), formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for the Class A-11 Certificates required to be distributed
to Holders of the Class A-11 Certificates on such Distribution Date, subject to
adjustment in certain events as specified in the Agreement. Distributions in
reduction of the Principal Balance of certain Classes of Class A Certificates
may not commence on the first Distribution Date specified above. Distributions
of principal will be allocated among the Classes of Class A Certificates in
accordance with the provisions of the Agreement. The pass-through rate on the
Class A-11 Certificates applicable to each Distribution Date will be % per
annum. Prior to the applicable Accretion Termination Date, no distribution of
interest on this Certificate will be made. Prior to the applicable Accretion
Termination Date, interest otherwise available for distribution on this
Certificate will be added to the Principal Balance of the Class A-11
Certificates on each Distribution Date. The amount of interest which accrues on
this Certificate in any month will be subject to reduction with respect to any
Non-Supported Interest Shortfall and the interest portion of certain Realized
Losses allocated to the Class A-11 Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this Certificate will be made after due notice of the
pendency of such distribution and only upon presentation and surrender of this
A-11-2
<PAGE>
Certificate at the office or agency specified by the Trustee for that purpose in
the notice of final distribution.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-11-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By____________________________
Authorized Officer
Countersigned:
[Trustee],
Trustee
By________________________
Authorized Officer
A-11-4
<PAGE>
EXHIBIT A-12
[FORM OF FACE OF CLASS A-12 CERTIFICATE]
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - CLASS A-12
evidencing an interest in a pool of fixed
interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to
four-family residential mortgage loans, which may
include loans secured by shares issued by
cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS
CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
<PAGE>
THIS CERTIFIES THAT ___________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class A-12 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans"), formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for the Class A-12 Certificates required to be distributed
to Holders of the Class A-12 Certificates on such Distribution Date, subject to
adjustment in certain events as specified in the Agreement. Distributions in
reduction of the Principal Balance of certain Classes of Class A Certificates
may not commence on the first Distribution Date specified above. Distributions
of principal will be allocated among the Classes of Class A Certificates in
accordance with the provisions of the Agreement. The Class A-12 Certificate
will not be entitled to distributions in respect of interest.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this Certificate will be made after due notice of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency specified by the Trustee for that purpose in
the notice of final distribution.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
A-12-2
<PAGE>
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-12-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By____________________________
Authorized Officer
Countersigned:
[Trustee],
Trustee
By________________________
Authorized Officer
A-12-4
<PAGE>
EXHIBIT A-13
[FORM OF FACE OF CLASS A-13 CERTIFICATE]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE Trustee OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - CLASS A-13
evidencing an interest in a pool of fixed
interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to
four-family residential mortgage loans, which may
include loans secured by shares issued by
cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS
CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
<PAGE>
THIS CERTIFIES THAT ___________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class A-13 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans"), formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for the Class A-13 Certificates required to be distributed
to Holders of the Class A-13 Certificates on such Distribution Date, subject to
adjustment in certain events as specified in the Agreement. Distributions in
reduction of the Principal Balance of certain Classes of Class A Certificates
may not commence on the first Distribution Date specified above. Distributions
of principal will be allocated among the Classes of Class A Certificates in
accordance with the provisions of the Agreement. The pass-through rate on the
Class A-13 Certificates applicable to each Distribution Date will be % per
annum. The amount of interest which accrues on this Certificate in any month
will be subject to reduction with respect to any Non-Supported Interest
Shortfall and the interest portion of certain Realized Losses allocated to the
Class A-13 Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this Certificate will be made after due notice of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency specified by the Trustee for that purpose in
the notice of final distribution.
A-13-2
<PAGE>
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-13-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By____________________________
Authorized Officer
Countersigned:
[Trustee],
Trustee
By________________________
Authorized Officer
A-13-4
<PAGE>
EXHIBIT A-14
[FORM OF FACE OF CLASS A-14 CERTIFICATE]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - CLASS A-14
evidencing an interest in a pool of fixed
interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to
four-family residential mortgage loans, which may
include loans secured by shares issued by
cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS
CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
<PAGE>
THIS CERTIFIES THAT ___________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class A-14 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans"), formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for the Class A-14 Certificates required to be distributed
to Holders of the Class A-14 Certificates on such Distribution Date, subject to
adjustment in certain events as specified in the Agreement. Distributions in
reduction of the Principal Balance of certain Classes of Class A Certificates
may not commence on the first Distribution Date specified above. Distributions
of principal will be allocated among the Classes of Class A Certificates in
accordance with the provisions of the Agreement. The pass-through rate on the
Class A-14 Certificates applicable to each Distribution Date will be % per
annum. The amount of interest which accrues on this Certificate in any month
will be subject to reduction with respect to any Non-Supported Interest
Shortfall and the interest portion of certain Realized Losses allocated to the
Class A-14 Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this Certificate will be made after due notice of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency specified by the Trustee for that purpose in
the notice of final distribution.
A-14-2
<PAGE>
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-14-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By____________________________
Authorized Officer
Countersigned:
[Trustee],
Trustee
By________________________
Authorized Officer
A-14-4
<PAGE>
EXHIBIT A-15
[FORM OF FACE OF CLASS A-15 CERTIFICATE]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - CLASS A-15
evidencing an interest in a pool of fixed
interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to
four-family residential mortgage loans, which may
include loans secured by shares issued by
cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS
CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
<PAGE>
THIS CERTIFIES THAT ___________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class A-15 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans"), formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for the Class A-15 Certificates required to be distributed
to Holders of the Class A-15 Certificates on such Distribution Date, subject to
adjustment in certain events as specified in the Agreement. Distributions in
reduction of the Principal Balance of certain Classes of Class A Certificates
may not commence on the first Distribution Date specified above. Distributions
of principal will be allocated among the Classes of Class A Certificates in
accordance with the provisions of the Agreement. The pass-through rate on the
Class A-15 Certificates applicable to each Distribution Date will be % per
annum. The amount of interest which accrues on this Certificate in any month
will be subject to reduction with respect to any Non-Supported Interest
Shortfall and the interest portion of certain Realized Losses allocated to the
Class A-15 Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this Certificate will be made after due notice of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency specified by the Trustee for that purpose in
the notice of final distribution.
A-15-2
<PAGE>
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-15-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By____________________________
Authorized Officer
Countersigned:
[Trustee],
Trustee
By________________________
Authorized Officer
A-15-4
<PAGE>
EXHIBIT A-16
[FORM OF FACE OF CLASS A-16 CERTIFICATE]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - CLASS A-16
evidencing an interest in a pool of fixed
interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to
four-family residential mortgage loans, which may
include loans secured by shares issued by
cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
UNTIL THE APPLICABLE ACCRETION TERMINATION DATE, THE INTEREST THAT
ACCRUES ON THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL NOT BE PAYABLE.
BECAUSE SUCH UNPAID INTEREST IS ADDED TO THE PRINCIPAL BALANCE OF THIS
CERTIFICATE AND BECAUSE DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE WILL
BE MADE IN THE MANNER DESCRIBED IN THE AGREEMENT (AS DEFINED HEREIN), THE
OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE AT ANY TIME MAY BE MORE OR
LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
<PAGE>
THIS CERTIFIES THAT ___________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class A-16 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans"), formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for the Class A-16 Certificates required to be distributed
to Holders of the Class A-16 Certificates on such Distribution Date, subject to
adjustment in certain events as specified in the Agreement. Distributions in
reduction of the Principal Balance of certain Classes of Class A Certificates
may not commence on the first Distribution Date specified above. Distributions
of principal will be allocated among the Classes of Class A Certificates in
accordance with the provisions of the Agreement. The pass-through rate on the
Class A-16 Certificates applicable to each Distribution Date will be % per
annum. Prior to the applicable Accretion Termination Date, no distribution of
interest on this Certificate will be made. Prior to the applicable Accretion
Termination Date, interest otherwise available for distribution on this
Certificate will be added to the Principal Balance of the Class A-16
Certificates on each Distribution Date. The amount of interest which accrues on
this Certificate in any month will be subject to reduction with respect to any
Non-Supported Interest Shortfall and the interest portion of certain Realized
Losses allocated to the Class A-16 Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this
A-16-2
<PAGE>
Certificate will be made after due notice of the pendency of such distribution
and only upon presentation and surrender of this Certificate at the office or
agency specified by the Trustee for that purpose in the notice of final
distribution.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-16-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By____________________________
Authorized Officer
Countersigned:
[Trustee],
Trustee
By________________________
Authorized Officer
A-16-4
<PAGE>
EXHIBIT A-17
[FORM OF FACE OF CLASS A-17 CERTIFICATE]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - CLASS A-17
evidencing an interest in a pool of fixed
interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to
four-family residential mortgage loans, which may
include loans secured by shares issued by
cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS
CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
<PAGE>
THIS CERTIFIES THAT ___________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class A-17 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans"), formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for the Class A-17 Certificates required to be distributed
to Holders of the Class A-17 Certificates on such Distribution Date, subject to
adjustment in certain events as specified in the Agreement. Distributions in
reduction of the Principal Balance of certain Classes of Class A Certificates
may not commence on the first Distribution Date specified above. Distributions
of principal will be allocated among the Classes of Class A Certificates in
accordance with the provisions of the Agreement. The pass-through rate on the
Class A-17 Certificates applicable to each Distribution Date will be % per
annum. The amount of interest which accrues on this Certificate in any month
will be subject to reduction with respect to any Non-Supported Interest
Shortfall and the interest portion of certain Realized Losses allocated to the
Class A-17 Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this Certificate will be made after due notice of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency specified by the Trustee for that purpose in
the notice of final distribution.
A-17-2
<PAGE>
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-17-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By____________________________
Authorized Officer
Countersigned:
[Trustee],
Trustee
By________________________
Authorized Officer
A-17-4
<PAGE>
EXHIBIT A-18
[FORM OF FACE OF CLASS A-18 CERTIFICATE]
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - CLASS A-18
evidencing an interest in a pool of fixed
interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to
four-family residential mortgage loans, which may
include loans secured by shares issued by
cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
THE NOTIONAL AMOUNT OF THIS CERTIFICATE WILL BE REDUCED IN THE MANNER
DESCRIBED IN THE POOLING AND SERVICING AGREEMENT. ACCORDINGLY, THE OUTSTANDING
NOTIONAL AMOUNT OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL
NOTIONAL AMOUNT REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $ (Initial Class A-18
by this Certificate: % Notional Amount)
Final Scheduled Maturity Date:
<PAGE>
THIS CERTIFIES THAT ___________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class A-18 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans"), formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for the Class A-18 Certificates required to be distributed
to Holders of the Class A-18 Certificates on such Distribution Date, subject to
adjustment in certain events as specified in the Agreement. The Class A-18
Certificates are not entitled to distributions in respect of principal.
Interest will accrue on the Class A-18 Certificates each month in an amount
equal to the product of (i) 1/12th of % and (ii) the Class A-18 Notional
Amount as of the related Distribution Date. The amount of interest which
accrues on this Certificate in any month will be subject to reduction with
respect to any Non-Supported Interest Shortfall and the interest portion of
certain Realized Losses allocated to the Class A-18 Certificates, as described
in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency specified
by the Trustee for that purpose in the notice of final distribution.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
A-18-2
<PAGE>
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-18-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By
-----------------------
Authorized Officer
Countersigned:
[Trustee],
Trustee
By
-----------------------
Authorized Officer
A-18-4
<PAGE>
EXHIBIT A-19
[FORM OF FACE OF CLASS A-19 CERTIFICATE]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - CLASS A-19
evidencing an interest in a pool of fixed
interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to
four-family residential mortgage loans, which may
include loans secured by shares issued by
cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS
CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
<PAGE>
THIS CERTIFIES THAT ___________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class A-19 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans"), formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for the Class A-19 Certificates required to be distributed
to Holders of the Class A-19 Certificates on such Distribution Date, subject to
adjustment in certain events as specified in the Agreement. Distributions in
reduction of the Principal Balance of certain Classes of Class A Certificates
may not commence on the first Distribution Date specified above. Distributions
of principal will be allocated among the Classes of Class A Certificates in
accordance with the provisions of the Agreement. The pass-through rate on the
Class A-19 Certificates applicable to each Distribution Date will be % per
annum. The amount of interest which accrues on this Certificate in any month
will be subject to reduction with respect to any Non-Supported Interest
Shortfall and the interest portion of certain Realized Losses allocated to the
Class A-19 Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this Certificate will be made after due notice of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency specified by the Trustee for that purpose in
the notice of final distribution.
A-19-2
<PAGE>
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-19-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By
-----------------------
Authorized Officer
Countersigned:
[Trustee],
Trustee
By
-----------------------
Authorized Officer
A-19-4
<PAGE>
EXHIBIT A-20
[FORM OF FACE OF CLASS A-20 CERTIFICATE]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - CLASS A-20
evidencing an interest in a pool of fixed
interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to
four-family residential mortgage loans, which may
include loans secured by shares issued by
cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS
CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
<PAGE>
THIS CERTIFIES THAT ___________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class A-20 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans"), formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for the Class A-20 Certificates required to be distributed
to Holders of the Class A-20 Certificates on such Distribution Date, subject to
adjustment in certain events as specified in the Agreement. Distributions in
reduction of the Principal Balance of certain Classes of Class A Certificates
may not commence on the first Distribution Date specified above. Distributions
of principal will be allocated among the Classes of Class A Certificates in
accordance with the provisions of the Agreement. The pass-through rate on the
Class A-20 Certificates applicable to each Distribution Date will be % per
annum. The amount of interest which accrues on this Certificate in any month
will be subject to reduction with respect to any Non-Supported Interest
Shortfall and the interest portion of certain Realized Losses allocated to the
Class A-20 Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this Certificate will be made after due notice of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency specified by the Trustee for that purpose in
the notice of final distribution.
A-20-2
<PAGE>
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-20-3
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By
-----------------------
Authorized Officer
Countersigned:
[Trustee],
Trustee
By
-----------------------
Authorized Officer
A-20-4
<PAGE>
EXHIBIT A-PO
[FORM OF FACE OF CLASS A-PO CERTIFICATE]
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND LAWS OR
IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER
SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
THE PROVISIONS OF SECTION 5.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED
TO HEREIN.
EXCEPT AS PROVIDED IN SECTION 5.02(C) OF THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN, THIS CERTIFICATE MAY NOT BE PURCHASED BY OR TRANSFERRED TO
ANY PERSON THAT HAS NOT DELIVERED A REPRESENTATION LETTER STATING THAT THE
TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT
SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA") OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE"), OR A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF
ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL
EXTENT, SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE (COLLECTIVELY,
A "PLAN"), AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN.
<PAGE>
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - , CLASS A-PO
evidencing an interest in a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, which may include loans secured by shares issued by cooperative housing
corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS
CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
A-PO-2
<PAGE>
THIS CERTIFIES THAT ____________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class A-PO Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans") formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for the Class A-PO Certificates required to be distributed
to Holders of the Class A-PO Certificates on such Distribution Date, subject to
adjustment in certain events as specified in the Agreement. The Class A-PO
Certificates will not be entitled to distributions in respect of interest.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register.
Notwithstanding the above, the final distribution in reduction of the Principal
Balance of this Certificate will be made after due notice of the pendency of
such distribution and only upon presentation and surrender of this Certificate
at the office or agency specified by the Trustee for that purpose in the notice
of final distribution.
