<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 1996
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
BANKAMERICA MORTGAGE SECURITIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 94-324470
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
345 Montgomery Street Cheryl Sorokin, Secretary
Lower Level #2, Unit #8152 Bank of America Center
San Francisco, California 94104 555 California Street
(415) 445-4855 San Francisco, California 94104
(Address and telephone number (415) 622-3530
of principal executive offices) (Name, address and telephone number
of agent for service)
--------------------
COPIES TO:
<TABLE>
<S> <C> <C>
Andrea B. Sudmann Daniel G. Weiss Ralph C. Walker
BankAmerica Corporation BankAmerica Corporation Mark R. Levie
555 South Flower Street 555 California Street Orrick, Herrington & Sutcliffe
8th Floor, Unit #4362 Unit #03017 400 Sansome Street
Los Angeles, California 90071 San Francisco, California 94104 San Francisco, CA 94111
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any 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, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement 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>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO PRICE OFFERING AMOUNT OF
TO BE REGISTERED BE REGISTERED PER UNIT PRICE(1) REGISTRATION FEE
---------------- ------------- -------- --------- ----------------
<S> <C> <C> <C> <C>
Mortgage Pass-Through Certificates $290,000 100% $290,000 $100
============================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a). Exclusive of accrued interest, if any, on the
Mortgage Pass-Through Certificates.
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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 THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 19 )
$ (APPROXIMATE)
BANKAMERICA MORTGAGE SECURITIES, INC.
DEPOSITOR
BANK OF AMERICA [NATIONAL TRUST AND SAVINGS ASSOCIATION]
[, FEDERAL SAVINGS BANK]
MASTER SERVICER
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 19 -
[$ % CLASS A-1 CERTIFICATES
$ % CLASS A-2 CERTIFICATES
$ % CLASS A-3 CERTIFICATES
$ % CLASS A-4 CERTIFICATES
$ VARIABLE RATE CLASS A-5 CERTIFICATES
$ % CLASS M CERTIFICATES
$ % CLASS R CERTIFICATES
The Series 19 - Mortgage Pass-Through Certificates (the "Certificates")
will consist of the following Classes: (i) the Class A-1 Certificates, Class A-2
Certificates, Class A-3 Certificates, (ii) Class A-4 Certificates (the "Fixed
Strip Certificates"), (iii) Class A-5 Certificates (the "Variable Strip
Certificates"; together with the Class A-1 Certificates, Class A-2 Certificates,
Class A-3 Certificates and Fixed Strip Certificates, the "Senior Certificates"),
(iv) Class R Certificates (the "Residual Certificates") and (v) [ ] Classes of
subordinate Certificates which are designated as the Class M Certificates and
the Class B Certificates (together, the "Subordinate Certificates"). Only the
Senior Certificates, the Class M Certificates and the Residual Certificates
(collectively, the "Offered Certificates") are offered hereby.]
SEE "RISK FACTORS" ON [PAGE S-18 HEREIN AND ON] PAGE 10 IN THE PROSPECTUS
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BEFORE PURCHASING
[ANY CLASS OF OFFERED] CERTIFICATES.
------------------------
PROCEEDS FROM THE ASSETS IN THE TRUST FUND WILL BE THE ONLY SOURCE OF PAYMENTS
ON THE CERTIFICATES. THESE CERTIFICATES DO NOT REPRESENT AN OBLIGATION OF OR
INTEREST IN THE DEPOSITOR, BANKAMERICA CORPORATION, BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, BANK OF AMERICA, FEDERAL SAVINGS BANK OR
ANY OF THEIR AFFILIATES. NEITHER THE CERTIFICATES NOR THE UNDERLYING
MORTGAGE LOANS OR OTHER ASSETS OF THE TRUST FUND ARE INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY THE
DEPOSITOR, BANKAMERICA CORPORATION, BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, BANK OF AMERICA, FEDERAL
SAVINGS BANK OR ANY OF THEIR AFFILIATES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The [Offered] Certificates will be purchased from the Depositor by the
Underwriter[s] and will be offered by the Underwriter[s] from time to time to
the public in negotiated transactions or otherwise at varying prices to be
determined at the time of sale. The proceeds to the Depositor from the sale of
the [Offered] Certificates will be equal to % of the initial aggregate
principal balance of the [Offered] Certificates, plus accrued interest thereon
from 1, 19 (the "Cut-off Date"), net of any expenses payable by
the Depositor. The [Offered] Certificates are offered by the Underwriter[s]
subject to prior sale, when, as and if delivered to and accepted by the
Underwriter[s] and subject to certain other conditions. The Underwriter[s]
reserve[s] the right to withdraw, cancel or modify such offer and to reject any
order in whole or in part. It is expected that delivery of the Certificates will
be made on or about , 19 at the office of , [city and
state of offices where delivery is to be made] against payment therefor in
immediately available funds.
(Cover continued on next page)
[Name of Underwriters]
The date of this Prospectus Supplement is , 19 .
<PAGE> 3
(cover page continued)
The Certificates will evidence the entire beneficial ownership interest in
a trust fund (the "Trust Fund") consisting primarily of a pool of conventional
[fixed] [adjustable] rate one- to four-family first mortgage loans (the
"Mortgage Loans")[, exclusive of the Retained Yield (as defined herein),] to be
deposited by BankAmerica Mortgage Securities, Inc. (the "Depositor") into the
Trust Fund for the benefit of the Certificateholders. The Mortgage Loans were
[originated] [acquired from ] by (the "Seller").
The Depositor will acquire the Mortgage Loans from the Seller on the Delivery
Date. The Mortgage Loans will be serviced by Bank of America [National Trust and
Savings Association] [, Federal Savings Bank] (the "Master Servicer"). [The
Senior Certificates in the aggregate and the Class M Certificates will evidence
initial undivided interests of approximately % and %, respectively, in the
Trust Fund.] Certain characteristics of the Mortgage Loans are described herein
under "DESCRIPTION OF THE MORTGAGE POOL."
[A limited amount of losses on the Mortgage Loans will initially be covered
by [description of credit enhancement] (the "[name of credit enhancement]") to
be issued by (the " "). The maximum amount
available to be drawn under the [name of credit enhancement] will initially be
equal to approximately % of the aggregate principal balance of the Mortgage
Loans as of , 19 (the "Cut-off Date").]
[The interest rates on the Mortgage Loans (each, a "Mortgage Rate") will
change [semi-]annually based on the Index (as defined herein) and the respective
Note Margins described herein, subject to certain periodic and lifetime
limitations as described more fully herein.]
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES
SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Distributions on the Certificates will be made on the day of each month
or, if such day is not a business day, then on the next succeeding business day
commencing on , 19 (each, a "Distribution Date"). [As more fully
described herein, interest distributions on the Certificates will be based on
the principal balance of the Mortgage Loans and the then applicable Weighted
Average Adjustable Pass-Through Rate, which will equal the weighted average of
the Mortgage Rates on the Mortgage Loans, net of the related servicing [and
subservicing] fees [and Retained Yield] (as to each Mortgage Loan, the "Net
Mortgage Rate"), for the month preceding such Distribution Date, as described
more fully herein. The initial Weighted Average Adjustable Pass-Through Rate for
the Certificates will be % per annum. The Weighted Average Adjustable
Pass-Through Rate on the Certificates may increase or decrease from month to
month. Distributions in respect of principal of the Certificates will be made as
described herein under "DESCRIPTION OF THE CERTIFICATES -- Principal
Distributions."] [As more fully described herein, interest distributions on the
Offered Certificates will be based on the Certificate Principal Balance thereof
(or the Notional Amount, as defined herein, in the case of the Variable Strip
Certificates) and the then applicable Pass-Through Rate thereof, which will be
variable for the Variable Strip Certificates and fixed for all other Classes of
Certificates. Distributions in respect of principal of the Offered Certificates
will be allocated among the various Classes of the Offered Certificates as
described herein under "DESCRIPTION OF THE CERTIFICATES -- Principal
Distributions." The rights of the holders of the Class B Certificates to receive
distributions with respect to the Mortgage Loans will be subordinated to the
rights of the holders of the Offered Certificates, and the right of the holders
of the Class M Certificates to receive distributions with respect to the
Mortgage Loans will be subordinated to the right of the holders of the Senior
Certificates and
S-2
<PAGE> 4
(cover page continued)
the Residual Certificates, to the extent described herein.] [Certain losses
incurred due to defaults on the Mortgage Loans that are not covered by the
Subordinate Certificates will be allocated on a pro rata basis between the Class
A-1 and Class A-4 Certificates (the "Tiered Certificates") and the Class A-2,
Class A-3 and Variable Strip Certificates. Any such losses so allocated to the
Tiered Certificates will be allocated to the Class A-4 Certificates until the
Certificate Principal Balance thereof is reduced to zero, and then to the Class
A-1 Certificates.]
[Certain Mortgage Loans provide that, at the option of the related
Mortgagors, the adjustable rate on such Mortgage Loans may be converted to a
fixed rate (the "Convertible Mortgage Loans"), provided that certain conditions
have been satisfied. Upon notification from a Mortgagor of such Mortgagor's
intent to convert from an adjustable rate to a fixed rate and prior to the
conversion of any such Mortgage Loan (a "Converting Mortgage Loan"), the Master
Servicer will be obligated to [purchase the] [act as remarketing agent with
respect to such Converting Mortgage Loan and, in such capacity, to use its best
efforts to arrange for the sale of such] Converting Mortgage Loan at a net price
of par plus accrued interest thereon (the "Conversion Price"). In the event that
the Master Servicer does not [purchase] [sell] a Converting or Converted
Mortgage Loan (as defined herein), the Mortgage Pool will thereafter include
both fixed rate and adjustable rate Mortgage Loans. See "CERTAIN YIELD AND
PREPAYMENT CONSIDERATIONS" herein.]
Except as set forth herein, the Master Servicer's only obligations with
respect to the Certificates are its contractual obligations under the terms of
the Pooling Agreement (as defined herein).
The yield to maturity on the [Offered] Certificates will depend on the rate
of payment of principal (including prepayments, defaults[,] [and] liquidations
[and purchases of Converting Mortgage Loans and Converted Mortgage Loans]) on
the Mortgage Loans. [The Mortgage Loans may be prepaid in full or in part at any
time without penalty.] The yield to investors on the [Offered] Certificates will
be adversely affected by any shortfalls in interest collected on the Mortgage
Loans due to prepayments, liquidations or otherwise. [The yield to investors on
the Variable Strip Certificates and, in particular, on the Fixed Strip
Certificates, will be extremely sensitive to the rate of principal payments
(including prepayments) and defaults on the Mortgage Loans and may fluctuate
significantly over time. A rapid rate of principal payments on the Mortgage
Loans could result in the failure of such investors to recover their initial
investments.] See "CERTAIN YIELD AND PREPAYMENT CONSIDERATIONS" herein and
"YIELD CONSIDERATIONS" in the Prospectus.
There is currently no secondary market for the [Offered] Certificates.
(the "Underwriter[s]") intend[s] to make a secondary market in the
[Offered] Certificates but [is] [are] not obligated to do so. There can be no
assurance that a secondary market for the Certificates will develop or, if it
does develop, that it will continue. The [Offered] Certificates will not be
listed on any securities exchange.
It is a condition of the issuance of the [Offered] Certificates that they
be rated " " by and " " by .
[As described herein, an] [No] election will be made to treat the Trust
Fund underlying the Certificates as a real estate mortgage investment conduit
("REMIC") for federal income tax purposes. [Each Class of Senior Certificates
and the Class M Certificates will constitute "regular interests" in the REMIC.
The Class R Certificates will constitute the sole Class of "residual interests"
in the REMIC. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" herein and in the
Prospectus."]
S-3
<PAGE> 5
THE [OFFERED] CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT CONSTITUTE
[PART OF] A SEPARATE SERIES OF CERTIFICATES BEING OFFERED BY THE DEPOSITOR
PURSUANT TO ITS PROSPECTUS DATED , 19 , OF WHICH THIS PROSPECTUS
SUPPLEMENT IS A PART AND WHICH ACCOMPANIES THIS PROSPECTUS SUPPLEMENT. THE
PROSPECTUS CONTAINS IMPORTANT INFORMATION REGARDING THIS OFFERING WHICH IS NOT
CONTAINED HEREIN, AND PROSPECTIVE INVESTORS ARE URGED TO READ THE PROSPECTUS AND
THIS PROSPECTUS SUPPLEMENT IN FULL. SALES OF THE CERTIFICATES MAY NOT BE
CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS.
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS TO WHICH IT RELATES. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
S-4
<PAGE> 6
SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein and in the Prospectus.
Capitalized terms used herein and not otherwise defined herein have the meanings
assigned in the Prospectus.
Title of Securities........ Mortgage Pass-Through Certificates, Series 19 - .
Depositor.................. BankAmerica Mortgage Securities, Inc. (the
"Depositor"), [an affiliate of the Master Servicer,
and] a wholly-owned subsidiary of Bank of America
National Trust and Savings Association ("Bank of
America NT&SA"). See "THE DEPOSITOR" in the
Prospectus.
Master Servicer............ (the "Master Servicer," [an
affiliate of the Depositor and] a wholly-owned
subsidiary of BankAmerica Corporation
("BankAmerica"). See "POOLING AGREEMENT -- The
Master Servicer" herein and "MORTGAGE LOAN
PROGRAMResidential Mortgage Loan Servicing
Activities" and "-- Delinquency, Foreclosure and
Loss Experience" in the Prospectus.
Trustee.................... , a national banking
association (the "Trustee").
Cut-off Date............... , 19 .
Delivery Date.............. On or about , 19 .
The Mortgage Pool.......... The Mortgage Pool will consist of [fixed]
[adjustable] rate, [fully-amortizing] [, level
monthly payment] mortgage loans (the "Mortgage
Loans")[, exclusive of the Retained Yield (as
defined herein)]. The Mortgage Loans were
[originated] [acquired from ]
by (the "Seller"). The
Depositor will acquire the Mortgage Loans from the
Seller on the Delivery Date. The aggregate
principal balance of the Mortgage Loans as of the
Cut-off Date will be approximately $ .
The Mortgage Loans are secured by first liens on
one- to four-family residential real properties
(each, a "Mortgaged Property"). The Mortgage Loans
have terms to maturity of years from the date of
origination or modification and a weighted average
remaining term to stated maturity of approximately
months as of the Cut-off Date.
[The Mortgage Loans will bear interest at Mortgage
Rates of at least % per annum but not more
than % per annum, with a weighted average
Mortgage Rate of approximately % per annum as
of the Cut-off Date.] [The Mortgage Rate on each
Mortgage Loan will adjust [monthly]
[semi-][annually] on its Adjustment Date (as
defined herein), with corresponding adjustments in
the amount of monthly payments, to equal the sum
(rounded as described herein) of the Index
described below and a fixed percentage set forth in
the related Mortgage Note (the "Note Margin").
However, (i) on any Adjustment Date such Mortgage
Rate may not increase or decrease by more than 1%
(the "Periodic Rate Cap"), and (ii) over the life
of such Mortgage Loan, such Mortgage Rate may not
exceed the related maximum Mortgage Rate (such
maximum Mortgage Rate is equal to the Mortgage Rate
at origination plus a lifetime rate cap (the
"Lifetime Rate Cap")); which maximum Mortgage Rates
will range from % to % and (iii) with
respect to approximately % of the Mortgage
Loans, by aggregate principal balance as of the
Cut-off Date, over the life of such
S-5
<PAGE> 7
Mortgage Loan, such Mortgage Rate may not be lower
than the minimum Mortgage Rate. The difference
between the Mortgage Rate on each Mortgage Loan at
origination and the minimum Mortgage Rate on such
Mortgage Loan will equal the lifetime rate floor
(the "Lifetime Rate Floor"). The minimum Mortgage
Rates will range from % to %.
Accordingly, changes in the Weighted Average
Adjustable Pass-Through Rate will not necessarily
correspond to changes in the Index or other
prevailing interest rates. Additionally, the
initial Mortgage Rates in effect on the Mortgage
Loans will likely be lower than the sum of the
Index and related Note Margin that would have been
applicable at origination. Because the maximum
Mortgage Rate on any Mortgage Loan is determined by
adding the Lifetime Rate Cap to the Mortgage Rate
at origination, the maximum rate on a Mortgage Loan
will likely be less than the sum of the Index and
the Note Margin that would have been applicable at
origination plus the Lifetime Rate Cap. No Mortgage
Loan provides for payment caps on any Adjustment
Date which would result in deferred interest or
negative amortization. The Mortgage Loans will bear
interest at Mortgage Rates of at least % per
annum but not more than % per annum, as of the
Cut-off Date.]
For a further description of the Mortgage Loans,
see "DESCRIPTION OF THE MORTGAGE POOL" herein.
[The Index................. As of any Adjustment Date with respect to any
Mortgage Loan, the Index applicable to the
determination of the related Mortgage Rate will be
a rate equal to [the twelve-month average of
monthly yields on actively traded U.S. Treasury
Securities adjusted to a constant maturity of one
year] [the weekly average of the secondary market
interest rates on six-month negotiable certificates
of deposit] [the average of interbank offered rates
for six-month U.S. dollar-denominated deposits in
the London Market] [the cost of funds of member
institutions of the Federal Home Loan Bank of San
Francisco] as most recently available days prior
to the Adjustment Date (the "Index").]
[Conversion of Mortgage
Loans.................... Approximately % of the Mortgage Loans, by
aggregate principal balance as of the Cut-off Date,
are Convertible Mortgage Loans. Upon notification
from a Mortgagor of such Mortgagor's intent to
convert from an adjustable rate to a fixed rate and
prior to the conversion thereof, the Master
Servicer will be obligated to [purchase the] [act
as remarketing agent with respect to such
Converting Mortgage Loan and, in such capacity, to
use its best efforts to arrange for the sale of
such] Converting Mortgage Loan at a net price of
par plus accrued interest thereon (the "Conversion
Price"). In the event that the Master Servicer does
not [purchase][sell] a Converting or Converted
Mortgage Loan, the Mortgage Pool will thereafter
include both fixed-rate and adjustable-rate
Mortgage Loans. See "CERTAIN YIELD AND PREPAYMENT
CONSIDERATIONS" herein.]
The [Offered]
Certificates............... The Certificates will evidence the entire
beneficial ownership interest in a trust fund (the
"Trust Fund") consisting primarily of the Mortgage
Pool[, exclusive of the Retained Yield]. The
Certificates will be issued pursuant to a Pooling
Agreement, to be dated as of the Cut-off Date,
among the Depositor, the Master Servicer, and the
Trustee (the "Pooling Agreement").
S-6
<PAGE> 8
[The Senior Certificates will evidence an initial
interest of approximately % in the Trust Fund.
The Class M Certificates will evidence an initial
interest of approximately % in the Trust Fund.
The Offered Certificates will have the following
Pass-Through Rates and Certificate Principal
Balances as of the Cut-off Date:
<TABLE>
<S> <C> <C>
Class A-1 Certificates............... % $
Class A-2 Certificates............... % $
Class A-3 Certificates............... % $
Class A-4 Certificates............... % $
Class A-5 Certificates............... Variable Rate $
Class M Certificates................. % $
Class R Certificates................. % $ ]
</TABLE>
Pass-Through Rate on the
[Offered] Certificates... [The Pass-Through Rate on all Classes of the
Offered Certificates, other than the Variable Strip
Certificates, is fixed. The Pass-Through Rate on
the Variable Strip Certificates on each
Distribution Date will equal the weighted average,
as determined on the Due Date in the month
preceding the month in which such Distribution Date
occurs, of the Pool Strip Rates on each of the
Mortgage Loans.] [The Pass-Through Rate applicable
to the Certificates in respect of each Distribution
Date will equal the weighted average of the Net
Mortgage Rates on the outstanding Mortgage Loans
for the month preceding such Distribution Date. The
initial weighted Average Adjustable Pass-Through
Rate will be % per annum. The Net Mortgage
Rate on each Mortgage Loan is equal to the Mortgage
Rate thereon minus the per annum rate at which the
related master [and primary] servicing fees accrue
(the "Servicing Fee Rate") [and the per annum rate
at which the Retained Yield referred to below under
"POOLING AGREEMENT -- Servicing and Other
Compensation and Payment of Expenses; Retained
Yield" accrues].] [The Pool Strip Rates on the
Mortgage Loans range between % and %. The
initial Pass-Through Rate on the Variable Strip
Certificates is approximately %.]
Denominations.............. The [Offered] Certificates will be offered in
registered form, in minimum denominations of
$ and integral multiples of $ in
excess thereof [with one Certificate evidencing the
authorized minimum denomination plus the remainder
of the aggregate initial principal balance of all
of the Certificates].
[The Certificates ("DTC Registered
Certificates") are issuable in book-entry form in
minimum denominations of approximately $[ ]
and integral multiples of $ in excess
thereof, and will be represented by certificates
registered in the name of Cede & Co. ("Cede"), as
the nominee of the depository, The Depository Trust
Company ("DTC" and, together with any successor
depository, the "Depository"), which will be the
"Certificateholder" of the DTC Registered
Certificates, as such term is used herein. A person
acquiring an interest in DTC Registered
Certificates (a "Beneficial Owner") will not be
entitled to receive a certificate representing such
Beneficial Owner's interest in the DTC Registered
Certificates except in the event that Definitive
Certificates (as defined herein) are issued for all
Certificates under the limited circumstances
described in the Prospectus. Until such time, the
rights of Beneficial Owners may be exercised only
through
S-7
<PAGE> 9
DTC and its participating organizations, except as
otherwise specified herein. See "DESCRIPTION OF THE
CERTIFICATES -- Book-Entry Registration of Certain
Certificates" herein and "DESCRIPTION OF THE
CERTIFICATES -- Form of Certificates" in the
Prospectus.]
Interest Distributions..... [Holders of each Class of Offered Certificates will
be entitled to receive distributions in an amount
equal to the Accrued Certificate Interest (as
defined below) on such Class on each Distribution
Date, to the extent of the Available Distribution
Amount (as defined herein) for such Distribution
Date.
With respect to any Distribution Date, Accrued
Certificate Interest will be equal to (a) in the
case of each Class of Offered Certificates, other
than the Variable Strip Certificates, one month's
interest accrued on the Certificate Principal
Balance of the Certificates of such Class, at the
Pass-Through Rate on such Class, and (b) in the
case of the Variable Strip Certificates, one
month's interest accrued on the Notional Amount (as
defined below) of the Variable Strip Certificates
at the then applicable Pass-Through Rate on such
Class for such Distribution Date; in each case less
any interest shortfalls not covered by the
Subordination (as defined herein), including any
Prepayment Interest Shortfall (as defined herein
and allocated as described herein) for such
Distribution Date.
The Notional Amount of the Variable Strip
Certificates as of any date of determination is
equal to the aggregate Certificate Principal
Balance of the Certificates of all Classes,
including the Subordinate Certificates, as of such
date.
If the Available Distribution Amount for any
Distribution Date is less than the aggregate amount
of Accrued Certificate Interest required to be
distributed on the Senior Certificates on such date
(the "Senior Interest Distribution Amount"), the
shortfall will be allocated among each affected
Class as described herein [(the portion of such
shortfall so allocated to the Tiered Certificates
(as defined herein) will be allocated first to the
Class A-4 Certificates to the extent described
herein), and will be distributable to holders of
the Certificates of such Classes on subsequent
Distribution Dates, to the extent of available
funds. Any such amount so carried forward will not
bear interest].
[Holders of the Certificates will be entitled to
receive distributions allocable to interest in
proportion to their respective Percentage Interests
(as defined herein) on each Distribution Date, to
the extent of available funds, in an aggregate
amount equal to one month's interest, at the then
applicable Weighted Average Adjustable Pass-Through
Rate, on the principal balance of the Certificates
outstanding as of the close of business on the
immediately preceding Distribution Date, subject to
reduction in the event of any full and partial
prepayments or any interest shortfalls not covered
by the [name of credit enhancement] (as defined
herein) as well as certain losses and delinquencies
on the Mortgage Loans as described herein. See
"DESCRIPTION OF THE CERTIFICATES -- Interest
Distributions" herein and in the Prospectus.]
[Compensating Interest..... [Description of extent of Master Servicer's
obligation to pay compensating interest for
prepayment interest shortfalls to be provided.]]
S-8
<PAGE> 10
Principal Distributions.... [Holders of the Senior Certificates will be
entitled to receive on each Distribution Date, in
the manner and priority set forth herein, to the
extent of the portion of the Available Distribution
Amount remaining after the Senior Interest
Distribution Amount is distributed to the holders
of the Senior Certificates, a distribution
allocable to principal which will, as more fully
described herein, include (i) the Senior Percentage
(as defined below) of scheduled principal payments
due on the Mortgage Loans and of the principal
portion of any unscheduled collections of principal
(other than mortgagor prepayments and amounts
received in connection with a Final Disposition (as
defined herein) of a Mortgage Loan described in
clause (ii) below), including repurchases of the
Mortgage Loans, (ii) in connection with the Final
Disposition of a Mortgage Loan that did not incur
any Excess Special Hazard Losses, Excess Fraud
Losses, Excess Bankruptcy Losses and Extraordinary
Losses (as defined herein), an amount equal to the
lesser of (a) the Senior Percentage of the Stated
Principal Balance (as defined herein) of such
Mortgage Loan and (b) the Senior Accelerated
Distribution Percentage (as defined herein) of the
related collections, including any Insurance
Proceeds and Liquidation Proceeds, to the extent
applied as recoveries of principal; (iii) the
Senior Accelerated Distribution Percentage (as
defined below) of mortgagor prepayments and (iv)
the Excess Subordinate Principal Amount (as defined
herein), if any, for such Distribution Date.
Distributions in respect of principal of the Senior
Certificates on any Distribution Date will be
allocated to the Classes then entitled to such
distributions, as described herein. See
"DESCRIPTION OF THE CERTIFICATES -- Principal
Distributions" herein.
Holders of the Class M Certificates will be
entitled to receive a distribution of principal on
each Distribution Date, to the extent of the
portion of the Available Distribution Amount
remaining after (i) distributions in respect of
interest and principal to the holders of the Senior
Certificates [and distributions of the Retained
Yield], (ii) reimbursement for certain Advances to
the Master Servicer and (iii) distributions in
respect of interest to the holders of the Class M
Certificates. Such principal distributions will be
made as to the Class M Certificates in the amounts
described herein.
The Senior Percentage initially will be
approximately % and will be recalculated after
each Distribution Date as described herein to
reflect the entitlement of the holders of the
Senior Certificates to subsequent distributions
allocable to principal. The Senior Accelerated
Distribution Percentage for each Distribution Date
occurring during the first five years after the
Delivery Date will equal %. Commencing in
, 19 , the Senior Accelerated
Distribution Percentage will decline annually,
subject to certain limitations, in accordance with
the schedule described herein until, commencing in
, it will equal the then applicable
Senior Percentage; however, the Senior Accelerated
Distribution Percentage will be 100% for any
Distribution Date on which the then applicable
Senior Percentage is greater than the initial
Senior Percentage. See "DESCRIPTION OF THE
CERTIFICATES -- Allocation of Losses;
Subordination" herein.]
[Principal payments (including prepayments)
received on the Mortgage Loans will be passed
through on each Distribution Date to holders of the
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<PAGE> 11
Certificates in proportion to their respective
Percentage Interests. See "DESCRIPTION OF THE
CERTIFICATES -- Principal Distributions" herein and
in the Prospectus.]
Advances................... The Master Servicer is required to make advances
("Advances") to holders of the Certificates in
respect of delinquent payments of principal and
interest on the Mortgage Loans, but only if the
Master Servicer believes that the amount advanced
will be recoverable from subsequent payments or
collections (including Insurance Proceeds and
Liquidation Proceeds) in respect of the related
Mortgage Loan and subject to the limitations
described herein. See "DESCRIPTION OF THE
CERTIFICATES -- Advances" herein and in the
Prospectus.
[Credit Enhancement]
[Allocation of Losses;
Subordination]........... Neither the [Offered] Certificates nor the
underlying Mortgage Loans or other assets of the
Trust Fund are insured or guaranteed by any
governmental agency or instrumentality or by the
Depositor, the Master Servicer, Bank America or any
of their affiliates. [A limited amount of losses on
the Mortgage Loans will be covered initially by
[description of credit enhancement] (the "[name of
credit enhancement]") to be issued by
(the " ") in favor of the Trustee for
the benefit of the holders of the Certificates. The
maximum amount available under the [name of credit
enhancement] to cover losses with respect to the
Mortgage Loans will initially equal $ (the
initial "Available Amount") which is equal to
approximately % of the aggregate principal
balance of the Mortgage Loans as of the Cut-off
Date. The Available Amount is subject to periodic
reduction as described herein.
The [name of credit enhancement] will cover losses
on the Mortgage Loans from [Defaulted Mortgage
Losses], [Special Hazard Losses], [Fraud Losses]
and [Bankruptcy Losses] (each as defined in the
Prospectus). [Coverage] [Amounts that may be drawn]
under the [name of credit enhancement] to cover
[Special Hazard Losses] [Fraud Losses] [Bankruptcy
Losses] are initially limited to $ ,
$ and $ , respectively. All of
the foregoing amounts are subject to periodic
reduction as described herein. Any [draws] [claims]
under the [name of credit enhancement], including
[draws] [claims] for [Special Hazard Losses] [Fraud
Losses] [Bankruptcy Losses] will reduce the
Available Amount. The [name of credit enhancement]
will expire on , 19 , unless earlier
terminated or extended in accordance with its terms
or replaced in a manner as herein described.
In the event losses on Mortgage Loans occur which
are not covered by the [name of credit enhancement]
or any replacement credit enhancement, such losses
will be borne by the Certificateholders [in the
order of priority described herein]. See
"DESCRIPTION OF CREDIT ENHANCEMENT" herein.]
[Subject to the limitations set forth below,
Realized Losses on the Mortgage Loans will be
allocated to the Subordinate Certificates prior to
allocation to the Senior Certificates and to the
Class B Certificates prior to allocation to the
Class M Certificates. The subordination provided to
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<PAGE> 12
the Senior Certificates by the Subordinate
Certificates and provided to the Class M
Certificates by the Class B Certificates will cover
Realized Losses on the Mortgage Loans from
Defaulted Mortgage Losses, Special Hazard Losses,
Fraud Losses and Bankruptcy Losses (each as defined
in the Prospectus). The aggregate amounts of
Realized Losses which may be allocated to the
Subordinate Certificates to cover Special Hazard
Losses, Fraud Losses and Bankruptcy Losses are
initially limited to $ , $ and
$ , respectively. All of the foregoing
amounts are subject to periodic reduction as
described herein. In the event the Certificate
Principal Balance of the Subordinate Certificates
is reduced to zero, all additional losses will be
borne by the Class M Certificateholders until the
Certificate Principal Balance of the Class M
Certificates is reduced to zero and then to the
Senior Certificateholders. In addition, any Special
Hazard Losses, Fraud Losses and Bankruptcy Losses
in excess of the respective amounts of coverage
therefor will be borne by the holders of Senior
Certificates and Subordinate Certificates on a pro
rata basis. [Any Default Losses (as defined herein)
incurred on the Mortgage Loans and not covered by
the Subordinate Certificates will be allocated on a
pro rata basis between the Class A-1 and Class A-4
Certificates (the "Tiered Certificates") and the
Class A-2, Class A-3 and Variable Strip
Certificates. Any such losses so allocated to the
Tiered Certificates will be allocated first to the
Class A-4 Certificates until the Certificate
Principal Balance thereof is reduced to zero and
then to the Class A-1 Certificates. However, the
credit enhancement provided to the Class A-1
Certificates by the Class A-4 Certificates will in
no event cover Special Hazard Losses, Bankruptcy
Losses or Fraud Losses.] Because principal
distributions are paid to certain Classes of Senior
Certificates before other Classes, holders of
Classes of Senior Certificates having a later
priority of payment bear a greater risk of such
losses than holders of Classes of Senior
Certificates having earlier priorities for
distribution of principal. See "DESCRIPTION OF THE
CERTIFICATES -- Allocation of Losses;
Subordination" herein.]
[Subordinate
Certificates............... The Class M Certificates and Class B Certificates
(together, the "Subordinate Certificates") have
aggregate initial Certificate Principal Balances of
approximately $ and $ ,
respectively, evidencing an initial Class M
Percentage and Class B Percentage of approximately
% and %, respectively, and Pass-Through
Rates of % and % respectively. The Class
B Certificates are not being offered hereby. The
Depositor expects that the Class B Certificates
will be privately placed directly or indirectly
with one or more institution investors.]
[Residual Certificates..... [The Class R Certificates (the "Residual
Certificates") have no Certificate Principal
Balance and no Pass-Through Rate.] [The Class R
Certificates (the "Residual Certificates") have an
aggregate initial Certificate Principal Balance of
approximately and a Pass-Through Rate
of %.] In addition, the Residual Certificates
represent the right to receive certain
distributions, if any, of amounts which are in
excess of the amounts required to be distributed to
all other Classes of Certificates, including the
Subordinate Certificates, following the retirement
of [the] [all of the Senior Certificates and the
Subordinate] Certificates. [The Residual
Certificates are not being offered hereby.]
S-11
<PAGE> 13
Optional Termination....... At its option, on any Distribution Date when the
principal balance of the Mortgage Loans is less
than [5][10]% of the aggregate principal balance of
the Mortgage Loans as of the Cut-off Date, the
Master Servicer or the Depositor may purchase from
the Trust Fund all remaining Mortgage Loans and
other assets thereof at a price equal to
and thereby effect early retirement of
the Certificates. See "POOLING
AGREEMENT -- Termination" herein and "THE POOLING
AGREEMENT -- Termination" in the Prospectus.
Special Prepayment
Considerations........... The rate of principal payments on the [Offered]
Certificates collectively will depend on the rate
and timing of principal payments (including
prepayments, defaults and liquidations) on the
Mortgage Loans. As is the case with mortgage-backed
securities generally, the [Offered] Certificates
are subject to substantial inherent cash-flow
uncertainties because the Mortgage Loans may be
prepaid at any time. Generally, when prevailing
interest rates are increasing, prepayment rates on
mortgage loans tend to decrease, resulting in a
reduced return of principal to investors at a time
when reinvestment at such higher prevailing rates
would be desirable. Conversely, when prevailing
interest rates are declining, prepayment rates on
mortgage loans tend to increase, resulting in a
greater return of principal to investors at a time
when reinvestment at comparable yields may not be
possible.
[The multiple Class structure of the Senior
Certificates results in the allocation of
prepayments among certain Classes as follows [to be
included as appropriate]:
[Sequentially paying Classes: [All] Classes of the
Senior Certificates are subject to various
priorities for payment of principal as described
herein. Distributions on Classes having an earlier
priority of payment will be immediately affected by
the prepayment speed of the Mortgage Loans early in
the life of the Mortgage Pool. Distribution on
Classes with a later priority of payment will not
be directly affected by the prepayment speed until
such time as principal is distributable on such
Classes; however, the timing of commencement of
principal distributions and the weighted average
lives of such Classes will be affected by the
prepayment speed experienced both before and after
the commencement of principal distributions on such
Classes.]
[PAC Certificates: Principal distributions on the
PAC Certificates will be payable in amounts
determined based on schedules as described herein,
provided that the prepayment speed of the Mortgage
Loans each month remains between approximately
% SPA and % SPA. However, as discussed
herein, actual principal distributions may be
greater or less than the described amounts. If the
prepayment speed of the Mortgage Loans is
consistently higher than % of SPA, then the
Companion Certificates, as defined below, will be
retired before all of the PAC Certificates are
retired, and the rate of principal distributions
and the weighted average lives of the remaining PAC
Certificates will become significantly more
sensitive to changes in the prepayment speed of the
Mortgage Loans and principal distribution thereon
will be more likely to deviate from the described
amounts.]
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<PAGE> 14
[TAC Certificates: Principal distributions on the
TAC Certificates will be payable in amounts
determined based on schedules as described herein,
if the prepayment speed of the Mortgage Loans were
to remain at a constant level of approximately
% SPA. However, as discussed herein, actual
principal distributions are likely to deviate from
the described amounts, because it is highly
unlikely that the actual prepayment speed of the
Mortgage Loans each month will remain at or near
% SPA. If the Companion Certificates are
retired before all of the TAC Certificates are
retired, the rate of principal distributions and
the weighted average lives of the remaining TAC
Certificates will become significantly more
sensitive to changes in the prepayment speed of the
Mortgage Loans, and principal distributions thereon
will be more likely to deviate from the described
amounts.]
[Companion Certificates: Because of the application
of amounts available for principal distributions
among the Senior Certificates in any given month,
first to the [PAC] [TAC] Certificates up to the
described amounts and then to the Companion
Certificates, the rate of principal distributions
and the weighted average lives of the Companion
Certificates will be extremely sensitive to changes
in the prepayment speed of the Mortgage Loans. The
weighted average lives of the Companion
Certificates will be significantly more sensitive
to changes in the prepayment speed than that of
either the [PAC] [TAC] Certificates or a fractional
undivided interest in the Mortgage Loans.]
[Subordination features: As described herein,
during certain periods all or a disproportionately
large percentage of principal prepayments on the
Mortgage Loans will be allocated among the Senior
Certificates, and during certain periods none or a
disproportionately small percentage (or, as
compared to the Class B Certificates during certain
periods, a disproportionately large percentage) of
such prepayments will be distributed on the Class M
Certificates. As a result, the weighted average
lives of the Class M Certificates will be extended
and, as a relative matter, the subordination
afforded the Senior Certificates by the Class M
Certificates (together with the Class B
Certificates) will be increased. [Similar
descriptions to be added to other classes with
subordination features.]]
See "DESCRIPTION OF THE CERTIFICATES --
Distributions" and "CERTAIN YIELD AND PREPAYMENT
CONSIDERATIONS" herein, and "MATURITY AND
PREPAYMENT CONSIDERATIONS" in the Prospectus.
Special Yield
Considerations............. [The yield to maturity on the Certificates will
depend on the rate and timing of principal payments
(including prepayments, defaults, liquidations [and
purchases of Mortgage Loans converting to a fixed
rate]) on the Mortgage Loans, as well as other
factors such as changes in the Index, provisions of
the Mortgage Loans limiting changes in the Mortgage
Rates and the purchase price for such Certificates,
as described herein. The Weighted Average
Adjustable Pass-Through Rate will be reduced to the
extent that prepayments, liquidations and purchases
occur at a faster rate for Mortgage Loans having
higher Net Mortgage Rates than for Mortgage Loans
having lower Net Mortgage Rates. [The yield to
investors on the Certificates will be adversely
affected by any allocation thereto of prepayment
interest shortfalls on the Mortgage Loans, which
are expected to result from the distribution of
interest only to the
S-13
<PAGE> 15
date of prepayment (rather than a full month's
interest) in connection with prepayments in full,
and the lack of any distribution of interest on the
amount of any partial prepayments.]
See "CERTAIN YIELD AND PREPAYMENT CONSIDERATIONS"
herein, and "YIELD CONSIDERATIONS" in the
Prospectus.]
[The yield to maturity on each respective Class of
the Senior Certificates will depend on the rate and
timing of principal payments (including
prepayments, defaults and liquidations) on the
Mortgage Loans and the allocation thereof (and of
any losses on the Mortgage Loans) to reduce the
Certificate Principal Balance (or Notional Amount)
of such Class, as well as other factors such as the
Pass-Through Rate (and any adjustments thereto) and
the purchase price for such Certificates. [The
yield to investors on any Class of Senior
Certificates will be adversely affected by any
allocation thereto of prepayment interest
shortfalls on the Mortgage Loans, which are
expected to result from the distribution of
interest only to the date of prepayment (rather
than a full month's interest) in connection with
prepayments in full, and the lack of any
distribution of interest on the amount of any
partial prepayments.]
In general, if a Class of Senior Certificates is
purchased at a premium and principal distributions
thereon occur at a rate faster than anticipated at
the time of purchase, the investor's actual yield
to maturity will be lower than that assumed at the
time of purchase. Conversely, if a Class of Senior
Certificates is purchased at a discount and
principal distributions thereon occur at a rate
slower than that assumed at the time of purchase,
the investor's actual yield to maturity will be
lower than that originally anticipated.
The Senior Certificates were structured based on a
number of assumptions, including a prepayment
assumption of % SPA and weighted average lives
corresponding thereto as set forth herein under
"SPECIAL PREPAYMENT CONSIDERATIONS." The yield
assumptions for the respective Classes that are to
be offered hereunder will vary as determined at the
time of sale.
[The multiple Class structure of the Senior
Certificates causes the yield of certain Classes to
be particularly sensitive to changes in the
prepayment speed of the Mortgage Loans and other
factors, as follows [to be included as
appropriate]:]
[Interest strip and inverse floater Classes: The
yield to investors on the [identify Classes] will
be extremely sensitive to the rate and timing of
principal payments on the Mortgage Loans (including
prepayments, defaults and liquidations), which may
fluctuate significantly over time. A rapid rate of
principal payments on the Mortgage Loans could
result in the failure of investors in the [identify
interest strip and inverse floater strip Classes]
to recover their initial investments, and a slower
than anticipated rate of principal payments on the
Mortgage Loans could adversely affect the yield to
investors on the [identify non-strip inverse
floater Classes].]
[Variable Strip Certificates: In addition to the
foregoing, the yield on the Variable Strip
Certificates will be materially adversely affected
to a
S-14
<PAGE> 16
greater extent than the yields on the other Senior
Certificates if the Mortgage Loans with higher
Mortgage Rates prepay faster than the Mortgage
Loans with lower Mortgage Rates, because holders of
the Variable Strip Certificates generally have
rights to relatively larger portions of interest
payments on the Mortgage Loans with higher Mortgage
Rates than on Mortgage Loans with lower Mortgage
Rates.]
[Adjustable rate (including inverse floater)
Classes: The yields on the [identify floating rate
Classes] will be sensitive, and the yield on the
[identify inverse floater Classes] will be
extremely sensitive, to fluctuations in the level
of [the index]. The Pass-Through Rate on the
[identify inverse floater Classes] will vary
inversely with, and at a multiple of, [the index].]
[Inverse floater companion Classes: In addition to
the foregoing, in the event of relatively low
prevailing interest rates (including [the index])
and relatively high rates of principal prepayments
over an extended period, while investors in the
[identify inverse floater companion Classes] may
then be experiencing a high current yield on such
Certificates, such yield may be realized only over
a relatively short period, and it is unlikely that
such investors would be able to reinvest such
principal prepayments on such Certificates at a
comparable yield.]
[Subordination features: The yield to maturity on
the Class M Certificates will be extremely
sensitive to losses due to defaults on the Mortgage
Loans (and the timing thereof), to the extent such
losses are not covered by the Class B Certificates,
because the entire amount of such losses (rather
than a pro rata portion thereof) will be allocable
to the Class [M] Certificates, as described herein.
[Similar descriptions to be added for other Classes
with subordination features.]]
[Residual Certificates: Holders of the Residual
Certificates are entitled to receive distributions
of principal and interest as described herein;
however, holders of such Certificates may have tax
liabilities with respect to their Certificates
during the early years of their term that
substantially exceed the principal and interest
payable thereon during such periods. [In addition,
such distributions will be reduced to the extent
that they are subject to United States federal
income tax withholding.]]
See "CERTIFICATE YIELD AND PREPAYMENT
CONSIDERATIONS" [, especially "-- Yield
Considerations," "-- Yield Considerations" and
"-- Additional Yield Considerations Applicable
Solely to the Residual Certificates" and "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES"] herein, and
"YIELD CONSIDERATIONS" in the Prospectus.
Certain Federal Income Tax
Consequences............. [An election will be made to treat the Trust Fund
as a real estate mortgage investment conduit (a
"REMIC"). Upon the issuance of the Certificates,
, counsel to the Depositor, will
deliver its opinion generally to the effect that,
assuming compliance with all provisions of the
Pooling Agreement. The Trust Fund will qualify as a
REMIC under Sections 860A through 860G of the
Internal Revenue Code of 1986 (the "Code").
S-15
<PAGE> 17
The assets of the REMIC will consist of the
Mortgage Loans and the other assets in the Trust
Fund. The Senior Certificates and the Class M
Certificates will be regular interests in the REMIC
and will be treated as debt instruments of the
REMIC for federal income tax purposes. The Class R
Certificates will be the "residual interests" in
the REMIC.
The Fixed Strip Certificates and Variable Strip
Certificates will be treated for federal income tax
reporting purposes as having been issued with
original issue discount. If the method for
computing original issue discount described in the
Prospectus results in a negative amount for any
period, a Fixed Strip Certificateholder and a
Variable Strip Certificateholder will be permitted
to offset such amounts only against the respective
figure income from such Fixed Strip Certificate or
Variable Strip Certificate, as the case may be.
Although uncertain, a Fixed Strip Certificateholder
and a Variable Strip Certificateholder may be
permitted to deduct a loss to the extent that their
respective remaining basis in such Fixed Strip
Certificate or Variable Strip Certificate exceeds
the maximum amount of future payments to which such
Fixed Strip Certificateholder and Variable Strip
Certificateholder are entitled, assuming no further
prepayments of the Mortgage Loans. The prepayment
assumption that will be used in determining the
rate of accrual of market discount and original
issue discount for federal income tax purposes will
be equal to % SPA (as defined herein). No
representation is made that the Mortgage Loans will
prepay at that rate or at any other rate.
For further information regarding the federal
income tax consequences of investing in the Senior
Certificates, see "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES" herein and in the Prospectus.
[No election will be made to treat the Trust Fund
as a real estate mortgage investment conduit for
federal income tax purposes.
, counsel to the
Depositor, will deliver its opinion to the effect
that the Trust Fund will be classified as a grantor
trust under the Internal Revenue Code of 1986 (the
"Code"), and not as a partnership or an association
taxable as a corporation. For federal income tax
purposes, the Certificateholders will be treated as
owners of stripped bonds, see "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES -- Grantor Trust Fractional
Interest Certificates" in the Prospectus. The
Certificateholders will therefore be required to
include their yield with respect to the Mortgage
Loans in gross income as it accrues, based on a
constant yield method in accordance with the
original issue discount rules, which may be in
advance of the receipt of cash attributable to such
income. In the absence of statutory or
administrative clarification, it is intended to
base information returns or reports to
Certificateholders and the Internal Revenue Service
on the use of a prepayment assumption of % CPR
(as defined herein) and a representative initial
offering price for the Certificates in computing
such constant yield. However, no representation is
made that the Mortgage Loans will prepay at that
rate or at any other rate. Certificateholders
should consult their tax advisors as to the proper
treatment of original issue discount on the
Mortgage Loans and the application of the stripped
bond rules. For further information regarding the
federal income tax consequences of investing in the
Certificates, see "CERTAIN FED-
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<PAGE> 18
ERAL INCOME TAX CONSEQUENCES" herein and in the
Prospectus.]
ERISA Considerations....... See "ERISA CONSIDERATIONS" herein and in the
Prospectus.
Rating..................... It is a condition of the issuance of the [Offered]
Certificates that they be rated at least " "
by and
" " by
. [RATINGS ON THE
CERTIFICATES WILL NOT REPRESENT ANY ASSESSMENT OF
THE MASTER SERVICER'S ABILITY TO [PURCHASE] [SELL]
CONVERTING MORTGAGE LOANS OR CONVERTED MORTGAGE
LOANS. In the event that the Master Servicer does
not [purchase] [sell] a Converting Mortgage Loans
or Converted Mortgage Loan, investors in the
Certificates might suffer a lower than anticipated
yield.] 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 organization. A security rating
does not address the frequency of prepayments of
Mortgage Loans, or the corresponding effect on
yield to investors. [The rating of the Fixed Strip
Certificates or Variable Strip Certificates does
not address the possibility that the holders of
such Certificates may fail to recover their initial
investment.] See "CERTAIN YIELD AND PREPAYMENT
CONSIDERATIONS" and "RATING" herein and "YIELD
CONSIDERATIONS" in the Prospectus.
Legal Investment........... The Certificates will constitute "mortgage related
securities" for purposes of the Secondary Mortgage
Market Enhancement Act of 1984 ("SMMEA") so long as
they are rated in at least the second highest
rating category by a Rating Agency. The
Certificates will not constitute "mortgage related
securities" for purposes of SMMEA. Institutions
whose investment activities are subject to legal
investment laws and regulations, regulatory capital
requirements or review by regulatory authorities
may be subject to restrictions on investment in the
[Offered] Certificates and should consult with
their legal advisors. See "LEGAL INVESTMENT" herein
and "LEGAL INVESTMENT MATTERS" in the Prospectus.
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<PAGE> 19
DESCRIPTION OF THE MORTGAGE POOL*
GENERAL
The Mortgage Pool will consist of Mortgage Loans with an aggregate
principal balance outstanding as of the Cut-off Date, after deducting payments
of principal due on such date, of approximately $ . The Mortgage Pool
will consist of conventional [fully-amortizing] [, level monthly payment] first
Mortgage Loans with [fixed] [adjustable] interest rates which have terms to
maturity of not less than years from the date of origination or modification.
With respect to Mortgage Loans which have been modified, references herein to
the date of origination shall be deemed to be the date of most recent
modification.
All of the Mortgage Loans were [originated] [acquired from ] by
the Seller, as more fully described herein and in the Prospectus. [Approximately
% and % of the Mortgage Loans, by aggregate principal balance as of the
Cut-off Date, are or will be subserviced by .]
Pursuant to the terms of the Pooling Agreement, the Depositor shall assign
the representations and warranties relating to the Mortgage Loans made by the
Seller to the Trustee for the benefit of the Certificateholders as of the
Delivery Date. To the extent that the Seller is not able to repurchase a
Mortgage Loan in the event of a breach of its representations and warranties
with respect to such Mortgage Loan, neither the Depositor [, the Master
Servicer] nor any of [their] [its] affiliates will be required to repurchase
such Mortgage Loan. If there was fraud in the origination of such Mortgage Loans
a limited amount of losses on such Mortgage Loans will be covered by the
[Subordination (as defined herein) provided by the Class M Certificates and
Class B Certificates as described herein under "DESCRIPTION OF THE
CERTIFICATES -- Allocation of Losses; Subordination."] [[name of credit
enhancement] as described herein under "DESCRIPTION OF CREDIT ENHANCEMENT."]
[FOR ARM LOAN MORTGAGE POOLS -- The Mortgage Rate on each Mortgage Loan
will adjust [monthly] [semi-]annually on a date specified in the related
Mortgage Note (the "Adjustment Date"). For approximately % of the Mortgage
Loans, by aggregate principal balance as of the Cut-off Date, the first
Adjustment Date occurred prior to the Cut-off Date.]
[FOR ARM LOAN MORTGAGE POOLS -- On each Adjustment Date, the Mortgage Rate
on a Mortgage Loan will be adjusted to equal the sum (rounded to the next
highest multiple of %) of (a) a rate per annum equal to [description of
applicable index to be provided] (the "Index") and as most recently available as
of the day days prior to such Adjustment Date or, in the event that such
Index is no longer available, an index selected by the Master Servicer and
reasonably acceptable to the Trustee that is based on comparable information,
and (b) the related Note Margin, subject to the following limitations. The
Mortgage
- ---------------
* The description herein of the Mortgage Pool and the Mortgaged Properties is
based upon the Mortgage Loans expected to be included in the Mortgage Pool at
the time the [Offered] Certificates are issued, using the principal balances
of such Mortgage Loans at the close of business on the Cut-off Date, after
deducting the scheduled principal payments due on or before such date, whether
or not actually received. All references herein to "principal balance" refer
to the principal balance as of the Cut-off Date, unless otherwise specifically
stated or required by the context. References herein to percentages of
Mortgage Loans refer in each case to the approximate percentage of the
aggregate principal balance of all Mortgage Loans, based on the outstanding
principal balances of the Mortgage Loans after giving effect to scheduled
principal payments due on or prior to the Cut-off Date, whether or not
received. References to weighted averages refer, in each case, to weighted
averages by principal balance as of the Cut-off Date of the related Mortgage
Loans (determined as described in the preceding sentence). Prior to the
issuance of the Certificates, Mortgage Loans may be removed from the Mortgage
Pool as a result of Principal Prepayments in full, delinquencies or otherwise.
In such event, other Mortgage Loans may be included in the Mortgage Pool. The
Depositor believes that the information set forth herein with respect to the
Mortgage Pool is representative of the characteristics of the Mortgage Pool as
it will actually be constituted at the time the [Offered] Certificates are
issued, although the range of Mortgage Rates and certain other characteristics
of the Mortgage Loans in the Mortgage Pool may vary. See "--Additional
Information" herein.
S-18
<PAGE> 20
Rate on the Mortgage Loan on any Adjustment Date may not increase or decrease by
more than the Periodic Rate Cap applicable to such Mortgage Loan and, over the
life of such Mortgage Loan, generally may not exceed the Mortgage Rate at
origination plus the Lifetime Rate Cap, or be less than the Mortgage Rate at
origination minus any Lifetime Rate Floor, applicable to such Mortgage Loan. No
Mortgage Loan provides for payment caps on any Adjustment Date which would
result in deferred interest or negative amortization. Effective with the first
payment due date on a Mortgage Loan after an Adjustment Date therefor, the
monthly principal and interest payment will be adjusted to an amount that will
fully amortize the then outstanding principal balance of such Mortgage Loan at
its stated maturity and pay interest at the adjusted Mortgage Rate. Because the
amortization schedule of each Mortgage Loan will be recalculated [monthly]
[semi-]annually, any partial prepayments thereof will not reduce the term to
maturity of such Mortgage Loan. An increase in the Mortgage Rate on a Mortgage
Loan will result in a larger monthly payment and in a larger percentage of such
monthly payment being allocated to interest and a smaller percentage being
allocated to principal, and conversely, a decrease in the Mortgage Rate on the
Mortgage Loan will result in a lower monthly payment and in a larger percentage
of each monthly payment being allocated to principal and a smaller percentage
being allocated to interest.]
[Description of source and availability of Index to be provided for ARM
Loan Mortgage Pools.]
[FOR ARM LOAN MORTGAGE POOLS -- Listed below are the historical values of
the Index since 1991. Such values may fluctuate significantly over time and may
not increase or decrease in a constant pattern from period to period. The
following does not purport to be representative of future values of the Index.
No assurance can be given as to the Index value to be applied on any future
Adjustment Date.
HISTORICAL LEVELS OF [NAME OF INDEX]
<TABLE>
<CAPTION>
MONTH 1991 1992 1993 1994 1995 1996
- ----------------------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
January..................................
February.................................
March....................................
April....................................
May......................................
June.....................................
July.....................................
August...................................
September................................
October..................................
November.................................
December.................................
</TABLE>
[FOR ARM LOAN MORTGAGE POOLS -- The initial Mortgage Rate in effect on a
Mortgage Loan generally will be lower than the sum of the Index that would have
been applicable at origination and the Note Margin. Absent a decline in the
Index subsequent to origination of a Mortgage Loan, the related Mortgage Rate
will generally increase on the first Adjustment Date following origination of
such Mortgage Loan. The repayment of such Mortgage Loans will be dependent on
the ability of the Mortgagor to make larger Monthly Payments following
adjustments of the Mortgage Rate. Moreover, because the maximum Mortgage Rate on
any Mortgage Loan is determined by adding the Lifetime Rate Cap to the Mortgage
Rate at origination, irrespective of the Index that would have been applicable
at origination, the maximum Mortgage Rate on a Mortgage Loan will generally be
less than the sum of the Index and the Note Margin that would have been
applicable at origination plus the Lifetime Rate Cap. Mortgage Loans that have
the same initial Mortgage Rate may not always bear interest at the same Mortgage
Rate because the Mortgage Loans may have different Adjustment Dates (and the
Mortgage Rate therefore may reflect different Index values), different Note
Margins, different Lifetime Rate Caps and different Lifetime Rate Floors, if
any.]
S-19
<PAGE> 21
[FOR ARM LOAN MORTGAGE POOLS WITH CONVERTIBLE MORTGAGE LOANS --
Approximately % of the Mortgage Loans, by aggregate principal balance as of
the Cut-off Date, are Convertible Mortgage Loans. The first month in which any
of the Mortgage Loans could convert was , and the last month in
which any of the Mortgage Loans may convert is 1, . Upon
conversion, the monthly payments of principal and interest will be adjusted to
provide for full amortization at scheduled maturity. Upon notification from a
Mortgagor of such Mortgagor's intent to convert from an adjustable rate to a
fixed rate and prior to the conversion thereof, the Master Servicer will be
obligated to [purchase the Converting Mortgage Loan] [act as remarketing agent
with respect to such Converting Mortgage Loan and, in such capacity, to use its
best efforts to arrange for the sale of such Converting Mortgage Loan at the
Conversion Price].
In the event that the Master Servicer fails to [purchase] [sell] a
Converting Mortgage Loan or any such Mortgage Loan following its conversion (a
"Converted Mortgage Loan"), neither the Depositor, the Master Servicer or any of
their affiliates nor any other entity is obligated to purchase or arrange for
the purchase of any Converted Mortgage Loan. Any such Converted Mortgage Loan
will remain in the Mortgage Pool as a fixed-rate Mortgage Loan and will result
in the Mortgage Pool having both fixed rate and adjustable rate Mortgage Loans.
See "CERTAIN YIELD AND PREPAYMENT CONSIDERATIONS" herein.
Following the purchase of any Converting Mortgage Loan or Converted
Mortgage Loan as described above, the purchaser will be entitled to receive an
assignment from the Trustee of such Mortgage Loan and the purchaser will
thereafter own such Mortgage Loan free of any further obligation to the Trustee
or the Certificateholders with respect thereto.]
The Principal Balance of any Mortgage Loan as of any time of determination
is the principal balance of such Mortgage Loan remaining to be paid by the
Mortgagor at the close of business on the Cut-off Date, after deduction of all
payments due on or before the Cut-off Date whether or not paid, reduced by all
amounts distributed to Certificateholders with respect to such Mortgage Loan and
reported to them as allocable to principal, including the principal components
of any Advances (as described below under "DESCRIPTION OF THE
CERTIFICATES -- Advances").
[FOR ARM LOAN MORTGAGE POOLS -- The Mortgage Loans will have approximately
the following characteristics as of the Cut-off Date:
<TABLE>
<S> <C>
Number of Mortgage Loans.....................
Weighted Average Adjustable Pass-Through
Rate(1)
Mortgage Rates:
Weighted Average...........................
Range......................................
Range of Net Mortgage Rates..................
Note Margins:
Weighted Average...........................
Range......................................
Net Note Margin(2)...........................
Maximum Mortgage Rates:
Weighted Average...........................
Range......................................
Maximum Net Mortgage Rates(3):
Weighted Average...........................
Range......................................
Weighted Average Months to Next Adjustment
Date after , 19 (4).........
</TABLE>
- ---------------
(1) The Weighted Average Adjustable Pass-Through Rate is equal to the weighted
average of the Net Mortgage Rates on the Mortgage Loans.
S-20
<PAGE> 22
(2) The Net Note Margin is the Note Margin on each Mortgage Loan minus the
Servicing Fee Rate [and the rate at which the Retained Yield accrues].
(3) The difference between the maximum Net Mortgage Rate and the Net Mortgage
Rate as of the Cut-off Date may be less than the Lifetime Rate Cap.
(4) The Weighted Average Months to the next Adjustment Date is equal to the
weighted average of the number of months until the Adjustment Date next
following , 19 .]
The Mortgage Loans in the Mortgage Pool will have the following
characteristics as of the Cut-off Date (except as otherwise indicated).
Percentages of the Mortgage Pool are percentages of the aggregate principal
balance of the Mortgage Loans having such characteristics relative to the
aggregate principal balance of all Mortgage Loans in the Mortgage Pool):
[FOR FIXED RATE MORTGAGE LOAN POOLS--MORTGAGE RATES
<TABLE>
<CAPTION>
NUMBER OF PRINCIPAL PERCENTAGE OF
MORTGAGE RATES MORTGAGE LOANS BALANCE MORTGAGE POOL
--------------------------------------------- -------------- --------- -------------
<S> <C> <C> <C>
%....................................... $ %
------- -------- ------
Total.............................. $ %
======= ======== ======
</TABLE>
As of the Cut-off Date, the weighted average Mortgage Rate of the Mortgage
Loans will be approximately % per annum.]
ORIGINAL MORTGAGE LOAN PRINCIPAL BALANCES
<TABLE>
<CAPTION>
UNPAID
ORIGINAL MORTGAGE LOAN NUMBER OF PRINCIPAL PERCENTAGE OF
PRINCIPAL BALANCE MORTGAGE LOANS BALANCE MORTGAGE POOL
--------------------------------------------- -------------- --------- -------------
<S> <C> <C> <C>
%....................................... $ %
------- -------- ------
Total.............................. $ %
======= ======== ======
</TABLE>
As of the Cut-off Date, the average unpaid principal balance of the
Mortgage Loans will be approximately $ .
ORIGINAL LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
LOAN-TO-VALUE NUMBER OF PRINCIPAL PERCENTAGE OF
RATIO(%) MORTGAGE LOANS BALANCE MORTGAGE POOL
--------------------------------------------- -------------- --------- -------------
<S> <C> <C> <C>
%....................................... $ %
------- -------- ------
Total.............................. $ %
======= ======== ======
</TABLE>
S-21
<PAGE> 23
The weighted average Loan-to-Value Ratio at origination of the Mortgage
Loans will have been approximately %.
GEOGRAPHIC DISTRIBUTIONS OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
UNPAID
NUMBER OF PRINCIPAL PERCENTAGE OF
STATE MORTGAGE LOANS BALANCE MORTGAGE POOL
--------------------------------------------- -------------- --------- -------------
<S> <C> <C> <C>
........................................ $ %
Other(1).....................................
------- -------- ------
Total.............................. $ %
======= ======== ======
</TABLE>
- ---------------
(1) Other includes states and the District of Columbia with under 3%
concentrations individually.
No more than % of the Mortgage Loans will be secured by Mortgaged
Properties located in any one zip code area in California and no more than
% of the Mortgage Loans will be secured by Mortgaged Properties located in
any one zip code area outside California.
MORTGAGED PROPERTY TYPES
<TABLE>
<CAPTION>
NUMBER OF PRINCIPAL PERCENTAGE OF
PROPERTY TYPE MORTGAGE LOANS BALANCE MORTGAGE POOL
- ----------------------------------------------------- -------------- --------- -------------
<S> <C> <C> <C>
Single-family detached............................... $ %
Planned Unit Developments (detached).................
Two- to four-family units............................
Condo Low-Rise (less than 5 stories).................
Condo Mid-Rise (5 to 8 stories)......................
Condo High-Rise (9 stories or more)..................
Townhouse............................................
Planned Unit Developments (attached).................
Leasehold............................................
------- -------- ------
Total:..................................... $ %
======= ======== ======
</TABLE>
[In connection with each Mortgage Loan that is secured by a leasehold
interest, the related Seller shall have represented to the Depositor that, among
other things: the use of leasehold estates for residential properties is an
accepted practice in the area where the related Mortgaged Property is located;
residential property in such area consisting of leasehold estates is readily
marketable; the lease is recorded and no party is in any way in breach of any
provision of such lease; the leasehold is in full force and effect and is not
subject to any prior lien or encumbrance by which the leasehold could be
terminated or subject to any change or penalty; and the remaining term of the
lease does not terminate less than ten years after the maturity date of each
such Mortgage Loan.]
None of the Mortgage Loans in the Mortgage Pool will have been originated
prior to , 19 or will have a scheduled maturity later than
, . No Mortgage Loan will have an unexpired term to stated
maturity as of the Cut-off Date of less than months. The weighted average
remaining term to stated maturity of the Mortgage Loans as of the Cut-off Date
will be approximately
months.
S-22
<PAGE> 24
As of the Cut-off Date, no Mortgage Loan will be one month or more
delinquent in payment of principal and interest.
Mortgage Loans, constituting % of the Mortgage Pool, will
be Buydown Mortgage Loans.
Approximately % of the Mortgage Loans were equity refinance mortgage
loans made to mortgagors who used less than the entire amount of the proceeds to
refinance an existing mortgage loan. The weighted average Loan-to-Value Ratio at
origination of such Mortgage Loans, as of the Cut-off Date, is approximately
%. Approximately % of the Mortgage Loans were made to Mortgagors who
used the entire proceeds to refinance an existing Mortgage Loan. The weighted
average Loan-to-Value Ratio at origination of such Mortgage Loans, as of the
Cut-off Date, is approximately %.
Approximately % of the Mortgage Loans provide for deferred interest or
negative amortization.
Approximately % of the Mortgage Loans will have been underwritten
under the Rapid Processing Program described in the Prospectus under "MORTGAGE
LOAN PROGRAM -- Underwriting Standards." The weighted average Loan-to-Value
Ratio at origination of the Mortgage Loans in the Mortgage Pool which were
underwritten under the Rapid Processing Program will be approximately %.
Approximately % of the Mortgage Loans underwritten under the Rapid
Processing Program will be secured by Mortgaged Properties located in
California. See "POOLING AGREEMENT -- The Master Servicer" herein.
Approximately % of the Mortgage Loans will be secured by vacation or
second homes. Approximately % of the Mortgage Loans will be secured by
non-owner-occupied residences.
[FOR ARM LOAN MORTGAGE POOLS -- The following table sets forth the number
and aggregate principal balance as of the Cut-off Date of Mortgage Loans having
their next Adjustment Dates in the month described therein. The table also
indicates the approximate percentage of Mortgage Loans with an Adjustment Date
in each such month.
<TABLE>
<CAPTION>
PERCENTAGE OF
MONTH OF NUMBER OF AGGREGATE MORTGAGE POOL
ADJUSTMENT DATE MORTGAGE LOANS PRINCIPAL BALANCE BALANCE
---------------------------------------- -------------- ----------------- -------------
<S> <C> <C> <C>
$ %
------- ------- -------
Total:........................ $ %]
======= ======= =======
</TABLE>
[FOR ARM LOAN MORTGAGE POOLS -- The following table sets forth the number
and average original principal balance of Mortgage Loans having original
principal balances in the ranges described therein, as of the Cut-off Date. The
table also indicates the approximate weighted average Mortgage Rate and the
approximate weighted average Loan-to-Value Ratio at origination of the Mortgage
Loans in each given range, as of the Cut-off Date. Such weighted average
Loan-to-Value Ratio of the Mortgage Loans is equal to the average of the
Loan-to-Value Ratios at origination.
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
ORIGINAL
NUMBER OF AVERAGE ORIGINAL WEIGHTED AVERAGE LOAN-TO-VALUE
ORIGINAL PRINCIPAL BALANCE MORTGAGE LOANS PRINCIPAL BALANCE MORTGAGE RATE RATIO
- ----------------------------------- -------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total, Average or
Weighted Average....... $ % %
============ ============ ============= =============
</TABLE>
As of the Cut-off Date, the average unpaid principal balance of the
Mortgage Loans will be approximately $ .]
S-23
<PAGE> 25
PRIMARY MORTGAGE INSURANCE AND PRIMARY HAZARD INSURANCE
Each Mortgage Loan is required to be covered by a standard hazard insurance
policy (a "Primary Hazard Insurance Policy"). In addition, each Mortgage Loan
with a Loan-to-Value Ratio at origination in excess of 80% is required to be
covered by a primary mortgage insurance policy covering the amount of such
Mortgage Loan in excess of 75% of the value of the related Mortgaged Property
used in determining such Loan-to-Value Ratio (a "Primary Insurance Policy").
Approximately % of the Mortgage Loans, by aggregate principal balance
as of the Cut-off Date, were required to be covered by Primary Insurance
Policies and, to the best of the Depositor's knowledge, such Mortgage Loans are
so covered. Substantially all of such Primary Insurance Policies were issued by
(together with the other primary mortgage guaranty
insurers for the Mortgage Loans, the "Primary Insurers"). The Master Servicer
shall keep or cause to be kept in full force and effect each such Primary
Insurance Policy until the principal balance of the related Mortgage Loan
secured by a Mortgaged Property is reduced to 80% or less of the appraised value
in the case of such a Mortgage Loan having a Loan-to-Value Ratio at origination
in excess of 80%, provided that such Primary Insurance Policy was in place as of
the Cut-off Date and the Depositor had knowledge of such Primary Insurance
Policy. [In the event that the Depositor gains knowledge that as of the Closing
Date, a Mortgage Loan had a Loan-to-Value Ratio at origination in excess of 80%
and was not the subject of a Primary Insurance Policy and that such Mortgage
Loan has a then current Loan-to-Value Ratio in excess of 80%, then the Master
Servicer is required to use its reasonable efforts to obtain and maintain a
Primary Insurance Policy to the extent that such a policy is obtainable at a
reasonable price.] Each Primary Insurer has a claims-paying ability currently
acceptable to the Rating Agencies that have been requested to rate the
Certificates; however, there is no assurance as to the actual ability of any
Primary Insurer to pay claims. See "PRIMARY MORTGAGE INSURANCE, HAZARD
INSURANCE; CLAIMS THEREUNDER" in the Prospectus.
ADDITIONAL INFORMATION
A Current Report on Form 8-K will be available to purchasers of the
[Offered] Certificates and will be filed, together with the Pooling Agreement,
with the Securities and Exchange Commission within fifteen days after the
initial issuance of the [Offered] Certificates. In the event Mortgage Loans are
removed from or added to the Mortgage Pool as set forth in the footnote on page
, such removal or addition will be noted in the Current Report on Form 8-K.
DESCRIPTION OF THE CERTIFICATES
GENERAL
[The Series 19 Mortgage Pass-Through Certificates (the "Certificates")
will consist of the following Classes: (i) the Class A-1 Certificates, Class A-2
Certificates, Class A-3 Certificates, (ii) Class A-4 Certificates (the "Fixed
Strip Certificates"), (iii) Class A-5 Certificates (the "Variable Strip
Certificates"; together with the Class A-1 Certificates, Class A-2 Certificates,
Class A-3 Certificates and Fixed Strip Certificates, the "Senior Certificates"),
(iv) Class R Certificates (the "Residual Certificates") and (v) [ ] Classes of
Subordinate Certificates which are designated as the Class M Certificates and
the Class B Certificates (together, the "Subordinate Certificates"). The
Certificates will evidence in the aggregate the entire beneficial ownership in
the Trust Fund. The Trust Fund will consist of (i) the Mortgage Loans[,
exclusive of the Depositor's rights in and to the Retained Yield with respect to
each Mortgage Loan]; (ii) such assets as from time to time are identified as
deposited in respect of the Mortgage Loans in the Custodial Account and in the
Certificate Account and belonging to the Trust Fund; (iii) property acquired by
foreclosure of such Mortgage Loans or deed in lieu of foreclosure; [and] (iv)
any applicable Primary Insurance Policies and Primary Hazard Insurance Policies
and all proceeds thereof; [and (v) the [name of credit enhancement] (or any
alternate form of credit support substituted therefor) and all proceeds thereof,
other than any amount drawn thereunder and deposited in a reserve fund.]
S-24
<PAGE> 26
[The Certificates (the "DTC Registered Certificates")
will be issued, maintained and transferred on the book-entry records of DTC and
its Participants. The DTC Registered Certificates will be issued in minimum
denominations of $[ ] and integral multiples of $1 in excess thereof.]
The Certificates will be issued in registered, certificated form in minimum
denominations of $ and integral multiples of $ in excess
thereof, except for one Certificate, evidencing the sum of an
authorized denomination thereof and the remainder of the aggregate initial
Certificate Principal Balance of such Class of Certificates. The Residual
Certificates will be issued in registered, certificated form in minimum
denominations of a 20% Percentage Interest, except as otherwise set forth herein
under "CERTAIN FEDERAL INCOME TAX CONSEQUENCES."
[The DTC Registered Certificates will be represented by one or more
certificates registered in the name of the nominee of DTC. The Depositor has
been informed by DTC that DTC's nominee will be Cede & Co. ("Cede"). No
Beneficial Owner will be entitled to receive a certificate representing such
person's interest (a "Definitive Certificate"), except as set forth in the
Prospectus under "DESCRIPTION OF THE CERTIFICATES -- Form of Certificates."
Unless and until Definitive Certificates are issued for the DTC Registered
Certificates under the limited circumstances described herein, all references to
actions by Certificateholders with respect to the DTC Registered Certificates
shall refer to actions taken by DTC upon instructions from its Participants, and
all references herein to distributions, notices, reports and statements to
Certificateholders with respect to the DTC Registered Certificates shall refer
to distributions, notices, reports and statements to DTC or Cede, as the
registered holder of the DTC Registered Certificates, for distribution to
Beneficial Owners by DTC in accordance with DTC procedures.
BOOK-ENTRY REGISTRATION OF CERTAIN CERTIFICATES
General. Beneficial Owners that are not Participants or Intermediaries but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, the related DTC Registered Certificates may do so only through Participants
and Intermediaries. In addition, Beneficial Owners will receive all
distributions of principal of and interest on the related DTC Registered
Certificates from the Paying Agent through DTC and Participants. Accordingly,
Beneficial Owners may experience delays in their receipt of payments. Unless and
until Definitive Certificates are issued for the related DTC Registered
Certificates, it is anticipated that the only registered Certificateholder of
such DTC Registered Certificates will be Cede, as nominee of DTC. Beneficial
Owners will not be recognized by the Trustee or the Master Servicer as
Certificateholders, as such term is used in the Pooling Agreement, and
Beneficial Owners will be permitted to receive information furnished to
Certificateholders and to exercise the rights of Certificateholders only
indirectly through DTC, its Participants and Intermediaries.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
DTC Registered Certificates among Participants and to receive and transmit
distributions of principal of, and interest on, such DTC Registered
Certificates. Participants and Intermediaries with which Beneficial Owners have
accounts with respect to such DTC Registered Certificates similarly are required
to make book-entry transfers and receive and transmit such distributions on
behalf of their respective Beneficial Owners. Accordingly, although Beneficial
Owners will not possess physical certificates evidencing their interests in DTC
Registered Certificates, the Rules provide a mechanism by which Beneficial
Owners, through their Participants and Intermediaries, will receive
distributions and will be able to transfer their interests in the DTC Registered
Certificates.
None of the Depositor, the Master Servicer or the Trustee will have any
liability for any actions taken by DTC or its nominee, including, without
limitation, actions for any aspect of the records relating to or payments made
on account of beneficial ownership interests in the DTC Registered Certificates
held by Cede, as nominee for DTC, or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
Definitive Certificates. Definitive Certificates will be issued to
Beneficial Owners or their nominees, respectively, rather than to DTC or its
nominee, only under the limited conditions set forth in the Prospectus under
"DESCRIPTION OF THE CERTIFICATES -- Form of Certificates."
S-25
<PAGE> 27
Upon the occurrence of an event described in the Prospectus in the third
paragraph under "DESCRIPTION OF THE CERTIFICATES -- Form of Certificates," the
Trustee is required to notify, through DTC, Participants who have ownership of
DTC Registered Certificates as indicated on the records of DTC of the
availability of Definitive Certificates for their DTC Registered Certificates.
Upon surrender by DTC of the definitive certificates representing the DTC
Registered Certificates and upon receipt of instructions from DTC for
re-registration, the Trustee will reissue the DTC Registered Certificates as
Definitive Certificates issued in the respective principal amounts owned by
individual Beneficial Owners, and thereafter the Trustee and the Master Servicer
will recognize the holders of such Definitive Certificates as Certificateholders
under the Pooling Agreement.
For additional information regarding DTC and the DTC Registered
Certificates, see "DESCRIPTION OF THE CERTIFICATES -- Form of Certificates" in
the Prospectus.]
AVAILABLE DISTRIBUTION AMOUNT
The "Available Distribution Amount" for any Distribution Date is equal to
(i) the aggregate amount of scheduled payments on the Mortgage Loans due on the
related Due Date and received on or prior to the related Determination Date,
after deduction of the related master servicing fees and any subservicing fees
(collectively, the "Servicing Fees"), (ii) certain unscheduled payments,
including Mortgagor prepayments on the Mortgage Loans, Insurance Proceeds,
Liquidation Proceeds and proceeds from repurchases of and substitutions for the
Mortgage Loans occurring during the preceding calendar month and (iii) all
Advances made for such Distribution Date, in each case net of amounts
reimbursable therefrom to the Master Servicer and any Subservicer. In addition
to the foregoing amounts, with respect to unscheduled collections, not including
Mortgagor prepayments, the Master Servicer may elect to treat such amounts as
included in the Available Distribution Amount for the Distribution Date in the
month of receipt, but is not obligated to do so. As described herein under
"-- Principal Distributions," any such amount with respect to which such
election is so made shall be treated as having been received on the last day of
the preceding calendar month for the purposes of calculating the amount of
principal and interest distributions to any Class of Certificates. With respect
to any Distribution Date, (i) the Due Date is the first day of the month in
which such Distribution Date occurs and (ii) the Determination Date is the th
day of the month in which such Distribution date occurs or, if such day is not a
business day, the immediately succeeding business day.
INTEREST DISTRIBUTIONS
[FOR ARM LOAN MORTGAGE POOLS -- Interest distributions to holders of
Certificates will be made on each Distribution Date based on their respective
Percentage Interests. The undivided Percentage Interest of a Certificate will be
equal to the percentage obtained by dividing the initial principal balance of
such Certificate by the aggregate initial principal balance of all Certificates,
which will equal the aggregate principal balance of the Mortgage Loans as of the
Cut-off Date.
Holders of Certificates will be entitled to receive distributions of
interest on each Distribution Date, to the extent of the Available Distribution
Amount, in an aggregate amount equal to one month's interest, at the then
applicable Weighted Average Adjustable Pass-Through Rate on the principal
balance of the Mortgage Loans outstanding as of the close of business on the
immediately preceding Distribution Date (or, in the case of the first
Distribution Date, outstanding as of the Cut-off Date), subject to reduction in
the event of any interest shortfalls not covered by the [name of credit
enhancement], including any Prepayment Interest Shortfalls (as defined below)
resulting from full and partial prepayments to the extent not covered by the
Master Servicer, as well as the interest portions of Realized Losses (including
Special Hazard Losses in excess of the Special Hazard Amount ("Excess Special
Hazard Losses"), Fraud Losses in excess of the Fraud Loss Amount ("Excess Fraud
Losses"), Bankruptcy Losses in excess of the Bankruptcy Loss Amount ("Excess
Bankruptcy Losses") and losses occasioned by war, civil insurrection, certain
governmental actions, nuclear reaction and certain other risks ("Extraordinary
Losses")) not covered by the [name of credit enhancement]. The Weighted Average
Adjustable Pass-Through Rate for any Distribution Date will equal the average of
the Net Mortgage Rates (expressed as a percentage rounded to four decimal
places) on the Mortgage Loans (weighted by the principal balances of such
Mortgage Loans as of the Due Date occurring in the preceding
S-26
<PAGE> 28
month). Subject to the following limitations, for each period beginning on the
related Adjustment Date therefor, the Net Mortgage Rate on a Mortgage Loan will
equal the sum of the Index (rounded to the nearest multiple of %) and the
Net Note Margin. The Net Note Margin for each Mortgage Loan will be %.