No transfer of a Class A-PO Certificate will be made unless such
transfer is exempt from the registration requirements of the Securities Act of
1933, as amended, and any applicable state securities laws or is made in
accordance with said Act and laws. In the event that such a transfer is desired
to be made by the Holder hereof, (i) the transferee will be required to execute
an investment letter in the form described in the Agreement and (ii) if such
transfer is to be made within three years from the later of (a) the date of
initial issuance of the Certificates or (b) the last date on which the Seller or
any affiliate thereof was a Holder of the Certificates proposed to be
transferred, and unless such transfer is made in reliance on Rule 144A of the
Securities Act of 1933, as amended, the Trustee or the Seller may require the
Holder to deliver an opinion of counsel acceptable to and in form and substance
satisfactory to the Trustee and the Seller that such transfer is exempt
(describing the applicable exemption and
A-PO-3
<PAGE>
the basis therefor) from or is being made pursuant to the registration
requirements of the Securities Act of 1933, as amended, and of any applicable
statute of any state. The Holder hereof desiring to effect such transfer shall,
and does hereby agree to, indemnify the Trustee, the Seller, the Master
Servicer, and any Paying Agent acting on behalf of the Trustee against any
liability that may result if the transfer is not so exempt or is not made in
accordance with such Federal and state laws. In connection with any such
transfer, the Trustee will also require (i) a representation letter, in the form
as described in the Agreement, stating that the transferee is not a Plan and is
not acting on behalf of a Plan or using the assets of a Plan to effect such
purchase or (ii) if such transferee is a Plan, (a) an opinion of counsel
acceptable to and in form and substance satisfactory to the Trustee and the
Seller with respect to certain matters and (b) such other documentation as the
Seller or the Master Servicer may require, as described in the Agreement.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-PO-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By
-----------------------
Authorized Officer
Countersigned:
[Trustee],
Trustee
By
-----------------------
Authorized Officer
A-PO-5
<PAGE>
EXHIBIT A-R
[Form of Face of Class A-R Certificate]
FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "RESIDUAL INTEREST"
IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE DEFINED,
RESPECTIVELY, IN SECTIONS 860G(a)(2) AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE"). A TRANSFEREE OF THIS CERTIFICATE, BY ACCEPTANCE
HEREOF, IS DEEMED TO HAVE ACCEPTED THIS CERTIFICATE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFERABILITY, AS SET FORTH IN SECTION 5.02(d) OF THE POOLING
AND SERVICING AGREEMENT, AND SHALL BE REQUIRED TO FURNISH AN AFFIDAVIT TO THE
TRANSFEROR AND THE TRUSTEE TO THE EFFECT THAT, AMONG OTHER THINGS, IT IS NOT A
DISQUALIFIED ORGANIZATION, AS SUCH TERM IS DEFINED IN CODE SECTION 860E(e)(5),
AN AGENT (INCLUDING A BROKER, NOMINEE OR OTHER MIDDLEMAN) FOR A DISQUALIFIED
ORGANIZATION OR A NON-PERMITTED FOREIGN HOLDER, AS DEFINED IN SECTION 5.02(d) OF
THE POOLING AND SERVICING AGREEMENT AND TO HAVE AGREED TO SUCH AMENDMENTS TO THE
POOLING AND SERVICING AGREEMENT AS MAY BE REQUIRED TO FURTHER EFFECTUATE THE
RESTRICTIONS ON TRANSFERS TO DISQUALIFIED ORGANIZATIONS, AGENTS THEREOF OR NON-
PERMITTED FOREIGN HOLDERS.
THE HOLDER OF THIS CLASS A-R CERTIFICATE, BY ACCEPTANCE HEREOF, IS DEEMED TO
HAVE AGREED TO THE DESIGNATION OF THE MASTER SERVICER AS ITS AGENT TO ACT AS
"TAX MATTERS PERSON" OF THE UPPER-TIER REMIC TO PERFORM THE FUNCTIONS OF A "TAX
MATTERS PARTNER" FOR PURPOSES OF SUBCHAPTER C OF CHAPTER 63 OF SUBTITLE F OF THE
CODE, OR, IF SO REQUESTED BY THE MASTER SERVICER, TO ACT AS TAX MATTERS PERSON
OF THE UPPER-TIER REMIC.
THIS CERTIFICATE MAY NOT BE PURCHASED BY OR TRANSFERRED TO ANY PERSON WHICH IS
AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT SUBJECT TO TITLE I OF
THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE CODE OR A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF
ERISA SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT,
SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE (COLLECTIVELY, A
"PLAN"), OR ANY PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN.
<PAGE>
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - , CLASS A-R
evidencing an interest in a pool of fixed
interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to
four-family residential mortgage loans, which may
include loans secured by shares issued by
cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS
CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
A-R-2
<PAGE>
THIS CERTIFIES THAT __________________________ is the registered owner
of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holder of the Class A-R Certificate with respect to a Trust
Estate consisting of a pool of fixed interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to four-family residential mortgage loans,
other than the Fixed Retained Yield, if any, with respect thereto, and which may
include loans secured by shares issued by cooperative housing corporations (the
"Mortgage Loans"), formed by Norwest Asset Securities Corporation (hereinafter
called the "Seller", which term includes any successor entity under the
Agreement referred to below). The Trust Estate was created pursuant to a
Pooling and Servicing Agreement dated as of , 199 (the "Agreement")
among the Seller, Norwest Bank Minnesota, National Association, as master
servicer (the "Master Servicer") and [Trustee], as trustee (the "Trustee"), a
summary of certain of the pertinent provisions of which is set forth
hereinafter. To the extent not defined herein, the capitalized terms used herein
have the meanings ascribed to such terms in the Agreement. This Certificate is
issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for the Class A-R Certificate required to be distributed to
Holders of the Class A-R Certificate on such Distribution Date, subject to
adjustment in certain events as specified in the Agreement. Distributions in
reduction of the Principal Balance of certain Classes of Class A Certificates
may not commence on the first Distribution Date specified above. Distributions
of principal will be allocated among the Classes of Class A Certificates in
accordance with the provisions of the Agreement. The pass-through rate on the
Class A-R Certificate applicable to each Distribution Date will be % per
annum. The amount of interest which accrues on this Certificate in any month
will be subject to reduction with respect to any Non-Supported Interest
Shortfall and the interest portion of certain Realized Losses allocated to the
Class A-R Certificate, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency specified
by the Trustee for that purpose in the notice of final distribution.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
A-R-3
<PAGE>
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By
-----------------------
Authorized Officer
Countersigned:
[Trustee],
Trustee
By
-----------------------
Authorized Officer
A-R-4
<PAGE>
EXHIBIT A-LR
[Form of Face of Class A-LR Certificate]
FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "RESIDUAL INTEREST"
IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE DEFINED,
RESPECTIVELY, IN SECTIONS 860G(a)(2) AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE"). A TRANSFEREE OF THIS CERTIFICATE, BY ACCEPTANCE
HEREOF, IS DEEMED TO HAVE ACCEPTED THIS CERTIFICATE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFERABILITY, AS SET FORTH IN SECTION 5.02(d) OF THE POOLING
AND SERVICING AGREEMENT, AND SHALL BE REQUIRED TO FURNISH AN AFFIDAVIT TO THE
TRANSFEROR AND THE TRUSTEE TO THE EFFECT THAT, AMONG OTHER THINGS, IT IS NOT A
DISQUALIFIED ORGANIZATION, AS SUCH TERM IS DEFINED IN CODE SECTION 860E(e)(5),
AN AGENT (INCLUDING A BROKER, NOMINEE OR OTHER MIDDLEMAN) FOR A DISQUALIFIED
ORGANIZATION OR A NON-PERMITTED FOREIGN HOLDER, AS DEFINED IN SECTION 5.02(d) OF
THE POOLING AND SERVICING AGREEMENT AND TO HAVE AGREED TO SUCH AMENDMENTS TO THE
POOLING AND SERVICING AGREEMENT AS MAY BE REQUIRED TO FURTHER EFFECTUATE THE
RESTRICTIONS ON TRANSFERS TO DISQUALIFIED ORGANIZATIONS, AGENTS THEREOF OR NON-
PERMITTED FOREIGN HOLDERS.
THE HOLDER OF THIS CLASS A-LR CERTIFICATE, BY ACCEPTANCE HEREOF, IS DEEMED TO
HAVE AGREED TO THE DESIGNATION OF THE MASTER SERVICER AS ITS AGENT TO ACT AS
"TAX MATTERS PERSON" OF THE LOWER-TIER REMIC TO PERFORM THE FUNCTIONS OF A "TAX
MATTERS PARTNER" FOR PURPOSES OF SUBCHAPTER C OF CHAPTER 63 OF SUBTITLE F OF THE
CODE, OR, IF SO REQUESTED BY THE MASTER SERVICER, TO ACT AS TAX MATTERS PERSON
OF THE LOWER-TIER REMIC.
THIS CERTIFICATE MAY NOT BE PURCHASED BY OR TRANSFERRED TO ANY PERSON WHICH IS
AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT SUBJECT TO TITLE I OF
THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE CODE OR A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF
ERISA SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT,
SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE (COLLECTIVELY, A
"PLAN"), OR ANY PERSON ACTING ON BEHALF OF OR INVESTING THE ASSETS OF A PLAN.
<PAGE>
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - , CLASS A-LR
evidencing an interest in a pool of fixed
interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to
four-family residential mortgage loans, which may
include loans secured by shares issued by
cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS
CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
A-LR-2
<PAGE>
THIS CERTIFIES THAT __________________________ is the registered owner
of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holder of the Class A-LR Certificate with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans"), formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and the Class A
Distribution Amount for the Class A-LR Certificate required to be distributed to
Holders of the Class A-LR Certificate on such Distribution Date, subject to
adjustment in certain events as specified in the Agreement. Distributions in
reduction of the Principal Balance of certain Classes of Class A Certificates
may not commence on the first Distribution Date specified above. Distributions
of principal will be allocated among the Classes of Class A Certificates in
accordance with the provisions of the Agreement. The pass-through rate on the
Class A-LR Certificate applicable to each Distribution Date will be % per
annum. The amount of interest which accrues on this Certificate in any month
will be subject to reduction with respect to any Non-Supported Interest
Shortfall and the interest portion of certain Realized Losses allocated to the
Class A-LR Certificate, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency specified
by the Trustee for that purpose in the notice of final distribution.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
A-LR-3
<PAGE>
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By
-----------------------
Authorized Officer
Countersigned:
[Trustee],
Trustee
By
-----------------------
Authorized Officer
A-LR-4
<PAGE>
EXHIBIT B-1
[FORM OF FACE OF CLASS B-1 CERTIFICATE]
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A CERTIFICATES
AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
EXCEPT AS PROVIDED IN SECTION 5.02(C) OF THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN, THIS CERTIFICATE MAY NOT BE PURCHASED BY OR TRANSFERRED TO
ANY PERSON THAT HAS NOT DELIVERED A REPRESENTATION LETTER STATING EITHER (A)
THAT THE TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT
ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE"), OR A GOVERNMENTAL PLAN, AS DEFINED IN SECTION
3(32) OF ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A
MATERIAL EXTENT, SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE
(COLLECTIVELY, A "PLAN"), AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS
OF A PLAN OR (B) SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE POOLING AND
SERVICING AGREEMENT, THAT THE SOURCE OF FUNDS USED TO PURCHASE THIS CERTIFICATE
IS AN "INSURANCE COMPANY GENERAL ACCOUNT."
<PAGE>
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - , CLASS B-1
evidencing an interest in a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, which may include loans secured by shares issued by cooperative housing
corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS
CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
B-1-2
<PAGE>
THIS CERTIFIES THAT ____________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class B-1 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans") formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and, subject to
the prior rights of the Class A Certificates as specified in the Agreement, any
Class B-1 Distribution Amount required to be distributed to Holders of the Class
B-1 Certificates on such Distribution Date, subject to adjustment, in certain
events, as specified in the Agreement. The pass-through rate on the Class B-1
Certificates applicable to each Distribution Date will be % per annum. The
amount of interest which accrues on this Certificate in any month will be
subject to reduction with respect to any Non-Supported Interest Shortfall and
the interest portion of certain Realized Losses allocated to the Class B-1
Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this Certificate will be made after due notice of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency specified by the Trustee for that purpose in
the notice of final distribution.
No transfer of a Class B-1 Certificate will be made unless the Holder
hereof desiring to make any such transfer shall deliver to the Trustee (i) a
representation letter, in the form as described in the Agreement, stating either
(a) that the transferee is not a Plan and is not
B-1-3
<PAGE>
acting on behalf of a Plan or using the assets of a Plan to effect such purchase
or (b) subject to certain conditions described in the Agreement, that the source
of funds used to purchase this Certificate is an "insurance company general
account," or (ii) if such transferee is a Plan, (a) an opinion of counsel
acceptable to and in form and substance satisfactory to the Trustee and the
Seller with respect to certain matters and (b) such other documentation as the
Seller or the Master Servicer may require, as described in the Agreement.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
B-1-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By
-----------------------
Authorized Officer
Countersigned:
[Trustee],
Trustee
By
-----------------------
Authorized Officer
B-1-5
<PAGE>
EXHIBIT B-2
[FORM OF FACE OF CLASS B-2 CERTIFICATE]
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A CERTIFICATES
AND THE CLASS B-1 CERTIFICATES AS DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN.
EXCEPT AS PROVIDED IN SECTION 5.02(C) OF THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN, THIS CERTIFICATE MAY NOT BE PURCHASED BY OR TRANSFERRED TO
ANY PERSON THAT HAS NOT DELIVERED A REPRESENTATION LETTER STATING EITHER (A)
THAT THE TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT
ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE"), OR A GOVERNMENTAL PLAN, AS DEFINED IN SECTION
3(32) OF ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A
MATERIAL EXTENT, SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE
(COLLECTIVELY, A "PLAN"), AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS
OF A PLAN OR (B) SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE POOLING AND
SERVICING AGREEMENT, THAT THE SOURCE OF FUNDS USED TO PURCHASE THIS CERTIFICATE
IS AN "INSURANCE COMPANY GENERAL ACCOUNT."
<PAGE>
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - , CLASS B-2
evidencing an interest in a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, which may include loans secured by shares issued by cooperative housing
corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS
CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
B-2-2
<PAGE>
THIS CERTIFIES THAT ____________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class B-2 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans") formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and, subject to
the prior rights of the Class A Certificates and each Class of Class B
Certificates bearing a lower numerical designation as specified in the
Agreement, any Class B-2 Distribution Amount required to be distributed to
Holders of the Class B-2 Certificates on such Distribution Date, subject to
adjustment, in certain events, as specified in the Agreement. The pass-through
rate on the Class B-2 Certificates applicable to each Distribution Date will be
% per annum. The amount of interest which accrues on this Certificate in any
month will be subject to reduction with respect to any Non-Supported Interest
Shortfall and the interest portion of certain Realized Losses allocated to the
Class B-2 Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this Certificate will be made after due notice of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency specified by the Trustee for that purpose in
the notice of final distribution.
No transfer of a Class B-2 Certificate will be made unless the Holder
hereof desiring to make any such transfer shall deliver to the Trustee (i) a
representation letter, in the
B-2-3
<PAGE>
form as described in the Agreement, stating either (a) that the transferee is
not a Plan and is not acting on behalf of a Plan or using the assets of a Plan
to effect such purchase or (b) subject to certain conditions described in the
Agreement, that the source of funds used to purchase this Certificate is an
"insurance company general account," or (ii) if such transferee is a Plan, (a)
an opinion of counsel acceptable to and in form and substance satisfactory to
the Trustee and the Seller with respect to certain matters and (b) such other
documentation as the Seller or the Master Servicer may require, as described in
the Agreement.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
B-2-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By
-----------------------
Authorized Officer
Countersigned:
[Trustee],
Trustee
By
-----------------------
Authorized Officer
B-2-5
<PAGE>
EXHIBIT B-3
[FORM OF FACE OF CLASS B-3 CERTIFICATE]
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A
CERTIFICATES, THE CLASS B-1 CERTIFICATES AND THE CLASS B-2 CERTIFICATES AS
DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
EXCEPT AS PROVIDED IN SECTION 5.02(C) OF THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN, THIS CERTIFICATE MAY NOT BE PURCHASED BY OR TRANSFERRED TO
ANY PERSON THAT HAS NOT DELIVERED A REPRESENTATION LETTER STATING EITHER (A)
THAT THE TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT
ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE"), OR A GOVERNMENTAL PLAN, AS DEFINED IN SECTION
3(32) OF ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A
MATERIAL EXTENT, SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE
(COLLECTIVELY, A "PLAN"), AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS
OF A PLAN OR (B) SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE POOLING AND
SERVICING AGREEMENT, THAT THE SOURCE OF FUNDS USED TO PURCHASE THIS CERTIFICATE
IS AN "INSURANCE COMPANY GENERAL ACCOUNT."
<PAGE>
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - , CLASS B-3
evidencing an interest in a pool of fixed
interest rate, conventional, monthly pay,
fully amortizing, first lien, one- to
four-family residential mortgage loans, which may
include loans secured by shares issued by
cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS
CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
B-3-2
<PAGE>
THIS CERTIFIES THAT _______________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class B-3 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans") formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and, subject to
the prior rights of the Class A Certificates and each Class of Class B
Certificates bearing a lower numerical designation as specified in the
Agreement, any Class B-3 Distribution Amount required to be distributed to
Holders of the Class B-3 Certificates on such Distribution Date, subject to
adjustment, in certain events, as specified in the Agreement. The pass-through
rate on the Class B-3 Certificates applicable to each Distribution Date will be
% per annum. The amount of interest which accrues on this Certificate in any
month will be subject to reduction with respect to any Non-Supported Interest
Shortfall and the interest portion of certain Realized Losses allocated to the
Class B-3 Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this Certificate will be made after due notice of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency specified by the Trustee for that purpose in
the notice of final distribution.
No transfer of a Class B-3 Certificate will be made unless the Holder
hereof desiring to make any such transfer shall deliver to the Trustee (i) a
representation letter, in the
B-3-3
<PAGE>
form as described in the Agreement, stating either (a) that the transferee is
not a Plan and is not acting on behalf of a Plan or using the assets of a Plan
to effect such purchase or (b) subject to certain conditions described in the
Agreement, that the source of funds used to purchase this Certificate is an
"insurance company general account," or (ii) if such transferee is a Plan, (a)
an opinion of counsel acceptable to and in form and substance satisfactory to
the Trustee and the Seller with respect to certain matters and (b) such other
documentation as the Seller or the Master Servicer may require, as described in
the Agreement.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
B-3-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By
-----------------------
Authorized Officer
Countersigned:
[Trustee],
Trustee
By
-----------------------
Authorized Officer
B-3-5
<PAGE>
EXHIBIT B-4
[FORM OF FACE OF CLASS B-4 CERTIFICATE]
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A
CERTIFICATES, THE CLASS B-1 CERTIFICATES, THE CLASS B-2 CERTIFICATES AND THE
CLASS B-3 CERTIFICATES AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND LAWS OR
IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER
SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
THE PROVISIONS OF SECTION 5.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED
TO HEREIN.
EXCEPT AS PROVIDED IN SECTION 5.02(C) OF THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN, THIS CERTIFICATE MAY NOT BE PURCHASED BY OR TRANSFERRED TO
ANY PERSON THAT HAS NOT DELIVERED A REPRESENTATION LETTER STATING EITHER (A)
THAT THE TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT
ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE"), OR A GOVERNMENTAL PLAN, AS DEFINED IN SECTION
3(32) OF ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A
MATERIAL EXTENT, SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE
(COLLECTIVELY, A "PLAN"), AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS
OF A PLAN OR (B) SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE POOLING AND
SERVICING AGREEMENT, THAT THE SOURCE OF FUNDS USED TO PURCHASE THIS CERTIFICATE
IS AN "INSURANCE COMPANY GENERAL ACCOUNT."
<PAGE>
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - , CLASS B-4
evidencing an interest in a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, which may include loans secured by shares issued by cooperative housing
corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS
CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
B-4-2
<PAGE>
THIS CERTIFIES THAT ____________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class B-4 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans") formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and, subject to
the prior rights of the Class A Certificates and each Class of Class B
Certificates bearing a lower numerical designation as specified in the
Agreement, any Class B-4 Distribution Amount required to be distributed to
Holders of the Class B-4 Certificates on such Distribution Date, subject to
adjustment, in certain events, as specified in the Agreement. The pass-through
rate on the Class B-4 Certificates applicable to each Distribution Date will be
% per annum. The amount of interest which accrues on this Certificate in any
month will be subject to reduction with respect to any Non-Supported Interest
Shortfall and the interest portion of certain Realized Losses allocated to the
Class B-4 Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this Certificate will be made after due notice of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency specified by the Trustee for that purpose in
the notice of final distribution.
No transfer of a Class B-4 Certificate will be made unless such
transfer is exempt from the registration requirements of the Securities Act of
1933, as amended, and any applicable
B-4-3
<PAGE>
state securities laws or is made in accordance with said Act and laws. In the
event that such a transfer is desired to be made by the Holder hereof, (i) the
transferee will be required to execute an investment letter in the form
described in the Agreement and (ii) if such transfer is to be made within three
years from the later of (a) the date of initial issuance of the Certificates or
(b) the last date on which the Seller or any affiliate thereof was a Holder of
the Certificates proposed to be transferred, and unless such transfer is made in
reliance on Rule 144A of the Securities Act of 1933, as amended, the Trustee or
the Seller may require the Holder to deliver an opinion of counsel acceptable to
and in form and substance satisfactory to the Trustee and the Seller that such
transfer is exempt (describing the applicable exemption and the basis therefor)
from or is being made pursuant to the registration requirements of the
Securities Act of 1933, as amended, and of any applicable statute of any state.
The Holder hereof desiring to effect such transfer shall, and does hereby agree
to, indemnify the Trustee, the Seller, the Master Servicer, and any Paying Agent
acting on behalf of the Trustee against any liability that may result if the
transfer is not so exempt or is not made in accordance with such Federal and
state laws. In connection with any such transfer, the Trustee will also require
(i) a representation letter, in the form as described in the Agreement, stating
either (a) that the transferee is not a Plan and is not acting on behalf of a
Plan or using the assets of a Plan to effect such purchase or (b) subject to
certain conditions described in the Agreement, that the source of funds used to
purchase this Certificate is an "insurance company general account," or (ii) if
such transferee is a Plan, (a) an opinion of counsel acceptable to and in form
and substance satisfactory to the Trustee and the Seller with respect to certain
matters and (b) such other documentation as the Seller or the Master Servicer
may require, as described in the Agreement.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
B-4-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By
-----------------------
Authorized Officer
Countersigned:
[Trustee],
Trustee
By
-----------------------
Authorized Officer
B-4-5
<PAGE>
EXHIBIT B-5
[FORM OF FACE OF CLASS B-5 CERTIFICATE]
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A
CERTIFICATES, THE CLASS B-1 CERTIFICATES, THE CLASS B-2 CERTIFICATES, THE CLASS
B-3 CERTIFICATES AND THE CLASS B-4 CERTIFICATES AS DESCRIBED IN THE POOLING AND
SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND LAWS OR
IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER
SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
THE PROVISIONS OF SECTION 5.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED
TO HEREIN.
EXCEPT AS PROVIDED IN SECTION 5.02(C) OF THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN, THIS CERTIFICATE MAY NOT BE PURCHASED BY OR TRANSFERRED TO
ANY PERSON THAT HAS NOT DELIVERED A REPRESENTATION LETTER STATING EITHER (A)
THAT THE TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT
ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE"). OR A GOVERNMENTAL PLAN, AS DEFINED IN SECTION
3(32) OF ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A
MATERIAL EXTENT, SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE
(COLLECTIVELY, A "PLAN"), AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS
OF A PLAN OR (B) SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE POOLING AND
SERVICING AGREEMENT, THAT THE SOURCE OF FUNDS USED TO PURCHASE THIS CERTIFICATE
IS AN "INSURANCE COMPANY GENERAL ACCOUNT."
<PAGE>
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - , CLASS B-5
evidencing an interest in a pool of fixed interest rate, conventional,
monthly pay, fully amortizing, first lien, one- to four-family
residential mortgage loans, which may include loans secured by
shares issued by cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS
CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
B-5-2
<PAGE>
THIS CERTIFIES THAT ____________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class B-5 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans") formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and, subject to
the prior rights of the Class A Certificates and each Class of Class B
Certificates bearing a lower numerical designation as specified in the
Agreement, any Class B-5 Distribution Amount required to be distributed to
Holders of the Class B-5 Certificates on such Distribution Date, subject to
adjustment, in certain events, as specified in the Agreement. The pass-through
rate on the Class B-5 Certificates applicable to each Distribution Date will be
% per annum. The amount of interest which accrues on this Certificate in any
month will be subject to reduction with respect to any Non-Supported Interest
Shortfall and the interest portion of certain Realized Losses allocated to the
Class B-5 Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this Certificate will be made after due notice of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency specified by the Trustee for that purpose in
the notice of final distribution.
No transfer of a Class B-5 Certificate will be made unless such
transfer is exempt from the registration requirements of the Securities Act of
1933, as amended, and any applicable
B-5-3
<PAGE>
state securities laws or is made in accordance with said Act and laws. In the
event that such a transfer is desired to be made by the Holder hereof, (i) the
transferee will be required to execute an investment letter in the form
described in the Agreement and (ii) if such transfer is to be made within three
years from the later of (a) the date of initial issuance of the Certificates or
(b) the last date on which the Seller or any affiliate thereof was a Holder of
the Certificates proposed to be transferred, and unless such transfer is made in
reliance on Rule 144A of the Securities Act of 1933, as amended, the Trustee or
the Seller may require the Holder to deliver an opinion of counsel acceptable to
and in form and substance satisfactory to the Trustee and the Seller that such
transfer is exempt (describing the applicable exemption and the basis therefor)
from or is being made pursuant to the registration requirements of the
Securities Act of 1933, as amended, and of any applicable statute of any state.
The Holder hereof desiring to effect such transfer shall, and does hereby agree
to, indemnify the Trustee, the Seller, the Master Servicer, and any Paying Agent
acting on behalf of the Trustee against any liability that may result if the
transfer is not so exempt or is not made in accordance with such Federal and
state laws. In connection with any such transfer, the Trustee will also require
(i) a representation letter, in the form as described in the Agreement, stating
either (a) that the transferee is not a Plan and is not acting on behalf of a
Plan or using the assets of a Plan to effect such purchase or (b) subject to
certain conditions described in the Agreement, that the source of funds used to
purchase this Certificate is an "insurance company general account," or (ii) if
such transferee is a Plan, (a) an opinion of counsel acceptable to and in form
and substance satisfactory to the Trustee and the Seller with respect to certain
matters and (b) such other documentation as the Seller or the Master Servicer
may require, as described in the Agreement.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
B-5-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By
-------------------------------------
Authorized Officer
Countersigned:
[Trustee],
Trustee
By
----------------------------
Authorized Officer
B-5-5
<PAGE>
EXHIBIT B-6
[FORM OF FACE OF CLASS B-6 CERTIFICATE]
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A
CERTIFICATES, THE CLASS B-1 CERTIFICATES, THE CLASS B-2 CERTIFICATES, THE CLASS
B-3 CERTIFICATES, THE CLASS B-4 CERTIFICATES AND THE CLASS B-5 CERTIFICATES AS
DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND LAWS OR
IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER
SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
THE PROVISIONS OF SECTION 5.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED
TO HEREIN.
EXCEPT AS PROVIDED IN SECTION 5.02(C) OF THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN, THIS CERTIFICATE MAY NOT BE PURCHASED BY OR TRANSFERRED TO
ANY PERSON THAT HAS NOT DELIVERED A REPRESENTATION LETTER STATING EITHER (A)
THAT THE TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT
ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE"), OR A GOVERNMENTAL PLAN, AS DEFINED IN SECTION
3(32) OF ERISA, SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A
MATERIAL EXTENT, SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE
(COLLECTIVELY, A "PLAN"), AND IS NOT ACTING ON BEHALF OF OR INVESTING THE ASSETS
OF A PLAN OR (B) SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE POOLING AND
SERVICING AGREEMENT, THAT THE SOURCE OF FUNDS USED TO PURCHASE THIS CERTIFICATE
IS AN "INSURANCE COMPANY GENERAL ACCOUNT."
<PAGE>
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 199 - , CLASS B-6
evidencing an interest in a pool of fixed interest rate, conventional,
monthly pay, fully amortizing, first lien, one- to four-family
residential mortgage loans, which may include loans secured by
shares issued by cooperative housing corporations, sold by
NORWEST ASSET SECURITIES CORPORATION
(Not an interest in or obligation of the Seller)
THIS CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST
IN, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES, AND
IS NOT INSURED OR GUARANTEED BY THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR
ANY OF THEIR AFFILIATES, OR BY ANY GOVERNMENT AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS
CERTIFICATE WILL BE MADE IN THE MANNER DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL BALANCE OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL BALANCE REPRESENTED HEREBY.
Certificate No. Cut-Off Date: , 199
CUSIP No.: First Distribution Date: , 199
Percentage Interest evidenced Denomination: $
by this Certificate: %
Final Scheduled Maturity Date:
B-6-2
<PAGE>
THIS CERTIFIES THAT ____________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
distributions to the Holders of the Class B-6 Certificates with respect to a
Trust Estate consisting of a pool of fixed interest rate, conventional, monthly
pay, fully amortizing, first lien, one- to four-family residential mortgage
loans, other than the Fixed Retained Yield, if any, with respect thereto, and
which may include loans secured by shares issued by cooperative housing
corporations (the "Mortgage Loans") formed by Norwest Asset Securities
Corporation (hereinafter called the "Seller", which term includes any successor
entity under the Agreement referred to below). The Trust Estate was created
pursuant to a Pooling and Servicing Agreement dated as of , 199 (the
"Agreement") among the Seller, Norwest Bank Minnesota, National Association, as
master servicer (the "Master Servicer") and [Trustee], as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereinafter. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to such terms in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such distribution, in an amount equal to the
product of the Percentage Interest evidenced by this Certificate and, subject to
the prior rights of the Class A Certificates and each Class of Class B
Certificates bearing a lower numerical designation as specified in the
Agreement, any Class B-6 Distribution Amount required to be distributed to
Holders of the Class B-6 Certificates on such Distribution Date, subject to
adjustment, in certain events, as specified in the Agreement. The pass-through
rate on the Class B-6 Certificates applicable to each Distribution Date will be
% per annum. The amount of interest which accrues on this Certificate in any
month will be subject to reduction with respect to any Non-Supported Interest
Shortfall and the interest portion of certain Realized Losses allocated to the
Class B-6 Certificates, as described in the Agreement.
Distributions on this Certificate will be made on behalf of the
Trustee either by the Master Servicer or by a Paying Agent appointed by the
Master Servicer by check mailed to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register, unless such
Person is entitled to receive payments by wire transfer in immediately available
funds in accordance with the Pooling and Servicing Agreement and such Person has
notified the Master Servicer pursuant to the Pooling and Servicing Agreement
that such payments are to be made by wire transfer of immediately available
funds. Notwithstanding the above, the final distribution in reduction of the
Principal Balance of this Certificate will be made after due notice of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency specified by the Trustee for that purpose in
the notice of final distribution.