The Net Mortgage Rate on any Mortgage Loan on any Adjustment Date may not
increase or decrease by more than the Periodic Rate Cap, and the Net Mortgage
Rate on any Mortgage Loan will not exceed the maximum Net Mortgage Rate (the
"Maximum Net Mortgage Rate") applicable to such Mortgage Loan as specified in
the Pooling Agreement. The difference between the Net Mortgage Rate as of the
Cut-off Date and the Maximum Net Mortgage Rate will not exceed, and may be less
than, the Lifetime Rate Cap. With respect to each Mortgage Loan, the Net
Mortgage Rate is the rate per annum equal to the Mortgage Rate for such Mortgage
Loan, net of the Servicing Fee Rate [and the per annum rate at which the
Retained Yield accrues]. See "DESCRIPTION OF THE MORTGAGE POOL" and "POOLING
AGREEMENT -- Servicing and Other Compensation and Payment of Expenses;" herein.]
[FOR FIXED RATE MORTGAGE LOAN POOLS -- Holders of each Class of
Certificates will be entitled to receive distributions in an amount equal to the
Accrued Certificate Interest on such Class on each Amount for such Distribution
Date[, provided however, in the case of the Tiered Certificates, that following
the Credit Support Depletion Date such distributions shall be made in the
priority set forth in the th paragraph under the heading "Principal
Distributions"]. With respect to any Distribution Date, Accrued Certificate
Interest will be equal to (a) in the case of each Class of Offered Certificates
other than the Variable Strip Certificates, one month's interest accrued on the
Certificate Principal Balance of the Certificates of such Class at the
Pass-Through Rate on such Class and (b) in the case of the Variable Strip
Certificates, one month's interest accrued on the Notional Amount of the
Certificates of such Class at the then applicable Pass-Through Rate on such
Class for such Distribution Date; in each case less interest shortfalls, if any,
for such Distribution Date not covered by the Subordination provided by the
Subordinate Certificates, including in each case (i) any Prepayment Interest
Shortfall (as defined below), (ii) the interest portions of Realized Losses
(including Special Hazard Losses in excess of the Special Hazard Amount ("Excess
Special Hazard Losses"), Fraud Losses in excess of the Fraud Loss Amount
("Excess Fraud Losses"), Bankruptcy Losses in excess of the Bankruptcy Amount
("Excess Bankruptcy Losses") and losses occasioned by war, civil insurrection,
certain governmental actions, nuclear reaction and certain other risks
("Extraordinary Losses")) not covered by the Subordination [(which with respect
to the pro rata portion thereof allocated to the Tiered Certificates, to the
extent such losses are Default Losses, will be allocated first to the Class A-4
Certificates and then to the Class A-1 Certificates)] (iii) the interest portion
of any Advances that were made with respect to delinquencies that were
ultimately determined to be Excess Special Hazard Losses, Excess Fraud Losses,
Excess Bankruptcy Losses or Extraordinary Losses and (iv) any other interest
shortfalls not covered by Subordination, including interest shortfalls relating
to the Relief Act (as defined in the Prospectus) or similar legislation or
regulations, all allocated as described below. The Variable Strip Certificates
will not receive any interest distributions with respect to their Certificate
Principal Balance. Accrued Certificate Interest is calculated on the basis of a
360-day year consisting of twelve 30-day months.
If the Available Distribution Amount for any Distribution Date is less than
the aggregate amount of the Accrued Certificate Interest required to be
distributed on the Senior Certificates on such date (the "Senior Interest
Distribution Amount"), the shortfall will be allocated among the holders of all
Classes of Senior Certificates pro rata based on the Accrued Certificate
Interest of each such Distribution Date, and will be distributable to holders of
the Certificates of such Classes, on subsequent Distribution Dates, to the
extent of available funds, provided, however, that following the Credit Support
Depletion Date distributions will be made to the Tiered Certificates in the
priority set forth in the eighth paragraph under the heading "PRINCIPAL
DISTRIBUTIONS" and therefore the pro rata portion of such shortfall that is
allocated to the Tiered Certificates will be allocated first to the Class A-4
Certificates. Shortfalls could occur, for example, if loses realized on the
Mortgage Loans in the Trust Fund were exceptionally high and were concentrated
in a particular month and if advances by the Master Servicer did not cover the
shortfall. Any such amount so carried forward will not bear interest.
The Pass-Through Rate on each Class of Offered Certificates, other than the
Variable Strip Certificates, is set forth on the cover hereof and is fixed for
each Distribution Date. The Pass-Through Rate on the Fixed
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Strip Certificates is equivalent to a fixed interest rate of approximately
% on the aggregate Certificate Principal Balance of all of the Class A-1
and Fixed Strip Certificates. The Pass-Through Rate on the Variable Strip
Certificates for each Distribution Date will equal the weighted average, as
determined as of the Due Date in the month preceding the month in which such
Distribution Date occurs, of the Pool Strip Rates on each of the Mortgage Loans
in the Mortgage Pool. The Pool Strip Rate on any Mortgage Loan is equal to the
Net Mortgage Rate thereon minus %. The Net Mortgage Rate on each Mortgage
Loan is equal to the Mortgage Rate thereon minus the Servicing Fee Rate. The
initial Pass-Through Rate on the Class A-5 Certificates is approximately
%.
As described herein, the Accrued Certificate Interest allocable to each
Class of Offered Certificates is based on the Certificate Principal Balance
thereof or in the case of the Variable Strip Certificates, on the Notional
Amount. The Certificate Principal Balance of any Certificate as of any date of
determination is equal to the initial Certificate Principal Balance thereof,
reduced by the aggregate of (a) all amounts allocable to principal previously
distributed with respect to such Certificate and (b) any reductions in the
Certificate Principal Balance thereof deemed to have occurred in connection with
allocations of Realized Losses (as defined herein) in the manner described
herein. The Notional Amount of the Variable Strip Certificates as of any date of
determination is equal to the aggregate Certificate Principal Balance of the
Certificates of all Classes (including the Variable Strip Certificates, Residual
Certificates and Subordinate Certificates) as of such date. Reference to the
Notional Amount of a Variable Strip Certificate is solely for convenience in
certain calculations and does not represent the right to receive any
distributions allocable to principal other than such Class's initial Certificate
Principal Balance.]
The Prepayment Interest Shortfall for any Distribution Date is equal to the
aggregate shortfall, if any, in collections of interest (adjusted to the related
Net Mortgage Rates) resulting from Mortgagor prepayments on the Mortgage Loans
during the preceding calendar month. Such shortfalls will result because
interest on prepayments in full is paid only to the date of prepayment, and no
interest is paid on prepayments in part, as such prepayments are applied to
reduce the outstanding principal balance of the related Mortgage Loan as of the
Due Date in the month of prepayment. [The Prepayment Interest Shortfall, the
interest portions of Realized Losses not covered by the [name of credit
enhancement] [Subordination] interest shortfalls relating to the Relief Act (as
defined herein) or similar legislation and other interest shortfalls not covered
by the [name of credit enhancement] [Subordination] on any Distribution Date
will be allocated [to] [among] the holders of [all Classes of] [the]
Certificates [(including the Subordinate and Residual Certificates), in
proportion to the respective amounts of Accrued Certificate Interest for such
Distribution Date on each such Class] [pro rata based on distributions of
interest to be made on such Distribution Date], before taking into account any
such reduction [(except with respect to interest portions of such Realized
Losses that are Default Losses that are allocated as described in the fourth
preceding paragraph)]. Prepayment Interest Shortfalls and other interest
shortfalls will not be offset by a reduction of the servicing compensation of
the Master Servicer or otherwise.]
PRINCIPAL DISTRIBUTIONS
[FOR ARM LOAN MORTGAGE POOLS -- Holders of the Certificates will be
entitled to receive on each Distribution Date, to the extent of available funds
after distributions of interest as set forth above, an amount equal to the
"Principal Distribution Amount" for such Distribution Date, which will equal the
sum of: (a) the principal portion of any Advances for such Distribution Date;
(b) any amount required to be paid by the Master Servicer due to the operation
of a deductible clause in any blanket policy maintained by it to cover hazard
losses on the Mortgage Loans as described in the Prospectus under "PRIMARY
MORTGAGE INSURANCE, HAZARD INSURANCE; CLAIMS THEREUNDER"; (c) all payments in
respect of the Mortgage Loans on account of principal (including, without
limitation, Principal Prepayments, the principal portion of any Liquidation
Proceeds and Insurance Proceeds, the principal portion of proceeds from
repurchased Mortgage Loans and the principal portion of proceeds from the sale
of Converting Mortgage Loans and Converted Mortgage Loans) on deposit in the
Custodial Account on the Determination Date immediately preceding such
Distribution Date, except (i) Liquidation Proceeds, Insurance Proceeds (other
than draws or payments under the [name of credit enhancement]) and Principal
Prepayments received during
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the month in which such Distribution Date occurs (unless such amounts are deemed
to have been received in the prior month pursuant to the Pooling Agreement as
described below), (ii) scheduled payments of principal due on a date or dates
subsequent to the first day of the month in which such Distribution Date occurs,
(iii) late payments of principal which have been the subject of a previous
Advance or Advances that have not been reimbursed to the Master Servicer (on
behalf of itself or on behalf of any Subservicer) and (iv) an amount equal to
liquidation expenses incurred by the Master Servicer to the extent not
reimbursed from related Liquidation Proceeds; and (d) all amounts required to be
deposited in the Certificate Account on the Business Day immediately preceding
such Distribution Date, with respect to draws or payments under the [name of
credit enhancement] which are allocable to payments on account of principal of
the Mortgage Loans, except for payments of principal which have been the subject
of a previous Advance or Advances and which are eligible for withdrawal in
reimbursement to the Master Servicer or any Subservicer.
Distributions for any Distribution Date will be reduced if net Liquidation
Proceeds or net Insurance Proceeds (including receipt of any amounts payable as
described below under "DESCRIPTION OF CREDIT ENHANCEMENT") received on a
defaulted Mortgage Loan during the month preceding the month in which such
Distribution Date occurs are less than the outstanding principal balance of such
Mortgage Loan, plus interest thereon at the related Net Mortgage Rate. If an
Advance by the Master Servicer was previously made in respect of a defaulted
Mortgage Loan, any late payments of principal and interest, Insurance Proceeds
and Liquidation Proceeds remitted to the Master Servicer relating to such
Mortgage Loan will be subject to withdrawal by the Master Servicer from the
Custodial Account in reimbursement to itself for such Advance prior to being
made available to the Certificateholders. To the extent that an Advance is not
made, the distributions for such Distribution Date will be reduced accordingly.
Reimbursement of the Master Servicer or the Depositor for any other advances or
expenses reimbursable to either as described in the Prospectus, out of amounts
otherwise distributable to the Certificateholders, will also reduce the
distributions for the related Distribution Date. Distributions for any
Distribution Date will be reduced to the extent that losses on any Mortgage
Loans in the Mortgage Pool are not covered by the [name of credit enhancement]
or any substitute form of credit enhancement.]
[FOR FIXED RATE MORTGAGE LOAN POOLS -- Holders of the Senior Certificates
will be entitled to receive on each Distribution Date, to the extent of the
portion of the Available Distribution Amount remaining after the Senior Interest
Distribution Amount is distributed to such holders, a distribution allocable to
principal in the following amount:
(i) the product of (A) the then applicable Senior Percentage and (B)
the aggregate of the following amounts:
(1) the principal portion of the all scheduled monthly payments on
the Mortgage Loans due on the related Due Date, whether or not received
on or prior to the related Determination Date, less the principal
portion of Debt Service Reductions (as defined below) which together
with other Bankruptcy Losses are in excess of the Bankruptcy Amount;
(2) the principal portion of all proceeds of the repurchase of any
Mortgage Loan as required by any applicable Mortgage Loan Purchase
Agreement during the preceding calendar month;
(3) the principal portion of all other unscheduled collections
received during the preceding calendar month (other than full and
partial Principal Prepayments made by the respective mortgagors and any
amounts received in connection with a Final Disposition (as defined
below) of a Mortgage Loan described in clause (ii) below), to the extent
applied as recoveries of principal;
(ii) in connection with the Final Disposition of a Mortgage Loan (x)
that occurred in the preceding calendar month and (y) that did not result
in any Excess Special Hazard Losses, Excess Fraud Losses, Excess Bankruptcy
Losses or Extraordinary Losses, an amount equal to the lesser of (a) the
then-applicable Senior Percentage of the Stated Principal Balance of such
Mortgage Loan and (b) the then-applicable Senior Accelerated Distribution
Percentage (as defined below) of the related collections, including
Insurance Proceeds and Liquidation Proceeds to the extent applied as
recoveries of principal;
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<PAGE> 31
(iii) the then applicable Senior Accelerated Distribution Percentage
of the aggregate of all full and partial Principal Prepayments made by the
respective Mortgagors during the preceding calendar month;
(iv) any Excess Subordinate Principal Amount (as defined below) for
such Distribution Date;
(v) any amounts allocable to principal for any previous Distribution
Date (calculated pursuant to clauses (i) through (iii) above) that remain
undistributed to the extent any such amounts are not attributable to
Realized Losses which are allocated to the Subordinate Certificates.
Holders of the Class M Certificates will be entitled to receive a
distribution of principal on each Distribution Date, to the extent of the
portion of the Available Distribution Amount remaining after (i) distributions
in respect of interest and principal to the holders of the Senior Certificates
[and distributions of the Retained Yield], (ii) reimbursement for certain
Advances to the Master Servicer and (iii) distributions in respect of interest
to the holders of the Class M Certificates. Such principal distributions will be
made as to the Class M Certificates in the amounts described herein.
With respect to any Distribution Date on which the Certificate Principal
Balance of the most subordinate Class or Classes of Certificates then
outstanding is to be reduced to zero and on which Realized Losses are to be
allocated to such Class or Classes, the "Excess Subordinate Principal Amount" is
equal to the amount, if any, by which (i) the amount that would otherwise be
distributable in respect of principal on such Class or Classes of Certificates
on such Distribution Date is greater than (ii) the excess, if any, of the
aggregate of the Certificate Principal Balance of such Class or Classes of
Certificates immediately prior to such Distribution Date over the aggregate
amount of Realized Losses to be allocated to such Class or Classes of
Certificates on such Distribution Date.
A "Final Disposition" of a defaulted Mortgage Loan is deemed to have
occurred upon a determination by the Master Servicer that it has received all
Insurance Proceeds, Liquidation Proceeds and other payments or cash recoveries
which the Master Servicer reasonably and in good faith expects to be finally
recoverable with respect to such Mortgage Loan.
The "Stated Principal Balance" of any Mortgage Loan as of any date of
determination is equal to the principal balance thereof as of the Cut-off Date,
after application of all scheduled principal payments due on or before the
Cut-off Date, whether or not received, reduced by all amounts allocable to
principal that have been distributed to Certificateholders with respect to such
Mortgage Loan on or before such date, and as further reduced to the extent that
Classes of Certificates on or before the date of determination.
The Senior Percentage, which initially will equal approximately % and
will in no event exceed 100%, will be adjusted for each Distribution Date to be
the percentage equal to the aggregate Certificate Principal Balance of the
Senior Certificates immediately prior to such Distribution Date divided by the
aggregate Stated Principal Balance of all of the Mortgage Loans immediately
prior to such Distribution Date. The Subordinate Percentage as of any date of
determination is equal to 100% minus the Senior Percentage as of such date.
The Senior Accelerated Distribution Percentage for any Distribution Date
occurring during the first five years following the Delivery Date after the
Delivery Date will equal 100%. Thereafter, the Senior Accelerated Distribution
Percentage will be subject to gradual reduction as described in the following
paragraph. This disproportionate allocation of certain unscheduled payments in
respect of principal will have the effect of accelerating the amortization of
the Senior Certificates while, in the absence of Realized Losses allocated to
the Subordinate Certificates, increasing the proportionate interest in the Trust
Fund evidenced by the Subordinate Certificates. Increasing the proportionate
interest of the Subordinate Certificates relative to that of the Senior
Certificates is intended to preserve the availability of the subordination
provided by the Subordinate Certificates.
The Senior Accelerated Distribution Percentage for any Distribution Date
occurring after the first five years will be as follows: for any Distribution
Date falling in the sixth year after the Delivery Date, the Senior Percentage
for such Distribution Date plus 70% of the Subordinate Percentage (as defined
below) for such Distribution Date; for any Distribution Date falling in the
seventh year after the Delivery Date, the Senior Percentage for such
Distribution Date plus 60% of the Subordinate Percentage for such Distribution
Date; for
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any Distribution Date falling in the eighth year after the Delivery Date, the
Senior Percentage for such Distribution Date plus 40% of the Subordinate
Percentage for such Distribution Date; for any Distribution Date falling in the
ninth year after the Delivery Date, the Senior Percentage for such Distribution
Date plus 20% of the Subordinate Percentage for such Distribution Date; and for
any Distribution Date thereafter, the Senior Percentage for such Distribution
Date (unless on any such Distribution Date the Senior Percentage exceeds the
initial Senior Percentage, in which case the Senior Accelerated Distribution
Percentage for such Distribution Date will once again equal 100%). The scheduled
reductions in the Senior Accelerated Distribution percentage occurring in the
sixth and subsequent years after the Delivery Date will be postponed on the
Distribution Date on which such reduction is scheduled to occur if certain
criteria regarding the delinquency and loss experience of the Mortgage Loans are
not met. See "SUBORDINATION" in the Prospectus.
On each Distribution Date occurring prior to the Credit Support Depletion
Date, (i) the product of (a) the Senior Principal Distribution Amount times (b)
the Variable Strip Percentage (as defined below) will be distributed in
reduction Certificates, and (ii) the excess of the Senior Principal Distribution
Amount over the amount described in clause (i) of Certificates as follows:
first, concurrently to the Class A-1 and Class A-4 Certificates, with the amount
to be distributed allocated as between such Classes on a pro rata basis in
proportion to the respective Certificate Principal Balances thereof, until the
Certificate Principal Balance of each such Class is reduced to zero; second, to
the Class A-2 Certificates until the Certificate Principal Balance thereof is
reduced to zero; and third, to the Class A-3 Certificates until the Certificate
Principal Balance thereof is reduced to zero.
On each Distribution Date occurring on or after the Credit Support
Depletion Date, all priorities relating to sequential distributions in respect
of principal among the various Classes of Certificates will be disregarded, and
the Senior Principal Distribution Amount will be distributed to all Classes of
Certificates pro rata in accordance with their respective outstanding
Certificate Principal Balances; provided, that the aggregate amount
distributable to the Class A-1 and Class A-4 Certificates (the "Tiered
Certificates") in respect of Accrued Certificate Interest thereof and in respect
of their pro rata portion of the Senior Principal Distribution Amount shall be
distributed among the Tiered Certificates in the amounts and priority as
follows: first to the Class A-1 Certificates, up to an amount equal to the
Accrued Certificate Interest thereon; second to the Class A-1 Certificates, up
to an amount equal to the Optimal Principal Distribution Amount thereof (as
defined below) in reduction of the Certificate Principal Balance thereof; third
to the Class A-4 Certificates, up to an amount equal to the Accrued Certificate
Interest thereon; and fourth to the Class A-4 Certificates the remainder of the
amount so distributable among the Tiered Certificates.
The "Credit Support Depletion Date" is the first Distribution Date on which
the Senior Percentage equals 100%, with respect to any Distribution Date, the
"Variable Strip Percentage" is equal to a fraction, expressed as a percentage,
the numerator of which is the Certificate Principal Balance of the Variable
Strip Certificates as of the Cut-off Date and the denominator of which is the
aggregate Certificate Principal Balance of all Classes of Senior Certificates as
of the Cut-off Date. The "Optimal Principal Distribution Amount" is equal to the
product of (a) the then applicable Optimal Percentage and (b) the amounts
described in clauses (i), (ii) and (iii) of the eighth preceding paragraph. The
"Optimal Percentage" is equal to a fraction, expressed as a percentage, the
numerator of which is the aggregate Certificate Principal Balance of the Class
A-1 Certificates immediately prior to the applicable Distribution Date and the
denominator of which is the aggregate Certificate Principal Balance of all
Senior Certificates immediately prior to such Distribution Date.]
The Master Servicer may elect to treat Insurance Proceeds, Liquidation
Proceeds and other unscheduled collections (not including prepayments by the
mortgagors) received in any calendar month, as included in the Available
Distribution Amount [and the Senior Principal Distribution Amount] for the
Distribution Date in the month of receipt, but is not obligated to do so. If the
Master Servicer so elects, such amounts will be deemed to have been received
(and any related Realized Loss [which requires a [draw on] [claim under] the
[name of credit enhancement] shall be deemed to have occurred) on the last day
of the month prior to the receipt thereof.
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[ALLOCATION OF LOSSES; SUBORDINATION
Any Realized Losses which are not Excess Special Hazard Losses, Excess
Fraud Losses, Excess Bankruptcy Losses or Extraordinary Losses will be allocated
first to the Class B Certificates until the Certificate Principal Balance of the
Class B Certificates has been reduced to zero, then to the Class M Certificates
until the Certificate Principal Balance of the Class M Certificates has been
reduced to zero, and then except as provided below on a pro rata basis to the
Senior Certificates based on their then outstanding Certificate Principal
Balance or the Accrued Certificate Interest thereon, as applicable. Any
allocation of a Realized Loss (other than a Debt Service Reduction) to a Senior
Certificate will be made by reducing the Certificate Principal Balance thereof,
in the case of the principal portion of such Realized Loss, and the Accrued
Certificate Interest thereon, in the case of the interest portion of such
Realized Loss, by the amount so allocated as of the Distribution Date occurring
in the month following the calendar month in which such Realized Loss was
incurred. Allocations of Realized Losses which are Default Losses (as defined
below) to Senior Certificates will be made on a pro rata basis, based on their
then outstanding Certificate Principal Balances, or the Accrued Certificate
Interest thereon, as applicable, between the Tiered Certificates and the Class
A-2, Class A-3 and Variable Strip Certificates. Any such Realized Losses so
allocated to the Tiered Certificates will be allocated first to the Class A-4
Certificates until the Certificate Principal Balance thereof is reduced to zero
and then to the Class A-1 Certificates. "Default Losses" are Realized Losses
that are attributable to the Mortgagor's failure to make any payment of
principal or interest as required under the Mortgage Note, and do not include
Special Hazard Losses (or any other loss resulting from damage to a Mortgaged
Property), Bankruptcy Losses, Fraud Losses, or other losses of a type not
covered by the Subordination. Allocations of Debt Service Reductions to the
Subordinate Certificates will result from the priority of distributions to the
Senior Certificateholders of the Available Distribution Amount as described
under the captions "Interest Distributions" and "Principal Distributions"
herein. An allocation of the interest portion of a Realized Loss as well as the
principal portion of Debt Service Reductions will not be treated as
Subordination, as such term is defined herein, until an amount in respect
thereof has been actually disbursed to the Senior Certificateholders or the
Class M Certificateholders, as applicable. Any Excess Special Hazard Losses,
Excess Fraud Losses, Excess Bankruptcy Losses, or the Class M
Certificateholders, as applicable Extraordinary Losses or other losses of a type
not covered by Subordination will be allocated on a pro rata basis among the
Senior Certificates, [, the Retained Yield (in the case of the interest portion
of any such Realized Losses)] and the Subordinate Certificates (any such which
are allocated to the Senior Certificates will be allocated without priority
among the various Classes of Senior Certificates).
With respect to any defaulted Mortgage Loan that is finally liquidated,
through foreclosure sale, disposition of the related Mortgaged Property if
acquired on behalf of the Certificateholders by deed in lieu of foreclosure, or
otherwise, the amount of loss realized, if any, will equal the portion of the
Stated Principal Balance remaining, if any, plus interest thereon through the
last day of the month in which such Mortgage Loan was finally liquidated, after
application of all amounts recovered (net of amounts reimbursable to the Master
Servicer or any Subservicer for Advances and expenses; including attorneys'
fees) towards interest and principal owing on the Mortgage Loan. Such amount of
loss realized and any Special Hazard Losses, Fraud Losses and Bankruptcy Losses
are referred to herein as "Realized Losses." As used herein, "Debt Service
Reductions" means reductions in the amount of monthly payments due to certain
bankruptcy proceedings, but does not include any forgiveness of principal.
In order to maximize the likelihood of distribution in full of the Senior
Interest Distribution Amount and the Senior Principal Distribution Amount,
holders of Senior Certificates will have a prior right, on each Distribution
Date, to the Available Distribution Amount, to the extent necessary to satisfy
the Senior Interest Distribution Amount and the Senior Principal Distribution
Amount. The Senior Principal Distribution Amount is subject to adjustment on
each Distribution Date to reflect the then applicable Senior Percentage and the
Senior Accelerated Distribution Percentage, as described herein under "Principal
Distributions," each of which may be increased (to not more than 100%) in the
event of delinquencies or Realized Losses on the Mortgage Loans. The application
of the Senior Accelerated Distribution Percentage when it exceeds the Senior
Percentage to determine the Senior Principal Distribution Amount, together with
amounts, if any, paid on Senior Certificates in respect of Unrecovered Senior
Portions, will accelerate the amortization of the Senior
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<PAGE> 34
Certificates relative to the actual amortization of the Mortgage Loans. To the
extent that the Senior Certificates are amortized faster than the Mortgage
Loans, the percentage interest evidenced by the Senior Certificates in the Trust
Fund will be decreased (with a corresponding increase in the interest in the
Trust Fund evidenced by the Subordinate Certificates), thereby increasing, as a
relative matter, the Subordination afforded by the Subordinate Certificates.
Similarly, holders of Class A-1 Certificates will have a prior right, on each
Distribution Date occurring on or after the Credit Support Depletion Date, to
that portion of the Available Distribution Amount allocated to the Tiered
Certificates, to the extent necessary to satisfy the Accrued Certificate
Interest on the Class A-1 Certificates and the Optimal Principal Distribution
Amount. Therefore, any shortfalls in the amounts that would otherwise be
distributable to Class A-1 Certificateholders, whether resulting from Mortgage
Loan delinquencies or Realized Losses will be borne by the holders of the Class
A-4 Certificates.
The total amount of Realized Losses which may be allocated solely to the
Subordinate Certificates through the operation of the subordination provisions
described above ("Subordination") in connection with Special Hazard Losses (the
"Special Hazard Amount") will equal $ less the sum of (A) any amounts
allocated solely to the Subordinate Certificates through Subordination in
respect of Special Hazard Losses and (B) the Adjustment 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, without giving effect to the deduction
of the Adjustment Amount for such anniversary, exceeds the greater of (i) 1%
(or, if greater than 1%, the highest percentage of Mortgage Loans, by principal
balance, in any California zip code area) times the aggregate principal balance
of all of the Mortgage Loans in the Mortgage Pool on such anniversary and (ii)
twice the principal balance of the single Mortgage Loan in the Mortgage Pool
having the largest principal balance. As used in this Prospectus Supplement,
"Special Hazard Losses" has the same meaning set forth in the Prospectus except
that Special Hazard Losses will not include and the Subordination will not cover
Extraordinary Losses and Special Hazard Losses will not exceed the lesser of the
cost of repair or replacement of the related Mortgaged Properties.
The total amount of Realized Losses which may be allocated to the
Subordinate Certificates in connection with Fraud Losses (the "Fraud Loss
Amount") from Subordination shall initially be equal to $ . As of any
date of determination after the Cut-off Date the Fraud Loss Amount shall equal
(X) prior to the first anniversary of the Cut-off Date an amount equal to %
of the aggregate principal balance of all of the Mortgage Loans as of the
Cut-off Date minus the aggregate amounts allocated solely to the Subordinate
Certificates through Subordination with respect to Fraud Losses up to such date
of determination, 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) % of the aggregate
principal balance of all of the Mortgage Loans as of the most recent anniversary
of the Cut-off Date minus (2) the aggregate amounts allocated solely to the
Subordinate Certificates through Subordination with respect to Fraud Losses
since the most recent anniversary of the Cut-off Date up to such date of
determination. After the fifth anniversary of the Cut-off Date the Fraud Loss
Amount shall be zero and no allocation solely to the Subordinate Certificates
through Subordination shall be made with respect to Fraud Losses.
The total amount of Realized Losses which may be allocated solely to the
Subordinate Certificates in connection with Bankruptcy Losses (the "Bankruptcy
Amount") from Subordination will equal $ less the sum of any amounts
allocated solely to the Subordinate Certificates through Subordination for such
losses up to such date of determination. As of any day of determination on or
after the first anniversary of the Cut-off Date, the Bankruptcy Amount will
equal the excess, if any, of (1) the lesser of (a) the Bankruptcy Amount as of
the business day next preceding the most recent anniversary of the Cut-off Date
(the "Relevant Anniversary") and (b) the greater of (A) an amount calculated
pursuant to the terms of the Pooling Agreement, which amount as calculated will
provide for a reduction in the Bankruptcy Amount, if delinquency rates and
losses on the Mortgage Loans do not exceed certain levels as set forth in the
Pooling Agreement and (B) the excess of (i) the aggregate of all monthly
payments on the largest Mortgage Loan in the Mortgage Pool secured by a
non-primary residence over the remaining term of such Mortgage Loan over (ii)
the aggregate of all monthly payments that would be made on such Mortgage Loan
over such remaining
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<PAGE> 35
term if the related Mortgage Rate were equal to 6% per annum, over (2) the
aggregate amount of Bankruptcy Losses allocated solely to the Subordinate
Certificate through Subordination since such anniversary.
Notwithstanding the foregoing, the provisions relating to Subordination
will not be applicable in connection with a Bankruptcy Loss so long as the
Master Servicer has notified the Trustee in writing that the Master 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 the Master Servicer or a
Subservicer.]
ADVANCES
Prior to each Distribution Date, the Master Servicer is required to make
Advances (out of its own funds, advances made by a Subservicer, or funds held in
the Custodial Account (as described in the Prospectus) for future distribution
or withdrawal) with respect to any payments of principal and interest (net of
the related Servicing Fees [and the Retained Yield]) which were due on the
Mortgage Loans on the immediately preceding Due Date and delinquent on the
business day next preceding the related Determination Date, but only if the
Master Servicer believes that the amount advanced will be recoverable from
related late collections, Insurance Proceeds [(including [draws on] [payments
under] the [name of credit enhancement)] [or] [,] Liquidation Proceeds [or
amounts otherwise payable to the holders of the Subordinate Certificates].
The purpose of making such Advances is to maintain a regular cash flow to
the Certificateholders, rather than to guarantee or insure against losses. The
Master Servicer will not be required to make any Advances with respect to
reductions in the amount of the monthly payments on the Mortgage Loans due to
Debt Service Reductions or the application of the Relief Act or similar
legislation. Any failure by the Master Servicer to make an Advance as required
under the Pooling Agreement will constitute an Event of Default thereunder, in
which case the Trustee, as successor Master Servicer, will be obligated to make
any such advance, in accordance with the terms of the Pooling Agreement.
All Advances will be reimbursable to the Master Servicer on a first
priority basis from [either (a)] late collections, Insurance Proceeds
[(including [draws on] [payments under] the [name of credit enhancement)] and
Liquidation Proceeds from the Mortgage Loan as to which such unreimbursed
Advance was made [or (b) as to any Advance that remains unreimbursed following
the final liquidation of the related Mortgage Loan, from amounts otherwise
distributable on the Subordinate Certificates; provided however that only the
Subordinate Percentage of such Advances are reimbursable from amounts otherwise
distributable on the Subordinate Certificates in the event that such Advances
were made with respect to delinquencies which ultimately were determined to be
Excess Special Hazard Losses, Excess Fraud Losses, Excess Bankruptcy Losses or
Extraordinary Losses and the Senior Percentage of such Advances which may not be
so reimbursed from amounts otherwise distributable on the Subordinate
Certificates may be reimbursed to the Master Servicer out of any funds in the
Custodial Account or Certificate Account prior to distributions on the Senior
Certificates. In the latter event, the aggregate amount otherwise distributable
on the Senior Certificates will be reduced by an amount equal to the Senior
Percentage of such Advances.] In addition, [if the Certificate Principal Balance
of the Subordinate Certificates has been reduced to zero,] any Advances
previously made which are deemed by the Master Servicer to be nonrecoverable
from related late collections, Insurance Proceeds [(including [draws on]
[payments under] the [name of credit enhancement])] and Liquidation Proceeds may
be reimbursed to the Master Servicer out of any funds in the Custodial Account
or Certificate Account prior to distributions on the Senior Certificates.
CERTAIN YIELD AND PREPAYMENT CONSIDERATIONS
The effective yield to the holders of [Offered] Certificates will be lower
than the yield otherwise produced by the applicable [Weighted Average
Adjustable] Pass-Through Rate and purchase price because monthly distributions
will not be made to such holders until the th day (or if such day is not a
business day,
S-34
<PAGE> 36
then on the next succeeding business day) of the month following the month in
which interest accrues on the Mortgage Loans (without any additional
distributions of interest or earnings thereon in respect of such delay). See
"YIELD CONSIDERATIONS" in the Prospectus.
The yield to maturity and the aggregate amount of distributions on the
[Offered] Certificates will be directly related to the rate of payment of
principal on the Mortgage Loans. Such yield may be adversely affected by a
higher or lower than anticipated rate of payment of principal on the Mortgage
Loans in the Trust Fund. The rate of payment of principal on such Mortgage Loans
will in turn be affected by the amortization schedules of the Mortgage Loans
[(which will change periodically as described above)], the rate of principal
prepayments thereon by the Mortgagors, liquidations of defaulted Mortgage Loans
and purchases of Mortgage Loans due to certain breaches of representations [or
the conversion of Convertible Mortgage Loans. The principal component of the
monthly payments on the Mortgage Loans may change on each related Adjustment
Date.] [The Mortgage Loans may be prepaid by the Mortgagors at any time without
payment of any prepayment fee or penalty.] All of the Mortgage Loans contain
due-on-sale clauses. In addition, the amortization schedule of a Mortgage Loan
may be changed in connection with the receipt of a partial prepayment thereon,
provided however that such changes will not include a change in the maturity
date of the related Mortgage Loan. See "Description of the Mortgage
Pool -- General" herein. [As described under "DESCRIPTION OF THE
CERTIFICATES -- Principal Distributions" herein, all or a disproportionate
percentage of principal prepayments on the Mortgage Loans will be distributed to
the Senior Certificates during not less than the first nine years after the
Delivery Date.]
Factors affecting prepayment of mortgage loans include changes in
mortgagors' housing needs, job transfers, mortgage market interest rates,
unemployment, mortgagors' net equity in the mortgaged properties, changes in the
value of the mortgaged properties and servicing decisions. If prevailing
mortgage rates fell significantly below the Mortgage Rates on the Mortgage
Loans, the rate of prepayment (and refinancing) would be expected to increase.
Conversely, if prevailing mortgage rates rose significantly above the Mortgage
Rates on the Mortgage Loans, the rate of prepayment on the Mortgage Loans would
be expected to decrease. There can be no certainty as to the rate of prepayments
on[, or conversions of,] the Mortgage Loans during any period or over the life
of the Certificates.] [However, in the event that substantial numbers of
Mortgagors exercise their conversion rights, and the Master Servicer [purchases]
[sells] the Converting and Converted Mortgage Loans, the Mortgage Pool will
experience substantial prepayment of principal.]
[The yield to maturity on the Variable Strip Certificates and, in
particular, on the Fixed Strip Certificates, which Classes are expected to be
sold at substantial premiums, will be extremely sensitive to both the timing of
receipt of prepayments and the overall rate of principal prepayments and
defaults on the Mortgage Loans, which rate may fluctuate significantly from time
to time. The yield to maturity on the Fixed Strip Certificates is particularly
sensitive to the rate of principal payments because the Certificate Principal
Balance of the Fixed Strip Certificates is paid down on a pro rata basis with
the Certificate Principal Balance of the Class A-1 Certificates and Class A-4
Certificates before distributions to other Classes of Senior Certificates. The
yields to investors on all of the Offered Certificates will also be adversely
affected by any interest shortfalls of a type not covered by Subordination,
including Prepayment Interest Shortfalls. In addition, holders of Variable Strip
Certificates generally have rights to relatively larger portions of interest
payments on Mortgage Loans with higher Mortgage Rates; thus, the yield on the
Variable Strip Certificates will be materially adversely affected to a greater
extent than on the other Senior Certificates if the Mortgage Loans with the
higher Mortgage Rates prepay faster than the rate assumed by investors. There
can be no assurance that the Mortgage Loans will prepay at any particular rate
or that the cash flows on the Fixed Strip Certificates or Variable Strip
Certificates will conform to the cash flows described herein. Investors in the
Fixed Strip Certificates and Variable Strip Certificates should fully consider
the associated risks, including the risk that a rapid rate of prepayments on the
Mortgage Loans could result in the failure of such investors to fully recover
their investments.
Because the Mortgage Rates on the Mortgage Loans and the Pass-Through Rates
on the Offered Certificates (other than the Variable Strip Certificates) are
fixed, such rates will not change in response to changes in market interest
rates. The Pass-Through Rate on the Variable Strip Certificates is based on the
weighted average of the Pool Strip Rates on the Mortgage Loans, and such rates
will also not change in
S-35
<PAGE> 37
response to changes in market interest rates. Accordingly, if market interest
rates or market yields for securities similar to the Offered Certificates were
to rise, the market value of the Offered Certificates may decline. In addition,
if prevailing mortgage rates fell significantly below the Mortgage Rates on the
Mortgage Loans, the rate of prepayments (including refinancings) would be
expected to increase. Conversely, if prevailing mortgage rates rose
significantly above the Mortgage Rates on the Mortgage Loans, the rate of
prepayment on the Mortgage Loans would be expected to decrease.
The rate of defaults on the Mortgage Loans will also affect the rate of
payment of principal on the Mortgage Loans. In general, defaults on mortgage
loans are expected to occur with greater frequency in their early years. The
rate of default on mortgage loans which are equity refinance mortgage loans may
be higher than for other types of Mortgage Loans. Prepayments, liquidations and
purchases of the Mortgage Loans will result in distributions to
Certificateholders of principal amounts which would otherwise be distributed
over the remaining terms of the Mortgage Loans. Furthermore, the rate of
prepayments, defaults and liquidations on the Mortgage Loans will be affected by
the general economic condition of the region of the country in which the related
Mortgaged Properties are located. The risk of delinquencies and loss is greater
and prepayments are less likely in regions where a weak or deteriorating economy
exists, as may be evidenced by, among other factors, increasing unemployment or
falling property values. See "MATURITY AND PREPAYMENT CONSIDERATIONS" in the
Prospectus. Since the rates of payment of principal on the Mortgage Loans will
depend on future events and on a variety of factors (as described more fully
herein and in the Prospectus under "YIELD CONSIDERATIONS" and "MATURITY AND
PREPAYMENT CONSIDERATIONS"), no assurance can be given as to such rate or the
rate of principal prepayments on the Certificates.
[The periodic increase in the interest paid by the Mortgagor of a Buydown
Mortgage Loan during or at the end of the applicable Buydown Period may create a
greater financial burden for the Mortgagor, who might not have otherwise
qualified for a mortgage under the applicable lender's underwriting guidelines,
and may accordingly increase the risk of default with respect to the related
Mortgage Loan. See "MORTGAGE LOAN PROGRAM -- Underwriting Standards" in the
Prospectus.]
The amount of interest otherwise payable to holders of the Certificates
will be reduced by any interest shortfalls not covered by Subordination,
including Prepayment Interest Shortfalls. [Such shortfalls will not be offset by
a reduction in the Servicing Fees payable to the Master Servicer or otherwise.
See "YIELD CONSIDERATIONS" in the Prospectus and "DESCRIPTION OF THE
CERTIFICATES -- Interest Distributions" for a discussion of the effect of
principal prepayments on the Mortgage Loans on the yield to maturity of the
Certificates and certain possible shortfalls in the collection of interest.]
The timing of changes in the rate of prepayments, liquidations and
repurchases of the Mortgage Loans may significantly affect an investor's actual
yield to maturity, even if the average rate of principal payments experienced
over time is consistent with an investor's expectation. Because all or a
disproportionate percentage of principal prepayments will be allocated to the
Senior Certificates during not less than the first nine years after the Delivery
Date, the rate of prepayments on the Mortgage Loans during this period may
significantly affect the yield to maturity of the Offered Certificates.
In addition, the yield to maturity of the Certificates will depend on the
price paid by the holders of the Certificates and the related Pass-Through Rate.
The extent to which the yield to maturity of a Certificate may vary from the
anticipated yield thereon will depend upon the degree to which it is purchased
at a discount or premium and the degree to which the timing of payments thereon
is sensitive to prepayments. Because principal distributions are paid to certain
Classes of Offered Certificates before other Classes, holders of Classes of
Offered Certificates having a later priority of payment bear a greater risk of
losses than holders of Classes of Offered Certificates having earlier priorities
for distribution of principal. In addition, the Class A-4 Certificates bear a
greater risk of losses than the other Tiered Certificates because Default Losses
on the Mortgage Loans not covered by the Subordination which are allocated to
the Tiered Certificates are allocated first to the Class A-4 Certificates prior
to allocation to the Class A-1 Certificates to the extent described herein. For
additional considerations relating to the yield on the Certificates, see YIELD
CONSIDERATIONS" and "MATURITY AND PREPAYMENT CONSIDERATIONS" in the Prospectus.
S-36
<PAGE> 38
The assumed final Distribution Date with respect to each Class of
Certificates is , 20 . The assumed final Distribution Date is the
Distribution Date immediately following the latest scheduled maturity date of
any Mortgage Loan in the Mortgage Pool.
Weighted average life refers to the average amount of time that will elapse
from the date of issuance of a security until a dollar amount in payment of
principal equal to the original principal balance of such security (less losses)
is distributed to the investor. The weighted average life of the Certificates
will be influenced by among other things, the rate at which principal of the
Mortgage Loans is paid, which may be in the form of scheduled amortization,
prepayments or liquidations.
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 prepayment
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
additional 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. Correspondingly, % SPA" assumes prepayment rates equal to %
of SPA, and so forth. SPA does not purport to be a historical description of
prepayment experience or a prediction of the anticipated rate of prepayment of
any pool of mortgage loans, including the Mortgage Loans.
The table set forth below has been prepared on the basis of assumptions
regarding the characteristics of the Mortgage Loans and of the Certificates as
follows: (i) as of the date of issuance of the Certificates, the aggregate
principal balance of the Mortgage Loans is approximately $ and each
Mortgage Loan has a Mortgage Rate of %, an original term of months, a
remaining term to maturity of months, and a related Servicing Fee of %,
(ii) the scheduled monthly payment for each Mortgage Loan has been based on its
outstanding balance, interest rate and remaining term to maturity, such that the
Mortgage Loan will amortize in amounts sufficient for repayment thereof by its
remaining term to maturity, (iii) in the aggregate, the Senior Certificates
represent an initial interest of % in the Mortgage Loans, (iv) the Senior
Certificates will have the following Pass-Through Rates and initial Certificate
Principal Balances as of the Cut-off Date; Class A-1, %, $ ; Class
A-2, %, $ , Class A-3, %, $ , Class A-4, %,
$ , Class A-5, %, $ (v) the Subordinate Certificates
represent an initial interest of % in the Mortgage Loans, have a Pass-Through
Rate of % and have an initial Certificate Principal Balance of approximately
$ , (vi) the Seller, the Master Servicer or the Depositor will not
repurchase any Mortgage Loan, as described under "MORTGAGE LOAN
PROGRAM -- Representations by Sellers" and "DESCRIPTION OF THE
CERTIFICATES -- Assignment of the Mortgage Loans" in the Prospectus, and the
Master Servicer and the Depositor will not exercise their options to purchase
the Mortgage Loans and thereby cause a termination of the Trust Fund, (vii)
there are no delinquencies and principal payments on the Mortgage Loans will be
timely received at the respective percentages of SPA set forth in the table,
(viii) there is no Prepayment Interest Shortfall or any other interest shortfall
in any month, (ix) and (x) there are no additional ongoing Trust Fund expenses
payable out of the Trust Fund. SOME OF THE FOREGOING ASSUMPTIONS REGARDING THE
CHARACTERISTICS OF THE MORTGAGE LOANS AND THE CERTIFICATES DIFFER FROM THE
ACTUAL CHARACTERISTICS THEREOF.
The discrepancies between the assumptions used in constructing the tables
and the actual characteristics of the Mortgage Loans and the Certificates
underscore the hypothetical nature of the table beginning on page S- , which is
provided to give a general sense of principal cash flows under varying
prepayment scenarios. Likewise, it is very unlikely that the Mortgage Loans will
prepay at a constant level of SPA until maturity or that all of the Mortgage
Loans will prepay at the same level of SPA. Any difference between such
assumptions and the actual characteristics of the Mortgage Loans or of the
Certificates, or the actual prepayment experience of the Mortgage Loans may
result in percentages of the initial Certificate Principal Balance outstanding
and weighted average lives of the Classes of Senior Certificates different from
those shown. Moreover, the diverse remaining terms to maturity of the Mortgage
Loans could produce slower or faster
S-37
<PAGE> 39
principal distributions than indicated in the table at the various constant
percentages of SPA specified, even if the weighted average remaining term to
maturity of the Mortgage Loans is months.
The assumed Pass-Through Rate on the Fixed Strip Certificates was
calculated to be approximately equal to (i) the excess, as of the Cut-off Date,
of (a) % aggregate assumed Certificate Principal Balances of the Tiered
Certificates, over (b) the sum of (1) % of the assumed Certificate Principal
Balance of the Class A-1 Certificates and (2) % of the assumed Certificate
Principal Balance of the Class A-4 Certificates divided by (ii) the assumed
Certificate Principal Balance of the Fixed Strip Certificates.
Based upon the foregoing assumptions, the following table indicates the
projected weighted average life of each Class of Senior Certificates and sets
forth the percentages of the initial Certificate Principal Balance of each such
Class of Senior Certificates that would be outstanding after each of the dates
shown at various percentages of SPA.
PERCENT OF INITIAL CERTIFICATE PRINCIPAL BALANCE
OUTSTANDING AT THE FOLLOWING PERCENTAGES OF SPA
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS A-3
------------------------------- ------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DISTRIBUTION DATE........ % % % % % % % % % % % % % % %
Initial Percentage.......
</TABLE>
- ---------------
Weighted Average Life in Years (**) . . . .
* Indicates a number that is greater than zero but less than .5%.
** The weighted average life of a Certificate of any Class is determined by (i)
multiplying the amount of each distribution in reduction of Certificate
Principal Balance by the number of years from the date of issuance of the
Certificate to the related Distribution Date, (ii) adding the results, and
(iii) dividing the sum by the initial Certificate Principal Balance of the
Certificate.
FIXED STRIP CERTIFICATES AND VARIABLE STRIP CERTIFICATES YIELD CONSIDERATIONS
The following tables indicate the sensitivity of the yield on the Fixed
Strip Certificates and Variable Strip Certificates to various rates of
prepayment by projecting the monthly aggregate payments of principal and
interest on the Fixed Strip Certificates and Variable Strip Certificates and the
corresponding pre-tax yields on a corporate bond equivalent basis, based on
distributions being made on the Mortgage Loans that are assumed to be included
in the Trust Fund, as described in the assumptions stated in clauses (i) through
(x) of the fourth paragraph preceding the table commencing on page S-
(including the assumptions regarding the characteristics of the Mortgage Loans
and the Certificates, which differ in certain respects from the actual
characteristics thereof), and assuming, further, that (i) principal prepayments
on the Mortgage Loans will be received at the respective percentages of SPA set
forth in the following table, (ii) the Certificates will be purchased on
, 19 , and (iii) payments on the Fixed Strip Certificates and the
Variable Strip Certificates will be received on the th Day of each month,
commencing , 19 .
PRE-TAX YIELD TO MATURITY ON THE FIXED STRIP CERTIFICATES
AND THE VARIABLE STRIP CERTIFICATES AT THE FOLLOWING PERCENTAGES OF SPA
<TABLE>
<CAPTION>
FIXED STRIP CERTIFICATES
-----------------------------------
<S> <C> <C> <C> <C> <C>
Assumed Purchase Price.................................. % % % % %
</TABLE>
<TABLE>
<CAPTION>
VARIABLE STRIP CERTIFICATES
-----------------------------------
<S> <C> <C> <C> <C> <C>
Assumed Purchase Price.................................. % % % % %
</TABLE>
The pre-tax yield set forth in the preceding tables were calculated by
determining the monthly discount rates which, when applied to the assumed
streams of cash flows to be paid on the Fixed Strip Certificates and Variable
Strip Certificates, would cause the discounted present value of such assumed
streams of cash flows to
S-38
<PAGE> 40
equal the assumed purchase prices listed as percentages of the original
Certificate Principal Balances in the table for the Fixed Strip Certificates and
Variable Strip Certificates, respectively. Yields shown are corporate bond
equivalent and are based on the assumed prices given in the tables. The prices
shown do not include accrued interest but an amount of accrued interest
consistent with the assumptions was computed and was used to arrive at these
yields. Implicit in the use of any discounted present value or internal rate of
return calculation such as these in the assumption that cash flows are
reinvested at the discount rate or internal rate of return. Thus, these
calculations do not take into account the different interest rates at which
investors may be able to reinvest funds received by them as distributed on the
Fixed Strip Certificates or Variable Strip Certificates. Consequently these
yields do not purport to reflect the return on any investment in the Fixed Strip
Certificates or Variable Strip Certificates when such reinvestment rates are
considered.
The preceding tables are based on a set of assumptions that vary from other
information provided herein. The differences between such assumptions and the
actual characteristics of the Mortgage Loans and of the Certificates may result
in actual yields being different from those shown in such tables. For example,
the Pass-Through Rate on the Fixed Strip Certificates is chosen to be
approximately equivalent to the formula given in the second paragraph
immediately preceding the table entitled "Percent of Initial Certificate
Principal Balance Outstanding." This formula references various Certificate
Principal Balances for the purposes of making the computations for the
subsequent tables. The actual Pass-Through Rate computed by applying the formula
using actual Certificate Principal Balances may vary from these assumptions.
Likewise, the Pass-Through Rate on the Variable Strip Certificates, which is
assumed to be fixed throughout the life of the Certificates, will actually be
likely to change from one period to the next, and the rate assumed may be
different from the actual initial Pass-Through Rate on the Variable Strip
Certificates. Such discrepancies between assumed and actual characteristics
underscore the hypothetical nature of the tables, which are provided to give a
general sense of the sensitivity of yields in varying prepayment scenarios.
Notwithstanding the assumed prepayment rates reflected in the preceding
table, it is highly unlikely that the Mortgage Loans will prepay at a constant
rate until maturity or that all of the Mortgage Loans will be prepaid according
to one particular pattern. For this reason, and because the timing of cash flows
is critical to determining yields, the pre-tax yields on the Fixed Strip
Certificates and Variable Strip Certificates are likely to differ from those
shown in such table, even if all of the Mortgage Loans prepay at the indicated
percentages of SPA over any given time period or over the entire life of the
Certificates. No representation is made as to the actual rate of principal
payment on the Mortgage Loans for any period or over the life of the
Certificates or as to the yield on the Certificates. In addition, the various
remaining terms to maturity of the Mortgage Loans could produce slower or faster
principal distributions than indicated in the preceding tables at the various
constant percentages of SPA specified, even if the weighted average remaining
term to maturity of the Mortgage Loans is months. Investors are urged to make
their investment decisions based on their determinations as to anticipated rates
of prepayment under a variety of scenarios.
[Certain of the Mortgage Loans provide that the Mortgagors may, during a
specified period of time, convert the adjustable rate of such Mortgage Loans to
a fixed rate. The Depositor is not aware of any publicly available statistics
that set forth principal prepayment or conversion experience or prepayment or
conversion forecasts of adjustable rate mortgage loans over an extended period
of time, and its experience with respect to adjustable rate mortgages is
insufficient to draw any conclusions with respect to the expected prepayment or
conversion rates on the adjustable rate Mortgage Loans included in the Mortgage
Pool. The rate of payments (including prepayments) on pools of mortgage loans is
influenced by a variety of economic, geographic, social and other factors. As is
the case with conventional fixed rate mortgage loans, adjustable rate mortgage
loans may be subject to a greater rate of principal prepayments or purchases due
to their conversion to fixed interest rate loans in a low interest rate
environment. For example, if prevailing interest rates fall significantly,
adjustable rate mortgage loans could be subject to higher prepayment and
conversion rates than if prevailing interest rates remain constant because the
availability of fixed rate or other adjustable rate mortgage loans at
competitive interest rates may encourage Mortgagors to refinance their
adjustable rate mortgages to "lock in" a lower fixed interest rate or take
advantage of the availability of such other adjustable rate mortgage loans, or,
in the case of convertible adjustable rate mortgage loans, to exercise their
option to convert the adjustable interest rates to fixed interest rates. The
conversion feature may also be exercised in a rising interest rate
S-39
<PAGE> 41
environment as Mortgagors attempt to limit their risk of higher rates. Such a
rising interest rate environment may also result in an increase in the rate of
defaults on the Mortgage Loans. In the event that the Master Servicer
[purchases] [sells] Converting or Converted Mortgage Loans, a Mortgagor's
exercise of the conversion option will result in a pro rata distribution of the
principal portion thereof to the Certificateholders, as described herein.
Alternatively, to the extent the Master Servicer fails in its obligation to
[purchase] [sell] Converting Mortgage Loans, as described herein, the Mortgage
Pool will include fixed rate Mortgage Loans, which will have the effect of
limiting the extent to which the Weighted Average Adjustable Pass-Through Rate
can increase or decrease in accordance with changes in the Index and accordingly
may affect the yield to Certificateholders.
The existence of Periodic Rate Caps, Lifetime Rate Caps and any Lifetime
Rate Floors also will affect the likelihood of prepayments resulting from
refinancing and the exercise of the conversion option. Although the Mortgage
Rates on the Mortgage Loans will adjust periodically, such increases and
decreases will be limited by the Periodic Rate Caps, Lifetime Rate Caps and any
Lifetime Rate Floors on each Mortgage Loan and will be based on the Index (which
may not rise and fall consistently with mortgage interest rates) plus the
related Note Margins (which may be different from the prevailing margins on
other mortgage loans). As a result, the Mortgage Rates on the Mortgage Loans at
any time may not equal the prevailing rates for other adjustable rate loans and
accordingly, the rate of prepayment may be lower or higher than would otherwise
be anticipated.
With respect to those Mortgage Loans having Lifetime Rate Floors, if
prevailing mortgage rates were to fall below the minimum Mortgage Rates, the
rate of prepayment on such Mortgage Loans may be expected to increase and such
Mortgage Loans may prepay at a rate higher than would otherwise be anticipated
for adjustable rate mortgage loans.
All of the Mortgage Loans are assumable under certain circumstances if, in
the sole judgment of the Master Servicer or any applicable Subservicer, the
prospective purchaser of a Mortgaged Property is creditworthy and the security
for such Mortgage Loan is not impaired by the assumption. The extent to which
the Mortgage Loans are assumed by purchasers of the Mortgaged Properties rather
than prepaid by the related mortgagors in connection with the sales of the
Mortgaged Properties will affect the weighted average life of the Certificates
and may result in a prepayment experience on the Mortgage Loans that differs
from that on other conventional mortgage loans.
The yield to maturity of the Certificates will depend on the rate of
payment of principal (including principal prepayments, purchases of Mortgage
Loans which are Converting Mortgage Loans or Converted Mortgage Loans or in
respect of which a breach of a representation or warranty has occurred, and
liquidation of defaulted Mortgage Loans) on the Mortgage Loans, the price paid
by the holders of Certificates and the Weighted Average Adjustable Pass-Through
Rate in effect from time to time. Such yield may be adversely affected by a
higher or lower than anticipated rate of prepayments on the Mortgage Loans.
Because the Weighted Average Adjustable Pass-Through Rate at any time is the
weighted average of the Net Mortgage Rates on the Mortgage Loans, the Weighted
Average Adjustable Pass-Through Rate (and the yield on the Certificates) will be
reduced as a result of prepayments, liquidations and purchases at a faster rate
for Mortgage Loans having higher Net Mortgage Rates as opposed to Mortgage Loans
having lower Net Mortgage Rates. Because Mortgage Loans having higher Net
Mortgage Rates generally have higher Mortgage Rates, such Mortgage Loans are
generally more likely to be prepaid at a faster rate under most circumstances
than are Mortgage Loans having lower Net Mortgage Rates.
The rate of default on the Mortgage Loans will also affect the rate of
payment of principal on the Mortgage Loans. In general, defaults on mortgage
loans are expected to occur with greater frequency in their early years,
although little data is available with respect to the rate of default on
adjustable rate mortgage loans. Increases in the monthly payments to an amount
in excess of the preceding monthly payment required at the time of origination
may result in a default rate higher than that on level payment mortgage loans.
Furthermore, the Mortgagor under each Mortgage Loan was qualified on the basis
of the Mortgage Rate in effect at origination. The repayment of such Mortgage
Loans will be dependent on the ability of the Mortgagor to make larger monthly
payments following adjustments of the Mortgage Rate. The rate of default on
S-40
<PAGE> 42
Mortgage Loans which are equity refinance mortgage loans may be higher than for
other types of Mortgage Loans.
Prepayments, liquidations and purchases of the Mortgage Loans will result
in distributions to Certificateholders of principal amounts which would
otherwise be distributed over the remaining terms of the Mortgage Loans.
Furthermore, the rate of prepayments, defaults and liquidations on, or
conversions of, the Mortgage Loans will be affected by the general economic
condition of the region of the country where the related Mortgaged Properties
are located. The risk of delinquencies and loss is greater and prepayments are
less likely in regions where a weak or deteriorating economy exists, as may be
evidenced by increasing unemployment or falling property values. See "MATURITY
AND PREPAYMENT CONSIDERATIONS" in the Prospectus. Since the rates of payment of
principal on the Mortgage Loans will depend on future events and a variety of
factors (as described more fully herein and in the Prospectus under "YIELD
CONSIDERATIONS" and "MATURITY AND PREPAYMENT CONSIDERATIONS"), no assurance can
be given as to such rate or the rate of principal prepayments on the
Certificates.
[The amount of interest passed through to holders of the Certificates will
be reduced by shortfalls in collections of interest resulting from full or
partial principal prepayments or otherwise, which will not be offset by a
reduction in the Servicing Fees payable to the Master Servicer or otherwise. See
"YIELD CONSIDERATIONS" in the Prospectus and "DESCRIPTION OF THE
CERTIFICATES -- Distributions" herein for a discussion of the effect of
principal prepayments on the Mortgage Loans on the yield to maturity of the
Certificates.]
The timing of changes in the rate of prepayments, liquidations and
repurchases of the Mortgage Loans may significantly affect an investor's actual
yield to maturity, even if the average rate of principal payments experienced
over time is consistent with an investor's expectation.
In addition, the yield to maturity of the Certificates will depend on the
price paid by holders of the Certificates. If any Certificate is purchased at
initial issuance at a discount and the rate of prepayments on the Mortgage Loans
is lower than that originally anticipated, the purchaser's yield to maturity
will be lower than that assumed at the time of purchase. Conversely, if any
Certificate is purchased at initial issuance at a premium and the rate of
prepayments on the Mortgage Loans is higher than that originally anticipated,
the purchaser's yield to maturity will be lower than that assumed at the time of
purchase.
The first distribution on the Certificates reflecting an adjustment to the
scheduled monthly payments on a related Mortgage Loan will be passed through to
holders of Certificates on the second Distribution Date following the date on
which the adjustment to such Mortgage Rate was made. Furthermore, adjustments in
the Net Mortgage Rates are based on the Index as reported days prior to the
Adjustment Date. Accordingly, the yield to Certificateholders will be adjusted
on a delayed basis relative to movements in the Index. Although the Net Mortgage
Rate of each Mortgage Loan will be adjusted pursuant to the Index, such rate is
subject to the Periodic Rate Cap and is also limited by the Lifetime Rate Cap
and any Lifetime Rate Floor applicable to such Mortgage Loan. With respect to
certain Mortgage Loans the difference between the Net Mortgage Rate as of the
Cut-off Date and the maximum Net Mortgage Rate will be less than the Lifetime
Rate Cap. Therefore, if the Index changes substantially between Adjustment
Dates, the Net Mortgage Rate may be lower than if the Net Mortgage Rate could be
adjusted based on the Index without such caps.
A number of factors affect the performance of the Index and may cause the
Index to move in a manner different from other indices. To the extent that the
Index may reflect changes in the general level of interest rates less quickly
than other indices, in a period of rising interest rates, increases in the yield
to Certificateholders due to such rising interest rates may occur later than
that which would be produced by other indices, and in a period of declining
rates, the Index may remain higher than other market interest rates which may
result in a higher level of prepayments of Mortgage Loans which adjust in
accordance with the Index than mortgage loans which adjust in accordance with
other indices.]
For additional considerations relating to the yield on the Certificates,
see "YIELD CONSIDERATIONS" and "MATURITY AND PREPAYMENT CONSIDERATIONS" in the
Prospectus.
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[YIELD CONSIDERATIONS RELATING TO THE CLASS M CERTIFICATES
The following tables indicate the sensitivity of the yields to maturity on
the Class M Certificates to various rates of prepayment and varying levels of
aggregate Realized Losses by projecting the monthly aggregate cash flows on the
Class M Certificates and computing the corresponding pre-tax yields to maturity
on a corporate bond equivalent basis. The tables are based on the assumptions
described in the fourth paragraph preceding the table entitled "Percent of
Initial Certificate Principal Balance Outstanding at the Following Percentages
of SPA" under the heading "CERTAIN YIELD AND PREPAYMENT
CONSIDERATIONS -- General" herein, including the assumptions regarding the
characteristics and performance of the Mortgage Loans, which differ from the
actual characteristics and performance thereof, and assuming further that (i)
defaults and final liquidations occur on the last day of each month at the
respective SDA percentages set forth in the tables, (ii) each liquidation
results in a Realized Loss allocable to principal equal to the percentage
indicated (the "Loss Severity Percentage") times the principal balances of the
Mortgage Loans assumed to be liquidated, (iii) there are no delinquencies on the
Mortgage Loans, and principal payments on the Mortgage Loans (other than those
on Mortgage Loans assumed to be liquidated) will be timely received together
with prepayments, if any, at the respective constant percentages of SPA set
forth in the tables before giving effect to defaults in such periods, (iv) there
are no Excess Special Hazard Losses, Excess Fraud Losses, Excess Bankruptcy
Losses or Extraordinary Losses, and (v) the purchase prices of the Class M
Certificates will be $ , including accrued interest. Investors should
also consider the possibility that aggregate losses incurred may not in fact be
materially reduced by higher prepayment speeds because mortgage loans that would
otherwise ultimately default and be liquidated may be less likely to be prepaid.
Any differences between such assumptions and the actual characteristics and
performance of the Mortgage Loans and of the Certificates may result in yields
different from those shown in such tables. Discrepancies between assumed and
actual characteristics and performance underscore the hypothetical nature of the
tables, which are provided only to give a general sense of the sensitivity of
yields in varying Realized Loss and prepayment scenarios.
SENSITIVITY OF PRE-TAX YIELD TO MATURITY OF THE
CLASS M CERTIFICATES TO PREPAYMENTS AND REALIZED LOSSES
CLASS M CERTIFICATES
<TABLE>
<CAPTION>
PERCENTAGE OF
SDA LOSS SEVERITY PERCENTAGE PERCENTAGE OF SPA
- ------------- ----------------------------------- --------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
% N/A................................ % % % % %
% %.................................. % % % % %
% %.................................. % % % % %
% %.................................. % % % % %
</TABLE>
Each pre-tax yield to maturity set forth in the preceding table was
calculated by determining the monthly discount rate which, when applied to the
assumed stream of cash flows to be paid on the Class M Certificates, as
applicable, would cause the discounted present value of such assumed stream of
cash flows to equal the assumed purchase price referred to above, and converting
such rate to a semi-annual corporate bond equivalent yield. Accrued interest, if
any, is included in the assumed purchase price and is used in computing the
corporate bond equivalent yields shown. These yields do not take into account
the different interest rates at which investors may be able to reinvest funds
received by them as distributions on the Class M Certificates, and thus do not
reflect the return on any investment in the Class M Certificates when any
reinvestment rates other than the discount rates are considered.
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<PAGE> 44
The following table sets forth the amount of Realized Losses that would be
incurred with respect to the Certificates in the aggregate under each of the
scenarios in the preceding table, expressed as a percentage of the aggregate
outstanding principal balance of the Mortgage Loans as of the Cut-off Date:
<TABLE>
<CAPTION>
AGGREGATE REALIZED LOSSES
--------------------------------------------------
PERCENTAGE OF
SDA LOSS SEVERITY PERCENTAGE PERCENTAGE OF SPA
- ------------- ----------------------------------- --------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
% %.................................. % % % % %
% %.................................. % % % % %
% %.................................. % % % % %
% %.................................. % % % % %
</TABLE>
Notwithstanding the assumed Percentages of SDA, Loss Severity Percentages
and prepayment rates reflected in the preceding tables, it is highly unlikely
that the Mortgage Loans will be prepaid or that Realized Losses will be incurred
according to one particular pattern. For this reason, and because the timing of
cash flows is critical to determining yields, the pre-tax yields to maturity on
the Class M Certificates are likely to differ from those shown in the tables.
There can be no assurance that the Mortgage Loans will prepay at any particular
rate or that Realized Losses will be incurred at any particular level or that
the yields on the Class M Certificates will conform to the yields described
herein. Moreover, the various remaining terms to maturity of the Mortgage Loans
could produce slower or faster principal distributions than indicated in the
preceding tables at the various constant percentages of SPA specified, even if
the weighted average remaining term to maturity of the Mortgage Loans is as
assumed.]
POOLING AGREEMENT
GENERAL
The Certificates will be issued pursuant to a Pooling and Servicing
Agreement (the "Pooling Agreement") dated as of , 19 , among the
Depositor, the Master Servicer and the Trustee. Reference is made to the
Prospectus for important information additional to that set forth herein
regarding the terms and conditions of the Pooling Agreement and the [Offered]
Certificates. [The Trustee will appoint to serve as
Custodian in connection with the Certificates]. The [Offered] Certificates will
be transferable and exchangeable at the corporate trust office of the Trustee,
which will serve as Certificate Registrar and Paying Agent. The Depositor will
provide a prospective or actual Certificateholder without charge, on written
request, a copy (without exhibits) of the Pooling Agreement. Requests should be
addressed to BankAmerica Mortgage Securities, Inc., 345 Montgomery Street, Lower
Level #2, Unit #8152, San Francisco, California, 94104, Attention: Rebecca Cull.
THE MASTER SERVICER
Bank of America [, Federal Savings Bank] [National Trust and Savings
Association] [, the corporate parent of the Depositor,] will act as master
servicer for the Certificates pursuant to the Pooling Agreement. For a general
description of Bank of America [FSB] [NT&SA] and its activities, as well as
certain information regarding its delinquency, foreclosure and loss experience
on the portfolio of one- to four-family first mortgage loans owned by Affiliated
Sellers and serviced by it, see "MORTGAGE LOAN PROGRAM -- Certain Affiliated
Sellers -- Bank of America [, Federal Savings Bank] [National Trust and Savings
Association]," "-- Residential Mortgage Loan Servicing Activities" and
"-- Delinquency, Foreclosure and Loss Experience" in the Prospectus.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES[; RETAINED YIELD]
The Servicing Fees for each Mortgage Loan are payable out of the interest
payments on such Mortgage Loan. The Servicing Fees in respect of each Mortgage
Loan will be at least % and not more than % per annum of the outstanding
principal balance of each Mortgage Loan. The Servicing Fees consist of (a)
servicing compensation payable to any Master Servicer in respect of its master
servicing activities, and
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<PAGE> 45
(b) subservicing and other related compensation payable to any Subservicer
(including such compensation paid to the Master Servicer as the direct servicer
of a Mortgage Loan for which there is no Subservicer). The primary compensation
to be paid to the Master Servicer in respect of its master servicing activities
will be % per annum of the outstanding principal balance of each Mortgage
Loan. As described more fully in the Prospectus, a Subservicer is entitled to
servicing compensation in a minimum amount equal to % per annum of the
outstanding principal balance of each Mortgage Loan serviced by it. The Master
Servicer is obligated to pay certain ongoing expenses associated with the Trust
Fund and incurred by the Master Servicer in connection with its responsibilities
under the Pooling Agreement[, including the expenses of the [name of credit
enhancement] and any substitute credit support]. See "THE POOLING
AGREEMENT -- Servicing and Other Compensation and Payment of Expenses; Retained
Yield" in the Prospectus for information regarding other possible compensation
to the Master Servicer and Subservicers and for information regarding expenses
payable by the Master Servicer.
[Pursuant to the terms of the Pooling Agreement, the Master Servicer will
be obligated to remit to the Depositor or its designee, a portion of the
interest collected on each Mortgage Loan (the "Retained Yield"). The rate at
which the Retained Yield on each Mortgage Loan accrues will be equal to % per
annum.]
TERMINATION
The circumstances under which the obligations created by the Pooling
Agreement will terminate in respect of the Certificates are described in
"DESCRIPTION OF THE CERTIFICATES -- Termination; Retirement of Certificates" in
the Prospectus. The Master Servicer or the Depositor will have the option to
purchase all remaining Mortgage Loans and other assets in the Trust Fund,
thereby effecting early retirement of the Certificates, but such option will not
be exercisable until such time as the aggregate principal balance of the
Mortgage Loans as of the Distribution Date on which the purchase proceeds are to
be distributed to the Certificateholders is less than [5] [10]% of the aggregate
principal balance of the Mortgage Loans as of the Cut-off Date. Any such
purchase of Mortgage Loans and other assets of the Trust Fund shall be made at a
price equal to the sum of (a) 100% of the unpaid principal balance of each
Mortgage Loan (or the fair market value of the related underlying Mortgaged
Properties with respect to defaulted Mortgage Loans as to which title to such
Mortgaged Properties has been acquired if such fair market value is less than
such unpaid principal balance) (net of any unreimbursed Advance attributable to
principal) plus (b) accrued interest thereon at the [Net] [Weighted Average
Pass-Through] Rate to, but not including, the first day of the month of
repurchase.
Upon presentation and surrender of the Certificates in connection with the
termination of the Trust Fund under the circumstances described above, the
holders of [each Class of Offered][the] Certificates will receive[, in
proportion to their respective Percentage Interests, an amount equal to the sum
of the principal balances of the Mortgage Loans plus one month's accrued
interest thereon at the then applicable Weighted Average Adjustable Pass-Through
Rate.] [An amount equal to the Certificate Principal Balance of such Class plus
one month's interest thereon (or with respect to the Variable Strip
Certificates, one month's interest on the Notional Amount) at the applicable
Pass-Through Rate plus any previously unpaid Accrued Certificate Interest.] An
amount equal to the Certificate Principal Balance of such Class plus one month's
interest thereon (or with respect to the Variable Strip Certificates, one
month's interest on the Notional Amount) at the applicable Pass-Through Rate
plus any previously unpaid Accrued Certificate Interest.]
[DESCRIPTION OF CREDIT ENHANCEMENT
GENERAL
All of the Mortgage Loans are the subject of credit support coverage
provided by the [name of credit enhancement]. In addition, each Mortgage Loan is
covered by a Primary Hazard Insurance Policy as described under "PRIMARY
MORTGAGE INSURANCE, HAZARD INSURANCE; CLAIMS THEREUNDER" in the Prospectus. See
also "DESCRIPTION OF THE MORTGAGE POOL -- Primary Mortgage Insurance" herein.]
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<PAGE> 46
[Description of types and amounts of losses covered by any applicable
credit enhancement, procedures and conditions to filing claims or making draws
under any applicable credit enhancement, any rights of the Master Servicer to
substitute a different form of credit enhancement for any initial form of credit
enhancement and a general description of the credit enhancement provider
(including financial statements of credit enhancement provider if credit
enhancement is material) and its activities.]
LETTER OF CREDIT
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
[Upon the issuance of the Offered Certificates, Orrick, Herrington &
Sutcliffe, counsel to the Depositor, will deliver its opinion generally to the
effect that, assuming compliance with all provisions of the Pooling Agreement,
for federal income tax purposes, the Trust Fund will qualify as a REMIC under
the Code.
For federal income tax purposes, the Class R Certificates will be the sole
class of "residual interests" in the Trust Fund and the Offered Certificates
(other than the Residual Certificates) and Class B Certificates will represent
ownership of "regular interests" in the Trust Fund and will generally be treated
as representing ownership of debt instruments of the Trust Fund. See "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES -- REMICs" in the Prospectus.
The Certificates will not be treated as having been issued with
original issue discount for federal income tax reporting purposes. The
Certificates will be treated as having been issued with original issue discount
for federal income tax reporting purposes. The prepayment assumption that will
be used in determining the rate of accrual of original issue discount, market
discount and premium, if any, for federal income tax purposes will be based on
the assumption that subsequent to the date of any determination the Mortgage
Loans will prepay at a rate equal to % SPA. No representation is made that
the Mortgage Loans will prepay at that rate or at any other rate. See "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES -- REMICs -- Taxation of Owners of REMIC Regular
Certificates -- Original Issue Discount" in the Prospectus.
The OID Regulations suggest that original issue discount with respect to
securities such as the Stripped Interests Certificates that represent multiple
uncertificated REMIC regular interests, in which ownership interests will be
issued simultaneously to the same buyer and which are required under the Pooling
Agreement to be transferred together, should be computed on an aggregate method.
In the absence of further guidance from the IRS, original issue discount with
respect to the uncertificated regular interests represented by the Stripped
Interests Certificates will be reported to the IRS and the Certificateholders on
an aggregate method based on a single overall constant yield and the prepayment
assumption stated above, treating all such uncertificated regular interests as a
single debt instrument as set forth in the OID Regulations.
If the method for computing original issue discount described in the
Prospectus results in a negative amount for any period with respect to a
Certificateholder (in particular, the Stripped Interests Certificateholders),
the amount of original issue discount allocable to such period would be zero and
such Certificateholder will be permitted to offset such negative amount only
against future original issue discount (if any) attributable to such
Certificates. Although the matter is not free from doubt, a Stripped Interests
Certificateholder may be permitted to deduct a loss to the extent that his or
her respective remaining basis in such Certificate exceeds the maximum amount of
future payments to which such Certificateholder is entitled, assuming no further
prepayments of the Mortgage Loans. Any such loss might be treated as a capital
loss.
Although they are unclear on the issue, in certain circumstances the OID
Regulations appear to permit the holder of a debt instrument to recognize
original issue discount under a method that differs from that used by the
issuer. Accordingly, it is possible that the holder of a Certificate may be able
to select a method for recognizing original issue discount that differs from
that used by the Master Servicer in preparing reports to the Certificateholders
and the IRS.
Certain Classes of the Offered Certificates may be treated for federal
income tax purposes as having been issued at a premium. Whether any holder of
such a Class of Certificates will be treated as holding a certificate
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<PAGE> 47
with amortizable bond premium will depend on such Certificateholder's purchase
price and the distributions remaining to be made on such Certificate at the time
of its acquisition by such Certificateholder. Holders of such Classes of
Certificates should consult their own tax advisors regarding the possibility of
making an election to amortize such premium. See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES -- REMICs -- Taxation of Owners of REMIC Regular Certificates" and
"-- Premium" in the Prospectus.
The Offered Certificates will be treated as "qualifying real property
loans" under Section 593(d) of the Code, assets described in Section
7701(a)(19)(C) of the Code and "real estate assets" under Section 856(c)(5)(A)
of the Code generally in the same proportion that the assets of the Trust Fund
would be so treated. In addition, interest on the Offered Certificates will be
treated as "interest on obligations secured by mortgages on real property" under
Section 856(c)(3)(B) of the Code generally to the extent that such Offered
Certificates are treated as "real estate assets" under Section 856(c)(5)(A) of
the Code. Moreover, the Offered Certificates (other than the Residual
Certificates) will be "qualified mortgages" within the meaning of Section
860G(a)(3) of the Code. However, prospective investors in Offered Certificates
that will be generally treated as assets described in Section 860G(a)(3) of the
Code should note that, notwithstanding such treatment, any repurchase of such a
Certificate pursuant to the right of the Master Servicer or the Depositor to
repurchase such Offered Certificates may adversely affect any REMIC that holds
such Offered Certificates if such repurchase is made under circumstances giving
rise to a Prohibited Transaction Tax. See "THE POOLING AGREEMENT -- Termination"
herein and "CERTAIN FEDERAL INCOME TAX CONSEQUENCES -- REMICs --
Characterization of Investments in REMIC Certificates" in the Prospectus.
For further information regarding the federal income tax consequences of
investing in the Offered Certificates, see "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES -- REMICs" in the Prospectus.
SPECIAL TAX CONSIDERATIONS APPLICABLE TO RESIDUAL CERTIFICATES
The IRS has issued regulations under the provisions of the Code related to
REMICs (the "REMIC Regulations") that significantly affect holders of Residual
Certificates. The REMIC Regulations impose restrictions on the transfer or
acquisition of certain residual interests, including the Residual Certificates.
In addition, the REMIC Regulations contain restrictions that apply to: (i)
thrift institutions holding residual interests lacking "significant value" and
(ii) the transfer of "noneconomic" residual interests to United States persons.
Pursuant to the Pooling Agreement, the Residual Certificates may not be
transferred to non-United States persons.
The REMIC Regulations provide for the determination of whether a residual
interest has "significant value" for purposes of applying the rules relating to
"excess inclusions" with respect to residual interests. Based on the REMIC
Regulations, the Residual Certificates do not have significant value and,
accordingly, thrift institutions and their affiliates will be prevented from
using their unrelated losses or loss carryovers to offset any excess inclusions
with respect to the Residual Certificates which will be in an amount equal to
all or virtually all of the taxable income includable by holders of the Residual
Certificates. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES -- REMICs -- Taxation
of Owners of REMIC Residual Certificates -- Excess Inclusions" in the
Prospectus.
The REMIC Regulations also provide that a transfer to a United States
person of "noneconomic" residual interests will be disregarded for all federal
income tax purposes, and that the purported transferor of "noneconomic" residual
interests will continue to remain liable for any taxes due with respect to the
income on such residual interests, unless "no significant purpose of the
transfer was to impede the assessment or collection of tax." Based on the REMIC
Regulations, the Residual Certificates may constitute noneconomic residual
interests during some or all of their terms for purposes of the REMIC
Regulations and, accordingly, unless no significant purpose of a transfer is to
impede the assessment or collection of tax, transfers of the Residual
Certificates may be disregarded and purported transferors may remain liable for
any taxes due with respect to the income on the Residual Certificates. All
transfers of the Residual Certificates will be subject to certain restrictions
under the terms of the Pooling Agreement that are intended to reduce the
possibility of any
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<PAGE> 48
such transfer being disregarded to the extent that the Residual Certificates
constitute noneconomic residual interests. See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES -- REMICs -- Taxation of Owners of REMIC Residual
Certificates -- Noneconomic REMIC Residual Certificates" in the Prospectus.
The Residual Certificateholders may be required to report an amount of
taxable income with respect to the earlier accrual periods of the Trust Fund's
term that significantly exceeds the amount of cash distributions received by
such Class Residual Certificateholders from the Trust Fund with respect to such
periods. Furthermore, the tax on such income may exceed the cash distributions
with respect to such periods. Consequently, Residual Certificateholders should
have other sources of funds sufficient to pay any federal income taxes due in
the earlier years of the Trust Funds' term as a result of their ownership of the
Residual Certificates. In addition, the required inclusion of this amount of
taxable income during the Trust Fund's earlier accrual periods and the deferral
of corresponding tax losses or deductions until later accrual periods or until
the ultimate sale or disposition of a Residual Certificate (or possibly later
under the "wash sale" rules of Section 1091 of the Code) may cause the Residual
Certificateholders' after-tax rate of return to be zero or negative even if the
Residual Certificateholders' pre-tax rate of return is positive. that is, on a
present value basis, the Residual Certificateholders' resulting tax liabilities
could substantially exceed the sum of any tax benefits and the amount of any
cash distributions on such Residual Certificates over their life.