No transfer of a Class B-6 Certificate will be made unless such
transfer is exempt from the registration requirements of the Securities Act of
1933, as amended, and any applicable
B-6-3
<PAGE>
state securities laws or is made in accordance with said Act and laws. In the
event that such a transfer is desired to be made by the Holder hereof, (i) the
transferee will be required to execute an investment letter in the form
described in the Agreement and (ii) if such transfer is to be made within three
years from the later of (a) the date of initial issuance of the Certificates or
(b) the last date on which the Seller or any affiliate thereof was a Holder of
the Certificates proposed to be transferred, and unless such transfer is made in
reliance on Rule 144A of the Securities Act of 1933, as amended, the Trustee or
the Seller may require the Holder to deliver an opinion of counsel acceptable to
and in form and substance satisfactory to the Trustee and the Seller that such
transfer is exempt (describing the applicable exemption and the basis therefor)
from or is being made pursuant to the registration requirements of the
Securities Act of 1933, as amended, and of any applicable statute of any state.
The Holder hereof desiring to effect such transfer shall, and does hereby agree
to, indemnify the Trustee, the Seller, the Master Servicer, and any Paying Agent
acting on behalf of the Trustee against any liability that may result if the
transfer is not so exempt or is not made in accordance with such Federal and
state laws. In connection with any such transfer, the Trustee will also require
(i) a representation letter, in the form as described in the Agreement, stating
either (a) that the transferee is not a Plan and is not acting on behalf of a
Plan or using the assets of a Plan to effect such purchase or (b) subject to
certain conditions described in the Agreement, that the source of funds used to
purchase this Certificate is an "insurance company general account," or (ii) if
such transferee is a Plan, (a) an opinion of counsel acceptable to and in form
and substance satisfactory to the Trustee and the Seller with respect to certain
matters and (b) such other documentation as the Seller or the Master Servicer
may require, as described in the Agreement.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate constitutes a "regular interest" in a "real estate
mortgage investment conduit" as those terms are defined in Section 860G(a)(1)
and Section 860D, respectively, of the Internal Revenue Code of 1986, as
amended.
Unless this Certificate has been countersigned by an authorized
officer of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
B-6-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed as of the date set forth below.
Dated:
[Trustee],
Trustee
By
-----------------------------------
Authorized Officer
Countersigned:
[Trustee],
Trustee
By
--------------------------------
Authorized Officer
B-6-5
<PAGE>
EXHIBIT C
[Form of Reverse of Series 199 - Certificates]
NORWEST ASSET SECURITIES CORPORATION
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 199 -
This Certificate is one of a duly authorized issue of Certificates
issued in several Classes designated as Mortgage Pass-Through Certificates of
the Series specified hereon (herein collectively called the "Certificates").
The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. In the event funds are
advanced with respect to any Mortgage Loan by a Servicer, the Master Servicer or
the Trustee, such advances are reimbursable to such Servicer, the Master
Servicer or the Trustee to the extent provided in the Agreement, from related
recoveries on such Mortgage Loan or from other cash that would have been
distributable to Certificateholders.
As provided in the Agreement, withdrawals from the Certificate Account
created for the benefit of Certificateholders may be made by the Master Servicer
from time to time for purposes other than distributions to Certificateholders,
such purposes including reimbursement to a Servicer, the Master Servicer or the
Trustee, as applicable, of advances made by such Servicer, the Master Servicer
or the Trustee.
The Agreement permits, with certain exceptions therein provided, the
amendment of the Agreement and the modification of the rights and obligations of
the Seller, the Master Servicer and the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Seller, the Master
Servicer and the Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 66 2/3% of the Voting Interests of
each Class of Certificates affected thereby. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon the Certificate. The Agreement also permits the
amendment thereof in certain circumstances without the consent of the Holders of
any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the office or agency appointed by the Trustee, duly endorsed by, or
accompanied by an assignment in the form below or other written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar, duly
executed by the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of authorized Denominations
evidencing the same Class and aggregate Percentage Interest will be issued to
the designated transferee or transferees.
<PAGE>
The Certificates are issuable only as registered Certificates without
coupons in Classes and Denominations specified in the Agreement. As provided in
the Agreement and subject to certain limitations therein set forth, Certificates
are exchangeable for new Certificates of authorized Denominations evidencing the
same Class and aggregate Percentage Interest, as requested by the Holder
surrendering the same.
No service charge will be made for any such registration of transfer
or exchange, but the Trustee or the Certificate Registrar may require payment of
a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Seller, the Master Servicer, the Trustee and the Certificate
Registrar, and any agent of the Seller, the Master Servicer, the Trustee or the
Certificate Registrar, may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and neither the Seller, the
Master Servicer, the Trustee, the Certificate Registrar nor any such agent shall
be affected by notice to the contrary.
The obligations created by the Agreement in respect of the
Certificates and the Trust Estate created thereby shall terminate upon the last
action required to be taken by the Trustee on the Final Distribution Date
pursuant to the Agreement following the earlier of (i) the payment or other
liquidation (or advance with respect thereto) of the last Mortgage Loan subject
thereto or the disposition of all property acquired upon foreclosure or deed in
lieu of foreclosure of any Mortgage Loan, and (ii) the purchase by the Seller
from the Trust Estate of all remaining Mortgage Loans and all property acquired
in respect of such Mortgage Loans; provided, however, that the Trust Estate will
in no event continue beyond the expiration of 21 years from the death of the
last survivor of the descendants of Joseph P. Kennedy, the late ambassador of
the United States to the Court of St. James, living on the date of the
Agreement. The Agreement permits, but does not require, the Seller to purchase
all remaining Mortgage Loans and all property acquired in respect of any
Mortgage Loan at a price determined as provided in the Agreement. The exercise
of such option will effect early retirement of the Certificates, the Seller's
right to exercise such option being subject to the Pool Scheduled Principal
Balance of the Mortgage Loans as of the Distribution Date upon which the
proceeds of such repurchase are distributed being less than ten percent of the
Cut-Off Date Aggregate Principal Balance.
C-2
<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s)
unto ________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
(Please print or typewrite name and address including postal zip code of
assignee)
the beneficial interest evidenced by the within Mortgage Pass-Through
Certificate and hereby authorizes the transfer of registration of such interest
to assignee on the Certificate Register of the Trust Estate.
I (We) further direct the Certificate Registrar to issue a new
Certificate of a like Denomination or Percentage Interest and Class, to the
above named assignee and deliver such Certificate to the following address:
______________________________________________________________________________
______________________________________________________________________________
Social Security or other Identifying Number of Assignee:
______________________________________________________________________________
Dated:
------------------------------------------
Signature by or on behalf of assignor
------------------------------------------
Signature Guaranteed
C-3
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of distribution:
Distributions shall be made, if the assignee is eligible to receive
distributions in immediately available funds, by wire transfer or otherwise, in
immediately available funds to ________________________________________ for the
account of _______________________________________________ account number
_____________, or, if mailed by check, to _____________. Applicable statements
should be mailed to __________________________________________________________.
This information is provided by ______________________, the assignee
named above, or ___________________________________, as its agent.
C-4
<PAGE>
EXHIBIT D
RESERVED
<PAGE>
EXHIBIT E
CUSTODIAL AGREEMENT
-------------------
THIS CUSTODIAL AGREEMENT (as amended and supplemented from time to
time, the "Agreement"), dated as of _____________, by and among [TRUSTEE], not
individually, but solely as Trustee (including its successors under the Pooling
and Servicing Agreement defined below, the "Trustee"), NORWEST ASSET SECURITIES
CORPORATION (together with any successor in interest, the "Seller"), NORWEST
BANK MINNESOTA, NATIONAL ASSOCIATION (together with any successor in interest or
successor under the Pooling and Servicing Agreement referred to below, the
"Master Servicer") and ___________________________ (together with any successor
in interest or any successor appointed hereunder, the "Custodian").
W I T N E S S E T H T H A T
- - - - - - - - - - - - - -
WHEREAS, the Seller, the Master Servicer and the Trustee, have entered
into a Pooling and Servicing Agreement dated as of , 199 relating to
the issuance of Mortgage Pass-Through Certificates, Series 199 - (as in effect
on the date of this Agreement, the "Original Pooling and Servicing Agreement",
and as amended and supplemented from time to time, the "Pooling and Servicing
Agreement"); and
WHEREAS, the Custodian has agreed to act as agent for the Trustee for
the purposes of receiving and holding certain documents and other instruments
delivered by the Seller under the Pooling and Servicing Agreement, all upon the
terms and conditions and subject to the limitations hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the Trustee, the Seller, the
Master Servicer and the Custodian hereby agree as follows:
ARTICLE I
Definitions
Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned in the Original Pooling and Servicing Agreement,
unless otherwise required by the context herein.
ARTICLE II
Custody of Mortgage Documents
Section 2.1. Custodian to Act as Agent; Acceptance of Custodial
--------------------------------------------------
Files. The Custodian, as the duly appointed agent of the Trustee for these
purposes, acknowledges receipt of
<PAGE>
the Mortgage Notes, the Mortgages, the assignments and other documents relating
to the Mortgage Loans identified on the schedule attached hereto and declares
that it holds and will hold such Mortgage Notes, Mortgages, assignments and
other documents and any similar documents received by the Trustee subsequent to
the date hereof (the "Custodial Files") as agent for the Trustee, in trust, for
the use and benefit of all present and future Certificateholders.
Section 2.2. Recordation of Assignments. If any Custodial File
--------------------------
includes one or more assignments to the Trustee of Mortgage Notes and related
Mortgages that have not been recorded, each such assignment shall be delivered
by the Custodian to the Seller for the purpose of recording it in the
appropriate public office for real property records, and the Seller, at no
expense to the Custodian, shall promptly cause to be recorded in the appropriate
public office for real property records each such assignment and, upon receipt
thereof from such public office, shall return each such assignment to the
Custodian.
Section 2.3. Review of Custodial Files. The Custodian agrees, for
-------------------------
the benefit of Certificateholders, to review, in accordance with the provisions
of Section 2.01 of the Pooling and Servicing Agreement, each Custodial File. If
in performing the review required by this Section 2.3 the Custodian finds any
document or documents constituting a part of a Custodial File to be missing or
defective in any material respect, the Custodian shall promptly so notify the
Seller, the Master Servicer and the Trustee.
Section 2.4. Notification of Breaches of Representations and
-----------------------------------------------
Warranties. Upon discovery by the Custodian of a breach of any representation
- ----------
or warranty made by the Seller or the Master Servicer as set forth in the
Pooling and Servicing Agreement, the Custodian shall give prompt written notice
to the Seller, the Master Servicer and the Trustee.
Section 2.5. Custodian to Cooperate; Release of Custodial Files.
--------------------------------------------------
Upon the payment in full of any Mortgage Loan, or the receipt by the Master
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Master Servicer shall immediately notify the
Custodian by a certification (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 Certificate Account pursuant
to Section 3.02 of the Pooling and Servicing Agreement have been or will be so
deposited) of a Servicing Officer and shall request delivery to it of the
Custodial File. The Custodian agrees, upon receipt of such certification and
request, promptly to release the related Custodial File to the Master Servicer.
From time to time as is appropriate for the servicing or foreclosure
of any Mortgage Loan, the Master Servicer shall deliver to the Custodian a
certificate of a Servicing Officer requesting that possession of all, or any
document constituting part of, the Custodial File be released to the Master
Servicer and certifying as to the reason for such release and that such release
will not invalidate any insurance coverage provided in respect of the Mortgage
Loan. With such certificate, the Master Servicer shall deliver to the Custodian
a receipt signed by a Servicing Officer on behalf of the Master Servicer, and
upon receipt of the foregoing, the Custodian shall deliver the Custodial File or
such document to the Master Servicer. The Master Servicer shall cause each
Custodial File or any document therein so released to be returned to the
Custodian when the need therefor by the Master Servicer no longer exists, unless
(i) the Mortgage
E-2
<PAGE>
Loan has been liquidated and the Liquidation Proceeds relating to the Mortgage
Loan have been deposited in the Certificate Account to the extent required by
the Pooling and Servicing Agreement or (ii) the Custodial 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 Master Servicer has delivered to the
Custodian a certificate of a Servicing Officer certifying as to the name and
address of the Person to which such Custodial File or such document were
delivered and the purpose or purposes of such delivery. In the event of the
liquidation of a Mortgage Loan, the Custodian shall deliver such receipt with
respect thereto to the Master Servicer upon deposit of the related Liquidation
Proceeds in the Certificate Account to the extent required by the Pooling and
Servicing Agreement.
Section 2.6. Assumption Agreements. In the event that any assumption
---------------------
agreement or substitution of liability agreement is entered into with respect to
any Mortgage Loan subject to this Agreement in accordance with the terms and
provisions of the Pooling and Servicing Agreement, the Master Servicer shall
notify the Custodian that such assumption or substitution agreement has been
completed by forwarding to the Custodian the original of such assumption or
substitution agreement, which copy shall be added to the related Custodial File
and, for all purposes, shall be considered a part of such Custodial File to the
same extent as all other documents and instruments constituting parts thereof.
ARTICLE III
Concerning the Custodian
Section 3.1. Custodian a Bailee and Agent of the Trustee. With
-------------------------------------------
respect to each Mortgage Note, Mortgage and other documents constituting each
Custodian File which are delivered to the Custodian, the Custodian is
exclusively the bailee and agent of the Trustee, holds such documents for the
benefit of Certificateholders and undertakes to perform such duties and only
such duties as are specifically set forth in this Agreement. Except upon
compliance with the provisions of Section 2.5 of this Agreement, no Mortgage
Note, Mortgage or other document constituting a part of a Custodial File shall
be delivered by the Custodian to the Seller or the Master Servicer or otherwise
released from the possession of the Custodian.
Section 3.2. Indemnification. The Seller hereby agrees to indemnify
---------------
and hold the Custodian harmless from and against all claims, liabilities,
losses, actions, suits or proceedings at law or in equity, or any other
expenses, fees or charges of any character or nature, which the Custodian may
incur or with which the Custodian may be threatened by reasons of its acting as
custodian under this Agreement, including indemnification of the Custodian
against any and all expenses, including attorney's fees if counsel for the
Custodian has been approved by the Seller, and the cost of defending any action,
suit or proceedings or resisting any claim. Notwithstanding the foregoing, it
is specifically understood and agreed that in the event any such claim,
liability, loss, action, suit or proceeding or other expense, fees, or charge
shall have been caused by reason of any negligent act, negligent failure to act,
or willful misconduct on the part of the Custodian, or which shall constitute a
willful breach of its duties hereunder, the indemnification provisions of this
Agreement shall not apply.
E-3
<PAGE>
Section 3.3. Custodian May Own Certificates. The Custodian in its
------------------------------
individual or any other capacity may become the owner or pledgee of Certificates
with the same rights it would have if it were not Custodian.
Section 3.4. Master Servicer to Pay Custodian's Fees and Expenses.
----------------------------------------------------
The Master Servicer covenants and agrees to pay to the Custodian from time to
time, and the Custodian shall be entitled to, reasonable compensation for all
services rendered by it in the exercise and performance of any of the powers and
duties hereunder of the Custodian, and the Master Servicer will pay or reimburse
the Custodian upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Custodian 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), except any such expense, disbursement or advance as may arise from
its negligence or bad faith.
Section 3.5. Custodian May Resign; Trustee May Remove Custodian. The
--------------------------------------------------
Custodian may resign from the obligations and duties hereby imposed upon it as
such obligations and duties relate to its acting as Custodian of the Mortgage
Loans. Upon receiving such notice of resignation, the Trustee shall either take
custody of the Custodial Files itself and give prompt notice thereof to the
Seller, the Master Servicer and the Custodian or promptly appoint a successor
Custodian by written instrument, in duplicate, one copy of which instrument
shall be delivered to the resigning Custodian and one copy to the successor
Custodian. If the Trustee shall not have taken custody of the Custodial Files
and no successor Custodian shall have been so appointed and have accepted
resignation, the resigning Custodian may petition any court of competent
jurisdiction for the appointment of a successor Custodian.
The Trustee may remove the Custodian at any time. In such event, the
Trustee shall appoint, or petition a court of competent jurisdiction to appoint,
a successor Custodian hereunder. Any successor Custodian shall be a depository
institution subject to supervision or examination by federal or state authority
and shall be able to satisfy the other requirements contained in Section 3.7.
Any resignation or removal of the Custodian and appointment of a
successor Custodian pursuant to any of the provisions of this Section 3.5 shall
become effective upon acceptance of appointment by the successor Custodian. The
Trustee shall give prompt notice to the Seller and the Master Servicer of the
appointment of any successor Custodian. No successor Custodian shall have been
appointed and accepted appointment by the Trustee without the prior approval of
the Seller and the Master Servicer.
Section 3.6. Merger or Consolidation of Custodian. Any Person into
------------------------------------
which the Custodian may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Custodian shall be a party, or any Person succeeding
to the business of the Custodian, shall be the successor of the Custodian
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.
Section 3.7. Representations of the Custodian. The Custodian hereby
--------------------------------
represents that it is a depository institution subject to supervision or
examination by a federal or state
E-4
<PAGE>
authority, has a combined capital and surplus of at least $10,000,000 and is
qualified to do business in the jurisdiction in which it will hold any Custodian
File.
ARTICLE IV
Miscellaneous Provisions
Section 4.1. Notices. All notices, requests, consents and demands
-------
and other communications required under this Agreement or pursuant to any other
instrument or document delivered hereunder shall be in writing and, unless
otherwise specifically provided, may be delivered personally, by telegram or
telex, or by registered or certified mail, postage prepaid, return receipt
requested, at the addresses specified on the signature page hereof (unless
changed by the particular party whose address is stated herein by similar notice
in writing), in which case the notice will be deemed delivered when received.
Section 4.2. Amendments. No modification or amendment of or
----------
supplement to this Agreement shall be valid or effective unless the same is in
writing and signed by all parties hereto, and neither the Seller, the Master
Servicer nor the Trustee shall enter into any amendment hereof except as
permitted by the Pooling and Servicing Agreement. The Trustee shall give prompt
notice to the Custodian of any amendment or supplement to the Pooling and
Servicing Agreement and furnish the Custodian with written copies thereof.
SECTION 4.3. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED A
-------------
CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
Section 4.4. Recordation of Agreement. 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 Master Servicer and at its expense on
direction by the Trustee, but only upon direction accompanied by an Opinion of
Counsel to the effect that such recordation materially and beneficially affects
the interests of the Certificateholders.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
Section 4.5. 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.
E-5
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed as of the date first
above written.
Address: [TRUSTEE]
230 South Tryon Street By:_____________________________________
Charlotte, North Carolina, 28288 Name:___________________________________
Title:__________________________________
Address: NORWEST ASSET SECURITIES
CORPORATION
7485 New Horizon Way
Frederick, Maryland 21703 By:_____________________________________
Name:___________________________________
Title:__________________________________
Address: NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
7485 New Horizon Way
Frederick, Maryland 21703 By:_____________________________________
Name:___________________________________
Title:__________________________________
Address: [CUSTODIAN]
By:_____________________________________
Name:___________________________________
Title:__________________________________
E-6
<PAGE>
STATE OF )
: ss.:
COUNTY OF )
On this ____ day of _________, 19__, before me, a notary public in and
for the State of ____________, personally appeared _______________, known to me
who, being by me duly sworn, did depose and say that he resides at
__________________________; that he is the __________ of Norwest Asset
Securities Corporation a Delaware corporation, one of the parties that executed
the foregoing instrument; and that he signed his name thereto by order of the
Board of Directors of said corporation.
--------------------------------------
Notary Public
[NOTARIAL SEAL]
E-7
<PAGE>
STATE OF )
: ss.:
COUNTY OF )
On this ____ day of _________, 19__, before me, a notary public in and
for the State of ____________, personally appeared _______________, known to me
who, being by me duly sworn, did depose and say that he resides at
__________________________; that he is the __________ of Norwest Bank Minnesota,
National Association, a national banking association, one of the parties that
executed the foregoing instrument; and that he signed his name thereto by order
of the Board of Directors of said corporation.
---------------------------------------
Notary Public
[NOTARIAL SEAL]
E-8
<PAGE>
STATE OF )
: ss.:
COUNTY OF )
On this ___ day of ________, 19__, before me, a notary public in and
for the State of ____________, personally appeared __________ _________, known
to me who, being by me duly sworn, did depose and say that he resides at
__________________________; that he is the ____________________ of [Trustee], a
national banking association, one of the parties that executed the foregoing
instrument; and that he signed his name thereto by order of the Board of
Directors of said association.
------------------------------------------
Notary Public
[NOTARIAL SEAL]
E-9
<PAGE>
STATE OF )
: ss.:
COUNTY OF )
On this ____ day of ________, 19__, before me, a notary public in and
for the State of __________, personally appeared __________ __________, known to
me who, being by me duly sworn, did depose and say that he resides at
__________________________; that he is the _______________________ of
______________________, a _________________________, one of the parties that
executed the foregoing instrument; and that he signed his name thereto by order
of the Board of Directors of said association.
------------------------------------
Notary Public
[NOTARIAL SEAL]
E-10
<PAGE>
EXHIBIT F-1
[Schedule of Mortgage Loans Serviced by Norwest Mortgage
from locations other than Frederick, Maryland]
<PAGE>
EXHIBIT F-2
[Schedule of Mortgage Loans Serviced by Norwest Mortgage in Frederick, Maryland]
<PAGE>
EXHIBIT F-3
[Schedule of Mortgage Loans Serviced by Other Servicers]
<PAGE>
EXHIBIT G
REQUEST FOR RELEASE
(for Trustee/Custodian)
Loan Information
- ----------------
Name of Mortgagor: _____________________________
Servicer
Loan No.: _____________________________
Custodian/Trustee
- -----------------
Name: _____________________________
Address: _____________________________
_____________________________
Custodian/Trustee
Mortgage File No.: _____________________________
Seller
- ------
Name: _____________________________
Address: _____________________________
_____________________________
Certificates: Mortgage Pass-Through Certificates,
Series 199 -
The undersigned Master Servicer hereby acknowledges that it has
received from [Trustee], as Trustee for the Holders of Mortgage Pass-Through
Certificates, Series 199 - , the documents referred to below (the "Documents").
All capitalized terms not otherwise defined in this Request for Release shall
have the meanings given them in the Pooling and Servicing Agreement dated as of
, 199 (the "Pooling and Servicing Agreement") among the Trustee, the Seller and
the Master Servicer.
( ) Promissory Note dated ______________, 199__, in the original principal sum
of $___________, made by ____________________, payable to, or endorsed to
the order of, the Trustee.
<PAGE>
( ) Mortgage recorded on _____________________ as instrument no.
______________ in the County Recorder's Office of the County of
____________________, State of _______________________ in book/reel/docket
____________________ of official records at page/image ____________.
( ) Deed of Trust recorded on ____________________ as instrument no.
_________________ in the County Recorder's Office of the County of
___________________, State of _________________ in book/reel/docket
____________________ of official records at page/image ____________.
( ) Assignment of Mortgage or Deed of Trust to the Trustee, recorded on
______________________________ as instrument no. ______________ in the
County Recorder's Office of the County of ______________________, State of
_____________________ in book/reel/docket ____________________ of official
records at page/image ____________.
( ) Other documents, including any amendments, assignments or other
assumptions of the Mortgage Note or Mortgage.
( ) _____________________________________________
( ) _____________________________________________
( ) _____________________________________________
( ) _____________________________________________
The undersigned Master Servicer hereby acknowledges and agrees as follows:
(1) The Master Servicer shall hold and retain possession of the
Documents in trust for the benefit of the Trustee, solely for the purposes
provided in the Agreement.
(2) The Master Servicer shall not cause or permit the Documents to
become subject to, or encumbered by, any claim, liens, security interest,
charges, writs of attachment or other impositions nor shall the Master
Servicer assert or seek to assert any claims or rights of setoff to or
against the Documents or any proceeds thereof.
(3) The Master Servicer shall return the Documents to the Trustee when
the need therefor no longer exists, unless the Mortgage Loan relating to
the Documents has been liquidated and the proceeds thereof have been
remitted to the Certificate Account and except as expressly provided in the
Agreement.
(4) The Documents and any proceeds thereof, including any proceeds of
proceeds, coming into the possession or control of the Master Servicer
shall at all times be earmarked for the account of the Trustee and the
Master Servicer shall keep the Documents and any proceeds separate and
distinct from all other property in the Master Servicer's possession,
custody or control.
G-2
<PAGE>
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
By: __________________________
Title: ________________________
Date: ________________, 19__
G-3
<PAGE>
EXHIBIT H
AFFIDAVIT PURSUANT TO SECTION 860E(e)(4) OF
THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED, AND FOR NON-ERISA INVESTORS
STATE OF )
) ss:
COUNTY OF )
[NAME OF OFFICER], being first duly sworn, deposes and says:
1. That he is [Title of Officer] of [Name of Purchaser] (the
"Purchaser"), a [description of type of entity] duly organized and existing
under the laws of the [State of _______] [United States], on behalf of which he
makes this affidavit.
2. That the Purchaser's Taxpayer Identification Number is [ ].
3. That the Purchaser is not a "disqualified organization" within the
meaning of Section 860E(e)(5),of the Internal Revenue Code of 1986, as amended
(the "Code"), or an ERISA Prohibited Holder, and will not be a "disqualified
organization" or an ERISA Prohibited Holder, as of [date of transfer], and that
the Purchaser is not acquiring Norwest Asset Securities Corporation Mortgage
Pass-Through Certificates, Series 199 - , Class [A-R][A-LR] Certificate (the
"Class [A-R][A-LR] Certificate") for the account of, or as agent (including a
broker, nominee, or other middleman) for, any person or entity from which it has
not received an affidavit substantially in the form of this affidavit. For
these purposes, a "disqualified organization" means the United States, any state
or political subdivision thereof, any foreign government, any international
organization, any agency or instrumentality of any of the foregoing (other than
an instrumentality if all of its activities are subject to tax and a majority of
its board of directors is not selected by such governmental entity), any
cooperative organization furnishing electric energy or providing telephone
service to persons in rural areas as described in Code Section 1381(a)(2)(C), or
any organization (other than a farmers' cooperative described in Code Section
521) that is exempt from taxation under the Code unless such organization is
subject to the tax on unrelated business income imposed by Code Section 511.
For these purposes, an "ERISA Prohibited Holder" means an employee benefit plan
or other retirement arrangement subject to Title I of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or Code Section 4975 or a
governmental plan, as defined in Section 3(32) of ERISA, subject to any federal,
state or local law which is, to a material extent, similar to the foregoing
provisions of ERISA or the Code (collectively, a "Plan") or a Person acting on
behalf of or investing the assets of such a Plan.
4. That the Purchaser historically has paid its debts as they have
come due and intends to pay its debts as they come due in the future and the
Purchaser intends to pay taxes associated with holding the Class [A-R][A-LR]
Certificate as they become due.
<PAGE>
5. That the Purchaser understands that it may incur tax liabilities
with respect to the Class [A-R][A-LR] Certificate in excess of cash flows
generated by the Class [A-R][A-LR] Certificate.
6. That the Purchaser will not transfer the Class [A-R][A-LR]
Certificate to any person or entity from which the Purchaser has not received an
affidavit substantially in the form of this affidavit and as to which the
Purchaser has actual knowledge that the requirements set forth in paragraph 3, 4
or 7 hereof are not satisfied or that the Purchaser has reason to know does not
satisfy the requirements set forth in paragraph 4 hereof.
7. That the Purchaser (i) is a U.S. Person or (ii) is a person other
than a U.S. Person (a "Non-U.S. Person") that holds the Class [A-R][A-LR]
Certificate in connection with the conduct of a trade or business within the
United States and has furnished the transferor and the Trustee with an effective
Internal Revenue Service Form 4224 or successor form at the time and in the
manner required by the Code or (iii) is a Non-U.S. Person that has delivered to
both the transferor and the Trustee an opinion of a nationally recognized tax
counsel to the effect that the transfer of the Class [A-R][A-LR] Certificate to
it is in accordance with the requirements of the Code and the regulations
promulgated thereunder and that such transfer of the Class [A-R][A-LR]
Certificate will not be disregarded for federal income tax purposes. "U.S.
Person" means a citizen or resident of the United States, a corporation,
partnership (except to the extent provided in applicable Treasury regulations)
or other entity created or organized in or under the laws of the United States
or any political subdivision thereof, an estate that is subject to U.S. federal
income tax regardless of the source of its income or a trust if a court within
the United States is able to exercise primary supervision over the
administration of such trust, and one or more such U.S. Persons have the
authority to control all substantial decisions of such trust (or, to the extent
provided in applicable Treasury regulations, certain trusts in existence on
August 20, 1996 which are eligible to elect to be treated as U.S. Persons).
8. That the Purchaser agrees to such amendments of the Pooling and
Servicing Agreement as may be required to further effectuate the restrictions on
transfer of the Class [A-R][A-LR] Certificate to such a "disqualified
organization," an agent thereof, an ERISA Prohibited Holder or a person that
does not satisfy the requirements of paragraph 4, paragraph 5 and paragraph 7
hereof.
9. That the Purchaser consents to the designation of the Master
Servicer as its agent to act as "tax matters person" of the [Upper-Tier
REMIC][Lower-Tier REMIC] pursuant to Section 3.01 of the Pooling and Servicing
Agreement, and if such designation is not permitted by the Code and applicable
law, to act as tax matters person if requested to do so.
H-2
<PAGE>
IN WITNESS WHEREOF, the Purchaser has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by its
[Title of Officer] this ___ day of __________, 19 __.
[NAME OF PURCHASER]
BY:__________________________
[Name of Officer]
[Title of Officer]
Personally appeared before me the above-named [Name of Officer], known
or proved to me to be the same person who executed the foregoing instrument and
to be the [Title of Officer], of the Purchaser, and acknowledged to me that he
[she] executed the same as his [her] free act and deed and the free act and deed
of the Purchaser.
Subscribed and sworn before me this __ day of __________, 19 __.
_____________________________
NOTARY PUBLIC
COUNTY OF____________________
STATE OF_____________________
MY COMMISSION EXPIRES THE __ DAY OF __________, 19__.
H-3
<PAGE>
EXHIBIT I
[Letter from Transferor of Class [A-R][A-LR] Certificate]
[Date]
[Trustee]
[Address]
Re: Norwest Asset Securities Corporation,
Series 199 - , Class [A-R][A-LR]
-------------------------------------
Ladies and Gentlemen:
[Transferor] has reviewed the attached affidavit of [Transferee], and
has no actual knowledge that such affidavit is not true and has no reason to
know that the information contained in paragraph 4 thereof is not true.
Very truly yours,
[Transferor]
______________________
<PAGE>
EXHIBIT J
NORWEST ASSET SECURITIES CORPORATION
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 199 -
CLASS [A-PO][B-4][B-5][B-6] CERTIFICATES
TRANSFEREE'S LETTER
-------------------
_________________ __, ____
[Trustee]
[Address]
Norwest Asset Securities Corporation
7485 New Horizon Way
Frederick, Maryland 21703
The undersigned (the "Purchaser") proposes to purchase Norwest Asset
Securities Corporation Mortgage Pass-Through Certificates, Series 199 - , Class
[A-PO][B-4][B-5][B-6] Certificates (the "Class [A-PO][B-4][B-5][B-6]
Certificates") in the principal amount of $___________. In doing so, the
Purchaser hereby acknowledges and agrees as follows:
Section 1. Definitions. Each capitalized term used herein and not
-----------
otherwise defined herein shall have the meaning ascribed to it in the Pooling
and Servicing Agreement, dated as of , 199 (the "Pooling and Servicing
Agreement") among Norwest Asset Securities Corporation, as seller (the
"Seller"), Norwest Bank Minnesota, National Association, as master servicer (the
"Master Servicer") and [Trustee], as trustee (the "Trustee"), of Norwest Asset
Securities Corporation Mortgage Pass-Through Certificates, Series 199 - .