The Master Servicer will be designated as the "tax matters person" with
respect to the Trust Fund as defined in the REMIC Provisions (as defined in the
Prospectus), and in connection therewith will be required to hold not less than
0.01% of the Residual Certificates.
Purchasers of the Residual Certificates are strongly advised to consult
their own tax advisors as to the economic and tax consequences of investment in
such Residual Certificates.
For further information regarding the federal income tax consequences of
investing in the Residual Certificates, see "CERTAIN YIELD AND PREPAYMENT
CONSIDERATION -- Additional Yield Considerations Applicable Solely to the
Residual Certificates" herein and "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES -- REMICs -- Taxation of Owners of REMIC Residual Certificates" in
the Prospectus.
[No election will be made to treat the Trust Fund as a real estate mortgage
investment conduit for federal income tax purposes. Orrick, Herrington &
Sutcliffe, counsel to the Depositor, will deliver its opinion to the effect that
the Trust Fund will be classified as a grantor trust under Subpart E, Part I of
Subchapter J of the Code, and not as a partnership or an association taxable as
a corporation.
Taxpayers and preparers of tax returns (including those filed by any REMIC
or other issuer) should be aware that under applicable Treasury regulations a
provider of advice on specific issues of law is not considered an income tax
return preparer unless the advice is (i) given with respect to events that have
occurred at the time the advice is rendered and is not given with respect to the
consequences of contemplated actions, and (ii) is directly relevant to the
determination of any entry on a tax return. Accordingly, taxpayers should
consult their own tax advisors and tax return preparers regarding the
preparation of any item on a tax return, even where the anticipated tax
treatment has been discussed herein.
Each Certificateholder will generally be treated as an owner of an interest
in the Mortgage Loans, which will be treated as an interest in "stripped bonds".
Accordingly, the Certificateholders will be required to include their yield with
respect to the Mortgage Loans in gross income as it accrues, based on a constant
yield method in accordance with the original issue discount rules, which may
result in income being recognized for tax purposes in advance of the receipt of
cash attributable to such income. See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES -- Grantor Trust Funds -- TAXATION OF OWNERS OF GRANTOR TRUST
FRACTIONAL INTEREST CERTIFICATES -- IF STRIPPED BOND RULES APPLY" in the
Prospectus.
In the absence of statutory or administrative clarification, it is intended
that information returns or reports to Certificateholders and the Internal
Revenue Service (the "IRS") will be based on the use of a prepayment assumption
of % [SPA.] [of the Constant Prepayment Rate ("CPR")] and on a representative
initial offering price for the Certificates in computing the constant yield.
[The Constant Prepayment Rate or CPR
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<PAGE> 49
represents a constant assumed rate of prepayment each month relative to the
outstanding principal balance of a pool of mortgage loans for the life of such
mortgage loans.] However, no representation is made that the Mortgage Loans will
in fact prepay at that rate or at any other rate and Certificateholders should
bear in mind that the use of a representative initial offering price will mean
that such information returns or reports, even if otherwise accepted as accurate
by the IRS, will in any event be accurate only as to the initial
Certificateholders. The Certificateholders should consult their own tax advisors
as to the proper treatment of their investment in the Mortgage Loans under the
stripped bond rules.
Orrick, Herrington & Sutcliffe will deliver its opinion that the
Certificates represent interests in "real estate assets" within the meaning of
Section 856(c)(5)(A) of the Code, "loans . . . secured by an interest in real
property" within the meaning of Section 7701(a)(19)(C)(v) of the Code and as
"qualifying real property loans" within the meaning of Section 593(d) of the
Code, and the interest thereon will be treated as "interest on obligations
secured by mortgages on real property" within the meaning of Section
856(c)(3)(B) of the Code. In addition, the Certificates will be "qualified
mortgages" within the meaning of Section 860G(a)(3)(A) of the Code. See "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES -- Grantor Trust Funds -- Characterization of
Investments in Grantor Trust Certificates -- Grantor Trust Fractional Interest
Certificates" in the Prospectus.
For further information regarding the federal income tax consequences of
investing in the Certificates, see "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES-Grantor Trust Funds" in the Prospectus.]
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting Agreement
dated , 19 , the Underwriter[s] [has] [have] agreed to purchase and
the Depositor has agreed to sell to the Underwriter[s] [the] [each class of
Offered] Certificates.
The Underwriting Agreement provides that the obligation of the
Underwriter[s] to pay for and accept delivery of the [Offered] Certificates is
subject to, among other things, the receipt of certain legal opinions and to the
conditions, among others, that no stop order suspending the effectiveness of the
Depositor's Registration Statement shall be in effect, and that no proceedings
for such purpose shall be pending before or threatened by the Securities and
Exchange Commission.
The distribution of the [Offered] Certificates by the Underwriter[s] may be
effected from time to time in one or more negotiated transactions, or otherwise,
at varying prices to be determined at the time of sale. Proceeds to the
Depositor from the sale of the Certificates, before deducting expenses payable
by the Depositor, will be % of the aggregate Certificate Principal Balance of
the [Offered] Certificates plus accrued interest thereon from the Cut-off Date.
The Underwriter[s] may effect such transactions by selling the [Offered]
Certificates to or through dealers, and such dealers may receive compensation in
the form of underwriting discounts, concessions or commissions from the
Underwriter for whom they act as agent. In connection with the sale of the
[Offered] Certificates, the Underwriter[s] may be deemed to have received
compensation from the Depositor in the form of underwriting compensation. The
Underwriter[s] and any dealers that participate with the Underwriter[s] in the
distribution of the [Offered] Certificates may be deemed to be underwriters, and
any profit on the resale of the [Offered] Certificates positioned by them may be
deemed to be underwriting discounts and commissions under the Securities Act of
1933.
The Underwriting Agreement provides that the Depositor will indemnify the
Underwriter[s], and under limited circumstances the Underwriter[s] will
indemnify the Depositor, against certain civil liabilities under the Securities
Act of 1933, or contribute to payments required to be made in respect thereof.
There can be no assurance that a secondary market for the [Offered]
Certificates will develop or, if it does develop, that it will continue. The
primary source of information available to investors concerning the [Offered]
Certificates will be the monthly statements discussed in the Prospectus under
"DESCRIPTION OF THE CERTIFICATES -- Reports to Certificateholders," which will
include information as to the outstanding principal balance of the [Offered]
Certificates and the status of the applicable form of credit enhancement. There
can be no assurance that any additional information regarding the [Offered]
Certificates
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<PAGE> 50
will be available through any other source. In addition, the Depositor is not
aware of any source through which price information about the [Offered]
Certificates will be generally available on an ongoing basis. The limited nature
of such information regarding the [Offered] Certificates may adversely affect
the liquidity of the [Offered] Certificates, even if a secondary market for the
[Offered] Certificates becomes available.
LEGAL OPINIONS
Certain legal matters relating to the Certificates will be passed upon for
the Depositor by Orrick, Herrington & Sutcliffe, San Francisco, California and
for the Underwriter by .
RATING
It is a condition to the issuance of the [Offered] Certificates that they
be rated not lower than " " by [and
" " by ].
The ratings of on mortgage pass-through certificates address the
likelihood of the receipt by certificateholders of all distributions on the
underlying mortgage loans to which they are entitled. ratings on
pass-through certificates do not represent any assessment of the likelihood that
principal prepayments will be made by mortgagors or the degree to which such
prepayments might differ from that originally anticipated. [ ratings on
pass-through certificates do not represent any assessment of the Master
Servicer's ability to [purchase] [sell] Converting Mortgage Loans or Converted
Mortgage Loans. In the event that the Master Servicer [purchases] [sells] a
Converting or Converted Mortgage Loan, investors might suffer a lower than
anticipated yield.] The rating does not address the possibility that
Certificateholders might suffer a lower than anticipated yield.
The Depositor has not requested a rating on the [Offered] Certificates by
any rating agency other than [and ]. However, there can be
no assurance as to whether any other rating agency will rate the [Offered]
Certificates, or, if it does, what rating would be assigned by any such other
rating agency. A rating on the [Offered] Certificates by another rating agency,
if assigned at all, may be lower than the rating assigned to the [Offered]
Certificates by and .
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
organization. Each security rating should be evaluated independently of any
other security rating. The rating of the Fixed Strip Certificates or Variable
Strip Certificates does not address the possibility that the holders of such
Certificates may fail to fully recover their initial investment. In the event
that the rating initially assigned to the [Offered] Certificates is subsequently
lowered for any reason, no person or entity is obligated to provide any
additional support or credit enhancement with respect to the [Offered]
Certificates.
LEGAL INVESTMENT
The Certificates will constitute "mortgage related securities" for purposes
of SMMEA so long as they are rated in at least the second highest rating
category by one of the Rating Agencies, and, as such, are legal investments for
certain entities to the extent provided by SMMEA. SMMEA provides, however, that
states could override its provisions on legal investment and restrict or
condition investment in mortgage related securities by taking statutory action
on or prior to October 3, 1991. Certain states have enacted legislation which
overrides the preemption provisions of SMMEA. The Certificates will not
constitute "mortgage related securities" for purposes of SMMEA.
The Depositor makes no representation as to the proper characterization of
[any Class of the Offered] [the] Certificates for legal investment or other
purposes, or as to the ability of particular investors to purchase [any Class of
the Offered] [the] Certificates under applicable legal investment restrictions.
These uncertainties may affect the liquidity of [any Class of Offered] [the]
Certificates. Accordingly, all institutions 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
S-49
<PAGE> 51
extent [any Class of the Offered] [the] Certificates constitutes a legal
investment or is subject to investment, capital or other restrictions.
See "LEGAL INVESTMENT MATTERS" in the Prospectus.
ERISA CONSIDERATIONS
Any fiduciary or other Plan Asset Investor that proposes to use Plan Assets
to acquire any [Offered] Certificates should consult with its counsel with
respect to the potential consequences under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code"), of the acquisition and ownership
of such Certificates with Plan Assets. See "ERISA CONSIDERATIONS" in the
Prospectus.
PROHIBITED TRANSACTION CLASS EXEMPTIONS
To qualify for exemption under PTCE 83-1 (see "ERISA CONSIDERATIONS --
Prohibited Transaction Class Exemptions" in the Prospectus), a Certificate (i)
must entitle its holder to more than nominal pass-through payments of both
principal and interest from the Mortgage Loans and (ii) must not be subordinated
to other Classes of Certificates with respect to the right to receive payments
in the event of defaults or delinquencies on the underlying Mortgage Loans. See
"ERISA CONSIDERATIONS -- Prohibited Transaction Class Exemption 83-1" in the
Prospectus.
[Because the Certificates, which are
subordinated to the extent specified herein (see "DESCRIPTION OF THE
CERTIFICATES -- Subordination and Allocation of Losses" herein), and the
Residual Certificates do not qualify for exemption under PTCE 83-1, exemptive
relief will not be available under PTCE 83-1 to Plans or other persons that use
Plan Assets to acquire such Certificates from the prohibited transaction rules
of ERISA and Section 4975 of the Code. However, other prohibited transaction
class exemptions issued by the U.S. Department of Labor may apply with respect
to such Certificates. See "ERISA CONSIDERATIONS -- Prohibited Transaction Class
Exemption 83-1" in the Prospectus.]
[UNDERWRITER'S PTE]
[ (the "Underwriter") is the recipient of a
final prohibited transaction exemption (the "Underwriter's PTE") which may
afford protection from violations under Section 406 and 407 of ERISA and Section
4975 of the Code for Plans or Plan Asset Investors that acquire [Offered]
Certificates [(other than the or Residual
Certificates)]. Plans or Plan Asset Investors that acquire [Offered]
Certificates [(other than the or Residual
Certificates)] may be eligible for protection under the Underwriter's PTE if:
(a) The [Class of such] Certificates acquired with Plan Assets is not
subordinated to other Classes of Certificates with respect to the right to
receive payment in the event of defaults or delinquencies on the underlying
Mortgage Loans;
(b) The Plan or Plan Asset Investor is an "accredited investor" (as
defined in Rule 501(a)(1) of Regulation D under the Securities Act of 1933,
as amended (the "Act"));
(c) At the time of such acquisition, the [Class of] Certificates
acquired by the Plan or Plan Asset Investor has received a rating in one of
the three highest generic rating categories from Standard & Poor's Ratings
Services, Moody's Investors Service, Inc. Duff & Phelps, Inc. or Fitch
Investors Service, L.P.;
(d) The Trustee is not an affiliate of any member of the Restricted
Group (as defined in paragraph (3) below);
(e) The [Offered] Certificates evidence ownership in Trust Assets that
do not include subordinate certificates backed by mortgages or mortgage
participations (unless interest and principal payable with respect to such
mortgage certificates are guaranteed by the GNMA, FHLMC or FNMA);
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<PAGE> 52
(f) The acquisition of such Certificates with Plan Assets is on terms
(including the price paid for the Certificates) that are at least as
favorable to the Plan or Plan Asset Investor as they would be in an arm's
length transaction with an unrelated party; and
(g) The sum of all payments made to and retained by the Underwriter in
connection with the distribution of such Certificates represents not more
than reasonable compensation for underwriting such Certificates; the sum of
all payments made to and retained by the Depositor pursuant to the sale of
the Mortgage Loans to the Trust Fund represents not more than the fair
market value of the Mortgage Loans; and the sum of all payments made to and
retained by the Master Servicer and any Subservicer represents not more
than reasonable compensation for its services under the Pooling Agreement
and reimbursement of its reasonable expenses in connection therewith.
In addition, the Underwriter's PTE will not provide exemptive relief for
certain transactions prohibited by Section 406(b) of ERISA or Section
4975(c)(1)(E) or (F) of the Code with may result from apply to a Plan's
investment in Certificates if:
(1) The Plan's investment in any [Class of such] Certificates exceeds
25% of the outstanding Certificates [of that Class] at the time of
acquisition;
(2) Immediately after such acquisition, 25% or more of the Plan assets
with respect to which the fiduciary or other Plan Asset Investor has
discretionary authority or renders investment advice are invested in
certificates evidencing interests in trusts sponsored or containing assets
sold or serviced by the same entity;
(3) The Plan is sponsored by the Depositor, the Underwriter, the
Trustee, the Master Servicer, any Subservicer, any Pool, Special Hazard or
Primary Insurer or the obligor under any credit support mechanism, a
Mortgagor with respect to obligations constituting more than 5% of the
aggregate unamortized principal balance of the Trust Fund on the Closing
Date (a "Major Obligor"), or any of their affiliates (together, the
"Restricted Group");
(4) The fiduciary or other Plan Asset Investor responsible for the
decision to invest any Plan Assets, or any of its affiliates, is a Major
Obligor; or
(5) In the case of an acquisition in connection with the initial
issuance of Certificates, at least 50% of [each Class of] [the]
Certificates in which Plans have invested is acquired by persons
independent of the members of the Restricted Group and at least 50% of the
aggregate interest in the Trust Fund is acquired by persons independent of
the Restricted Group.
Whether the conditions of the Underwriter's PTE will be satisfied with
respect to [Offered] Certificates [(other than the
Certificates and the Residual Certificates, for which the
Underwriter's PTE will not afford protection) of a particular Class] will depend
upon the facts and circumstances existing at the time Plan Assets are used to
acquire Certificates [of that Class]. Any fiduciary or other Plan Asset Investor
that proposes to use Plan Assets to acquire such Certificates in reliance upon
the Underwriter's PTE should determine whether such acquisition will satisfy all
applicable conditions and consult with its counsel regarding other factors that
may affect the applicability of the Underwriter's PTE.]
[Because the Certificates and the Residual
Certificates will not qualify for the exemptions under PTCE 83-1, [or the
Underwriter's PTE,] transfers of such Certificates to any Plan or Plan Asset
Investor will not be registered unless the transferee provides an opinion of
counsel satisfactory to the Trustee and the Depositor that the purchase of any
such Certificate by, on behalf of or with Plan Assets of any Plan is permissible
under applicable law, will not constitute or result in a non-exempt prohibited
transaction under ERISA or Section 4975 of the Code, and will not subject the
Master Servicer, the Depositor or the Trustee to any obligation in addition to
those undertaken in the Pooling Agreement.]
S-51
<PAGE> 53
PROSPECTUS
BANKAMERICA MORTGAGE SECURITIES, INC.
MORTGAGE PASS-THROUGH CERTIFICATES
BankAmerica Mortgage Securities, Inc. (the "Depositor") intends to sell
from time to time, as described in the related Prospectus Supplement and on
terms to be determined at the time of sale, one or more Series (each, a
"Series") of certificates (the "Certificates") consisting of one or more Classes
(each, a "Class") evidencing beneficial ownership interests in a trust (the
"Trust Fund"), to be created by the Depositor.
The property of each Trust Fund will consist primarily of a segregated pool
(a "Mortgage Pool") of conventional one- to four-family residential first
mortgage loans (the "Mortgage Loans") or interests therein, conveyed to such
Trust Fund by the Depositor. The Depositor will acquire the assets of any
Mortgage Pool from Bank of America National Trust and Savings Association ("Bank
of America NT&SA"), Bank of America, Federal Savings Bank ("Bank of America,
FSB") and/or one or more other affiliated or unaffiliated institutions specified
in the applicable Prospectus Supplement (collectively, the "Sellers"). Unless
otherwise specified in the related Prospectus Supplement, each Mortgage Pool
will consist of one or more of the various types of Mortgage Loans described
herein. See "THE MORTGAGE POOLS." The general characteristics of the Mortgage
Loans to be evidenced by the Certificates of a Series will be set forth in the
related Prospectus Supplement.
Each Class of Certificates of any Series will represent the right, which
right may be senior or subordinate to the rights of one or more other Classes of
the Certificates for such Series, to receive a specified portion of payments of
principal or interest (or both) on the Mortgage Loans in the related Trust Fund
in the manner described herein and in the related Prospectus Supplement. A
Series may include one or more Classes of Certificates entitled to principal
distributions, with disproportionate, nominal or no interest distributions, or
to interest distributions, with disproportionate, nominal or no principal
distributions. A Series may include two or more Classes of Certificates which
differ as to the timing, sequential order, priority of payment, rate of interest
or amount of distributions of principal or interest or both.
The Depositor's only obligations with respect to a Series of Certificates
will be pursuant to certain representations and warranties made by the
Depositor. The master servicer (the "Master Servicer") for each Series of
Certificates, which will be an affiliate of the Depositor, will be named in the
related Prospectus Supplement. The principal obligations of the Master Servicer
will be pursuant to its contractual servicing obligations (which include its
limited obligation to make certain advances in the event of delinquencies in
payment on the Mortgage Loans). See "DESCRIPTION OF THE CERTIFICATES."
If so specified in the related Prospectus Supplement, the Trust Fund for a
Series of Certificates may include any one or any combination of a mortgage pool
insurance policy, letter of credit, bankruptcy bond, special hazard insurance
policy, certificate insurance policy, reserve fund or other form of credit
support. In addition to or in lieu of the foregoing, credit enhancement may be
provided by means of subordination. See "DESCRIPTION OF CREDIT ENHANCEMENTS."
One or more separate elections may be made to treat a Trust Fund as a real
estate mortgage investment conduit ("REMIC") for federal income tax purposes. If
applicable, the Prospectus Supplement for a Series of Certificates will specify
which Class or Classes of the related Series of Certificates will be considered
to be regular interests in the related REMIC and which Class of Certificates or
other interests will be designated as the residual interest in the related
REMIC. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" herein.
SEE "RISK FACTORS" ON PAGE 10 HEREIN FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BEFORE PURCHASING CERTIFICATES OF ANY SERIES.
PROCEEDS FROM THE ASSETS IN THE RELATED TRUST FUND WILL BE THE ONLY SOURCE OF
PAYMENTS ON THE CERTIFICATES OF EACH SERIES. THE CERTIFICATES DO NOT REPRESENT
AN OBLIGATION OF OR INTEREST IN THE DEPOSITOR, BANKAMERICA CORPORATION, BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, BANK OF AMERICA, FEDERAL SAVINGS
BANK OR ANY OF THEIR AFFILIATES. NEITHER THE CERTIFICATES NOR THE UNDERLYING
MORTGAGE LOANS OR OTHER ASSETS OF A TRUST FUND ARE INSURED OR GUARANTEED BY ANY
GOVERNMENTAL AGENCY
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Offers of the Certificates may be made through one or more different
methods, including offerings through underwriters, as more fully described under
"METHODS OF DISTRIBUTION" herein and in the related Prospectus Supplement.
Affiliates of the Depositor may from time to time act as agents or underwriters
in connection with the sale of the Certificates.
There will be no secondary market for any Series of Certificates prior to
the offering thereof. The Certificates will not be listed on any securities
exchange. There can be no assurance that a secondary market for any of the
Certificates will develop or, if it does develop, that it will continue.
This Prospectus may not be used to consummate sales of Certificates unless
accompanied by a Prospectus Supplement.
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE> 54
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT................................................................. 3
AVAILABLE INFORMATION................................................................. 3
REPORTS TO CERTIFICATEHOLDERS......................................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... 3
SUMMARY OF PROSPECTUS................................................................. 5
RISK FACTORS.......................................................................... 10
THE MORTGAGE POOLS.................................................................... 11
THE DEPOSITOR......................................................................... 15
MORTGAGE LOAN PROGRAM................................................................. 15
DESCRIPTION OF THE CERTIFICATES....................................................... 23
SUBORDINATION......................................................................... 37
DESCRIPTION OF CREDIT ENHANCEMENTS.................................................... 39
PRIMARY MORTGAGE INSURANCE, HAZARD INSURANCE; CLAIMS THEREUNDER....................... 45
THE POOLING AGREEMENT................................................................. 48
YIELD CONSIDERATIONS.................................................................. 52
MATURITY AND PREPAYMENT CONSIDERATIONS................................................ 54
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND RELATED MATTERS........................... 56
CERTAIN FEDERAL INCOME TAX CONSEQUENCES............................................... 61
STATE AND OTHER TAX CONSEQUENCES...................................................... 86
ERISA CONSIDERATIONS.................................................................. 87
LEGAL INVESTMENT MATTERS.............................................................. 90
USE OF PROCEEDS....................................................................... 91
METHODS OF DISTRIBUTION............................................................... 91
RATING................................................................................ 92
LEGAL MATTERS......................................................................... 93
FINANCIAL INFORMATION................................................................. 93
ADDITIONAL INFORMATION................................................................ 93
INDEX OF PRINCIPAL DEFINITIONS........................................................ 94
</TABLE>
UNTIL 90 DAYS AFTER THE DATE OF EACH SUPPLEMENT TO THIS PROSPECTUS, ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES COVERED BY SUCH
SUPPLEMENT, WHETHER OR NOT PARTICIPATING IN THE DISTRIBUTION THEREOF, MAY BE
REQUIRED TO DELIVER SUCH SUPPLEMENT AND THIS PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A SUPPLEMENT AND PROSPECTUS WHEN ACTING AS
UNDERWRITERS OF SECURITIES COVERED BY SUCH SUPPLEMENT AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND EACH SUPPLEMENT
TO THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE CERTIFICATES
OFFERED HEREBY, NOR AN OFFER OF THE CERTIFICATES TO ANY PERSON IN ANY STATE OR
OTHER JURISDICTION IN WHICH SUCH OFFER WOULD BE UNLAWFUL. THE DELIVERY OF THIS
PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT INFORMATION HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE; HOWEVER, IF ANY MATERIAL CHANGE OCCURS WHILE
THIS PROSPECTUS IS REQUIRED BY LAW TO BE DELIVERED, THIS PROSPECTUS WILL BE
AMENDED OR SUPPLEMENTED ACCORDINGLY.
2
<PAGE> 55
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to the Certificates of each Series to be
offered hereunder will, among other things, set forth with respect to such
Certificates, as appropriate: (i) a description of the Class or Classes of
Certificates and the Pass-Through Rate or method of determining the amount of
interest, if any, to be passed through to each such Class; (ii) the aggregate
initial principal amount and Distribution Dates relating to such Series, the
method used to calculate the aggregate amount of principal to be distributed
with respect to the Certificates of such Series on each Distribution Date, the
order of the application of principal distributions to the respective Classes
and the allocation of principal to be so applied, and, if applicable, the
initial and final scheduled Distribution Dates for each Class; (iii) information
as to the assets comprising the Trust Fund, including the general
characteristics of the Mortgage Loans included therein and, if applicable,
included in the Trust Fund; (iv) the circumstances, if any, under which the
Trust Fund may be subject to early termination; (v) additional information with
respect to the plan of distribution of such Certificates; (vi) whether a REMIC
election will be made and designation of the regular interests and residual
interests; (vii) the aggregate original percentage ownership interest in the
Trust Fund to be evidenced by each Class of Certificates; (viii) information as
to the Trustee; (ix) information as to the nature and extent of subordination
with respect to any Class of Certificates that is subordinate in right of
payment to any other Class; and (x) identity of the applicable Master Servicer.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act of 1933, as
amended, with respect to the Certificates. This Prospectus and the Prospectus
Supplement relating to each Series of Certificates contain summaries of the
material terms of the documents referred to herein and therein, but do not
contain all of the information set forth in the Registration Statement of which
this Prospectus is a part. For further information, reference is made to such
Registration Statement and the exhibits thereto. In addition, the Depositor will
be subject to the information requirements of the Securities Exchange Act of
1934, as amended, and in accordance therewith, will file reports and other
information with the Commission. Such Registration Statement, the exhibits
thereto and any reports or other information filed with the Commission can be
inspected and copied at prescribed rates at the public reference facilities
maintained by the Commission at its Public Reference Section, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at its Regional Offices located as follows:
Midwest Regional Office, Northwestern Atrium Center, 500 West Madison Avenue,
Chicago, Illinois 60661-2511; and Northeast Regional Office, 7 World Trade
Center, Suite 1300, New York, New York 10048.
REPORTS TO CERTIFICATEHOLDERS
The trustee for each Series of Certificates (the "Trustee") will provide or
cause to be provided to holders of the Certificates (the "Certificateholders")
of such Series periodic reports concerning the Mortgage Pool underlying their
respective Certificates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed or caused to be filed by the Depositor with the
Commission relating to the offering of Certificates referred to in the
accompanying Prospectus Supplement pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934, prior to the termination of any offering
of the Certificates described in such Prospectus Supplement, shall be
incorporated by reference in this Prospectus and be a part of this Prospectus
from the date of the filing of such documents. Copies of the documents
incorporated herein by reference, other than the exhibits to such documents,
unless such exhibits are specifically incorporated by reference in such
documents, will be provided to each person to whom this Prospectus and the
related Prospectus Supplement is delivered in connection with the offering of
one or more Classes of Certificates upon written or oral request of such person.
Requests should be directed to: BankAmerica Mortgage Securities,
3
<PAGE> 56
Inc., 345 Montgomery Street, Lower Level #2, Unit #8152, San Francisco,
California 94104, Attention: David M. Grout, telephone number (415) 445-4855.
Each Series of Certificates will be issued under a separate Pooling and
Servicing Agreement (each a "Pooling Agreement"), among the Depositor, the
Master Servicer and the trustee for such Series (the "Trustee"), substantially
in the form (the "Form of Pooling Agreement") filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The summaries of
certain provisions of the Certificates and such Form of Pooling Agreement
included in this Prospectus do not purport to be complete and are subject to,
and qualified in their entirety by reference to, all of the provisions of the
Form of Pooling Agreement, and the final Pooling Agreement executed in
connection with the issuance of a Series. Section references herein are
references to the Form of Pooling Agreement. An index indicating where certain
terms used herein are defined appears at the end of this Prospectus. Terms used
but not defined herein have the meanings assigned to them in the Form of Pooling
Agreement. References herein to the Master Servicer, the Trustee or the
Depositor include, unless otherwise specified, any agents acting on behalf of
the Master Servicer, the Trustee or the Depositor, any subcontractor of the
Master Servicer, the Trustee or the Depositor, any of which agents or
subcontractors may be the Depositor or one of its affiliates.
4
<PAGE> 57
SUMMARY OF PROSPECTUS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference to
the information with respect to each Series of Certificates contained in the
Prospectus Supplement to be prepared and delivered in connection with the
offering of such Series. Capitalized terms used in this summary that are not
otherwise defined shall have the meanings ascribed thereto in this Prospectus.
An index indicating where certain terms used herein are defined appears at the
end of this Prospectus.
Title of Certificates........... Mortgage Pass-Through Certificates, issuable
in Series (the "Certificates").
Depositor....................... BankAmerica Mortgage Securities, Inc., a
wholly-owned subsidiary of Bank of America
National Trust and Savings Association ("Bank
of America NT&SA"). See "THE DEPOSITOR."
Master Servicer................. The entity named as Master Servicer in the
related Prospectus Supplement, which will be
either be Bank of America NT&SA, the
corporate parent of the Depositor, or Bank of
America, Federal Savings Bank ("Bank of
America, FSB"). See "MORTGAGE LOAN
PROGRAM -- Certain Affiliated Sellers -- Bank
of America National Trust and Savings
Association" and "-- Bank of America, Federal
Savings Bank" and "THE POOLING
AGREEMENT -- Certain Matters Regarding the
Master Servicer and the Depositor."
Trustee......................... The trustee (the "Trustee") for each Series
of Certificates will be specified in the
related Prospectus Supplement.
Description of Certificates..... Each Series of Certificates will include one
or more Classes of Certificates which will
represent in the aggregate the entire
beneficial ownership interest in a segregated
pool (a "Mortgage Pool") of conventional one-
to four-family residential first mortgage
loans (the "Mortgage Loans") or interests
therein and certain other assets as described
below (collectively, a "Trust Fund") and will
be issued pursuant to a pooling and servicing
agreement among the Depositor, the Trustee
and the Master Servicer (each, a "Pooling
Agreement"). Except for any Strip
Certificates (defined in the following
paragraph), each Series of Certificates, or
Class of Certificates in the case of a Series
consisting of two or more Classes, will have
a stated principal balance (a "Certificate
Principal Balance") and will be entitled to
distributions of interest based on a
specified interest rate or rates (each, a
"Pass-Through Rate"). Each Series or Class of
Certificates may have a different Pass-
Through Rate, which may be a fixed, variable
or adjustable Pass-Through Rate, or any
combination of two or more such Pass-Through
Rates. The related Prospectus Supplement will
specify the Pass-Through Rate or Rates for
each Series or Class of Certificates, or the
initial Pass-Through Rate or Rates and the
method for determining subsequent changes to
the Pass-Through Rate or Rates.
5
<PAGE> 58
A Series may include one or more Classes of
Certificates ("Strip Certificates") entitled
(i) to principal distributions, with
disproportionate, nominal or no interest
distributions, or (ii) to interest
distributions, with disproportionate, nominal
or no principal distributions. In addition, a
Series may include two or more Classes of
Certificates which differ as to timing,
sequential order, priority of payment,
Pass-Through Rate or amount of distributions
of principal or interest or both, or as to
which distributions of principal or interest
or both on any Class may be made upon the
occurrence of specified events, in accordance
with a schedule or formula, or on the basis
of collections from designated portions of
the Mortgage Pool, which Series may include
one or more Classes of Certificates ("Accrual
Certificates") as to which certain accrued
interest will not be distributed but rather
will be added to the Certificate Principal
Balance thereof on each Distribution Date, as
hereinafter defined, in the manner described
in the related Prospectus Supplement.
If so provided in the related Prospectus
Supplement, a Series of Certificates may
include one or more Classes of Certificates
(collectively, the "Senior Certificates")
which are senior to one or more Classes
(collectively, the "Subordinate
Certificates") in respect of certain
distributions of principal and interest and
allocations of losses on Mortgage Loans. In
addition, certain Classes of Senior (or
Subordinate) Certificates may be senior to
other Classes of Senior (or Subordinate)
Certificates in respect of such distributions
or losses.
As to each Series, one or more elections may
be made to treat the related Trust Fund or a
designated portion thereof as a "real estate
mortgage investment conduit" or "REMIC" as
defined in the Internal Revenue Code of 1986
(the "Code"). See "DESCRIPTION OF THE
CERTIFICATES."
Proceeds from the assets in the related Trust
Fund will be the only source of payments on
the Certificates of each Series. The
Certificates do not represent an obligation
of or interest in the Depositor, BankAmerica
Corporation ("BankAmerica"), Bank of America
NT&SA, Bank of America, FSB or any of their
affiliates. Neither the Certificates nor the
underlying Mortgage Loans or other assets of
a Trust Fund will be guaranteed or insured by
any governmental agency or instrumentality or
by the Depositor, BankAmerica, Bank of
America NT&SA, Bank of America, FSB or any of
their affiliates.
The Mortgage Pools.............. Unless otherwise specified in the related
Prospectus Supplement, each Trust Fund will
consist primarily of Mortgage Loans or
interests therein secured by first liens on
one- to four-family residential properties,
located in any one of the 50 states or the
District of Columbia (the "Mortgaged
Properties"). Unless otherwise specified in
the applicable Prospectus Supplement, all
Mortgage Loans will have been purchased by
the Depositor from affiliates of the
Depositor on or before the date of initial
issuance of the related Series of
Certificates. See "MORT-
6
<PAGE> 59
GAGE LOAN PROGRAM." For a description of the
types of Mortgage Loans that may be included
in the Mortgage Pools, see "THE MORTGAGE
POOLS -- The Mortgage Loans."
A Current Report on Form 8-K will be
available upon request to purchasers of the
related Series of Certificates and will be
filed, together with the related Pooling
Agreement, with the Commission within fifteen
days after such initial issuance.
Interest Distributions.......... Except as otherwise specified herein or in
the related Prospectus Supplement, interest
on each Class of Certificates of each Series,
other than Strip Certificates or Accrual
Certificates (prior to the time when accrued
interest becomes payable thereon), will be
remitted at the applicable Pass-Through Rate
(which may be a fixed, variable or adjustable
rate or any combination thereof) on such
Class's outstanding Certificate Principal
Balance, on the 25th day (or if such day is
not a business day, the next succeeding
business day) of each month, commencing with
the month following the month in which the
Cut-off Date (as defined in the applicable
Prospectus Supplement) occurs (each, a
"Distribution Date"). Distributions, if any,
with respect to interest on Strip
Certificates will be made on each
Distribution Date as described herein and in
the related Prospectus Supplement. Interest
that has accrued but is not yet payable on
any Accrual Certificates will be added to the
principal balance of such Class on each
Distribution Date, and will thereafter bear
interest. Unless otherwise specified in the
related Prospectus Supplement, distributions
of interest with respect to any Series of
Certificates (or accruals thereof in the case
of Accrual Certificates), or with respect to
one or more Classes included therein, may be
reduced to the extent of interest shortfalls
not covered by advances or the applicable
form of credit support, including shortfalls
(a "Prepayment Interest Shortfall") in
collections of a full month's interest in
connection with prepayments. See "YIELD
CONSIDERATIONS" and "DESCRIPTION OF THE
CERTIFICATES."
Principal Distributions......... Except as otherwise specified in the related
Prospectus Supplement, principal
distributions on the Certificates of each
Series will be payable on each Distribution
Date, commencing with the Distribution Date
in the month following the month in which the
Cut-off Date occurs, to the holders of the
Certificates of such Series, or of the Class
or Classes of Certificates then entitled
thereto, on a pro rata basis among all such
Certificates or among the Certificates of any
such Class, in proportion to their respective
outstanding Certificate Principal Balances,
or in the priority and manner otherwise
specified in the related Prospectus
Supplement. Strip Certificates with no
Certificate Principal Balance will not
receive distributions in respect of
principal. Distributions of principal with
respect to any Series of Certificates, or
with respect to one or more Classes included
therein, may be reduced to the extent of
certain delinquencies not covered by advances
or losses not covered by the applicable form
of credit enhancement. See "THE MORTGAGE
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POOLS," "MATURITY AND PREPAYMENT
CONSIDERATIONS" and "DESCRIPTION OF THE
CERTIFICATES."
Subordination and Credit
Enhancements................ If specified in the related Prospectus
Supplement, the Trust Fund with respect to
any Series of Certificates may include any
one or any combination of a letter of credit,
mortgage pool insurance policy, special
hazard insurance policy, certificate
insurance policy, bankruptcy bond, reserve
fund or other type of credit support to
provide partial coverage for certain defaults
and losses relating to the Mortgage Loans.
Credit support also may be provided in the
form of subordination of one or more Classes
of Certificates in a Series under which
losses are first allocated to any Subordinate
Certificates up to a specified limit. Unless
otherwise specified in the related Prospectus
Supplement, any form of credit enhancement
will have certain limitations and exclusions
from coverage thereunder, which will be
described in the related Prospectus
Supplement. Losses not covered by any form of
credit enhancement will be borne by the
holders of the related Certificates (or
certain Classes thereof). To the extent not
set forth herein, the amount and types of
coverage, the identification of any entity
providing the coverage, the terms of any
subordination and related information will be
set forth in the Prospectus Supplement
relating to a Series of Certificates. See
"DESCRIPTION OF CREDIT ENHANCEMENTS" and
"SUBORDINATION."
Advances........................ Unless otherwise specified in the applicable
Prospectus Supplement, the Master Servicer
will be obligated to make certain advances
with respect to delinquent scheduled payments
on the Mortgage Loans, but only to the extent
that the Master Servicer believes that such
amounts will be recoverable by it. Any
advance made by the Master Servicer with
respect to a Mortgage Loan is recoverable by
it as provided herein under "DESCRIPTION OF
THE CERTIFICATES -- Advances" either from
recoveries on the specific Mortgage Loan or,
with respect to any advance subsequently
determined to be nonrecoverable, out of funds
otherwise distributable to the holders of the
related Series of Certificates, which may
include the holders of any Senior
Certificates of such Series.
Optional Termination............ If specified in the applicable Prospectus
Supplement, the Master Servicer, the
Depositor or the holder of the residual
interest in a REMIC may at its option effect
early retirement of a Series of Certificates
through the purchase of the assets in the
related Trust Fund under the circumstances
and in the manner set forth herein under "THE
POOLING AGREEMENT -- Termination; Retirement
of Certificates" and in the related
Prospectus Supplement.
Rating.......................... At the date of issuance, as to each Series,
each Class of Certificates offered by means
of this Prospectus and the related Prospectus
Supplement will be rated at the request of
the Depositor in one of the four highest
rating categories by one or
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more nationally recognized statistical rating
agencies (each, a "Rating Agency"). See
"RATING" herein and in the related Prospectus
Supplement.
Legal Investment................ Unless otherwise specified in the related
Prospectus Supplement, each Class of
Certificates offered by means of this
Prospectus and the related Prospectus
Supplement that is rated in one of the two
highest rating categories by at least one
Rating Agency will constitute "mortgage
related securities" for purposes of the
Secondary Mortgage Market Enhancement Act of
1984 ("SMMEA"). See "LEGAL INVESTMENT
MATTERS" herein.
ERISA Considerations............ Fiduciaries of employee benefit plans and
certain other retirement plans and
arrangements, including individual retirement
accounts and annuities, Keogh plans, and
collective investment funds and separate
accounts in which such plans, accounts,
annuities or arrangements are invested, that
are subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"),
or Section 4975 of the Code (each, a "Plan")
should carefully review with their legal
advisors whether the purchase or holding of
Certificates could give rise to a transaction
that is prohibited or is not otherwise
permissible either under ERISA or Section
4975 of the Code. Investors are advised to
consult their counsel and to review "ERISA
CONSIDERATIONS" herein.
Certain Federal Income Tax
Consequences.................. Certificates of each Series offered hereby
will constitute either (i) interests
("Grantor Trust Certificates") in a Trust
Fund treated as a grantor trust under
applicable provisions of the Code, or (ii)
"regular interests" ("REMIC Regular
Certificates") or "residual interests"
("REMIC Residual Certificates") in a Trust
Fund, or a portion thereof, treated as a
REMIC under Sections 860A through 860G of the
Code.
Investors are advised to consult their tax
advisors and to review "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES" herein and in the
related Prospectus Supplement.
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RISK FACTORS
Investors should consider, among other things, the following factors in
connection with the purchase of the Certificates:
Limited Liquidity. There can be no assurance that a secondary market for
the Certificates of any Series will develop or, if it does develop, that it will
provide Certificateholders with liquidity of investment or that it will continue
for the life of the Certificates of any Series. The Prospectus Supplement for
any Series of Certificates may indicate that an underwriter specified therein
intends to establish a secondary market in such Certificates; however, no
underwriter will be obligated to do so and offerings may be effected hereunder
without participation by any underwriter. The Certificates will not be listed on
any securities exchange.
Limited Obligations. The Certificates will not represent an interest in or
obligation of the Depositor, BankAmerica Corporation ("BankAmerica"), Bank of
America National Trust and Savings Association ("Bank of America NT&SA"), Bank
of America, Federal Savings Bank ("Bank of America, FSB") or any of their
affiliates. The only obligations of the foregoing entities with respect to the
Certificates or the Mortgage Loans will be (i) the obligations (if any) of any
such entity as a Seller (defined herein) pursuant to certain limited
representations and warranties made with respect to the Mortgage Loans sold by
it and (ii) the Master Servicer's servicing obligations under the related
Pooling Agreement (including its limited obligation to make certain advances in
the event of delinquencies on the Mortgage Loans, but only to the extent deemed
recoverable). Neither the Certificates nor the underlying Mortgage Loans will be
guaranteed or insured by any governmental agency or instrumentality, or by the
Depositor, BankAmerica, Bank of America NT&SA, Bank of America, FSB or any of
their affiliates. Proceeds of the assets included in the related Trust Fund for
each Series of Certificates (including the Mortgage Loans and any form of credit
enhancement) will be the sole source of payments on the Certificates, and there
will be no recourse to the Depositor, BankAmerica, Bank of America NT&SA, Bank
of America, FSB or any other entity in the event that such proceeds are
insufficient or otherwise unavailable to make all payments provided for under
the Certificates.
Limitations, Reduction and Substitution of Credit Enhancements. 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 herein, including, but not limited to: subordination of other Classes of
Certificates of the same Series; a Letter of Credit; a Mortgage Pool Insurance
Policy; a Special Hazard Insurance Policy; a Certificate Insurance Policy; a
Bankruptcy Bond; a Reserve Fund; or any combination thereof. See "SUBORDINATION"
and "DESCRIPTION OF CREDIT ENHANCEMENTS" herein. 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. Furthermore, such credit enhancements may provide only very
limited coverage as to certain types of losses or risks, and may provide no
coverage as to certain other types of losses or risks. 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 thereof). All or a
portion of the credit enhancement for any Series of Certificates will generally
be permitted to be reduced, terminated or substituted for, if each applicable
Rating Agency indicates that the then-current rating thereof will not be
adversely affected. 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 Depositor, BankAmerica, Bank of America NT&SA, Bank of America, FSB
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 Series of Certificates. See "DESCRIPTION OF CREDIT ENHANCEMENTS -- Reduction
of Credit Enhancement."
Investment in the Mortgage Loans. An investment in securities such as the
Certificates which generally represent interests in mortgage loans may be
affected by, among other things, a decline in real estate values and changes in
the borrowers' financial condition. No assurance can be given that values of the
Mortgaged Properties (as defined herein) have remained or will remain at their
levels on the dates of origination of the
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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, and any secondary financing on the Mortgaged Properties, in a
particular Mortgage Pool become equal to or greater than the value of the
Mortgaged Properties, the actual rates of delinquencies, foreclosures and losses
could be higher than those now generally experienced in the mortgage lending
industry. To the extent that such losses are not covered by the applicable
credit enhancement, holders of Certificates of the Series evidencing interests
in the related Mortgage Pool 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. Certain of the types of loans which may be included in
the Mortgage Pools may involve additional uncertainties not present in
traditional types of loans. For example, certain of the Mortgage Loans provide
for escalating or variable payments by the borrower under the Mortgage Loan (the
"Mortgagor"), as to which the Mortgagor is generally qualified on the basis of
the initial payment amount. In some instances, the Mortgagors may not be able to
make their loan payments as such payments increase and thus the likelihood of
default will increase. In addition to the foregoing, 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 than will be experienced on mortgage loans generally.
For example, a region's economic condition and housing market may be directly,
or indirectly, adversely affected by natural disasters or civil disturbances
such as earthquakes, hurricanes, floods, eruptions or riots. The economic impact
of any of these types of events may also be felt in areas beyond the region
immediately affected by the disaster or disturbance. The Mortgage Loans
underlying certain Series of Certificates may be concentrated in these regions,
and such concentration may present risk considerations in addition to those
generally present for similar mortgage-backed securities without such
concentration. Moreover, as described below, any Mortgage Loan for which a
breach of a representation or warranty exists will remain in the related Trust
Fund in the event that a Seller is unable, or disputes its obligation, to
repurchase such Mortgage Loan. In such event, any resulting losses will be borne
by the related form of credit enhancement, to the extent available.
Yield and Prepayment Considerations. The yield to maturity of the
Certificates of each Series will depend on the rate and timing of principal
payments (including prepayments, liquidations due to defaults, and repurchase)
on the Mortgage Loans and the price paid by Certificateholders. Such yield may
be adversely affected by a higher or lower than anticipated rate of prepayments
on the related Mortgage Loans. The yield to maturity on Strip Certificates will
be extremely sensitive to the rate of prepayments on the related Mortgage Loans.
In addition, the yield to maturity on certain other types of Classes of
Certificates, including Accrual Certificates, Certificates with a Pass-Through
Rate which fluctuates inversely with an index or certain other Classes in a
Series including more than one Class of Certificates, may be relatively more
sensitive to the rate of prepayment on the related Mortgage Loans than other
Classes of Certificates. Prepayments are influenced by a number of factors,
including prevailing mortgage market interest rates, local and regional economic
conditions and homeowner mobility. See "YIELD CONSIDERATIONS" and "MATURITY AND
PREPAYMENT CONSIDERATIONS" herein.
THE MORTGAGE POOLS
GENERAL
Unless otherwise specified in the related Prospectus Supplement, each
Mortgage Pool will consist primarily of conventional Mortgage Loans, minus any
portion of the interest payable thereon retained by the Depositor or a Seller
(the "Retained Yield"), if any, evidenced by promissory notes (the "Mortgage
Notes") secured by first mortgages or first deeds of trust or other similar
security instruments (the "Mortgages") creating a first lien on one- to
four-family residential properties (the "Mortgaged Properties"), or interests in
such Mortgage Loans. The Mortgaged Properties will consist primarily of
owner-occupied attached or detached single-family dwelling units, two- to
four-family dwelling units, condominiums, townhouses, row houses, individual
units in planned-unit developments and certain other dwelling units, and the
fee, leasehold
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or other interests in the underlying real property. The Mortgaged Properties may
include vacation, second and non-owner-occupied homes.
Each Mortgage Loan will be selected by the Depositor for inclusion in a
Mortgage Pool from among those originated by Bank of America NT&SA, Bank of
America, FSB or another affiliate of the Depositor (each, an "Affiliated
Seller") or purchased either directly or through its affiliates from banks,
savings associations, mortgage bankers, investment banking firms, the FDIC and
other mortgage loan originators or sellers not affiliated with the Depositor
("Unaffiliated Sellers"), all as described below under "MORTGAGE LOAN PROGRAM."
Affiliated Sellers and Unaffiliated Sellers are collectively referred to herein
as "Sellers". The characteristics of the Mortgage Loans are as described in the
related Prospectus Supplement. Other mortgage loans available for purchase by
the Depositor may have characteristics which would make them eligible for
inclusion in a Mortgage Pool but were not selected for inclusion in such
Mortgage Pool.
Each Series of Certificates will evidence interests in one Mortgage Pool
including Mortgage Loans having an aggregate principal balance of not less than
approximately $10,000,000 as of the Cut-off Date. Each Certificate will evidence
an interest in only the related Mortgage Pool and corresponding Trust Fund, and
not in any other Mortgage Pool or Trust Fund.
THE MORTGAGE LOANS
Unless otherwise specified below or in the related Prospectus Supplement,
all of the Mortgage Loans in a Mortgage Pool will (i) have monthly payments due
on the first of each month, (ii) be secured by Mortgaged Properties located in
any of the 50 states or the District of Columbia and (iii) be of only one type
of the following types of mortgage loans described or referred to in paragraphs
numbered (1) through (5):
(1) Fixed-rate, fully-amortizing mortgage loans (which may include
mortgage loans converted from adjustable-rate mortgage loans or otherwise
modified) providing for level monthly payments of principal and interest
over the terms of such Mortgage Loans;
(2) Fully-amortizing adjustable-rate mortgage loans ("ARM Loans")
having an original or modified term to maturity of not more than 40 years,
with a related interest rate (a "Mortgage Rate") which generally adjusts
initially either one, three or six months or one, three, five, seven or ten
years subsequent to the initial payment date, and thereafter at either
one-month, six-month, one-year or other intervals (with corresponding
adjustments in the amount of monthly payments) over the term of the
mortgage loan to equal the sum of a fixed percentage set forth in the
related Mortgage Note (the "Note Margin") and an index*. The related
Prospectus Supplement will set forth the relevant index and the highest,
lowest and weighted average Note Margin with respect to the ARM Loans in
the related Mortgage Pool. The related 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 related
Prospectus Supplement, an ARM Loan may include a provision that allows the
Mortgagor to convert the adjustable Mortgage Rate to a fixed rate at some
point during the term of such ARM Loan generally during the period from one
to twelve years subsequent to the initial payment date;
(3) Mortgage Loans having an original or modified term to maturity of
not more than 30 years with a Mortgage Rate which adjusts initially five
years subsequent to the initial payment date, and thereafter
- ---------------
* The index (the "Index") for a particular Mortgage Pool will be specified in
the related Prospectus Supplement and may include one of the following
indices: (i) the twelve-month average of monthly yields on actively traded
U.S. Treasury securities adjusted to a constant maturity of one year, (ii) the
weekly average yield on U.S. Treasury securities adjusted to a constant
maturity of one year, (iii) the weekly average of the secondary market
interest rates on six-month negotiable certificates of deposit, (iv) the
average of interbank offered rates for six-month U.S. dollar-denominated
deposits in the London market, or (v) the monthly weighted average cost of
funds for member institutions of the Federal Home Loan Bank of San Francisco,
each calculated as of a date prior to each scheduled interest rate adjustment
date which will be specified in the related Prospectus Supplement.
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at one-month, six-month, one-year or other intervals (with corresponding
adjustments in the amount of monthly payments) over the term of the
mortgage loan to equal the sum of the related Note Margin and Index, and
providing for monthly payments of interest only prior to the date of the
initial Mortgage Rate adjustment and monthly payments of principal and
interest thereafter sufficient to fully-amortize the Mortgage Loans over
their remaining terms to maturity ("Net 5 Loans"). The related Prospectus
Supplement will set forth the relevant index and the highest, lowest and
weighted average Note Margin with respect to the Net 5 Loans in the related
Mortgage Pool. The related Prospectus Supplement will also indicate any
periodic or lifetime limitations on changes in any per annum Mortgage Rate
at the time of any adjustment;
(4) Balloon mortgage loans ("Balloon Loans"), which are fixed-rate
mortgage loans having original or modified terms to maturity of generally
five or seven years as described in the related Prospectus Supplement, with
level monthly payments of principal and interest based on a 30-year
amortization schedule. The amount of the monthly payment will remain
constant until the maturity date, upon which date the full outstanding
principal balance on such Balloon Loan will be due and payable (such
amount, the "Balloon Amount"); or
(5) Another type of mortgage loan described in the related Prospectus
Supplement.
Certain information, including information regarding loan-to-value ratios
(each, a "Loan-to-Value Ratio") at origination (unless otherwise specified in
the related Prospectus Supplement) of the Mortgage Loans underlying each Series
of Certificates, will be supplied in the related Prospectus Supplement. The
Loan-to-Value Ratio at origination is defined generally as the ratio, expressed
as a percentage, of the principal amount of the Mortgage Loan at origination to
the lesser of (x) the appraised value determined in an appraisal obtained at
origination of such Mortgage Loan and (y) the sales price for the related
Mortgaged Property. The lesser of the items described in (x) and (y) of the
preceding sentence is hereinafter referred to as the "Appraised Value."
The Mortgage Loans may be "equity refinance" Mortgage Loans, as to which a
portion of the proceeds are used to refinance an existing mortgage loan, and the
remaining proceeds may be retained by the Mortgagor or used for purposes
unrelated to the Mortgaged Property. Alternatively, the Mortgage Loans may be
"rate and term refinance" Mortgage Loans, as to which substantially all of the
proceeds (net of related costs incurred by the Mortgagor) are used to refinance
an existing mortgage loan or loans (which may include a junior lien) primarily
in order to change the interest rate or other terms thereof. The Mortgage Loans
may be mortgage loans which have been consolidated and/or have had various terms
changed, mortgage loans which have been converted from adjustable rate mortgage
loans to fixed rate mortgage loans, or construction loans which have been
converted to permanent mortgage loans. The Mortgagors may be required to or have
the option to make payments by means of automatic debits from their checking or
savings accounts. In addition, a Mortgaged Property may be subject to secondary
financing at the time of origination of the Mortgage Loan or thereafter.
If provided for in the related Prospectus Supplement, a Mortgage Pool may
contain ARM Loans which allow the Mortgagors to convert the adjustable rates on
such Mortgage Loans to a fixed rate at some point during the life of such
Mortgage Loans (each such Mortgage Loan, a "Convertible Mortgage Loan"),
generally during the period from one to twelve years subsequent to the date of
origination, depending upon the length of the initial adjustment period. If
specified in the related Prospectus Supplement, upon any conversion, the
Depositor or the applicable Master Servicer, Seller or a third party may have
the obligation or the option to purchase the converted Mortgage Loan as and to
the extent set forth in the related Prospectus Supplement. If specified in the
related Prospectus Supplement, the Depositor or the applicable Master Servicer
(or another party specified therein) may agree to act as remarketing agent with
respect to such converted Mortgage Loans and, in such capacity, to use its best
efforts to arrange for the sale of converted Mortgage Loans in the event that
such party does not exercise its option to purchase such converted Mortgage
Loans. Upon the failure of any party to fulfill its obligation or exercise its
option to purchase any such converted Mortgage Loan or the inability of any
remarketing agent to arrange for the sale of the converted Mortgage Loan, the
related Mortgage Pool will thereafter include both fixed rate and adjustable
rate Mortgage Loans. In addition, the
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Prospectus Supplement relating to any Series of Certificates may specify other
arrangements relating to the Convertible Loans upon their conversion.
If provided for in the related Prospectus Supplement, certain of the
Mortgage Loans may be subject to temporary buydown plans ("Buydown Mortgage
Loans") pursuant to which the monthly payments made by the Mortgagor during the
early years of the Mortgage Loan (the "Buydown Period") will be less than the
scheduled monthly payments on the Mortgage Loan, the resulting difference to be
made up from (i) an amount (such amount, exclusive of investment earnings
thereon, being hereinafter referred to as "Buydown Funds") contributed by the
seller of the Mortgaged Property or another source and placed in a custodial
account (the "Buydown Account"), (ii) if the Buydown Funds are contributed on a
present value basis, investment earnings on such Buydown Funds or (iii)
additional buydown funds to be contributed over time by the Mortgagor's employer
or another source. The applicable Prospectus Supplement or Current Report on
Form 8-K will contain information with respect to any Buydown Mortgage Loans,
including information on the interest rate initially payable by the Mortgagor,
increases in the interest rate paid by the Mortgagor over the term of the
related Buydown Mortgage Loan and the length of the Buydown Period.
The Prospectus Supplement for each Series of Certificates will contain
information as to the type of Mortgage Loans which will be included in the
related Mortgage Pool. Each Prospectus Supplement applicable to a Series of
Certificates will include certain information, generally as of the Cut-off Date
and to the extent then available to the Depositor, on an approximate basis, as
to (i) the aggregate principal balance of the Mortgage Loans, (ii) the type of
property securing the Mortgage Loans, (iii) the original or modified terms to
maturity of the Mortgage Loans, (iv) the range of principal balances of the
Mortgage Loans at origination or modification, (v) the earliest origination or
modification date and latest maturity date of the Mortgage Loans, (vi) the
Loan-to-Value Ratios of the Mortgage Loans, (vii) the Mortgage Rate or range of
Mortgage Rates borne by the Mortgage Loans, (viii) if any of the Mortgage Loans
are ARM Loans or Net 5 Loans, the applicable Index, the range of Note Margins
and the weighted average Note Margin, (ix) the geographical distribution of the
Mortgage Loans, (x) the number and aggregate principal balance of Buydown
Mortgage Loans, if applicable, and (xi) the percent of ARM Loans which are
convertible to fixed-rate mortgage loans, if applicable.
A Current Report on Form 8-K will be available to the Purchasers of the
related Series of Certificates at or before the initial issuance of such Series
of Certificates and will be filed, together with the related Pooling Agreement,
with the Securities and Exchange Commission within fifteen days after the
initial issuance of such Certificates. In the event that Mortgage Loans are
added to or deleted from the Trust Fund after the date of the related Prospectus
Supplement, such addition or deletion will be noted in the Current Report on
Form 8-K. In addition, specific information with respect to the Mortgage Loans
in a particular Mortgage Pool and any applicable credit enhancements which is
not included in the related Prospectus Supplement will generally be included in
such Current Report on Form 8-K.
The Depositor will cause the Mortgage Loans constituting each Mortgage Pool
to be assigned to the Trustee named in the related Prospectus Supplement, for
the benefit of the holders of all of the Certificates of a Series. The Master
Servicer named in the related Prospectus Supplement, which will be either Bank
of America NT&SA or Bank of America, FSB, will service the Mortgage Loans,
pursuant to a Pooling Agreement, and will receive a fee for such services. See
"MORTGAGE LOAN PROGRAM" and "DESCRIPTION OF THE CERTIFICATES." Certain Mortgage
Loans may be serviced for the Master Servicer by other mortgage servicing
institutions ("Subservicers"), which may be affiliates of the Depositor and the
Master Servicer. With respect to those Mortgage Loans serviced by the Master
Servicer through a Subservicer, the Master Servicer will remain liable for its
servicing obligations under the related Pooling Agreement as if the Master
Servicer alone were servicing such Mortgage Loans.
Except as otherwise specified in the applicable Prospectus Supplement, the
Depositor will assign certain limited representations and warranties regarding
the Mortgage Loans, but the Depositor will not make any representations or
warranties regarding the Mortgage Loans and its assignment of the Mortgage Loans
to the Trustee will be without recourse. See "DESCRIPTION OF THE
CERTIFICATES -- Assignment of Mortgage Loans." The Master Servicer's obligations
with respect to the Mortgage Loans will consist
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principally of its contractual servicing obligations under the related Pooling
Agreement (including its obligation to enforce certain purchase and other
obligations of Sellers and Subservicers, if any, as more fully described herein
under "MORTGAGE LOAN PROGRAM--Representations and Warranties by Sellers," and
"DESCRIPTION OF THE CERTIFICATES -- Assignment of Mortgage Loans," and its
obligation to make certain cash advances in the event of delinquencies in
payments on or with respect to the Mortgage Loans in amounts described herein
under "DESCRIPTION OF THE CERTIFICATES -- Advances"). The obligation of the
Master Servicer to make advances will be limited to amounts which the Master
Servicer believes ultimately would be reimbursable out of the proceeds of
liquidation of the Mortgage Loans or any applicable form of credit support. See
"DESCRIPTION OF THE CERTIFICATES -- Advances."
THE DEPOSITOR
The Depositor was incorporated in the State of Delaware on May 6, 1996 and
is a wholly-owned subsidiary of Bank of America NT&SA. It is not expected that
the Depositor will have any business operations other than offering Certificates
and related similar activities.
The principal executive offices of the Depositor are located at 345
Montgomery Street, Lower Level #2, Unit #8152, San Francisco, California 94104.
The Depositor's telephone number is (415) 445-4855.
MORTGAGE LOAN PROGRAM
The Depositor will purchase the Mortgage Loans, either directly or
indirectly through its affiliates, from Sellers. The Prospectus Supplement
related to any Series of Certificates will specify the entity that will act as
Master Servicer pursuant to the Pooling Agreement relating to such Series of
Certificates, which will be either Bank of America NT&SA or Bank of America,
FSB.
The Mortgage Pools may consist of Mortgage Loans purchased from Affiliated
Sellers, Unaffiliated Sellers or both Unaffiliated Sellers and Affiliated
Sellers. Descriptions of certain Affiliated Sellers are given below under
"Certain Affiliated Sellers," and the Prospectus Supplement related to any
Series of Certificates for which the underlying Mortgage Pool contains a
substantial number of Mortgage Loans purchased from any other Affiliated Seller
will describe such Affiliated Seller. The Mortgage Loans purchased from
Affiliated Sellers will generally have been originated in accordance with the
underwriting standards of the Affiliated Sellers, as described below under
"Underwriting Standards."
The Prospectus Supplement related to any Series of Certificates for which
the underlying Mortgage Pool contains a substantial number of Mortgage Loans
purchased from an Unaffiliated Seller will describe such Unaffiliated Seller.
The Mortgage Loans purchased from Unaffiliated Sellers may have been originated
in accordance with underwriting standards that vary substantially from those
used by Affiliated Sellers. See "Underwriting Standards" and "Qualifications of
Unaffiliated Sellers" below.
CERTAIN AFFILIATED SELLERS
Bank of America National Trust and Savings Association
With more than $163 billion in assets as of December 31, 1995, Bank of
America NT&SA is the primary subsidiary of BankAmerica Corporation, the nation's
third largest bank holding company, and is currently the third largest
commercial bank in the United States and the largest in California. In
California it operates more than 1,000 full-service branches as well as major
consumer lending, residential lending, small business banking, and commercial
banking operations. It also maintains corporate banking offices in major U.S.
cities, and branches and other facilities in more than 30 countries and
territories around the world. Its residential lending and home loan servicing
operation, combined with that of Bank of America, FSB, ranks among the top ten
in the United States, according to Inside Mortgage Finance, with originations of
more than $10 billion for 1995 and with a combined servicing portfolio of $63
billion as of December 31, 1995.
Bank of America NT&SA's deposits are insured by the Federal Deposit
Insurance Corporation (the "FDIC") to the extent provided by law. Bank of
America NT&SA has been approved as a mortgagee and
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<PAGE> 68
Seller/Servicer by the Federal Housing Administration ("FHA"), the Veterans
Administration ("VA"), the Government National Mortgage Association ("GNMA"),
the Federal National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"). Bank of America NT&SA has historically been an
active one- to four-family mortgage lender. It originates both fixed and
adjustable rate loans and purchases mortgage loans in negotiated transactions
from other Affiliated and Unaffiliated Sellers. See "-- Residential Mortgage
Loan Servicing Activities" and "-- Delinquency, Foreclosure and Loss Experience"
for a description of Bank of America NT&SA's loan servicing operations and
activities.
The principal executive offices of Bank of America NT&SA are located at 555
California Street, San Francisco, California 94104.
Bank of America, Federal Savings Bank
With more than $8 billion in assets as of December 31, 1995, Bank of
America, FSB, a subsidiary of BankAmerica Corporation, originates and services
home loans nationwide through retail, wholesale, and other specialized channels,
and originates and services manufactured housing loans throughout the United
States. In addition, Bank of America, FSB's Hawaii Division is a full-service
bank with 45 branches on four Hawaiian islands; its Midwest Retail Division
operates ATMs and a small network of Financial Service Centers, primarily in the
Chicago metropolitan area; and its Community Development Division finances
affordable housing projects and offers government-guaranteed small business
loans in 11 states.
Bank of America, FSB's deposits are insured by the FDIC to the extent
provided by law. Bank of America, FSB has been approved as a mortgagee and
Seller/Servicer by the Department of Housing and Urban Development, the VA,
GNMA, FNMA and FHLMC. Bank of America, FSB has been an active one-to four-family
residential real estate mortgage lender since 1992. It originates both fixed and
adjustable rate loans throughout the United States. See "-- Residential Mortgage
Loan Servicing Activities" and "-- Delinquency, Foreclosure and Loss Experience"
for a description of Bank of America, FSB's loan servicing operations and
activities.
Bank of America, FSB's headquarters is located in Portland, Oregon, and its
administrative offices are located at 555 California Street, San Francisco,
California 94104 (telephone 415-622-2220).
UNDERWRITING STANDARDS
The Affiliated Sellers have written, and are continuously updating,
underwriting guides for the origination of one- to four-family residential first
mortgage loans (as modified from time to time, the "Guides"). The underwriting
standards as set forth in the Guides are continuously revised based on
prevailing conditions in the residential mortgage market, evolving credit
standards of the Affiliated Sellers and the investment market for residential
mortgage loans.
The underwriting standards set forth in the Guides are intended to assess
the prospective borrower's ability and willingness to repay the debt and the
adequacy of the property as collateral for the loan requested. Credit policies
of the Affiliated Sellers require that loan underwriters be satisfied that the
value of the property being financed supports the outstanding loan balance with
sufficient value at loan origination to mitigate the effects of adverse shifts
in real estate values. The emphasis, however, remains on the borrowers' ability
to repay debt.
The real estate lending processes of the Affiliated Sellers for one- to
four-family mortgage loans follow standard procedures, designed to comply with
applicable federal and state laws and regulations. Initially, a prospective
borrower is required to fill out a detailed application designed to provide to
the underwriter pertinent information about the prospective borrower, the
property to be financed and the type of loan desired. Information regarding the
property to be financed may be provided by the prospective borrower after the
applicable Affiliated Seller has approved, subject to review of the property to
be financed, a loan to the prospective borrower. As part of the description of
the prospective borrower's financial condition, the Affiliated Sellers require a
description of assets and liabilities and income and expenses and an
authorization to the applicable Affiliated Seller to apply for a credit report
which summarizes the prospective borrower's credit
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<PAGE> 69
history with merchants and lenders and any public records, such as bankruptcy.
In most cases, employment verification is obtained providing current and
historical income information. Such employment verification is obtained either
through the applicable Affiliated Seller's analysis of the prospective
borrower's W-2 forms for the most recent two years and year-to-date earnings
statement or most recent two years' tax returns or from the prospective
borrower's employer, wherein the employer reports the length of employment and
current salary with that organization. Self-employed prospective borrowers are
required to submit their federal tax returns for the past two years plus
year-to-date financial statements if the loan application is made 120 days or
longer after the end of the most recent tax year for which a federal tax return
was provided. In general, an employment verification is obtained, and with
respect to certain loans, a telephonic employment confirmation is obtained by
the Affiliated Seller.
Beginning in April 1994, the Affiliated Sellers began using an automated
process to assist in making credit decisions on certain residential real estate
loans. A prospective borrower's credit history is assigned a score based on
standard criteria designed to predict the possibility of a default by the
prospective borrower on a mortgage loan. An application from a prospective
borrower whose score indicates a high probability of default may be declined on
the basis of the score, although applications for certain types of mortgage
loans will receive a judgmental review from an underwriter who may override a
decision based on the credit score. An application from a prospective borrower
whose score indicates a low probability of default is subject to less stringent
underwriting guidelines and documentation standards to verify the information in
the application.
Once the employment verification (or confirmation) and the credit report
are received by the underwriter considering the loan application, a
determination is made as to whether the prospective borrower has sufficient
monthly income available to meet the borrower's monthly obligations on the
proposed loan and other expenses related to the residence as well as to meet
other financial obligations and monthly living expenses. The Affiliated Sellers
have established as general lending guidelines that the mortgage payments plus
applicable real property taxes, condominium or homeowner association common
charges, hazard insurance premiums and premiums on any Primary Mortgage
Insurance Policy (as defined herein) generally should not exceed 33% of the
borrower's gross income, and that all monthly payments, including those
mentioned above and other obligations, such as car payments, generally should
not exceed 38% of gross income. However, other credit considerations may cause
an underwriter to depart from these guidelines. The Affiliated Sellers follow
standard exceptions procedures pursuant to which underwriters generally have
delegated authority to approve or recommend the approval of loan applications
when certain lending guidelines are not met, including when the ratios of the
borrower's housing and fixed expenses to gross income exceed 40%. Where there
are two individuals co-signing any mortgage note, the income and payment
obligations of both may be included in the computation. With respect to ARM
Loans with Mortgage Rates that adjust initially five or more years after their
origination and Net 5 Loans, these ratios are calculated using the initial
Mortgage Rates. With respect to all other ARM Loans, these ratios are generally
calculated using the fully-indexed Mortgage Rate.
Prior to final loan approval a prospective borrower generally is expected
to have liquid assets sufficient to cover the down-payment, closing costs and
cash reserves that could be used to pay future housing expenses in a depository
or related account of the borrower. However, the Affiliated Sellers do not
require prospective borrowers to have such liquid assets when they originate
rate and term refinance loans.
An appraisal is made of each property to be financed. The appraisal is
conducted by either a staff appraiser of the applicable Affiliated Seller, or in
some instances, an independent fee appraiser licensed in the jurisdiction where
such property is located. Generally, as part of the loan origination process,
the appraiser personally visits the property and estimates its market value on
the basis of comparable properties and other factors.
The Affiliated Sellers have generally not made one- to four-family mortgage
loans having Loan-to-Value Ratios above 80% unless they have obtained or caused
the borrowers to obtain Primary Mortgage Insurance Policies.
The Mortgaged Properties may be located in states where, in general, a
lender providing credit on a single-family property may not seek a deficiency
judgment against the mortgagor but rather must look solely to the property for
repayment in the event of foreclosure. See "CERTAIN LEGAL ASPECTS OF THE
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<PAGE> 70
MORTGAGE LOANS -- Anti-Deficiency Legislation and Other Limitations on Lenders."
The underwriting standards contained in the Guides applicable to all states
(including anti-deficiency states) require that the value of the property being
financed, as indicated by the appraisal, currently supports and is anticipated
to support in the future the outstanding loan balance, although there can be no
assurance that such value will support the loan balance in the future.
In addition, the Depositor will purchase Mortgage Loans which may not fully
conform to the underwriting standards set forth in the Guides. Certain of the
Mortgage Loans will be purchased either directly or through an affiliate of the
Depositor in negotiated transactions, and such negotiated transactions may be
governed by agreements ("Master Commitments") relating to ongoing purchases of
Mortgage Loans by the Depositor or such affiliate of the Depositor, from
Unaffiliated Sellers who will represent that the Mortgage Loans have been
originated in accordance with underwriting standards agreed to by the Depositor
or such affiliate of the Depositor. The Depositor or an affiliate of the
Depositor will generally review only a sample of the Mortgage Loans in any
delivery of such Mortgage Loans from the related Unaffiliated Seller for credit
quality.
The underwriting standards utilized in negotiated transactions and Master
Commitments with Unaffiliated Sellers may vary substantially from the
underwriting standards set forth in the Guides. Such underwriting standards are
generally intended to provide an underwriter with information to evaluate the
borrower's repayment ability and the adequacy of the Mortgaged Property as
collateral. Due to the variety of underwriting standards and review procedures
that may be applicable to the Mortgage Loans included in any Mortgage Pool, the
related Prospectus Supplement generally will not distinguish among the various
underwriting standards applicable to the Mortgage Loans nor describe any review
for compliance with applicable underwriting standards performed by the Depositor
or an affiliate of the Depositor. Moreover, there can be no assurance that every
Mortgage Loan was originated in conformity with the applicable underwriting
standards in all material respects, or that the quality or performance of
Mortgage Loans underwritten pursuant to varying standards as described above
will be equivalent under all circumstances.
QUALIFICATION OF UNAFFILIATED SELLERS
Unless otherwise specified in the related Prospectus Supplement, each
Unaffiliated Seller will be required to satisfy the qualifications set forth
herein. Each Unaffiliated Seller must be an institution experienced in
originating and servicing Mortgage Loans of the type contained in the related
Mortgage Pool in accordance with accepted practices and prudent guidelines, must
maintain satisfactory facilities to originate and service those Mortgage Loans,
must be a seller/servicer approved by either FNMA or FHLMC and must be a
mortgagee approved by the FHA or an institution the deposit accounts in which
are insured by the FDIC. In addition, each Unaffiliated Seller must satisfy
certain criteria as to financial stability evaluated on a case by case basis by
the Depositor.
REPRESENTATIONS AND WARRANTIES BY SELLERS
Unless otherwise specified in the related Prospectus Supplement, each
Seller will have made representations and warranties in respect of the Mortgage
Loans sold by such Seller to the Depositor which the Depositor will assign to
the related Trust Fund on the date of initial issuance of the related Series of
Certificates. Such representations and warranties generally include, among other
things, that at the time of the sale by the Depositor of each Mortgage Loan to
the applicable Trust Fund: (i) the information set forth in the schedule of
Mortgage Loans is true and correct in all material respects; (ii) title
insurance (or in the case of Mortgaged Properties located in areas where such
policies are generally not available, an attorney's certificate of title) and
any required hazard and primary mortgage insurance were effective at the
origination of each Mortgage Loan, and each policy (or certificate of title)
remains in full force and effect; (iii) the Seller has good title to each such
Mortgage Loan and such Mortgage Loan was subject to no offsets, defenses or
counterclaims except as may be provided under the Relief Act and except to the
extent that any buydown agreement exists for a Buydown Mortgage Loan; (iv) each
Mortgage is a valid first lien on an unencumbered estate in fee simple or
leasehold interest in the Mortgaged Property (subject only to (a) liens for
current real property taxes and special assessments, (b) covenants, conditions
and restrictions, rights of way, easements
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<PAGE> 71
and other matters of public record as of the date of recording of such Mortgage,
such exceptions appearing of record being acceptable to mortgage lending
institutions generally or specifically reflected in the mortgage originator's
appraisal, (c) exceptions set forth in the title insurance policy covering such
Mortgaged Property and (d) other matters to which like properties are commonly
subject which do not materially interfere with the benefits of the security
intended to be provided by the Mortgage); (v) each Mortgaged Property is free
from material damage and in generally good repair, except for ordinary wear and
tear; (vi) there are no delinquent tax or assessment liens against the Mortgaged
Property; (vii) if a Primary Mortgage Insurance Policy is required with respect
to a Mortgage Loan, such Mortgage Loan is the subject of such a policy; (viii)
each Mortgage Loan was made in compliance with all applicable local, state and
federal laws in all material respects; and (ix) that the Mortgage Note and
documents relating to each Mortgage Loan are genuine and that each is the legal,
valid and binding obligation of the maker thereof, subject to certain customary
exceptions.
In the event of a breach of a Seller's representation or warranty that
materially adversely affects the interests of the Certificateholders in a
Mortgage Loan, the related Seller will be obligated to cure such breach or
repurchase or substitute another Mortgage Loan for such Mortgage Loan as
described below. Promptly upon becoming aware of any breach of a representation
or warranty which materially and adversely affects the interests of the
Certificateholders with respect to a Mortgage Loan or Mortgage Loans, the Master
Servicer shall be required to provide notice to the related Seller and request
that such Seller either cure such breach or repurchase or substitute another
Mortgage Loan for such Mortgage Loan. However, there can be no assurance that a
Seller will honor its obligation to cure such breach or repurchase or substitute
another Mortgage Loan for any Mortgage Loan as to which such a breach of a
representation or warranty arises.
If a Seller cannot cure a breach of any representation or warranty made by
it in respect of a Mortgage Loan which materially and adversely affects the
interests of the Certificateholders in such Mortgage Loan within 90 days after
notice from the Master Servicer, such Seller will be obligated to purchase such
Mortgage Loan. The Purchase Price for any such Mortgage Loan will be equal to
the principal balance thereof as of the date of purchase plus accrued and unpaid
interest to the first day of the month following the month of repurchase at the
Pass-Through Rate. Unless otherwise specified in the related Prospectus
Supplement, as to any such Mortgage Loan required to be purchased by the related
Seller as provided above, rather than repurchase the Mortgage Loan, the related
Seller may, at its sole option, remove such Mortgage Loan (a "Deleted Mortgage
Loan") from the Trust Fund and substitute in its place another Mortgage Loan of
like kind (a "Qualified Substitute Mortgage Loan"); however, such substitution
must be effected within 120 days of the date of the initial issuance of the
Certificates with respect to a Trust Fund for which no REMIC election is to be
made. With respect to a Trust Fund for which a REMIC election is to be made,
except as otherwise provided in the Prospectus Supplement relating to a Series
of Certificates, such substitution of a defective Mortgage Loan must be effected
within two years of the date of the initial issuance of the Certificates, and
may not be made if such substitution would cause the Trust Fund to not qualify
as a REMIC or result in a prohibited transaction tax under the Internal Revenue
Code of 1986 (the "Code"). Except as otherwise provided in the related
Prospectus Supplement, any Qualified Substitute Mortgage Loan generally will, on
the date of substitution, (i) have an outstanding principal balance, after
deduction of the principal portion of the monthly payment due in the month of
substitution, not in excess of the outstanding principal balance of the Deleted
Mortgage Loan (the amount of any shortfall to be deposited in a custodial
account (the "Custodial Account") in the month of substitution for distribution
to the Certificateholders), (ii) have a Mortgage Rate and a Net Mortgage Rate
not less than (and not more than one percentage point greater than) the Mortgage
Rate and Net Mortgage Rate, respectively, of the Deleted Mortgage Loan as of the
date of substitution, (iii) have a Loan-to-Value Ratio at the time of
substitution no higher than that of the Deleted Mortgage Loan at the time of
substitution, (iv) have a remaining term to maturity not greater than (and not
more than one year less than) that of the Deleted Mortgage Loan, and (v) comply
with all of the representations and warranties set forth in the related mortgage
loan purchase agreement as of the date of substitution. (Section 2.04) The
related Pooling Agreement may include additional requirements relating to ARM
Loans, Net 5 Loans or other specific types of Mortgage Loans, or additional
provisions relating to meeting the foregoing requirements on an aggregate basis
where a number of substitutions occur contempora-
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<PAGE> 72
neously. This substitution or repurchase obligation constitutes the sole remedy
available to the Certificateholders or the Trustee for any such breach.
RESIDENTIAL MORTGAGE LOAN SERVICING ACTIVITIES
Unless otherwise specified in the Prospectus Supplement, residential
mortgage loans originated by the Affiliated Sellers, or purchased from
Unaffiliated Sellers, including the Mortgage Loans, are serviced currently by
Bank of America NT&SA at its servicing facility located in Cypress, California
(the "Cypress Center") or by Bank of America, FSB at its servicing facility
located in Richmond, Virginia (the "Richmond Center"). On March 31, 1996, the
Cypress Center was servicing approximately 397,000 mortgage loans with an
aggregate principal balance of $46,000,000,000 and the Richmond Center was
servicing approximately 232,000 mortgage loans with an aggregate principal
balance of $20,000,000,000. On February 29, 1996, Bank of America, FSB entered
into an agreement to acquire servicing rights to approximately 184,000 mortgage
loans with an aggregate outstanding principal balance of approximately
$13,600,000,000 from FBS Mortgage Corporation. Pursuant to that agreement, Bank
of America, FSB will begin servicing these mortgages on several dates in 1996.
The Cypress Center and Richmond Center are responsible for answering
customers inquiries, receiving loan payments, reporting to investors,
maintaining hazard insurance or a blanket hazard policy, monitoring payment of
taxes, assessments and, when applicable, Primary Mortgage Insurance Policies,
and all mortgage accounting and record keeping. The Cypress Center and Richmond
Center also are responsible for collection efforts on delinquent residential
mortgage loans and foreclosures thereon. Separate units exist within affiliates
of BankAmerica to manage and dispose of other real estate owned.
Because both Centers service loans for governmental and quasi-governmental
agencies of the U.S. Government, the Centers are regularly examined by either
Bank of America NT&SA's or Bank of America, FSB's internal and external auditors
and periodically by FNMA, FHLMC, GNMA, the Comptroller of the Currency or the
Office of Thrift Supervision ("OTS"), as applicable, and HUD. Certain financial
records of Bank of America NT&SA and Bank of America, FSB relating to their
mortgage servicing activities are reviewed annually by their independent public
accountants.
DELINQUENCY, FORECLOSURE AND LOSS EXPERIENCE
The delinquency, foreclosure and loss experience on the portfolios of one-
to four-family first mortgage loans owned and serviced by each of Bank of
America NT&SA and Bank of America, FSB, respectively, are set forth in the
following tables. The delinquency, foreclosure and loss experience indicated for
Bank of America NT&SA excludes certain loans originated by its private banking
unit. Most of the loans serviced by Bank of America, FSB in 1994 were not
originated by Bank of America, FSB. The portfolios of mortgage loans serviced by
Bank of America NT&SA and Bank of America, FSB include both fixed and adjustable
interest rate mortgage loans, including Buydown Mortgage Loans, loans with
stated maturities of 15 to 40 years and other types of mortgage loans having a
variety of payment characteristics, and includes mortgage loans secured by
mortgaged properties in geographic locations that may not be representative of
the geographic distribution or concentration of the Mortgaged Properties
securing the Mortgage Loans. There can be no assurance that the delinquency,
foreclosure and loss experience set forth below with respect to the portfolio of
one- to four-family first mortgage loans owned by Bank of America NT&SA and
serviced by Bank of America NT&SA and Bank of America, FSB, respectively, will
be similar to the results that may be experienced with respect to the Mortgage
Loans underlying any Series of Certificates. In addition, because Bank of
America, FSB did not begin servicing mortgage loans for BankAmerica until August
31, 1994, the delinquency, foreclosure and loss experience set forth below with
respect to the mortgage loans owned and serviced by Bank of America, FSB should
not be considered representative of its historical experience servicing mortgage
loans similar to the Mortgage Loans or indicative of future servicing
performance.
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<PAGE> 73
DELINQUENCY, FORECLOSURE AND LOSS EXPERIENCE OF BANK OF AMERICA NT&SA
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31, AT OR FOR THE THREE-
---------------------------------------------------------------------------
MONTH PERIOD ENDED
1993 1994 1995 MARCH 31, 1996
----------------------- ----------------------- ----------------------- -----------------------
BY DOLLAR BY DOLLAR BY DOLLAR BY DOLLAR
BY AMOUNT OF BY AMOUNT OF BY AMOUNT OF BY AMOUNT OF
NO. OF LOANS NO. OF LOANS NO. OF LOANS NO. OF LOANS
LOANS (IN MILLIONS) LOANS (IN MILLIONS) LOANS (IN MILLIONS) LOANS (IN MILLIONS)
------- ------------- ------- ------------- ------- ------------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Portfolio........... 173,825 $25,118.5 175,323 $25,513.8 170,017 $25,460.0 167,544 $25,849.5
Average Portfolio
Balance(1).............. 170,520 24,430.7 173,760 25,286.6 175,016 25,777.7 169,600 25,928.9
Period of Delinquency
31 to 59 days........... 2,759 356.6 2,317 299.1 2,673 360.2 2,621 363.4
60 to 89 days........... 687 106.2 652 98.4 776 117.3 753 114.1
90 days or more(2)...... 1,179 243.1 1,017 194.9 876 161.4 825 152.4
------- --------- ------- --------- ------- --------- ------- ---------
Total Delinquent Loans.... 4,625 $ 705.9 3,986 $ 592.4 4,325 $ 638.9 4,199 $ 629.9
Delinquency Ratio......... 2.66% 2.81% 2.27% 2.32% 2.54% 2.51% 2.51% 2.44%
Foreclosures Pending(3)... 956 $ 233.6 693 $ 162.9 1,099 $ 215.7 1,051 $ 206.9
Foreclosure Ratio......... 0.55% 0.93% 0.40% 0.64% 0.65% 0.85% 0.63% 0.80%
Losses(4)................. 608 $ 68.4 975 $ 101.6 1,286 $ 112.6 465 $ 28.5
Loss Ratio(5)............. 0.36% 0.28% 0.56% 0.40% 0.73% 0.44% 1.10% 0.44%
Excess Recovery(6)........ (7) (7) (7) (7) 12 $ 0.3 1 $ 0.1
</TABLE>
- ---------------
(1) Average Portfolio Balance for the period indicated is based on end of month
balances divided by the number of months in the period indicated.
(2) Does not include Foreclosures Pending.
(3) Includes mortgage loans for which foreclosure proceedings had been
instituted and title to which had not been acquired by BankAmerica NT&SA, a
third party or by an insurer at the date indicated.
(4) Losses are the sum of losses less net gains (Excess Recoveries) on all
mortgage loans liquidated during the period indicated. Loss for any mortgage
loan is equal to the difference between (a) the sum of the outstanding
principal balance plus accrued interest, lost interest income accrued at
Bank of America NT&SA's internal reinvestment rate from the date such
mortgage loan became a REO mortgage loan until the date it was liquidated,
Servicing Advances and all liquidation expenses related to such mortgage
loan and (b) all amounts received in connection with the liquidation of the
related mortgaged property. Losses are included in the year in which they
were expensed or written down.
(5) Loss Ratios are computed by dividing the Losses during the period indicated
by the Average Portfolio Balance during such period.
(6) Excess Recovery is calculated only with the respect to defaulted mortgage
loans as to which the liquidation of the related mortgaged property resulted
in recoveries in excess of the sum of the outstanding principal balance plus
accrued interest thereon, Servicing Advances and all liquidation expenses
related to such mortgage loan.
(7) Excess Recovery cannot be computed for the indicated period.
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<PAGE> 74
DELINQUENCY, FORECLOSURE AND LOSS EXPERIENCE OF BANK OF AMERICA, FSB
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31, AT OR FOR THE
--------------------------------------------------- THREE-MONTH PERIOD
ENDED
1994 1995 MARCH 31, 1996
----------------------- ----------------------- -----------------------
BY BY DOLLAR BY BY DOLLAR BY BY DOLLAR
NO. AMOUNT OF NO. AMOUNT OF NO. AMOUNT OF
OF LOANS OF LOANS OF LOANS
LOANS (IN MILLIONS) LOANS (IN MILLIONS) LOANS (IN MILLIONS)
----- ------------- ----- ------------- ----- -------------
<S> <C> <C> <C> <C> <C> <C>
Total Portfolio............. 931 $ 105.8 4,846 $ 875.2 6,094 $ 1,268.9
Average Portfolio
Balance(1)................ 703 78.0 3,206 530.8 5,557 1,100.7
Period of Delinquency
31 to 59 days............. 1 0.1 55 7.4 45 7.6
60 50 89 days............. 1 0.0 3 1.0 5 0.7
90 days or more(2)........ 4 0.3 1 0.3 4 0.7
---- ------ ---- ------ ---- ------
Total Delinquent Loans...... 6 $ 0.4 59 $ 8.6 54 $ 8.9
Delinquency Ratio........... 0.64 % 0.41% 1.22% 0.98% 0.89% 0.70%
Foreclosures Pending(3)..... 0 $ 0.0 2 $ 0.3 3 $ 0.6
Foreclosure Ratio........... 0.00 % 0.00% 0.04% 0.04% 0.05% 0.04%
Losses...................... 0 $ 0 0 $ 0 0 $ 0
Loss Ratio(5)............... 0.00 % 0.00% 0.00% 0.00% 0.00% 0.00%
</TABLE>
- ---------------
(1) Average Portfolio Balance for the period indicated is based on end of month
balances divided by the number of months in the period indicated.
(2) Does not include Foreclosures Pending.
(3) Includes mortgage loans for which foreclosure proceedings had been
instituted and title to which had not been acquired by Bank of America FSB,
a third party or by an insurer at the date indicated.
(4) Losses are the sum of losses less net gains (Excess Recoveries) on all
mortgage loans liquidated during the period indicated. Loss for any mortgage
loan is equal to the difference between (a) the sum of the outstanding
principal balance plus accrued interest, lost interest income accrued at
Bank of America, FSB's internal reinvestment rate from the date such
mortgage loan became a REO mortgage loan until the date it was liquidated,
Servicing Advances and all liquidation expenses related to such mortgage
loan and (b) all amounts received in connection with the liquidation of the
related mortgaged property. Losses are included in the year in which they
were expensed or written down. Excess Recovery is calculated only with the
respect to defaulted mortgage loans as to which the liquidation of the
related mortgaged property resulted in recoveries in excess of the sum of
the outstanding principal balance plus accrued interest thereon, Servicing
Advances and all liquidation expenses related to such mortgage loan.
(5) Loss Ratios are computed by dividing the Losses during the period indicated
by the Average Portfolio Balance during such period.
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<PAGE> 75
DESCRIPTION OF THE CERTIFICATES
GENERAL
Each Series of Certificates will be issued pursuant to a Pooling Agreement,
similar to the form filed as an exhibit to the Registration Statement of which
this Prospectus is a part. Each Pooling Agreement will be filed with the
Securities and Exchange Commission as an exhibit to a Current Report on Form
8-K. The following summaries (together with additional summaries under "THE
POOLING AGREEMENT" below) describe certain provisions relating to the
Certificates common to each Pooling Agreement. References in this Prospectus to
the relevant articles, sections and exhibits of the applicable Pooling Agreement
appear in parenthesis. 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 Agreement for each Trust Fund and the related
Prospectus Supplement. Wherever particular sections or defined terms of the
Pooling Agreement are referred to herein, such sections or defined terms are
thereby incorporated herein by reference.
Unless otherwise specified in the Prospectus Supplement with respect to a
Series, Certificates of each Series covered by a particular Pooling Agreement
will evidence specified beneficial ownership interests in a separate Trust Fund
created pursuant to such Pooling Agreement. (Article I and Sections 5.01 and
5.02) A Trust Fund will consist of, to the extent provided in the Pooling
Agreement: (i) such Mortgage Loans (and the related mortgage documents) or
interests therein underlying a particular Series of Certificates as from time to
time are subject to the Pooling Agreement (exclusive of any Retained Yield
(described below)); (ii) such assets including, without limitation, all payments
and collections in respect of the Mortgage Loans due after the related Cut-off
Date, as from time to time are identified as deposited in respect thereof in the
Custodial Account and in the related Certificate Account; (iii) property
acquired by foreclosure of such Mortgage Loans or deed in lieu of foreclosure;
(iv) hazard insurance policies and Primary Mortgage Insurance Policies, if any,
and certain proceeds thereof; and (v) any combination, as and to the extent
specified in the related Prospectus Supplement, of a Letter of Credit, Mortgage
Pool Insurance Policy, Special Hazard Insurance Policy, Certificate Insurance
Policy, Bankruptcy Bond or other type of credit enhancement as described under
"DESCRIPTION OF CREDIT ENHANCEMENTS." To the extent that any Trust Fund includes
certificates of interest or participations in Mortgage Loans, the related
Prospectus Supplement will describe the material terms and conditions of such
certificates or participations. (Article I)
Each Series of Certificates may consist of any one or a combination of the
following: (i) a single Class of Certificates; (ii) two or more Classes of
Certificates, one or more Classes of which will be senior ("Senior
Certificates") in right of payment to one or more of the other Classes
("Subordinate Certificates"), and as to which certain Classes of Senior (or
Subordinate) Certificates may be senior to other Classes of Senior (or
Subordinate) Certificates, as described in the respective Prospectus Supplement
(any such Series, a "Senior/Subordinate Series"); (iii) two or more Classes of
Certificates, one or more Classes ("Strip Certificates") of which will be
entitled to (a) principal distributions, with disproportionate, nominal or no
interest distributions or (b) interest distributions, with disproportionate,
nominal or no principal distributions; (iv) two or more Classes of Certificates
which differ as to the timing, sequential order, rate, pass-through rate or
amount of distributions of principal or interest or both, or as to which
distributions of principal or interest or both on any Class may be made upon the
occurrence of specified events, in accordance with a schedule or formula
(including "planned amortization Classes" and "targeted amortization Classes"),
or on the basis of collections from designated portions of the Mortgage Pool,
which Series may include one or more Classes of Certificates ("Accrual
Certificates") with respect to which certain accrued interest will not be
distributed but rather will be added to the principal balance thereof on each
Distribution Date for the period described in the related Prospectus Supplement;
or (v) other types of Classes of Certificates, as described in the related
Prospectus Supplement. Credit support for each Series of Certificates will be
provided by a Mortgage Pool Insurance Policy, Special Hazard Insurance Policy,
Certificate Insurance Policy, Bankruptcy Bond, Letter of Credit, Reserve Fund or
other credit enhancement as described under "DESCRIPTION OF CREDIT
ENHANCEMENTS," by the subordination of one or more Classes of Certificates as
described under "SUBORDINATION" or by any combination of the foregoing, as
specified in the Prospectus Supplement applicable for such Series.
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If so specified in the Prospectus Supplement relating to a Series of
Certificates, one or more elections may be made to treat the related Trust Fund,
or designated portion thereof, as a REMIC. If such an election is made with
respect to a Series of Certificates, one of the Classes of Certificates will be
designated as evidencing the sole Class of "residual interests" in each related
REMIC, as defined in the Code; alternatively, a separate Class of ownership
interests will evidence such residual interests. All other Classes of
Certificates in such Series will constitute "regular interests" in the related
REMIC, as defined in the Code and will be designated as such. As to each Series,
all Certificates offered hereby will be rated in one of the four highest rating
categories by one or more Rating Agencies. As to each Series of Certificates as
to which a REMIC election is to be made, the Depositor, or such other person
specified in the related Prospectus Supplement, will be obligated to take
certain specified actions required in order to comply with applicable laws and
regulations.
FORM OF CERTIFICATES
Unless otherwise specified in the related Prospectus Supplement, the
Certificates of each Series will be issued as physical certificates in fully
registered form only in the denominations specified in the related Prospectus
Supplement, and will be transferable and exchangeable at the corporate trust
office of the Certificate Registrar named in the related Prospectus Supplement.
(Section 5.02) No service charge will be made for any registration of exchange
or transfer of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge. (Section 5.02) The
term "Certificateholder" or "Holder" as used herein refers to the entity whose
name appears on the records of the Certificate Registrar (or, if applicable, the
Transfer Agent) as the registered holder thereof, except as otherwise indicated
in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, one or more Classes
of Certificates of a Series ("Book-Entry Certificates") may be initially
represented by one or more certificates registered in the name of The Depository
Trust Company ("DTC") or other securities depository and be available only in
the form of book-entries. Any Book-Entry Certificates will initially be
registered in the name of Cede & Co., the nominee of DTC. Certificateholders may
also hold Certificates of a Series through CEDEL or Euroclear (in Europe), if
they are participants in such systems or indirectly through organizations that
are participants in such systems. CEDEL and Euroclear will hold omnibus
positions on behalf of their participants through customers' certificates
accounts in CEDEL's and Euroclear's names on the books of their respective
Depositaries which in turn will hold such positions in customers' certificates
accounts in the Depositaries' names on the books of DTC. Citibank, N.A.
("Citibank"), will act as depositary for CEDEL and Morgan Guaranty Trust Company
of New York ("Morgan") will act as depositary for Euroclear (in such capacities,
the "Depositaries").
Transfers between DTC participants will occur in the ordinary way in
accordance with DTC rules. Transfers between CEDEL Participants and Euroclear
Participants will occur in the ordinary way in accordance with their applicable
rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL or
Euroclear Participants, on the other, will be effected in DTC in accordance with
DTC rules on behalf of the relevant European international clearing system by
its Depositary; however, such cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in such system in accordance with its rules an procedures and
within its established deadlines (European time). The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its Depositary to take action to effect
final settlement on its behalf by delivering or receiving certificates in DTC,
and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. CEDEL Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of certificates received in CEDEL
or Euroclear as a result of a transaction with a DTC participant will be made
during subsequent certificates settlement processing and dated the business day
following the DTC settlement date. Such credits or any transactions in such
certificates settled during such processing will be reported to the relevant
Euroclear or CEDEL participant on such business day. Cash received in CEDEL or
Euroclear as a result of sales of certificates by or through a CEDEL
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Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
CEDEL or Euroclear cash account only as of the business day following settlement
in DTC. For information with respect to tax documentation procedures relating to
the Certificates, see "CERTAIN FEDERAL INCOME TAX CONSEQUENCES -- Prohibited
Transactions and Other Possible REMIC Taxes -- Foreign Investors in REMIC
Certificates" herein.
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 the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. DTC accepts securities for deposit
from its participating organizations ("Participants") and facilitates the
clearance and settlement of securities transactions between Participants in such
securities through electronic book-entry changes in accounts of Participants,
thereby eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks and trust companies and clearing
corporations and may include certain other organizations. Indirect access to the
DTC system is also available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants").
Beneficial owners ("Owners") that are not Participants but desire to
purchase, sell or otherwise transfer ownership of Book-Entry Certificates may do
so only through Participants (unless and until Definitive Certificates, as
defined below, are issued). In addition, Owners will receive all distributions
of principal of, and interest on, the Book-Entry Certificates from the Trustee
or any Trustee, as the case may be, through DTC and Participants. Owners will
not receive or be entitled to receive certificates representing their respective
interests in the Book-Entry Certificates, except under the limited circumstances
described below.
Unless and until Definitive Certificates (as defined below) are issued, it
is anticipated that the only "holder" of Book-Entry Certificates of any Series
will be Cede & Co., as nominee of DTC. Owners will only be permitted to exercise
the rights of holders indirectly through Participants and DTC.
While any Book-Entry Certificates of a Series are outstanding (except under
the circumstances described below), under the rules, regulations and procedures
creating and affecting DTC and its operations (the "Rules"), DTC is required to
make book-entry transfers among Participants on whose behalf it acts with
respect to the Book-Entry Certificates and is required to receive and transmit
distributions of principal of, and interest on, the Book-Entry Certificates.
Participants with whom Owners have accounts with respect to Book-Entry
Certificates are similarly required to make book-entry transfers and receive and
transmit such distributions on behalf of their respective Owners. Accordingly,
although Owners will not possess certificates, the Rules provide a mechanism by
which Owners will receive distributions and will be able to transfer their
interests.
Unless and until Definitive Certificates are issued, Owners who are not
Participants may transfer ownership of Book-Entry Certificates of a Series only
through Participants by instructing such Participants to transfer Book-Entry
Certificates, by book-entry transfer, through DTC for the account of the
purchasers of such Book-Entry Certificates, which account is maintained with
their respective Participants. Under the Rules and in accordance with DTC's
normal procedures, transfers of ownership of Book-Entry Certificates will be
executed through DTC and the accounts of the respective Participants at DTC will
be debited and credited. Similarly, the respective Participants will make debits
or credits, as the case may be, on their records on behalf of the selling and
purchasing Owners.
Book-Entry Certificates of a Series will be issued in registered form to
Owners, or their nominees, rather than to DTC (such Book-Entry Certificates
being referred to herein as "Definitive Certificates") only under the
circumstances provided in the related Pooling Agreement, which generally will
include, except if otherwise provided therein, if (i) the Depositor advises the
Trustee in writing that DTC is no longer willing or able to discharge properly
its responsibilities as nominee and depository with respect to the Book-Entry
Certificates of such Series and the Trustee and the Depositor are unable to
locate a qualified successor, (ii) the Depositor, at its sole option, elects to
terminate the book-entry system through DTC or (iii) after the occurrence of an
event of default under the Pooling Agreement, a majority of the aggregate
Percentage Interest of any Class of
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Certificates of such Series advises DTC in writing that the continuation of a
book-entry system through DTC (or a successor thereto) to the exclusion of any
physical certificates being issued to Owners is no longer in the best interests
of Owners of such Class of Certificates. Upon issuance of Definitive
Certificates of a Series to Owners, such Book-Entry Certificates will be
transferable directly (and not exclusively on a book-entry basis) and registered
holders will deal directly with the Trustee with respect to transfers, notices
and distributions.
DTC has advised the Master Servicer and the Depositor that, unless and
until Definitive Certificates are issued, DTC will take any action permitted to
be taken by a holder only at the direction of one or more Participants to whose
DTC accounts the Certificates are credited. DTC has advised the Master Servicer
and the Depositor that DTC will take such action with respect to any Percentage
Interests of the Book-Entry Certificates of a Series only at the direction of
and on behalf of such Participants with respect to such Percentage Interests of
the Book-Entry Certificates. DTC may take actions, at the direction of the
related Participants, with respect to some Book-Entry Certificates which
conflict with actions taken with respect to other Book-Entry Certificates.
Centrale de Livraison de Valeurs Mobilieres S.A. ("CEDEL") is incorporated
under the laws of Luxembourg as a professional depository. CEDEL holds
securities for its participating organizations ("CEDEL Participants") and
facilitates the clearance and settlement of securities transactions between
CEDEL Participants through electronic book-entry changes in accounts of CEDEL
Participants, thereby eliminating the need for physical movement of securities.
Transactions may be settled in CEDEL in any of 28 currencies, including United
States dollars. CEDEL provides to its Participants, among other things, services
for safekeeping, administration, clearance and settlement of internationally
traded securities and securities lending and borrowing. CEDEL interfaces with
domestic markets in several countries. As a professional depository, CEDEL is
subject to regulation by the Luxembourg Monetary Institute. CEDEL Participants
are recognized financial institutions around the world including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations and may include any underwriters, agents or
dealers with respect to a Series of Certificates offered hereby. Indirect access
to CEDEL is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a CEDEL
Participant, either directly or indirectly.
The Euroclear System ("Euroclear") was created in 1968 to hold securities
for participants of the Euroclear System ("Euroclear Participants") and to clear
and settle transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the need for
physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. Transactions may now be settled in any of 27
currencies, including United States dollars. The Euroclear System includes
various other services, including securities lending and borrowing, and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. The Euroclear
System is operated by Morgan Guaranty Trust Company of New York, Brussels,
Belgium office (the "Euroclear Operator"), under contract with Euroclear
Clearance System S.C., a Belgian cooperative corporation (the "Cooperative").
All operations are conducted by the Euroclear Operator, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with the
Euroclear Operator, not the Cooperative. The Cooperative establishes policy for
Euroclear on behalf of Euroclear Participants. Euroclear Participants include
banks (including central banks), securities brokers and dealers with respect to
a Series of Certificates offered hereby. Indirect access to Euroclear is also
available to other firms that clear through or maintain a custodial relationship
with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation that is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Certificates clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of Euroclear and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
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transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear and receipts of payments with respect to securities in the
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions with respect to Certificates held through CEDEL or Euroclear
will be credited to the cash accounts of CEDEL Participants or Euroclear
Participants in accordance with the relevant systems' rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" herein. CEDEL or the Euroclear
Operator, as the case may be, will take any other action permitted to be taken
by a Certificateholder under the Pooling Agreement or the relevant Supplement on
behalf of a CEDEL Participant or Euroclear Participant only in accordance with
its relevant rules and procedures and subject to its Depositary's ability to
effect such actions on its behalf through DTC.
ASSIGNMENT OF MORTGAGE LOANS
At the time of issuance of a Series of Certificates, the Depositor will
cause the Mortgage Loans being included in the related Trust Fund to be assigned
to the Trustee (or its nominee) together with, unless otherwise specified in the
related Prospectus Supplement, all principal and interest received on or with
respect to such Mortgage Loans after the Cut-off Date, other than principal and
interest due on or before the Cut-off Date. If specified in the related
Prospectus Supplement, the Depositor or a Seller may retain the Retained Yield,
if any, for itself or transfer the same to others. (Sections 2.01 and 3.10) The
Trustee will, concurrently with such assignment, deliver a Series of
Certificates to the Depositor in exchange for the Mortgage Loans. (Section 2.05)
Each Mortgage Loan will be identified in a schedule appearing as an exhibit to
the related Pooling Agreement. Such schedule will include, among other things,
information as to the principal balance of each Mortgage Loans as of the Cut-off
Date, as well as information respecting the Mortgage Rate, the currently
scheduled monthly payment of principal and interest, the maturity of the
Mortgage Note and the Loan-to-Value Ratio at origination or modification
(without regard to any secondary financing). (Article I)
In addition, the Depositor will, as to each Mortgage Loan, deliver to the
Trustee (or to the custodian described below) the Mortgage Note (and any
modification or amendment thereto) endorsed without recourse either in blank or
to the order of the Trustee (or its nominee), the Mortgage with evidence of
recording indicated thereon (except for any Mortgage not returned from the
public recording office) an assignment in recordable form of the Mortgage and,
if applicable, any riders or modifications to such Mortgage Note and Mortgage,
together with certain other documents at such times as set forth in the related
Pooling Agreement. Such assignments may be blanket assignments covering
Mortgages secured by Mortgaged Properties located in the same county, if
permitted by law. In the event that, with respect to any Mortgage Loan, the
Depositor cannot deliver the Mortgage or any assignment with evidence of
recording thereon concurrently with the execution and delivery of the related
Pooling Agreement because of a delay caused by the public recording office, the
Depositor will deliver or cause to be delivered to the Trustee or the custodian
a true and correct photocopy of such Mortgage or assignment. The Depositor will
deliver or cause to be delivered to the Trustee or the custodian such Mortgage
or assignment with evidence of recording indicated thereon after receipt thereof
from the public recording office or from the related Seller. Assignments of the
Mortgage Loans to the Trustee (or its nominee) will be recorded in the
appropriate public recording office, except in states where, in the opinion of
counsel acceptable to the Trustee, such recording is not required to protect the
Trustee's interests in the Mortgage Loan against the claim of any subsequent
transferee or any successor to or creditor of the Depositor or the originator of
such Mortgage Loan, or except as otherwise specified in the related Prospectus
Supplement as to any Series of Certificates. (Section 2.01)
The Trustee (or the custodian hereinafter referred to) will hold such
documents in trust for the benefit of the Certificateholders, and generally will
review such documents within 45 days after receipt thereof in the case of
documents delivered concurrently with the execution and delivery of the related
Pooling Agreement, and within the time period specified in the related Pooling
Agreement in the case of all other documents delivered. Unless otherwise
specified in the related Prospectus Supplement, if any such document is found to
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be missing or defective in any material respect, the Trustee (or such custodian)
shall promptly so notify the Master Servicer and the Depositor, the former of
which shall notify the related Seller. If the Seller does not cure the omission
or defect within 60 days after notice is given to the Master Servicer, the
Seller will be obligated to purchase within 90 days of such notice the related
Mortgage Loan from the Trustee at its Purchase Price (or, unless otherwise
specified in the related Prospectus Supplement, will be permitted to substitute
for such Mortgage Loan under the conditions specified herein and in the related
Prospectus Supplement). The Master Servicer will be obligated to enforce this
obligation of the Seller to the extent described above under "MORTGAGE LOAN
PROGRAM -- Representations and Warranties by Sellers" but subject to the
provisions described below under "-- Realization Upon Defaulted Mortgage Loans."
There can be no assurance that the applicable Seller will fulfill its obligation
to purchase any Mortgage Loan as described above. Neither the Master Servicer
nor the Depositor will be obligated to purchase or substitute for such Mortgage
Loan if the Seller defaults on its obligation to do so. Unless otherwise
specified in the related Prospectus Supplement, this obligation to purchase or
substitute for any such Mortgage Loan constitutes the sole remedy available to
the Certificateholders or the Trustee for omission of, or a material defect in,
a constituent document. Any Mortgage Loan not so purchased or substituted for
shall remain in the related Trust Fund.
The Trustee will be authorized at any time to appoint one or more
custodians pursuant to a custodial agreement to hold title to the Mortgage
Loans, to maintain possession of and, if applicable, to review the documents
relating to the Mortgage Loans as the agent of the Trustee. The identity of any
such custodian to be appointed on the date of initial issuance of the
Certificates will be set forth in the related Prospectus Supplement. Unless
otherwise specified in the Prospectus Supplement related to a Series of
Certificates, such custodian may not be an affiliate of the Depositor or the
Master Servicer. (Section 8.11)
If specified in the Prospectus Supplement related to a Series of
Certificates, during the period that any Class of Certificates of that Series
are outstanding and so long as the ratings of the long-term senior unsecured
debt of BankAmerica Corporation satisfy the rating conditions set forth in the
Prospectus Supplement, the Master Servicer identified in the Prospectus
Supplement will hold the original documentation relating to each Mortgage Loan,
including the related Mortgage Note and Mortgage (such original documentation,
the "Mortgage File"), as custodian and agent for the Trustee. If BankAmerica's
long-term senior unsecured debt rating does not satisfy the above-described
conditions, the Mortgage Files will be delivered to the Trustee or an
independent custodian on behalf of the Trustee within 90 days of the date such
conditions are not satisfied. Under the related Pooling Agreement, the Trustee
will be appointed attorney-in-fact for the Depositor with power to prepare,
execute and record assignments of the Mortgages in the event that the Depositor
fails to do so on a timely basis. See "RISK FACTORS -- Creditors' Rights and
Bankruptcy Considerations" in the applicable Prospectus Supplement for a
description of the risks to Certificateholders with respect to any such Series.
Pursuant to each Pooling Agreement, the Master Servicer, either directly or
through Subservicers, will service and administer the Mortgage Loans assigned to
the Trustee as more fully set forth below.
RETAINED YIELD
For certain Series of Certificates, the Depositor or a Seller may retain a
portion of the interest payable on each Mortgage Loan (the "Retained Yield").
The Retained Yield will either be set as a fixed rate or will be calculated by
subtracting the Master Servicing Fee and the Pass-Through Rate from the Mortgage
Rate. Unless otherwise specified in the applicable Prospectus Supplement, any
such Retained Yield and any earnings from reinvestments thereof will not be part
of the Trust Fund. The Depositor or the Seller, as the case may be, may at its
option transfer to a third party all or a portion of the Retained Yield for a
Series of Certificates.
PAYMENTS ON MORTGAGE LOANS; DEPOSITS TO CERTIFICATE ACCOUNT
The Master Servicer will deposit or will cause to be deposited into the
Custodial Account on a daily basis certain payments and collections received by
it subsequent to the Cut-off Date (other than payments due on
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or before the Cut-off Date), as specifically set forth in the related Pooling
Agreement, which generally will include the following except as otherwise
provided therein:
(i) all payments on account of principal, including principal payments
received in advance of the date on which the related monthly payment is due
(the "Due Date") ("Principal Prepayments"), on the Mortgage Loans
comprising a Trust Fund;
(ii) all payments on account of interest on the Mortgage Loans
comprising such Trust Fund, net of the portion of each payment thereof
retained by the Master Servicer or any Subservicer, if any, as its
servicing or other compensation;
(iii) all amounts (net of unreimbursed liquidation expenses and
insured expenses incurred, and unreimbursed Servicing Advances made, by any
related Subservicer) received and retained in connection with the
liquidation of any defaulted Mortgage Loan, by foreclosure or otherwise
("Liquidation Proceeds"), including all proceeds of any Special Hazard
Insurance Policy, Bankruptcy Bond, Mortgage Pool Insurance Policy,
Certificate Insurance Policy, Primary Mortgage Insurance Policy and any
title, hazard or other insurance policy covering any Mortgage Loan in such
Mortgage Pool (together with any payments under any Letter of Credit,
"Insurance Proceeds") or proceeds from any alternative arrangements
established in lieu of any such insurance and described in the applicable
Prospectus Supplement, other than proceeds to be applied to the restoration
of the related property or released to the Mortgagor in accordance with the
Master Servicer's normal servicing procedures;
(iv) any Buydown Funds (and, if applicable, investment earnings
thereon) required to be paid to Certificateholders, as described below;
(v) all proceeds of any Mortgage Loan in such Trust Fund purchased
(or, in the case of a substitution, certain amounts representing a
principal adjustment) by the Depositor, any Seller or any other person
pursuant to the terms of the Pooling Agreement. See "MORTGAGE LOAN
PROGRAM -- Representations and Warranties by Sellers" and "-- Assignment of
Mortgage Loans" above;
(vi) any amount required to be deposited by the Master Servicer in
connection with losses realized on investments of funds held in the
Custodial Account, as described below; and
(vii) any amounts required to be transferred from the Certificate
Account to the Custodial Account.
In addition to the Custodial Account, the Master Servicer will establish
and maintain, in the name of the Trustee for the benefit of the holders of each
Series of Certificates, an account for the disbursement of payments on the
Mortgage Loans evidenced by each Series of Certificates (the "Certificate
Account"). Both the Custodial Account and the Certificate Account must be either
(i) maintained with a depository institution whose debt obligations at the time
of any deposit therein are rated by the Rating Agency or Agencies that rated one
or more Classes of Certificates of the related Series not less than a specified
level comparable to the rating category of such Certificates, (ii) an account or
accounts the deposits in which are fully insured to the limits established by
the FDIC, provided that any deposits not so insured shall be otherwise
maintained such that, as evidenced by an opinion of counsel, the
Certificateholders have a claim with respect to the funds in such accounts or a
perfected first priority security interest in any collateral securing such funds
that is superior to the claims of any other depositors or creditors of the
depository institution with which such accounts are maintained, (iii) in the
case of the Certificate Account, a trust account or accounts maintained at the
Trustee, or (iv) such other account or accounts acceptable to the Rating Agency
or Agencies that rated one or more Classes of Certificates of such Series (an
"Eligible Account"). The collateral that is eligible to secure amounts in an
Eligible Account is limited to certain permitted investments, which are
generally limited to United States government securities and other investments
that are rated, at the time of acquisition, in one of the categories permitted
by the related Pooling Agreement ("Permitted Investments"). (Article I and
Section 3.07) A Certificate Account may be maintained as an interest-bearing or
a non-interest-bearing account, or funds therein may be invested in Permitted
Investments as described below. The Custodial Account may contain funds relating
to more than one Series of Mortgage Pass-Through Certificates as well as
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payments received on other mortgage loans serviced or master serviced by the
Master Servicer that have been deposited into the Custodial Account.
Unless otherwise set forth in the related Prospectus Supplement, not later
than the business day preceding each Distribution Date (the "Certificate Account
Deposit Date"), the Master Servicer will withdraw from the Custodial Account and
deposit into the applicable Certificate Account, in immediately available funds,
the amount to be distributed therefrom to Certificateholders on such
Distribution Date. The Master Servicer or the Trustee will also deposit or cause
to be deposited into the Certificate Account the amount of any advances made by
the Master Servicer as described herein under "Advances," any payments under any
Letter of Credit, any amounts required to be transferred to the Certificate
Account from a Reserve Fund, as described under "Credit Enhancements" below, any
amounts required to be paid by the Master Servicer out of its own funds due to
the operation of a deductible clause in any blanket policy maintained by the
Master Servicer to cover hazard losses on the Mortgage Loans as described under
"PRIMARY MORTGAGE INSURANCE, HAZARD INSURANCE; CLAIMS THEREUNDER" below and any
other amounts as specifically set forth in the related Pooling Agreement.
Unless otherwise specified in the related Prospectus Supplement, the
portion of any payment received by the Master Servicer in respect of a Mortgage
Loan that is allocable to Retained Yield will generally be deposited into the
Custodial Account, but will not be deposited in the Certificate Account for the
related Series of Certificates and will be distributed as provided in the
related Pooling Agreement.
Funds on deposit in the Custodial Account may be invested in Permitted
Investments maturing in general not later than the business day preceding the
next Distribution Date and funds on deposit in the related Certificate Account
may be invested in Permitted Investments maturing, in general, no later than the
Distribution Date. Unless otherwise specified in the related Prospectus
Supplement, all income and gain realized from any such investment will be for
the account of the Master Servicer. The amount of any loss incurred in
connection with any such investment must be deposited in the Custodial Account
or in the Certificate Account, as the case may be, by the Master Servicer out of
its own funds upon realization of such loss. (Sections 3.07 and 4.01).
With respect to each Buydown Mortgage Loan, the Master Servicer will
deposit the related Buydown Funds provided to it in a Buydown Account which will
comply with the requirements set forth herein with respect to a Custodial
Account. Unless otherwise specified in the related Prospectus Supplement, the
terms of all Buydown Mortgage Loans provide for the contribution of Buydown
Funds in an amount equal to or exceeding either (i) the total payments to be
made from such funds pursuant to the related buydown plan or (ii) if such
Buydown Funds are to be deposited on a discounted basis, that amount of Buydown
Funds which, together with investment earnings thereon at a rate that will
support the scheduled level of payments due under the Buydown Mortgage Loan.
Neither the Master Servicer nor the Depositor will be obligated to add to any
such discounted Buydown Funds any of its own funds should investment earnings
prove insufficient to maintain the scheduled level of payments. To the extent
that any such insufficiency is not recoverable from the Mortgagor or, in an
appropriate case, from the Seller, distributions to Certificateholders may be
affected. With respect to each Buydown Mortgage Loan, the Master Servicer will
withdraw from the Buydown Account and remit to the Custodial Account on or
before the date specified in the Subservicing Agreement described above the
amount, if any, of the Buydown Funds (and, if applicable, investment earnings
thereon) for each Buydown Mortgage Loan that, when added to the amount due from
the Mortgagor on such Buydown Mortgage Loan, equals the full monthly payment
which would be due on the Buydown Mortgage Loan if it were not subject to the
buydown plan. The Buydown Funds will in no event be a part of the related Trust
Fund.
If the Mortgagor on a Buydown Mortgage Loan prepays such Mortgage Loan in
its entirety during the Buydown Period, the Master Servicer will withdraw from
the Buydown Account and remit to the Mortgagor or such other designated party in
accordance with the related buydown plan any Buydown Funds remaining in the
Buydown Account. Generally, if a prepayment by a Mortgagor during the Buydown
Period together with Buydown Funds will result in full prepayment of a Buydown
Mortgage Loan, the Master Servicer will be required to withdraw from the Buydown
Account and deposit in the Custodial Account the Buydown Funds and investment
earnings thereon, if any, which together with such prepayment will result in a
prepayment in
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full. Any Buydown Funds so remitted to the Master Servicer in connection with a
prepayment described in the preceding sentence will be deemed to reduce the
amount that would be required to be paid by the Mortgagor to repay fully the
related Mortgage Loan if the Mortgage Loan were not subject to the buydown plan.
Any investment earnings remaining in the Buydown Account after prepayment or
after termination of the Buydown Period will be remitted to the related
Mortgagor or such other designated party pursuant to the agreement relating to
each Buydown Mortgage Loan (the "Buydown Agreement"). If the Mortgagor defaults
during the Buydown Period with respect to a Buydown Mortgage Loan and the
property securing such Buydown Mortgage Loan is sold in liquidation (either by
the Master Servicer, the Primary Mortgage Insurer, the insurer under the
Mortgage Pool Insurance Policy (the "Pool Insurer") or any other insurer), the
Master Servicer will withdraw from the Buydown Account the Buydown Funds and all
investment earnings thereon, if any, and deposit the same in the Custodial
Account or pay the same to the Primary Mortgage Insurer or the Pool Insurer if
the Mortgaged Property is transferred to such insurer and such insurer pays all
of the loss incurred in respect of such default.
WITHDRAWALS FROM THE CUSTODIAL ACCOUNT
The Master Servicer may, from time to time, make withdrawals from the
Custodial Account for certain purposes, as specifically set forth in the related
Pooling Agreement, which generally will include the following except as
otherwise provided therein:
(i) to make deposits to the Certificate Account in the amounts and in
the manner provided in the Pooling Agreement and described in "Payments on
Mortgage Loans; Deposits to Certificate Account";
(ii) to reimburse itself or any Subservicer for Advances, or for
amounts advanced in respect of taxes, insurance premiums or similar
expenses ("Servicing Advances") as to any Mortgaged Property, out of late
payments or collections on the related Mortgage Loan with respect to which
such Advances or Servicing Advances were made;
(iii) to pay to itself or any Subservicer unpaid Servicing Fees and
Subservicing Fees, out of payments or collections of interest on each
Mortgage Loan;
(iv) to pay to itself as additional servicing compensation any
investment income on funds deposited in the Custodial Account, and, if so
provided in the Pooling Agreement, any profits realized upon disposition of
a Mortgaged Property acquired by deed in lieu of foreclosure or otherwise
allowed under the Pooling Agreement;
(v) to pay to the Seller all amounts received with respect to each
Mortgage Loan repurchased pursuant to the terms of the Pooling Agreement
and not required to be distributed as of the date on which the related
Purchase Price is determined;
(vi) to pay the Depositor or the Seller, as applicable, or its
assignee all amounts constituting Retained Yield, if any, out of
collections or payments which represent interest on each Mortgage Loan
(including any Mortgage Loan as to which title to the underlying Mortgaged
Property was acquired);
(vii) to reimburse itself or any Subservicer for any Advance or
Servicing Advance previously made which the Master Servicer has determined
to not be ultimately recoverable from Liquidation Proceeds, Insurance
Proceeds or otherwise (a "Nonrecoverable Advance"), subject, in the case of
a Senior/Subordinate Series, to certain limitations set forth in the
Pooling Agreement as described in the related Prospectus Supplement;
(viii) to reimburse itself or the Depositor for certain other expenses
incurred for which it or the Depositor is entitled to reimbursement or
against which it or the Depositor is indemnified pursuant to the Pooling
Agreement; and
(ix) to clear the Custodial Account of amounts relating to the
corresponding Mortgage Loans in connection with the termination of the
Trust Fund pursuant to the Pooling Agreement, as described in "THE POOLING
AGREEMENT -- Termination; Retirement of Certificates." (Section 3.10)
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DISTRIBUTIONS
Beginning on the Distribution Date in the month next succeeding the month
in which the Cut-off Date occurs (or such other date as may be set forth in the
related Prospectus Supplement) for a Series of Certificates, distributions of
principal and interest (or, where applicable, of principal only or interest
only) on each Class of Certificates entitled thereto will be made either by the
Trustee, the Master Servicer acting on behalf of the Trustee or a paying agent
appointed by the Trustee (the "Paying Agent"), to the persons who are registered
as the Holders of such Certificates at the close of business on the last
business day of the preceding month (the "Record Date") in proportion to their
respective Percentage Interests. Unless otherwise specified in the related
Prospectus Supplement, interest which accrues and is not payable on a Class of
Certificates will be added to the principal balance of each Certificate of such
Class in proportion to its Percentage Interest. The undivided percentage
interest (the "Percentage Interest") represented by a Certificate of a
particular Class will be equal to the percentage obtained by dividing the
initial principal balance or notional amount of such Certificate by the
aggregate initial amount or notional balance of all the Certificates of such
Class. Distributions will be made in immediately available funds (by wire
transfer or otherwise) to the account of a Certificateholder at a bank or other
entity having appropriate facilities therefor, if such Certificateholder has so
notified the Trustee, the Master Servicer or the Paying Agent, as the case may
be, and the applicable Pooling Agreement provides for such form of payment, or
by check mailed to the address of the person entitled thereto as it appears on
the Certificate Register; provided, however, that the final distribution in
retirement of the Certificates will be made only upon presentation and surrender
of the Certificates at the office or agency of the Trustee specified in the
notice to Certificateholders of such final distribution. (Article I and Sections
4.01 and 9.01)
PRINCIPAL AND INTEREST ON THE CERTIFICATES
The method of determining, and the amount of, distributions of principal
and interest (or, where applicable, of principal only or interest only) on a
particular Series of Certificates will be described in the related Prospectus
Supplement. Distributions of interest on each Class of Certificates will be made
prior to distributions of principal thereon. Each Class of Certificates (other
than certain Classes of Strip Certificates) may have a different Pass-Through
Rate, which may be a fixed, variable or adjustable Pass-Through Rate, or any
combination of two or more such Pass-Through Rates. The related Prospectus
Supplement will specify the Pass-Through Rate or Rates for each Class, or the
initial Pass-Through Rate or Rates and the method for determining the
Pass-Through Rate or Rates. If so specified in the related Prospectus
Supplement, interest on any Class of Certificates for any Distribution Date may
be limited to the extent of available funds for such Distribution Date. Unless
otherwise specified in the related Prospectus Supplement, interest on the
Certificates will be calculated on the basis of a 360-day year consisting of
twelve 30-day months.
On each Distribution Date for a Series of Certificates, the Trustee or the
Master Servicer on behalf of the Trustee will distribute or cause the Paying
Agent to distribute, as the case may be, to each holder of record on the Record
Date of a Class of Certificates, an amount equal to the Percentage Interest
represented by the Certificate held by such holder multiplied by such Class's
Distribution Amount. The Distribution Amount for a Class of Certificates for any
Distribution Date will be the portion, if any, of the Principal Distribution
Amount (as defined in the related Prospectus Supplement) allocable to such Class
for such Distribution Date, as described in the related Prospectus Supplement,
plus, if such Class is entitled to payments of interest on such Distribution
Date, one month's interest at the applicable Pass-Through Rate on the principal
balance or notional balance of such Class specified in the applicable Prospectus
Supplement, less certain interest shortfalls, as specified in the Prospectus
Supplement, which generally will include (i) any Deferred Interest added to the
principal balance of the Mortgage Loans and/or the outstanding balance of one or
more Classes of Certificates on the related Due Date, (ii) any other interest
shortfalls (including, without limitation, shortfalls resulting from application
of the Relief Act or similar legislation or regulations as in effect from time
to time) allocable to Certificateholders which are not covered by advances or
the applicable credit enhancement and (iii) unless otherwise specified in the
related Prospectus Supplement, shortfalls (a "Prepayment Interest Shortfall") in
collections of interest on Mortgage Loans resulting from Mortgagor
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prepayments during the month preceding the month of distribution, in each case
in such amount that is allocated to such Class on the basis set forth in the
Prospectus Supplement.
In the case of a Series of Certificates which includes two or more Classes
of Certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of principal, and any schedule or formula or other
provisions applicable to the determination thereof (including distributions
among multiple Classes of Senior Certificates or Subordinate Certificates) of
each such Class shall be as set forth in the related Prospectus Supplement.
Distributions in respect of principal of any Class of Certificates will be made
on a pro rata basis among all of the Certificates of such Class.
Except as otherwise provided in the related Pooling Agreement, on or prior
to the 15th day (or if such day is not a business day, the next succeeding
business day) of the month of distribution (the "Determination Date"), the
Master Servicer will determine the amounts of principal and interest which will
be passed through to Certificateholders on the immediately succeeding
Distribution Date. Prior to the close of business on the business day next
succeeding each Determination Date, the Master Servicer will furnish a statement
to the Trustee (the information in such statement to be made available to
Certificateholders by the Master Servicer on request) setting forth, among other
things, the amount to be distributed on the next succeeding Distribution Date.
ADVANCES
Unless otherwise specified in the related Prospectus Supplement, the Master
Servicer will agree to advance (either out of its own funds, funds advanced to
it by Subservicers or funds being held in the Custodial Account for future
distribution to the holders of such Certificates), for the benefit of the
holders of the Certificates of the related Series, on or before each
Distribution Date, an amount equal to the aggregate of all scheduled payments of
principal (other than any Balloon Amount in the case of a Balloon Loan) and
interest at the applicable Pass-Through Rate or Net Mortgage Rate, as the case
may be (an "Advance"), which were delinquent as of the close of business on the
business day preceding the related Determination Date on the Mortgage Loans in
the related Mortgage Pool, but only to the extent that such advances would, in
the judgment of the Master Servicer, be recoverable out of late payments by the
Mortgagors, Liquidation Proceeds, Insurance Proceeds or otherwise. (Article I
and Sections 3.07 and 4.04)
The Master Servicer will make such advances in order to maintain a regular
flow of scheduled interest and principal payments to holders of the relevant
Classes of Certificates; such advances do not represent an obligation of the
Master Servicer to guarantee or insure against losses. If advances have been
made by the Master Servicer from cash being held for future distribution to
Certificateholders, the Master Servicer will replace such funds on or before any
future Distribution Date to the extent that funds in the applicable Certificate
Account on such Distribution Date would be less than payments required to be
made to Certificateholders on such date. Any Master Servicer funds advanced as
described above will be reimbursable to the Master Servicer out of recoveries on
the related Mortgage Loans for which such amounts were advanced (e.g., late
payments made by the related Mortgagor, any related Liquidation Proceeds,
proceeds of any applicable form of credit enhancement, or proceeds of any
Mortgage Loan purchased by a Seller under the circumstances described above).
Such advances by the Master Servicer will also be reimbursable to the Master
Servicer (or Subservicer) from cash otherwise distributable to
Certificateholders to the extent that the Master Servicer shall determine that
any such advances previously made are not ultimately recoverable from proceeds
of the applicable Mortgage Loan. The Master Servicer will also be obligated to
make advances for the purpose of protecting any Mortgaged Property or the Trust
Fund's security interest therein, including certain taxes and insurance premiums
not paid by Mortgagors on a timely basis, but only to the extent that such
advances would, in the judgment of the Master Servicer, be recoverable out of
Liquidation Proceeds or other proceeds of the related Mortgage Loan. Funds so
advanced will also be reimbursable to the Master Servicer from cash otherwise
distributable to Certificateholders to the extent that the Master Servicer shall
determine that any such advances previously made are not ultimately recoverable
from proceeds of the applicable Mortgage Loan. Notwithstanding the foregoing, if
the Master Servicer exercises its option, if any, to purchase the assets of a
Trust Fund as described under "THE POOLING AGREEMENT -- Termination; Retirement
of Certificates" below, the Master Servicer will be deemed to have been
reimbursed for all related
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advances previously made by it and not theretofore reimbursed to it. The Master
Servicer's obligation to make advances may be supported as described in the
related Pooling Agreement. In the event that the short-term or long-term
obligations of the provider of such support are downgraded by a Rating Agency
rating the related Certificates or if any collateral supporting such obligation
is not performing or is removed pursuant to the terms of any agreement described
in the related Prospectus Supplement, the Certificates may also be downgraded.
(Article I and Sections 3.08, 3.10 and 4.04)
REPORTS TO CERTIFICATEHOLDERS
With each distribution to Certificateholders of a particular Class, the
Trustee will forward or cause to be forwarded to each holder of record of such
Class of Certificates a statement or statements with respect to the related
Trust Fund setting forth the information specifically described in the related
Pooling Agreement, which generally will include the following as applicable
except as otherwise provided therein:
(i) the amount, if any, of such distribution allocable to principal;
(ii) the amount, if any, of such distribution allocable to interest,
and, with respect to a Senior/Subordinate Series of Certificates, the
amount, if any, of any shortfall in the amount of interest and principal
distributed;
(iii) the aggregate unpaid principal balance of the Mortgage Loans
after giving effect to the distribution of principal on such Distribution
Date;
(iv) with respect to a Series consisting of two or more Classes the
outstanding principal balance or notional amount of each Class after giving
effect to the distribution of principal on such Distribution Date;
(v) the number and aggregate principal balances of Mortgage Loans in
the related Mortgage Pool that are delinquent (a) one month, (b) two months
and (c) three months, and that are in foreclosure;
(vi) the book value of any real estate acquired by such Trust Fund
through foreclosure or grant of a deed in lieu of foreclosure;
(vii) the balance of the Reserve Fund, if any, at the close of
business on such Distribution Date;
(viii) the Senior Percentages and Senior Accelerated Distribution
Percentage, if applicable, after giving effect to the distributions on such
Distribution Date;
(ix) the amount of coverage under any Letter of Credit, Mortgage Pool
Insurance Policy, Certificate Insurance Policy or other form of credit
enhancement covering default risk as of the close of business on the
applicable Determination Date and a description of any credit enhancement
substituted therefor;
(x) the Special Hazard Amount, Fraud Loss Amount and Bankruptcy Amount
as of the close of business on the applicable Distribution Date and a
description of any change in the calculation of such amounts; and
(xi) in the case of Certificates benefiting from alternative credit
enhancement arrangements described in a Prospectus Supplement, the amount
of coverage under such alternative arrangements as of the close of business
on the applicable Determination Date.
Each amount set forth pursuant to clause (i) and (ii) above will be
expressed as a dollar amount per Single Certificate. As to a particular Class of
Certificates, a "Single Certificate" generally will evidence a Percentage
Interest obtained by dividing $1,000 by the initial principal balance or
notional balance of all the Certificates of such Class, except as otherwise
provided in the related Pooling Agreement. In addition to the information
described above, reports to Certificateholders will contain such other
information as is set forth in the applicable Pooling Agreement, which may
include, without limitation, information as to Advances, reimbursements to
Subservicers and the Master Servicer and losses borne by the related Trust Fund.
In addition, within a reasonable period of time after the end of each calendar
year, the Master Servicer will
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furnish a report to each holder of record of a Class of Certificates at any time
during such calendar year which, among other things, will include information as
to the aggregate of amounts reported pursuant to clauses (i) and (ii) above for
such calendar year or, in the event such person was a holder of record of a
Class of Certificates during a portion of such calendar year, for the applicable
portion of such a year. (Section 4.02 or 4.03)
COLLECTION AND OTHER SERVICING PROCEDURES
The Master Servicer, directly or through Subservicers, as the case may be,
will make reasonable efforts to collect all payments required under the Mortgage
Loans and will, consistent with the Pooling Agreement and any Letter of Credit,
Mortgage Pool Insurance Policy, Certificate Insurance Policy, Primary Mortgage
Insurance Policy, Bankruptcy Bond or applicable alternative credit enhancement
arrangements, follow such collection procedures as it would employ in its good
faith business judgment and which are normal and usual in its general mortgage
servicing activities. Consistent with the foregoing, the Master Servicer may in
its discretion (i) waive payments of interest or principal, (ii) accept a deed
in lieu of foreclosure, (iii) waive any late payment charge or any prepayment
charge or penalty interest in connection with the prepayment of a Mortgage Loan
or (iv) extend the Due Date for payments due on a Mortgage Loan, provided,
however, that the Master Servicer shall first determine that any such action
will not impair the coverage of any related insurance policy or materially
adversely affect the lien of the related Mortgage.
In any case in which property subject to a Mortgage Loan (other than an ARM
Loan described below) is being conveyed by the Mortgagor, unless the related
Prospectus Supplement provides otherwise, the Master Servicer, directly or
through a Subservicer, shall in general be obligated, to the extent it has
knowledge of such conveyance, to exercise its rights to accelerate the maturity
of such Mortgage Loan under any due-on-sale clause applicable thereto, but only
if the exercise of such rights is permitted by applicable law and only to the
extent it would not adversely affect or jeopardize coverage under any Primary
Mortgage Insurance Policy or applicable credit enhancement arrangements. The
original Mortgagor may be released from liability on a Mortgage Loan if the
Master Servicer or Subservicer shall have determined in good faith that such
release will not adversely affect the collectability of the Mortgage Loan. An
ARM Loan may be assumed if such ARM Loan is by its terms assumable and if, in
the reasonable judgment of the Master Servicer or the Subservicer, the proposed
transferee of the related Mortgaged Property establishes its ability to repay
the loan and the security for such ARM Loan would not be impaired by the
assumption. If a Mortgagor transfers the Mortgaged Property subject to an ARM
Loan without consent, such ARM Loan may be declared due and payable. Any fee
collected by the Master Servicer or Subservicer for entering into an assumption
or substitution of liability agreement will be retained by the Master Servicer
or Subservicer as additional servicing compensation unless otherwise set forth
in the related Prospectus Supplement. See "CERTAIN LEGAL ASPECTS OF MORTGAGE
LOANS AND RELATED MATTERS -- Enforceability of Certain Provisions" herein. In
connection with any such assumption, the Mortgage Rate borne by the related
Mortgage Note may not be altered. Mortgagors may, from time to time, request
partial releases of the Mortgaged Properties, easements, consents to alteration
or demolition and other similar matters. The Master Servicer or the related
Subservicer may approve such a request if it has determined, exercising its good
faith business judgment in the same manner as it would if it were the owner of
the related Mortgage Loan, that such approval will not adversely affect the
security for, and the timely and full collectability of, the related Mortgage
Loan. Any fee collected by the Master Servicer or the Subservicer for processing
such request will be retained by the Master Servicer or Subservicer as
additional servicing compensation. (Section 3.13)
The Master Servicer is required to maintain a fidelity bond and errors and
omissions policy with respect to its officers and employees and other persons
acting on behalf of the Master Servicer in connection with its activities under
the Pooling Agreement. (Section 3.12)
REALIZATION UPON DEFAULTED MORTGAGE LOANS
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
will be issued to the Trustee or to its nominee on behalf of Certificateholders
of the related Series. Notwithstanding any such acquisition of title and
cancellation of the
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related Mortgage Loan, such Mortgage Loan (an "REO Mortgage Loan") will be
considered for most purposes to be an outstanding Mortgage Loan held in the
Trust Fund until such time as the Mortgaged Property is sold and all recoverable
Liquidation Proceeds and Insurance Proceeds have been received with respect to
such defaulted Mortgage Loan (a "Liquidated Mortgage Loan"). For purposes of
calculations of amounts distributable to Certificateholders in respect of an REO
Mortgage Loan, the amortization schedule in effect at the time of any such
acquisition of title (before any adjustment thereto by reason of any bankruptcy
or any similar proceeding or any moratorium or similar waiver or grace period)
will be deemed to have continued in effect (and, in the case of an ARM Loan,
such amortization schedule will be deemed to have adjusted in accordance with
any interest rate changes occurring on any adjustment date therefor) so long as
such REO Mortgage Loan is considered to remain in the Trust Fund. Any Mortgaged
Property so acquired by the Trust Fund must be disposed of, if a REMIC election
has been made, in accordance with applicable federal income tax regulations and
consistent with the status of the Trust Fund as a REMIC. Any income (net of
expenses and other than gains described below) received by the Master Servicer
or a Subservicer on such Mortgaged Property prior to its disposition will be
deposited in the Custodial Account upon such disposition and will be available
at such time to the extent provided in the related Pooling Agreement, for making
payments to Certificateholders. (Section 3.14)
With respect to a Mortgage Loan in default, the Master Servicer may pursue
foreclosure (or similar remedies) concurrently with pursuing any remedy for a
breach of a representation and warranty. However, the Master Servicer is not
required to continue to pursue both such remedies if it determines that one such
remedy is more likely to result in a greater recovery. Upon the first to occur
of final liquidation (by foreclosure or otherwise) and a repurchase or
substitution pursuant to a breach of a representation and warranty, such
Mortgage Loan will be removed from the related Trust Fund if it has not been
removed previously. The Master Servicer may elect to treat a defaulted Mortgage
Loan as having been finally liquidated if substantially all amounts expected to
be received in connection therewith have been received. Any additional
liquidation expenses relating to such Mortgage Loan thereafter incurred will be
reimbursable to the Master Servicer (or any Subservicer) from any amounts
otherwise distributable to holders of Certificates of the related Series, or may
be offset by any subsequent recovery related to such Mortgage Loan.
Alternatively, for purposes of determining the amount of related Liquidation
Proceeds to be distributed to Certificateholders, the amount of any Realized
Loss or the amount required to be drawn under any applicable form of credit
support, the Master Servicer may take into account minimal amounts of additional
receipts expected to be received, as well as estimated additional liquidation
expenses expected to be incurred in connection with such defaulted Mortgage
Loan. With respect to certain Series of Certificates, if so provided in the
related Prospectus Supplement, the applicable form of credit enhancement may
provide, to the extent of coverage thereunder, that a defaulted Mortgage Loan or
REO Mortgage Loan will be removed from the Trust Fund prior to the final
liquidation thereof. In the case of a Senior/Subordinate Series, unless
otherwise specified in the related Prospectus Supplement, if a final liquidation
of a Mortgage Loan resulted in a Realized Loss and within two years thereafter
the Master Servicer receives a subsequent recovery specifically related to such
Mortgage Loan (in connection with a related breach of a representation or
warranty or otherwise), such subsequent recovery shall be distributed to current
Certificateholders of the Class or Classes to which such Realized Loss was
allocated (with the amounts to be distributed allocated among such Classes in
the same proportions as such Realized Loss was allocated), provided that no such
distribution shall result in distributions on the Certificates of any such Class
in excess of the total amounts of principal and interest that would have been
distributable thereon if such Mortgage Loan had been liquidated with no Realized
Loss. In the case of a Series of Certificates other than a Senior/Subordinate
Series, if so provided in the related Prospectus Supplement, the applicable form
of credit enhancement may provide for reinstatement subject to certain
conditions in the event that, following the final liquidation of a Mortgage Loan
and a draw under such credit enhancement, subsequent recoveries are received. If
a defaulted Mortgage Loan or REO Mortgage Loan is not so removed from the Trust
Fund, then, upon the final liquidation thereof, if a loss is realized which is
not covered by any applicable form of credit enhancement or other insurance, the
Certificateholders will bear such loss. However, if a gain results from the
final liquidation of an REO Mortgage Loan which is not required by law to be
remitted to the related Mortgagor, the Master Servicer will be entitled to
retain such gain as additional servicing compensation unless the related
Prospectus Supplement provides otherwise. For a description of the Master
Servicer's obligations
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to maintain and make claims under applicable forms of credit enhancement and
insurance relating to the Mortgage Loans, see "DESCRIPTION OF CREDIT
ENHANCEMENTS" and "PRIMARY MORTGAGE INSURANCE, HAZARD INSURANCE; CLAIMS
THEREUNDER."
SUBORDINATION
A Senior/Subordinate Series of Certificates will consist of one or more
Classes of Senior Certificates and one or more Classes of Subordinate
Certificates, as specified in the related Prospectus Supplement. Except as
otherwise specified in the related Prospectus Supplement, only the Senior
Certificates will be offered hereby. Subordination of the Subordinate
Certificates of any Senior/Subordinate Series of Certificates will be effected
by the following method, unless an alternative method is specified in the
related Prospectus Supplement. In addition, certain Classes of Senior (or
Subordinated Certificates may be senior to other Classes of Senior (or
Subordinate) Certificates, as specified in the related Prospectus Supplement, in
which case the following discussion is qualified in its entirety by reference to
the related Prospectus Supplement with respect to the various priorities and
other rights as among the various Classes of Senior Certificates or Subordinate
Certificates, as the case may be.
With respect to any Senior/Subordinate Series of Certificates, the total
amount available for distribution on each Distribution Date, as well as the
method for allocating such amount among the various Classes of Certificates
included in such Series, will be described in the related Prospectus Supplement.
Generally, the amount available for distribution will be allocated first to
interest on the Senior Certificates of such Series, and then to principal of the
Senior Certificates up to the amounts determined as specified in the related
Prospectus Supplement, prior to allocation to the Subordinate Certificates of
such Series.
In the event of any Realized Losses (as defined below) on Mortgage Loans
not in excess of the limitations described below, other than Extraordinary
Losses, the rights of the Subordinate Certificateholders to receive
distributions with respect to the Mortgage Loans will be subordinate to the
rights of the Senior Certificateholders. With respect to any defaulted Mortgage
Loan that is finally liquidated, through foreclosure sale, disposition of the
related Mortgaged Property if acquired by deed in lieu of foreclosure, or
otherwise, the amount of loss realized, if any (as more fully described in the
related Pooling Agreement, a "Realized Loss"), will equal the portion of the
Stated Principal Balance remaining after application of all amounts recovered
(net of amounts reimbursable to the Master Servicer for related Advances and
expenses) towards interest and principal owing on the Mortgage Loan. With
respect to a Mortgage Loan the principal balance of which has been reduced in
connection with bankruptcy proceedings, the amount of such reduction will be
treated as a Realized Loss.
Except as noted below, Realized Losses will be allocated to the Subordinate
Certificates of the related Series, until the Certificate Principal Balance (as
defined in the related Prospectus Supplement) of such Subordinate Certificates
thereof has been reduced to zero. Additional Realized Losses, if any, will be
allocated to the Senior Certificates (or, if such Series includes more than one
Class of Senior Certificates, either on a pro rata basis among all of the Senior
Certificates in proportion to their respective outstanding Certificate Principal
Balances or as otherwise provided in the related Prospectus Supplement).
With respect to certain Realized Losses resulting from physical damage to
Mortgaged Properties which are generally of the same type as are covered under a
Special Hazard Insurance Policy, the amount thereof that may be allocated to the
Subordinate Certificates of the related Series may be limited to an amount (the
"Special Hazard Amount") specified in the related Prospectus Supplement. See
"DESCRIPTION OF CREDIT ENHANCEMENTS -- Special Hazard Insurance Policies." If
so, any Special Hazard Losses in excess of the Special Hazard Amount will be
allocated among all outstanding Classes of Certificates of the related Series,
either on a pro rata basis in proportion to their outstanding Certificate
Principal Balances, regardless of whether any Subordinate Certificates remain
outstanding, or as otherwise provided in the related Prospectus Supplement. The
respective amounts of other specified types of losses (including Fraud Losses
and Bankruptcy Losses) that may be borne solely by the Subordinate Certificates
may be similarly limited to an amount (with respect to Fraud Losses, the "Fraud
Loss Amount" and with respect to Bankruptcy Losses, the "Bankruptcy Amount"),
and the Subordinate Certificates may provide no coverage with respect to certain
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other specified types of losses, as described in the related Prospectus
Supplement, in which case such losses would be allocated on a pro rata basis
among all outstanding Classes of Certificates. Each of the Special Hazard
Amount, Fraud Loss Amount and Bankruptcy Amount may be subject to periodic
reductions under provisions described in the related Prospectus Supplement. Each
such amount may be subject to further reduction or termination, without the
consent of the Certificateholders, upon the written confirmation from each
applicable Rating Agency that the then-current rating of the related Series of
Certificates will not be adversely affected thereby.
Generally, any allocation of a Realized Loss (including a Special Hazard
Loss) to a Certificate in a Senior/Subordinate Series will be made by reducing
the Certificate Principal Balance thereof as of the Distribution Date following
the calendar month in which such Realized Loss was incurred. If so provided in
the related Prospectus Supplement, in the event of certain Realized Losses, the
Senior Certificateholders may be entitled to receive a distribution of
principal, to be paid from and to the extent of funds otherwise distributable to
the Subordinate Certificateholders, equal to the product of the then applicable
Senior Percentage (as defined below) and the amount, if any, by which (i) the
Stated Principal Balance of the related Mortgage Loan exceeds (ii) the total
amount of the related unscheduled recovery which is allocable to principal (as
more fully described in the related Pooling Agreement, the "Unrecovered Senior
Portion"). Payments to the Senior Certificateholders in respect of any
Unrecovered Senior Portion on any Distribution Date will only be made with
respect to Realized Losses incurred in connection with Mortgage Loans that were
finally liquidated during the preceding calendar month, and will not be made as
to any Special Hazard Losses in excess of the Special Hazard Amount, Fraud
Losses in excess of the Fraud Loss Amount or Bankruptcy Losses in excess of the
Bankruptcy Amount (or other specified types of losses in excess of any
applicable coverage limitations), if applicable. See "DESCRIPTION OF CREDIT
ENHANCEMENTS -- Special Hazard Insurance Policies." As with any other
distribution of principal, any payment to the holders of Senior Certificates
attributable to an Unrecovered Senior Portion will be applied to reduce the
Certificate Principal Balance thereof. At any given time, the percentage of the
Certificate Principal Balances of all of the Certificates evidenced by the
Senior Certificates is the "Senior Percentage," determined in the manner set
forth in the related Prospectus Supplement. The "Stated Principal Balance" of
any Mortgage Loan as of any date of determination is equal to the principal
balance thereof as of the Cut-off Date, after application of all scheduled
principal payments due on or before the Cut-off Date whether or not received,
reduced by all amounts allocable to principal that are distributed to
Certificateholders on or before the date of determination, and as further
reduced to the extent that any Realized Loss thereon has been allocated to one
or more Classes of Certificates on or before the date of determination.
As set forth above, the rights of holders of the various Classes of
Certificates of any Series to receive distributions of principal and interest is
determined by the aggregate Certificate Principal Balance of each such Class
(or, if applicable, the related notional amount). The Certificate Principal
Balance of any Certificate will be reduced by all amounts previously distributed
on such Certificate in respect of principal, and by any Realized Losses
allocated thereto. If there are no Realized Losses or prepayments of principal
on any of the Mortgage Loans, the respective rights of the holders of
Certificates of any Series to future distributions generally would not change.
However, to the extent so provided in the related Prospectus Supplement, holders
of Senior Certificates may be entitled to receive a disproportionately larger
amount of prepayments received during certain specified periods, which will have
the effect (absent offsetting losses) of accelerating the amortization of the
Senior Certificates and increasing the respective percentage ownership interest
evidenced by the Subordinate Certificates in the related Trust Fund (with a
corresponding decrease in the Senior Percentage), thereby preserving the
availability of the subordination provided by the Subordinate Certificates. In
addition, as set forth above, certain Realized Losses generally will be
allocated first to Subordinate Certificates by reduction of the Certificate
Principal Balance thereof, which will have the effect of increasing the
respective ownership interest evidenced by the Senior Certificates in the
related Trust Fund.
If so provided in the related Prospectus Supplement, certain amounts
otherwise payable on any Distribution Date to holders of Subordinate
Certificates may be deposited into a reserve fund. Amounts held in any reserve
fund may be applied as described under "DESCRIPTION OF CREDIT ENHANCEMENTS
- -- Reserve Funds" and in the related Prospectus Supplement.
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In lieu of the foregoing provisions, subordination may be effected in the
following manner, or in any other manner as may be described in the related
Prospectus Supplement. The rights of the holders of Subordinate Certificates to
receive any or a specified portion of distributions with respect to the Mortgage
Loans may be subordinated to the extent of the amount set forth in the related
Prospectus Supplement (the "Subordinate Amount"). As specified in the related
Prospectus Supplement, the Subordinate Amount may be subject to reduction based
upon the amount of losses borne by the holders of the Subordinate Certificates
as a result of such subordination, a specified schedule or such other method of
reduction as such Prospectus Supplement may specify. If so specified in the
related Prospectus Supplement, additional credit support for this form of
subordination may be provided by the establishment of a reserve fund for the
benefit of the holders of the Senior Certificates (which may, if such Prospectus
Supplement so provides, initially be funded by a cash deposit) into which
certain distributions otherwise allocable to the holders of the Subordinate
Certificates may be placed; such funds would thereafter be available to cure
shortfalls in distributions to holders of the Senior Certificates.
With respect to any Senior/Subordinate Series of Certificates, the terms
and provisions of the subordination may vary from those described above; any
such variation and any related additional credit support will be described in
the related Prospectus Supplement.
DESCRIPTION OF CREDIT ENHANCEMENTS
Unless otherwise provided in the applicable Prospectus Supplement, credit
support with respect to each Series of Certificates may be comprised of one or
more of the following components. Each component will have a dollar limit and
will provide coverage with respect to Realized Losses that are (i) attributable
to the Mortgagor's failure to make any payment of principal or interest as
required under the Mortgage Note, but not including Special Hazard Losses,
Extraordinary Losses or other losses resulting from damage to a Mortgaged
Property, Bankruptcy Losses or Fraud Losses (any such loss, a "Defaulted
Mortgage Loss"); (ii) of a type generally covered by a Special Hazard Insurance
Policy (as defined below) (any such loss, a "Special Hazard Loss"); (iii)
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 Mortgage Rate on a Mortgage Loan or an extension
of its maturity (any such loss, a "Bankruptcy Loss"); and (iv) incurred on
defaulted Mortgage Loans as to which there was fraud in the origination of such
Mortgage Loans (any such loss, a "Fraud Loss"). Defaulted Mortgage Losses,
Special Hazard Losses, Bankruptcy Losses and Fraud Losses in excess of the
amount of coverage provided therefor and losses occasioned by war, civil
insurrection, certain governmental actions, nuclear reaction and certain other
risks ("Extraordinary Losses") will not be covered. To the extent that the
credit enhancement for any Series of Certificates is exhausted, the
Certificateholders will bear all further risks of loss not otherwise insured
against.
As set forth below and in the applicable Prospectus Supplement, (i)
coverage with respect to Defaulted Mortgage Losses may be provided by one or
more of a Letter of Credit, a Certificate Insurance Policy or a Mortgage Pool
Insurance Policy, (ii) coverage with respect to Special Hazard Losses may be
provided by one or more of a Letter of Credit, a Certificate Insurance Policy or
a Special Hazard Insurance Policy (any instrument, to the extent providing such
coverage, a "Special Hazard Instrument"), (iii) coverage with respect to
Bankruptcy Losses may be provided by one or more of a Letter of Credit, a
Certificate Insurance Policy or a Bankruptcy Bond and (iv) coverage with respect
to Fraud Losses may be provided by one or more of a Letter of Credit, a
Certificate Insurance Policy, Mortgage Pool Insurance Policy or mortgage
repurchase bond. In addition, if provided in the applicable Prospectus
Supplement, in lieu of or in addition to any or all of the foregoing
arrangements, credit enhancement may be in the form of a Reserve Fund to cover
such losses, in the form of subordination of one or more Classes of Subordinate
Certificates to provide credit support to one or more Classes of Senior
Certificates as described under "SUBORDINATION," or in the form of the
applicable Seller's agreement to repurchase certain mortgage loans, which
obligation may be supported by a Letter of Credit, surety bonds or other types
of insurance policies, certain other secured or unsecured corporate guarantees
or in such other form as may be described in the related Prospectus Supplement,
or in the form of a combination of two or more of the foregoing. The credit
support may be provided by an assignment of the right to receive certain cash
amounts, a deposit of cash into a Reserve Fund or other pledged
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assets, or by banks, insurance companies, guarantees or any combination thereof
identified in the applicable Prospectus Supplement.
The amounts and type of credit enhancement arrangement as well as the
provider thereof (the "Credit Enhancer"), if applicable, with respect to each
Series of Certificates will be set forth in the related Prospectus Supplement.
The Pooling Agreement or other documents may be modified in connection with the
provisions of any credit enhancement arrangement to provide for reimbursement
rights, control rights or other provisions that may be required by the Credit
Enhancer. To the extent provided in the applicable Prospectus Supplement and the
Pooling Agreement, the credit enhancement arrangements may be periodically
modified, reduced and substituted for based on the aggregate outstanding
principal balance of the Mortgage Loans covered thereby. See "DESCRIPTION OF
CREDIT ENHANCEMENTS -- Reduction or Substitution of Credit Enhancement." If
specified in the applicable Prospectus Supplement, credit support for a Series
of Certificates may cover one or more other Series of Certificates.
The descriptions of any insurance policies or bonds described in this
Prospectus or any Prospectus Supplement and the coverage thereunder do not
purport to be complete and are qualified in their entirety by reference to the
actual forms of such policies, copies of which will be filed as an exhibit to a
Current Report on Form 8-K within 15 days of issuance of the Certificates of
such Series.
LETTER OF CREDIT
If any component of credit enhancement as to any Series of Certificates is
to be provided by a letter of credit (the "Letter of Credit"), a bank (the
"Letter of Credit Bank") will deliver to the Trustee an irrevocable Letter of
Credit. The Letter of Credit may also provide for the payment of advances which
the Master Servicer would be obligated to make with respect to delinquent
monthly mortgage payments. The Letter of Credit Bank and certain information
with respect thereto, as well as the amount available under the Letter of Credit
with respect to each component of credit enhancement, will be specified in the
applicable Prospectus Supplement. The Letter of Credit will expire on the
expiration date set forth in the related Prospectus Supplement, unless earlier
terminated or extended in accordance with its terms. A copy of any Letter of
Credit for a Series will be filed with the Commission as an exhibit to a Current
Report on Form 8-K within 15 days of the issuance of the Certificates of such
Series.
MORTGAGE POOL INSURANCE POLICIES
If so specified in the related Prospectus Supplement, an insurance policy
covering Defaulted Mortgage Losses (a "Mortgage Pool Insurance Policy") will be
obtained for a particular Series of Certificates. Each Mortgage Pool Insurance
Policy will, subject to the limitations described in the applicable Prospectus
Supplement, cover Defaulted Mortgage Losses in an amount equal to a percentage
specified in the applicable Prospectus Supplement of the aggregate principal
balance of the Mortgage Loans on the Cut-off Date. As set forth under
"Maintenance of Credit Enhancement," the Master Servicer will use its best
reasonable efforts to maintain the Mortgage Pool Insurance Policy and to present
claims thereunder to the Pool Insurer on behalf of itself, the Trustee and the
Certificateholders. The Mortgage Pool Insurance Policies, however, are not
blanket policies against loss, since claims thereunder may only be made
respecting particular defaulted Mortgage Loans and only upon satisfaction of
certain conditions precedent described in the applicable Prospectus Supplement.
Unless specified in the related Prospectus Supplement, the Mortgage Pool
Insurance Policies may not cover losses due to a failure to pay or denial of a
claim under a Primary Mortgage Insurance Policy, irrespective of the reason
therefor. A copy of any Mortgage Pool Insurance Policy for a Series will be
filed with the Commission as an exhibit to a Current Report on Form 8-K within
15 days of the issuance of the Certificates of such Series.
SPECIAL HAZARD INSURANCE POLICIES
If so provided in the related Prospectus Supplement, an insurance policy
covering Special Hazard Losses (a "Special Hazard Insurance Policy") will be
obtained for a particular Series of Certificates. Each Special Hazard Insurance
Policy will, subject to limitations and satisfaction of certain conditions
precedent described
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in the applicable Prospectus Supplement, protect holders of the related Series
of Certificates from (i) losses due to direct physical damage to a Mortgaged
Property other than any loss of a type covered by a hazard insurance policy or a
flood insurance policy, if applicable, and (ii) losses from partial damage
caused by reason of the application of the co-insurance clauses contained in
hazard insurance policies ("Special Hazard Losses"). See "PRIMARY MORTGAGE
INSURANCE, HAZARD INSURANCE; CLAIMS THEREUNDER." A Special Hazard Insurance
Policy will not cover losses occasioned by war, civil insurrection, certain
governmental actions, errors in design, faulty workmanship or materials (except
under certain circumstances), nuclear reaction, chemical contamination, waste by
the Mortgagor and certain other risks. A copy of any Special Hazard Insurance
Policy for a Series will be filed with the Commission as an exhibit to a Current
Report on Form 8-K within 15 days of the issuance of the Certificates of such
Series.
As indicated under "DESCRIPTION OF THE CERTIFICATES -- Assignment of
Mortgage Loans" above and to the extent set forth in the applicable Prospectus
Supplement, coverage in respect of Special Hazard Losses for a Series of
Certificates may be provided, in whole or in part, by a type of Special Hazard
Instrument other than a Special Hazard Insurance Policy.
BANKRUPTCY BONDS
In the event of a personal bankruptcy of a Mortgagor, it is possible that
the bankruptcy court may establish the value of the Mortgaged Property of such
Mortgagor at an amount less than the then outstanding principal balance of the
Mortgage Loan secured by such Mortgaged Property (a "Deficient Valuation"). The
amount of the secured debt could then be reduced to such value, and, thus, the
holder of such Mortgage Loan would become an unsecured creditor to the extent
the outstanding principal balance of such Mortgage Loan exceeds the value
assigned to the Mortgaged Property by the bankruptcy court. In addition, certain
other modifications of the terms of a Mortgage Loan can result from a bankruptcy
proceeding, including a reduction in the amount of the Monthly Payment on the
related Mortgage Loan (a "Debt Service Reduction"; Debt Service Reductions and
Deficient Valuations, collectively referred to herein as "Bankruptcy Losses").