Section 2. Representations and Warranties of the Purchaser. In
-----------------------------------------------
connection with the proposed transfer, the Purchaser represents and warrants to
the Seller, the Master Servicer and the Trustee that:
(a) The Purchaser is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which the Purchaser is
organized, is authorized to
<PAGE>
invest in the Class [A-PO][B-4][B-5][B-6] Certificates, and to enter into
this Agreement, and duly executed and delivered this Agreement.
(b) The Purchaser is acquiring the Class [A-PO][B-4][B-5][B-6]
Certificates for its own account as principal and not with a view to the
distribution thereof, in whole or in part.
[(c) The Purchaser has knowledge of financial and business matters and
is capable of evaluating the merits and risks of an investment in the Class
[A-PO][B-4][B-5][B-6] Certificates; the Purchaser has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision; and the Purchaser is able to bear the
economic risk of an investment in the Class [A-PO][B-4][B-5][B-6]
Certificates and can afford a complete loss of such investment.]
[(c) The Purchaser is a "Qualified Institutional Buyer" within the
meaning of Rule 144A of the Act.]
(d) The Purchaser confirms that (a) it has received and reviewed a copy
of the Private Placement Memorandum dated __________ __, 19__, relating to
the Class [A-PO][B-4][B-5][B-6] Certificates and reviewed, to the extent it
deemed appropriate, the documents attached thereto or incorporated by
reference therein, (b) it has had the opportunity to ask questions of, and
receive answers from the Seller concerning the Class [A-PO][B-4][B-5][B-6]
Certificates and all matters relating thereto, and obtain any additional
information (including documents) relevant to its decision to purchase the
Class [A-PO][B-4][B-5][B-6] Certificates that the Seller possesses or can
possess without unreasonable effort or expense and (c) it has undertaken
its own independent analysis of the investment in the Class [A-PO][B-4][B-
5][B-6] Certificates. The Purchaser will not use or disclose any
information it receives in connection with its purchase of the Class [A-
PO][B-4][B-5][B-6] Certificates other than in connection with a subsequent
sale of Class [A-PO][B-4][B-5][B-6] Certificates.
(e) Either (i) the Purchaser is not an employee benefit plan or other
retirement arrangement subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended, ("ERISA"), or Section 4975 of the
Internal Revenue Code of 1986, as amended (the "Code"), or a governmental
plan, as defined in Section 3(32) of ERISA subject to any federal, state or
local law ("Similar Law") which is, to a material extent, similar to the
foregoing provisions of ERISA or the Code (collectively, a "Plan"), an
agent acting on behalf of a Plan, or a person utilizing the assets of a
Plan or (ii) [for Class [B-4][B-5][B-6] Certificates only] if the Purchaser
is an insurance company, (A) the source of funds used to purchase the Class
[B-4][B-5][B-6] Certificate is an "insurance company general account" (as
such term is defined in Section V(e) of Prohibited Transaction Class
Exemption 95-60 ("PTE 95-60"), 60 Fed. Reg. 35925 (July 12, 1995), (B)
there is no Plan with respect to which the amount of such general account's
reserves and liabilities for the contract(s) held by or on behalf of such
Plan and all other Plans maintained by the same employer (or affiliate
thereof as defined in Section V(a)(1) of PTE 95-60) or by the same employee
organization exceeds 10% of the total of all reserves and liabilities of
such
J-2
<PAGE>
general account (as such amounts are determined under Section I(a) of PTE
95-60) at the date of acquisition and (C) the purchase and holding of such
Class [B-4][B-5][B-6] Certificates are covered by Sections I and III of PTE
95-60 or (iii) the Purchaser has provided (a) a "Benefit Plan Opinion"
satisfactory to the Seller and the Trustee of the Trust Estate and (b) such
other opinions of counsel, officers' certificates and agreements as the
Seller or the Master Servicer may have required. A Benefit Plan Opinion is
an opinion of counsel to the effect that the proposed transfer will not
cause the assets of the Trust Estate to be regarded as "plan assets" and
subject to the prohibited transaction provisions of ERISA, the Code or
Similar Law and will not subject the Trustee, the Trustee, the Seller or
the Master Servicer to any obligation in addition to those undertaken in
the Pooling and Servicing Agreement (including any liability for civil
penalties or excise taxes imposed pursuant to ERISA, Section 4975 of the
Code or Similar Law).
(f) If the Purchaser is a depository institution subject to the
jurisdiction of the Office of the Comptroller of the Currency ("OCC"), the
Board of Governors of the Federal Reserve System ("FRB"), the Federal
Deposit Insurance Corporation ("FDIC"), the Office of Thrift Supervision
("OTS") or the National Credit Union Administration ("NCUA"), the Purchaser
has reviewed the "Supervisory Policy Statement on Securities Activities"
dated January 28, 1992 of the Federal Financial Institutions Examination
Council and the April 15, 1994 Interim Revision thereto as adopted by the
OCC, FRB, FDIC, OTS and NCUA (with modifications as applicable), as
appropriate, other applicable investment authority, rules, supervisory
policies and guidelines of these agencies and, to the extent appropriate,
state banking authorities and has concluded that its purchase of the Class
[A-PO][B-4][B-5][B-6] Certificates is in compliance therewith.
Section 3. Transfer of Class [A-PO][B-4][B-5][B-6] Certificates.
----------------------------------------------------
(a) The Purchaser understands that the Class [A-PO][B-4][B-5][B-6]
Certificates have not been registered under the Securities Act of 1933 (the
"Act") or any state securities laws and that no transfer may be made unless
the Class [A-PO][B-4][B-5][B-6] Certificates are registered under the Act
and applicable state law or unless an exemption from registration is
available. The Purchaser further understands that neither the Seller, the
Master Servicer nor the Trustee is under any obligation to register the
Class [A-PO][B-4][B-5][B-6] Certificates or make an exemption available.
In the event that such a transfer is to be made in reliance upon an
exemption from the Act or applicable state securities laws, (i) the Trustee
shall require, in order to assure compliance with such laws, that the
Certificateholder's prospective transferee certify to the Seller and the
Trustee as to the factual basis for the registration or qualification
exemption relied upon, and (ii) unless the transferee is a "Qualified
Institutional Buyer" within the meaning of Rule 144A of the Act, the
Trustee or the Seller may, if such transfer is made within three years from
the later of (a) the Closing Date or (b) the last date on which the Seller
or any affiliate thereof was a holder of the Certificates proposed to be
transferred, require an Opinion of Counsel that such transfer may be made
pursuant to an exemption from the Act and state securities laws, which
Opinion of Counsel shall not be an expense of the Trustee, the Master
Servicer or the Seller. Any such Certificateholder desiring to effect such
transfer shall, and does hereby agree to, indemnify the Trustee, the Master
Servicer, any
J-3
<PAGE>
Paying Agent acting on behalf of the Trustee and the Seller against any
liability that may result if the transfer is not so exempt or is not made
in accordance with such federal and state laws.
(b) No transfer of a Class [A-PO][B-4][B-5][B-6] Certificate shall be
made unless the transferee provides the Seller and the Trustee with a
Transferee's Letter, substantially in the form of this Agreement.
(c) The Purchaser acknowledges that its Class [A-PO][B-4][B-5][B-6]
Certificates bear a legend setting forth the applicable restrictions on
transfer.
J-4
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
validly executed by its duly authorized representative as of the day and the
year first above written.
[PURCHASER]
By: ______________________________
Its: ______________________________
J-5
<PAGE>
EXHIBIT K
NORWEST ASSET SECURITIES CORPORATION
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 199 -
CLASS [B-1] [B-2] [B-3] CERTIFICATES
TRANSFEREE'S LETTER
-------------------
________________ __, ____
[Trustee]
[Address]
Norwest Asset Securities Corporation
7485 New Horizon Way
Frederick, Maryland 21703
The undersigned (the "Purchaser") proposes to purchase Norwest Asset
Securities Corporation Mortgage Pass-Through Certificates, Series 199 - , Class
[B-1][B-2][B-3] Certificates (the "Class [B-1][B-2][B-3] Certificates") in the
principal amount of $___________. In doing so, the Purchaser hereby
acknowledges and agrees as follows:
Section 1. Definitions. Each capitalized term used herein and not
-----------
otherwise defined herein shall have the meaning ascribed to it in the Pooling
and Servicing Agreement, dated as of , 199 (the "Pooling and Servicing
Agreement") among Norwest Asset Securities Corporation, as seller (the
"Seller"), Norwest Bank Minnesota, National Association, as master servicer (the
"Master Servicer") and [Trustee], as trustee (the "Trustee") of Norwest Asset
Securities Corporation Mortgage Pass-Through Certificates, Series 199 - .
Section 2. Representations and Warranties of the Purchaser. In
-----------------------------------------------
connection with the proposed transfer, the Purchaser represents and warrants to
the Seller, the Master Servicer and the Trustee that:
<PAGE>
Either (i) the Purchaser is not an employee benefit plan or other
retirement arrangement subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended, ("ERISA"), or Section 4975 of the
Internal Revenue Code of 1986, as amended (the "Code"), or a governmental
plan, as defined in Section 3(32) of ERISA subject to any federal, state or
local law ("Similar Law") which is, to a material extent, similar to the
foregoing provisions of ERISA or the Code (collectively, a "Plan"), an
agent acting on behalf of a Plan, or a person utilizing the assets of a
Plan or (ii) if the Purchaser is an insurance company, (A) the source of
funds used to purchase the Class [B-1] [B-2] [B-3] Certificate is an
"insurance company general account" (as such term is defined in Section
V(e) of Prohibited Transaction Class Exemption 95-60 ("PTE 95-60"), 60 Fed.
Reg. 35925 (July 12, 1995), (B) there is no Plan with respect to which the
amount of such general account's reserves and liabilities for the
contract(s) held by or on behalf of such Plan and all other Plans
maintained by the same employer (or affiliate thereof as defined in Section
V(a)(1) of PTE 95-60) or by the same employee organization, exceed 10% of
the total of all reserves and liabilities of such general account (as such
amounts are determined under Section I(a) of PTE 95-60) at the date of
acquisition and (C) the purchase and holding of such Class [B-1][B-2][B-3]
Certificate are covered by Sections I and III of PTE 95-60 or (iii) the
Purchaser has provided (a) a "Benefit Plan Opinion" satisfactory to the
Seller and the Trustee of the Trust Estate and (b) such other opinions of
counsel, officers' certificates and agreements as the Seller or the Master
Servicer may have required. A Benefit Plan Opinion is an opinion of
counsel to the effect that the proposed transfer will not cause the assets
of the Trust Estate to be regarded as "plan assets" and subject to the
prohibited transaction provisions of ERISA, the Code or Similar Law and
will not subject the Trustee, the Seller or the Master Servicer to any
obligation in addition to those undertaken in the Pooling and Servicing
Agreement (including any liability for civil penalties or excise taxes
imposed pursuant to ERISA, Section 4975 of the Code or Similar Law).
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be validly
executed by its duly authorized representative as of the day and the year first
above written.
[PURCHASER]
By: _____________________________
Its: _____________________________
[Reserved]
K-2
<PAGE>
EXHIBIT L
SERVICING AGREEMENTS
[Insert Servicing Agreements]
<PAGE>
EXHIBIT M
[FORM OF SPECIAL SERVICING AGREEMENT]
SPECIAL SERVICING AND COLLATERAL FUND AGREEMENT
-----------------------------------------------
This SPECIAL SERVICING AND COLLATERAL FUND AGREEMENT (the "Agreement") is
made and entered into as of , between Norwest Bank Minnesota, National
Association (the "Company" and "Norwest Bank") and (the "Purchaser").
PRELIMINARY STATEMENT
__________ is the holder of the entire interest in Norwest Asset Securities
Corporation Mortgage Pass-Through Certificates, Series 199 - , Class ____ (the
"Class B Certificates"). The Class B Certificates were issued pursuant to a
Pooling and Servicing Agreement dated as of , 199 among Norwest Asset
Securities Corporation, as seller (the "Seller"), Norwest Bank Minnesota,
National Association, as Master Servicer and [Trustee], as Trustee.
___________ intends to resell all of the Class B Certificates directly to
the Purchaser on or promptly after the date hereof.
In connection with such sale, the parties hereto have agreed that the
Company will cause, to the extent that the Company as Master Servicer is granted
such authority in the related Servicing Agreements, the related servicers (each
a related "Servicer"), which service the Mortgage Loans which comprise the Trust
Estate related to the above referenced series under the related servicing
agreements (each a related "Servicing Agreement"), to engage in certain special
servicing procedures relating to foreclosures for the benefit of the Purchaser,
and that the Purchaser will deposit funds in a collateral fund to cover any
losses attributable to such procedures as well as all advances and costs in
connection therewith, as set forth herein.
In consideration of the mutual agreements herein contained, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Purchaser
agree that the following provisions shall become effective and shall be binding
on and enforceable by the Company and the Purchaser:
ARTICLE I
DEFINITIONS
Section 1.01 Defined Terms
-------------
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
<PAGE>
Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a day
------------
on which banking institutions in the State of New York are required or
authorized by law or executive order to be closed.
Collateral Fund: The fund established and maintained pursuant to Section
---------------
3.01 hereof.
Collateral Fund Permitted Investments: Either (i) obligations of, or
-------------------------------------
obligations fully guaranteed as to 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, (ii) a money market fund
rated in the highest rating category by a nationally recognized rating agency
selected by the Company, (iii) cash, (iv) mortgage pass-through certificates
issued or guaranteed by Government National Mortgage Association, FNMA or FHLMC,
(v) commercial paper (including both non-interest-bearing discount obligations
and interest-bearing obligations payable on demand or on a specified date), the
issuer of which may be an affiliate of the Company, having at the time of such
investment a rating of at least by (" ") or at least by ("
") or (vi) demand and time deposits in, certificates of deposit of, any
depository institution or trust company (which may be an affiliate of the
Company) incorporated under the laws of the United States of America or any
state thereof and subject to supervision and examination by federal and/or state
banking authorities, so long as at the time of such investment either (x) the
long-term debt obligations of such depository institution or trust company have
a rating of at least by or , (y) the certificate of deposit or other
unsecured short-term debt obligations of such depository institution or trust
company have a rating of at least by or by or (z) the depository
institution or trust company is one that is acceptable to either or and,
for each of the preceding clauses (i), (iv), (v) and (vi), the maturity thereof
shall be not later than the earlier to occur of (A) 30 days from the date of the
related investment and (B) the next succeeding Distribution Date as defined in
the related Pooling and Servicing Agreement.
Commencement of Foreclosure: The first official action required under local
---------------------------
law in order to commence foreclosure proceedings or to schedule a trustee's sale
under a deed of trust, including (i) in the case of a mortgage, any filing or
service of process necessary to commence an action to foreclose, or (ii) in the
case of a deed of trust, posting, the publishing, filing or delivery of a notice
of sale, but not including in either case (x) any notice of default, notice of
intent to foreclose or sell or any other action prerequisite to the actions
specified in (i) or (ii) above, (y) the acceptance of a deed-in-lieu of
foreclosure (whether in connection with a sale of the related property or
otherwise) or (z) initiation and completion of a short pay-off.
Current Appraisal: With respect to any Mortgage Loan as to which the
-----------------
Purchaser has made an Election to Delay Foreclosure, an appraisal of the related
Mortgaged Property obtained by the Purchaser at its own expense from an
independent appraiser (which shall not be an affiliate of the Purchaser)
acceptable to the Company as nearly contemporaneously as practicable to the time
of the Purchaser's election, prepared based on the Company's customary
requirements for such appraisals.