See "CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND RELATED MATTERS -- Anti-
Deficiency Legislation and Other Limitations on Lenders." Any Bankruptcy Bond to
provide coverage for Bankruptcy Losses for proceedings under the federal
Bankruptcy Code obtained by the Depositor for a Trust Fund will be issued by an
insurer named in the applicable Prospectus Supplement. The level of coverage
under each Bankruptcy Bond will be set forth in the applicable Prospectus
Supplement. A copy of any Bankruptcy Bond for a Series will be filed with the
Commission as an exhibit to a Current Report on Form 8-K within 15 days of the
issuance of the Certificates of such Series.
CERTIFICATE INSURANCE POLICIES
If so provided in the related Prospectus Supplement, one or more insurance
policies (each, a "Certificate Insurance Policy") will be obtained for a
particular Series of Certificates guaranteeing timely distributions of interest
and full distributions of principal on the basis of a schedule of principal
distributions set forth in or determined in the manner specified in the related
Prospectus Supplement for such Series or for one or more Classes of Certificates
of such Series. If so specified in the related Prospectus Supplement, a
Certificate Insurance Policy will also guarantee against any payment made to a
Certificateholder which is subsequently treated as a "voidable preference"
payment under the Bankruptcy Code. A copy of any Certificate Insurance Policy
for a Series will be filed with the Commission as an exhibit to a Current Report
on Form 8-K within 15 days of the issuance of the Certificates of such Series.
RESERVE FUNDS
If so provided in the related Prospectus Supplement, the Depositor will
deposit or cause to be deposited in an account (a "Reserve Fund") any
combination of cash, one or more irrevocable letters of credit or one or more
Permitted Investments in specified amounts, or any other instrument satisfactory
to the Rating Agency or Agencies, which will be applied and maintained in the
manner and under the conditions specified in such Prospectus Supplement. In the
alternative or in addition to such deposit, to the extent described in the
related Prospectus Supplement, a Reserve Fund may be funded through application
of all or a portion of amounts
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otherwise payable on any related Subordinate Certificates, from Retained Yield
or otherwise. To the extent that the funding of the Reserve Fund is dependent on
amounts otherwise payable on related Subordinate Certificates, Retained Yield or
other cash flows attributable to the related Mortgage Loans or on reinvestment
income, the Reserve Fund may provide less coverage than initially expected if
the cash flows or reinvestment income on which such funding is dependent are
lower than anticipated. In addition, with respect to any Series of Certificates
as to which credit enhancement includes a Letter of Credit, if so specified in
the related Prospectus Supplement, under certain circumstances the remaining
amount of the Letter of Credit may be drawn by the Trustee and deposited in a
Reserve Fund. Amounts in a Reserve Fund may be distributed to
Certificateholders, or applied to reimburse the Master Servicer for outstanding
advances, or may be used for other purposes, in the manner and to the extent
specified in the related Prospectus Supplement. Unless otherwise provided in the
related Prospectus Supplement, any such Reserve Fund will not be deemed to be
part of the related Trust Fund. If set forth in the related Prospectus
Supplement, a Reserve Fund may provide coverage to more than one Series of
Certificates.
In connection with the establishment of any Reserve Fund, unless otherwise
specified in the related Prospectus Supplement, the Reserve Fund will be
structured so that the Trustee will have a perfected security interest for the
benefit of the Certificateholders in the assets in the Reserve Fund. However, to
the extent that the Depositor, any affiliate thereof or any other entity has an
interest in any Reserve Fund, in the event of the bankruptcy, receivership or
insolvency of such entity, there could be delays in withdrawals from the Reserve
Fund and corresponding payments to the Certificateholders which could adversely
affect the yield to investors on the related Certificates.
Amounts deposited in any Reserve Fund for a Series will be invested in
Permitted Investments by, or at the direction of, and for the benefit of the
Master Servicer or any other person named in the related Prospectus Supplement.
MAINTENANCE OF CREDIT ENHANCEMENT
To the extent that the applicable Prospectus Supplement does not expressly
provide for alternative credit enhancement arrangements in lieu of some or all
of the arrangements mentioned below, the following paragraphs shall apply.
If a Letter of Credit, Certificate Insurance Policy or alternate form of
credit enhancement has been obtained for a Series of Certificates, the Master
Servicer will be obligated to exercise its best reasonable efforts to keep or
cause to be kept such Letter of Credit, Certificate Insurance Policy or
alternate form of credit support in full force and effect throughout the term of
the applicable Pooling Agreement, unless coverage thereunder has been exhausted
through payment of claims or otherwise, or substitution therefor is made as
described below under "Reduction or Substitution of Credit Enhancement." Unless
otherwise specified in the applicable Prospectus Supplement, if a Letter of
Credit obtained for a Series of Certificates is scheduled to expire prior to the
date the final distribution on such Certificates is made and coverage under such
Letter of Credit has not been exhausted and no substitution has occurred, the
Trustee will draw the amount available under the Letter of Credit and maintain
such amount in trust for such Certificateholders.
If a Mortgage Pool Insurance Policy has been obtained for a Series of
Certificates, the Master Servicer will be obligated to exercise its best
reasonable efforts to keep each Mortgage Pool Insurance Policy (or an alternate
form of credit support) in full force and effect throughout the term of the
applicable Pooling Agreement, unless coverage thereunder has been exhausted
through payment of claims or until such Mortgage Pool Insurance Policy is
replaced in accordance with the terms of the applicable Pooling Agreement.
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer will agree to pay from collections received on the Mortgage Loans the
premiums for each Mortgage Pool Insurance Policy on a timely basis. In the event
the Pool Insurer ceases to be a Qualified Insurer (such term being defined to
mean a private mortgage guaranty insurance company duly qualified as such under
the laws of the state of its incorporation and each state having jurisdiction
over the insurer in connection with the Mortgage Pool Insurance Policy and
approved as an insurer by FHLMC, FNMA or any successor entity) because it ceases
to be qualified under any such law to transact such insurance business or
coverage is terminated for any reason
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other than exhaustion of such coverage, the Master Servicer will use its best
reasonable efforts to obtain from another Qualified Insurer a replacement
insurance policy comparable to the Mortgage Pool Insurance Policy with a total
coverage equal to the then outstanding coverage of such Mortgage Pool Insurance
Policy, provided that, if the cost of the replacement policy is greater than the
cost of such Mortgage Pool Insurance Policy, the coverage of the replacement
policy will, unless otherwise agreed to by the Depositor, be reduced to a level
such that its premium rate does not exceed the premium rate on such Mortgage
Pool Insurance Policy. In the event that the Pool Insurer ceases to be a
Qualified Insurer because it ceases to be approved as an insurer by FHLMC, FNMA
or any successor entity, the Master Servicer will agree to review, not less
often than annually, the financial condition of the Pool Insurer and will
monitor the credit ratings of the Pool Insurer, in each case with a view toward
determining whether recoveries under the Mortgage Pool Insurance Policy are
jeopardized for reasons related to the financial condition of the Pool Insurer.
If the Master Servicer determines that recoveries are so jeopardized, it has
agreed to exercise its best reasonable efforts to obtain from another Qualified
Insurer a replacement insurance policy as described above, subject to the same
cost limit. Any losses associated with any reduction or withdrawal in rating by
an applicable Rating Agency shall be borne by the Certificateholders. (Article I
and Section 3.11)
In lieu of the Master Servicer's obligation to maintain a Letter of Credit,
Mortgage Pool Insurance Policy, Certificate Insurance Policy or other form of
credit enhancement as provided above, the Master Servicer may obtain a
substitute Letter of Credit, Mortgage Pool Insurance Policy, Certificate
Insurance Policy or an alternate form of credit enhancement. If the Master
Servicer obtains such a substitute Letter of Credit, Mortgage Pool Insurance
Policy, Certificate Insurance Policy or other form of credit enhancement, it
will maintain and keep such Letter of Credit, Mortgage Pool Insurance Policy,
Certificate Insurance Policy or alternate form of credit enhancement in full
force and effect as provided herein. Prior to its obtaining any substitute
Letter of Credit, Mortgage Pool Insurance Policy, Certificate Insurance Policy
or alternate form of credit enhancement, the Master Servicer will obtain written
confirmation from the Rating Agency or Agencies that rated the related Series of
Certificates that the substitution of such Mortgage Pool Insurance Policy,
Letter of Credit, Certificate Insurance Policy or alternate form of credit
enhancement for the existing credit enhancement will not adversely affect the
then-current ratings assigned to such Certificates by such Rating Agency or
Agencies.
If a Special Hazard Instrument has been obtained for a Series of
Certificates, the Master Servicer will also be obligated to exercise its best
reasonable efforts to maintain and keep such Special Hazard Instrument in full
force and effect throughout the term of the applicable Pooling Agreement, unless
coverage thereunder has been exhausted through payment of claims or otherwise or
substitution therefor is made as described below under "Reduction or
Substitution of Credit Enhancement." If the Special Hazard Instrument takes the
form of a Special Hazard Insurance Policy, such policy will provide coverage
against risks of the type described herein under "DESCRIPTION OF CREDIT
ENHANCEMENTS -- Special Hazard Insurance Policies." The Master Servicer may
obtain a substitute Special Hazard Instrument for the existing Special Hazard
Instrument if prior to such substitution the Master Servicer obtains written
confirmation from the Rating Agency or Agencies that rated the Certificates that
such substitution shall not adversely affect the then-current ratings assigned
to the Certificates by such Rating Agency or Agencies. (Sections 3.12 and 3.16)
If a Bankruptcy Bond has been obtained for a Series of Certificates, the
Master Servicer will be obligated to exercise its best reasonable efforts to
maintain and keep such Bankruptcy Bond in full force and effect throughout the
term of the Pooling Agreement, unless coverage thereunder has been exhausted
through payment of claims or substitution therefor is made as described below
under "Reduction or Substitution of Credit Enhancement." The Master Servicer may
obtain a substitute Bankruptcy Bond or other credit enhancement for the existing
Bankruptcy Bond if prior to such substitution the Master Servicer obtains
written confirmation from the Rating Agency or Agencies that rated the
Certificates that such substitution shall not adversely affect the then-current
ratings assigned to the Certificates by such Rating Agency or Agencies.
(Sections 3.16 and 3.21) See "DESCRIPTION OF CREDIT ENHANCEMENTS -- Bankruptcy
Bonds."
The Master Servicer, on behalf of itself, the Trustee and
Certificateholders, will provide the Trustee information required for the
Trustee to draw under the Letter of Credit and will present claims to each Pool
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Insurer, to the issuer of each Special Hazard Insurance Policy or other Special
Hazard Instrument, to the issuer of each Bankruptcy Bond and, in respect of
defaulted Mortgage Loans for which there is no Subservicer, to each Primary
Mortgage Insurer and take such reasonable steps as are necessary to permit
recovery under such Letter of Credit, Certificate Insurance Policies or other
insurance policies or comparable coverage respecting defaulted Mortgage Loans or
Mortgage Loans which are the subject of a bankruptcy proceeding. As set forth
above, all collections by the Master Servicer under any Mortgage Pool Insurance
Policy, any Primary Mortgage Insurance Policy or any Bankruptcy Bond and, where
the related property has not been restored, any Special Hazard Instrument, are
to be deposited initially in the Custodial Account and ultimately in the
Certificate Account, subject to withdrawal as described above. All draws under
any Letter of Credit or Certificate Insurance Policy will be initially deposited
in the Certificate Account. In those cases in which a Mortgage Loan is serviced
by a Subservicer, the Subservicer, on behalf of itself, the Trustee and the
Certificateholders will present claims to the Primary Mortgage Insurer, and all
collections thereunder shall initially be deposited in a segregated account
generally comparable to the Custodial Account. (Sections 3.11, 3.12, 3.21 and
4.01)
If any property securing a defaulted Mortgage Loan is damaged and proceeds,
if any, from the related hazard insurance policy or any applicable Special
Hazard Instrument are insufficient to restore the damaged property to a
condition sufficient to permit recovery under any Letter of Credit, Mortgage
Pool Insurance Policy or any related Primary Mortgage Insurance Policy, the
Master Servicer is not required to expend its own funds to restore the damaged
property unless it determines (i) that such restoration will increase the
proceeds to one or more Classes of Certificateholders on liquidation of the
Mortgage Loan after reimbursement of the Master Servicer for its expenses and
(ii) that such expenses will be recoverable by it through Liquidation Proceeds
or Insurance Proceeds. If recovery under any Letter of Credit, Mortgage Pool
Insurance Policy, other credit enhancement or any related Primary Mortgage
Insurance Policy is not available because the Master Servicer has been unable to
make the above determinations, has made such determinations incorrectly or
recovery is not available for any other reason, the Master Servicer is
nevertheless obligated to follow such normal practices and procedures (subject
to the preceding sentence) as it deems necessary or advisable to realize upon
the defaulted Mortgage Loan and in any such event is entitled to reimbursement
of its expenses in connection with such restoration prior to payments to
Certificateholders. (Section 3.14)
REDUCTION OR SUBSTITUTION OF CREDIT ENHANCEMENT
Unless otherwise specified in the Prospectus Supplement, the amount of
credit support provided pursuant to any of the credit enhancements (including,
without limitation, a Mortgage Pool Insurance Policy, Special Hazard Insurance
Policy, Certificate Insurance Policy, Bankruptcy Bond, Letter of Credit, Reserve
Fund, or any alternative form of credit enhancement) may be reduced under
certain specified circumstances. In most cases, the amount available pursuant to
any credit enhancement will be subject to periodic reduction in accordance with
a schedule or formula on a nondiscretionary basis pursuant to the terms of the
related Pooling Agreement. Additionally, in most cases, such credit support (and
any replacements therefor) may be replaced, reduced or terminated, and the
formula used in calculating the amount of coverage with respect to Bankruptcy
Losses, Special Hazard Losses or Fraud Losses may be changed, without the
consent of the Certificateholders, upon the written assurance from each
applicable Rating Agency that the then-current rating of the related Series of
Certificates will not be adversely affected. Furthermore, in the event that the
credit rating of any obligor under any applicable credit enhancement is
downgraded, the credit rating of the related Certificates may be downgraded to a
corresponding level, and, unless otherwise specified in the related Prospectus
Supplement, the Master Servicer will not be obligated to obtain replacement
credit support in order to restore the rating of the Certificates. The Master
Servicer will also be permitted to replace such credit support with other credit
enhancement instruments issued by obligors whose credit ratings are equivalent
to such downgraded level and in lower amounts which would satisfy such
downgraded level, provided that the then-current rating of the related Series of
Certificates is maintained. Where the credit support is in the form of a Reserve
Fund, a permitted reduction in the amount of credit enhancement will result in a
release of all or a portion of the assets in the Reserve Fund to the Depositor,
the Master Servicer or such other person that is entitled thereto. Any assets so
released will not be available for distributions in future periods.
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PRIMARY MORTGAGE INSURANCE, HAZARD INSURANCE; CLAIMS THEREUNDER
Each Mortgage Loan will be required to be covered by a hazard insurance
policy (as described below) and, if required as described below, a Primary
Mortgage Insurance Policy. The following is only a brief description of certain
insurance policies and does not purport to summarize or describe all of the
provisions of these policies. Such insurance is subject to underwriting and
approval of individual Mortgage Loans by the respective insurers, unless such
underwriting and approval authority has been delegated to the applicable lender.
The descriptions of any insurance policies described in this Prospectus or any
Prospectus Supplement and the coverage thereunder do not purport to be complete
and are qualified in their entirety by reference to such forms of policies,
sample copies of which are available upon request.
PRIMARY MORTGAGE INSURANCE POLICIES
Unless otherwise specified in the related Prospectus Supplement, (i) each
Mortgage Loan having a Loan-to-Value Ratio at origination of over 80% is
required by the Depositor to be covered by a primary mortgage guaranty insurance
policy (a "Primary Mortgage Insurance Policy") insuring against default on such
Mortgage Loan up to at least the minimum amount required to be covered by FNMA
and FHLMC, unless and until the principal balance of the Mortgage Loan is
reduced to a level that would produce a Loan-to-Value Ratio equal to or less
than 80%, and (ii) the applicable Seller will represent and warrant that, to the
best of such Seller's knowledge, such Mortgage Loans are so covered. The
Mortgagor with respect to each Mortgage Loan covered by a Primary Mortgage
Insurance Policy will be required to pay the premiums allocable to such Mortgage
Loan under any applicable Primary Mortgage Insurance Policy. However, the
foregoing standard may vary significantly depending on the characteristics of
the Mortgage Loans and the applicable underwriting standards. A Mortgage Loan
will not be considered to be an exception to the foregoing standard if no
Primary Mortgage Insurance Policy was obtained at origination but the Mortgage
Loan has amortized to below an 80% Loan-to-Value Ratio level as of the
applicable Cut-off Date. In addition, unless otherwise specified in the
Prospectus Supplement, the Master Servicer will have the ability to cancel any
Primary Mortgage Insurance Policy if the Loan-to-Value Ratio of the Mortgage
Loan is reduced below a specified percentage, which typically will be either 75%
or 80%, either based on an appraisal of the Mortgaged Property after the related
Cut-off Date or as a result of principal payments that reduce the principal
balance of the Mortgage Loan after such Cut-off Date, or if necessary to comply
with applicable law.
While the terms and conditions of the Primary Mortgage Insurance Policies
issued by one primary mortgage guaranty insurer (a "Primary Mortgage Insurer")
will differ from those in Primary Mortgage Insurance Policies issued by other
Primary Mortgage Insurers, each Primary Mortgage Insurance Policy will in
general provide substantially the following coverage. The amount of the loss as
calculated under a Primary Mortgage Insurance Policy covering a Mortgage Loan
(herein referred to as the "Loss") will generally consist of the unpaid
principal amount of such Mortgage Loan and accrued and unpaid interest thereon
and limited reimbursement of certain expenses, less (i) rents or other payments
collected or received by the insured (other than the proceeds of hazard
insurance) that are derived from the related Mortgaged Property, (ii) hazard
insurance proceeds in excess of the amount required to restore such Mortgaged
Property and which have not been applied to the payment of the Mortgage Loan,
(iii) amounts expended but not approved by the Primary Mortgage Insurer, (iv)
claim payments previously made on such Mortgage Loan and (v) unpaid premiums and
certain other amounts.
The Primary Mortgage Insurer will generally be required to pay either: (i)
the insured percentage of the Loss; (ii) the entire amount of the Loss, after
receipt by the Primary Mortgage Insurer of good and merchantable title to, and
possession of, the Mortgaged Property; or (iii) at the option of the Primary
Mortgage Insurer under certain Primary Mortgage Insurance Policies, the sum of
the delinquent monthly payments plus any advances made by the insured, both to
the date of the claim payment and, thereafter, monthly payments in the amount
that would have become due under the Mortgage Loan if it had not been discharged
plus any advances made by the insured until the earlier of (a) the date the
Mortgage Loan would have been discharged in full if the default had not occurred
or (b) an approved sale.
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As conditions precedent to the filing or payment of a claim under a Primary
Mortgage Insurance Policy, in the event of default by the Mortgagor, the insured
will typically be required, among other things, to: (i) advance or discharge (a)
hazard insurance premiums and (b) as necessary and approved in advance by the
Primary Mortgage Insurer, real estate taxes, protection and preservation
expenses and foreclosure and related costs; (ii) in the event of any physical
loss or damage to the Mortgaged Property, have the Mortgaged Property restored
to at least its condition at the effective date of the Primary Mortgage
Insurance Policy (ordinary wear and tear excepted); and, if requested by the
Primary Mortgage Insurer, (iii) tender to the Primary Mortgage Insurer good and
merchantable title to, and possession of, the Mortgaged Property. Because the
Master Servicer will not be required to make Servicing Advances deemed to be
nonrecoverable, conditions (i) and (ii) above may not be satisfied with respect
to some claims under the Primary Mortgage Insurance Policies. In any such event,
Losses that would otherwise have been recoverable under the applicable Primary
Mortgage Insurance Policy may not be paid under such policy and, as a result,
will be borne by the Certificateholders.
For any Certificates offered hereunder, the Master Servicer will maintain
or cause any applicable Subservicer to maintain in full force and effect and to
the extent coverage is available a Primary Mortgage Insurance Policy with regard
to each Mortgage Loan for which such coverage is required under the standard
described above, provided that such Primary Mortgage Insurance Policy was in
place as of the Cut-off Date and the Master Servicer had knowledge of such
Primary Mortgage Insurance Policy. In the event that the Master Servicer gains
knowledge that as of the Closing Date, a Mortgage Loan had a Loan-to-Value Ratio
at origination in excess of 80% and was not the subject of a Primary Mortgage
Insurance Policy (and was not included in any exception to such standard
disclosed in the related Prospectus Supplement) and that such Mortgage Loan has
a then current Loan-to-Value Ratio in excess of 80%, then the Master Servicer is
required to use its reasonable efforts to obtain and maintain a Primary Mortgage
Insurance Policy to the extent that such a policy is obtainable at a reasonable
price. The Master Servicer will not cancel or refuse to renew any such Primary
Mortgage Insurance Policy in effect at the time of the initial issuance of a
Series of Certificates that is required to be kept in force under the applicable
Pooling Agreement unless the replacement Primary Mortgage Insurance Policy for
such cancelled or non-renewed policy is maintained with an insurer whose
claims-paying ability is acceptable to the Rating Agency or Agencies that rated
such Series of Certificates for mortgage pass-through certificates having a
rating equal to or better than the then-current ratings of such Series of
Certificates. (Section 3.11) The premiums allocable to a Mortgage Loan covered
by any Primary Mortgage Insurance Policy, to the extent not paid by the related
Mortgagor, will be reimbursed to the Master Servicer from collections on the
applicable Mortgage Pool. For further information regarding the extent of
coverage under any Mortgage Pool Insurance Policy or Primary Mortgage Insurance
Policy, see "DESCRIPTION OF CREDIT ENHANCEMENTS -- Mortgage Pool Insurance
Policies."
HAZARD INSURANCE POLICIES
The terms of the Mortgage Loans require each Mortgagor to maintain a hazard
insurance policy with extended coverage customary in the state in which the
related Mortgaged Property is located for their Mortgage Loan. Additionally, the
Pooling Agreement for each Series of Certificates will require the Master
Servicer to cause to be maintained for each Mortgage Loan a hazard insurance
policy providing for no less than the coverage of the standard form of fire
insurance policy with extended coverage customary in the state in which the
property is located. Unless otherwise specified in the related Prospectus
Supplement, such coverage generally will be in an amount equal to the lesser of
the principal balance owing on such Mortgage Loan or 100% of the insurable value
of the improvements securing the Mortgage Loan except that, if generally
available, such coverage must not be less than the minimum amount required under
the terms thereof to fully compensate for any damage or loss on a replacement
cost basis. The ability of the Master Servicer to ensure that hazard insurance
proceeds are appropriately applied may be dependent on its being named as an
additional insured or loss payee under any hazard insurance policy and under any
flood insurance policy referred to below, or upon the extent to which
information in this regard is furnished to the Master Servicer by Mortgagors or
Subservicers.
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As set forth above, all amounts collected by the Master Servicer under any
hazard policy (except for amounts to be applied to the restoration or repair of
the Mortgaged Property or released to the Mortgagor in accordance with the
Master Servicer's normal servicing procedures) will be deposited initially in
the Custodial Account and ultimately in the Certificate Account, subject to
permitted withdrawals. The Pooling Agreement provides that the Master Servicer
may satisfy its obligation to cause hazard policies to be maintained by
maintaining a blanket policy insuring against losses on the Mortgage Loans. If
such blanket policy contains a deductible clause, the Master Servicer will
deposit in the Custodial Account or the applicable Certificate Account all sums
which would have been deposited therein but for such clause.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements on the property by fire,
lightning, explosion, smoke, windstorm, hail, riot, strike and civil commotion,
subject to the conditions and exclusions specified in each policy. Although the
policies relating to the Mortgage Loans will be underwritten by different
insurers under different state laws in accordance with different applicable
state forms and therefore will not contain identical terms and conditions, the
basic terms thereof are dictated by respective state laws, and most such
policies typically do 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
reactions, wet or dry rot, vermin, rodents, insects or domestic animals, theft
and, in certain cases, vandalism. The foregoing list is merely indicative of
certain kinds of uninsured risks and is not intended to be all inclusive. Where
the improvements securing a Mortgage Loan are located in a federally designated
flood area in participating communities at the time of origination of such
Mortgage Loan, the Pooling Agreement requires the Master Servicer to cause to be
maintained for each such Mortgage Loan serviced, flood insurance (to the extent
available) in an amount equal in general to the lesser of the amount required to
compensate for any loss or damage on a replacement cost basis or the maximum
insurance available under the federal flood insurance program.
The hazard insurance policies covering the Mortgaged Properties typically
contain a co-insurance clause which in effect requires the insured at all times
to carry insurance of a specified percentage (generally 80% to 90%) of the full
replacement value of the improvements on the property in order to recover the
full amount of any partial loss. If the insured's coverage falls below this
specified percentage, such clause generally provides that the insurer's
liability in the event of partial loss does not exceed the greater of (i) the
replacement cost of the improvements damaged or destroyed less physical
depreciation or (ii) such proportion of the loss as the amount of insurance
carried bears to the specified percentage of the full replacement cost of such
improvements.
Since the amount of hazard insurance that Mortgagors are required to
maintain on the improvements securing the Mortgage Loans may decline as the
principal balances owing thereon decrease, and since residential properties have
historically appreciated in value over time, hazard insurance proceeds could be
insufficient to restore fully the damaged property in the event of a partial
loss. See "SUBORDINATION" above for a description of when subordination is
provided, the protection (limited to the Special Hazard Amount as described in
the related Prospectus Supplement) afforded by such subordination, and
"DESCRIPTION OF CREDIT ENHANCEMENTS -- Special Hazard Insurance Policies" for a
description of the limited protection afforded by any Special Hazard Insurance
Policy against losses occasioned by hazards which are otherwise uninsured
against (including losses caused by the application of the co-insurance clause
described in the preceding paragraph).
Under the terms of the Mortgage Loans, Mortgagors are generally required to
present claims to insurers under hazard insurance policies maintained on the
Mortgaged Properties. The Master Servicer, on behalf of the Trustee and
Certificateholders, is obligated to present claims under any Special Hazard
Insurance Policy or other Special Hazard Instrument and any blanket insurance
policy insuring against hazard losses on the Mortgaged Properties. However, the
ability of the Master Servicer to present such claims is dependent upon the
extent to which information in this regard is furnished to the Master Servicer
or the Subservicers by Mortgagors. (Section 3.12)
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THE POOLING AGREEMENT
As described above under "DESCRIPTION OF THE CERTIFICATES -- General," each
Series of Certificates will be issued pursuant to a Pooling Agreement as
described in that section. The following summaries describe certain additional
provisions common to each Pooling Agreement.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES; RETAINED YIELD
The principal servicing compensation to be paid to the Master Servicer in
respect of its master servicing activities for each Series of Certificates will
be equal to the percentage per annum described in the related Prospectus
Supplement (which may vary under certain circumstances) of the outstanding
principal balance of each Mortgage Loan, and such compensation will be retained
by it from collections of interest on such Mortgage Loan in the related Trust
Fund (after provision has been made for the payment of interest at the
applicable Pass-Through Rate to Certificateholders and for the payment of any
Retained Yield) at the time such collections are deposited into the applicable
Custodial Account. Unless otherwise specified in the related Prospectus
Supplement, as compensation for its servicing duties, a Subservicer or, if there
is no Subservicer, the Master Servicer will be entitled to a monthly servicing
fee as described in the related Prospectus Supplement, which may vary under
certain circumstances from the amounts described in the Prospectus Supplement.
Certain Subservicers, in their capacity as Sellers, may also be entitled to
Retained Yield as additional compensation for the sale of the applicable
Mortgage Loans.
The Master Servicer will pay or cause to be paid certain ongoing expenses
associated with each Trust Fund and incurred by it in connection with its
responsibilities under the Pooling Agreement, including, without limitation,
payment of any fee or other amount payable in respect of any alternative credit
enhancement arrangements, payment of the fees and disbursements of the Trustee,
any custodian appointed by the Trustee, the Certificate Registrar and any Paying
Agent, and payment of expenses incurred in enforcing the obligations of
Subservicers and Sellers. The Master Servicer will be entitled to reimbursement
of expenses incurred in enforcing the obligations of Subservicers and Sellers
under certain limited circumstances. In addition, as described above under
"DESCRIPTION OF THE CERTIFICATES -- Advances," the Master Servicer will be
entitled to reimbursements for certain expenses incurred by it in connection
with Liquidated Mortgage Loans and in connection with the restoration of
Mortgaged Properties, such right of reimbursement being prior to the rights of
Certificateholders to receive any related Liquidation Proceeds (including
Insurance Proceeds).
The Prospectus Supplement for a Series of Certificates will specify whether
there will be any Retained Yield. Any such Retained Yield will be a specified
portion of the interest payable on each Mortgage Loan in a Mortgage Pool. Any
such Retained Yield will be established on a loan-by-loan basis and the amount
thereof with respect to each Mortgage Loan in a Mortgage Pool will be specified
on an exhibit to the related Pooling Agreement. Any Retained Yield in respect of
a Mortgage Loan will represent a specified portion of the interest payable
thereon and will not be part of the related Trust Fund. Any partial recovery of
interest in respect of a Mortgage Loan will be allocated between the owners of
any Retained Yield and the holders of Classes of Certificates entitled to
payments of interest as provided in the Prospectus Supplement and the applicable
Pooling Agreement.
EVIDENCE AS TO COMPLIANCE
Each Pooling Agreement will provide that on or before a specified date in
each year, beginning the first such date that is at least a specified number of
months after the Cut-off Date, a firm of independent public accountants will
furnish a statement to the Depositor and the Trustee to the effect that, on the
basis of an examination by such firm conducted substantially in compliance with
the Uniform Single Audit Program for Mortgage Bankers or the Audit Program for
Mortgages serviced for FHLMC, the servicing of mortgage loans under agreements
(including the related Pooling Agreement) substantially similar to each other
was conducted in compliance with such agreements except for such significant
exceptions or errors in records that, in the opinion of the firm, the Uniform
Single Audit Program for Mortgage Bankers or the Audit Program for Mortgages
serviced for FHLMC requires it to report. (Section 3.19)
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Each Pooling Agreement will also provide for delivery (on or before a
specified date in each year) to the Trustee of an annual statement signed by an
officer of the Master Servicer to the effect that the Master Servicer has
fulfilled in all material respects its obligations under the Pooling Agreement
throughout the preceding year or, if there has been a material default in the
fulfillment of any such obligation, such statement shall specify each such known
default and the nature and status thereof. Such statement may be provided as a
single form making the required statements as to more than one Pooling
Agreement. (Section 3.18)
Copies of the annual statement of the Master Servicer may be obtained by
Certificateholders without charge upon written request to the Trustee.
CERTAIN MATTERS REGARDING THE MASTER SERVICER AND THE DEPOSITOR
The Pooling Agreement for each Series of Certificates will provide that the
Master Servicer may not resign from its obligations and duties thereunder except
upon a determination that performance of such duties is no longer permissible
under applicable law or except in connection with a permitted transfer of
servicing. No such resignation will become effective until the Trustee or a
successor servicer has assumed the Master Servicer's obligations and duties
under the Pooling Agreement. (Section 6.04)
Each Pooling Agreement will also provide that, except as set forth below,
neither the Master Servicer, the Depositor, nor any director, officer, employee
or agent of the Master Servicer or the Depositor will be under any liability to
the Trust Fund or the Certificateholders for any action taken or for refraining
from the taking of any action in good faith pursuant to the Pooling Agreement,
or for errors in judgment; provided, however, that neither the Master Servicer,
the Depositor, nor any such person will be protected against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties thereunder. Each Pooling Agreement will further provide
that the Master Servicer, the Depositor, and any director, officer, employee or
agent of the Master Servicer or the Depositor is entitled to indemnification by
the Trust Fund and will be held harmless against any loss, liability or expense
incurred in connection with any legal action relating to the Pooling Agreement
or the related Series of Certificates, other than any loss, liability or expense
related to any specific Mortgage Loan or Mortgage Loans (except any such loss,
liability or expense otherwise reimbursable pursuant to the Pooling Agreement)
and any loss, liability or expense incurred by reason of willful misfeasance,
bad faith or gross negligence in the performance of duties thereunder or by
reason of reckless disregard of obligations and duties thereunder. In addition,
each Pooling Agreement will provide that neither the Master Servicer nor the
Depositor will be under any obligation to appear in, prosecute or defend any
legal or administrative action that is not incidental to its respective duties
under the Pooling Agreement and which in its opinion may involve it in any
expense or liability. The Master Servicer or the Depositor may, however, in its
discretion undertake any such action which it may deem necessary or desirable
with respect to the Pooling 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 Fund and the
Master Servicer or the Depositor, as the case may be, will be entitled to be
reimbursed therefor out of funds otherwise distributable to Certificateholders.
(Section 6.03)
Any person into which the Master Servicer may be merged or consolidated,
any person resulting from any merger or consolidation to which the Master
Servicer is a party or any person succeeding to the business of the Master
Servicer will be the successor of the Master Servicer under the Pooling
Agreement, provided that (i) such person is qualified to service mortgage loans
on behalf of FNMA or FHLMC and (ii) such merger, consolidation or succession
does not adversely affect the then-current rating of the Classes of Certificates
of the related Series that have been rated. In addition, notwithstanding the
prohibition on its resignation, the Master Servicer may assign its rights under
a Pooling Agreement to any person to whom the Master Servicer is transferring a
substantial portion of its mortgage servicing portfolio, provided clauses (i)
and (ii) above are satisfied and such person is reasonably satisfactory to the
Depositor and the Trustee. In the case of any such assignment, the Master
Servicer will be released from its obligations under such Pooling Agreement,
exclusive of liabilities and obligations incurred by it prior to the time of
such assignment. (Section 6.02)
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EVENTS OF DEFAULT
Events of Default under the Pooling Agreement in respect of a Series of
Certificates, unless otherwise specified in the Prospectus Supplement, will
include, without limitation, (i) any failure by the Master Servicer to make a
required deposit to the Certificate Account or, if the Master Servicer is the
Paying Agent, to distribute to the holders of any Class of Certificates of such
Series any required payment which continues unremedied for 5 days after the
giving of written notice of such failure to the Master Servicer by the Trustee
or the Depositor, or to the Master Servicer, the Depositor and the Trustee by
the holders of Certificates of such Class evidencing not less than 25% of the
aggregate Percentage Interests constituting such Class; (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 Agreement with respect to such Series
of Certificates which continues unremedied for 30 days (15 days in the case of a
failure to pay the premium for any insurance policy which is required to be
maintained under the Pooling Agreement) after the giving of written notice of
such failure to the Master Servicer by the Trustee or the Depositor, or to the
Master Servicer, the Depositor and the Trustee by the holders of any Class of
Certificates of such Series evidencing not less than 25% of the aggregate
Percentage Interests constituting such Class; and (iii) certain events of
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings regarding the Master Servicer and certain actions by the
Master Servicer indicating its insolvency or inability to pay its obligations.
(Section 7.01)
RIGHTS UPON EVENT OF DEFAULT
So long as an Event of Default remains unremedied, either the Depositor or
the Trustee may, and at the direction of the holders of Certificates evidencing
not less than 51% of the aggregate undivided interests (or, if so specified in
the related Prospectus Supplement, voting rights) in the related Trust Fund
(except as otherwise provided for in the related Pooling Agreement with respect
to the Credit Enhancer) the Trustee shall, by written notification to the Master
Servicer and to the Depositor or the Trustee, as applicable, terminate all of
the rights and obligations of the Master Servicer under the Pooling Agreement
covering such Trust Fund and in and to the Mortgage Loans and the proceeds
thereof, whereupon the Trustee or, upon notice to the Depositor and with the
Depositor's consent, its designee will succeed to all responsibilities, duties
and liabilities of the Master Servicer under such Pooling Agreement and will be
entitled to similar compensation arrangements. In the event that the Trustee
would be obligated to succeed the Master Servicer but is unwilling so to act, it
may appoint (or if it is unable so to act, it shall appoint) or petition a court
of competent jurisdiction for the appointment of, a FNMA- or FHLMC-approved
mortgage servicing institution with a net worth of at least $10,000,000 to act
as successor to the Master Servicer under the Pooling Agreement (unless
otherwise set forth in the Pooling Agreement). Pending such appointment, the
Trustee is obligated to act in such capacity. The Trustee and such successor may
agree upon the servicing compensation to be paid, which in no event may be
greater than the compensation to the initial Master Servicer under the Pooling
Agreement. (Sections 7.01 and 7.02)
No Certificateholder will have any right under a Pooling Agreement to
institute any proceeding with respect to such Pooling Agreement (except as
otherwise provided for in the related Pooling Agreement with respect to the
Credit Enhancer) unless such holder previously has given to the Trustee written
notice of default and the continuance thereof and unless the holders of
Certificates of any Class evidencing not less than 25% of the aggregate
Percentage Interests constituting such Class 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
after receipt of such request and indemnity has neglected or refused to
institute any such proceeding. (Section 11.03) However, the Trustee will be
under no obligation to exercise any of the trusts or powers vested in it by the
Pooling Agreement or to institute, conduct or defend any litigation thereunder
or in relation thereto at the request, order or direction of any of the holders
of Certificates covered by such Pooling Agreement, unless such
Certificateholders have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred therein or
thereby. (Section 8.02)
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AMENDMENT
Each Pooling Agreement may be amended by the Depositor, the Master Servicer
and the Trustee, without the consent of any of the holders of Certificates
covered by such Pooling Agreement, (i) to cure any ambiguity, (ii) to correct or
supplement any provision therein which may be inconsistent with any other
provision therein or to correct any error, (iii) to change the timing and/or
nature of deposits in the Custodial Account or the Certificate Account or to
change the name in which the Custodial Account is maintained; provided that (a)
the Certificate Account Deposit Date would in no event be later than the related
Distribution Date, (b) such change would not adversely affect in any material
respect the interests of any Certificateholder, as evidenced by an opinion of
counsel, and (c) such change would not adversely affect the then-current rating
of any rated Classes of Certificates, as evidenced by a letter from each
applicable Rating Agency, (iv) if a REMIC election has been made with respect to
the related Trust Fund, to modify, eliminate or add to any of its provisions (A)
to such extent as shall be necessary to maintain the qualification of the Trust
Fund as a REMIC or to avoid or minimize the risk of imposition of any tax on the
related Trust Fund, provided that the Trustee has received an Opinion of Counsel
to the effect that (a) such action is necessary or desirable to maintain such
qualification or to avoid or minimize such risk, and (b) such action will not
adversely affect in any material respect the interests of any holder of
Certificates covered by the Pooling Agreement, or (B) to restrict the transfer
of the REMIC Residual Certificates, provided that the Depositor has determined
that the then-current ratings of the Classes of the Certificates that have been
rated will not be adversely affected, as evidenced by a letter from each
applicable Rating Agency, and that any such amendment will not give rise to any
tax with respect to the transfer of the REMIC Residual Certificates to a
non-Permitted Transferee, (v) to make any other provisions with respect to
matters or questions arising under such Pooling Agreement which are not
materially inconsistent with the provisions thereof, provided that such action
will not adversely affect in any material respect the interests of any
Certificateholder, or (vi) to amend specified provisions that are not material
to holders of any Class of Certificates offered hereunder.
The Pooling Agreement may also be amended by the Depositor, the Master
Servicer and the Trustee (except as otherwise provided for in the related
Pooling Agreement with respect to the Credit Enhancer) with the consent of the
holders of Certificates of each Class affected thereby evidencing, in each case,
not less than 66% of the aggregate Percentage Interests constituting such Class
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of such Pooling Agreement or of modifying in
any manner the rights of the holders of Certificates covered by such Pooling
Agreement, except that no such amendment may (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 a Certificate of any Class without the consent of
the holder of such Certificate or (ii) 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 covered by such Pooling Agreement then outstanding.
Notwithstanding the foregoing, if a REMIC election has been made with
respect to the related Trust Fund, the Trustee will not be entitled to consent
to any amendment to a Pooling Agreement without having first received an Opinion
of Counsel to the effect that such amendment or the exercise of any power
granted to the Master Servicer, the Depositor or the Trustee in accordance with
such amendment will not result in the imposition of a tax on the related Trust
Fund or cause such Trust Fund to fail to qualify as a REMIC. (Section 11.01)
TERMINATION; RETIREMENT OF CERTIFICATES
The obligations created by the Pooling Agreement for each Series of
Certificates (other than certain limited payment and notice obligations of the
Trustee and the Depositor, respectively) will terminate upon the payment to
Certificateholders of that Series of all amounts held in the Certificate Account
or by the Master Servicer and required to be paid to them pursuant to such
Pooling Agreement following the earlier of (i) the final payment or other
liquidation or disposition (or any advance with respect thereto) of the last
Mortgage Loan subject thereto and all property acquired upon foreclosure or deed
in lieu of foreclosure of any such Mortgage Loan and (ii) the purchase by the
Master Servicer or the Depositor or, if specified in the related Prospectus
Supplement, by the holder of the REMIC Residual Certificates (see "CERTAIN
FEDERAL
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INCOME TAX CONSEQUENCES" below) from the Trust Fund for such Series of all
remaining Mortgage Loans and all property acquired in respect of such Mortgage
Loans. In no event, however, will the trust created by the Pooling Agreement
continue beyond the expiration of 21 years from the death of the survivor of
certain persons named in such Pooling Agreement. Written notice of termination
of the Pooling Agreement will be given 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 Trustee which will be
specified in the notice of termination. (Section 9.01) If the Certificateholders
are permitted to terminate the trust under the applicable Pooling Agreement, a
penalty may be imposed upon the Certificateholders based upon the fee that would
be foregone by the Master Servicer because of such termination.
Any such purchase of Mortgage Loans and property acquired in respect of
Mortgage Loans evidenced by a Series of Certificates shall be made at the option
of the Master Servicer or the Depositor or, if applicable, the holder of the
REMIC Residual Certificates at the price specified in the related Prospectus
Supplement. The exercise of such right will effect early retirement of the
Certificates of that Series, but the right of the Master Servicer or the
Depositor or, if applicable, such holder to so purchase is subject to the
aggregate principal balance of the Mortgage Loans for that Series as of the
Distribution Date on which the purchase proceeds are to be distributed to
Certificateholders being less than the percentage specified in the related
Prospectus Supplement of the aggregate principal balance of the Mortgage Loans
at the Cut-off Date for that Series. The Prospectus Supplement for each Series
of Certificates will set forth the amounts that the holders of such Certificates
will be entitled to receive upon such early retirement. Such early termination
may adversely affect the yield to holders of certain Classes of such
Certificates. If a REMIC election has been made, the termination of the related
Trust Fund will be effected in a manner consistent with applicable federal
income tax regulations and its status as a REMIC. (Sections 9.01 and 9.02)
THE TRUSTEE
The Trustee under each Pooling Agreement will be named in the related
Prospectus Supplement. The commercial bank or trust company serving as Trustee
may have normal banking relationships with the Depositor and/or its affiliates,
including Bank of America NT&SA or Bank of America, FSB.
The Trustee may resign at any time, in which event the Depositor will be
obligated to appoint a successor Trustee. The Depositor may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Pooling Agreement or if the Trustee becomes insolvent. Upon becoming aware of
such circumstances, the Depositor will be obligated to appoint a successor
Trustee. The Trustee may also be removed at any time by the holders of
Certificates evidencing not less than 51% of the aggregate undivided interests
(or, if so specified in the related Prospectus Supplement, voting rights) in the
related Trust Fund. Any resignation or removal of the Trustee and appointment of
a successor Trustee will not become effective until acceptance of the
appointment by the successor Trustee. (Section 8.07)
YIELD CONSIDERATIONS
The yield to maturity of a Certificate will depend on the price paid by the
holder for such Certificate, the Pass-Through Rate on any such Certificate
entitled to payments of interest (which Pass-Through Rate may vary if so
specified in the related Prospectus Supplement) and the rate and timing of
principal payments (including prepayments, defaults, liquidations and
repurchases) on the Mortgage Loans and the allocation thereof to reduce the
principal balance of such Certificate (or notional amount thereof if applicable)
and other factors.
Each monthly interest payment on a Mortgage Loan will be calculated as
one-twelfth of the applicable Mortgage Rate multiplied by the principal balance
of such Mortgage Loan outstanding as of the first day of the month prior to the
month in which the Distribution Date for the related Series of Certificates
occurs, after giving effect to the payment of principal due on such first day,
subject to any Deferred Interest. The amount of such payments with respect to
each Mortgage Loan distributed (or accrued in the case of Deferred Interest or
Accrual Certificates) monthly to holders of a Class of Certificates entitled to
payments of interest will be similarly calculated on the basis of such Class's
specified percentage of each such payment of interest (or
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accrual in the case of Accrual Certificates) and will be expressed as a fixed,
adjustable or variable Pass-Through Rate payable on the outstanding principal
balance or notional amount of such Certificate, or any combination of such
Pass-Through Rates, calculated as described herein and in the related Prospectus
Supplement. Holders of Strip Certificates or a Class of Certificates having a
Pass-Through Rate that varies based on the weighted average Mortgage Rate of the
underlying Mortgage Loans will be affected by disproportionate prepayments and
repurchases of Mortgage Loans having higher Net Mortgage Rates or rates
applicable to the Strip Certificates, as applicable.
The effective yield to maturity to each holder of Certificates entitled to
payments of interest will be below that otherwise produced by the applicable
Pass-Through Rate and purchase price of such Certificate because, while interest
will accrue on each Mortgage Loan from the first day of each month, the
distribution of such interest will be made on the 25th day (or, if such day is
not a business day, the next succeeding business day) of the month following the
month of accrual.
A Class of Certificates may be entitled to payments of interest at a fixed
Pass-Through Rate, a variable Pass-Through Rate or adjustable Pass-Through Rate,
or any combination of such Pass-Through Rates, each as specified in the related
Prospectus Supplement. A variable Pass-Through Rate may be calculated based on
the weighted average of the Mortgage Rates (net of servicing fees and any
Retained Yield (each, a "Net Mortgage Rate")) of the related Mortgage Loans for
the month preceding the Distribution Date if so specified in the related
Prospectus Supplement. As will be described in the related Prospectus
Supplement, the aggregate payments of interest on a Class of Certificates, and
the yield to maturity thereon, will be affected by the rate of payment of
principal on the Certificates (or the rate of reduction in the notional balance
of Certificates entitled only to payments of interest) and, in the case of
Certificates evidencing interests in ARM Loans or Net 5 Loans, by changes in the
Net Mortgage Rates on the ARM Loans or Net 5 Loans, as applicable. See "MATURITY
AND PREPAYMENT CONSIDERATIONS" below. The yield on the Certificates will also be
affected by liquidations of Mortgage Loans following Mortgagor defaults and by
purchases of Mortgage Loans in the event of breaches of representations made in
respect of such Mortgage Loans by the Sellers, or conversions of ARM Loans to a
fixed interest rate. See "MORTGAGE LOAN PROGRAM -- Representations and
Warranties by Sellers" and "Descriptions of the Certificates -- Assignment of
Mortgage Loans" above.
In general, if a Class of Certificates is purchased at initial issuance at
a premium and payments of principal on the related Mortgage Loans occur at a
rate faster than anticipated at the time of purchase, the purchaser's actual
yield to maturity will be lower than that assumed at the time of purchase.
Conversely, if a Class of Certificates is purchased at initial issuance at a
discount and payments of principal on the related Mortgage Loans occur at a rate
slower than that assumed at the time of purchase, the purchaser's actual yield
to maturity will be lower than that originally anticipated. The effect of
principal prepayments, liquidations and purchases on yield will be particularly
significant in the case of a Series of Certificates having a Class entitled to
payments of interest only or to payments of interest that are disproportionately
high relative to the principal payments to which such Class is entitled. Such a
Class will likely be sold at a substantial premium to its principal balance and
any faster than anticipated rate of prepayments will adversely affect the yield
to holders thereof. In certain circumstances extremely rapid prepayments may
result in the failure of such holders to recoup their original investment. In
addition, the yield to maturity on certain other types of Classes of
Certificates, including Accrual Certificates, Certificates with a Pass-Through
Rate which fluctuates inversely with or at a multiple of an index or certain
other Classes in a Series including more than one Class of Certificates, may be
relatively more sensitive to the rate of prepayment on the related Mortgage
Loans than other Classes of Certificates.
The timing of changes in the rate of principal payments on or repurchases
of the Mortgage Loans may significantly affect an investor's actual yield to
maturity, even if the average rate of principal payments experienced over time
is consistent with an investor's expectation. In general, the earlier a
prepayment of principal on the underlying Mortgage Loans or a repurchase
thereof, the greater will be the effect on an investor's yield to maturity. As a
result, the effect on an investor's yield of principal payments and repurchases
occurring at a rate higher (or lower) than the rate anticipated by the investor
during the period immediately
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following the issuance of a Series of Certificates would not be fully offset by
a subsequent like reduction (or increase) in the rate of principal payments.
When a full prepayment is made on a Mortgage Loan, the Mortgagor is charged
interest on the principal amount of the Mortgage Loan so prepaid for the number
of days in the month actually elapsed up to the date of the prepayment, at a
daily rate determined by dividing the Mortgage Rate by 365. Unless otherwise
specified in the related Prospectus Supplement, the effect of prepayments in
full will be to reduce the amount of interest paid in the following month to
holders of Certificates entitled to payments of interest because interest on the
principal amount of any Mortgage Loan so prepaid will be paid only to the date
of prepayment rather than for a full month. Unless otherwise specified in the
related Prospectus Supplement, a partial prepayment of principal is applied so
as to reduce the outstanding principal balance of the related Mortgage Loan as
of the first day of the month in which such partial prepayment is received. As a
result, unless otherwise specified in the related Prospectus Supplement, the
effect of a partial prepayment on a Mortgage Loan will be to reduce the amount
of interest passed through to holders of Certificates in the month following the
receipt of such partial prepayment by an amount equal to one month's interest at
the applicable Pass-Through Rate or Net Mortgage Rate, as the case may be, on
the prepaid amount. Neither full nor partial principal prepayments are passed
through until the month following receipt. See "MATURITY AND PREPAYMENT
CONSIDERATIONS."
The rate of defaults on the Mortgage Loans will also affect the rate and
timing of principal payments on the Mortgage Loans and thus the yield on the
Certificates. In general, defaults on mortgage loans are expected to occur with
greater frequency in their early years. The rate of default on Mortgage Loans
which are refinance mortgage loans, and on Mortgage Loans with high
Loan-to-Value Ratios, may be higher than for other types of Mortgage Loans.
Furthermore, the rate and timing of prepayments, defaults and liquidations on
the Mortgage Loans will be affected by the general economic condition of the
region of the country in which the related Mortgaged Properties are located. The
risk of delinquencies and loss is greater and prepayments are less likely in
regions where a weak or deteriorating economy exists, as may be evidenced by,
among other factors, increasing unemployment or falling property values.
For each Mortgage Pool, if all necessary advances are made and if there is
no unrecoverable loss on any Mortgage Loan, the net effect of each distribution
respecting interest will be to pass-through to each holder of a Class of
Certificates entitled to payments of interest an amount which is equal to one
month's interest at the applicable Pass-Through Rate on such Class's principal
balance or notional balance, as adjusted downward to reflect any decrease in
interest caused by any principal prepayments and the addition of any Deferred
Interest to the principal balance of any Mortgage Loan. See "DESCRIPTION OF THE
CERTIFICATE -- Principal and Interest on the Certificates."
MATURITY AND PREPAYMENT CONSIDERATIONS
As indicated above under "THE MORTGAGE POOLS," the original terms to
maturity of the Mortgage Loans in a given Mortgage Pool will vary depending upon
the type of Mortgage Loans included in such Mortgage Pool. The Prospectus
Supplement for a Series of Certificates will contain information with respect to
the types and maturities of the Mortgage Loans in the related Mortgage Pool.
Unless otherwise specified in the related Prospectus Supplement, all of the
Mortgage Loans may be prepaid without penalty in full or in part at any time.
The prepayment experience of the Mortgage Loans in a Mortgage Pool will affect
the life and yield of the related Series of Certificates.
With respect to Balloon Loans, payment of the Balloon Amount (which, based
on the amortization schedule of such Mortgage Loans, is expected to be a
substantial amount) will generally depend on the Mortgagor's ability to obtain
refinancing of such Mortgage Loans or to sell the Mortgaged Property prior to
the maturity of the Balloon Loan. The ability to obtain refinancing will depend
on a number of factors prevailing at the time refinancing or sale is required,
including, without limitation, real estate values, the Mortgagor's financial
situation, prevailing mortgage loan interest rates, the Mortgagor's equity in
the related Mortgaged Property, tax laws and prevailing general economic
conditions. Neither the Seller or the Depositor,
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Bank of America NT&SA, Bank of America, FSB nor any of their affiliates will be
obligated to refinance or repurchase any Mortgage Loan or to sell the Mortgaged
Property.
A number of factors, including homeowner mobility, economic conditions,
enforceability of due-on-sale clauses, mortgage market interest rates,
solicitations and the availability of mortgage funds, affect prepayment
experience. Unless otherwise specified in the related Prospectus Supplement, all
Mortgage Loans (other than ARM Loans) will contain due-on-sale provisions
permitting the mortgagee to accelerate the maturity of the Mortgage Loan upon
sale or certain transfers by the Mortgagor of the underlying Mortgaged Property.
Unless the related Prospectus Supplement indicates otherwise, the Master
Servicer will generally enforce any due-on-sale clause to the extent it has
knowledge of the conveyance or proposed conveyance of the underlying Mortgaged
Property and it is entitled to do so under applicable law, provided, however,
that the Master Servicer will not take any action in relation to the enforcement
of any due-on-sale provision which would adversely affect or jeopardize coverage
under any applicable insurance policy. An ARM Loan is assumable under certain
conditions if the proposed transferee of the related Mortgaged Property
establishes its ability to repay the Mortgage Loan and, in the reasonable
judgment of the Master Servicer or any related Subservicer, the security for the
ARM Loan would not be impaired by the assumption. The extent to which ARM Loans
are assumed by purchasers of the Mortgaged Properties rather than prepaid by the
related Mortgagors in connection with the sales of the Mortgaged Properties will
affect the weighted average life of the related Series of Certificates. See
"DESCRIPTION OF THE CERTIFICATES -- Collection and Other Servicing Procedures"
and "Certain Legal Aspects of the Mortgage Loans and Related
Matters -- Enforceability of Certain Provisions" for a description of certain
provisions of the Pooling Agreement and certain legal developments that may
affect the prepayment experience on the Mortgage Loans.
At the request of the Mortgagor, the Master Servicer may allow the
refinancing of a Mortgage Loan in any Trust Fund by accepting prepayments
thereon and permitting a new loan secured by a mortgage on the same property. In
the event of such a refinancing, the new loan would not be included in the
related Trust Fund and, therefore, such refinancing would have the same effect
as a prepayment in full of the related Mortgage Loan. The Master Servicer may,
from time to time, implement programs designed to encourage refinancing. Such
programs may include, without limitation, modifications of existing loans,
general or targeted solicitations, the offering of pre-approved applications,
reduced origination fees or closing costs, or other financial incentives. In
addition, the Master Servicer may encourage the refinancing of Mortgage Loans,
including defaulted Mortgage Loans, that would permit creditworthy borrowers to
assume the outstanding indebtedness of such Mortgage Loans.
All statistics known to the Depositor that have been compiled with respect
to prepayment experience on mortgage loans indicate that while some mortgage
loans may remain outstanding until their stated maturities, a substantial number
will be paid prior to their respective stated maturities.
Although the Mortgage Rates on ARM Loans and Net 5 Loans will be subject to
periodic adjustments, such adjustments generally will, unless otherwise
specified in the related Prospectus Supplement, (i) not increase or decrease
such Mortgage Rates by more than a stated percentage amount on each adjustment
date, (ii) not increase such Mortgage Rates over a fixed percentage amount
during the life of any ARM Loan and (iii) be based on an index (which may not
rise and fall consistently with mortgage interest rates) plus the related Note
Margin (which may be different from margins being used at the time for newly
originated adjustable rate mortgage loans). As a result, the Mortgage Rates on
the ARM Loans or Net 5 Loans, as applicable, in a Mortgage Pool at any time may
not equal the prevailing rates for similar, newly originated mortgage loans. In
certain rate environments, the prevailing rates on fixed-rate mortgage loans may
be sufficiently low in relation to the then-current Mortgage Rates on ARM Loans
or Net 5 Loans that the rate of prepayment may increase as a result of
refinancings. There can be no certainty as to the rate of prepayments on the
Mortgage Loans during any period or over the life of any Series of Certificates.
Under certain circumstances, the Master Servicer or the Depositor or, if
specified in the related Prospectus Supplement, the holders of the REMIC
Residual Certificates may have the option to purchase the Mortgage Loans in a
Trust Fund. See "THE POOLING AGREEMENT -- Termination; Retirement of
Certificates."
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CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND RELATED MATTERS
The following discussion contains summaries of certain legal aspects of
mortgage loans that are general in nature. Because such legal aspects are
governed in part by state law (which laws may differ substantially from state to
state), the summaries do not purport to be complete, to reflect the laws of any
particular state or to encompass the laws of all states in which the Mortgaged
Properties may be 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 be secured by either deeds of trust or mortgages,
depending upon the prevailing practice in the state in which the related
Mortgaged Property is located. In some states, a mortgage or deed of trust
creates a lien upon the real property encumbered by the mortgage. In other
states, the mortgage or deed of trust conveys legal title to the property to the
mortgagee subject to a condition subsequent (i.e., the payment of the
indebtedness secured thereby). It is not prior to the lien for real estate taxes
and assessments and other charges imposed under governmental police powers.
Priority with respect to such instruments depends on their terms and in some
cases on the terms of separate subordination or inter-creditor agreements, and
generally on the order of recordation of the mortgage in the appropriate
recording office. There are two parties to a mortgage, the mortgagor, who is the
borrower and homeowner, and the mortgagee, who is the lender. Under the mortgage
instrument, the mortgagor delivers to the mortgagee a note or bond and the
mortgage. In the case of a land trust, there are three parties because title to
the property is held by a land trustee under a land trust agreement of which the
borrower is the beneficiary; at origination of a mortgage loan, the borrower
executes a separate undertaking to make payments on the mortgage note. Although
a deed of trust is similar to a mortgage, a deed of trust has three parties: the
trustor, who is the borrower/homeowner; the beneficiary, who is the lender; 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 obligation. The
trustee's authority under a deed of trust and the mortgagee's authority under a
mortgage are governed by the law of the state in which the real property is
located, the express provisions of the deed of trust or mortgage and, in certain
deed of trust transactions, the directions of the beneficiary.
FORECLOSURE
Although a deed of trust may also be foreclosed by judicial action,
foreclosure of a deed of trust is generally accomplished by a nonjudicial
trustee's sale under a specific provision in the deed of trust which authorizes
the trustee to sell the property upon any default by the borrower under the
terms of the note or deed of trust. In addition to any notice requirements
contained in a deed of trust, 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 notice of default and notice of sale. In
addition, in some states, the trustee must provide notice 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 a specified
period, a notice of sale must be posted in a public place and, in most states,
published for a specific period of time in one or more newspapers. In addition,
some states' 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 real
property.
Foreclosure of a mortgage generally is 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 may result from difficulties in locating and serving
necessary parties, including borrowers located outside the jurisdiction in which
the mortgaged property is located. If the mortgagee's right to foreclose is
contested, the legal proceedings necessary to resolve the issue can be
time-consuming.
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,
in such states, 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.
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In the case of foreclosure under either a mortgage or a deed of trust, the
sale by the referee or other designated officer or by the trustee generally 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 a
foreclosure sale. Rather, it is common for the lender to purchase the property
from the trustee or referee for a credit bid less than or equal to the unpaid
principal amount of the mortgage or deed of trust, accrued and unpaid interest
and the expense of foreclosure. Generally, state law controls the amount of
foreclosure costs and expenses, including attorneys' fees, which may be
recovered by a lender. 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. Generally, the lender will obtain the services of a real estate broker
and pay the broker's 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 and, in some
states, the lender may be entitled to a deficiency judgment. Any loss may be
reduced by the receipt of any mortgage insurance proceeds or other forms of
credit enhancement for a Series of Certificates. See "DESCRIPTION OF CREDIT
ENHANCEMENTS."
RIGHTS OF REDEMPTION
In some states, after sale pursuant to a deed of trust or foreclosure of a
mortgage, the borrower and foreclosed junior lienors or other parties are given
a statutory period (generally ranging from six months to two years) in which to
redeem the property from the foreclosure sale. In some states, redemption may
occur only upon payment of the entire principal balance of the loan, accrued
interest and expenses of foreclosure. In other states, redemption may be
authorized if the former borrower pays only a portion of the sums due. The
effect of a statutory right of redemption is to diminish the ability of the
lender to sell the foreclosed property. The rights of redemption would defeat
the title of any purchaser subsequent to 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 expired.
ANTI-DEFICIENCY LEGISLATION 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 (including California), statutes limit the right of the beneficiary or
mortgagee to obtain a deficiency judgment against the borrower following
foreclosure. A deficiency judgment is 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. In
the case of a Mortgage Loan secured by a property owned by a trust where the
Mortgage Note is executed on behalf of the trust, a deficiency judgment against
the trust following foreclosure or sale under a deed of trust, even if
obtainable under applicable law, may be of little value to the mortgagee or
beneficiary if there are no trust assets against which such deficiency judgment
may be executed. Some state 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. In certain other states, the lender has the option of bringing a
personal action against the borrower on the debt without first exhausting such
security; however in some of these states, the lender, following judgment on
such personal action, may be deemed to have elected a remedy and may be
precluded from exercising remedies with respect to the security. Consequently,
the practical effect of the election requirement, in those states permitting
such election, is that lenders will usually proceed against the security first
rather than bringing a personal action against the borrower.
Finally, in certain other states, statutory provisions limit any deficiency
judgment against the borrower following a foreclosure to the excess of the
outstanding debt over the fair value of the property at the time of the public
sale. The purpose of these statutes is generally to prevent a beneficiary or
mortgagee from obtaining a large deficiency judgment against the former borrower
as a result of low or no bids at the judicial sale.
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In addition to laws limiting or prohibiting deficiency judgments, numerous
other federal and state statutory provisions, including the federal bankruptcy
laws and state laws affording relief to debtors, may interfere with or affect
the ability of the secured mortgage lender to realize upon its collateral and/or
enforce a deficiency judgment. For example, under the federal bankruptcy law,
all actions against the debtor, the debtor's property and any co-debtor are
automatically stayed upon the filing of a bankruptcy petition. Moreover, a court
having federal bankruptcy jurisdiction may permit a debtor through its Chapter
11 or Chapter 13 rehabilitative plan to cure a monetary default in respect of a
mortgage loan on a debtor's residence by paying arrearages within a reasonable
time period and reinstating the original mortgage loan payment schedule, even
though the lender accelerated the mortgage loan and final judgment of
foreclosure had been entered in state court prior to the filing of the debtor's
petition. Some courts with federal bankruptcy jurisdiction have approved plans,
based on the particular facts of the reorganization case, that effected the
curing of a mortgage loan default by paying arrearages over a number of years.
Courts with federal bankruptcy jurisdiction have also indicated that the
terms of a mortgage loan secured by property which is not the principal
residence of the debtor may be modified. These courts have allowed modifications
that include reducing the amount of each monthly payment, changing the rate of
interest, altering the repayment schedule, forgiving all or a portion of the
debt and reducing the lender's security interest to the value of the residence,
thus leaving the lender a general unsecured creditor for the difference between
the value of the residence and the outstanding balance of the loan. Generally,
however, the terms of a mortgage loan secured only by a mortgage on real
property that is the debtor's principal residence may not be modified pursuant
to a plan confirmed pursuant to Chapter 11 or Chapter 13 except with respect to
mortgage payment arrearages, which may be cured within a reasonable time period.
Certain tax liens arising under the Code may, in certain circumstances,
have priority over the lien of a mortgage or deed of trust. This may have the
effect of delaying or interfering with the enforcement of rights with respect to
a defaulted Mortgage Loan. 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 Truth-in-Lending Act, Real Estate Settlement
Procedures Act, Equal Credit Opportunity Act, Fair Credit Billing Act, Fair
Credit Reporting Act and related statutes. These laws impose specific statutory
liabilities upon lenders who originate mortgage loans and who fail to comply
with the provisions of the law. In some cases, this liability may affect
assignees of the mortgage loans.
ENVIRONMENTAL LEGISLATION
Real property pledged as security to a lender may be subject to unforeseen
environmental risks. Most environmental statutes create obligations for any
party that can be classified as the "owner" or "operator" of a "facility"
(referring to both operating facilities and to real property). Under the laws of
some states and under the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, a lender may be liable, as an "owner" or
"operator," for costs arising out of releases or threatened releases of
hazardous substances that require remedy at a mortgaged property, if agents or
employees of the lender have become sufficiently involved in the operations of
the borrower or, subsequent to a foreclosure, in the management of the property.
Such liability may arise regardless of whether the environmental damage or
threat was caused by a prior owner.
Under federal and certain state laws, contamination of a property may give
rise to a lien on the property to assure the payment of clean-up costs. Under
federal law and in several states, such a lien has priority over the lien of an
existing mortgage against such property. If a lender is or becomes directly
liable for environmental remediation as an "owner" following a foreclosure, it
may be precluded from bringing an action for contribution against the owner or
operator who created the environmental hazard. Such clean-up costs may be
substantial. It is possible that such costs could become a liability of the
related Trust Fund and occasion a loss to Certificateholders in certain
circumstances described above if such remedial costs were incurred.
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Except as otherwise specified in the applicable Prospectus Supplement, at
the time the Mortgage Loans were originated, no environmental assessment or a
very limited environment assessment of the Mortgaged Properties will have been
conducted.
ENFORCEABILITY OF CERTAIN PROVISIONS
Unless the Prospectus Supplement indicates otherwise, the Mortgage Loans
generally contain due-on sale clauses. These clauses permit the lender to
accelerate the maturity of the loan if the borrower sells, transfers or conveys
the property. The enforceability of these clauses has been the subject of
legislation or litigation in many states, and in some cases the enforceability
of these clauses was limited or denied. However, the Garn-St Germain Depository
Institutions Act of 1982 (the "Garn-St Germain Act") preempts state
constitutional, statutory and case law that prohibit the enforcement of
due-on-sale clauses and permits lenders to enforce these clauses in accordance
with their terms, subject to certain limited exceptions. The Garn-St Germain Act
does "encourage" lenders to permit assumption of loans at the original rate of
interest or at some other rate less than the average of the original rate and
the market rate.
The Garn-St Germain Act also sets forth nine specific instances in which a
mortgage lender covered by the Garn-St Germain Act may not exercise a
due-on-sale clause, notwithstanding the fact that a transfer of the mortgaged
property may have occurred. These include intra-family transfers, certain
transfers by operation of law, leases of fewer than three years and the creation
of a junior encumbrance. Regulations promulgated under the Garn-St Germain Act
also prohibit the imposition of a prepayment penalty upon the acceleration of a
loan pursuant to a due-on-sale clause.
The inability to enforce a due-on-sale clause may result in a mortgage loan
bearing an interest rate below the current market rate being assumed by a new
home buyer rather than being paid off, which may have an impact upon the average
life of the Mortgage Loans and the number of Mortgage Loans which may be
outstanding until maturity.
Upon foreclosure, courts have imposed general equitable principles. These
equitable principles are generally designed to relieve the borrower from the
legal effect of his defaults under the loan documents. Examples of judicial
remedies that have been 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 required that lenders reinstate
loans or recast payment schedules in order to accommodate borrowers who are
suffering from temporary financial disability. In other cases, courts have
limited the right of the lender 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. Finally, some courts have been faced with the issue of
whether or not federal or state constitutional provisions reflecting due process
concerns for adequate notice require that borrowers under deeds of trust or
mortgages receive notices in addition to the statutorily prescribed minimum. 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.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 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. A similar federal statute was in effect with
respect to mortgage loans made during the first three months of 1980. The Office
of Thrift Supervision 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. In addition, even where Title V is not so rejected, any
state is authorized by the law to adopt a provision limiting discount points or
other charges on
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mortgage loans covered by Title V. Certain states have taken action to reimpose
interest rate limits or to limit discount points or other charges.
As indicated above under "MORTGAGE LOAN PROGRAM -- Representations and
Warranties by Sellers," each Seller of a Mortgage Loan will have represented
that each Mortgage Loan sold by it was originated in compliance with then
applicable state laws, including usury laws, in all material respects. However,
the Mortgage Rates on the Mortgage Loans will be subject to applicable usury
laws as in effect from time to time.
ALTERNATIVE MORTGAGE INSTRUMENTS
Alternative mortgage instruments, including adjustable rate mortgage loans
and early ownership mortgage loans, originated by non-federally chartered
lenders have historically been subjected to a variety of restrictions. Such
restrictions differed from state to state, resulting in difficulties in
determining whether a particular alternative mortgage instrument originated by a
state-chartered lender was in compliance with applicable law. These difficulties
were alleviated substantially as a result of the enactment of Title VIII of the
Garn-St Germain Act ("Title VIII"). Title VIII provides that, notwithstanding
any state law to the contrary, (i) state-chartered banks may originate
alternative mortgage instruments in accordance with regulations promulgated by
the Comptroller of the Currency with respect to origination of alternative
mortgage instruments by national banks, (ii) state-chartered credit unions may
originate alternative mortgage instruments in accordance with regulations
promulgated by the National Credit Union Administration with respect to
origination of alternative mortgage instruments by federal credit unions and
(iii) all other non-federally chartered housing creditors, including
state-chartered savings and loan associations, state-chartered savings banks and
mutual savings banks and mortgage banking companies, may originate alternative
mortgage instruments in accordance with the regulations promulgated by the
Federal Home Loan Bank Board, predecessor to the Office of Thrift Supervision,
with respect to origination of alternative mortgage instruments by federal
savings and loan associations. Title VIII provides that any state may reject
applicability of the provisions of Title VIII by adopting, prior to October 15,
1985, a law or constitutional provision expressly rejecting the applicability of
such provisions. Certain states have taken such action.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
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 was in
reserve status and is called to active duty after origination of the mortgage
loan), may not be charged interest (including fees and charges) 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. The Relief Act applies to
borrower who are members of the Army, Navy, Air Force, Marines, National Guard,
Reserves, Coast Guard, and officers of the U.S. Public Health Service assigned
to duty with the military. Because the Relief Act applies to borrowers who enter
military service (including reservists who are called to active duty) after
origination of the related mortgage loan, no information can be provided as to
the number of mortgage loans that may be affected by the Relief Act. With
respect to Mortgage Loans included in a Trust Fund, application of the Relief
Act would adversely affect, for an indeterminate period of time, the ability of
the Master Servicer to collect full amounts of interest on certain of the
Mortgage Loans. Any shortfall in interest collections resulting from the
application of the Relief Act or similar legislation or regulations, which would
not be recoverable from the related Mortgage Loans, would result in a reduction
of the amounts distributable to the holders of the related Certificates, and
would not be covered by Advances or any form of credit enhancement provided in
connection with the related Series of Certificates. In addition, the Relief Act
imposes limitations that would impair the ability of the Master Servicer to
foreclose on an affected Mortgage Loan during the Mortgagor's period of active
duty status, and, under certain circumstances, during an additional three month
period thereafter. Thus, in the event that the Relief Act or similar legislation
or regulations applies to any Mortgage Loan which goes into default, there may
be delays in payment and losses on the related Certificates in connection
therewith. Any other interest shortfalls, deferrals or forgiveness of
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payments on the Mortgage Loans resulting from similar legislation or regulations
may result in delays in payments or losses to Certificateholders of the related
Series.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general discussion of certain anticipated material
federal income tax consequences of the purchase, ownership and disposition of
the Certificates offered hereunder. This discussion is directed solely to
Certificateholders that hold the Certificates as capital assets within the
meaning of Section 1221 of the Code and does not purport to discuss all federal
income tax consequences that may be applicable to particular categories of
investors, some of which (such as banks, insurance companies and foreign
investors) may be subject to special rules. Further, the authorities on which
this discussion, and the opinion referred to below, are based are subject to
change or differing interpretations, which could apply retroactively. Taxpayers
and preparers of tax returns (including those filed by any REMIC or other
issuer) should be aware that under applicable Treasury regulations a provider of
advice on specific issues of law is not considered an income tax return preparer
unless the advice (i) is given with respect to events that have occurred at the
time the advice is rendered and is not given with respect to the consequences of
contemplated actions, and (ii) is directly relevant to the determination of an
entry on a tax return. Accordingly, taxpayers should consult their own tax
advisors and tax return preparers regarding the preparation of any item on a tax
return, even where the anticipated tax treatment has been discussed herein. In
addition to the federal income tax consequences described herein, potential
investors should consider the state and local tax consequences, if any, of the
purchase, ownership and disposition of the Certificates. See "STATE AND OTHER
TAX CONSEQUENCES." Certificateholders are advised to consult their own tax
advisors concerning the federal, state, local or other tax consequences to them
of the purchase, ownership and disposition of the Certificates offered
hereunder.
The following discussion addresses securities of two general types: (i)
certificates ("Grantor Trust Certificates") representing interests in a Trust
Fund ("Grantor Trust Fund") which the Master Servicer will covenant not to elect
to have treated as a real estate mortgage investment conduit ("REMIC"), and (ii)
certificates ("REMIC Certificates") representing interests in a Trust Fund, or a
portion thereof, which the Master Servicer will covenant to elect to have
treated as a REMIC under Sections 860A through 860G (the "REMIC Provisions") of
the Code. The Prospectus Supplement for each Series of Certificates will
indicate whether a REMIC election (or elections) will be made for the related
Trust Fund and, if such an election is to be made, will identify all "regular
interests" and "residual interests" in the REMIC. For purposes of this tax
discussion, references to a "Certificateholder" or a "holder" are to the
beneficial owner of a Certificate.
The following discussion is based in part upon the rules governing original
issue discount that are set forth in Sections 1271-1273 and 1275 of the Code and
in the Treasury regulations issued thereunder (the "OID Regulations"), and in
part upon the REMIC Provisions and the Treasury regulations issued thereunder
(the "REMIC Regulations"). The OID Regulations, which are effective with respect
to debt instruments issued on or after April 4, 1994, do not adequately address
certain issues relevant to, and in some instances provide that they are not
applicable to, securities such as the Certificates.
GRANTOR TRUST FUNDS
Classification of Grantor Trust Funds
With respect to each Series of Grantor Trust Certificates, Orrick,
Herrington & Sutcliffe, counsel to the Depositor, will deliver their opinion to
the effect that, assuming compliance with all provisions of the related Pooling
Agreement, the related Grantor Trust Fund will be Classified as a grantor trust
under subpart E, part I of subchapter J of the Code and not as a partnership or
an association taxable as a corporation. Accordingly, each holder of a Grantor
Trust Certificate generally will be treated as the owner of an interest in the
Mortgage Loans included in the Grantor Trust Fund.
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For purposes of the following discussion, a Grantor Trust Certificate
representing an undivided equitable ownership interest in the principal of the
Mortgage Loans constituting the related Grantor Trust Fund, together with
interest thereon at a pass-through rate, will be referred to as a "Grantor Trust
Fractional Interest Certificate." A Grantor Trust Certificate representing
ownership of all or a portion of the difference between interest paid on the
Mortgage Loans constituting the related Grantor Trust Fund (net of normal
administration fees and any Retained Yield) and interest paid to the holders of
Grantor Trust Fractional Interest Certificates issued with respect to such
Grantor Trust Fund will be referred to as a "Grantor Trust Strip Certificate." A
Grantor Trust Strip Certificate may also evidence a nominal ownership interest
in the principal of the Mortgage Loans constituting the related Grantor Trust
Fund.
CHARACTERIZATION OF INVESTMENTS IN GRANTOR TRUST CERTIFICATES
Grantor Trust Fractional Interest Certificates
In the case of Grantor Trust Fractional Interest Certificates, unless
otherwise disclosed in the related Prospectus Supplement and subject to the
discussion below with respect to Buydown Mortgage Loans, counsel to the
Depositor will deliver an opinion that, in general, Grantor Trust Fractional
Interest Certificates will represent interests in (i) "qualifying real property
loans" within the meaning of Section 593(d) of the Code; (ii)
"loans . . . secured by an interest in real property" within the meaning of
Section 7701(a)(19)(C)(v) of the Code; (iii) "obligation[s] (including any
participation or certificate of beneficial ownership therein) which . . . [are]
principally secured by an interest in real property" within the meaning of
Section 860G(a)(3)(A) of the Code; and (iv) "real estate assets" within the
meaning of Section 856(c)(5)(A) of the Code. In addition, counsel to the
Depositor will deliver an opinion that interest on Grantor Trust Fractional
Interest Certificates will be considered "interest on obligations secured by
mortgages on real property or on interests in real property" within the meaning
of Section 856(c)(3)(B) of the Code.
The assets constituting certain Grantor Trust Funds may include Buydown
Mortgage Loans. The characterization of an investment in Buydown Mortgage Loans
will depend upon the precise terms of the related Buydown Agreement, but to the
extent that such Buydown Mortgage Loans are secured by a bank account or other
personal property, they may not be treated in their entirety as assets described
in the foregoing sections of the Code. No directly applicable precedents exist
with respect to the federal income tax treatment or the characterization of
investments in Buydown Mortgage Loans. Accordingly, holders of Grantor Trust
Certificates should consult their own tax advisors with respect to the
characterization of investments in Grantor Trust Certificates representing an
interest in a Grantor Trust Fund that includes Buydown Mortgage Loans.
Grantor Trust Strip Certificates
Even if Grantor Trust Strip Certificates evidence an interest in a Grantor
Trust Fund consisting of Mortgage Loans that are "loans secured by an interest
in real property" within the meaning of Section 7701(a)(19)(C)(v) of the Code,
"qualifying real property loans" within the meaning of Section 593(d) of the
Code, and "real estate assets" within the meaning of Section 856(c)(5)(A) of the
Code, and the interest on which is "interest on obligations secured by mortgages
on real property" within the meaning of Section 856(c)(3)(B) of the Code, it is
unclear whether the Grantor Trust Strip Certificates, and the income therefrom,
will be so characterized. However, the policies underlying such sections
(namely, to encourage or require investments in mortgage loans by thrift
institutions and real estate investment trusts) may suggest that such
characterization is appropriate. Counsel to the Depositor will not deliver any
opinion on these questions. Prospective purchasers to which such
characterization of an investment in Grantor Trust Strip Certificates is
material should consult their tax advisors regarding whether the Grantor Trust
Strip Certificates, and the income therefrom, will be so characterized.
The Grantor Trust Strip Certificates will be "obligation[s] (including any
participation or certificate of beneficial ownership therein) which . . . [are]
principally secured by an interest in real property" within the meaning of
Section 860G(a)(3)(A) of the Code.
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Taxation of Owners of Grantor Trust Fractional Interest Certificates
Holders of a particular Series of Grantor Trust Fractional Interest
Certificates generally will be required to report on their federal income tax
returns their shares of the entire income from the Mortgage Loans (including
amounts used to pay reasonable servicing fees and other expenses) and will be
entitled to deduct their shares of any such reasonable servicing fees and other
expenses. Because of stripped interests, market or original issue discount, or
premium, the amount includible in income on account of a Grantor Trust
Fractional Interest Certificate may differ significantly from the amount
distributable thereon representing interest on the Mortgage Loans. Under Section
67 of the Code, an individual, estate or trust holding a Grantor Trust
Fractional Interest Certificate directly or through certain pass-through
entities will be allowed a deduction for such reasonable servicing fees and
expenses only to the extent that the aggregate of such holder's miscellaneous
itemized deductions exceeds two percent of such holder's adjusted gross income.
In addition, Section 68 of the Code provides that the amount of itemized
deductions otherwise allowable for an individual whose adjusted gross income
exceeds a specified amount will be reduced by the lesser of (i) 3% of the excess
of the individual's adjusted gross income over such amount or (ii) 80% of the
amount of itemized deductions otherwise allowable for the taxable year. The
amount of additional taxable income reportable by holders of Grantor Trust
Fractional Interest Certificates who are subject to the limitations of either
Section 67 or Section 68 of the Code may be substantial. Further,
Certificateholders (other than corporations) subject to the alternative minimum
tax may not deduct miscellaneous itemized deductions in determining such
holder's alternative minimum taxable income. Although it is not entirely clear,
it appears that in transactions in which multiple Classes of Grantor Trust
Certificates (including Grantor Trust Strip Certificates) are issued, such fees
and expenses should be allocated among the Classes of Grantor Trust Certificates
using a method that recognizes that each such Class benefits from the related
services. In the absence of statutory or administrative clarification as to the
method to be used, it currently is intended to base information returns or
reports to the Internal Revenue Service (the "IRS") and Certificateholders on a
method that allocates such expenses among Classes of Grantor Trust Certificates
with respect to each period based on the distributions made to each such Class
during that period.
The federal income tax treatment of Grantor Trust Fractional Interest
Certificates of any Series will depend on whether they are subject to the
"stripped bond" rules of Section 1286 of the Code. Grantor Trust Fractional
Interest Certificates may be subject to those rules if (i) a Class of Grantor
Trust Strip Certificates is issued as part of the same Series of Certificates or
(ii) the Depositor or any of its affiliates retains (for its own account or for
purposes of resale) a right to receive a specified portion of the interest
payable on the Mortgage Loans. Further, the IRS has ruled that an unreasonably
high servicing fee retained by a seller or servicer will be treated as a
retained ownership interest in mortgages that constitutes a stripped coupon. For
purposes of determining what constitutes reasonable servicing fees for various
types of mortgages the IRS has established certain "safe harbors." The servicing
fees paid with respect to the Mortgage Loans for certain Series of Grantor Trust
Certificates may be higher than the "safe harbors" and, accordingly, may not
constitute reasonable servicing compensation. The related Prospectus Supplement
will include information regarding servicing fees paid to the Master Servicer,
any subservicer or their respective affiliates necessary to determine whether
the preceding "safe harbor" rules apply.
If Stripped Bond Rules Apply
If the stripped bond rules apply, each Grantor Trust Fractional Interest
Certificate will be treated as having been issued with "original issue discount"
within the meaning of Section 1273(a) of the Code, subject, however, to the
discussion below regarding the treatment of certain stripped bonds as market
discount bonds and the discussion regarding de minimis market discount. See
"-- Taxation of Owners of Grantor Trust Fractional Interest
Certificates -- Market Discount." Under the stripped bond rules, the holder of a
Grantor Trust Fractional Interest Certificate (whether a cash or accrual method
taxpayer) will be required to report interest income from its Grantor Trust
Fractional Interest Certificate for each month in an amount equal to the income
that accrues on such Certificate in that month calculated under a constant yield
method, in accordance with the rules of the Code relating to original issue
discount.
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The original issue discount on a Grantor Trust Fractional Interest
Certificate will be the excess of such Certificate's stated redemption price
over its issue price. The issue price of a Grantor Trust Fractional Interest
Certificate as to any purchaser will be equal to the price paid by such
purchaser for the Grantor Trust Fractional Interest Certificate. The stated
redemption price of a Grantor Trust Fractional Interest Certificate will be the
sum of all payments to be made on such Certificate, as well as such
Certificate's share of reasonable servicing fees and other expenses, other than
payments of "qualified stated interest," if any. See "-- Taxation of Owners of
Grantor Trust Fractional Interest Certificates -- If Stripped Bond Rules Do Not
Apply" for a definition of "qualified stated interest." In general, the amount
of such income that accrues in any month would equal the product of such
holder's adjusted basis in such Grantor Trust Fractional Interest Certificate at
the beginning of such month (see "Sales of Grantor Trust Certificates") and the
yield of such Grantor Trust Fractional Interest Certificate to such holder. Such
yield would be computed at the rate (assuming compounding based on the regular
interval between payment dates) that, if used to discount the holder's share of
future payments on the Mortgage Loans, would cause the present value of those
future payments to equal the price at which the holder purchased such
Certificate. In computing yield under the stripped bond rules, a
Certificateholder's share of future payments on the Mortgage Loans will not
include any payments made in respect of any ownership interest in the Mortgage
Loans retained by the Depositor, the Master Servicer, any subservicer or their
respective affiliates, but will include such Certificateholder's share of any
reasonable servicing fees and other expenses.
Section 1272(a)(6) of the Code requires (i) the use of a reasonable
prepayment assumption in accruing original issue discount and (ii) adjustments
in the accrual of original issue discount when prepayments do not conform to the
prepayment assumption with respect to certain categories of debt instruments,
and regulations could be adopted applying those provisions to the Grantor Trust
Fractional Interest Certificates. It is unclear whether those provisions would
be applicable to the Grantor Trust Fractional Interest Certificates or whether
use of a prepayment assumption may be required or permitted in the absence of
such regulations. It is also uncertain, if a prepayment assumption is used,
whether the assumed prepayment rate would be determined based on conditions at
the time of the first sale of the Grantor Trust Fractional Interest Certificate
or, with respect to any subsequent holder, at the time of purchase of the
Grantor Trust Fractional Interest Certificate by that holder. Certificateholders
are advised to consult their own tax advisors concerning reporting original
issue discount in general and, in particular, whether a prepayment assumption
should be used in reporting original issue discount with respect to Grantor
Trust Fractional Interest Certificates.
In the case of a Grantor Trust Fractional Interest Certificate acquired at
a price equal to the principal amount of the Mortgage Loans allocable to such
Certificate, the use of a prepayment assumption would not ordinarily have any
significant effect on the yield used in calculating accruals of interest income.
In the case, however, of a Grantor Trust Fractional Interest Certificate
acquired at a discount or premium (that is, at a price less than or greater than
such principal amount, respectively), the use of a prepayment assumption would
increase or decrease such yield, and thus accelerate or decelerate,
respectively, the reporting of income.
If a prepayment assumption is not used, then when a Mortgage Loan prepays
in full, the holder of a Grantor Trust Fractional Interest Certificate acquired
at a discount or a premium generally will recognize ordinary income or loss
equal to the difference between the portion of the prepaid principal amount of
the Mortgage Loan that is allocable to such Certificate and the portion of the
adjusted basis of such Certificate that is allocable to such Certificateholder's
interest in the Mortgage Loan. If a prepayment assumption is used, it appears
that no separate item of income or loss should be recognized upon a prepayment.
Instead, a prepayment should be treated as a partial payment of the stated
redemption price of the Grantor Trust Fractional Interest Certificate and
accounted for under a method similar to that described for taking account of
original issue discount on REMIC Regular Certificates. See
"-- REMICs -- Taxation of Owners of REMIC Regular Certificates -- Original Issue
Discount." It is unclear what adjustments would be required to reflect
differences between an assumed prepayment rate and the actual rate of
prepayments.
In the absence of statutory or administrative clarification, it is
currently intended to base information reports or returns to the IRS and
Certificateholders in transactions subject to the stripped bond rules on a
prepayment assumption (the "Prepayment Assumption") that will be disclosed in
the related Prospectus Supplement and on a constant yield computed using a
representative initial offering price for each Class of
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Certificates. However, neither the Depositor nor the Master Servicer will make
any representation that the Mortgage Loans will in fact prepay at a rate
conforming to such Prepayment Assumption or any other rate and
Certificateholders should bear in mind that the use of a representative initial
offering price will mean that such information returns or reports, even if
otherwise accepted as accurate by the IRS, will in any event be accurate only as
to the initial Certificateholders of each Series who bought at that price.
Under Treasury regulation Section 1.1286-1T, certain stripped bonds are to
be treated as market discount bonds and, accordingly, any purchaser of such a
bond is to account for any discount on the bond as market discount rather than
original issue discount. This treatment only applies, however, if immediately
after the most recent disposition of the bond by a person stripping one or more
coupons from the bond and disposing of the bond or coupon (i) there is no
original issue discount (or only a de minimis amount of original issue discount)
or (ii) the annual stated rate of interest payable on the original bond is no
more than one percentage point lower than the gross interest rate payable on the
original mortgage loan (before subtracting any servicing fee or any stripped
coupon). If interest payable on a Grantor Trust Fractional Interest Certificate
is more than one percentage point lower than the gross interest rate payable on
the Mortgage Loans, the related Prospectus Supplement will disclose that fact.
If the original issue discount or market discount on a Grantor Trust Fractional
Interest Certificate determined under the stripped bond rules is less than 0.25%
of the stated redemption price multiplied by the weighted average maturity of
the Mortgage Loans, then such original issue discount or market discount will be
considered to be de minimis. Original issue discount or market discount of only
a de minimis amount will be included in income in the same manner as de minimis
original issue and market discount described in "-- Taxation of Owners of
Grantor Trust Fractional Interest Certificates -- If Stripped Bond Rules Do Not
Apply" and "-- Market Discount."
If Stripped Bond Rules Do Not Apply
Subject to the discussion below on original issue discount, if the stripped
bond rules do not apply to a Grantor Trust Fractional Interest Certificate, the
Certificateholder will be required to report its share of the interest income on
the Mortgage Loans in accordance with such Certificateholder's normal method of
accounting. The original issue discount rules will apply to a Grantor Trust
Fractional Interest Certificate to the extent it evidences an interest in
Mortgage Loans issued with original issue discount.
The original issue discount, if any, on the Mortgage Loans will equal the
difference between the stated redemption price of such Mortgage Loans and their
issue price. Under the OID Regulations, the stated redemption price is equal to
the total of all payments to be made on such Mortgage Loan other than "qualified
stated interest." "Qualified stated interest" includes interest that is
unconditionally payable at least annually at a single fixed rate, or at a
"qualified floating rate," an "objective rate," a combination of a single fixed
rate and one or more "qualified floating rates" or one "qualified inverse
floating rate," or a combination of "qualified floating rates" that generally
does not operate in a manner that accelerates or defers interest payments on
such Mortgage Loan. In general, the issue price of a Mortgage Loan will be the
amount received by the borrower from the lender under the terms of the Mortgage
Loan, less any "points" paid by the borrower, and the stated redemption price of
a Mortgage Loan will equal its principal amount, unless the Mortgage Loan
provides for an initial below-market rate of interest or the acceleration or the
deferral of interest payments.
In the case of Mortgage Loans bearing adjustable or variable interest
rates, the related Prospectus Supplement will describe the manner in which such
rules will be applied with respect to those Mortgage Loans by the Trustee in
preparing information returns to the Certificateholders and the IRS.
Notwithstanding the general definition of original issue discount, original
issue discount will be considered to be de minimis if such original issue
discount is less than 0.25% of the stated redemption price multiplied by the
weighted average maturity of the Mortgage Loan. For this purpose, the weighted
average maturity of the Mortgage Loan will be computed as the sum of the amounts
determined, as to each payment included in the stated redemption price of such
Mortgage Loan, by multiplying (i) the number of complete years (rounding down
for partial years) from the issue date until such payment is expected to be made
by (ii) a fraction, the numerator of which is the amount of the payment and the
denominator of which is the stated redemption price of the Mortgage Loan. Under
the OID Regulations, original issue discount of only a
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de minimis amount (other than de minimis original issue discount attributable to
a so-called "teaser" rate or initial interest holiday) will be included in
income as each payment of stated principal is made, based on the product of the
total amount of such de minimis original issue discount and a fraction, the
numerator of which is the amount of each such payment and the denominator of
which is the outstanding stated principal amount of the Mortgage Loan. The OID
Regulations also permit a Certificateholder to elect to accrue de minimis
original issue discount into income currently based on a constant yield method.
See "-- Taxation of Owners of Grantor Trust Fractional Interest
Certificates -- Market Discount" below.
If original issue discount is in excess of a de minimis amount, all
original issue discount with respect to a Mortgage Loan will be required to be
accrued and reported in income each month, based on a constant yield. The OID
Regulations suggest that no prepayment assumption is appropriate in computing
the yield on prepayable obligations issued with original issue discount. In the
absence of statutory or administrative clarification, it currently is not
intended to base information reports or returns to the IRS and
Certificateholders on the use of a prepayment assumption in transactions not
subject to the stripped bond rules. However, Section 1272(a)(6) of the Code may
require that a prepayment assumption be used in computing yield with respect to
all mortgage-backed securities. Certificateholders are advised to consult their
own tax advisors concerning whether a prepayment assumption should be used in
reporting original issue discount with respect to Grantor Trust Fractional
Interest Certificates. Certificateholders should refer to the related Prospectus
Supplement with respect to each Series to determine whether and in what manner
the original issue discount rules will apply to Mortgage Loans in such Series.
A purchaser of a Grantor Trust Fractional Interest Certificate that
purchases such Grantor Trust Fractional Interest Certificate at a cost less than
such Certificate's allocable portion of the aggregate remaining stated
redemption price of the Mortgage Loans held in the related Trust Fund will also
be required to include in gross income such Certificate's daily portions of any
original issue discount with respect to such Mortgage Loans. However, each such
daily portion will be reduced, if the cost of such Grantor Trust Fractional
Interest Certificate to such purchaser is in excess of such Certificate's
allocable portion of the aggregate "adjusted issue prices" of the Mortgage Loans
held in the related Trust Fund, approximately in proportion to the ratio such
excess bears to such Certificate's allocable portion of the aggregate original
issue discount remaining to be accrued on such Mortgage Loans. The adjusted
issue price of a Mortgage Loan on any given day equals the sum of (i) the
adjusted issue price (or, in the case of the first accrual period, the issue
price) of such Mortgage Loan at the beginning of the accrual period that
includes such day and (ii) the daily portions of original issue discount for all
days during such accrual period prior to such day. The adjusted issue price of a
Mortgage Loan at the beginning of any accrual period will equal the issue price
of such Mortgage Loan, increased by the aggregate amount of original issue
discount with respect to such Mortgage Loan that accrued in prior accrual
periods, and reduced by the amount of any payments made on such Mortgage Loan in
prior accrual periods of amounts included in its stated redemption price.
The Trustee will provide to any holder of a Grantor Trust Fractional
Interest Certificate such information as such holder may reasonably request from
time to time with respect to original issue discount accruing on Grantor Trust
Fractional Interest Certificates. See "Grantor Trust Reporting" below.
Market Discount
If the stripped bond rules do not apply to the Grantor Trust Fractional
Interest Certificate, a Certificateholder may be subject to the market discount
rules of Sections 1276 through 1278 of the Code to the extent an interest in a
Mortgage Loan is considered to have been purchased at a "market discount," that
is, in the case of a Mortgage Loan issued without original issue discount, at a
purchase price less than its remaining stated redemption price (as defined
above), or in the case of a Mortgage Loan issued with original issue discount,
at a purchase price less than its adjusted issue price (as defined above). If
market discount is in excess of a de minimis amount (as described below), the
holder generally will be required to include in income in each month the amount
of such discount that has accrued (under the rules described in the next
paragraph) through such month that has not previously been included in income,
but limited, in the case of the portion of such discount that is allocable to
any Mortgage Loan, to the payment of stated redemption price on such Mortgage
Loan that is received by (or, in the case of accrual basis Certificateholders,
due to) the
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Trust Fund in that month. A Certificateholder may elect to include market
discount in income currently as it accrues (under a constant yield method based
on the yield of the Certificate to such holder) rather than including it on a
deferred basis in accordance with the foregoing. If made, such election will
apply to all market discount bonds acquired by such Certificateholder during or
after the first taxable year to which such election applies. In addition, the
OID Regulations would permit a Certificateholder to elect to accrue all
interest, discount (including de minimis market or original issue discount) and
premium in income as interest, based on a constant yield method. If such an
election were made with respect to a Mortgage Loan with market discount, the
Certificateholder would be deemed to have made an election to include market
discount in income currently with respect to all other debt instruments having
market discount that such Certificateholder acquires during the taxable year of
the election and thereafter, and possibly previously acquired instruments.
Similarly, a Certificateholder that made this election for a Certificate
acquired at a premium would be deemed to have made an election to amortize bond
premium with respect to all debt instruments having amortizable bond premium
that such Certificateholder owns or acquires. See "-- REMICs -- Taxation of
Owners of REMIC Regular Certificates -- Premium" below. Each of these elections
to accrue interest, discount and premium with respect to a Certificate on a
constant yield method or as interest is irrevocable.
Section 1276(b)(3) of the Code specifically authorizes the Treasury
Department to issue regulations providing for the method for accruing market
discount on debt instruments, the principal of which is payable in more than one
installment. Until such time as regulations are issued by the Treasury
Department, certain rules described in the Conference Committee Report (the
"Committee Report") accompanying the Tax Reform Act of 1986 will apply. Under
those rules, in each accrual period market discount on the Mortgage Loans should
accrue, at the Certificateholder's option: (i) on the basis of a constant yield
method, (ii) in the case of a Mortgage Loan issued without original issue
discount, in an amount that bears the same ratio to the total remaining market
discount as the stated interest paid in the accrual period bears to the total
stated interest remaining to be paid on the Mortgage Loan as of the beginning of
the accrual period, or (iii) in the case of a Mortgage Loan issued with original
issue discount, in an amount that bears the same ratio to the total remaining
market discount as the original issue discount accrued in the accrual period
bears to the total original issue discount remaining at the beginning of the
accrual period. The prepayment assumption, if any, used in calculating the
accrual of original issue discount is to be used in calculating the accrual of
market discount. The effect of using a prepayment assumption could be to
accelerate the reporting of such discount income. Because the regulations
referred to in this paragraph have not been issued, it is not possible to
predict what effect such regulations might have on the tax treatment of a
Mortgage Loan purchased at a discount in the secondary market.
Since the Mortgage Loans will provide for periodic payments of stated
redemption price, such discount may be required to be included in income at a
rate that is not significantly slower than the rate at which such discount would
be included in income if it were original issue discount.
Market discount with respect to Mortgage Loans generally will be considered
to be de minimis if it is not greater than or equal to 0.25% of the stated
redemption price of the Mortgage Loans multiplied by the number of complete
years to maturity remaining after the date of its purchase. In interpreting a
similar rule with respect to original issue discount on obligations payable in
installments, the OID Regulations refer to the weighted average maturity of
obligations, and it is likely that the same rule will be applied with respect to
market discount, presumably taking into account the prepayment assumption used,
if any. The effect of using a prepayment assumption could be to accelerate the
reporting of such discount income. If market discount is treated as de minimis
under the foregoing rule, it appears that actual discount would be treated in a
manner similar to original issue discount of a de minimis amount. See
"-- Taxation of Owners of Grantor Trust Fractional Interest Certificates -- If
Stripped Bond Rules Do Not Apply."
Further, under the rules described in "-- REMICs -- Taxation of Owners of
REMIC Regular Certificates -- Market Discount," below, any discount that is not
original issue discount and exceeds a de minimis amount may require the deferral
of interest expense deductions attributable to accrued market discount not yet
includible in income, unless an election has been made to report market discount
currently as it accrues.
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Premium
If a Certificateholder is treated as acquiring the underlying Mortgage
Loans at a premium, that is, at a price in excess of their remaining stated
redemption price, such Certificateholder may elect under Section 171 of the Code
to amortize such premium using a constant yield method. Amortizable premium is
treated as an offset to interest income on the related Mortgage Loans rather
than as a separate interest deduction. Premium allocable to Mortgage Loans for
which an amortization election is not made should be allocated among the
payments on the Mortgage Loan representing stated redemption price and be
allowed as an ordinary deduction as such -- payments are made (or, for a
Certificateholder using the accrual method of accounting, when such payments are
due).
It is unclear whether a prepayment assumption should be used in computing
amortization of premium allowable under Section 171 of the Code. If premium is
not subject to amortization using a prepayment assumption and a Mortgage Loan
prepays in full, the holder of a Grantor Trust Fractional Interest Certificate
acquired at a premium should recognize a loss, equal to the difference between
the portion of the prepaid principal amount of the Mortgage Loan that is
allocable to the Certificate and the portion of the adjusted basis of the
Certificate that is allocable to the Mortgage Loan. If a prepayment assumption
is used to amortize such premium, it appears that such a loss would be
unavailable. Instead, if a prepayment assumption is used, a prepayment should be
treated as a partial payment of the stated redemption price of the Grantor Trust
Fractional Interest Certificate and accounted for under a method similar to that
described for taking account of original issue discount on REMIC Regular
Certificates. See "-- REMICs -- Taxation of Owners of REMIC Regular
Certificates--Original Issue Discount." It is unclear what adjustments would be
required to reflect differences between an assumed prepayment rate and the
actual rate of prepayments.
Taxation of Owners of Grantor Trust Strip Certificates
The "stripped coupon" rules of Section 1286 of the Code will apply to the
Grantor Trust Strip Certificates. Except as described above in "-- Taxation of
Owners of Grantor Trust Fractional Interest Certificates -- If Stripped Bond
Rules Apply," no regulations or published rulings under Section 1286 of the Code
have been issued and some uncertainty exists as to how it will be applied to
securities such as the Grantor Trust Strip Certificates. Accordingly, holders of
Grantor Trust Strip Certificates should consult their own tax advisors
concerning the method to be used in reporting income or loss with respect to
such Certificates.
The OID Regulations do not apply to "stripped coupons," although they
provide general guidance as to how the original issue discount sections of the
Code will be applied. In addition, the discussion below is subject to the
discussion under "Possible Application of Proposed Contingent Payment Rules" and
assumes that the holder of a Grantor Trust Strip Certificate will not own any
Grantor Trust Fractional Interest Certificates.
Under the stripped coupon rules, it appears that original issue discount
will be required to be accrued in each month on the Grantor Trust Strip
Certificates based on a constant yield method. In effect, each holder of Grantor
Trust Strip Certificates would include as interest income in each month an
amount equal to the product of such holder's adjusted basis in such Grantor
Trust Strip Certificate at the beginning of such month and the yield of such
Grantor Trust Strip Certificate to such holder. Such yield would be calculated
based on the price paid for that Grantor Trust Strip Certificate by its holder
and the payments remaining to be made thereon at the time of the purchase, plus
an allocable portion of the servicing fees and expenses to be paid with respect
to the Mortgage Loans. See "-- Taxation of Owners of Grantor Trust Fractional
Interest Certificates -- If Stripped Bond Rules Apply" above.
As noted above, Section 1272(a)(6) of the Code requires that a prepayment
assumption be used in computing the accrual of original issue discount with
respect to certain categories of debt instruments, and that adjustments be made
in the amount and rate of accrual of such discount when prepayments do not
conform to such prepayment assumption. Regulations could be adopted applying
those provisions to the Grantor Trust Strip Certificates. It is unclear whether
those provisions would be applicable to the Grantor Trust Strip Certificates or
whether use of a prepayment assumption may be required or permitted in the
absence of such regulations. It is also uncertain, if a prepayment assumption is
used, whether the assumed
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prepayment rate would be determined based on conditions at the time of the first
sale of the Grantor Trust Strip Certificate or, with respect to any subsequent
holder, at the time of purchase of the Grantor Trust Strip Certificate by that
holder.
The accrual of income on the Grantor Trust Strip Certificates will be
significantly slower if a prepayment assumption is permitted to be made than if
yield is computed assuming no prepayments. In the absence of statutory or
administrative clarification, it currently is intended to base information
returns or reports to the IRS and Certificateholders on the Prepayment
Assumption disclosed in the related Prospectus Supplement and on a constant
yield computed using a representative initial offering price for each Class of
Certificates. However, neither the Depositor nor the Master Servicer will make
any representation that the Mortgage Loans will in fact prepay at a rate
conforming to the Prepayment Assumption or at any other rate and
Certificateholders should bear in mind that the use of a representative initial
offering price will mean that such information returns or reports, even if
otherwise accepted as accurate by the IRS, will in any event be accurate only as
to the initial Certificateholders of each Series who bought at that price.
Prospective purchasers of the Grantor Trust Strip Certificates should consult
their own tax advisors regarding the use of the Prepayment Assumption.
It is unclear under what circumstances, if any, the prepayment of a
Mortgage Loan will give rise to a loss to the holder of a Grantor Trust Strip
Certificate. If a Grantor Trust Strip Certificate is treated as a single
instrument (rather than an interest in discrete mortgage loans) and the effect
of prepayments is taken into account in computing yield with respect to such
Grantor Trust Strip Certificate, it appears that no loss may be available as a
result of any particular prepayment unless prepayments occur at a rate faster
than the Prepayment Assumption. However, if a Grantor Trust Strip Certificate is
treated as an interest in discrete Mortgage Loans, or if the Prepayment
Assumption is not used, then when a Mortgage Loan is prepaid, the holder of a
Grantor Trust Strip Certificate should be able to recognize a loss equal to the
portion of the adjusted issue price of the Grantor Trust Strip Certificate that
is allocable to such Mortgage Loan.
Possible Application of Proposed Contingent Payment Rules
The coupon stripping rules' general treatment of stripped coupons is to
regard them as newly issued debt instruments in the hands of each purchaser. To
the extent that payments on the Grantor Trust Strip Certificates would cease if
the Mortgage Loans were prepaid in full, the Grantor Trust Strip Certificates
could be considered to be debt instruments providing for contingent payments.
Under the OID Regulations, debt instruments providing for contingent payments
are not subject to the same rules as debt instruments providing for
noncontingent payments, but no final regulations have been promulgated with
respect to contingent payment debt instruments. Proposed regulations were
promulgated on December 16, 1994 regarding contingent payment debt instruments.
As in the case of the OID Regulations, such proposed regulations do not
specifically address securities, such as the Grantor Trust Strip Certificates,
that are subject to the stripped bond rules of Section 1286 of the Code.
If the contingent payment rules under the proposed regulations were to
apply, the holder of a Grantor Trust Strip Certificate would be required to
apply a "noncontingent bond method." Under that method, the issuer of a Grantor
Trust Strip Certificate would determine a projected payment schedule with
respect to such Grantor Trust Strip Certificate. Holders of Grantor Trust Strip
Certificates would be bound by the issuer's projected payment schedule, which
would consist of all noncontingent payments and a projected amount for each
contingent payment based on the projected yield (as described below) of the
Grantor Trust Strip Certificate. The projected amount of each payment would be
determined so that the projected payment schedule reflected the projected yield
reasonably expected to be received by the holder of a Grantor Trust Strip
Certificate. The projected yield referred to above would be a reasonable rate,
not less than the "applicable Federal rate" that, as of the issue date,
reflected general market conditions, the credit quality of the issuer, and the
terms and conditions of the Mortgage Loans. The holder of a Grantor Trust Strip
Certificate would be required to include as interest income in each month the
adjusted issue price of the Grantor Trust Strip Certificate at the beginning of
the period multiplied by the projected yield, and would add to, or subtract
from, such income any variation between the payment actually received in such
month and the payment originally projected to be made in such month.
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Certificateholders should consult their tax advisors concerning the
possible application of the contingent payment rules to the Grantor Trust Strip
Certificates.
Sales of Grantor Trust Certificates
Except as described below, any gain or loss recognized on the sale of a
Grantor Trust Certificate generally will be capital gain or loss, and will be
equal to the difference between the amount realized on the sale of a Grantor
Trust Certificate and its adjusted basis. The adjusted basis of a Grantor Trust
Certificate generally will equal its cost, increased by any income (including
original issue discount and market discount income) recognized by the seller and
reduced (but not below zero) by any previously reported losses, amortized
premium and distributions with respect to such Grantor Trust Certificate. The
Code currently provides for a top marginal tax rate applicable to ordinary
income of individuals of 39.6% while maintaining a maximum marginal rate for the
long-term capital gains of individuals of 28%. No such rate differential exists
for corporations. In addition, the distinction between a capital gain or loss
and ordinary income or loss remains relevant for other purposes.
Gain or loss from the sale of a Grantor Trust Certificate may be partially
or wholly ordinary and not capital in certain circumstances. Gain attributable
to accrued and unrecognized market discount will be treated as ordinary income,
as will gain or loss recognized by banks and other financial institutions
subject to Section 582(c) of the Code. Furthermore, a portion of any gain that
might otherwise be capital gain may be treated as ordinary income to the extent
that the Grantor Trust Certificate is held as part of a "conversion transaction"
within the meaning of Section 1258 of the Code. A conversion transaction
generally is one in which the taxpayer has taken two or more positions in
Certificates or similar property that reduce or eliminate market risk, if
substantially all of the taxpayer's return is attributable to the time value of
the taxpayer's net investment in such transaction. The amount of gain realized
in a conversion transaction that is recharacterized as ordinary income generally
will not exceed the amount of interest that would have accrued on the taxpayer's
net investment at 120% of the appropriate "applicable Federal rate" (which rate
is computed and published monthly by the IRS) at the time the taxpayer enters
into the conversion transaction, subject to appropriate reduction for prior
inclusion of interest and other ordinary income items from the transaction.
Finally, a taxpayer may elect to have net capital gain taxed at ordinary income
rates rather than capital gains rates in order to include such net capital gain
in total net investment income for that taxable year, for purposes of the
limitation on the deduction of interest on indebtedness incurred to purchase or
carry property held for investment to a taxpayer's net investment income.
Grantor Trust Reporting
The Trustee will furnish to each holder of a Grantor Trust Certificate with
each distribution a statement setting forth the amount of such distribution
allocable to principal on the underlying Mortgage Loans and to interest thereon
at the related Pass-Through Rate. In addition, within a reasonable time after
the end of each calendar year, based on information provided by the Master
Servicer, the Trustee will furnish to each Certificateholder during such year
such customary factual information as the Trustee deems necessary or desirable
to enable holders of Grantor Trust Certificates to prepare their tax returns and
will furnish comparable information to the IRS as and when required by law to do
so. Because the rules for accruing discount and amortizing premium with respect
to the Grantor Trust Certificates are uncertain in various respects, there is no
assurance the IRS will agree with the Trustee's information reports of such
items of income and expense. Moreover, such information reports, even if
otherwise accepted as accurate by the IRS, will in any event be accurate only as
to the initial Certificateholders who bought their Certificates at the
representative initial offering price used in preparing such reports.
Backup Withholding
In general, the rules described in "-- REMICs -- Backup Withholding with
Respect to REMIC Certificates" will also apply to Grantor Trust Certificates.
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Foreign Investors
In general, the discussion with respect to REMIC Regular Certificates in
"-- REMICs -- Foreign Investors in REMIC Certificates -- REMIC Regular
Certificates" applies to Grantor Trust Certificates.
To the extent that interest on a Grantor Trust Certificate would be exempt
under Sections 871(h)(1) and 881(c) of the Code from United States withholding
tax, and the Grantor Trust Certificate is not held in connection with a
Certificateholder's trade or business in the United States, such Grantor Trust
Certificate will not be subject to United States estate taxes in the estate of a
non-resident alien individual.
REMICS
Classification of REMICs
Upon the issuance of each Series of REMIC Certificates, Orrick, Herrington
& Sutcliffe, counsel to the Depositor, will deliver their opinion generally to
the effect that, assuming compliance with all provisions of the related Pooling
Agreement, the related Trust Fund (or each applicable portion thereof) will
qualify as a REMIC and the REMIC Certificates offered with respect thereto will
be considered to evidence ownership of "regular interests" ("REMIC Regular
Certificates") or "residual interests" ("REMIC Residual Certificates") in that
REMIC within the meaning of the REMIC Provisions.
If an entity electing to be treated as a REMIC fails to comply with one or
more of the ongoing requirements of the Code for such status during any taxable
year, the Code provides that the entity will not be treated as a REMIC for such
year and thereafter. In that event, such entity may be taxable as a separate
corporation under Treasury regulations, and the related REMIC Certificates may
not be accorded the status or given the tax treatment described below. Although
the Code authorizes the Treasury Department to issue regulations providing
relief in the event of an inadvertent termination of REMIC status, no such
regulations have been issued. Any such relief, moreover, may be accompanied by
sanctions, such as the imposition of a corporate tax on all or a portion of the
Trust Fund's income for the period in which the requirements for such status are
not satisfied. The Pooling Agreement with respect to each REMIC will include
provisions designed to maintain the Trust Fund's status as a REMIC under the
REMIC Provisions. It is not anticipated that the status of any Trust Fund as a
REMIC will be terminated.
Characterization of Investments in REMIC Certificates
In general, the REMIC Certificates will be "qualifying real property loans"
within the meaning of Section 593(d) of the Code, "real estate assets" within
the meaning of Section 856(c)(5)(A) of the Code and assets described in Section
7701(a)(19)(C) of the Code in the same proportion that the assets of the REMIC
underlying such Certificates would be so treated. Moreover, if 95% or more of
the assets of the REMIC qualify for any of the foregoing treatments at all times
during a calendar year, the REMIC Certificates will qualify for the
corresponding status in their entirety for that calendar year. Interest
(including original issue discount) on the REMIC Regular Certificates and income
allocated to the Class of REMIC Residual Certificates will be interest described
in Section 856(c)(3)(B) of the Code to the extent that such Certificates are
treated as "real estate assets" within the meaning of Section 856(c)(5)(A) of
the Code. In addition, the REMIC Regular Certificates will be "qualified
mortgages" within the meaning of Section 860G(a)(3)(C) of the Code if
transferred to another REMIC on its startup day in exchange for regular or
residual interests therein. The determination as to the percentage of the
REMIC's assets that constitute assets described in the foregoing sections of the
Code will be made with respect to each calendar quarter based on the average
adjusted basis of each category of the assets held by the REMIC during such
calendar quarter. The Master Servicer will report those determinations to
Certificateholders in the manner and at the times required by applicable
Treasury regulations.
The assets of the REMIC will include, in addition to Mortgage Loans,
payments on Mortgage Loans held pending distribution on the REMIC Certificates
and property acquired by foreclosure held pending sale, and may include amounts
in reserve accounts. It is unclear whether property acquired by foreclosure held
pending sale and amounts in reserve accounts would be considered to be part of
the Mortgage Loans, or whether such
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assets (to the extent not invested in assets described in the foregoing
sections) otherwise would receive the same treatment as the Mortgage Loans for
purposes of all of the foregoing sections. In addition, in some instances
Mortgage Loans may not be treated entirely as assets described in the foregoing
sections. If so, the related Prospectus Supplement will describe the Mortgage
Loans that may not be so treated. The REMIC Regulations do provide, however,
that payments on Mortgage Loans held pending distribution are considered part of
the Mortgage Loans for purposes of Sections 593(d) and 856(c)(5)(A) of the Code.
Tiered REMIC Structures
For certain Series of REMIC Certificates, two or more separate elections
may be made to treat designated portions of the related Trust Fund as REMICs
("Tiered REMICs") for federal income tax purposes. Upon the issuance of any such
Series of REMIC Certificates, Orrick, Herrington & Sutcliffe, counsel to the
Depositor, will deliver their opinion generally to the effect that, assuming
compliance with all provisions of the related Pooling Agreement, the Tiered
REMICs will each qualify as a REMIC and the REMIC Certificates issued by the
Tiered REMICs, respectively, will be considered to evidence ownership of REMIC
Regular Certificates or REMIC Residual Certificates in the related REMIC within
the meaning of the REMIC Provisions.
Solely for purposes of determining whether the REMIC Certificates will be
"qualifying real property loans" under Section 593(d) of the Code, "real estate
assets" within the meaning of Section 856(c)(5)(A) of the Code, and "loans
secured by an interest in real property" under Section 7701(a)(19)(C) of the
Code, and whether the income on such Certificates is interest described in
Section 856(c)(3)(B) of the Code, the Tiered REMICs will be treated as one
REMIC.
TAXATION OF OWNERS OF REMIC REGULAR CERTIFICATES
General
Except as otherwise stated in this discussion, REMIC Regular Certificates
will be treated for federal income tax purposes as debt instruments issued by
the REMIC and not as ownership interests in the REMIC or its assets. Moreover,
holders of REMIC Regular Certificates that otherwise report income under a cash
method of accounting will be required to report income with respect to REMIC
Regular Certificates under an accrual method.
Original Issue Discount
Certain REMIC Regular Certificates may be issued with "original issue
discount" within the meaning of Section 1273(a) of the Code. Any holders of
REMIC Regular Certificates issued with original issue discount generally will be
required to include original issue discount in income as it accrues, in
accordance with the method described below, in advance of the receipt of the
cash attributable to such income. In addition, Section 1272(a)(6) of the Code
provides special rules applicable to REMIC Regular Certificates and certain
other debt instruments issued with original issue discount. Regulations have not
been issued under that section.
The Code requires that a prepayment assumption be used with respect to
Mortgage Loans held by a REMIC in computing the accrual of original issue
discount on REMIC Regular Certificates issued by that REMIC, and that
adjustments be made in the amount and rate of accrual of such discount to
reflect differences between the actual prepayment rate and the prepayment
assumption. The prepayment assumption is to be determined in a manner prescribed
in Treasury regulations; as noted above, those regulations have not been issued.
The Committee Report indicates that the regulations will provide that the
prepayment assumption used with respect to a REMIC Regular Certificate must be
the same as that used in pricing the initial offering of such REMIC Regular
Certificate. The prepayment assumption used by the Master Servicer in reporting
original issue discount for each Series of REMIC Regular Certificates (the
"Prepayment Assumption") will be consistent with this standard and will be
disclosed in the related Prospectus Supplement. However, neither the Depositor
nor the Master Servicer will make any representation that the Mortgage Loans
will in fact prepay at a rate conforming to the Prepayment Assumption or at any
other rate.
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The original issue discount, if any, on a REMIC Regular Certificate will be
the excess of its stated redemption price at maturity over its issue price. The
issue price of a particular Class of REMIC Regular Certificates will be the
first cash price at which a substantial amount of REMIC Regular Certificates of
that Class is sold (excluding sales to bond houses, brokers and underwriters).
If less than a substantial amount of a particular Class of REMIC Regular
Certificates is sold for cash on or prior to the date of their initial issuance
(the "Closing Date"), the issue price for such Class will be treated as the fair
market value of such Class on the Closing Date. Under the OID Regulations, the
stated redemption price of a REMIC Regular Certificate is equal to the total of
all payments to be made on such Certificate other than "qualified stated
interest." "Qualified stated interest" includes interest that is unconditionally
payable at least annually at a single fixed rate, or in the case of a variable
rate debt instrument, at a "qualified floating rate," an "objective rate," a
combination of a single fixed rate and one or more "qualified floating rates" or
one "qualified inverse floating rate," or a combination of "qualified floating
rates" that generally does not operate in a manner that accelerates or defers
interest payments on such REMIC Regular Certificate.
In the case of REMIC Regular Certificates bearing adjustable interest
rates, the determination of the total amount of original issue discount and the
timing of the inclusion thereof will vary according to the characteristics of
such REMIC Regular Certificates. If the original issue discount rules apply to
such Certificates, the related Prospectus Supplement will describe the manner in
which such rules will be applied by the Master Servicer with respect to those
Certificates in preparing information returns to the Certificateholders and the
IRS.
Certain Classes of the REMIC Regular Certificates may provide for the first
interest payment with respect to such Certificates to be made more than one
month after the date of issuance, a period which is longer than the subsequent
monthly intervals between interest payments. Assuming the "accrual period" (as
defined below) for original issue discount is each monthly period that ends on a
Distribution Date, in some cases, as a consequence of this "long first accrual
period," some or all interest payments may be required to be included in the
stated redemption price of the REMIC Regular Certificate and accounted for as
original issue discount. Because interest on REMIC Regular Certificates must in
any event be accounted for under an accrual method, applying this analysis would
result in only a slight difference in the timing of the inclusion in income of
the yield on the REMIC Regular Certificates.
In addition, if the accrued interest to be paid on the first Distribution
Date is computed with respect to a period that begins prior to the Closing Date,
a portion of the purchase price paid for a REMIC Regular Certificate will
reflect such accrued interest. In such cases, information returns to the
Certificateholders and the IRS will be based on the position that the portion of
the purchase price paid for the interest accrued with respect to periods prior
to the Closing Date is treated as part of the overall cost of such REMIC Regular
Certificate (and not as a separate asset the cost of which is recovered entirely
out of interest received on the next Distribution Date) and that portion of the
interest paid on the first Distribution Date in excess of interest accrued for a
number of days corresponding to the number of days from the Closing Date to the
first Distribution Date should be included in the stated redemption price of
such REMIC Regular Certificate. However, the OID Regulations state that all or
some portion of such accrued interest may be treated as a separate asset the
cost of which is recovered entirely out of interest paid on the first
Distribution Date. It is unclear how an election to do so would be made under
the OID Regulations and whether such an election could be made unilaterally by a
Certificateholder.
Notwithstanding the general definition of original issue discount, original
issue discount on a REMIC Regular Certificate will be considered to be de
minimis if it is less than 0.25% of the stated redemption price of the REMIC
Regular Certificate multiplied by its weighted average maturity. For this
purpose, the weighted average maturity of the REMIC Regular Certificate is
computed as the sum of the amounts determined, as to each payment included in
the stated redemption price of such REMIC Regular Certificate, by multiplying
(i) the number of complete years (rounding down for partial years) from the
issue date until such payment is expected to be made (presumably taking into
account the Prepayment Assumption) by (ii) a fraction, the numerator of which is
the amount of the payment, and the denominator of which is the stated redemption
price at maturity of such REMIC Regular Certificate. Under the OID Regulations,
original issue discount of only a de minimis amount (other than de minimis
original issue discount attributable to a so-called "teaser"
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interest rate or an initial interest holiday) will be included in income as each
payment of stated principal is made, based on the product of the total amount of
such de minimis original issue discount and a fraction, the numerator of which
is the amount of such principal payment and the denominator of which is the
outstanding stated principal amount of the REMIC Regular Certificate. The OID
Regulations also would permit a Certificateholder to elect to accrue de minimis
original issue discount into income currently based on a constant yield method.
See "Taxation of Owners of REMIC Regular Certificates -- Market Discount" for a
description of such election under the OID Regulations.
If original issue discount on a REMIC Regular Certificate is in excess of a
de minimis amount, the holder of such Certificate must include in ordinary gross
income the sum of the "daily portions" of original issue discount for each day
during its taxable year on which it held such REMIC Regular Certificate,
including the purchase date but excluding the disposition date. In the case of
an original holder of a REMIC Regular Certificate, the daily portions of
original issue discount will be determined as follows.
As to each "accrual period," that is, unless otherwise stated in the
related Prospectus Supplement, each period that ends on a date that corresponds
to a Distribution Date and begins on the first day following the immediately
preceding accrual period (or in the case of the first such period, begins on the
Closing Date), a calculation will be made of the portion of the original issue
discount that accrued during such accrual period. The portion of original issue
discount that accrues in any accrual period will equal the excess, if any, of
(i) the sum of (A) the present value, as of the end of the accrual period, of
all of the distributions remaining to be made on the REMIC Regular Certificate,
if any, in future periods and (B) the distributions made on such REMIC Regular
Certificate during the accrual period of amounts included in the stated
redemption price, over (ii) the adjusted issue price of such REMIC Regular
Certificate at the beginning of the accrual period. The present value of the
remaining distributions referred to in the preceding sentence will be calculated
(i) assuming that distributions on the REMIC Regular Certificate will be
received in future periods based on the Mortgage Loans being prepaid at a rate
equal to the Prepayment Assumption and (ii) using a discount rate equal to the
original yield to maturity of the Certificate. For these purposes, the original
yield to maturity of the Certificate will be calculated based on its issue price
and assuming that distributions on the Certificate will be made in all accrual
periods based on the Mortgage Loans being prepaid at a rate equal to the
Prepayment Assumption. The adjusted issue price of a REMIC Regular Certificate
at the beginning of any accrual period will equal the issue price of such
Certificate, increased by the aggregate amount of original issue discount that
accrued with respect to such Certificate in prior accrual periods, and reduced
by the amount of any distributions made on such REMIC Regular Certificate in
prior accrual periods of amounts included in its stated redemption price. The
original issue discount accruing during any accrual period, computed as
described above, will be allocated ratably to each day during the accrual period
to determine the daily portion of original issue discount for such day.
A subsequent purchaser of a REMIC Regular Certificate that purchases such
Certificate at a price (excluding any portion of such price attributable to
accrued qualified stated interest) less than its remaining stated redemption
price will also be required to include in gross income the daily portions of any
original issue discount with respect to such Certificate. However, each such
daily portion will be reduced, if such cost is in excess of its "adjusted issue
price," in proportion to the ratio such excess bears to the aggregate original
issue discount remaining to be accrued on such REMIC Regular Certificate. The
adjusted issue price of a REMIC Regular Certificate on any given day equals the
sum of (i) the adjusted issue price (or, in the case of the first accrual
period, the issue price) of such Certificate at the beginning of the accrual
period which includes such day and (ii) the daily portions of original issue
discount for all days during such accrual period prior to such day.
Market Discount
A Certificateholder that purchases a REMIC Regular Certificate at a market
discount, that is, in the case of a REMIC Regular Certificate issued without
original issue discount, at a purchase price less than its remaining stated
principal amount, or in the case of a REMIC Regular Certificate issued with
original issue discount, at a purchase price less than its adjusted issue price
will recognize income upon receipt of each distribution representing stated
redemption price. In particular, under Section 1276 of the Code such a
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Certificateholder generally will be required to allocate the portion of each
such distribution representing stated redemption price first to accrued market
discount not previously included in income, and to recognize ordinary income to
that extent. A Certificateholder may elect to include market discount in income
currently as it accrues rather than including it on a deferred basis in
accordance with the foregoing. If made, such election will apply to all market
discount bonds acquired by such Certificateholder on or after the first day of
the first taxable year to which such election applies. In addition, the OID
Regulations permit a Certificateholder to elect to accrue all interest, discount
(including de minimis market or original issue discount) and premium in income
as interest, based on a constant yield method. If such an election were made
with respect to a REMIC Regular Certificate with market discount, the
Certificateholder would be deemed to have made an election to include market
discount in income currently with respect to all other debt instruments having
market discount that such Certificateholder acquires during the taxable year of
the election or thereafter, and possibly previously acquired instruments.
Similarly, a Certificateholder that made this election for a Certificate that is
acquired at a premium would be deemed to have made an election to amortize bond
premium with respect to all debt instruments having amortizable bond premium
that such Certificateholder owns or acquires. See "Taxation of Owners of REMIC
Regular Certificates -- Premium." Each of these elections to accrue interest,
discount and premium with respect to a Certificate on a constant yield method or
as interest would be irrevocable.
However, market discount with respect to a REMIC Regular Certificate will
be considered to be de minimis for purposes of Section 1276 of the Code if such
market discount is less than 0.25% of the remaining stated redemption price of
such REMIC Regular Certificate multiplied by the number of complete years to
maturity remaining after the date of its purchase. In interpreting a similar
rule with respect to original issue discount on obligations payable in
installments, the OID Regulations refer to the weighted average maturity of
obligations, and it is likely that the same rule will be applied with respect to
market discount, presumably taking into account the Prepayment Assumption. If
market discount is treated as de minimis under this rule, it appears that the
actual discount would be treated in a manner similar to original issue discount
of a de minimis amount. See "Taxation of Owners of REMIC Regular
Certificates -- Original Issue Discount." Such treatment would result in
discount being included in income at a slower rate than discount would be
required to be included in income using the method described above.
Section 1276(b)(3) of the Code specifically authorizes the Treasury
Department to issue regulations providing for the method for accruing market
discount on debt instruments, the principal of which is payable in more than one
installment. Until regulations are issued by the Treasury Department, certain
rules described in the Committee Report apply. The Committee Report indicates
that in each accrual period market discount on REMIC Regular Certificates should
accrue, at the Certificateholder's option: (i) on the basis of a constant yield
method, (ii) in the case of a REMIC Regular Certificate issued without original
issue discount, in an amount that bears the same ratio to the total remaining
market discount as the stated interest paid in the accrual period bears to the
total amount of stated interest remaining to be paid on the REMIC Regular
Certificate as of the beginning of the accrual period, or (iii) in the case of a
REMIC Regular Certificate issued with original issue discount, in an amount that
bears the same ratio to the total remaining market discount as the original
issue discount accrued in the accrual period bears to the total original issue
discount remaining on the REMIC Regular Certificate at the beginning of the
accrual period. Moreover, the Prepayment Assumption used in evaluating the
accrual of original issue discount is to be used in calculating the accrual of
market discount. Because the regulations referred to in this paragraph have not
been issued, it is not possible to predict what effect such regulations might
have on the tax treatment of a REMIC Regular Certificate purchased at a discount
in the secondary market.
To the extent that REMIC Regular Certificates provide for monthly or other
periodic distributions throughout their term, the effect of these rules may be
to require market discount to be includible in income at a rate that is not
significantly slower than the rate at which such discount would accrue if it
were original issue discount. Moreover, in any event a holder of a REMIC Regular
Certificate generally will be required to treat a portion of any gain on the
sale or exchange of such 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.
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Further, under Section 1277 of the Code a holder of a REMIC Regular
Certificate may be required to defer a portion of its interest deductions for
the taxable year attributable to any indebtedness incurred or continued to
purchase or carry a REMIC Regular Certificate purchased with market discount.
For these purposes, the de minimis rule referred to above applies. Any such
deferred interest expense would not exceed the market discount that accrues
during such taxable year and is, in general, allowed as a deduction not later
than the year in which such market discount is includible in income. If such
holder elects to include market discount in income currently as it accrues on
all market discount instruments acquired by such holder in that taxable year or
thereafter, the interest deferral rule described above will not apply.
Premium
A REMIC Regular Certificate purchased at a cost (excluding any portion of
such cost attributable to accrued qualified stated interest) greater than its
remaining stated redemption price will be considered to be purchased at a
premium. The holder of such a REMIC Regular Certificate may elect under Section
171 of the Code to amortize such premium under the constant yield method over
the life of the Certificate. If made, such an election will apply to all debt
instruments having amortizable bond premium that the holder owns or subsequently
acquires. Amortizable premium will be treated as an offset to interest income on
the related REMIC Regular Certificate, rather than as a separate interest
deduction. The OID Regulations also permit Certificateholders to elect to
include all interest, discount and premium in income based on a constant yield
method, further treating the Certificateholder as having made the election to
amortize premium generally. See "Taxation of Owners of REMIC Regular
Certificates -- Market Discount." The Committee Report states that the same
rules that apply to accrual of market discount (which rules will require use of
a Prepayment Assumption in accruing market discount with respect to REMIC
Regular Certificates without regard to whether such Certificates have original
issue discount) will also apply in amortizing bond premium under Section 171 of
the Code.
Realized Losses
Under Section 166 of the Code, both corporate holders of the REMIC Regular
Certificates and noncorporate holders of the REMIC Regular Certificates that
acquire such Certificates in connection with a trade or business should be
allowed to deduct, as ordinary losses, any losses sustained during a taxable
year in which their Certificates become wholly or partially worthless as the
result of one or more realized losses on the Mortgage Loans. However, it appears
that a noncorporate holder that does not acquire a REMIC Regular Certificate in
connection with a trade or business will not be entitled to deduct a loss under
Section 166 of the Code until such holder's Certificate becomes wholly worthless
(i.e., until its outstanding principal balance has been reduced to zero) and
that the loss will be characterized as a short-term capital loss.
Each holder of a REMIC Regular Certificate will be required to accrue
interest and original issue discount with respect to such Certificate, without
giving effect to any reductions in distributions attributable to defaults or
delinquencies on the Mortgage Loans or the Underlying Certificates until it can
be established that any such reduction ultimately will not be recoverable. As a
result, the amount of taxable income reported in any period by the holder of a
REMIC Regular Certificate could exceed the amount of economic income actually
realized by the holder in such period. Although the holder of a REMIC Regular
Certificate eventually will recognize a loss or reduction in income attributable
to previously accrued and included income that, as the result of a realized
loss, ultimately will not be realized, the law is unclear with respect to the
timing and character of such loss or reduction in income.
TAXATION OF OWNERS OF REMIC RESIDUAL CERTIFICATES
General
As residual interests, the REMIC Residual Certificates will be subject to
tax rules that differ significantly from those that would apply if the REMIC
Residual Certificates were treated for federal income tax purposes as direct
ownership interests in the Mortgage Loans or as debt instruments issued by the
REMIC.
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A holder of a REMIC Residual Certificate generally will be required to
report its daily portion of the taxable income or, subject to the limitations
noted in this discussion, the net loss of the REMIC for each day during a
calendar quarter that such holder owned such REMIC Residual Certificate. For
this purpose, the taxable income or net loss of the REMIC will be allocated to
each day in the calendar quarter ratably using a "30 days per month/90 days per
quarter/360 days per year" convention unless otherwise disclosed in the related
Prospectus Supplement. The daily amounts will then be allocated among the REMIC
Residual Certificateholders in proportion to their respective ownership
interests on such day. Any amount included in the gross income or allowed as a
loss of any REMIC Residual Certificateholder by virtue of this allocation will
be treated as ordinary income or loss. The taxable income of the REMIC will be
determined under the rules described below in "Taxable Income of the REMIC" and
will be taxable to the REMIC Residual Certificateholders without regard to the
timing or amount of cash distributions by the REMIC until the REMIC terminates.
Ordinary income derived from REMIC Residual Certificates will be "portfolio
income" for purposes of the taxation of taxpayers subject to limitations under
Section 469 of the Code on the deductibility of "passive losses."
A holder of a REMIC Residual Certificate that purchased such Certificate
from a prior holder of such Certificate also will be required to report on its
federal income tax return amounts representing its daily portion of the taxable
income (or net loss) of the REMIC for each day that it holds such REMIC Residual
Certificate. These daily portions generally will equal the amounts of taxable
income or net loss determined as described above. The Committee Report indicates
that certain modifications of the general rules may be made, by regulations,
legislation or otherwise, to reduce (or increase) the income or loss of a holder
of a REMIC Residual Certificateholder that purchased such REMIC Residual
Certificate from a prior holder of such Certificate at a price greater than (or
less than) the adjusted basis (as defined below) such REMIC Residual Certificate
would have had in the hands of an original holder of such Certificate. The REMIC
Regulations, however, do not provide for any such modifications.
Any payments received by a holder of a REMIC Residual Certificate in
connection with the acquisition of such REMIC Residual Certificate will be taken
into account in determining the income of such holder for federal income tax
purposes. Although it appears likely that any such payment would be includible
in income immediately upon its receipt, the IRS might assert that such payment
should be included in income over time according to an amortization schedule or
according to some other method. Because of the uncertainty concerning the
treatment of such payments, holders of REMIC Residual Certificates should
consult their tax advisors concerning the treatment of such payments for income
tax purposes.
The amount of income REMIC Residual Certificateholders will be required to
report (or the tax liability associated with such income) may exceed the amount
of cash distributions received from the REMIC for the corresponding period.
Consequently, REMIC Residual Certificateholders should have other sources of
funds sufficient to pay any federal income taxes due as a result of their
ownership of REMIC Residual Certificates or unrelated deductions against which
income may be offset, subject to the rules relating to "excess inclusions,"
residual interests without "significant value" and "noneconomic" residual
interests discussed below. The fact that the tax liability associated with the
income allocated to REMIC Residual Certificateholders may exceed the cash
distributions received by such REMIC Residual Certificateholders for the
corresponding period may significantly adversely affect such REMIC Residual
Certificateholders' after-tax rate of return.
Taxable Income of the REMIC
The taxable income of the REMIC will equal the income from the Mortgage
Loans and other assets of the REMIC plus any cancellation of indebtedness income
due to the allocation of realized losses to REMIC Regular Certificates, less the
deductions allowed to the REMIC for interest (including original issue discount
and reduced by the amortization of any premium received on issuance) on the
REMIC Regular Certificates (and any other Class of REMIC Certificates
constituting "regular interests" in the REMIC not offered hereby), amortization
of any premium on the Mortgage Loans, bad debt deductions with respect to the
Mortgage Loans and, except as described below, for servicing, administrative and
other expenses.
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For purposes of determining its taxable income, the REMIC will have an
initial aggregate basis in its assets equal to their fair market value
immediately after their transfer to the REMIC. For this purpose, the Master
Servicer intends to treat the fair market value of the Mortgage Loans as being
equal to the aggregate issue prices of the REMIC Regular Certificates and REMIC
Residual Certificates. Such aggregate basis will be allocated among the Mortgage
Loans collectively and the other assets of the REMIC in proportion to their
respective fair market values. The issue price of any REMIC Certificates offered
hereby will be determined in the manner described above under "-- Taxation of
Owners of REMIC Regular Certificates -- Original Issue Discount." Accordingly,
if one or more Classes of REMIC Certificates are retained initially rather than
sold, the Master Servicer may be required to estimate the fair market value of
such interests in order to determine the basis of the REMIC in the Mortgage
Loans and other property held by the REMIC.
Subject to the possible application of the de minimis rules, the method of
accrual by the REMIC of original issue discount income and market discount
income with respect to Mortgage Loans that it holds will be equivalent to the
method of accruing original issue discount income for REMIC Regular
Certificateholders (that is, under the constant yield method taking into account
the Prepayment Assumption). However, a REMIC that acquires loans at a market
discount must include such discount in income currently, as it accrues, on a
constant interest basis. See "-- Taxation of Owners of REMIC Regular
Certificates" above, which describes a method of accruing discount income that
is analogous to that required to be used by a REMIC as to Mortgage Loans with
market discount that it holds.
A Mortgage Loan will be deemed to have been acquired with discount (or
premium) to the extent that the REMIC's basis therein, determined as described
in the preceding paragraph, is less than (or greater than) its stated redemption
price. Any such discount will be includible in the income of the REMIC as it
accrues, in advance of receipt of the cash attributable to such income, under a
method similar to the method described above for accruing original issue
discount on the REMIC Regular Certificates. It is anticipated that each REMIC
will elect under Section 171 of the Code to amortize any premium on the Mortgage
Loans. Premium on any Mortgage Loan to which such election applies may be
amortized under a constant yield method, presumably taking into account a
Prepayment Assumption.
The REMIC will be allowed deductions for interest (including original issue
discount) on the REMIC Regular Certificates (including any other Class of REMIC
Certificates constituting "regular interests" in the REMIC not offered hereby)
equal to the deductions that would be allowed if the REMIC Regular Certificates
(including any other Class of REMIC Certificates constituting "regular
interests" in the REMIC not offered hereby) were indebtedness of the REMIC.
Original issue discount will be considered to accrue for this purpose as
described above under "-- Taxation of Owners of REMIC Regular
Certificates -- Original Issue Discount," except that the de minimis rule and
the adjustments for subsequent holders of REMIC Regular Certificates (including
any other Class of Certificates constituting "regular interests" in the REMIC
not offered hereby) described therein will not apply.
If a Class of REMIC Regular Certificates is issued at a price in excess of
the stated redemption price of such Class (such excess, "Issue Premium"), the
net amount of interest deductions that are allowed the REMIC in each taxable
year with respect to the REMIC Regular Certificates of such Class will be
reduced by an amount equal to the portion of the Issue Premium that is
considered to be amortized or repaid in that year. Although the matter is not
entirely certain, it is likely that Issue Premium would be amortized under a
constant yield method in a manner analogous to the method of accruing original
issue discount described above under "-- Taxation of Owners of REMIC Regular
Certificates -- Original Issue Discount."
As a general rule, the taxable income of the REMIC is required to be
determined in the same manner as if the REMIC were an individual having the
calendar year as its taxable year and using the accrual method of accounting.
However, no item of income, gain, loss or deduction allocable to a prohibited
transaction will be taken into account. See "-- Prohibited Transactions and
Other Possible REMIC Taxes" below. Further, the limitation on miscellaneous
itemized deductions imposed on individuals by Section 67 of the Code (which
allows such deductions only to the extent they exceed in the aggregate two
percent of the taxpayer's adjusted gross income) will not be applied at the
REMIC level so that the REMIC will be allowed deductions for servicing,
administrative and other non-interest expenses in determining its taxable
income. All such expenses
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will be allocated as a separate item to the holders of REMIC Certificates,
subject to the limitation of Section 67 of the Code. See "-- Possible
Pass-Through of Miscellaneous Itemized Deductions." If the deductions allowed to
the REMIC exceed its gross income for a calendar quarter, such excess will be
the net loss for the REMIC for that calendar quarter.
Basis Rules, Net Losses and Distributions
The adjusted basis of a REMIC Residual Certificate will be equal to the
amount paid for such REMIC Residual Certificate, increased by amounts included
in the income of the REMIC Residual Certificateholder and decreased (but not
below zero) by distributions made, and by net losses allocated, to such REMIC
Residual Certificateholder.
A REMIC Residual Certificateholder is not allowed to take into account any
net loss for any calendar quarter to the extent such net loss exceeds such REMIC
Residual Certificateholder's adjusted basis in its REMIC Residual Certificate as
of the close of such calendar quarter (determined without regard to such net
loss). Any loss that is not currently deductible by reason of this limitation
may be carried forward indefinitely to future calendar quarters and, subject to
the same limitation, may be used only to offset income from the REMIC Residual
Certificate. The ability of REMIC Residual Certificateholders to deduct net
losses may be subject to additional limitations under the Code, as to which
REMIC Residual Certificateholders should consult their tax advisors.
Any distribution on a REMIC Residual Certificate will be treated as a
non-taxable return of capital to the extent it does not exceed the holder's
adjusted basis in such REMIC Residual Certificate. To the extent a distribution
on a REMIC Residual Certificate exceeds such adjusted basis, it will be treated
as gain from the sale of such REMIC Residual Certificate. Holders of certain
REMIC Residual Certificates may be entitled to distributions early in the term
of the related REMIC under circumstances in which their bases in such REMIC
Residual Certificates will not be sufficiently large that such distributions
will be treated as nontaxable returns of capital. Their bases in such REMIC
Residual Certificates will initially equal the amount paid for such REMIC
Residual Certificates and will be increased by their allocable shares of taxable
income of the Trust Fund. However, such basis increases may not occur until the
end of the calendar quarter, or perhaps the end of the calendar year, with
respect to which such REMIC taxable income is allocated to the REMIC Residual
Certificateholders. To the extent such REMIC Residual Certificateholders'
initial bases are less than the distributions to such REMIC Residual
Certificateholders, and increases in such initial bases either occur after such
distributions or (together with their initial bases) are less than the amount of
such distributions, gain will be recognized to such REMIC Residual
Certificateholders on such distributions and will be treated as gain from the
sale of their REMIC Residual Certificates.
The effect of these rules is that a Residual Certificateholder may not
amortize its basis in a REMIC Residual Certificate, but may only recover its
basis through distributions, through the deduction of its share of any net
losses of the REMIC or upon the sale of its REMIC Residual Certificate. See
"-- Sales of REMIC Certificates." For a discussion of possible modifications of
these rules that may require adjustments to income of a holder of a REMIC
Residual Certificate other than an original holder in order to reflect any
difference between the cost of such REMIC Residual Certificate to such holder
and the adjusted basis such REMIC Residual Certificate would have had in the
hands of the original holder, see "-- Taxation of Owners of REMIC Residual
Certificates -- General."
Excess Inclusions
Any "excess inclusions" with respect to a REMIC Residual Certificate will,
with an exception discussed below for certain REMIC Residual Certificates held
by thrift institutions, be subject to federal income tax in all events.
In general, the "excess inclusions" with respect to a REMIC Residual
Certificate for any calendar quarter will be the excess, if any, of (i) the sum
of the daily portions of REMIC taxable income allocable to such REMIC Residual
Certificate over (ii) the sum of the "daily accruals" (as defined below) for
each day during such quarter that such REMIC Residual Certificate was held by
such REMIC Residual Certificate-
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holder. The daily accruals of a REMIC Residual Certificateholder will be
determined by allocating to each day during a calendar quarter its ratable
portion of the product of the "adjusted issue price" of the REMIC Residual
Certificate at the beginning of the calendar quarter and 120% of the "long-term
Federal rate" in effect on the Closing Date. For this purpose, the adjusted
issue price of a REMIC Residual Certificate as of the beginning of any calendar
quarter will be equal to the issue price of the REMIC Residual Certificate,
increased by the sum of the daily accruals for all prior quarters and decreased
(but not below zero) by any distributions made with respect to such REMIC
Residual Certificate before the beginning of such quarter. The issue price of a
REMIC Residual Certificate is the initial offering price to the public
(excluding bond houses and brokers) at which a substantial amount of the REMIC
Residual Certificates were sold. The "long-term Federal rate" is an average of
current yields on Treasury securities with a remaining term of greater than nine
years, computed and published monthly by the IRS.
For REMIC Residual Certificateholders, an excess inclusion (i) will not be
permitted to be offset by deductions, losses or loss carryovers from other
activities, (ii) will be treated as "unrelated business taxable income" to an
otherwise tax-exempt organization and (iii) will not be eligible for any rate
reduction or exemption under any applicable tax treaty with respect to the 30%
United States withholding tax imposed on distributions to REMIC Residual
Certificateholders that are foreign investors. See, however, "-- Foreign
Investors in REMIC Certificates," below.
As an exception to the general rules described above, thrift institutions
are allowed to offset their excess inclusions with unrelated deductions, losses
or loss carryovers, but only if the REMIC Residual Certificates are considered
to have "significant value." The REMIC Regulations provide that in order to be
treated as having significant value, the REMIC Residual Certificates must have
an aggregate issue price at least equal to two percent of the aggregate issue
prices of all of the related REMIC's Regular and Residual Certificates. In
addition, based on the Prepayment Assumption, the anticipated weighted average
life of the REMIC Residual Certificates must equal or exceed 20 percent of the
anticipated weighted average life of the REMIC, based on the Prepayment
Assumption and on any required or permitted clean up calls or required qualified
liquidation provided for in the REMIC's organizational documents. Although it
has not done so, the Treasury also has authority to issue regulations that would
treat the entire amount of income accruing on a REMIC Residual Certificate as an
excess inclusion if the REMIC Residual Certificates are considered not to have
"significant value." The related Prospectus Supplement will disclose whether
offered REMIC Residual Certificates may be considered to have "significant
value" under the REMIC Regulations; provided, however, that any disclosure that
a REMIC Residual Certificate will have "significant value" will be based upon
certain assumptions, and the Depositor will make no representation that a REMIC
Residual Certificate will have "significant value" for purposes of the
above-described rules. The above-described exception for thrift institutions
applies only to those residual interests held directly by, and deductions,
losses and loss carryovers incurred by, such institutions (and not by other
members of an affiliated group of corporations filing a consolidated income tax
return) or by certain wholly-owned direct subsidiaries of such institutions
formed or operated exclusively in connection with the organization and operation
of one or more REMICs.
In the case of any REMIC Residual Certificates held by a real estate
investment trust, the aggregate excess inclusions with respect to such REMIC
Residual Certificates, reduced (but not below zero) by the real estate
investment trust taxable income (within the meaning of Section 857(b)(2) of the
Code, excluding any net capital gain), will be allocated among the shareholders
of such trust in proportion to the dividends received by such shareholders from
such trust, and any amount so allocated will be treated as an excess inclusion
with respect to a REMIC Residual Certificate as if held directly by such
shareholder. Treasury regulations yet to be issued could apply a similar rule to
regulated investment companies, common trust funds and certain cooperatives; the
REMIC Regulations currently do not address this subject.
Noneconomic REMIC Residual Certificates
Under the REMIC Regulations, transfers of "noneconomic" REMIC Residual
Certificates will be disregarded for all federal income tax purposes if "a
significant purpose of the transfer was to enable the transferor to impede the
assessment or collection of tax." If such transfer is disregarded, the purported
transferor will continue to remain liable for any taxes due with respect to the
income on such "noneconomic"
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REMIC Residual Certificate. The REMIC Regulations provide that a REMIC Residual
Certificate is noneconomic unless, based on the Prepayment Assumption and on any
required or permitted clean up calls, or required qualified liquidation provided
for in the REMIC's organizational documents, (1) the present value of the
expected future distributions (discounted using the "applicable Federal rate"
for obligations whose term ends on the close of the last quarter in which excess
inclusions are expected to accrue with respect to the REMIC Residual
Certificate, which rate is computed and published monthly by the IRS) on the
REMIC Residual Certificate equals at least the present value of the expected tax
on the anticipated excess inclusions, and (2) the transferor reasonably expects
that the transferee will receive distributions with respect to the REMIC
Residual Certificate at or after the time the taxes accrue on the anticipated
excess inclusions in an amount sufficient to satisfy the accrued taxes.
Accordingly, all transfers of REMIC Residual Certificates that may constitute
noneconomic residual interests will be subject to certain restrictions under the
terms of the related Pooling Agreement that are intended to reduce the
possibility of any such transfer being disregarded. Such restrictions will
require each party to a transfer to provide an affidavit that no purpose of such
transfer is to impede the assessment or collection of tax, including certain
representations as to the financial condition of the prospective transferee, as
to which the transferor also is required to make a reasonable investigation to
determine such transferee's historic payment of its debts and ability to
continue to pay its debts as they come due in the future. Prior to purchasing a
REMIC Residual Certificate, prospective purchasers should consider the
possibility that a purported transfer of such REMIC Residual Certificate by such
a purchaser to another purchaser at some future date may be disregarded in
accordance with the above-described rules which would result in the retention of
tax liability by such purchaser.
The related Prospectus Supplement will disclose whether offered REMIC
Residual Certificates may be considered "noneconomic" residual interests under
the REMIC Regulations; provided, however, that any disclosure that a REMIC
Residual Certificate will not be considered "noneconomic" will be based upon
certain assumptions, and the Depositor will make no representation that a REMIC
Residual Certificate will not be considered "noneconomic" for purposes of the
above-described rules. See "-- Foreign Investors in REMIC Certificates -- REMIC
Residual Certificates" below for additional restrictions applicable to transfers
of certain REMIC Residual Certificates to foreign persons.
Mark-to-Market Rules
On December 28, 1993, the IRS released temporary regulations (the
"Mark-to-Market Regulations") 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 owned by 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 "negative value" REMIC Residual Certificate is not treated as a
security and thus generally may not be marked to market. This exclusion from the
mark-to-market requirement is expanded to include all REMIC Residual
Certificates under proposed Treasury regulations published January 4, 1995 which
provide that any REMIC Residual Certificate issued after January 4, 1995 will
not be treated as a security and therefore generally may not be marked to
market. Prospective purchasers of a REMIC Residual Certificate should consult
their tax advisors regarding the possible application of the mark-to-market
requirement to REMIC Residual Certificates.
Possible Pass-Through of Miscellaneous Itemized Deductions
Fees and expenses of a REMIC generally will be allocated to the holders of
the related REMIC Residual Certificates. The applicable Treasury regulations
indicate, however, that in the case of a REMIC that is similar to a single Class
grantor trust, all or a portion of such fees and expenses should be allocated to
the holders of the related REMIC Regular Certificates. Unless otherwise stated
in the related Prospectus Supplement, such fees and expenses will be allocated
to holders of the related REMIC Residual Certificates in their entirety and not
to the holders of the related REMIC Regular Certificates.
With respect to REMIC Residual Certificates or REMIC Regular Certificates
the holders of which receive an allocation of fees and expenses in accordance
with the preceding discussion, if any holder thereof is an individual, estate or
trust, or a "pass-through entity" beneficially owned by one or more individuals,
estates
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or trusts, (i) an amount equal to such individual's, estate's or trust's share
of such fees and expenses will be added to the gross income of such holder and
(ii) such individual's, estate's or trust's share of such fees and expenses will
be treated as a miscellaneous itemized deduction allowable subject to the
limitation of Section 67 of the Code, which permits such deductions only to the
extent they exceed in the aggregate two percent of a taxpayer's adjusted gross
income. In addition, Section 68 of the Code provides that the amount of itemized
deductions otherwise allowable for an individual whose adjusted gross income
exceeds a specified amount will be reduced by the lesser of (i) 3% of the excess
of the individual's adjusted gross income over such amount or (ii) 80% of the
amount of itemized deductions otherwise allowable for the taxable year. The
amount of additional taxable income reportable by REMIC Certificateholders that
are subject to the limitations of either Section 67 or Section 68 of the Code
may be substantial. Furthermore, in determining the alternative minimum taxable
income of such a holder of a REMIC Certificate that is an individual, estate or
trust, or a "pass-through entity" beneficially owned by one or more individuals,
estates or trusts, no deduction will be allowed for such holder's allocable
portion of servicing fees and other miscellaneous itemized deductions of the
REMIC, even though an amount equal to the amount of such fees and other
deductions will be included in such holder's gross income. Accordingly, such
REMIC Certificates may not be appropriate investments for individuals, estates,
or trusts, or pass-through entities beneficially owned by one or more
individuals, estates or trusts. Such prospective investors should consult
carefully with their tax advisors prior to making an investment in such
Certificates.
Sales of REMIC Certificates
If a REMIC Certificate is sold, the selling Certificateholder will
recognize gain or loss equal to the difference between the amount realized on
the sale and its adjusted basis in the REMIC Certificate. The adjusted basis of
a REMIC Regular Certificate generally will equal the cost of such REMIC Regular
Certificate to such Certificateholder, increased by income reported by such
Certificateholder with respect to such REMIC Regular Certificate (including
original issue discount and market discount income) and reduced (but not below
zero) by distributions on such REMIC Regular Certificate received by such
Certificateholder and by any amortized premium. The adjusted basis of a REMIC
Residual Certificate will be determined as described under "-- Taxation of
Owners of REMIC Residual Certificates -- Basis Rules, Net Losses and
Distributions." Except as described below, any such gain or loss generally will
be capital gain or loss. The Code as of the date of this Prospectus provides for
a top marginal tax rate of 39.6% for individuals and a maximum marginal rate for
long-term capital gains of individuals of 28%. No such rate differential exists
for corporations. In addition, the distinction between a capital gain or loss
and ordinary income or loss remains relevant for other purposes.
Gain from the sale of a REMIC Regular Certificate that might otherwise be
capital gain will be treated as ordinary income to the extent such gain does not
exceed the excess, if any, of (i) the amount that would have been includible in
the seller's income with respect to such REMIC Regular Certificate had income
accrued thereon at a rate equal to 110% of the "applicable Federal rate"
(generally, a rate based on an average of current yields on Treasury securities
having a maturity comparable to that of the Certificate, which rate is computed
and published monthly by the IRS), determined as of the date of purchase of such
REMIC Regular Certificate, over (ii) the amount of ordinary income actually
includible in the seller's income prior to such sale. In addition, gain
recognized on the sale of a REMIC Regular Certificate by a seller who purchased
such REMIC Regular Certificate at a market discount will be taxable as ordinary
income to the extent of any accrued and previously unrecognized market discount
that accrued during the period the Certificate was held. See "-- Taxation of
Owners of REMIC Regular Certificates -- Market Discount."
REMIC Certificates will be "evidences of indebtedness" within the meaning
of Section 582(c)(1) of the Code, so that gain or loss recognized from the sale
of a REMIC Certificate by a bank or thrift institution to which such section
applies will be ordinary income or loss.
A portion of any gain from the sale of a REMIC Regular Certificate that
might otherwise be capital gain may be treated as ordinary income to the extent
that such Certificate is held as part of a "conversion transaction" within the
meaning of Section 1258 of the Code. A conversion transaction generally is one
in which the taxpayer has taken two or more positions in Certificates or similar
property that reduce or eliminate
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market risk, if substantially all of the taxpayer's return is attributable to
the time value of the taxpayer's net investment in such transaction. The amount
of gain so realized in a conversion transaction that is recharacterized as
ordinary income generally will not exceed the amount of interest that would have
accrued on the taxpayer's net investment at 120% of the appropriate "applicable
Federal rate" (which rate is computed and published monthly by the IRS) at the
time the taxpayer enters into the conversion transaction, subject to appropriate
reduction for prior inclusion of interest and other ordinary income items from
the transaction.
Finally, a taxpayer may elect to have net capital gain taxed at ordinary
income rates rather than capital gains rates in order to include such net
capital gain in total net investment income for the taxable year, for purposes
of the limitation on the deduction of interest on indebtedness incurred to
purchase or carry property held for investment to a taxpayer's net investment
income.
Except as may be provided in Treasury regulations yet to be issued, if the
seller of a REMIC Residual Certificate reacquires the Certificate, any other
residual interest in a REMIC or any similar interest in a "taxable mortgage
pool" (as defined in Section 7701(i) of the Code) within six months of the date
of such sale, the sale will be subject to the "wash sale" rules of Section 1091
of the Code. In that event, any loss realized by the REMIC Residual
Certificateholder on the sale will not be deductible, but instead will be added
to such REMIC Residual Certificateholder's adjusted basis in the newly-acquired
asset.
PROHIBITED TRANSACTIONS AND OTHER POSSIBLE REMIC TAXES
The Code imposes a tax on REMICs equal to 100% of the net income derived
from "prohibited transactions" (a "Prohibited Transactions Tax"). In general,
subject to certain specified exceptions a prohibited transaction means the
disposition of a Mortgage Loan, the receipt of income from a source other than a
Mortgage Loan or certain other permitted investments, the receipt of
compensation for services, or gain from the disposition of an asset purchased
with the payments on the Mortgage Loans for temporary investment pending
distribution on the REMIC Certificates. It is not anticipated that any REMIC
will engage in any prohibited transactions in which it would recognize a
material amount of net income.
In addition, certain contributions to a REMIC made after the day on which
the REMIC issues all of its interests could result in the imposition of a tax on
the REMIC equal to 100% of the value of the contributed property (a
"Contributions Tax"). Each Pooling Agreement will include provisions designed to
prevent the acceptance of any contributions that would be subject to such tax.
REMICs also are 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. "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.
Unless otherwise disclosed in the related Prospectus Supplement, it is not
anticipated that any REMIC will recognize "net income from foreclosure property"
subject to federal income tax.
Unless otherwise disclosed in the related Prospectus Supplement, it is not
anticipated that any material state or local income or franchise tax will be
imposed on any REMIC.
Unless otherwise stated in the related Prospectus Supplement, and to the
extent permitted by then applicable laws, any Prohibited Transactions Tax,
Contributions Tax, tax on "net income from foreclosure property" or state or
local income or franchise tax that may be imposed on the REMIC will be borne by
the related Master Servicer or Trustee in either case out of its own funds,
provided that the Master Servicer or the Trustee, as the case may be, has
sufficient assets to do so, and provided further that such tax arises out of a
breach of the Master Servicer's or the Trustee's obligations, as the case may
be, under the related Pooling Agreement and in respect of compliance with
applicable laws and regulations. Any such tax not borne by the Master Servicer
or the Trustee will be payable out of the related Trust Fund resulting in a
reduction in amounts payable to holders of the related REMIC Certificates.