Election to Delay Foreclosure: Any election by the Purchaser to delay the
-----------------------------
Commencement of Foreclosure, made in accordance with Section 2.02(b).
M-2
<PAGE>
Election to Foreclose: Any election by the Purchaser to proceed with the
---------------------
Commencement of Foreclosure, made in accordance with Section 2.03(a).
Monthly Advances: Principal and interest advances and servicing advances
----------------
including costs and expenses of foreclosure.
Required Collateral Fund Balance: As of any date of determination, an
--------------------------------
amount equal to the aggregate of all amounts previously required to be deposited
in the Collateral Fund pursuant to Section 2.02(d) (after adjustment for all
withdrawals and deposits pursuant to Section 2.02(e)) and Section 2.03(b) (after
adjustment for all withdrawals and deposits pursuant to Section 2.03(c)) and
Section 3.02 to be reduced by all withdrawals therefrom pursuant to Section
2.02(g) and Section 2.03(d).
Section 1.02 Definitions Incorporated by Reference
-------------------------------------
All capitalized terms not otherwise defined in this Agreement shall have
the meanings assigned in the Pooling and Servicing Agreement.
ARTICLE II
SPECIAL SERVICING PROCEDURES
Section 2.01 Reports and Notices
-------------------
(a) In connection with the performance of its duties under the Pooling and
Servicing Agreement relating to the realization upon defaulted Mortgage Loans,
the Company as Master Servicer shall provide to the Purchaser the following
notices and reports:
(i) Within five Business Days after each Distribution Date (or
included in or with the monthly statements to Certificateholders pursuant
to the Pooling and Servicing Agreement), the Company, shall provide to the
Purchaser a report, using the same methodology and calculations in its
standard servicing reports, indicating for the Trust Estate the number of
Mortgage Loans that are (A) thirty days, (B) sixty days, (C) ninety days or
more delinquent or (D) in foreclosure, and indicating for each such
Mortgage Loan the loan number and outstanding principal balance.
(ii) Prior to the Commencement of Foreclosure in connection with
any Mortgage Loan, the Company shall cause (to the extent that the Company
as Master Servicer is granted such authority in the related Servicing
Agreement) the Servicer to provide the Purchaser with a notice (sent by
telecopier) of such proposed and imminent foreclosure, stating the loan
number and the aggregate amount owing under the Mortgage Loan. Such notice
may be provided to the Purchaser in the form of a copy of a referral letter
from such Servicer to an attorney requesting the institution of
foreclosure.
(b) If requested by the Purchaser, the Company shall cause the Servicer (to
the extent that the Company as Master Servicer is granted such authority in the
related Servicing
M-3
<PAGE>
Agreement) to make its servicing personnel available (during their normal
business hours) to respond to reasonable inquiries, by phone or in writing by
facsimile, electronic, or overnight mail transmission, by the Purchaser in
connection with any Mortgage Loan identified in a report under subsection (a)
(i) (B), (a) (i) (C), (a) (i) (D), or (a) (ii) which has been given to the
Purchaser; provided, that (1) the related Servicer shall only be required to
provide information that is readily accessible to its servicing personnel and is
non-confidential and (2) the related Servicer shall respond within five Business
Days orally or in writing by facsimile transmission.
(c) In addition to the foregoing, the Company shall cause the Servicer
(to the extent that the Company as Master Servicer is granted such authority in
the related Servicing Agreement) to provide to the Purchaser such information as
the Purchaser may reasonably request provided, however, that such information is
consistent with normal reporting practices, concerning each Mortgage Loan that
is at least ninety days delinquent and each Mortgage Loan which has become real
estate owned, through the final liquidation thereof; provided, that the related
Servicer shall only be required to provide information that is readily
accessible to its servicing personnel and is non-confidential provided, however,
that the Purchaser will reimburse the Company and the related Servicer for any
out of pocket expenses.
Section 2.02 Purchaser's Election to Delay Foreclosure Proceedings
-----------------------------------------------------
(a) The Purchaser shall be deemed to direct the Company to direct (to
the extent that the Company as Master Servicer is granted such authority in the
related Servicing Agreement) the related Servicer that in the event that the
Company does not receive written notice of the Purchaser's election pursuant to
subsection (b) below within 24 hours (exclusive of any intervening non-Business
Days) of transmission of the notice provided by the Company under Section 2.01
(a) (ii) subject to extension as set forth in Section 2.02(b), the related
Servicer may proceed with the Commencement of Foreclosure in respect of such
Mortgage Loan in accordance with its normal foreclosure policies without further
notice to the Purchaser. Any foreclosure that has been initiated may be
discontinued (i) without notice to the Purchaser if the Mortgage Loan has been
brought current or if a refinancing or prepayment occurs with respect to the
Mortgage Loan (including by means of a short payoff approved by the related
Servicer) or (ii) if the related Servicer has reached the terms of a forbearance
agreement with the borrower. In the latter case, the related Servicer may
complete such forbearance agreement unless instructed otherwise by the Purchaser
within two Business Days notification.
(b) In connection with any Mortgage Loan with respect to which a
notice under Section 2.01(a)(ii) has been given to the Purchaser, the Purchaser
may elect to instruct the Company to cause, to the extent that the Company as
Master Servicer is granted such authority in the related Servicing Agreement,
the related Servicer to delay the Commencement of Foreclosure until such time as
the Purchaser determines that the related Servicer may proceed with the
Commencement of Foreclosure. Such election must be evidenced by written notice
received within 24 hours (exclusive of any intervening non-Business Days) of
transmission of the notice provided by the Company under Section 2.01(a)(ii).
Such 24 hour period shall be extended for no longer than an additional four
Business Days after the receipt of the information if the Purchaser requests
additional information related to such foreclosure; provided, however, that the
Purchaser will have at least one Business Day to respond to any requested
additional information. Any such
M-4
<PAGE>
additional information shall be provided only to the extent it (i) is not
confidential in nature and (ii) is obtainable by the related Servicer from
existing reports, certificates or statements or is otherwise readily accessible
to its servicing personnel. The Purchaser agrees that it has no right to deal
with the mortgagor during such period. However, if such servicing activities
include acceptance of a deed-in-lieu of foreclosure or short payoff, the
Purchaser will be notified and given two Business Days to respond.
(c) With respect to any Mortgage Loan as to which the Purchaser has
made an Election to Delay Foreclosure, the Purchaser shall obtain a Current
Appraisal as soon as practicable, but in no event more than 15 business days
thereafter, and shall provide the Company with a copy of such Current Appraisal.
(d) Within two Business Days of making any Election to Delay
Foreclosure, the Purchaser shall remit by wire transfer to the Company, for
deposit in the Collateral Fund, an amount, as calculated by the Company, equal
to the sum of (i) 125% of the greater of the unpaid principal balance of the
Mortgage Loan and the value shown in the Current Appraisal referred to in
subsection (c) above (or, if such Current Appraisal has not yet been obtained,
the Company's estimate thereof, in which case the required deposit under this
subsection shall be adjusted upon obtaining such Current Appraisal), and (ii)
three months' interest on the Mortgage Loan at the applicable Mortgage Interest
Rate. If any Election to Delay Foreclosure extends for a period in excess of
three months (such excess period being referred to herein as the "Excess
Period"), within two Business Days the Purchaser shall remit by wire transfer in
advance to the Company for deposit in the Collateral Fund the amount of each
additional month's interest, as calculated by the Company, equal to interest on
the Mortgage Loan at the applicable Mortgage Interest Rate for the Excess
Period. The terms of this Agreement will no longer apply to the servicing of
any Mortgage Loan upon the failure of the Purchaser to deposit any of the above
amounts relating to the Mortgage Loan within two Business Days of the Election
to Delay Foreclosure or within two Business Days of the commencement of the
Excess Period subject to Section 3.01.
(e) With respect to any Mortgage Loan as to which the Purchaser has
made an Election to Delay Foreclosure, the Company may withdraw from the
Collateral Fund from time to time amounts necessary to reimburse the related
Servicer for all related Monthly Advances and Liquidation Expenses thereafter
made by such Servicer in accordance with the Pooling and Servicing Agreement and
the related Servicing Agreement. To the extent that the amount of any such
Liquidation Expenses is determined by the Company based on estimated costs, and
the actual costs are subsequently determined to be higher, the Company may
withdraw the additional amount from the Collateral Fund. In the event that the
Mortgage Loan is brought current by the mortgagor and the foreclosure action is
discontinued, the amounts so withdrawn from the Collateral Fund shall be
redeposited if and to the extent that reimbursement therefor from amounts paid
by the mortgagor is not prohibited pursuant to the Pooling and Servicing
Agreement or the related Servicing Agreement, applicable law or the related
mortgage note. Except as provided in the preceding sentence, amounts withdrawn
from the Collateral Fund to cover Monthly Advances and Liquidation Expenses
shall not be redeposited therein or otherwise reimbursed to the Purchaser. If
and when any such Mortgage Loan is brought current by the mortgagor, all amounts
remaining in the Collateral Fund in respect of such Mortgage Loan (after
M-5
<PAGE>
adjustment for all permitted withdrawals and deposits pursuant to this
subsection) shall be released to the Purchaser.
(f) With respect to any Mortgage Loan as to which the Purchaser has
made an Election to Delay Foreclosure, the related Servicer shall continue to
service the Mortgage Loan in accordance with its customary procedures (other
than the delay in Commencement of Foreclosure as provided herein). If and when
the Purchaser shall notify the Company that it believes that it is appropriate
to do so, the related Servicer may proceed with the Commencement of Foreclosure.
In any event, if the Mortgage Loan is not brought current by the mortgagor by
the time the loan becomes 6 months delinquent, the Purchaser's election shall no
longer be effective and at the Purchaser's option, either (i) the Purchaser
shall purchase the Mortgage Loan from the related Trust Estate at a purchase
price equal to the fair market value as shown on the Current Appraisal, to be
paid by (x) applying any balance in the Collateral Fund to such to such purchase
price, and (y) to the extent of any deficiency, by wire transfer of immediately
available funds from the Purchaser to the Company for deposit in the related
Certificate Account; or (ii) the related Servicer shall proceed with the
Commencement of Foreclosure.
(g) Upon the occurrence of a liquidation with respect to any Mortgage
Loan as to which the Purchaser made an Election to Delay Foreclosure and as to
which the related Servicer proceeded with the Commencement of Foreclosure in
accordance with subsection (f) above, the Company shall calculate the amount, if
any, by which the value shown on the Current Appraisal obtained under subsection
(c) exceeds the actual sales price obtained for the related Mortgaged Property
(net of Liquidation Expenses and accrued interest related to the extended
foreclosure period), and the Company shall withdraw the amount of such excess
from the Collateral Fund, shall remit the same to the Trust Estate and in its
capacity as Master Servicer shall apply such amount as additional Liquidation
Proceeds pursuant to the Pooling and Servicing Agreement. After making such
withdrawal, all amounts remaining in the Collateral Fund in respect of such
Mortgage Loan (after adjustment for all permitted withdrawals and deposits
pursuant to this Agreement) shall be released to the Purchaser.
Section 2.03 Purchaser's Election to Commence Foreclosure Proceedings
---------------------------------------------------------
(a) In connection with any Mortgage Loan identified in a report under
Section 2.01(a)(i)(B), the Purchaser may elect to instruct the Company to cause,
to the extent that the Company as Master Servicer is granted such authority in
the related Servicing Agreement, the related Servicer to proceed with the
Commencement of Foreclosure as soon as practicable. Such election must be
evidenced by written notice received by the Company by 5:00 p.m., New York City
time, on the third Business Day following the delivery of such report under
Section 2.01(a)(i).
(b) Within two Business Days of making any Election to Foreclose, the
Purchaser shall remit to the Company, for deposit in the Collateral Fund, an
amount, as calculated by the Company, equal to 125% of the current unpaid
principal balance of the Mortgage Loan and three months interest on the Mortgage
Loan at the applicable Mortgage Interest Rate. If and when any such Mortgage
Loan is brought current by the mortgagor, all amounts in the Collateral Fund in
respect of such Mortgage Loan (after adjustment for all permitted withdrawals
and deposits
M-6
<PAGE>
pursuant to this Agreement) shall be released to the Purchaser if and to the
extent that reimbursement therefor from amounts paid by the mortgagor is not
prohibited pursuant to the Pooling and Servicing Agreement or the related
Servicing Agreement, applicable law or the related mortgage note. The terms of
this Agreement will no longer apply to the servicing of any Mortgage Loan upon
the failure of the Purchaser to deposit the above amounts relating to the
Mortgage Loan within two Business Days of the Election to Foreclose subject to
Section 3.01.
(c) With respect to any Mortgage Loan as to which the Purchaser has
made an Election to Foreclose, the related Servicer shall continue to service
the Mortgage Loan in accordance with its customary procedures (other than
Commencement of Foreclosure as provided herein). In connection therewith, the
Company shall have the same rights to make withdrawals for Monthly Advances and
Liquidations Expenses from the Collateral Fund as are provided under Section
2.02(e), and the Company shall make reimbursements thereto to the limited extent
provided under such subsection in accordance with its customary procedures. The
Company shall not be required to cause, to the extent that the Company as Master
Servicer is granted such authority in the related Servicing Agreement, the
related Servicer to proceed with the Commencement of Foreclosure if (i) the same
is stayed as a result of the mortgagor's bankruptcy or is otherwise barred by
applicable law, or to the extent that all legal conditions precedent thereto
have not yet been complied with, or (ii) the Company believes there is a breach
of representations or warranties by the Company, a Servicer, or a Seller, which
may result in a repurchase or substitution of such Mortgage Loan, or (iii) the
Company or related Servicer reasonably believes the Mortgaged Property may be
contaminated with or affected by hazardous wastes or hazardous substances (and,
without limiting the related Servicer's right not to proceed with the
Commencement of Foreclosure, the Company supplies the Purchaser with information
supporting such belief). Any foreclosure that has been initiated may be
discontinued (x) without notice to the Purchaser if the Mortgage Loan has been
brought current or if a refinancing or prepayment occurs with respect to the
Mortgage Loan (including by means of a short payoff approved by the Purchaser)
or (y) with notice to the Purchaser if the related Servicer has reached the
terms of a forbearance agreement unless instructed otherwise by the Purchaser
within two Business Days of such notification. Any such instruction shall be
based upon a decision that such forbearance agreement is not in conformity with
reasonable servicing practices.
(d) Upon the occurrence of a liquidation with respect to any Mortgage
Loan as to which the Purchaser made an Election to Foreclose and as to which the
related Servicer proceeded with the Commencement of Foreclosure in accordance
with subsection (c) above, the Company shall calculate the amount, if any, by
which the unpaid principal balance of the Mortgage Loan at the time of
liquidation (plus all unreimbursed interest and servicing advances and
Liquidation Expenses in connection therewith other than those paid from the
Collateral Fund) exceeds the actual sales price obtained for the related
Mortgaged Property, and the Company shall withdraw the amount of such excess
from the Collateral Fund, shall remit the same to the Trust Estate and in its
capacity as Master Servicer shall apply such amount as additional Liquidation
Proceeds pursuant to the Pooling and Servicing Agreement. After making such
withdrawal, all amounts remaining in the Collateral Fund (after adjustment for
all withdrawals and deposits pursuant to subsection (c) in respect of such
Mortgage Loan shall be released to the Purchaser.
M-7
<PAGE>
Section 2.04 Termination
-----------
(a) With respect to all Mortgage Loans included in the Trust Estate,
the Purchaser's right to make any Election to Delay Foreclosure or any Election
to Foreclose and the Company's obligations under Section 2.01 shall terminate
(i) at such time as the Principal Balance of the Class B Certificates has been
reduced to zero, (ii) if the greater of (x) 43% (or such lower or higher
percentage that represents the related Servicer's actual historical loss
experience with respect to the Mortgage Loans in the related pool as determined
by the Company) of the aggregate principal balance of all Mortgage Loans that
are in foreclosure or are more than 90 days delinquent on a contractual basis
and REO properties or (y) the aggregate amount that the Company estimates
through the normal servicing practices of the related Servicer will be required
to be withdrawn from the Collateral Fund with respect to Mortgage Loans as to
which the Purchaser has made an Election to Delay Foreclosure or an Election to
Foreclosure, exceeds (z) the then-current principal balance of the Class B
Certificates, (iii) upon any transfer by the Purchaser of any interest (other
than the minority interest therein, but only if the transferee provides written
acknowledgment to the Company of the Purchaser's right hereunder and that such
transferee will have no rights hereunder) in the Class B Certificates (whether
or not such transfer is registered under the Pooling and Servicing Agreement),
including any such transfer in connection with a termination of the Trust Estate
or (iv) upon any breach of the terms of this Agreement by the Purchaser.
(b) Except as set forth in 2.04(a), this Agreement and the respective
rights, obligations and responsibilities of the Purchaser and the Company
hereunder shall terminate upon the later to occur of (i) the final liquidation
of the last Mortgage Loan as to which the Purchaser made any Election to Delay
Foreclosure or any Election to Foreclose and the withdrawal of all remaining
amounts in the Collateral Fund as provided herein and (ii) ten Business Days'
notice. The Purchaser's right to make an election pursuant to Section 2.02 or
Section 2.03 hereof with respect to a particular Mortgage Loan shall terminate
if the Purchaser fails to make any deposit required pursuant to Section 2.02(d)
or 2.03(b) or if the Purchaser fails to make any other deposit to the Collateral
Fund pursuant to this Agreement.
ARTICLE III
COLLATERAL FUND; SECURITY INTEREST
Section 3.01. Collateral Fund
---------------
Upon receipt from the Purchaser of the initial amount required to be
deposited in the Collateral Fund pursuant to Article II, the Company shall
establish and maintain with Bankers Trust Company as a segregated account on its
books and records an account (the "Collateral Fund"), entitled "Norwest Bank
Minnesota, National Association, as Master Servicer, for the benefit of
registered holders of Norwest Asset Securities Corporation Mortgage Pass-Through
Certificates, Series 199 - . Amounts held in the Collateral Fund shall continue
to be the property of the Purchaser, subject to the first priority security
interest granted hereunder for the benefit of
M-8
<PAGE>
the Certificateholders, until withdrawn from the Collateral Fund pursuant to
Section 2.02 or 2.03 hereof. The Collateral Fund shall be an "outside reserve
fund" within the meaning of the REMIC Provisions, beneficially owned by the
Purchaser for federal income tax purposes. All income, gain, deduction or loss
with respect to the Collateral Fund shall be that of the Purchaser. All
distributions from the Trust Fund to the Collateral Fund shall be treated as
distributed to the Purchaser as the beneficial owner thereof.
Upon the termination of this Agreement and the liquidation of all
Mortgage Loans as to which the Purchaser has made any Election to Delay
Foreclosure or any Election to Foreclose pursuant to Section 2.04 hereof, the
Company shall distribute or cause to be distributed to the Purchaser all amounts
remaining in the Collateral Fund (after adjustment for all deposits and
permitted withdrawals pursuant to this Agreement) together with any investment
earnings thereon. In the event the Purchaser has made any Election to Delay
Foreclosure or any Election to Foreclose, prior to any distribution to the
Purchaser of all amounts remaining in the Collateral Fund, funds in the
Collateral Fund shall be applied consistent with the terms of this Agreement.
Section 3.02. Collateral Fund Permitted Investments.
--------------------------------------
The Company shall, at the written direction of the Purchaser, invest
the funds in the Collateral Fund in Collateral Fund Permitted Investments. Such
direction shall not be changed more frequently than quarterly. In the absence
of any direction, the Company shall select such investments in accordance with
the definition of Collateral Fund Permitted Investments in its discretion.
All income and gain realized from any investment as well as any
interest earned on deposits in the Collateral Fund (net of any losses on such
investments) and any payments of principal made in respect of any Collateral
Fund Permitted Investment shall be deposited in the Collateral Fund upon
receipt. All costs and realized losses associated with the purchase and sale of
Collateral Fund Permitted Investments shall be borne by the Purchaser and the
amount of net realized losses shall be deposited by the Purchaser in the
Collateral Fund promptly upon realization. The Company shall periodically (but
not more frequently than monthly) distribute to the Purchaser upon request an
amount of cash, to the extent cash is available therefore in the Collateral
Fund, equal to the amount by which the balance of the Collateral Fund, after
giving effect to all other distributions to be made from the Collateral Fund on
such date, exceeds the Required Collateral Fund Balance. Any amounts so
distributed shall be released from the lien and security interest of this
Agreement.
Section 3.03. Grant of Security Interest
--------------------------
The Purchaser hereby grants to the Company for the benefit of the
Certificateholders under the Pooling and Servicing Agreement a security interest
in and lien on all of the Purchaser's right, title and interest, whether now
owned or hereafter acquired, in and to: (1) the Collateral Fund, (2) all amounts
deposited in the Collateral Fund and Collateral Fund Permitted Investments in
which such amounts are invested (and the distributions and proceeds of such
investments) and (3) all cash and non-cash proceeds of any of the foregoing,
including proceeds of the voluntary conversion thereof (all of the foregoing
collectively, the "Collateral").
M-9
<PAGE>
The Purchaser acknowledges the lien on and the security interest in
the Collateral for the benefit of the Certificateholders. The Purchaser shall
take all actions requested by the Company as may be reasonably necessary to
perfect the security interest created under this Agreement in the Collateral and
cause it to be prior to all other security interests and liens, including the
execution and delivery to the Company for filing of appropriate financing
statements in accordance with applicable law. The Company shall file
appropriate continuation statements, or appoint an agent on its behalf to file
such statements, in accordance with applicable law.
Section 3.04. Collateral Shortfalls.
----------------------
In the event that amounts on deposit in the Collateral Fund at any
time are insufficient to cover any withdrawals therefrom that the Company is
then entitled to make hereunder, the Purchaser shall be obligated to pay such
amounts to the Company immediately upon demand. Such obligation shall
constitute a general corporate obligation of the Purchaser. The failure to pay
such amounts within two Business Days of such demand (except for amounts to
cover interest on a Mortgage Loan pursuant to Sections 2.02(d) and 2.03 (b)),
shall cause an immediate termination of the Purchaser's right to make any
Election to Delay Foreclosure or Election to Foreclose and the Company's
obligations under this Agreement with respect to all Mortgage Loans to which
such insufficiencies relate, without the necessity of any further notice or
demand on the part of the Company.
ARTICLE IV
MISCELLANEOUS PROVISIONS
Section 4.01. Amendment.
----------
This Agreement may be amended from time to time by the Company and the
Purchaser by written agreement signed by the Company and the Purchaser.
Section 4.02. Counterparts.
-------------
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 4.03. Governing Law.
--------------
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.
Section 4.04. Notices.
--------
M-10
<PAGE>
All demands, notices and direction hereunder shall be in writing or by
telecopy and shall be deemed effective upon receipt to:
(a) in the case of the Company,
Norwest Bank Minnesota, National Association
7485 New Horizon Way
Frederick, MD 21703
Attention: Vice President, Master Servicing
Phone: 301-696-7800
Fax: 301-815-6365
(b) in the case of the Purchaser,
-----------------------------
-----------------------------
-----------------------------
-----------------------------
Attention:
-------------------
Section 4.05. Severability of Provisions.
---------------------------
If any one or more of the covenants, agreements, provision or terms of
this Agreement shall be for any reason whatsoever, including regulatory, held
invalid, then such 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.
Section 4.06. Successors and Assigns.
-----------------------
The provisions of this Agreement shall be binding upon and inure to
the benefit of the respective successors and assigns of the parties hereto, and
all such provisions shall inure to the benefit of the Certificateholders;
provided, however, that the rights under this Agreement cannot be assigned by
the Purchaser without the consent of the Company.
Section 4.07. Article and Section Headings.
-----------------------------
The article and section headings herein are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
Section 4.08. Confidentiality.
----------------
The Purchaser agrees that all information supplied by or on behalf of
the Company pursuant to Sections 2.01 or 2.02, including individual account
information, is the property of the
M-11
<PAGE>
Company and the Purchaser agrees to hold such information confidential and not
to disclose such information.
Each party hereto agrees that neither it, nor any officer, director,
employee, affiliate or independent contractor acting at such party's direction
will disclose the terms of Section 4.09 of this Agreement to any person or
entity other than such party's legal counsel except pursuant to a final, non-
appealable order of court, the pendency of such order the other party will have
received notice of at least five business days prior to the date thereof, or
pursuant to the other party's prior express written consent.
SECTION 4.09. INDEMNIFICATION.
----------------
The Purchaser agrees to indemnify and hold harmless the Company, the
Seller, and each Servicer and each person who controls the Company, the Seller,
or a Servicer and each of their respective officers, directors, affiliates and
agents acting at the Company's, the Seller's, or a Servicer's direction (the
"Indemnified Parties") against any and all losses, claims, damages or
liabilities to which they may be subject, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of, or are
based upon, actions taken by, or actions not taken by, the Company, the Seller,
or a Servicer, or on their behalf, in accordance with the provisions of this
Agreement and (i) which actions conflict with the Company's, the Seller's, or a
Servicer's obligations under the Pooling and Servicing Agreement or the related
Servicing Agreement, or (ii) give rise to securities law liability under federal
or state securities laws with respect to the Certificates. The Purchaser hereby
agrees to reimburse the Indemnified Parties for the reasonable legal or other
expenses incurred by them in connection with investigating or defending any such
loss, claim, damage, liability or action. The indemnification obligations of
the Purchaser hereunder shall survive the termination or expiration of this
Agreement.
M-12
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchaser 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.
Norwest Bank Minnesota, National
Association
By:__________________________________
Name:________________________________
Title:_______________________________
_____________________________________
By:__________________________________
Name:________________________________
Title:_______________________________
M-13
<PAGE>
[LETTERHEAD OF CADWALADER, WICKERSHAM & TAFT APPEARS HERE]
Exhibit 5.1
October 8, 1998
Norwest Asset Securities Corporation
7485 New Horizon Way
Frederick, Maryland 21703
Re: Mortgage Pass-Through Certificates
----------------------------------
Gentlemen:
We have acted as your counsel in connection with the Registration
Statement on Form S-3 to be filed with the Securities and Exchange Commission
(the "Commission") on the date hereof, pursuant to the Securities Act of 1933,
as amended (as amended, the "Registration Statement"). The Registration
Statement covers Mortgage Pass-Through Certificates ("Certificates") to be sold
by Norwest Asset Securities Corporation (the "Company") in one or more series
(each, a "Series") of Certificates. Each Series of Certificates will be issued
under a separate pooling and servicing agreement (each, a "Pooling and Servicing
Agreement") among the Company, a trustee to be identified in the Prospectus
Supplement for such Series of Certificates (a "Trustee"), and Norwest Bank
Minnesota, National Association, as master servicer (the "Master Servicer"). A
form of Pooling and Servicing Agreement is included as an Exhibit to the
Registration Statement. Capitalized terms used and not otherwise defined herein
have the respective meanings ascribed to such terms in the Registration
Statement.
We have examined originals or copies certified or otherwise identified
to our satisfaction of such documents and records of the Company, and such
public documents and records as we have deemed necessary as a basis for the
opinions hereinafter expressed.
Based on the foregoing, we are of the opinion that:
1. When a Pooling and Servicing Agreement for a Series of Certificates
has been duly and validly authorized, executed and delivered by
the Company, a Trustee and the Master Servicer, such Pooling and
Servicing Agreement will constitute a valid and legally binding
agreement of the Company, enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy,
<PAGE>
2
reorganization, insolvency, moratorium and other laws affecting
the enforcement of rights of creditors generally and to general
principles of equity and the discretion of the court (regardless
of whether enforceability is considered in a proceeding in equity
or at law); and
2. When a Pooling and Servicing Agreement for a Series of
Certificates has been duly and validly authorized, executed and
delivered by the Company, a Trustee and the Master Servicer, and
the Certificates of such Series have been duly executed,
authenticated, delivered and sold as contemplated in the
Registration Statement, such Certificates will be legally and
validly issued, fully paid and nonassessable, and the holders of
such Certificates will be entitled to the benefits of such Pooling
and Servicing Agreement.
We hereby consent to the filing of this letter as an Exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Prospectus forming a part of the Registration Statement.
This consent is not to be construed as an admission that we are a person whose
consent is required to be filed with the Registration Statement under the
provisions of the Act.
Very truly yours,
/s/ CADWALADER, WICKERSHAM & TAFT
<PAGE>
Exhibit 8.1
[LETTERHEAD OF CADWALADER, WICKERSHAM & TAFT APPEARS HERE]
October 8, 1998
Norwest Asset Securities Corporation
7485 New Horizon Way
Frederick, Maryland 21703
Re: Mortgage Pass-Through Certificates
----------------------------------
Gentlemen:
We have acted as your counsel in connection with the Registration
Statement on Form S-3 to be filed with the Securities and Exchange Commission
(the "Commission") on the date hereof, pursuant to the Securities Act of 1933,
as amended (as amended, the "Registration Statement"). Capitalized terms used
and not otherwise defined herein have the respective meanings ascribed to such
terms in the Registration Statement.
In rendering the opinion set forth below, we have examined and relied
upon the following: (1) the Registration Statement, the Prospectus and the form
of Prospectus Supplement constituting a part thereof, each substantially in
the form being filed with the Commission; (2) the form of the Pooling and
Servicing Agreement, substantially in the form filed with the Commission; and
(3) such other documents, materials, and authorities as we have deemed
necessary in order to enable us to render our opinion set forth below.
As counsel to Norwest Asset Securities Corporation (the "Company") we
have advised the Company with respect to certain federal income tax aspects of
the proposed issuance of the Certificates. Such advise has formed the basis for
the description of material federal income tax consequences for holders of the
Certificates that appears under the heading "Certain Federal Income Tax
Consequences" in the Prospectus and under the headings "Summary Information --
Federal Income Tax Status" and "Federal Income Tax Considerations" in the form
of Prospectus Supplement. Such descriptions do not purport to discuss all
possible federal income tax ramifications of the proposed issuance of the
Certificates, but, with respect to those federal income tax consequences that
are discussed, in our opinion, the description is accurate in all material
respects.
This opinion is based on the facts and circumstances set forth in the
Prospectus and the Prospectus Supplement and in the other documents reviewed by
us. Our opinion as to the matters set forth herein could change with respect to
<PAGE>
a particular Series of Certificates as a result of changes in facts and
circumstances, changes in the terms of the documents reviewed by us, or changes
in the law subsequent to the date hereof. As the Registration Statement
contemplates Series of Certificates with numerous different characteristics, the
particular characteristics of each Series of Certificates must be considered in
determining the applicability of this opinion to a particular Series of
Certificates. The opinion contained in each Prospectus Supplement and Prospectus
prepared pursuant to the Registration Statement is, accordingly, deemed to be
incorporated herein.
We hereby consent to the filing of this letter as an Exhibit to the
Registration Statement and to the references to our firm under the heading
"Certain Federal Income Tax Consequences" in the Prospectus. This consent is
not to be construed as an admission that we are a person whose consent is
required to be filed with the Registration Statement under the provisions of the
Act.
Very truly yours,
/s/ CADWALADER, WICKERSHAM & TAFT