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Tax and Restrictions on Transfers of REMIC Residual Certificates to Certain
Organizations
If a REMIC Residual Certificate is transferred to a "disqualified
organization" (as defined below), a tax would be imposed in an amount
(determined under the REMIC Regulations) equal to the product of (i) the present
value (discounted using the "applicable Federal rate" for obligations whose term
ends on the close of the last quarter in which excess inclusions are expected to
accrue with respect to the Certificate, which rate is computed and published
monthly by the IRS) of the total anticipated excess inclusions with respect to
such REMIC Residual Certificate for periods after the transfer and (ii) the
highest marginal federal income tax rate applicable to corporations. The
anticipated excess inclusions must be determined as of the date that the REMIC
Residual Certificate is transferred and must be based on events that have
occurred up to the time of such transfer, the Prepayment Assumption and any
required or permitted clean up calls or required liquidation provided for in the
REMIC's organizational documents. Such a tax generally would be imposed on the
transferor of the REMIC Residual Certificate, except that where such transfer is
through an agent for a disqualified organization, the tax would instead be
imposed on such agent. However, a transferor of a REMIC 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 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. Moreover, an entity
will not qualify as a REMIC unless there are reasonable arrangements designed to
ensure that (i) residual interests in such entity are not held by disqualified
organizations and (ii) information necessary for the application of the tax
described herein will be made available. Restrictions on the transfer of REMIC
Residual Certificates and certain other provisions that are intended to meet
this requirement will be included in the Pooling Agreement, including provisions
(i) requiring any transferee of a REMIC Residual Certificate to provide an
affidavit representing that it is not a "disqualified organization" and is not
acquiring the REMIC Residual Certificate on behalf of a "disqualified
organization," undertaking to maintain such status and agreeing to obtain a
similar affidavit from any person to whom it shall transfer the REMIC Residual
Certificate, (ii) providing that any transfer of a REMIC Residual Certificate to
a "disqualified person" shall be null and void and (iii) granting to the Master
Servicer the right, without notice to the holder or any prior holder, to sell to
a purchaser of its choice any REMIC Residual Certificate that shall become owned
by a "disqualified organization" despite (i) and (ii) above.
In addition, if a "pass-through entity" (as defined below) includes in
income excess inclusions with respect to a REMIC Residual Certificate, and a
disqualified organization is the record holder of an interest in such entity,
then a tax will be imposed on such entity equal to the product of (i) the amount
of excess inclusions on the REMIC Residual Certificate that are allocable to the
interest in the pass-through entity held by such disqualified organization and
(ii) the highest marginal federal income tax rate imposed on corporations. A
pass-through entity will not be subject to this tax for any period, however, if
each record holder of an interest in such pass-through entity furnishes to such
pass-through entity (i) such holder's social security number and a statement
under penalties of perjury that such social security number is that of the
record holder or (ii) a statement under penalties of perjury that such record
holder is not a disqualified organization.
For these purposes, a "disqualified organization" means (i) the United
States, any State or political subdivision thereof, any foreign government, any
international organization, or any agency or instrumentality of the foregoing
(but would not include instrumentalities described in Section 168(h)(2)(D) of
the Code or the Federal Home Loan Mortgage Corporation), (ii) any organization
(other than a cooperative described in Section 521 of the Code) that is exempt
from federal income tax, unless it is subject to the tax imposed by Section 511
of the Code or (iii) any organization described in Section 1381(a)(2)(C) of the
Code. For these purposes, a "pass-through entity" means any regulated investment
company, real estate investment trust, trust, partnership or certain other
entities described in Section 860E(e)(6) of the Code. In addition, a person
holding an interest in a pass-through entity as a nominee for another person
will, with respect to such interest, be treated as a pass-through entity.
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Termination
A REMIC will terminate immediately after the Distribution Date following
receipt by the REMIC of the final payment in respect of the Mortgage Loans or
upon a sale of the REMIC's assets following the adoption by the REMIC of a plan
of complete liquidation. The last distribution on a REMIC Regular Certificate
will be treated as a payment in retirement of a debt instrument. In the case of
a REMIC Residual Certificate, if the last distribution on such REMIC Residual
Certificate is less than the REMIC Residual Certificateholder's adjusted basis
in such Certificate, such REMIC Residual Certificateholder should be treated as
realizing a loss equal to the amount of such difference, and such loss may be
treated as a capital loss.
Reporting and Other Administrative Matters
Solely for purposes of the administrative provisions of the Code, the REMIC
will be treated as a partnership and Residual Certificateholders will be treated
as partners. Unless otherwise stated in the related Prospectus Supplement, the
Master Servicer will file REMIC federal income tax returns on behalf of the
related REMIC, will be designated as and will act as the "tax matters person"
with respect to the REMIC in all respects, and generally will hold at least a
nominal amount of REMIC Residual Certificates.
As the tax matters person, the Master Servicer will, subject to certain
notice requirements and various restrictions and limitations, generally have the
authority to act on behalf of the REMIC and the REMIC Residual
Certificateholders in connection with the administrative and judicial review of
items of income, deduction, gain or loss of the REMIC, as well as the REMIC's
Classification. REMIC Residual Certificateholders will generally be required to
report such REMIC items consistently with their treatment on the related REMIC's
tax return and may in some circumstances be bound by a settlement agreement
between the Master Servicer, as tax matters person, and the IRS concerning any
such REMIC item. Adjustments made to the REMIC tax return may require a REMIC
Residual Certificateholder to make corresponding adjustments on its return, and
an audit of the REMIC's tax return, or the adjustments resulting from such an
audit, could result in an audit of a REMIC Residual Certificateholder's return.
No REMIC will be registered as a tax shelter pursuant to Section 6111 of the
Code because it is not anticipated that any REMIC will have a net loss for any
of the first five taxable years of its existence. Any person that holds a REMIC
Residual Certificate as a nominee for another person may be required to furnish
to the related REMIC, in a manner to be provided in Treasury regulations, the
name and address of such person and other information.
Reporting of interest income, including any original issue discount, with
respect to REMIC Regular Certificates is required annually, and may be required
more frequently under Treasury regulations. These information reports generally
are required to be sent to individual holders of REMIC Regular Interests and the
IRS; holders of REMIC Regular Certificates that are corporations, trusts,
securities dealers and certain other non-individuals will be provided interest
and original issue discount income information and the information set forth in
the following paragraph upon request in accordance with the requirements of the
applicable regulations. The information must be provided by the later of 30 days
after the end of the quarter for which the information was requested, or two
weeks after the receipt of the request. The REMIC must also comply with rules
requiring a REMIC Regular Certificate issued with original issue discount to
disclose on its face certain information including the amount of original issue
discount and the issue date, and requiring such information to be reported to
the IRS. Reporting with respect to the REMIC Residual Certificates, including
income, excess inclusions, investment expenses and relevant information
regarding qualification of the REMIC's assets will be made as required under the
Treasury regulations, generally on a quarterly basis.
As applicable, the REMIC Regular Certificate information reports will
include a statement of the adjusted issue price of the REMIC Regular Certificate
at the beginning of each accrual period. In addition, the reports will include
information required by regulations with respect to computing the accrual of any
market discount. Because exact computation of the accrual of market discount on
a constant yield method requires information relating to the holder's purchase
price that the Master Servicer will not have, such regulations only require that
information pertaining to the appropriate proportionate method of accruing
market discount be provided. See "Taxation of Owners of REMIC Regular
Certificates -- Market Discount."
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The responsibility for complying with the foregoing reporting rules will be
borne by the Master Servicer. The Prospectus Supplement related to any Series of
Certificates will specify the manner in which Certificateholders may request any
information with respect to the returns described in Section 1.6049-7(e)(2) of
the Treasury regulations.
Backup Withholding With Respect to REMIC Certificates
Payments of interest and principal, as well as payments of proceeds from
the sale of REMIC Certificates, may be subject to the "backup withholding tax"
under Section 3406 of the Code at a rate of 31% if recipients of such payments
fail to furnish to the payor certain information, including their taxpayer
identification numbers, or otherwise fail to establish an exemption from such
tax. Any amounts deducted and withheld from a distribution to a recipient would
be allowed as a credit against such recipient's federal income tax. Furthermore,
certain penalties may be imposed by the IRS on a recipient of payments that is
required to supply information but that does not do so in the proper manner.
Foreign Investors in REMIC Certificates
A REMIC Regular Certificateholder that is not a "United States person" (as
defined below) and is not subject to federal income tax as a result of any
direct or indirect connection to the United States in addition to its ownership
of a REMIC Regular Certificate will not be subject to United States federal
income or withholding tax in respect of a distribution on a REMIC Regular
Certificate, provided that the holder complies to the extent necessary with
certain identification requirements (including delivery of a statement, signed
by the Certificateholder under penalties of perjury, certifying that such
Certificateholder is not a United States person and providing the name and
address of such Certificateholder). For these purposes, "United States person"
means a citizen or resident of the United States, a corporation, partnership or
other entity created or organized in, or under the laws of, the United States or
any political subdivision thereof, or an estate or trust whose income from
sources without the United States is includible in gross income for United
States federal income tax purposes regardless of its connection with the conduct
of a trade or business within the United States. It is possible that the IRS may
assert that the foregoing tax exemption should not apply with respect to a REMIC
Regular Certificate held by a REMIC Residual Certificateholder that owns
directly or indirectly a 10% or greater interest in the REMIC Residual
Certificates. If the holder does not qualify for exemption, distributions of
interest, including distributions in respect of accrued original issue discount,
to such holder may be subject to a tax rate of 30%, subject to reduction under
any applicable tax treaty.
In addition, the foregoing rules will not apply to exempt a United States
shareholder of a controlled foreign corporation from taxation on such United
States shareholder's allocable portion of the interest income received by such
controlled foreign corporation.
Further, it appears that a REMIC Regular Certificate would not be included
in the estate of a nonresident alien individual and would not be subject to
United States estate taxes. However, Certificateholders who are non-resident
alien individuals should consult their tax advisors concerning this question.
Unless otherwise stated in the related Prospectus Supplement, transfers of
REMIC Residual Certificates to investors that are not United States Persons will
be prohibited under the related Pooling Agreement.
STATE AND OTHER TAX CONSEQUENCES
In addition to the federal income tax consequences described in "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES", potential investors should consider the state
and local tax consequences of the acquisition, ownership, and disposition of the
Certificates offered hereunder. State tax law may differ substantially from the
corresponding federal tax law, and the discussion above does not purport to
describe any aspect of the tax laws of any state or other jurisdiction.
Therefore, prospective investors should consult their own tax advisors with
respect to the various tax consequences of investments in the certificates
offered hereunder.
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ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain fiduciary and prohibited transaction restrictions on employee
pension and welfare benefit plans subject to ERISA ("ERISA Plans"). Section 4975
of the Code imposes similar prohibited transaction restrictions on tax-qualified
retirement plans described in Section 401(a) of the Code ("Qualified Retirement
Plans") and on Individual Retirement Accounts ("IRAs") described in Section 408
of the Code (collectively, "Tax-Favored Plans"). In accordance with the general
fiduciary standards of ERISA, an ERISA Plan fiduciary should consider whether an
investment in the Certificates is permitted by the documents and instruments
governing the Plan, consistent with the Plan's overall investment policy and
appropriate in view of the composition of its investment portfolio.
Certain employee benefit plans, such as 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 the ERISA requirements discussed herein. Accordingly,
assets of such plans may be invested in Certificates without regard to the ERISA
considerations described below, subject to the provisions of applicable federal
and state law. Any such plan that is a Qualified Retirement Plan and exempt from
taxation under Sections 401(a) and 501(a) of the Code, however, is subject to
the prohibited transaction rules set forth in Section 503 of the Code.
Section 406 of ERISA and Section 4975 of the Code prohibit a broad range of
transactions involving "plan assets" of ERISA Plans and Tax-Favored Plans
(collectively, "Plans") and persons ("Parties in Interest" under ERISA or
"Disqualified Persons" under the Code) who have certain specified relationships
to the Plans, unless a statutory or administrative exemption is available.
Certain Parties in Interest or Disqualified Persons who participate in a
prohibited transaction may be subject to a penalty or an excise tax imposed
pursuant to Section 502(i) of ERISA or Section 4975 of the Code, unless a
statutory or administrative exemption is available.
PLAN ASSET REGULATIONS
An investment of Plan Assets (as defined below) in Certificates may cause
the underlying Mortgage Loans included in a Trust Fund to be deemed "plan
assets" of such Plan. The U.S. Department of Labor (the "DOL") has promulgated
regulations (the "DOL Regulations") concerning whether or not the assets of a
Plan would be deemed to include an interest in the underlying assets of an
entity (such as a Trust Fund), for purposes of applying the general fiduciary
responsibility provisions of ERISA and the prohibited transaction provisions of
ERISA and Section 4975 of the Code, when a Plan acquires an "equity interest"
(such as a Certificate) in such entity. Because of the factual nature of certain
of the rules set forth in the DOL Regulations, Plan Assets either may be deemed
to include an interest in the assets of a Trust Fund or may be deemed merely to
include its interest in the Certificates. Therefore, neither Plans nor such
entities should acquire or hold Certificates in reliance upon the availability
of any exception under the DOL Regulations. For purposes of this Section "ERISA
CONSIDERATIONS," the term "Plan Assets" or "assets of a Plan" has the meaning
specified in the DOL Regulations and includes an undivided interest in the
underlying assets of certain entities in which a Plan invests.
The prohibited transaction provisions of Section 406 of ERISA and Section
4975 of the Code may apply to a Trust Fund and cause the Depositor, the Master
Servicer, any Subservicer, the Trustee, the obligor under any credit enhancement
mechanism or certain affiliates thereof, to be considered or become Parties in
Interest or Disqualified Persons with respect to an investing Plan or a Plan
holding an interest in an entity whose assets include Plan Assets (a "Plan Asset
Investor"). If so, the acquisition or holding of Certificates by, on behalf of
or with Plan Assets of any Plan could also give rise to a prohibited transaction
under ERISA and/or Section 4975 of the Code, unless some statutory or
administrative exemption is available. Certificates acquired by a Plan would
constitute assets of that Plan. Under the DOL Regulations, the Trust Fund,
including the Mortgage Loans and the other assets held in the Trust Fund, may
also be deemed to be assets of each Plan that acquires Certificates. Special
caution should be exercised before Plan Assets are used to acquire a Certificate
in such circumstances, especially if, with respect to such assets, the
Depositor, the Master Servicer, any Subservicer, the Trustee, the obligor under
any credit enhancement mechanism or an affiliate thereof
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either (i) has investment discretion with respect to the investment of such Plan
Assets or (ii) has authority or responsibility to give (or regularly gives)
investment advice with respect to such Plan Assets for a fee pursuant to an
agreement or understanding that such advice will serve as a primary basis for
investment decisions with respect to such Plan Assets.
Any person who has discretionary authority or control respecting the
management or disposition of Plan Assets, and any person who provides investment
advice with respect to such assets for a fee (in the manner described above), is
a fiduciary of the investing Plan. If the Mortgage Loans were to constitute Plan
Assets, then any party exercising management or discretionary control regarding
those assets may be deemed to be a Plan "fiduciary," and thus subject to the
fiduciary requirements of ERISA and the prohibited transaction provisions of
ERISA and Section 4975 of the Code with respect to any investing Plan. In
addition, if the Mortgage Loans were to constitute Plan Assets, then the
acquisition or holding of Certificates by, on behalf of or with Plan Assets, as
well as the operation of the Trust Fund, may constitute or result in a
prohibited transaction under ERISA and/or Section 4975 of the Code.
PROHIBITED TRANSACTION CLASS EXEMPTION 83-1
Prohibited Transaction Class Exemption ("PTCE") 83-1 (Class Exemption for
Certain Transactions Involving Mortgage Pool Investment Trusts) permits, subject
to certain conditions, 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 Plan
Asset Investors, regardless of whether (a) the mortgage pool is exempt from
"plan asset" treatment under the DOL Regulations or (b) the transactions would
otherwise be prohibited under ERISA or Section 4975 of the Code. If the general
conditions (described below) of PTCE 83-1 are satisfied, an investment by a Plan
in Certificates (1) will be exempt from the prohibitions of Section 406(a) of
ERISA (relating generally to Plan Asset transactions involving Parties in
Interest or Disqualified Persons who are not fiduciaries) if the Certificates
are purchased at no more than fair market value, and (2) will be exempt from the
prohibitions of Sections 406(b)(1) and (2) of ERISA (relating generally to Plan
Asset transactions with fiduciaries) if, in addition, the purchase is approved
by an independent fiduciary, the Plan Asset Investor pays no more for the
Certificates than would be paid in an arm's length transaction with an unrelated
party, no sales commission is paid to the Depositor as Mortgage Pool sponsor,
the Plan Asset Investor does not purchase more than 25% of the Certificates of
the applicable Series, and at least 50% of the Certificates of that Series is
purchased by persons independent of the Depositor, the Trustee and the obligor
under any credit enhancement mechanism, as applicable.
PTCE 83-1 sets forth three general conditions which must be satisfied for
any transaction to be eligible for exemption: (1) the existence of a pool
trustee who is not an affiliate of the pool sponsor; (2) the maintenance of a
system of insurance or other protection for the pooled mortgage loans and
property securing such loans, and for indemnifying certificateholders against
reductions in pass-through payments due to property damage or defaults in loan
payments; and (3) a limitation on the amount of the payment retained by the pool
sponsor, together with other funds inuring to its benefit, to not more than
adequate consideration for selling the mortgage loans plus reasonable
compensation for services provided by the pool sponsor to the mortgage pool.
Unless otherwise specified in the applicable Prospectus Supplement, the
Trustee for each Series will be unaffiliated with the Depositor, and the first
general condition of PTCE 83-1 will be satisfied for each such Series. With
respect to the second general condition of PTCE 83-1, the Depositor intends to
use its best efforts to establish for each Series of Certificates an insurance,
indemnification, subordination or other method of credit support which will
adequately protect the Mortgage Pools and indemnify Certificateholders of the
applicable Series against pass-through payment reductions resulting from
property damage or defaults in loan payments. See "DESCRIPTION OF CREDIT
ENHANCEMENTS." The amount, method and description of the credit support method
applicable to a Series of Certificates will be set forth in the related
Prospectus Supplement. With respect to the third general condition of PTCE 83-1,
the Depositor intends to use its best efforts to establish for each Series a
compensation method which will produce for the Depositor total compensation
which will not exceed adequate consideration for forming the Mortgage Pool,
selling the Certificates and fulfilling any duties owed the Mortgage Pool by the
Depositor under the applicable Pooling
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Agreement. However, the Depositor does not guarantee that its credit support and
compensation methods will be sufficient to meet the second and third general
conditions (described above) with respect to any Series.
As indicated in the two preceding paragraphs, the continued maintenance of
a system of insurance or other protection for the pooled mortgage loans and
property securing such loans, and for indemnifying certificateholders against
reductions in pass-through payments due to property damage or defaults in loan
payments, is one of the three general conditions that must be satisfied for any
transaction involving a Mortgage Pool to remain eligible for exemption by PTCE
83-1 from the prohibited transaction rules of ERISA and Section 4975 of the
Code. If the credit support method established for any Series is cancelled or
terminated, or if the credit support is reduced to such an extent that its
coverage amount is less than the greater of (a) 1% of the aggregate unpaid
principal balance of the Mortgage Loans or (b) the unpaid principal balance of
the largest single Mortgage Loan (see "DESCRIPTION OF CREDIT ENHANCEMENTS"),
then the Mortgage Pool relating to that Series may no longer satisfy the general
conditions of PTCE 83-1. In such event, the exemption from the prohibited
transaction rules afforded by PTCE 83-1 may no longer be available.
One or more Series of Certificates may be offered to Plan Asset Investors
through a forward delivery commitment contract, which is a contract for the
purchase of Certificates to be delivered at an agreed future settlement date.
PTCE 83-1 permits the sale of Certificates to a Plan Asset Investor pursuant to
such a contract, provided that the forward delivery commitment is expressly
approved by a fiduciary who is independent of the Depositor, the Trustee, the
obligor under any credit enhancement mechanism, as applicable, and their
respective affiliates, and who has the authority to manage and control the Plan
Assets being committed for investment in the Certificates.
If a Series of Certificates is subdivided into two or more Classes which
are entitled to disproportionate allocations of the principal and interest
payments on the Mortgage Loans, the availability of the exemption afforded by
PTCE 83-1 may be adversely affected, as described in the applicable Prospectus
Supplement. Moreover, if any Class of Certificates is entitled to pass-through
payments of principal (but no or only nominal interest) or interest (but no or
only nominal principal), PTCE 83-1 will not exempt holders of the Class of
Certificates from the prohibited transaction rules of ERISA and Section 4975 of
the Code.
OTHER EXEMPTIONS
If for any reason PTCE 83-1 does not provide an exemption for a particular
Certificateholder who is a Plan or a Plan Asset Investor, one of four other
prohibited transaction class exemptions issued by the DOL might apply, i.e.,
PTCE 95-60 (Class Exemption for Certain Transactions Involving Insurance Company
General Accounts), PTCE 91-38 (Class Exemption for Certain Transactions
Involving Bank Collective Investment Funds), PTCE 90-1 (Class Exemption for
Certain Transactions Involving Insurance Company Pooled Separate Accounts) or
PTCE 84-14 (Class Exemption for Plan Asset Transactions Determined by
Independent Qualified Professional Asset Managers). There can be no assurance
that any of these class exemptions will apply with respect to any particular
Plan or Plan Asset Investor or, even if it were to apply, that the exemption
would apply to all transactions involving the Mortgage Pool. In addition, the
underwriter with respect to a particular Series may be the recipient of a final
prohibited transaction exemption which, if so specified in the applicable
Prospectus Supplement, may accord a Plan or a Plan Asset Investor protection
from violations of the prohibited transaction rules of ERISA and Section 4975 of
the Code if the Plan or Plan Asset Investor satisfies the conditions described
in the applicable Prospectus Supplement.
TAX EXEMPT INVESTORS
A Plan that is exempt from federal income taxation pursuant to Section 501
of the Code (a "Tax Exempt Investor") nonetheless will be subject to federal
income taxation to the extent that its income is "unrelated business taxable
income" ("UBTI") within the meaning of Section 512 of the Code. All "excess
inclusions" of a REMIC allocated to a REMIC Residual Certificate held by a
Tax-Exempt Investor will be considered UBTI and thus will be subject to federal
income tax. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES -- Taxation of Owners
of REMIC Residual Certificates -- Excess Inclusions."
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<PAGE> 142
CONSULTATION WITH COUNSEL
Any fiduciary or other Plan Asset Investor that proposes to acquire or hold
Certificates on behalf of or with Plan Assets of any Plan should consult with
its counsel with respect to the potential applicability of the fiduciary
responsibility provisions of ERISA and the prohibited transaction provisions of
ERISA and Section 4975 of the Code to the proposed investment and the
availability of PTCE 83-1 or any other prohibited transaction exemption.
LEGAL INVESTMENT MATTERS
Each Class of Certificates offered by means of this Prospectus and the
related Prospectus Supplement will be rated at the date of issuance in one of
the four highest rating categories by at least one Rating Agency. Unless
otherwise specified in the related Prospectus Supplement each such Class that is
rated in one of the two highest rating categories by at least one Rating Agency
will constitute "mortgage related securities" for purposes of the Secondary
Mortgage Market Enhancement Act of 1984 ("SMMEA"), and, as such, will be legal
investments for persons, trusts, corporations, partnerships, associations,
business trusts and business entities (including depository institutions, life
insurance companies and pension funds) created pursuant to or existing under the
laws of the United States or of any State 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.
Under SMMEA, if a State enacted legislation on or prior to October 3, 1991
specifically limiting the legal investment authority of any such entities with
respect to "mortgage related securities," such securities will constitute legal
investments for entities subject to such legislation only to the extent provided
therein. Certain States have enacted legislation which overrides the preemption
provisions of SMMEA. SMMEA provides, however, that in no event will the
enactment of any such legislation affect the validity of any contractual
commitment to purchase, hold or invest in "mortgage related securities," or
require the sale or other disposition of such securities, so long as such
contractual commitment was made or such securities acquired prior to the
enactment of 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 with "mortgage
related securities" without limitation as to the percentage of their assets
represented thereby, federal credit unions may invest in such securities, and
national banks may purchase such securities for their own account without regard
to the limitations generally applicable to investment securities set forth in 12
U.S.C. 24 (Seventh), subject in each case to such regulations as the applicable
federal regulatory authority may prescribe.
The Federal Financial Institutions Examination Council has issued a
supervisory policy statement (the "Policy Statement") applicable to all
depository institutions, setting forth guidelines for and significant
restrictions on investments in "high-risk mortgage securities." The Policy
Statement has been adopted by the Federal Reserve Board, the Office of the
Comptroller of the Currency, the FDIC and the OTS with an effective date of
February 10, 1992. The Policy Statement generally indicates that a mortgage
derivative product will be deemed to be high risk if it exhibits greater price
volatility than a standard fixed rate 30-year mortgage security. According to
the Policy Statement, prior to purchase, a depository institution will be
required to determine whether a mortgage derivative product that it is
considering acquiring is high-risk, and if so that the proposed acquisition
would reduce the institution's overall interest rate risk. Reliance on analysis
and documentation obtained from a securities dealer or other outside party
without internal analysis by the institution would be unacceptable. There can be
no assurance as to which Classes of Certificates will be treated as high-risk
under the Policy Statement.
The predecessor to the OTS issued a bulletin, entitled "Mortgage Derivative
Products and Mortgage Swaps," which is applicable to thrift institutions
regulated by the OTS. The bulletin established guidelines for the investment by
savings institutions in certain "high-risk" mortgage derivative securities and
limitations on
90
<PAGE> 143
the use of such securities by insolvent, undercapitalized or otherwise
"troubled" institutions. According to the bulletin, such "high-risk" mortgage
derivative securities include securities having certain specified
characteristics, which may include certain Classes of Certificates. In addition,
the National Credit Union Administration has issued regulations governing
federal credit union investments which prohibit investment in certain specified
types of securities, which may include certain Classes of Certificates. Similar
policy statements have been issued by regulators having jurisdiction over other
types of depository institutions.
Certain Classes of Certificates offered hereby, including any Class that is
not rated in one of the two highest rating categories by at least one Rating
Agency, will not constitute "mortgage related securities" for purposes of SMMEA.
Any such Class of Certificates will be identified in the related Prospectus
Supplement. Prospective investors in such Classes of Certificates, in
particular, should consider the matters discussed in the following paragraph.
There may be other restrictions on the ability of certain investors either
to purchase certain Classes of Certificates or to purchase any Class of
Certificates representing more than a specified percentage of the investors'
assets. The Depositor will make no representations as to the proper
characterization of any Class of Certificates for legal investment or other
purposes, or as to the ability of particular investors to purchase any Class of
Certificates under applicable legal investment restrictions. These uncertainties
may adversely affect the liquidity of any Class of 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 own 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.
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement,
substantially all of the net proceeds to be received from the sale of
Certificates will be applied by the Depositor to finance the purchase of, or to
repay short-term loans incurred to finance the purchase of, the Mortgage Loans
underlying the Certificates or will be used by the Depositor for general
corporate purposes. The Depositor expects that it will make additional sales of
securities similar to the Certificates from time to time, but the timing and
amount of any such additional offerings will be dependent upon a number of
factors, including the volume of mortgage loans purchased by the Depositor,
prevailing interest rates, availability of funds and general market conditions.
METHODS OF DISTRIBUTION
The Certificates offered hereby and by the related Prospectus Supplements
will be offered in Series through one or more of the methods described below.
The Prospectus Supplement prepared for each Series will describe the method of
offering being utilized for that Series and will state the net proceeds to the
Depositor from such sale.
The Depositor intends that Certificates will be offered through the
following methods from time to time and that offerings may be made concurrently
through more than one of these methods or that an offering of a particular
Series of Certificates may be made through a combination of two or more of these
methods. Such methods are as follows:
1. By negotiated firm commitment or best efforts underwriting and
public re-offering by underwriters;
2. By placements by the Depositor with institutional investors through
dealers; and
3. By direct placements by the Depositor with institutional investors.
In addition, if specified in the related Prospectus Supplement, a Series of
Certificates may be offered in whole or in part in exchange for the Mortgage
Loans (and other assets, if applicable) that would comprise the Mortgage Pool in
respect of such Certificates.
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<PAGE> 144
If underwriters are used in a sale of any Certificates (other than in
connection with an underwriting on a best efforts basis), 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
fixed public offering prices or at varying prices to be determined at the time
of sale or at the time of commitment therefor. Such underwriters may be
broker-dealers affiliated with the Depositor whose identities and relationships
to the Depositor will be as set forth in the related Prospectus Supplement. The
managing underwriter or underwriters with respect to the offer and sale of a
particular Series of Certificates will be set forth on the cover of the
Prospectus Supplement relating to such Series and the members of the
underwriting syndicate, if any, will be named in such Prospectus Supplement.
In connection with the sale of the Certificates, underwriters may receive
compensation from the Depositor or from purchasers of the Certificates in the
form of discounts, concessions or commissions. Underwriters and dealers
participating in the distribution of the Certificates may be deemed to be
underwriters in connection with such Certificates, and any discounts or
commissions received by them from the Depositor and any profit on the resale of
Certificates by them may be deemed to be underwriting discounts and commissions
under the Securities Act of 1933, as amended.
It is anticipated that the underwriting agreement pertaining to the sale of
any Series of Certificates will provide that the obligations of the underwriters
will be subject to certain conditions precedent, that the underwriters will be
obligated to purchase all such Certificates if any are purchased (other than in
connection with an underwriting on a best efforts basis) and that, in limited
circumstances, the Depositor will indemnify the several underwriters and the
underwriters will indemnify the Depositor against certain civil liabilities,
including liabilities under the Securities Act of 1933, as amended, or will
contribute to payments required to be made in respect thereof.
The Prospectus Supplement with respect to any Series offered by placements
through dealers will contain information regarding the nature of such offering
and any agreements to be entered into between the Depositor 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 of 1933, as amended, in connection with reoffers
and sales by them of Certificates. Holders of Certificates should consult with
their legal advisors in this regard prior to any such reoffer or sale.
RATING
It is a condition to the issuance of the Certificates of each Series
offered hereby and by the related Prospectus Supplement that they shall have
been rated in one of the four highest rating categories by one or more
nationally recognized statistical rating agencies (each, a "Rating Agency")
specified in the related Prospectus Supplement.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by certificateholders of all distributions on the underlying mortgage
loans. These ratings address the structural, legal and issuer-related aspects
associated with such certificates, the nature of the underlying mortgage loans
and the credit quality of the guarantor, if any. Ratings on mortgage
pass-through certificates do not represent any assessment of the likelihood of
principal prepayments by mortgagors or of the degree by which such prepayments
might differ from those originally anticipated. As a result, certificateholders
might suffer a lower than anticipated yield, and, in addition, holders of
stripped pass-through certificates in extreme cases might fail to recoup their
initial investments.
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
organization. Each security rating should be evaluated independently of any
other security rating.
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<PAGE> 145
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by Orrick,
Herrington & Sutcliffe, San Francisco, California.
FINANCIAL INFORMATION
The Depositor has determined that its financial statements are not material
to the offering made hereby.
ADDITIONAL INFORMATION
This Prospectus, together with the Prospectus Supplement for each Series of
Certificates, contains a summary of the material terms of the applicable
exhibits to the Registration Statement and the documents referred to herein and
therein. Copies of such exhibits are on file at the offices of the Securities
and Exchange Commission in Washington, D.C., and may be obtained at rates
prescribed by the Commission upon request to the Commission and may be
inspected, without charge, at the Commission's offices.
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<PAGE> 146
INDEX OF PRINCIPAL DEFINITIONS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Accrual Certificates.................................................................. 7
Advance............................................................................... 33
Affiliated Seller..................................................................... 12
Appraised Value....................................................................... 13
ARM Loans............................................................................. 12
Balloon Amount........................................................................ 13
Balloon Loans......................................................................... 13
Bank of America FSB................................................................... 1
Bank of America NT&SA................................................................. 1
BankAmerica........................................................................... 10
Bankruptcy Amount..................................................................... 37
Bankruptcy Loss....................................................................... 39
Bankruptcy Losses..................................................................... 41
Book-Entry Certificates............................................................... 24
Buydown Account....................................................................... 14
Buydown Agreement..................................................................... 31
Buydown Funds......................................................................... 14
Buydown Mortgage Loans................................................................ 14
Buydown Period........................................................................ 14
CEDEL................................................................................. 26
CEDEL Participants.................................................................... 26
Certificate Account................................................................... 29
Certificate Account Deposit Date...................................................... 30
Certificate Insurance Policy.......................................................... 41
Certificate Principal Balance......................................................... 5
Certificateholder..................................................................... 24
Certificateholders.................................................................... 3
Certificates.......................................................................... 1
Citibank.............................................................................. 24
Class................................................................................. 1
Closing Date.......................................................................... 73
Code.................................................................................. 6
Commission............................................................................ 3
Committee Report...................................................................... 67
Contributions Tax..................................................................... 83
Convertible Mortgage Loan............................................................. 13
Cooperative........................................................................... 26
Credit Enhancer....................................................................... 40
Custodial Account..................................................................... 19
Cypress Center........................................................................ 20
Debt Service Reduction................................................................ 41
Defaulted Mortgage Loss............................................................... 39
Deficient Valuation................................................................... 41
Definitive Certificates............................................................... 25
Deleted Mortgage Loan................................................................. 19
Depositaries.......................................................................... 24
</TABLE>
94
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Depositor............................................................................. 1
Determination Date.................................................................... 33
Disqualified Persons.................................................................. 87
Distribution Date..................................................................... 7
DOL................................................................................... 87
DOL Regulations....................................................................... 87
Due Date.............................................................................. 29
Eligible Account...................................................................... 29
ERISA................................................................................. 9
ERISA Plans........................................................................... 87
Euroclear............................................................................. 26
Euroclear Operator.................................................................... 26
Euroclear Participants................................................................ 26
Extraordinary Losses.................................................................. 39
FDIC.................................................................................. 15
FHA................................................................................... 16
FHLMC................................................................................. 16
FNMA.................................................................................. 16
Form of Pooling Agreement............................................................. 4
Fraud Loss............................................................................ 39
Fraud Loss Amount..................................................................... 37
Garn-St Germain Act................................................................... 59
GNMA.................................................................................. 16
Grantor Trust Certificates............................................................ 9
Grantor Trust Fractional Interest Certificate......................................... 62
Grantor Trust Fund.................................................................... 61
Grantor Trust Strip Certificate....................................................... 62
Guides................................................................................ 16
Holder................................................................................ 25
Indirect Participants................................................................. 25
Insurance Proceeds.................................................................... 29
IRAs.................................................................................. 87
IRS................................................................................... 63
Issue Premium......................................................................... 78
Letter of Credit...................................................................... 40
Letter of Credit Bank................................................................. 40
Liquidated Mortgage Loan.............................................................. 36
Liquidation Proceeds.................................................................. 29
Loan-to-Value Ratio................................................................... 13
Loss.................................................................................. 45
Mark-to-Market Regulations............................................................ 81
Master Commitments.................................................................... 18
Master Servicer....................................................................... 1
Morgan................................................................................ 24
Mortgage Derivative Products and Mortgage Swaps....................................... 90
Mortgage File......................................................................... 28
Mortgage Loans........................................................................ 1
</TABLE>
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<PAGE> 148
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Mortgage Notes........................................................................ 11
Mortgage Pool......................................................................... 1
Mortgage Pool Insurance Policy........................................................ 40
Mortgage Rate......................................................................... 12
Mortgaged Properties.................................................................. 6
Mortgages............................................................................. 11
Mortgagor............................................................................. 9
Net 5 Loans........................................................................... 13
Net Mortgage Rate..................................................................... 53
Note Margin........................................................................... 12
OID Regulations....................................................................... 61
OTS................................................................................... 20
Owners................................................................................ 25
Parties in Interest................................................................... 87
Pass-Through Rate..................................................................... 5
Paying Agent.......................................................................... 32
Percentage Interest................................................................... 32
Permitted Investments................................................................. 29
Plan.................................................................................. 9
Plan Asset Investor................................................................... 87
Plan Assets........................................................................... 87
Plans................................................................................. 87
Policy Statement...................................................................... 90
Pool Insurer.......................................................................... 31
Pooling Agreement..................................................................... 4
Prepayment Assumption................................................................. 64
Prepayment Interest Shortfall......................................................... 7
Primary Mortgage Insurance Policy..................................................... 45
Primary Mortgage Insurer.............................................................. 45
Principal Prepayments................................................................. 29
Prohibited Transactions Tax........................................................... 83
PTCE.................................................................................. 88
Qualified Retirement Plans............................................................ 87
Qualified Substitute Mortgage Loan.................................................... 19
Rating Agency......................................................................... 9
Realized Loss......................................................................... 37
Record Date........................................................................... 32
Relief Act............................................................................ 60
REMIC................................................................................. 1
REMIC Certificates.................................................................... 61
REMIC Provisions...................................................................... 61
REMIC Regular Certificates............................................................ 9
REMIC Regulations..................................................................... 61
REMIC Residual Certificates........................................................... 9
REO Mortgage Loan..................................................................... 36
Reserve Fund.......................................................................... 41
Retained Yield........................................................................ 11
Richmond Center....................................................................... 20
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Rules................................................................................. 25
Sellers............................................................................... 1
Senior Certificates................................................................... 6
Senior Percentage..................................................................... 38
Senior/Subordinate Series............................................................. 23
Series................................................................................ 1
Servicing Advances.................................................................... 31
Single Certificate.................................................................... 34
SMMEA................................................................................. 9
Special Hazard Amount................................................................. 37
Special Hazard Instrument............................................................. 39
Special Hazard Insurance Policy....................................................... 40
Special Hazard Loss................................................................... 39
Stated Principal Balance.............................................................. 38
Strip Certificates.................................................................... 6
Subordinate Amount.................................................................... 39
Subordinate Certificates.............................................................. 6
Subservicers.......................................................................... 14
Tax Exempt Investor................................................................... 89
Tax-Favored Plans..................................................................... 87
Terms and Conditions.................................................................. 26
Tiered REMICs......................................................................... 72
Title V............................................................................... 59
Title VIII............................................................................ 60
Trust Fund............................................................................ 1
Trustee............................................................................... 4
UBTI.................................................................................. 89
Unaffiliated Sellers.................................................................. 12
Unrecovered Senior Portion............................................................ 38
VA.................................................................................... 16
</TABLE>
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- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
DEPOSITOR OR BY THE UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
SECURITIES OFFERED HEREBY TO ANYONE IN ANY JURISDICTION IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT INFORMATION HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SINCE THE DATE OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUPPLEMENT
SUMMARY.......................................... S-5
DESCRIPTION OF THE MORTGAGE POOL................. S-18
DESCRIPTION OF THE CERTIFICATES.................. S-24
CERTAIN YIELD AND PREPAYMENT CONSIDERATIONS...... S-34
POOLING AGREEMENT................................ S-43
[DESCRIPTION OF CREDIT ENHANCEMENT............... S-44
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.......... S-45
METHOD OF DISTRIBUTION........................... S-48
LEGAL OPINIONS................................... S-49
RATING........................................... S-49
LEGAL INVESTMENT................................. S-49
ERISA CONSIDERATIONS............................. S-50
PROSPECTUS
PROSPECTUS SUPPLEMENT............................
AVAILABLE INFORMATION............................
REPORTS TO CERTIFICATEHOLDERS....................
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE......................................
SUMMARY OF PROSPECTUS............................
RISK FACTORS.....................................
THE MORTGAGE POOLS...............................
THE DEPOSITOR....................................
MORTGAGE LOAN PROGRAM............................
DESCRIPTION OF THE CERTIFICATES..................
SUBORDINATION....................................
DESCRIPTION OF CREDIT ENHANCEMENTS...............
PRIMARY MORTGAGE INSURANCE, HAZARD INSURANCE;
CLAIMS THEREUNDER..............................
THE POOLING AGREEMENT............................
YIELD CONSIDERATIONS.............................
MATURITY AND PREPAYMENT CONSIDERATIONS...........
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND
RELATED MATTERS................................
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..........
STATE AND OTHER TAX CONSEQUENCES.................
ERISA CONSIDERATIONS.............................
LEGAL INVESTMENT MATTERS.........................
USE OF PROCEEDS..................................
METHODS OF DISTRIBUTION..........................
RATING...........................................
LEGAL MATTERS....................................
FINANCIAL INFORMATION............................
ADDITIONAL INFORMATION...........................
INDEX OF PRINCIPAL DEFINITIONS...................
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
BANKAMERICA MORTGAGE
SECURITIES, INC.
$ (APPROXIMATE)
MORTGAGE PASS-THROUGH
CERTIFICATES
SERIES 19 -
------------------------
PROSPECTUS SUPPLEMENT
------------------------
[NAME OF UNDERWRITER(S)]
, 19
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 151
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Registration Fee . . . . . . . . . . . . . . . . . . . . . . . $100
Trustee's Fees and Expenses . . . . . . . . . . . . . . . . . *
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . *
Printing and Engraving Expenses . . . . . . . . . . . . . . . *
Rating Agency Fees . . . . . . . . . . . . . . . . . . . . . . *
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . *
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . *
Total . . . . . . . . . . . . . . . . . . . . . . . . $ *
</TABLE>
- --------------------
*To be determined based upon the number of issuances and the specific
circumstances of each issuance.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subsection (a) of Section 145 of the General Corporation Law of
Delaware empowers a corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, employee or agent of the corporation or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expense
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification may be made
in respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine that despite the adjudication of liability such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper.
Section 145 further provides that to the extent a director,
officer, employee or agent of a corporation has been successful in the defense
of any action, suit or proceeding referred to in subsections (a) and (b) or in
the defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith; that indemnification or advancement of expenses
provided for by Section 145 shall not be deemed exclusive of any other rights to
which the indemnified party may be entitled; and empowers the
II-1
<PAGE> 152
corporation to purchase and maintain insurance on behalf of a director, officer,
employee or agent of the corporation against any liability asserted against him
or incurred by him in any such capacity or arising out of his status as such
whether or not the corporation would have the power to indemnify him against
such liabilities under Section 145.
The By-Laws of the Registrant provide, in effect, that to the
extent and under the circumstances permitted by subsections (a) and (b) of
Section 145 of the General Corporation Law of the State of Delaware, the
Registrant (i) shall indemnify and hold harmless each person who was or is a
party or is threatened to be made a party to any action, suit or proceeding
described in subsections (a) and (b) by reason of the fact that he is or was a
director or officer, or his testator or intestate is or was a director or
officer of the Registrant, against expenses, judgments, fines and amounts paid
in settlement, and (ii) shall indemnify and hold harmless each person who was or
is a party or is threatened to be made a party to any such action, suit or
proceeding if such person is or was serving at the request of the Registrant as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise.
There is directors' and officers' liability insurance presently
outstanding which insures directors and officers of BankAmerica Corporation and
certain of its subsidiaries, including the Registrant. The policies cover loss
for which BankAmerica Corporation or any of such subsidiaries shall be required
or permitted by law to indemnify directors and officers and which result from
claims made against such directors or officers based upon the commission of
wrongful acts in the performance of their duties. The policies also cover losses
which the directors or officers must pay as the result of claims brought against
them based upon the commission of wrongful acts in the performance of their
duties and for which they are not indemnified by BankAmerica Corporation or any
of such subsidiaries. The losses covered by the policies are subject to certain
exclusions and do not include fines or penalties imposed by law or other matters
uninsurable under the law. The policies contain certain provisions regarding
deductibles.
The Pooling and Servicing Agreements will provide that no
director, officer, employee or agent of the Registrant is liable to the Trust
Fund or the Certificateholders, except for such person's own willful
misfeasance, bad faith, gross negligence in the performance of duties or
reckless disregard of obligations and duties. The Pooling and Servicing
Agreements will further provide that, with the exceptions stated above, a
director, officer, employee or agent of the Registrant is entitled to be
indemnified against any loss, liability or expense incurred in connection with
legal action relating to such Pooling and Servicing Agreements and related
Certificates other than such expenses related to particular Mortgage Loans.
Any underwriters who execute an Underwriting Agreement in the
form filed as Exhibit 1.1 to this Registration Statement will agree to indemnify
the Registrant's directors and its officers who signed this Registration
Statement against certain liabilities which might arise under the Securities Act
of 1933 from certain information furnished to the Registrant by or on behalf of
such indemnifying party.
II-2
<PAGE> 153
ITEM 16. EXHIBITS.
Exhibit
Number Description of Exhibit
1.1 Form of Underwriting Agreement.
4.1 Form of Pooling and Servicing Agreement.
5.1 Opinion of Orrick, Herrington & Sutcliffe as to the legality
of the Certificates.
8.1 Opinion of Orrick, Herrington & Sutcliffe as to certain tax
matters.
23.1 Consents of Orrick, Herrington & Sutcliffe (included in
Exhibits 5.1 and 8.1 hereto).
24.1 Powers of Attorney.
ITEM 17. UNDERTAKINGS.
A. Undertakings 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 Securities 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 aggregate, represent a
fundamental change in the information set forth in the Registration Statement;
and (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; provided,
however, that the undertakings set forth in clauses (i) and (ii) above shall not
apply if the information required to be included in a post-effective amendment
by those clauses is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities 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.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE> 154
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 provisions referred to in Item 15
above, 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 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant 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 director, officer or controlling person
in connection with the securities 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 Act and
will be governed by the final adjudication of such issue.
C. Undertaking pursuant to Item 512(b).
The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 155
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT, BANKAMERICA MORTGAGE SECURITIES, INC., A CORPORATION ORGANIZED AND
EXISTING UNDER THE LAWS OF DELAWARE, CERTIFIES THAT IT HAS REASONABLE GROUNDS TO
BELIEVE THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS
DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY AND COUNTY OF SAN FRANCISCO,
STATE OF CALIFORNIA, ON THE 31ST DAY OF MAY, 1996.
BANKAMERICA MORTGAGE SECURITIES, INC.
By /s/ Arthur D. Ringwald
---------------------------------------------
Arthur D. Ringwald,
Chairman of the Board, Chief Executive Officer
and President (Principal Executive Officer)
and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE
/s/ Arthur D. Ringwald Chairman of the Board, Chief
- --------------------------------------- Executive Officer and President
Arthur D. Ringwald (Principal Executive Officer)
and Director
John D. Kelleghan* Chief Financial Officer
- --------------------------------------- (Principal Financial and
John D. Kelleghan Accounting Officer)
Directors:
Jacquelin Legorreta Erdman*
James G. Jones*
Claus H. Lund*
Shaun M. Maguire*
*By: /s/ Andrea B. Sudmann
- ---------------------------------------
Andrea B. Sudmann
Attorney-in-Fact
Dated: May 31, 1996
<PAGE> 156
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 3, 1996
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------
BANKAMERICA MORTGAGE SECURITIES, INC.
-----------
================================================================================
<PAGE> 157
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
1.1 Form of Underwriting Agreement.
4.1 Form of Pooling and Servicing Agreement.
5.1 Opinion of Orrick, Herrington & Sutcliffe as to the legality of the
Certificates.
8.1 Opinion of Orrick, Herrington & Sutcliffe as to certain tax matters.
23.1 Consents of Orrick, Herrington & Sutcliffe (included in Exhibits 5.1
and 8.1 hereto).
24.1 Powers of Attorney.
<PAGE> 1
EXHIBIT 1.1
BANKAMERICA MORTGAGE SECURITIES, INC.
Mortgage Pass-Through Certificates, Series 19__-___
[classes, principal balances and pass-through rates of certificates to
be listed]
UNDERWRITING AGREEMENT
___________, 19__
[name and address of Underwriter]
Ladies and Gentlemen:
BankAmerica Mortgage Securities, Inc., a Delaware corporation (the
"Depositor"), proposes to sell to you (also referred to herein as the
"Underwriter") Mortgage Pass-Through Certificates, Series 19__-___, [list
classes] [other than a de minimis portion of the Class R Certificates]
(collectively, the "Certificates"), having the aggregate principal amounts and
Pass-Through Rates set forth above. The Certificates[, together with the Class M
Certificates and Class B Certificates of the same series] [and the rights to the
Retained Yield], will evidence the entire beneficial interest in the Trust Fund
(as defined in the Pooling Agreement referred to below), consisting primarily of
a pool (the "Pool") of conventional, [fixed-] [adjustable-] rate, one- to
four-family residential mortgage loans (the "Mortgage Loans") as described in
the Prospectus Supplement (as hereinafter defined) to be sold by the Depositor.
A de minimis portion of the Class R Certificates will not be sold hereunder and
will be held by Bank of America [National Trust and Savings Association]
[Federal Savings Bank] (the "Master Servicer").
The Certificates will be issued pursuant to a pooling and servicing
agreement (the "Pooling Agreement") to be dated as of ____________________, 19__
(the "Cut-off Date") among the Depositor, the Master Servicer and
____________________, as trustee (the "Trustee"). The Certificates are described
more fully in the Basic Prospectus and the Prospectus Supplement (each as
hereinafter defined) which the Depositor has furnished to you.
<PAGE> 2
1. Representations, Warranties and Covenants.
1.1 The Depositor represents and warrants to, and agrees
with you that:
(a) The Depositor has filed with the Securities
and Exchange Commission (the "Commission") a registration statement
(No. 33-__________) on Form S-3 for the registration under the
Securities Act of 1933, as amended (the "Act"), of Mortgage
Pass-Through Certificates (issuable in series), including the
Certificates, which registration statement has become effective, and a
copy of which, as amended to the date hereof, has heretofore been
delivered to you. The Depositor proposes to file with the Commission
pursuant to Rule 424(b) under the rules and regulations of the
Commission under the Act (the "1933 Act Regulations") a supplement
dated ____________, 19___ (the "Prospectus Supplement"), to the
prospectus dated ____________, 19___ (the "Basic Prospectus"), relating
to the Certificates and the method of distribution thereof. Such
registration statement (No. 33-__________) including exhibits thereto
and any information incorporated therein by reference, as amended at
the date hereof, is hereinafter called the "Registration Statement";
and the Basic Prospectus and the Prospectus Supplement and any
information incorporated therein by reference, together with any
amendment thereof or supplement thereto authorized by the Depositor on
or prior to the Closing Date for use in connection with the offering of
the Certificates, are hereinafter called the "Prospectus." Any
preliminary form of the Prospectus Supplement which has heretofore been
filed pursuant to Rule 424, or prior to the effective date of the
Registration Statement pursuant to Rule 402(a), or 424(a) is
hereinafter called a "Preliminary Prospectus Supplement."
(b) The Registration Statement has become
effective, and the Registration Statement as of the effective date (the
"Effective Date"), and the Prospectus, as of the date of the Prospectus
Supplement, complied in all material respects with the applicable
requirements of the Act and the 1933 Act Regulations; and the
Registration Statement, as of the Effective Date, did not contain any
untrue statement of a material fact and did not omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading and the Prospectus, as of the date of
the Prospectus Supplement, did not, and as of the Closing Date will
not, contain an untrue statement of a material fact and did not and
will not omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Depositor makes
no representations or warranties as to the information contained in or
omitted from the Registration Statement or the Prospectus or any
amendment thereof or supplement thereto relating to the information
identified by underlining or other highlighting as shown in Exhibit D
(the "Excluded Information"); and provided, further, that the Depositor
makes no representations or warranties as to either (i) any information
in any Computational Materials or ABS Term Sheets (each as hereinafter
defined) required to be provided by the Underwriter to the Depositor
pursuant to Section 4.2, except to the extent of any
2
<PAGE> 3
information set forth therein that constitutes Pool Information (as
defined below), or (ii) any information contained in or omitted from
the portions of the Prospectus identified by underlining or other
highlighting as shown in Exhibit E (the "Underwriter Information"). As
used herein, "Pool Information" means information with respect to the
characteristics of the Mortgage Loans and administrative and servicing
fees, as provided by or on behalf of the Depositor to the Underwriter
in final form and set forth in the Prospectus Supplement. The Depositor
acknowledges that, except for any Computational Materials and ABS Term
Sheets, the Underwriter Information constitutes the only information
furnished in writing by you or on your behalf for use in connection
with the preparation of the Registration Statement, any preliminary
prospectus or the Prospectus, and you confirm that the Underwriter
Information is correct.
(c) The Depositor has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the State of Delaware and has the requisite corporate power to own its
properties and to conduct its business as presently conducted by it.
(d) This Agreement has been duly authorized, executed and
delivered by the Depositor.
(e) As of the Closing Date (as defined herein) the
Certificates will conform in all material respects to the description
thereof contained in the Prospectus and the representations and
warranties of the Depositor in the Pooling Agreement will be true and
correct in all material respects.
1.2 The Underwriter represents and warrants to and agrees
with the Depositor that:
(a) No purpose of the Underwriter relating to the
purchase of any of the Class R Certificates by the Underwriter is or
will be to enable the Depositor to impede the assessment or collection
of any tax.
(b) The Underwriter has no present knowledge or
expectation that it will be unable to pay any United States taxes owed
by it so long as any of the Certificates remain outstanding.
(c) The Underwriter has no present knowledge or
expectation that it will become insolvent or subject to a bankruptcy
proceeding for so long as any of the Certificates remain outstanding.
(d) No purpose of the Underwriter relating to any sale of
any of the Class R Certificates by the Underwriter will be to enable it
to impede the assessment or collection of tax. In this regard, the
Underwriter hereby represents to and for the benefit of the
3
<PAGE> 4
Depositor that the Underwriter intends to pay taxes associated with
holding the Class R Certificates, as they become due, fully
understanding that it may incur tax liabilities in excess of any cash
flows generated by the Class R Certificates.
(e) The Underwriter will, in connection with any transfer
it makes of any of the Class R Certificates, obtain from its transferee
the affidavit required by Section 5.02(f)(i)(B)(I) of the Pooling
Agreement, will not consummate any such transfer if it knows or
believes that any representation contained in such affidavit is false
and will provide the Trustee with the Certificate required by Section
5.02(f)(i)(B)(II) of the Pooling Agreement.
(f) The Underwriter represents that it has in place, and
covenants that it shall maintain internal controls and procedures which
it reasonably believes to be sufficient to ensure full compliance with
all applicable legal requirements of the No-Action Letters with respect
to the generation and use of Computational Materials and ABS Term
Sheets in connection with the offering of the Certificates. Prior to
the delivery of the Prospectus, no written material of any kind
relating to the Certificates will be delivered to potential investors
other than Computational Materials and ABS Term Sheets and the
Underwriter has not directed or caused any third party to generate or
distribute Computational Materials of ABS Term Sheets to prospective
investors.
(g) As of the date hereof and as of the Closing Date, the
Underwriter has complied with all of its obligations hereunder
including Section 4.2, and, with respect to all Computational Materials
and ABS Term Sheets provided by the Underwriter to the Depositor
pursuant to Section 4.2, if any, such Computational Materials and ABS
Term Sheets are accurate in all material respects (taking into account
the assumptions explicitly set forth in the Computational Materials or
ABS Term Sheets, except to the extent of any errors therein that are
caused by errors in the Pool Information). The Computational Materials
and ABS Term Sheets provided by the Underwriter to the Depositor
constitute a complete set of all Computational Materials and ABS Term
Sheets that are required to be filed with the Commission.
1.3 The Underwriter covenants and agrees to pay directly,
or reimburse the Depositor upon demand for (i) any and all taxes (including
penalties and interest) owed or asserted to be owed by the Depositor as a result
of a claim by the Internal Revenue Service that the transfer of any of the Class
R Certificates to the Underwriter hereunder or any transfer thereof by the
Underwriter may be disregarded for federal tax purposes and (ii) any and all
losses, claims, damages and liabilities, including attorney's fees and expenses,
arising out of any failure of the Underwriter to make payment or reimbursement
in connection with any such assertion as required in (i) above. In addition, the
Underwriter acknowledges that on the Closing Date immediately after the
transactions described herein it will be the owner of the Class R Certificates
for federal tax purposes, and the Underwriter covenants that it will not assert
in any
4
<PAGE> 5
proceeding that the transfer of the Class R Certificates from the Depositor to
the Underwriter should be disregarded for any purpose.
2. Purchase and Sale. Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Depositor
agrees to sell to you, and you agree to purchase from the Depositor, the
Certificates (other than a de minimis portion of the Class R Certificates, which
shall be transferred by the Depositor to the [Master Servicer] [Trustee]) at a
price equal to _________% of the aggregate principal balance of the Certificates
as of the Closing Date. There will be added to the purchase price of the
Certificates an amount equal to interest accrued thereon at the rate of ______%
per annum from the Cut-off Date to but not including the Closing Date. The
purchase price for the Certificates was agreed to by the Depositor in reliance
upon the transfer from the Depositor to the Underwriter of the tax liabilities
associated with the ownership of the Class R Certificates.
3. Delivery and Payment. Delivery of and payment for the
Certificates shall be made at the office of Orrick, Herrington & Sutcliffe at
______ a.m., San Francisco time, on ____________, 19___ or such later date as
you shall designate, which date and time may be postponed by agreement between
you and the Depositor (such date and time of delivery and payment for the
Certificates being herein called the "Closing Date"). Delivery of the
Certificates (except for the Class R Certificates) shall be made to you through
the Depository Trust Company ("DTC") (such Certificates, the "DTC Registered
Certificates"), and delivery of the Class R Certificates (the "Definitive
Certificates") shall be made in registered, certified form, in each case against
payment by you of the purchase price thereof to or upon the order of the
Depositor by wire transfer in immediately available funds. The Definitive
Certificates shall be registered in such names and in such denominations as you
may request not less than two business days in advance of the Closing Date. The
Depositor agrees to have the Definitive Certificates available for inspection,
checking and packaging by you in San Francisco, California not later than 1:00
p.m. on the business day prior to the Closing Date.
4. Offering by Underwriter.
4.1 It is understood that you propose to offer the
Certificates for sale to the public as set forth in the Prospectus and you agree
that all such offers and sales by you shall be made in compliance with all
applicable laws and regulations.
4.2 It is understood that you may prepare and provide to
prospective investors certain Computational Materials and ABS Term Sheets in
connection with your offering of the Certificates, subject to the following
conditions:
(a) The Underwriter shall comply with all
applicable laws and regulations in connection with the use of
Computational Materials, including the No- Action Letter of May 20,
1994 issued by the Commission to Kidder, Peabody Acceptance Corporation
I, Kidder, Peabody & Co. Incorporated and Kidder Structured
5
<PAGE> 6
Asset Corporation, as made applicable to other issuers and underwriters
by the Commission in response to the request of the Public Securities
Association dated May 24, 1994 (collectively, the "Kidder/PSA Letter"),
as well as the PSA Letter referred to below. The Underwriter shall
comply with all applicable laws and regulations in connection with the
use of ABS Term Sheets, including the No-Action Letter of February 17,
1995 issued by the Commission to the Public Securities Association (the
"PSA Letter" and, together with the Kidder/PSA Letter, the "No-Action
Letters").
(b) For purposes hereof, "Computational
Materials" as used herein shall have the meaning given such term in the
No-Action Letters, but shall include only those Computational Materials
that have been prepared or delivered to prospective investors by or at
the direction of the Underwriter. For purposes hereof, "ABS Term
Sheets" and "Collateral Term Sheets" as used herein shall have the
meanings given such terms in the PSA Letter but shall include only
those ABS Term Sheets or Collateral Term Sheets that have been prepared
or delivered to prospective investors by or at the direction of the
Underwriter.
(c) (i) All Computational Materials and ABS Term
Sheets provided to prospective investors that are required to be filed
with the Commission pursuant to the No-Action Letters shall bear a
legend on each page including the following statement:
"THE INFORMATION HEREIN HAS BEEN PROVIDED SOLELY BY [name of
Underwriter]. NEITHER THE ISSUER OF THE CERTIFICATES NOR ANY
OF ITS AFFILIATES MAKES ANY REPRESENTATION AS TO THE ACCURACY
OR COMPLETENESS OF THE INFORMATION HEREIN. THE INFORMATION
HEREIN IS PRELIMINARY, AND WILL BE SUPERSEDED BY THE
APPLICABLE PROSPECTUS SUPPLEMENT AND BY ANY OTHER INFORMATION
SUBSEQUENTLY FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION."
(ii) In the case of Collateral Term Sheets,
such legend shall also include the following statement:
"THE INFORMATION CONTAINED HEREIN WILL BE SUPERSEDED BY THE
DESCRIPTION OF THE MORTGAGE POOL CONTAINED IN THE PROSPECTUS
SUPPLEMENT RELATING TO THE CERTIFICATES AND [EXCEPT WITH
RESPECT TO THE INITIAL COLLATERAL TERM SHEET PREPARED BY THE
UNDERWRITER] SUPERSEDES ALL INFORMATION CONTAINED IN ANY
COLLATERAL TERM
6
<PAGE> 7
SHEETS RELATING TO THE MORTGAGE POOL PREVIOUSLY PROVIDED BY
[name of Underwriter]."
The Depositor shall have the right to require additional specific
legends or notations to appear on any Computational Materials or ABS
Term Sheets, the right to require changes regarding the use of
terminology and the right to determine the types of information
appearing therein. Notwithstanding the foregoing, this subsection (c)
will be satisfied if all Computational Materials and ABS Term Sheets
referred to therein bear a legend in a form previously approved in
writing by the Depositor.
(d) The Underwriter shall provide the Depositor
with representative forms of all Computational Materials and ABS Term
Sheets prior to their first use, to the extent such forms have not
previously been approved by the Depositor for use by the Underwriter.
The Underwriter shall provide to the Depositor, for filing on Form 8-K
as provided in Section 5.9, copies (in such format as required by the
Depositor) of all Computational Materials and ABS Term Sheets that are
required to be filed with the Commission pursuant to the No-Action
Letters. The Underwriter may provide copies of the foregoing in a
consolidated or aggregated form including all information required to
be filed. All Computational Materials and ABS Term Sheets described in
this subsection (d) must be provided to the Depositor not later than
10:00 a.m. San Francisco time one business day before filing thereof is
required pursuant to the terms of this Agreement. The Underwriter
agrees that it will not provide to any investor or prospective investor
in the Certificates any Computational Materials or ABS Term Sheets on
or after the day on which Computational Materials and ABS Term Sheets
are required to be provided to the Depositor pursuant to this Section
4.2(d) (other than copies of Computational Materials or ABS Term Sheets
previously submitted to the Depositor in accordance with this Section
4.2(d) for filing pursuant to Section 5.9), unless such Computational
Materials or ABS Term Sheets are preceded or accompanied by the
delivery of a Prospectus to such investor or prospective investor.
(e) All information included in the
Computational Materials and ABS Term Sheets shall be generated based on
substantially the same methodology and assumptions that are used to
generate the information in the Prospectus Supplement as set forth
therein; provided, however, that the Computational Materials and ABS
Term Sheets may include information based on alternative methodologies
or assumptions if specified therein. If any Computational Materials or
ABS Term Sheets that are required to be filed were based on assumptions
with respect to the Pool that differ from the final Pool Information in
any material respect or on Certificate structuring terms that were
revised in any material respect prior to the printing of the
Prospectus, the Underwriter shall prepare revised Computational
Materials or ABS Term Sheets, as the case may be, based on the final
Pool Information and structuring assumptions, circulate such revised
Computational Materials and ABS Term Sheets to all recipients of the
preliminary versions thereof that indicated or subsequently indicate
orally to the Underwriter they
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<PAGE> 8
will purchase all or any portion of the Certificates, and include such
revised Computational Materials and ABS Term Sheets (marked, "as
revised") in the materials delivered to the Depositor pursuant to
subsection (d) above.
(f) The Depositor shall not be obligated to file
any Computational Materials or ABS Term Sheets that have been
determined to contain any material error or omission; provided,
however, that, at the request of the Underwriter, the Depositor will
file Computational Materials or ABS Term Sheets that contain a material
error or omission if clearly marked "superseded by materials dated
_____" and accompanied by corrected Computational Materials or ABS Term
Sheets that are marked, "material previously dated _________, as
corrected." In the event that, within the period during which the
Prospectus relating to the Certificates is required to be delivered
under the Act, any Computational Materials or ABS Term Sheets are
determined, in the reasonable judgment of the Depositor or the
Underwriter, to contain a material error or omission, the Underwriter
shall prepare a corrected version of such Computational Materials or
ABS Term Sheets, shall circulate such corrected Computational Materials
and ABS Term Sheets to all recipients of the prior versions thereof
that either indicated orally to the Underwriter they would purchase all
or any portion of the Certificates, or actually purchased all or any
portion thereof, and shall deliver copies of such corrected
Computational Materials and ABS Term Sheets (marked, "as corrected") to
the Depositor for filing with the Commission in a subsequent Form 8-K
submission (subject to the Depositor's obtaining an accountant's
comfort letter in respect of such corrected Computational Materials and
ABS Term Sheets, which shall be at the expense of the Underwriter).
(g) If the Underwriter does not provide any
Computational Materials or ABS Term Sheets to the Depositor pursuant to
subsection (d) above, the Underwriter shall be deemed to have
represented, as of the Closing Date, that it did not provide any
prospective investors with any information in written or electronic
form in connection with the offering of the Certificates that is
required to be filed with the Commission in accordance with the
No-Action Letters, and the Underwriter shall provide the Depositor with
a certification to that effect on the Closing Date.
(h) In the event of any delay in the delivery by
the Underwriter to the Depositor of all Computational Materials and ABS
Term Sheets required to be delivered in accordance with subsection (d)
above, or in the delivery of the accountant's comfort letter in respect
thereof pursuant to Section 5.9, the Depositor shall have the right to
delay the release of the Prospectus to investors or to the Underwriter,
to delay the Closing Date and to take other appropriate actions in each
case as necessary in order to allow the Depositor to comply with its
agreement set forth in Section 5.9 to file the Computational Materials
and ABS Term Sheets by the time specified therein.
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<PAGE> 9
(i) Notwithstanding any other provision herein,
the Underwriter agrees to pay all costs and expenses of the Depositor
incurred in connection with (i) the filing by the Depositor of any
Computational Materials and ABS Term Sheets with the Commission and
(ii) any action by the Depositor against the Underwriter to enforce any
of its rights set forth in this Section 4.2, including, without
limitation, legal fees and expenses.
4.3 You further agree that on or prior to the [sixth] day
after the Closing Date, you shall provide the Depositor with a certificate,
substantially in the form of Exhibit F attached hereto, setting forth (i) in the
case of each class of Certificates, (a) if less than 10% of the aggregate
principal balance of such class of Certificates has been sold to the public as
of such date, the value calculated pursuant to clause (b)(iii) of Exhibit F
hereto, or, (b) if 10% or more of such class of Certificates has been sold to
the public as of such date but no single price is paid for at least 10% of the
aggregate principal balance of such class of Certificates, then the weighted
average price at which the Certificates of such class were sold expressed as a
percentage of the principal balance of such class of Certificates sold, or (c)
the first single price at which at least 10% of the aggregate principal balance
of such class of Certificates was sold to the public, (ii) the prepayment
assumption used in pricing each class of Certificates, and (iii) such other
information as to matters of fact as the Depositor may reasonably request to
enable it to comply with its reporting requirements with respect to each class
of Certificates to the extent such information can in the good faith judgment of
the Underwriter be determined by it.
5. Agreements. The Depositor agrees with you that:
5.1 Before amending or supplementing the Registration
Statement or the Prospectus with respect to the Certificates, the Depositor will
furnish you with a copy of each such proposed amendment or supplement.
5.2 The Depositor will cause the Prospectus Supplement to
be transmitted to the Commission for filing pursuant to Rule 424(b) under the
Act by means reasonably calculated to result in filing with the Commission
pursuant to said rule.
5.3 If, during the period after the first date of the
public offering of the Certificates in which a prospectus relating to the
Certificates is required to be delivered under the Act, any event occurs as a
result of which it is necessary to amend or supplement the Prospectus, as then
amended or supplemented, in order to make the statements therein, in the light
of the circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if it shall be necessary to amend or supplement the Prospectus to
comply with the Act or the 1933 Act Regulations, the Depositor promptly will
prepare and furnish, at its own expense, to you, either amendments or
supplements to the Prospectus so that the statements in the Prospectus as so
amended or supplemented will not, in the light of the circumstances when the
Prospectus is delivered to a purchaser, be misleading or so that the Prospectus
will comply with law.
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<PAGE> 10
5.4 The Depositor will furnish to you, without charge, a
copy of the Registration Statement (including exhibits thereto) and, so long as
delivery of a prospectus by an underwriter or dealer may be required by the Act,
as many copies of the Prospectus, any documents incorporated by reference
therein and any amendments and supplements thereto as you may reasonably
request.
5.5 The Depositor agrees, so long as the Certificates
shall be outstanding, or until such time as you shall cease to maintain a
secondary market in the Certificates, whichever first occurs, to deliver to you
the annual statement as to compliance delivered to the Trustee pursuant to
Section 3.18 of the Pooling Agreement and the annual statement of a firm of
independent public accountants furnished to the Trustee pursuant to Section 3.19
of the Pooling Agreement, as soon as such statements are furnished to the
Depositor.
5.6 The Depositor will endeavor to arrange for the
qualification of the Certificates for sale under the laws of such jurisdictions
as you may reasonably designate and will maintain such qualification in effect
so long as required for the initial distribution of the Certificates; provided,
however, that the Depositor shall not be required to qualify to do business in
any jurisdiction where it is not now so qualified or to take any action that
would subject it to general or unlimited service of process in any jurisdiction
where it is not now so subject.
5.7 If the transactions contemplated by this Agreement
are consummated, the Depositor will pay or cause to be paid all expenses
incident to the performance of the obligations of the Depositor under this
Agreement, and will reimburse you for any reasonable expenses (including
reasonable fees and disbursements of counsel) reasonably incurred by you in
connection with qualification of the Certificates for sale and determination of
their eligibility for investment under the laws of such jurisdictions as you
have reasonably requested pursuant to Section 5.6 above and the printing of
memoranda relating thereto, for any fees charged by investment rating agencies
for the rating of the Certificates, and for expenses incurred in distributing
the Prospectus (including any amendments and supplements thereto) to the
Underwriter. Except as herein provided, you shall be responsible for paying all
costs and expenses incurred by you, including the fees and disbursements of your
counsel, in connection with the purchase and sale of the Certificates.
5.8 If, during the period after the Closing Date in which
a prospectus relating to the Certificates is required to be delivered under the
Act, the Depositor receives notice that a stop order suspending the
effectiveness of the Registration Statement or preventing the offer and sale of
the Certificates is in effect, the Depositor will advise you of the issuance of
such stop order.
5.9 The Depositor shall file the Computational Materials
and ABS Term Sheets (if any) provided to it by the Underwriter under Section
4.2(d) with the Commission pursuant to a Current Report on Form 8-K by 10:00
a.m. on the morning the Prospectus is delivered to the Underwriter or, in the
case of any Collateral Term Sheet required to be filed prior to such
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<PAGE> 11
date, by 10:00 a.m. on the second business day following the first day on which
such Collateral Term Sheet has been sent to a prospective investor; provided,
however, that prior to such filing of the Computational Materials and ABS Term
Sheets (other than any Collateral Term Sheets that are not based on the Pool
Information) by the Depositor, the Underwriter must comply with its obligations
pursuant to Section 4.2 and the Depositor must receive a letter from Ernst &
Young, certified public accountants, satisfactory in form and substance to the
Depositor and its counsel, to the effect that such accountants have performed
certain specified procedures, all of which have been agreed to by the Depositor,
as a result of which they determined that all information that is included in
the Computational Materials and ABS Term Sheets (if any) provided by the
Underwriter to the Depositor for filing on Form 8-K, as provided in Section 4.2
and this Section 5.9, is accurate except as to such matters that are not deemed
by the Depositor to be material. The foregoing letter shall be at the expense of
the Underwriter. The Depositor shall file any corrected Computational Materials
described in Section 4.2(f) as soon as practicable following receipt thereof.
The Depositor also will file with the Commission within fifteen days of the
issuance of the Certificates a Current Report on Form 8-K (for purposes of
filing the Pooling Agreement).
6. Conditions to the Obligations of the Underwriter. The
Underwriter's obligation to purchase the Certificates shall be subject to the
following conditions:
6.1 No stop order suspending the effectiveness of the
Registration Statement shall be in effect, and no proceedings for that purpose
shall be pending or, to the knowledge of the Depositor, threatened by the
Commission; and the Prospectus Supplement shall have been filed or transmitted
for filing by means reasonably calculated to result in a filing with the
Commission pursuant to Rule 424(b) under the Act.
6.2 Since ____________, 19___ there shall have been no
material adverse change (not in the ordinary course of business) in the
condition of the Depositor.
6.3 The Depositor shall have delivered to you a
certificate, dated the Closing Date, of the President, a [Senior Vice President]
or a [Vice President] of the Depositor to the effect that the signer of such
certificate has examined this Agreement, the Prospectus, the Pooling Agreement
and various other closing documents, and that, to the best of his or her
knowledge after reasonable investigation:
(a) the representations and warranties of the
Depositor in this Agreement and in the Pooling Agreement are true and
correct in all material respects; and
(b) the Depositor has, in all material respects,
complied with all the agreements and satisfied all the conditions on
its part to be performed or satisfied hereunder at or prior to the
Closing Date.
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<PAGE> 12
6.4 You shall have received the opinion of Orrick,
Herrington & Sutcliffe, special counsel for the Depositor and the Master
Servicer, dated the Closing Date and substantially to the effect set forth in
Exhibit A, and the opinion of ____________________, [senior] counsel for the
Depositor and the Master Servicer, dated the Closing Date and substantially to
the effect set forth in Exhibit B.
6.5 You shall have received from ____________________,
counsel for the Underwriter, an opinion dated the Closing Date in form and
substance satisfactory to the Underwriter.
6.6 The Underwriter shall have received from Ernst &
Young, certified public accountants, (a) a letter dated the date hereof and
satisfactory in form and substance to the Underwriter and the Underwriter's
counsel, to the effect that they have performed certain specified procedures,
all of which have been agreed to by the Underwriter, as a result of which they
determined that certain information of an accounting, financial or statistical
nature set forth in the Prospectus Supplement under the captions ["DESCRIPTION
OF THE MORTGAGE POOL," "POOLING AGREEMENT," "DESCRIPTION OF THE CERTIFICATES"
and "CERTAIN YIELD AND PREPAYMENT CONSIDERATIONS" and in the Prospectus under
the captions "MORTGAGE LOAN PROGRAM--Residential Mortgage Loan Servicing
Activities" and "--Delinquency, Foreclosure and Loss Experience"] agrees with
the records of the Depositor and the Master Servicer excluding any questions of
legal interpretation and (b) the letter prepared pursuant to Section 5.9 hereof.
6.7 The Certificates shall have been rated "____" by each
of [Standard & Poor's Ratings Services] [Fitch Investors Service, L.P.] [Moody's
Investors Service].
6.8 You shall have received the opinion of
____________________, counsel to the Trustee, dated the Closing Date,
substantially to the effect set forth in Exhibit C.
The Depositor will furnish you with conformed copies of the above opinions,
certificates, letters and documents as you reasonably request.
7. Indemnification and Contribution.
7.1 The Depositor agrees to indemnify and hold harmless
you and each person, if any, who controls you within the meaning of either
Section 15 of the Act or Section 20 of the Securities Exchange Act of 1934, as
amended, from and against any and all losses, claims, damages and liabilities
caused by any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement for the registration of the Certificates
as originally filed or in any amendment thereof or other filing incorporated by
reference therein, or in the Prospectus or incorporated by reference therein (if
used within the period set forth in Section 5.3 hereof and as amended or
supplemented if the Depositor shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein
12
<PAGE> 13
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except insofar as such losses, claims, damages, or liabilities
are caused by any such untrue statement or omission or alleged untrue statement
or omission based upon any information with respect to which the Underwriter has
agreed to indemnify the Depositor pursuant to Section 7.2; provided, however,
that neither the Depositor nor you will be liable in any case to the extent that
any such loss, claim, damage or liability arises out of or is based upon any
such untrue statement or alleged untrue statement or omission or alleged
omission made therein relating to the Excluded Information or any information
included in Computational Materials or ABS Term Sheets that is incorrect solely
because the Pool Information deviates in any material respect from the
parameters set forth in the bid sheet attached hereto as Exhibit G provided that
you have complied with your obligations to circulate and deliver to the
Depositor revised Computational Materials and ABS Term Sheets in accordance with
Section 4.2(e) (the "Excluded Pool Information").
7.2 You agree to indemnify and hold harmless the
Depositor, its directors or officers and any person controlling the Depositor to
the same extent as the indemnity set forth in clause 7.1 above from the
Depositor to you, but only with respect to (i) the Underwriter Information and
(ii) the Computational Materials and ABS Term Sheets, except to the extent of
any errors in the Computational Materials or ABS Term Sheets that are caused by
errors in the Pool Information other than Excluded Pool Information. In
addition, you agree to indemnify and hold harmless the Depositor, its directors
or officers and any person controlling the Depositor against any and all losses,
claims, damages, liabilities and expenses (including, without limitation,
reasonable attorneys' fees) caused by, resulting from, relating to, or based
upon any legend regarding original issue discount on any Certificate resulting
from incorrect information provided by the Underwriter in the certificates
described in Section 4.3 hereof.
7.3 In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either clause 7.1 or 7.2, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the reasonable fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the reasonable fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that the indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees
and expenses of more than one separate firm for all such indemnified parties.
Such firm shall be designated
13
<PAGE> 14
in writing by you, in the case of parties indemnified pursuant to clause 7.1 and
by the Depositor, in the case of parties indemnified pursuant to clause 7.2. The
indemnifying party may, at its option, at any time upon written notice to the
indemnified party, assume the defense of any proceeding and may designate
counsel reasonably satisfactory to the indemnified party in connection therewith
provided that the counsel so designated would have no actual or potential
conflict of interest in connection with such representation. Unless it shall
assume the defense of any proceeding the indemnifying party shall not be liable
for any settlement of any proceeding, effected without its written consent, but
if settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment. If the
indemnifying party assumes the defense of any proceeding, it shall be entitled
to settle such proceeding with the consent of the indemnified party or, if such
settlement provides for release of the indemnified party in connection with all
matters relating to the proceeding which have been asserted against the
indemnified party in such proceeding by the other parties to such settlement,
without the consent of the indemnified party.
7.4 If the indemnification provided for in this Section 7
is unavailable to an indemnified party under clause 7.1 or 7.2 hereof or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities, in
such proportion as is appropriate to reflect not only the relative benefits
received by the Depositor on the one hand and the Underwriter on the other from
the offering of the Certificates but also the relative fault of the Depositor on
the one hand and of the Underwriter, on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Depositor on the one hand and of the Underwriter on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Depositor or by the Underwriter, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
7.5 The Depositor and the Underwriter agree that it would
not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the considerations referred to in clause 7.4, above.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in this Section 7 shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim except where the indemnified party is
required to bear such expenses pursuant to clause 7.4; which expenses the
indemnifying party shall pay as and when incurred, at the request of the
indemnified party, to the extent that the indemnifying party believes that it
will be ultimately obligated to pay such expenses. In the event that any
expenses so paid by the indemnifying
14
<PAGE> 15
party are subsequently determined to not be required to be borne by the
indemnifying party hereunder, the party which received such payment shall
promptly refund the amount so paid to the party which made such payment. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
7.6 The indemnity and contribution agreements contained
in this Section 7 and the representations and warranties of the Depositor in
this Agreement shall remain operative and in full force and effect regardless of
(i) any termination of this Agreement, (ii) any investigation made by the
Underwriter or on behalf of the Underwriter or any person controlling the
Underwriter or by or on behalf of the Depositor, its directors or officers or
any person controlling the Depositor and (iii) acceptance of and payment for any
of the Certificates.
8. Termination. This Agreement shall be subject to termination by
notice given to the Depositor, if the sale of the Certificates provided for
herein is not consummated because of any failure or refusal on the part of the
Depositor to comply with the terms or to fulfill any of the conditions of this
Agreement, or if for any reason the Depositor shall be unable to perform its
obligations under this Agreement. If you terminate this Agreement in accordance
with this Section 8, the Depositor will reimburse you for all reasonable
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been reasonably incurred by the Underwriter in connection with
the proposed purchase and sale of the Certificates.
9. Certain Representations and Indemnities to Survive. The
respective agreements, representations, warranties, indemnities and other
statements of the Depositor or the officers of either the Depositor or you set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation, or statement as to the results thereof,
made by you or on your behalf or made by or on behalf of the Depositor or any of
its officers, directors or controlling persons, and will survive delivery of and
payment for the Certificates.
10. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Underwriter will be mailed,
delivered or telegraphed and confirmed to you at
_________________________________________, Attention: __________________ or if
sent to the Depositor, will be mailed, delivered or telegraphed and confirmed to
it at BankAmerica Mortgage Securities, Inc., ______________________, San
Francisco, CA ______, Attention: __________________.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 7 hereof, and their
successors and assigns, and no other person will have any right or obligation
hereunder.
12. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of ____________________.
15
<PAGE> 16
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, which taken together
shall constitute one and the same instrument.
16
<PAGE> 17
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
letter and your acceptance shall represent a binding agreement between the
Depositor and you.
Very truly yours,
BANKAMERICA MORTGAGE SECURITIES, INC.
By:_________________________________________
Name:
Title:
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
[name of underwriter]
By:_____________________________________
Name:
Title:
<PAGE> 18
EXHIBIT A
[ORRICK, HERRINGTON & SUTCLIFFE LETTERHEAD]
__________, 19___
BankAmerica Mortgage Securities, Inc. [name and address of Trustee]
- ---------------------------------
- ---------------------------------
[name and address of Master Servicer] [name and address of Underwriter]
Re: BankAmerica Mortgage Securities, Inc.
Mortgage Pass-Through Certificates, Series 19___-__
Ladies and Gentlemen:
We have acted as special counsel to BankAmerica Mortgage Securities,
Inc. (the "Depositor") and Bank of America [National Trust and Savings
Association] [Federal Savings Bank] (the "Master Servicer") in connection with
the issuance and sale by the Depositor of Mortgage Pass-Through Certificates,
Series 19___-__ (the "Certificates") pursuant to a Pooling and Servicing
Agreement, dated as of ____________, 19___ (the "Pooling Agreement"), among the
Depositor, the Master Servicer and ______________________________, as trustee
(the "Trustee"). [The Certificates consist of __________ classes designated as
[classes to be listed] (collectively, the "Senior Certificates"); ____ classes
designated as [classes to be listed] (collectively, the "Class M Certificates");
and _____ classes designated as [classes to be listed] (collectively, the "Class
B Certificates"). Only the Senior Certificates and Class M Certificates (the
"Offered Certificates") are offered pursuant to the Prospectus.]
The Certificates[, together with the rights to the Retained Yield,]
will evidence the entire undivided interest in a trust fund (the "Trust Fund")
consisting primarily of a pool of conventional, [fixed-] [adjustable-] rate,
one- to four-family first mortgage loans (the "Mortgage Loans") [held by
______________________________, as custodian (the "Custodian"), pursuant to a
Custodial Agreement, dated as of ___________, 19__, among the Depositor, the
Master Servicer, the Custodian and the Trustee (the "Custodial Agreement")]. The
[Offered] Certificates are included in a Registration Statement on Form S-3
(File No. 33-__________) filed by the Depositor with the Securities and Exchange
Commission (the "Commission") on May __, 1996, and declared effective on
__________, 1996 (as amended as of the date hereof,
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<PAGE> 19
the "Registration Statement"), and are being offered pursuant to the prospectus
dated ____________, 19___, as supplemented by the prospectus supplement dated
____________, 19___ (together, the "Prospectus"), filed with the Commission
pursuant to Rule 424(b) of the rules and regulations of the Commission under the
Securities Act of 1933, as amended (the "Act").
The Depositor purchased the Mortgage Loans, either directly or
indirectly through its affiliates, from various sellers. Pursuant to the Pooling
Agreement, the Depositor will assign the Mortgage Loans to the Trust Fund in
exchange for the Certificates [and the ownership rights to the Retained Yield].
The Depositor will sell the [Certificates] [[list classes] (the "Underwritten
Certificates") [other than a de minimis portion of the Class R Certificates]] to
____________________ (the "Underwriter") pursuant to an Underwriting Agreement,
dated ____________ 19___, between the Depositor and the Underwriter (the
"Underwriting Agreement"). The Pooling Agreement[, the Custodial Agreement] and
the Underwriting Agreement are referred to herein collectively as the
"Agreements". Capitalized terms used but not defined herein shall have the
meanings set forth in the Agreements. This opinion letter is rendered pursuant
to Section 6.4 of the Underwriting Agreement.
In arriving at the opinions expressed below, we have examined and
relied on the following documents:
(a) executed copies of the Agreements;
(b) the certificate of incorporation and bylaws of the Depositor
and the articles of association and bylaws of the Master
Servicer;
(c) good standing certificates from the Secretary of State of the
State of Delaware concerning the Depositor and from the
[Office of Thrift Supervision] [Office of the Comptroller of
the Currency] concerning the Master Servicer;
(d) resolutions adopted by the Board of Directors of the Depositor
[at a meeting held on] [as of] ____________, 19___,
authorizing, among other things, the issuance of series of
certificates registered under the Registration Statement;
[(e) resolutions adopted by the Board of Directors of the Master
Servicer [at a meeting held on] [as of] ____________, 19___,
authorizing, among other things, the sale of the Mortgage
Loans;]
(f) a Certificate of Secretary executed by the Secretary of the
Depositor, authorizing, among other things, the issuance of
the Certificates;
(g) the Registration Statement;
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<PAGE> 20
(h) the Prospectus;
(i) the forms of the Certificates; and
(j) the documents delivered by the Depositor and the Master
Servicer on the Closing Date pursuant to the Underwriting
Agreement and the Pooling Agreement.
In addition, we have examined and relied, as to factual matters, on the
representations of the Depositor and the Master Servicer in the Underwriting
Agreement and the Pooling Agreement and on originals or copies certified or
otherwise identified to our satisfaction of all such corporate records of the
Depositor and the Master Servicer and such other instruments and other
certificates of public officials, officers and representatives of the Depositor,
the Master Servicer and the Trustee, and we have made such investigations of
law, as we have deemed appropriate as a basis for the opinions expressed below.
Based upon such examination and having regard for legal considerations
which we deem relevant, we are of the following opinions:
1. The Depositor is duly incorporated and validly existing as a
corporation in good standing under the laws of the State of
Delaware and the Depositor has the requisite power and
authority, corporate or other, to own its properties and
conduct its business, as presently conducted by it, and to
enter into and perform its obligations under the Agreements
and the Certificates.
2. The Registration Statement has become effective under the Act,
and, to our knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued
and not withdrawn, and no proceedings for that purpose have
been instituted or threatened under Section 8(d) of the Act.
3. The Registration Statement, as of the date it became
effective, and the Prospectus, as of the date of the
Prospectus Supplement, other than any financial or statistical
information or Computational Materials or ABS Term Sheets
contained therein as to which we express no opinion, complied
as to form in all material respects with the requirements of
the Act and the applicable rules and regulations thereunder.
4. The Offered Certificates, when duly and validly executed and
authenticated in accordance with the Pooling Agreement and
paid for and delivered in accordance with the Underwriting
Agreement, will be entitled to the benefits of the Pooling
Agreement.
5. The statements set forth in the Prospectus under the heading
"DESCRIPTION OF THE CERTIFICATES," insofar as such statements
purport to summarize certain
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<PAGE> 21
provisions of the Certificates and the Pooling Agreement, are
correct in all material respects. The statements set forth in
the Basic Prospectus and in the Prospectus Supplement under
the headings "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" and
"ERISA CONSIDERATIONS," to the extent that they constitute
matters of federal law or legal conclusions with respect
thereto, are correct in all material respects.
6. [Each Class of Senior Certificates and the Class M] [The]
Certificates will be "mortgage related securities," as defined
in Section 3(a)(41) of the Securities Exchange Act of 1934, as
amended, so long as such Certificates are rated in one of the
two highest rating categories by at least one nationally
recognized statistical rating organization.
7. The Pooling Agreement is not required to be qualified under
the Trust Indenture Act of 1939, as amended, and the Trust
Fund created by the Pooling Agreement is not required to be
registered under the Investment Company Act of 1940, as
amended.
[8. No consent, approval, authorization or order of any State of
[__________] court or governmental agency or body is required
for the consummation by the Depositor and the Master Servicer
of the transactions contemplated by the terms of the
Agreements, except for those consents, approvals,
authorizations or orders which previously have been obtained.
9. Neither the sale of the [Underwritten] Certificates to the
Underwriter by the Depositor pursuant to the Underwriting
Agreement nor the consummation by the Depositor and the Master
Servicer of any other of the transactions contemplated by, or
the fulfillment by the Depositor and the Master Servicer of
the terms of, the Agreements will result in a breach of any
term or provision of any federal or State of [__________]
statute or regulation or, to our knowledge, conflict with,
result in a breach, violation or acceleration of or constitute
a default under any order of any federal or State of
[__________] court, regulatory body, administrative agency or
governmental body having jurisdiction over the Depositor and
the Master Servicer.
[10. Each of the Pooling Agreement and the Custodial Agreement has
been duly authorized, executed and delivered by the Depositor
and the Master Servicer and the Underwriting Agreement has
been duly and validly authorized, executed and delivered by
the Depositor, and, upon due authorization, execution and
delivery by the other parties thereto, each will constitute a
valid, legal and binding agreement of the Depositor and, where
applicable, the Master Servicer, enforceable against the
Depositor and, where applicable, the Master Servicer in
accordance with its terms, except as enforceability may be
limited by
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<PAGE> 22
(i) bankruptcy, insolvency, liquidation, receivership,
moratorium, reorganization or other similar laws affecting the
rights of creditors, (ii) general principles of equity,
whether enforcement is sought in a proceeding in equity or at
law, and (iii) public policy considerations underlying the
securities laws, to the extent that such public policy
considerations limit the enforceability of the provisions of
the Agreements which purport to provide indemnification from
securities law violations.].
[11. Assuming compliance with all provisions of the Pooling
Agreement, under existing law, (a) the Trust Fund will be
treated as a "real estate mortgage investment conduit" (a
"REMIC") as defined by Section 860D of the Internal Revenue
Code of 1986 (the "Code"), (b) each Class of Senior
Certificates, Class M Certificates and Class B Certificates
[and the Retained Yield] will be treated as (or will be
comprised of) "regular interests" in the REMIC as the term
"regular interest" is defined in the Code, and (c) the Class R
Certificates will be treated as the sole class of "residual
interests" in the REMIC, as the term "residual interest" is
defined in the Code. However, continuation of the status of
the Trust Fund as a REMIC may entail compliance with statutory
changes in the future and with regulations not yet issued.]
In addition, we have participated in conferences with your
representatives and with representatives of the Depositor and the Master
Servicer concerning the Registration Statement and the Prospectus and have
considered the matters required to be stated therein and the statements
contained therein, although we have not independently verified the accuracy,
completeness or fairness of such statements (except as described in paragraph 5
above). Based upon and subject to the foregoing, nothing has come to our
attention to cause us to believe that the Registration Statement (excluding any
exhibits filed therewith), as of the date it became effective, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
or that the Prospectus, as of the date of the Prospectus Supplement and as of
the Closing Date, contained or contains an untrue statement of a material fact
or omitted or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading (it being understood that we have not been
requested to and we do not make any comment in this paragraph with respect to
the financial statements, schedules and other financial and statistical
information contained in the Registration Statement or the Prospectus or any
Computational Materials or ABS Term Sheets).
With your permission we have assumed the following: (a) the
authenticity of original documents and the genuineness of all signatures; (b)
the conformity to the originals of all documents submitted to us as copies; (c)
the truth, accuracy and completeness of the information, factual matters,
representations and warranties contained in the records, documents, instruments
and certificates we have reviewed; and (d) except as specifically covered in the
opinions set forth above, the due authorization, execution and delivery on
behalf of the
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<PAGE> 23
respective parties thereto of documents referred to herein and the legal, valid
and binding effect thereof on such parties.
Whenever a statement herein is qualified by the phrase "to our
knowledge," it is intended to indicate that, during the course of our
representation of the Depositor and the Master Servicer, no information that
would give us current actual knowledge of the inaccuracy of such statement has
come to the attention of those attorneys currently in this firm who have
rendered legal services in connection with this opinion letter. However, we have
not undertaken any independent investigation to determine the accuracy of any
such statement, and any limited inquiry undertaken by us during the preparation
of this opinion letter should not be regarded as such an investigation; no
inference as to our knowledge of any matters bearing on the accuracy of any such
statement should be drawn from the fact of our representation of the Depositor
and the Master Servicer.
Our opinion that any document is valid, legal and binding or
enforceable in accordance with its terms is subject to: (1) limitations imposed
by bankruptcy, insolvency, reorganization, arrangement, moratorium or other laws
relating to or affecting the enforcement of creditors' rights generally; (2)
general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law; and (3) rights to
indemnification which may be limited by applicable law or equitable principles
or otherwise unenforceable as against public policy.
With respect to our opinion set forth in paragraph 2, in passing on the
form of Registration Statement and the Prospectus, we have necessarily assumed
the correctness and completeness of the statements made therein.
We express no opinion as to matters of law other than the law of the
State of [__________], the federal law of the United States of America and, to
the extent necessary to render the opinions in Paragraph 1 above, the business
corporation act of the State of Delaware. As you know, we are not licensed to
practice law in the State of Delaware, and our opinions in Paragraph 1 as to
Delaware law are based solely on review of the statutes of Delaware as found in
a standard compilation of the official statutes of that jurisdiction.
A-6
<PAGE> 24
This opinion letter is solely for your benefit and may not be relied
upon or used by, circulated, quoted or referred to, nor may copies hereof be
delivered to, any other person without our prior written approval. We disclaim
any obligation to update this opinion letter for events occurring or coming to
our attention after the date hereof.
Very truly yours,
ORRICK, HERRINGTON & SUTCLIFFE
A-7
<PAGE> 25
EXHIBIT B
[LETTERHEAD OF DEPOSITOR/MASTER SERVICER]
__________, 19___
[name and address of Underwriter]
[name and address of Trustee]
Re: BankAmerica Mortgage Securities, Inc.
Mortgage Pass-Through Certificates, Series 19___-__
Ladies and Gentlemen:
I am [Senior] Counsel to BankAmerica Mortgage Securities, Inc. (the
"Depositor") and Bank of America [National Trust and Savings Association]
[Federal Savings Bank] (the "Master Servicer"). In that capacity, I am familiar
with the issuance and sale by the Depositor of Mortgage Pass-Through
Certificates, Series 19___-__ (the "Certificates") pursuant to a Pooling and
Servicing Agreement, dated as of ____________, 19__ (the "Pooling Agreement"),
among the Depositor, the Master Servicer and ____________________, as trustee
(the "Trustee"). [The Certificates consist of __________ classes designated as
[classes to be listed] (collectively, the "Senior Certificates"); __________
classes designated as [classes to be listed] (collectively, the "Class M
Certificates"); and ____ classes designated as [classes to be listed]
(collectively, the "Class B Certificates").
The Certificates in the aggregate[, together with the rights to the
Retained Yield,] will evidence the entire undivided interest in a trust fund
(the "Trust Fund") consisting primarily of a pool of conventional, [fixed-]
[adjustable-] rate, one- to four-family first mortgage loans (the "Mortgage
Loans") [held by ____________________, as custodian (the "Custodian"), pursuant
to a Custodial Agreement, dated as of ____________, 19___, among the Depositor,
the Master
B-1
<PAGE> 26
[name of Underwriter]
[name of Trustee]
_____________, 19___
Page 2
Servicer, the Custodian and the Trustee (the "Custodial Agreement")]. The
Depositor purchased the Mortgage Loans, either directly or indirectly through
its affiliates, from various sellers. Pursuant to the Pooling Agreement, the
Depositor will assign the Mortgage Loans to the Trust Fund in exchange for the
Certificates [and the ownership rights to the Retained Yield]. The Depositor
will sell the [Certificates] [[list classes] (the "Underwritten Certificates")
[other than a de minimis portion of the Class R Certificates]] to
____________________ (the "Underwriter") pursuant to an Underwriting Agreement,
dated ____________, 199__ between the Depositor and the Underwriter (the
"Underwriting Agreement"). The Pooling Agreement[, the Custodial Agreement] and
the Underwriting Agreement are referred to herein collectively as the
"Agreements". Capitalized terms used but not defined herein shall have the
meanings set forth in the Agreements. This opinion letter is rendered pursuant
to Section 6.4 of the Underwriting Agreement.
In connection with rendering this opinion letter, I have examined the
Agreements and such other records and other documents as I have deemed necessary
and relevant. As to matters of fact, I have examined and relied upon
representations of the parties contained in the Agreements and, where I have
deemed appropriate, representations and certifications of officers of the
Depositor, the Master Servicer, the Trustee or public officials. I have assumed
the authenticity of all documents submitted to me as originals, the genuineness
of all signatures, the legal capacity of natural persons and the conformity to
the original of all documents submitted to me as copies. I have assumed that all
parties, except for the Depositor and the Master Servicer, had the corporate
power and authority to enter into and perform all obligations under such
documents, and, as to such parties, I also have assumed the due authorization by
all requisite corporate action, the due execution and delivery and the validity,
binding effect and enforceability of such documents. I have not examined the
Mortgage Notes, the Mortgages or other documents in the Mortgage Files (such
documents, collectively, the "Mortgage Documents"), and I express no opinion
concerning the conformity of any of the Mortgage Documents to the requirements
of the Agreements.
In rendering this opinion letter, I do not express any opinion
concerning law other than the law of the State of California and the federal law
of the United States. I do not express any opinion, either implicitly or
otherwise, on any issue not expressly addressed below.
B-2
<PAGE> 27
[name of Underwriter]
[name of Trustee]
_____________, 19___
Page 3
Based upon the foregoing, I am of the opinion that:
1. The Master Servicer is duly incorporated and validly existing
as a [national banking association] [federal savings bank] in
good standing under the federal laws of the United States and
the Master Servicer has the requisite power and authority,
corporate or other, to own its own properties and conduct its
own business, as presently conducted by it, and to enter into
and perform its obligations under the Agreements and the
Certificates.
2. Each of the Pooling Agreement and the Custodial Agreement has
been duly and validly authorized, executed and delivered by
the Depositor and the Master Servicer and the Underwriting
Agreement has been duly and validly authorized, executed and
delivered by the Depositor, and, upon due authorization,
execution and delivery by other parties thereto, each will
constitute the valid, legal and binding agreements of the
Depositor and, where applicable, the Master Servicer,
enforceable against the Depositor and, where applicable, the
Master Servicer in accordance with its terms, except as
enforceability may be limited by (i) bankruptcy, insolvency,
liquidation, receivership, moratorium, reorganization or other
similar laws affecting the rights of creditors, (ii) general
principles of equity, whether enforcement is sought in a
proceeding in equity or at law, and (iii) public policy
considerations underlying the securities laws, to the extent
that such public policy considerations limit the
enforceability of the provisions of the Agreements which
purport to provide indemnification from securities law
violations.
3. No consent, approval, authorization or order of the State of
California or federal court or governmental agency or body is
required for the consummation by the Depositor and the Master
Servicer of the transactions contemplated by the terms of the
Agreements, except for those consents, approvals,
authorizations or orders which previously have been obtained.
4. Neither the sale, issuance and delivery of the Underwritten
Certificates by the Depositor as provided in the Agreements,
nor the consummation of any other of the transactions
contemplated by, or the fulfillment by the Depositor and the
Master Servicer of any other of the terms of, the Agreements,
will result in a breach of any term or provision of the
charter or bylaws of the Depositor or the
B-3
<PAGE> 28
[name of Underwriter]
[name of Trustee]
_____________, 19___
Page 4
Master Servicer or any State of California or federal statute
or regulation or conflict with, result in a breach, violation
or acceleration of, or constitute a default under, the terms
of any indenture or other material agreement or instrument to
which the Depositor or the Master Servicer is a party or by
which they are bound or any order or regulation of the State
of California or federal court, regulatory body,
administrative agency or governmental body having jurisdiction
over the Depositor or the Master Servicer.
This opinion letter is rendered for the sole benefit of the persons or
entities to which it is addressed, and no other person or entity is entitled to
rely hereon without my prior written consent. Copies of this opinion letter may
not be furnished to any other person or entity, nor may any portion of this
opinion letter be quoted, circulated or referred to in any other document
without my prior written consent.
Very truly yours,
_______________________
[Senior] Counsel
B-4
<PAGE> 29
EXHIBIT C
[LETTERHEAD OF COUNSEL TO THE TRUSTEE]
__________, 19__
[name and address of Underwriter] [name and address of Master Servicer]
BankAmerica Mortgage Securities, Inc. [name and address of Trustee]
- ---------------------------------
- ---------------------------------
Ladies and Gentlemen:
We have acted as special counsel to ______________________________ (the
"Bank") in its capacity as trustee (the "Trustee") in connection with the
issuance of Mortgage Pass- Through Certificates, Series 19___-__, consisting of
[list classes] (collectively, the "Certificates"), issued pursuant to a Pooling
and Servicing Agreement, dated as of ____________, 19__, among BankAmerica
Mortgage Securities, Inc. (the "Depositor"), ____________________ (the "Master
Servicer") and the Trustee (the "Pooling Agreement").
In connection therewith, we have reviewed an execution copy of the
Pooling Agreement [and the related Custodial Agreement, dated as of __________,
19___, by and among the Trustee, the Depositor, the Master Servicer and
____________________, as Custodian (the "Custodial Agreement")], photostatic
copies of the Certificates executed by the Trustee, the Articles of Association
and By-laws of the Trustee and such other documents as we have deemed necessary
to render the opinion set forth herein. In rendering this opinion, we have
assumed [(i) that ____________________ qualifies to serve as Custodian under
Section 8.11 of the Pooling Agreement and (ii)] the authenticity and conformity
to executed original documents of all documents submitted to us as certified,
photostatic or execution copies.
Based on the foregoing and subject to the qualifications and matters of
reliance set forth herein, it is our opinion that:
1. The Trustee is duly incorporated, validly existing and in good
standing as a national banking association under the laws of
the United States of America, with full corporate and trust
power and authority to conduct its business and affairs as a
Trustee.
<PAGE> 30
[name of Underwriter]
[name of Master Servicer]
BankAmerica Mortgage Securities, Inc.
[name of Trustee]
__________, 19___
Page 2
2. The Trustee has full corporate power and authority to execute
and deliver the Pooling Agreement[, the Custodial Agreement]
and the Certificates and to perform its obligations
thereunder.
3. The Trustee has duly accepted the office of trustee under the
Pooling Agreement.
4. The Trustee has duly authorized, executed, issued and
delivered the Pooling Agreement [and the Custodial Agreement]
and has duly and validly authorized, executed, issued and
delivered the Certificates as the Trustee.
5. The Pooling Agreement constitutes the legal, valid and binding
agreements of the Trustee, enforceable against the Trustee in
accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium
or other laws affecting the rights of creditors generally and
by general principles of equity and the discretion of the
court, regardless of whether such enforcement is considered in
a proceeding in equity or at law, and except as enforceability
may be determined according to or limited by the laws of
jurisdictions other than those specified below.
In rendering the foregoing opinion, we have assumed that the Pooling
Agreement [and the Custodial Agreement] have been duly authorized, executed and
delivered by the other parties thereto and are valid, legal, binding and
enforceable obligations of such parties.
We express no opinion as to any matter other than as expressly set
forth above, and, in conjunction therewith, we specifically express no opinion
as to the status of the Certificates or the Trust Fund under any federal or
state securities laws, including, but not limited to, the Securities Act of
1933, as amended, the Trust Indenture Act of 1939, as amended, and the
Investment Company Act of 1940, as amended.
This opinion is as of the date hereof and we undertake no, and disclaim
any, obligation to advise you of any change in any matter set forth herein. This
opinion has been furnished to you at your request in connection with the
transactions described herein, and it may not be relied upon by you for any
other purpose or by any other person without our prior written consent.
C-2
<PAGE> 31
[name of Underwriter]
[name of Master Servicer]
BankAmerica Mortgage Securities, Inc.
[name of Trustee]
__________, 19___
Page 3
We are admitted to practice law under the laws of the State of
[__________] and the opinion set forth above is limited to the laws of the State
of [__________] and the laws of the United States of America.
Very truly yours,
[name of Trustee's special counsel]
C-3
<PAGE> 32
EXHIBIT D
EXCLUDED INFORMATION
D-1
<PAGE> 33
EXHIBIT E
UNDERWRITER INFORMATION
E-1
<PAGE> 34
EXHIBIT F
__________, 19__
BankAmerica Mortgage Securities, Inc.
- --------------------
- --------------------
- --------------------
Re: BankAmerica Mortgage Securities, Inc., Mortgage
Pass-Through Certificates, Series 19___-__,
[list classes]
Pursuant to Section 4 of the Underwriting Agreement, dated __________,
19___, among BankAmerica Mortgage Securities, Inc., Bank of America [National
Trust and Savings Association] [Federal Savings Bank] and ____________________
(the "Underwriter") relating to the Certificates referenced above (the
"Underwriting Agreement"), the undersigned does hereby certify that:
(a) The prepayment assumption used in pricing the Certificates was
____% SPA.
(b) Set forth below is (i), the first price, as a percentage of
the principal balance of the Certificates, at which 10% of the aggregate
principal balance of the Certificates was sold to the public at a single price,
if applicable, or (ii) if more than 10% of the Certificates have been sold to
the public but no single price is paid for at least 10% of the aggregate
principal balance of the Certificates, then the weighted average price at which
the Certificates were sold expressed as a percentage of the principal balance of
the Certificates, or (iii) if less than 10% of the aggregate principal balance
of the Certificates has been sold to the public, the purchase price for the
Certificates paid by the Underwriter expressed as a percentage of the principal
balance of the Certificates calculated by: (1) estimating the fair market value
of the Certificates as of __________, 19___; (2) adding such estimated fair
market value to the aggregate purchase price of the Certificates described in
clause (i) or (ii) above; (3) dividing each of the fair market values determined
in clause (1) by the sum obtained in clause (2); (4) multiplying the quotient
F-1
<PAGE> 35
BankAmerica Mortgage Securities, Inc.
____________, 19___
Page 2
obtained for the Certificates in clause (3) by the purchase price paid by the
Underwriter for the Certificates; and (5) for the Certificates, dividing the
product obtained from the Certificates in clause (4) by the original principal
balance of the Certificates:
[list classes and prices thereof based on percentage of par value]
[* less than 10% has been sold to the public]
The prices set forth above do not include accrued interest with respect to
periods before closing.
[name of Underwriter]
By:________________________________________
Name:
Title:
F-2
<PAGE> 36
EXHIBIT G
BID SHEET
G-1
<PAGE> 1
EXHIBIT 4.1
- --------------------------------------------------------------------------------
BANKAMERICA MORTGAGE SECURITIES, INC.,
Depositor,
BANK OF AMERICA [NATIONAL TRUST AND SAVINGS ASSOCIATION]
[, FEDERAL SAVINGS BANK]
Master Servicer,
and
------------------------------,
Trustee
POOLING AND SERVICING AGREEMENT
Dated as of 1, 19
---------- --
Mortgage Pass-Through Certificates
Series 19 -
-- ----
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS
<S> <C>
Section 1.01. Definitions........................................... 3
Accrual Certificates............................................. 3
Accrued Certificate Interest..................................... 3
[Adjusted Mortgage Rate.......................................... 3
Advance.......................................................... 4
Affiliate........................................................ 4
Agreement........................................................ 4
Amount Held for Future Distribution.............................. 4
Appraised Value.................................................. 4
Assignment....................................................... 4
Available Distribution Amount.................................... 4
[Bankruptcy Amount............................................... 5
Bankruptcy Bond.................................................. 5
Bankruptcy Code.................................................. 5
Bankruptcy Loss.................................................. 5
Book-Entry Certificate........................................... 5
Business Day..................................................... 5
Buydown Funds.................................................... 5
Buydown Mortgage Loan............................................ 5
Cash Liquidation................................................. 5
Certificate...................................................... 6
Certificate Account.............................................. 6
Certificate Account Deposit Date................................. 6
Certificateholder or Holder...................................... 6
Certificate Insurance Policy..................................... 6
[Certificate Owner............................................... 6
Certificate Principal Balance.................................... 6
Certificate Register and Certificate Registrar................... 7
Claim............................................................ 7
Class............................................................ 7
Class A Certificate.............................................. 7
Class B Certificate.............................................. 7
Class R Certificate.............................................. 7
Closing Date..................................................... 7
Code............................................................. 7
Companion Certificates........................................... 7
[Compensating Interest........................................... 7
Converted Mortgage Loan.......................................... 7
Convertible Mortgage Loan........................................ 7
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
Corporate Trust Office........................................... 8
Credit Enhancement............................................... 8
Credit Enhancement Collection.................................... 8
Curtailment...................................................... 8
Custodial Account................................................ 8
Custodial Agreement.............................................. 8
Custodian........................................................ 8
Cut-off Date..................................................... 8
Cut-off Date Principal Balance................................... 8
Debt Service Reduction........................................... 8
Deficient Valuation.............................................. 8
Definitive Certificate........................................... 9
Deleted Mortgage Loan............................................ 9
[Depository...................................................... 9
[Depository Participant.......................................... 9
Determination Date............................................... 9
[Disqualified Organization....................................... 9
Distribution Date................................................ 9
Draw............................................................. 10
Due Date......................................................... 10
Due Period....................................................... 10
Eligible Account................................................. 10
Eligible Funds................................................... 10
Event of Default................................................. 10
Excess Bankruptcy Loss........................................... 10
Excess Fraud Loss................................................ 10
Excess Special Hazard Loss....................................... 10
Extraordinary Events............................................. 11
Extraordinary Losses............................................. 11
FDIC............................................................. 11
FHLMC............................................................ 11
Final Distribution Date.......................................... 11
Fitch............................................................ 12
Floater Certificates............................................. 12
FNMA............................................................. 12
Foreclosure Profits.............................................. 12
Fraud Loss Amount................................................ 12
Fraud Losses..................................................... 12
Gross Margin..................................................... 12
Independent...................................................... 12
Index............................................................ 12
Initial Certificate Principal Balance............................ 12
Initial Monthly Payment Fund..................................... 12
Insurance Proceeds............................................... 13
Insurer.......................................................... 13
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
Interest Only Certificates....................................... 13
Inverse Floater Certificates..................................... 13
Late Collections................................................. 13
Letter of Credit................................................. 13
Letter of Credit Amount.......................................... 13
Letter of Credit Bank............................................ 13
Liquidation Proceeds............................................. 13
Loan-to-Value Ratio.............................................. 13
Maturity Date.................................................... 14
Monthly Payment.................................................. 14
Moody's.......................................................... 14
Mortgage......................................................... 14
Mortgage File.................................................... 14
Mortgage Loan Purchase Agreement................................. 14
Mortgage Loan Schedule........................................... 14
Mortgage Loans................................................... 15
Mortgage Note.................................................... 15
Mortgage Pool Insurance Proceeds................................. 15
Mortgage Pool Insurer............................................ 15
Mortgage Rate.................................................... 15
Mortgaged Property............................................... 15
Mortgagor........................................................ 15
Net Mortgage Rate................................................ 16
Non-Covered Losses............................................... 16
Non-Primary Residence Loans...................................... 16
Non-United States Person......................................... 16
Nonrecoverable Advance........................................... 16
[Nonsubserviced Mortgage Loan.................................... 16
Officers' Certificate............................................ 16
Opinion of Counsel............................................... 16
Outstanding Mortgage Loan........................................ 16
Owner or Holder.................................................. 16
Ownership Interest............................................... 17
Pass-Through Rate................................................ 17
Paying Agent..................................................... 17
Percentage Interest.............................................. 17
Permitted Investments............................................ 17
[Permitted Transferee............................................ 18
Person........................................................... 18
Planned Amortization Class Certificates.......................... 18
Pool Stated Principal Balance.................................... 19
Prepayment Assumption............................................ 19
Prepayment Interest Shortfall.................................... 19
Prepayment Period................................................ 19
Primary Insurance Policy......................................... 19
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
Principal Only Certificates...................................... 19
Principal Prepayment............................................. 19
Principal Prepayment in Full..................................... 19
Purchase Price................................................... 19
Qualified Substitute Mortgage Loan............................... 20
Rating Agency.................................................... 20
Realized Loss.................................................... 20
Record Date...................................................... 20
Regular Certificate.............................................. 21
REMIC............................................................ 21
[REMIC Administrator............................................. 21
[REMIC Provisions................................................ 21
REO Acquisition.................................................. 21
REO Disposition.................................................. 21
REO Imputed Interest............................................. 21
REO Proceeds..................................................... 21
REO Property..................................................... 21
Request for Release.............................................. 21
Required Insurance Policy........................................ 21
Reserve Fund..................................................... 22
Responsible Officer.............................................. 22
Retained Yield................................................... 22
Seller........................................................... 22
Senior Percentage................................................ 22
[Senior Principal Distribution Amount............................ 22
Servicing Accounts............................................... 22
Servicing Advances............................................... 22
Servicing Fee.................................................... 22
Servicing Officer................................................ 23
[Special Hazard Amount........................................... 23
Special Hazard Insurance Policy.................................. 23
Special Hazard Loss.............................................. 23
Standard & Poor's................................................ 23
Stated Principal Balance......................................... 23
Subordinate Percentage........................................... 23
Subordinate Principal Distribution Amount........................ 23
Subserviced Mortgage Loan........................................ 24
Subservicer...................................................... 24
Subservicer Advance.............................................. 24
Subservicing Account............................................. 24
Subservicing Agreement........................................... 24
Subservicing Fee................................................. 24
Targeted Amortization Class Certificates......................... 24
Tax Returns...................................................... 24
Transfer......................................................... 24
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C>
Transferee...................................................................... 24
Transferor...................................................................... 24
Trust Fund...................................................................... 24
Uninsured Cause................................................................. 25
United States Person............................................................ 25
Voting Rights................................................................... 25
Withdrawal...................................................................... 25
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of Mortgage Loans........................................ 26
Section 2.02. Acceptance by Trustee............................................... 29
Section 2.03. Representations, Warranties and Covenants of the Master Servicer
and the Depositor................................................... 30
Section 2.04. Representations and Warranties of Sellers........................... 32
Section 2.05. Issuance of Certificates Evidencing Interests in the Trust Fund..... 33
ARTICLEIII
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
Section 3.01. Master Servicer to Act as Servicer.................................. 35
Section 3.02. Subservicing Agreements Between Master Servicer and
Subservicers; Enforcement of Subservicers' and Sellers'
Obligations......................................................... 36
Section 3.03. Successor Subservicers.............................................. 36
Section 3.04. Liability of the Master Servicer.................................... 37
Section 3.05. No Contractual Relationship Between Subservicer and Trustee or
Certificateholders.................................................. 37
Section 3.06. Assumption or Termination of Subservicing Agreements by
Trustee............................................................. 37
Section 3.07. Collection of Certain Mortgage Loan Payments; Deposits to
Custodial Account................................................... 38
Section 3.08. Subservicing Accounts; Servicing Accounts........................... 40
Section 3.09. Access to Certain Documentation and Information Regarding
the Mortgage Loans.................................................. 42
Section 3.10. Permitted Withdrawals from the Custodial Account.................... 42
Section 3.11. Maintenance of the Primary Insurance Policies;
Collections Thereunder.............................................. 44
Section 3.12. Maintenance of Fire Insurance and Omissions and Fidelity
Coverage............................................................ 44
</TABLE>
v
<PAGE> 7
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 3.13. Enforcement of Due-on-Sale Clauses; Assumption and
Modification Agreements; Certain Assignments........................ 46
Section 3.14. Realization Upon Defaulted Mortgage Loans........................... 48
Section 3.15. Trustee to Cooperate; Release of Mortgage Files..................... 50
Section 3.16. Servicing and Other Compensation.................................... 51
Section 3.17. Reports to the Trustee and the Depositor............................ 52
Section 3.18. Annual Statement as to Compliance................................... 53
Section 3.19. Annual Independent Public Accountants' Servicing Report............. 53
Section 3.20. Rights of the Depositor in Respect of the Master Servicer........... 54
Section 3.21. Administration of Buydown Funds..................................... 54
Section 3.22. Maintenance of the Mortgage Pool Insurance Policy; Collections
Thereunder.......................................................... 55
Section 3.23. Maintenance of the Credit Enhancement; Credit Enhancement
Collections......................................................... 56
Section 3.24. Special Hazard Coverage under the Credit Enhancement................ 58
Section 3.25. Bankruptcy Coverage Under the Credit Enhancement.................... 58
Section 3.26. Fraud Coverage under the Credit Enhancement......................... 59
ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
Section 4.01. Certificate Account................................................. 60
Section 4.02. Distributions....................................................... 60
Section 4.03. Statements to Certificateholders.................................... 62
Section 4.04. Distribution of Reports to the Trustee and the Depositor; Advances
by the Master Servicer.............................................. 64
[Section 4.05. Allocation of Realized Losses....................................... 66
Section 4.06. Reports of Foreclosures and Abandonment of Mortgaged Property....... 66
ARTICLE V
THE CERTIFICATES
Section 5.01. The Certificates.................................................... 67
Section 5.02. Registration of Transfer and Exchange of Certificates............... 68
Section 5.03. Mutilated, Destroyed, Lost or Stolen Certificates................... 73
Section 5.04. Persons Deemed Owners............................................... 74
Section 5.05. Appointment of Paying Agent......................................... 74
ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
Section 6.01. Respective Liabilities of the Depositor and the Master Servicer..... 75
</TABLE>
vi
<PAGE> 8
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 6.02. Merger or Consolidation of the Depositor or the Master Servicer;
Assignment of Rights and Delegation of Duties by Master Servicer.... 75
Section 6.03. Limitation on Liability of the Depositor, the Master Servicer and
Others.............................................................. 76
Section 6.04. Company and Master Servicer Not to Resign........................... 77
ARTICLE VII
DEFAULT
Section 7.01. Events of Default................................................... 78
Section 7.02. Trustee or Company to Act; Appointment of Successor................. 79
Section 7.03. Notification to Certificateholders.................................. 80
Section 7.04. Waiver of Events of Default......................................... 80
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.01. Duties of Trustee................................................... 82
Section 8.02. Certain Matters Affecting the Trustee............................... 83
Section 8.03. Trustee Not Liable for Certificates or Mortgage Loans............... 85
Section 8.04. Trustee May Own Certificates........................................ 85
Section 8.05. Master Servicer to Pay Trustee's Fees and Expenses;
Indemnification..................................................... 85
Section 8.06. Eligibility Requirements for Trustee................................ 86
Section 8.07. Resignation and Removal of the Trustee.............................. 87
Section 8.08. Successor Trustee................................................... 88
Section 8.09. Merger or Consolidation of Trustee.................................. 88
Section 8.11. Appointment of Custodians........................................... 90
Section 8.12. Appointment of Office or Agency..................................... 90
ARTICLE IX
TERMINATION
Section 9.01. Termination Upon Purchase by the Master Servicer or the
Depositor or Liquidation of All Mortgage Loans...................... 91
Section 9.02. Additional Termination Requirements................................. 93
[ARTICLE X
REMIC PROVISIONS
Section 10.01. REMIC Administration................................................ 95
</TABLE>
vii
<PAGE> 9
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 10.02. Master Servicer and Trustee Indemnification......................... 98
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Amendment........................................................... 99
Section 11.02. Recordation of Agreement; Counterparts.............................. 100
Section 11.03. Limitation on Rights of Certificateholders.......................... 101
Section 11.04. Governing Law....................................................... 102
Section 11.05. Notices............................................................. 102
Section 11.06. Notices to Rating Agency............................................ 102
Section 11.07. Severability of Provisions.......................................... 103
</TABLE>
viii
<PAGE> 10
EXHIBITS
Exhibit A: Form of Class A Certificate
Exhibit B: Form of Class B Certificate
Exhibit C: Form of Class R Certificate
Exhibit D: Form of Custodial Agreement
Exhibit E: Mortgage Loan Schedule
Exhibit F: Form of Mortgage Loan Purchase Agreement
Exhibit G: Forms of Request for Release
Exhibit H-1: Form of Transfer Affidavit and Agreement
Exhibit H-2: Form of Transferor Certificate
Exhibit I: Form of Investor Representation Letter
Exhibit J: Form of Transferor Representation Letter
Exhibit K: Form of Rule 144A Investment Representation Letter
Exhibit L: Form of Lender Certification for Assignment of Mortgage Loan
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<PAGE> 11
This is a Pooling and Servicing Agreement, effective as of __________
1, 19__, among BANKAMERICA MORTGAGE SECURITIES, INC., as the depositor (together
with its permitted successors and assigns, the "Depositor"), BANK OF AMERICA
[NATIONAL TRUST AND SAVINGS ASSOCIATION] [, FEDERAL SAVINGS BANK], as master
servicer (together with its permitted successors and assigns, the "Master
Servicer"), and ______________________________, as Trustee (together with its
permitted successors and assigns, the "Trustee"),
PRELIMINARY STATEMENT:
The Depositor intends to sell mortgage pass-through certificates
(collectively, the "Certificates"), to be issued hereunder in multiple classes,
which in the aggregate will evidence the entire beneficial ownership interest in
the Mortgage Loans (as defined herein). As provided herein, the Master Servicer
will make an election to treat the entire segregated pool of assets described in
the definition of Trust Fund (as defined herein), and subject to this Agreement
(including the Mortgage Loans but excluding the Initial Monthly Payment Fund),
as a real estate mortgage investment conduit (a "REMIC") for federal income tax
purposes. The [list classes] will be "regular interests" in the Trust Fund, and
the Class R Certificates will be the sole class of "residual interests" therein
for purposes of the REMIC Provisions (as defined herein) under federal income
tax law.
<PAGE> 12
The following table sets forth the designation, type, Pass-Through
Rate, aggregate Initial Certificate Principal Balance, Maturity Date, initial
ratings and certain features for each Class of Certificates comprising the
interests in the Trust Fund created hereunder.
<TABLE>
<CAPTION>
Aggregate Initial Initial
[Initial] Certificate Ratings
Pass-Through Principal Maturity [rating [Rating
Designation Type Rate Balance Features Date agency] Agency]
- ----------- ---- ------------ ----------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Class [A] % $ , 25, 20 [AAA] [AAA]
---------- ---- ---------- ----------- -------- --
Class [B]
Class R % $ Residual 25, 20 [AAA] [AAA]
---------- ---- ---------- -------- --
</TABLE>
The Mortgage Loans have an aggregate Cut-off Date Principal Balance
equal to $ . The Mortgage Loans are [fixed] [adjustable] rate
mortgage loans [describe other significant characteristics of the Mortgage
Loans] having terms to maturity at origination or modification of not more than
years.
2
<PAGE> 13
In consideration of the mutual agreements herein contained, the
Depositor, the Master Servicer and the Trustee agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the meanings specified in this
Article.
[Accrual Certificates: the [list Classes] Certificates.]
Accrued Certificate Interest: With respect to each Distribution Date,
as to any [list classes] Certificate, one month's interest accrued at the
related Pass-Through Rate on the Certificate Principal Balance thereof
immediately prior to such Distribution Date. Accrued Certificate Interest will
be calculated on the basis of a 360-day year consisting of twelve 30- day
months. In each case Accrued Certificate Interest on any Class of Certificates
will be reduced by the amount of (i) Prepayment Interest Shortfalls (to the
extent not offset by the Master Servicer with a payment of Compensating Interest
as provided in Section 4.01), (ii) the interest portion (adjusted to the Net
Mortgage Rate) of Realized Losses (including Excess Special Hazard Losses,
Excess Fraud Losses, Excess Bankruptcy Losses and Extraordinary Losses) not
allocated solely to one or more specific Classes of Certificates pursuant to
Section 4.05, (iii) the interest portion of Advances previously made with
respect to a Mortgage Loan or REO Property which remained unreimbursed following
the Cash Liquidation or REO Disposition of such Mortgage Loan or REO Property
that were made with respect to delinquencies that were ultimately determined to
be Excess Special Hazard Losses, Excess Fraud Losses, Excess Bankruptcy Losses
or Extraordinary Losses and (iv) any other interest shortfalls not covered by
the subordination provided by the [list subordinate classes] Certificates,
including interest that is not collectible from the Mortgagor pursuant to the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended, or similar
legislation or regulations as in effect from time to time, with all such
reductions allocated among all of the Certificates in proportion to their
respective amounts of Accrued Certificate Interest payable on such Distribution
Date which would have resulted absent such reductions. In addition to that
portion of the reductions described in the preceding sentence that are allocated
to any Class of [list Subordinate Certificates] Certificates, Accrued
Certificate Interest on such Class of [list Subordinate Certificates]
Certificates will be reduced by the interest portion (adjusted to the Net
Mortgage Rate) of Realized Losses that are allocated solely to such Class of
[list Subordinate Certificates] Certificates pursuant to Section 4.05.
[Adjusted Mortgage Rate: With respect to any Mortgage Loan and any date
of determination, the Mortgage Rate borne by the related Mortgage Note, less the
rate at which the related Subservicing Fee accrues.]
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<PAGE> 14
Advance: As to any Mortgage Loan, any advance made by the Master
Servicer, pursuant to Section 4.04.
Affiliate: With respect to any Person, any other Person controlling,
controlled by or under common control with such first Person. For the purposes
of this definition, "control" means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
Agreement: This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
Amount Held for Future Distribution: As to any Distribution Date, the
total of the amounts held in the Custodial Account at the close of business on
the preceding Determination Date on account of (i) Liquidation Proceeds,
Insurance Proceeds, Principal Prepayments, Mortgage Loan purchases made pursuant
to Sections 2.02 or 2.04 and Mortgage Loan substitutions made pursuant to
Sections 2.03 or 2.04 received or made in the month of such Distribution Date
(other than such Liquidation Proceeds, Insurance Proceeds and purchases of
Mortgage Loans that the Master Servicer has deemed to have been received in the
preceding month in accordance with Section 3.07(b)) and (ii) payments which
represent early receipt of scheduled payments of principal and interest due on a
date or dates subsequent to the related Due Date.
Appraised Value: As to any Mortgaged Property, the lesser of (i) the
appraised value of such Mortgaged Property based upon the appraisal made at the
time of the origination of the related Mortgage Loan, and (ii) the sales price
of the Mortgaged Property at such time of origination, except in the case of a
Mortgaged Property securing a refinanced or modified Mortgage Loan as to which
it is either the appraised value determined above or the appraised value
determined in an appraisal at the time of refinancing or modification, as the
case may be.
Assignment: An assignment of the Mortgage, notice of transfer or
equivalent instrument, in recordable form, sufficient under the laws of the
jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage Loan to the Trustee for the benefit of
Certificateholders, which assignment, notice of transfer or equivalent
instrument may be in the form of one or more blanket assignments covering
Mortgages secured by Mortgaged Properties located in the same county, if
permitted by law and accompanied by an Opinion of Counsel to that effect.
Available Distribution Amount: As to any Distribution Date, an amount
equal to (a) the sum of (i) the amount relating to the Mortgage Loans on deposit
in the Custodial Account as of the close of business on the immediately
preceding Determination Date and amounts deposited in the Custodial Account in
connection with the substitution of Qualified Substitute Mortgage Loans, (ii)
the amount of any Advance made on the immediately preceding Certificate Account
Deposit Date[,] [and] (iii) any amount deposited in the Custodial Account
pursuant to Section 3.12(a) [and (iv) Credit Enhancement Collections deposited
in the
4
<PAGE> 15
[Custodial] [Certificate] Account], reduced by (b) the sum as of the close of
business on the immediately preceding Determination Date of (w) aggregate
Foreclosure Profits, (x) the Amount Held for Future Distribution, and (y)
amounts permitted to be withdrawn by the Master Servicer from the Custodial
Account in respect of the Mortgage Loans pursuant to clauses (ii)-(x),
inclusive, of Section 3.10(a).
[Bankruptcy Amount: [Description of amount of any credit enhancement or
allocation to subordinate certificates applicable to Bankruptcy Losses to be
provided.]]
[Bankruptcy Bond: The instrument obtained pursuant to Section 3.__ from
______.]
Bankruptcy Code: The Bankruptcy Code of 1978, as amended.
Bankruptcy Loss: With respect to any Mortgage Loan, a Deficient
Valuation or Debt Service Reduction; provided, however, that neither a Deficient
Valuation nor a Debt Service Reduction shall be deemed a Bankruptcy Loss
hereunder so long as the Master Servicer has notified the Trustee in writing
that the Master 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 the Master Servicer
or a Subservicer, in either case without giving effect to any Debt Service
Reduction.
Book-Entry Certificate: Any Certificate registered in the name of the
Depository or its nominee.
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 or the State of
California (and such other state or states in which the Custodial Account or the
Certificate Account are at the time located) are required or authorized by law
or executive order to be closed.
Buydown Funds: Any amount contributed by the seller of a Mortgaged
Property, the Depositor or other source in order to enable the Mortgagor to
reduce the payments required to be made from the Mortgagor's funds in the early
years of a Mortgage Loan. Buydown Funds are not part of the Trust Fund prior to
deposit into the Custodial or Certificate Account.
Buydown Mortgage Loan: Any Mortgage Loan as to which a specified amount
of interest is paid out of related Buydown Funds in accordance with a related
buydown agreement.
Cash Liquidation: As to any defaulted Mortgage Loan other than a
Mortgage Loan as to which an REO Acquisition occurred, a determination by the
Master Servicer that it has received all Insurance Proceeds, Liquidation
Proceeds and other payments or cash recoveries
5
<PAGE> 16
which the Master Servicer reasonably and in good faith expects to be finally
recoverable with respect to such Mortgage Loan.
Certificate: Any [list classes of Certificates] Certificate.
Certificate Account: The separate account or accounts created and
maintained pursuant to Section 4.01, which shall be entitled
"____________________, as trustee, in trust for the registered holders of
BankAmerica Mortgage Securities, Inc., Mortgage Pass-Through Certificates,
Series 19__-____" and which must be an Eligible Account.
Certificate Account Deposit Date: As to any Distribution Date, the
Business Day prior thereto.
Certificateholder or Holder: The Person in whose name a Certificate is
registered in the Certificate Register, except that neither a Disqualified
Organization nor a Non-United States Person shall be a holder of a Class R
Certificate for purposes hereof and, solely for the purpose of giving any
consent or direction pursuant to this Agreement, any Certificate, other than a
Class R Certificate, registered in the name of the Depositor, the Master
Servicer or any Subservicer or any Affiliate thereof shall be deemed not to be
outstanding and the Percentage Interest or Voting Rights evidenced thereby shall
not be taken into account in determining whether the requisite amount of
Percentage Interests or Voting Rights necessary to effect any such consent or
direction has been obtained. [All references herein to "Holders" or
"Certificateholders" shall reflect the rights of Certificate Owners as they may
indirectly exercise such rights through the Depository and participating members
thereof, except as otherwise specified herein; provided, however, that the
Trustee shall be required to recognize as a "Holder" or "Certificateholder" only
the Person in whose name a Certificate is registered in the Certificate
Register.]
[Certificate Insurance Policy: The policy issued pursuant to Section
3.__ issued by ______.]
[Certificate Owner: With respect to a Book-Entry Certificate, the
Person who is the beneficial owner of such Certificate, as reflected on the
books of an indirect participating brokerage firm for which a Depository
Participant acts as agent, if any, and otherwise on the books of a Depository
Participant, if any, and otherwise on the books of the Depository.]
Certificate Principal Balance: With respect to each Certificate of any
Class, on any date of determination, an amount equal to (i) the Initial
Certificate Principal Balance of such Certificate as specified on the face
thereof, minus (ii) the sum of (x) the aggregate of all amounts previously
distributed with respect to such Certificate (or any predecessor Certificate)
and applied to reduce the Certificate Principal Balance or amount thereof
pursuant to Section 4.02(a) and (y) the aggregate of all reductions in
Certificate Principal Balance deemed to have occurred in connection with
Realized Losses which were previously allocated to such Certificate (or any
predecessor Certificate) pursuant to Section 4.05.
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<PAGE> 17
Certificate Register and Certificate Registrar: The register maintained
and the registrar appointed pursuant to Section 5.02.
[Claim: A claim upon any Bankruptcy Bond, Mortgage Pool Insurance
Policy, Special Hazard Insurance Policy or Certificate Insurance Policy.]
Class: Collectively, all of the Certificates bearing the same
designation.
Class A Certificate: Any one of the [list classes] Certificates,
executed by the Trustee and authenticated by the Certificate Registrar
substantially in the form annexed hereto as Exhibit A, each such Certificate
evidencing an interest designated as a "regular interest" in the Trust Fund for
purposes of the REMIC Provisions.
Class B Certificate: Any one of the [list classes] Certificates
executed by the Trustee and authenticated by the Certificate Registrar
substantially in the form annexed hereto as Exhibit B and evidencing an interest
designated as a "regular interest" in the Trust Fund for purposes of the REMIC
Provisions.
Class R Certificate: Any one of the Class R Certificates executed by
the Trustee and authenticated by the Certificate Registrar substantially in the
form annexed hereto as Exhibit C and evidencing an interest designated as a
"residual interest" in the Trust Fund for purposes of the REMIC Provisions.
Closing Date: __________ __, 19__.
Code: The Internal Revenue Code of 1986.
[Companion Certificates: The [list Classes] Certificates.]
[Compensating Interest: With respect to any Distribution Date, an
amount equal to Prepayment Interest Shortfalls resulting from Principal
Prepayments in Full during the related Prepayment Period, but not more than the
lesser of (a) one-twelfth of [the annual servicing fee rate] of the Stated
Principal Balance of the Mortgage Loans immediately preceding such Distribution
Date and (b) the sum of the Servicing Fee, all income and gain on amounts held
in the Custodial Account and the Certificate Account and payable to the
Certificateholders with respect to such Distribution Date and servicing
compensation to which the Master Servicer may be entitled pursuant to Section
3.10(a)(v) and (vi); provided that for purposes of this definition the amount of
the Servicing Fee will not be reduced pursuant to Section 7.02 except as may be
required pursuant to the last sentence of such Section.]
[Converted Mortgage Loan: A Convertible Mortgage Loan that has
converted from an adjustable Mortgage Rate to a fixed Mortgage Rate.]
[Convertible Mortgage Loan: A Mortgage Loan with a Mortgage Note that
provides for the conversion thereof at the option of the Mortgagor from an
adjustable Mortgage Rate to a fixed Mortgage Rate.]
7
<PAGE> 18
Corporate Trust Office: The principal office of the Trustee at which at
any particular time its corporate trust business with respect to this Agreement
shall be administered, which office at the date of the execution of this
instrument is located at
________________________________________, Attention: __________
____________________.
[Credit Enhancement: The [Letter of Credit] [Reserve Fund] [Certificate
Insurance Policy] [Bankruptcy Bond] [Special Hazard Insurance Policy] [Mortgage
Pool Insurance Policy] established pursuant to Section 3.__.]
[Credit Enhancement Collection: A Draw, when the Credit Enhancement is
a Letter of Credit, a Withdrawal, when the Credit Enhancement is a Reserve Fund,
or a Claim, when the Credit Enhancement is a Bankruptcy Bond, Mortgage Pool
Insurance Policy, Special Hazard Insurance Policy or Certificate Insurance
Policy.]
Curtailment: Any Principal Prepayment made by a Mortgagor which is not
a Principal Prepayment in Full.
Custodial Account: The custodial account or accounts created and
maintained pursuant to Section 3.07 in the name of a depository institution, as
custodian for the holders of the Certificates, for the holders of certain other
interests in mortgage loans serviced or sold by the Master Servicer and for the
Master Servicer, into which the amounts set forth in Section 3.07 shall be
deposited directly. Any such account or accounts shall be an Eligible Account.
Custodial Agreement: An agreement that may be entered into among the
Depositor, the Master Servicer, the Trustee and a Custodian in substantially the
form of Exhibit D hereto.
Custodian: A custodian appointed pursuant to a Custodial Agreement.
Cut-off Date: __________ 1, 19__.
Cut-off Date Principal Balance: As to any Mortgage Loan, the unpaid
principal balance thereof at the Cut-off Date after giving effect to all
installments of principal due on or prior thereto, whether or not received.
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 or any reduction that results in a permanent
forgiveness of principal.
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 constitutes a permanent
8
<PAGE> 19
forgiveness of principal, which valuation or reduction results from a proceeding
under the Bankruptcy Code.
Definitive Certificate: Any definitive, fully registered Certificate.
Deleted Mortgage Loan: A Mortgage Loan replaced or to be replaced with
a Qualified Substitute Mortgage Loan.
[Depository: The Depository Trust Company, or any successor Depository
hereafter named. The nominee of the initial Depository for purposes of
registering those Certificates that are to be Book-Entry Certificates is Cede &
Co. The Depository shall at all times be a "clearing corporation" as defined in
Section 8-102(3) of the Uniform Commercial Code of the State of New York and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended.]
[Depository Participant: A broker, dealer, bank or other financial
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.]
Determination Date: With respect to any Distribution Date, the __th day
(or if such __th day is not a Business Day, the Business Day immediately
following such ___th day) of the month of the related Distribution Date.
[Disqualified Organization: Any organization defined as a "disqualified
organization" under Section 860E(e)(5) of the Code, which includes any of the
following: (i) the United States, any State or political subdivision thereof,
any possession of the United States, or any agency or instrumentality of any of
the foregoing (other than an instrumentality which is a corporation if all of
its activities are subject to tax and, except for the FHLMC, a majority of its
board of directors is not selected by such governmental unit), (ii) a foreign
government, any international organization, or any agency or instrumentality of
any of the foregoing, (iii) any organization (other than certain farmers'
cooperatives described in Section 521 of the Code) which is exempt from the tax
imposed by Chapter 1 of the Code (including the tax imposed by Section 511 of
the Code on unrelated business taxable income), (iv) rural electric and
telephone cooperatives described in Section 1381(a)(2)(C) of the Code and (v)
any other Person so designated by the Trustee based upon an Opinion of Counsel
that the holding of an Ownership Interest in a Class R Certificate by such
Person may cause the Trust Fund or any Person having an Ownership Interest in
any Class of Certificates (other than such Person) to incur a liability for any
federal tax imposed under the Code that would not otherwise be imposed but for
the Transfer of an Ownership Interest in a Class R Certificate to such Person.
The terms "United States", "State" and "international organization" shall have
the meanings set forth in Section 7701 of the Code or successor provisions.]
Distribution Date: The __th day of any month beginning in the month
immediately following the month of the initial issuance of the Certificates or,
if such __th day is not a Business Day, the Business Day immediately following
such __th day.
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<PAGE> 20
[Draw: Any draw upon the Letter of Credit by the Trustee.]
Due Date: With respect to any Distribution Date, the first day of the
month in which such Distribution Date occurs.
Due Period: With respect to any Distribution Date, the period
commencing on the second day of the month preceding the month of such
Distribution Date and ending on the related Due Date.
Eligible Account: An account that is any of the following: (i)
maintained with a depository institution the debt obligations of which have been
rated by each Rating Agency in its highest rating available, or (ii) an account
or accounts in a depository institution in which such accounts are fully insured
to the limits established by the FDIC, provided that any deposits not so insured
shall, to the extent acceptable to each Rating Agency, as evidenced in writing,
be maintained such that (as evidenced by an Opinion of Counsel delivered to the
Trustee and each Rating Agency) the registered Holders of Certificates have a
claim with respect to the funds in such account or a perfected first security
interest against any collateral (which shall be limited to Permitted
Investments) securing such funds that is superior to claims of any other
depositors or creditors of the depository institution with which such account is
maintained, or (iii) in the case of the Certificate Account, a trust account or
accounts maintained in the corporate trust division of [name of Trustee], or
(iv) an account or accounts of a depository institution acceptable to each
Rating Agency (as evidenced in writing by each Rating Agency that use of any
such account as the Custodial Account or the Certificate Account will not reduce
the rating assigned to any Class of Certificates by such Rating Agency below the
lower of the then-current rating or the rating assigned to such Certificates as
of the Closing Date by such Rating Agency).
Eligible Funds: On any Distribution Date means the portion, if any, of
the Available Distribution Amount remaining after reduction by the sum of (i)
the aggregate amount of Accrued Certificate Interest on the [list classes of
Senior Certificates] Certificates [and the Retained Yield], (ii) the Senior
Principal Distribution Amount and (iii) the aggregate amount of Accrued
Certificate Interest on the [list all classes of subordinate certificates except
most subordinate] Certificates.
Event of Default: As defined in Section 7.01.
Excess Bankruptcy Loss: Any Bankruptcy Loss, or portion thereof, which
exceeds the then applicable Bankruptcy Amount.
Excess Fraud Loss: Any Fraud Loss, or portion thereof, which exceeds
the then applicable Fraud Loss Amount.
Excess Special Hazard Loss: Any Special Hazard Loss, or portion
thereof, that exceeds the then applicable Special Hazard Amount.
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<PAGE> 21
Extraordinary Events: Any of the following conditions with respect to a
Mortgaged Property or Mortgage Loan causing or resulting in a loss which causes
the liquidation of such Mortgage Loan:
(a) losses that are of the type that would be covered by the
fidelity bond and the errors and omissions insurance policy required to
be maintained pursuant to Section 3.12(b) but are in excess of the
coverage maintained thereunder;
(b) nuclear reaction or nuclear radiation or radioactive
contamination, all whether controlled or uncontrolled, and whether such
loss be direct or indirect, proximate or remote or be in whole or in
part caused by, contributed to or aggravated by a peril covered by the
definition of the term "Special Hazard Loss";
(c) hostile or warlike action in time of peace or war,
including action in hindering, combatting or defending against an
actual, impending or expected attack:
1. by any government or sovereign power, de jure
or de facto, or by any authority maintaining or using
military, naval or air forces; or
2. by military, naval or air forces; or
3. by an agent of any such government, power,
authority or forces;
(d) any weapon of war employing atomic fission or
radioactive force whether in time of peace or war; or
(e) insurrection, rebellion, revolution, civil war, usurped
power or action taken by governmental authority in hindering,
combatting or defending against such an occurrence, seizure or
destruction under quarantine or customs regulations, confiscation by
order of any government or public authority; or risks of contraband or
illegal transportation or trade.
Extraordinary Losses: Any loss incurred on a Mortgage Loan caused by or
resulting from an Extraordinary Event.
FDIC: Federal Deposit Insurance Corporation or any successor thereto.
FHLMC: Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created and existing under Title III of the
Emergency Home Finance Act of 1970, as amended, or any successor thereto.
Final Distribution Date: The Distribution Date on which the final
distribution in respect of the Certificates will be made pursuant to Section
9.01 which Final Distribution Date shall in no event be later than the end of
the 90-day liquidation period described in Section 9.02.
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<PAGE> 22
Fitch: Fitch Investors Service, L.P. or its successor in interest.
[Floater Certificates: The [list Classes] Certificates.]
FNMA: Federal National Mortgage Association, a federally chartered and
privately owned corporation organized and existing under the Federal National
Mortgage Association Charter Act, or any successor thereto.
Foreclosure Profits: As to any Distribution Date or related
Determination Date and any Mortgage Loan, the excess, if any, of Liquidation
Proceeds, Insurance Proceeds and REO Proceeds (net of all amounts reimbursable
therefrom pursuant to Section 3.10(a)(ii)) in respect of each Mortgage Loan or
REO Property for which a Cash Liquidation or REO Disposition occurred in the
related Prepayment Period over the sum of the unpaid principal balance of such
Mortgage Loan or REO Property (determined, in the case of an REO Disposition, in
accordance with Section 3.14) plus accrued and unpaid interest at the Mortgage
Rate on such unpaid principal balance from the Due Date to which interest was
last paid by the Mortgagor to the first day of the month following the month in
which such Cash Liquidation or REO Disposition occurred.
[Fraud Loss Amount: [Description of amount of any credit enhancement or
allocation to subordinate certificates applicable to Fraud Losses to be
provided.]]
Fraud Losses: Losses on Mortgage Loans as to which there was fraud in
the origination of such Mortgage Loan.
[Gross Margin: For each Mortgage Loan, the per annum percentage rate
designated as such on the Mortgage Loan Schedule for such Mortgage Loan.]
Independent: When used with respect to any specified Person, means such
a Person who (i) is in fact independent of the Depositor, the Master Servicer
and the Trustee, or any Affiliate thereof, (ii) does not have any direct
financial interest or any material indirect financial interest in the Depositor,
the Master Servicer or the Trustee or in an Affiliate thereof, and (iii) is not
connected with the Depositor, the Master Servicer or the Trustee as an officer,
employee, promoter, underwriter, trustee, partner, director or person performing
similar functions.
[Index: With respect to each Mortgage Loan for any date of
determination, the applicable value of [describe index] [,generally truncated to
three decimal places.]]
Initial Certificate Principal Balance: With respect to each Class of
Certificates, the Certificate Principal Balance of such Class of Certificates as
of the Cut-off Date as set forth in the Preliminary Statement hereto.
Initial Monthly Payment Fund: As defined in Section 2.01(f).
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<PAGE> 23
Insurance Proceeds: Proceeds paid in respect of the Mortgage Loans
pursuant to any Primary Insurance Policy [, from the Credit Enhancement] or any
other related insurance policy covering a Mortgage Loan, to the extent such
proceeds are payable to the mortgagee under the Mortgage, any Subservicer, the
Master Servicer or the Trustee and are not applied to the restoration of the
related Mortgaged Property or released to the Mortgagor in accordance with the
procedures that the Master Servicer would follow in servicing mortgage loans
held for its own account.
Insurer: Any named insurer under any Primary Insurance Policy
[,Bankruptcy Bond] [, Mortgage Pool Insurance Policy] [, Special Hazard
Insurance Policy] or any successor thereto or the named insurer in any
replacement policy.
[Interest Only Certificates: The [list Classes] Certificates.]
[Inverse Floater Certificates: The [list Classes] Certificates.]
Late Collections: With respect to any Mortgage Loan, all amounts
received during any Due Period, whether as late payments of Monthly Payments or
as Insurance Proceeds, Liquidation Proceeds or otherwise, which represent late
payments or collections of Monthly Payments due but delinquent for a previous
Due Period and not previously recovered.
[Letter of Credit: An irrevocable Letter of Credit [in the form
attached hereto as Exhibit __] delivered to the Trustee, issued solely to the
Trustee and its successors or assigns by a banking institution whose long-term
unsecured debt has received the highest rating from, or is otherwise acceptable
to, each Rating Agency, or any successor letter of credit in compliance with the
provisions herein and that provides that payment is conditional only on
certification by the Trustee of its authority to draw on such Letter of Credit
under the terms of this Agreement.
[Letter of Credit Amount: The sum of (i) the Bankruptcy Amount, (ii)
the Fraud Loss Amount, and (iii) the Special Hazard Amount, as reduced or
reinstated pursuant to any Letter of Credit.]
[Letter of Credit Bank: Initially, _________________, or any subsequent
issuer of a Letter of Credit.]
Liquidation Proceeds: Amounts (other than Insurance Proceeds) received
by the Master Servicer in connection with the taking of an entire Mortgaged
Property by exercise of the power of eminent domain or condemnation or in
connection with the liquidation of a defaulted Mortgage Loan through trustee's
sale, foreclosure sale or otherwise, other than REO Proceeds.
Loan-to-Value Ratio: As of any date, the fraction, expressed as a
percentage, the numerator of which is the current principal balance of the
related Mortgage Loan at the date of determination and the denominator of which
is the Appraised Value of the related Mortgaged Property.
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Maturity Date: The latest possible maturity date, solely for purposes
of Section 1.860G-1(a)(4)(iii) of the Treasury regulations, by which the
Certificate Principal Balance of each Class of Certificates representing a
regular interest in the Trust Fund and the rights to the Retained Yield would be
reduced to zero, which is __________ 25, 20__, the Distribution Date immediately
following the latest scheduled maturity date of any Mortgage Loan.
Monthly Payment: With respect to any Mortgage Loan (including any REO
Property) and any Due Date, the payment of principal and interest due thereon in
accordance with the amortization schedule at the time applicable thereto (after
adjustment, if any, for curtailments and for Deficient Valuations occurring
prior to such Due Date but before any adjustment to such amortization schedule
by reason of any bankruptcy, other than a Deficient Valuation, or similar
proceeding or any moratorium or similar waiver or grace period).
Moody's: Moody's Investors Service, Inc., or its successor in interest.
Mortgage: The mortgage, deed of trust or other comparable instrument
creating a first lien on an estate in fee simple or leasehold interest in real
property securing a Mortgage Note.
Mortgage File: The mortgage documents listed in Section 2.01 pertaining
to a particular Mortgage Loan and any additional documents required to be added
to the Mortgage File pursuant to this Agreement.
Mortgage Loan Purchase Agreement: The Mortgage Loan Purchase Agreement
between the Seller and the Depositor, dated __________ __, 19__, substantially
in the form attached hereto as Exhibit F.
Mortgage Loan Schedule: The list of the Mortgage Loans attached hereto
as Exhibit E (as amended from time to time to reflect the removal of Deleted
Mortgage Loans and the addition of Qualified Substitute Mortgage Loans), which
list shall set forth at a minimum the following information as to each Mortgage
Loan:
(i) the Mortgage Loan identifying number;
(ii) the street address of the Mortgaged Property including state and
zip code;
(iii) the maturity of the Mortgage Note;
(iv) the [initial] Mortgage Rate [and Gross Margin];
(v) the Subservicer pass-through rate;
(vi) the Net Mortgage Rate;
(vii) the Retained Yield;
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(viii) the initial scheduled monthly payment of principal, if any, and
interest;
(ix) the Cut-off Date Principal Balance;
(x) the Loan-to-Value Ratio at origination;
(xi) the rate at which any Subservicing Fee accrues and at which the
Servicing Fee accrues;
(xii) a code indicating that the Mortgage Loan is secured by a second
or vacation residence; and
(xiii) a code indicating that the Mortgage Loan is secured by a
non-owner occupied residence.
Such schedule may consist of multiple reports that collectively set forth all of
the information requested.
Mortgage Loans: Such of the mortgage loans transferred and assigned to
the Trustee pursuant to Section 2.01 as from time to time are held or deemed to
be held as a part of the Trust Fund, the Mortgage Loans originally so held being
identified in the initial Mortgage Loan Schedule, and Qualified Substitute
Mortgage Loans held or deemed held as part of the Trust Fund including, without
limitation, each related Mortgage Note, Mortgage and Mortgage File and all
rights appertaining thereto.
Mortgage Note: The originally executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan,
together with any modification thereto.
[Mortgage Pool Insurance Proceeds: Any proceeds of any Mortgage Pool
Insurance Policy other than amounts received in respect of current scheduled
Monthly Payments of principal and interest under the advance claims endorsement
of such policy.]
[Mortgage Pool Insurer: Any Insurer selected by the Master Servicer to
issue any Mortgage Pool Insurance Policy, or any successor thereto or the named
insurer in any replacement policy obtained by the Master Servicer pursuant to
Section 3.__.]
Mortgage Rate: As to any Mortgage Loan, the interest rate borne by the
related Mortgage Note, or any modification thereto.
Mortgaged Property: The underlying real property securing a Mortgage
Loan.
Mortgagor: The obligor on a Mortgage Note.
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Net Mortgage Rate: As to each Mortgage Loan, a per annum rate of
interest equal to the [Adjusted] Mortgage Rate less the per annum rate at which
the Servicing Fee is calculated.
[Non-Covered Losses: A Realized Loss which would have been covered
under the Mortgage Pool Insurance Policy but for the limitation of coverage
thereunder to ____% of the Mortgage Loan as of the Cut-off Date.]
Non-Primary Residence Loans: The Mortgage Loans designated as secured
by second or vacation residences, or by non-owner occupied residences, on the
Mortgage Loan Schedule.
Non-United States Person: Any Person other than a United States Person.
Nonrecoverable Advance: Any Advance previously made or proposed to be
made by the Master Servicer in respect of a Mortgage Loan (other than a Deleted
Mortgage Loan) which, in the good faith judgment of the Master Servicer, will
not, or, in the case of a proposed Advance, would not, be ultimately recoverable
by the Master Servicer from related Late Collections, Insurance Proceeds,
Liquidation Proceeds, REO Proceeds or amounts reimbursable to the Master
Servicer pursuant to Section 4.02(a) hereof.
[Nonsubserviced Mortgage Loan: Any Mortgage Loan that, at the time of
reference thereto, is not subject to a Subservicing Agreement.]
Officers' Certificate: A certificate signed by the Chairman of the
Board, the President or a Vice President or Assistant Vice President, or a
Director or Managing Director, and by the Treasurer, the Secretary, or one of
the Assistant Treasurers or Assistant Secretaries of the Seller, the Depositor
or the Master Servicer, as the case may be, and delivered to the Trustee, as
required by this Agreement.
Opinion of Counsel: A written opinion of counsel acceptable to the
Trustee and the Master Servicer, who may be counsel for the Seller, the
Depositor or the Master Servicer[, provided that any opinion of counsel (i)
referred to in the definition of "Permitted Transferee" or (ii) relating to the
qualification of the Trust Fund as a REMIC or compliance with the REMIC
Provisions must, unless otherwise specified, be an opinion of Independent
counsel.]
Outstanding Mortgage Loan: As to any Due Date, a Mortgage Loan
(including an REO Property) which was not the subject of a Principal Prepayment
in Full, Cash Liquidation or REO Disposition and which was not purchased,
deleted or substituted for prior to such Due Date pursuant to Section 2.02 or
2.04.
[Owner or Holder: With respect to the Retained Yield,
____________________, as the owner of all right, title and interest in and to
the Retained Yield. [Solely for the purpose of giving any consent or direction
pursuant to this Agreement, as long as ____________________ or any Affiliate
thereof is Master Servicer and the Retained Yield
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remains uncertificated, the Voting Rights evidenced thereby shall not be taken
into account in determining whether the requisite amount of Voting Rights
necessary to effect any such consent or direction has been obtained.]
Ownership Interest: As to any Certificate, any ownership or security
interest in such Certificate, including any interest in such Certificate as the
Holder thereof and any other interest therein, whether direct or indirect, legal
or beneficial, as owner or as pledgee.
Pass-Through Rate: With respect to any Class of Certificates and any
Distribution Date, the per annum rate set forth in the Preliminary Statement
hereto.
Paying Agent: ____________________ or any successor Paying Agent
appointed by the Trustee.
Percentage Interest: With respect to any Certificate [(other than a
Class __ Certificate)], the undivided percentage ownership interest in the
related Class evidenced by such Certificate, which percentage ownership interest
shall be equal to the Initial Certificate Principal Balance thereof divided by
the aggregate Initial Certificate Principal Balance of all of the Certificates
of the same Class. [With respect to a Class __ Certificate, the interest in
distributions to be made with respect to such Class evidenced thereby, expressed
as a percentage, as stated on the face of each such Certificate.]
Permitted Investments: One or more of the following:
(i) obligations of or guaranteed as to principal and interest by
the United States or any agency or instrumentality thereof
when such obligations are backed by the full faith and
credit of the United States;
(ii) repurchase agreements on obligations specified in clause (i)
maturing not more than one month from the date of
acquisition thereof, provided that the unsecured obligations
of the party agreeing to repurchase such obligations are at
the time rated by each Rating Agency in its highest
short-term rating available;
(iii) federal funds, certificates of deposit, demand deposits, time
deposits and bankers' acceptances (which shall each have an
original maturity of not more than 90 days and, in the case of
bankers' acceptances, shall in no event have an original
maturity of more than 365 days or a remaining maturity of more
than 30 days) denominated in United States dollars of any U.S.
depository institution or trust company incorporated under the
laws of the United States or any state thereof or of any
domestic branch of a foreign depository institution or trust
company; provided that the debt obligations of such depository
institution or trust company (or, if the only Rating Agency is
Standard & Poor's, in the case of the principal depository
institution in a depository institution holding company, debt
obligations of the depository institution holding company) at
the date of acquisition thereof have been rated
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by each Rating Agency in its highest short-term rating
available; and provided further that, if the only Rating
Agency is Standard & Poor's and if the depository or trust
company is a principal subsidiary of a bank holding company
and the debt obligations of such subsidiary are not
separately rated, the applicable rating shall be that of the
bank holding company; and, provided further that, if the
original maturity of such short-term obligations of a
domestic branch of a foreign depository institution or trust
company shall exceed 30 days, the short-term rating of such
institution shall be A-1+ in the case of Standard & Poor's
if Standard & Poor's is the Rating Agency;
(iv) commercial paper (having original maturities of not more
than 365 days) of any corporation incorporated under the
laws of the United States or any state thereof which on the
date of acquisition has been rated by each Rating Agency in
its highest short-term rating available; provided that such
commercial paper shall have a remaining maturity of not more
than 30 days;
(v) a money market fund or a qualified investment fund rated by
each Rating Agency in its highest long-term rating available;
and
(vi) other obligations or securities that are acceptable to each
Rating Agency as a Permitted Investment hereunder and will
not reduce the rating assigned to any Class of Certificates
by such Rating Agency below the lower of the then-current
rating or the rating assigned to such Certificates as of the
Closing Date by such Rating Agency, as evidenced in writing;
provided, however, that no instrument shall be a Permitted Investment if it
represents, either (1) the right to receive only interest payments with respect
to the underlying debt instrument or (2) the right to receive both principal and
interest payments derived from obligations underlying such instrument and the
principal and interest payments with respect to such instrument provide a yield
to maturity greater than 120% of the yield to maturity at par of such underlying
obligations. References herein to the highest rating available on unsecured
long-term debt shall mean AAA in the case of Standard & Poor's and Fitch and Aaa
in the case of Moody's, and references herein to the highest rating available on
unsecured commercial paper and short-term debt obligations shall mean A-1 in the
case of Standard & Poor's, P-1 in the case of Moody's and either A-1 by Standard
& Poor's, P-1 by Moody's or F-1 by Fitch in the case of Fitch.
[Permitted Transferee: Any Transferee of a Class R Certificate, other
than a Disqualified Organization or Non-United States Person.]
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
[Planned Amortization Class Certificates: The Class [list Classes]
Certificates.]
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Pool Stated Principal Balance: As to any date of determination, the
aggregate of the Stated Principal Balances of each Mortgage Loan that was an
Outstanding Mortgage Loan on the Due Date in the month preceding the month of
such date of determination.
Prepayment Assumption: A prepayment assumption of ____% of the standard
prepayment assumption, used for determining the accrual of original issue
discount and market discount and premium on the Certificates for federal income
tax purposes. The standard prepayment assumption assumes a constant rate of
prepayment of mortgage loans 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, increasing by an additional 0.2% per annum in each succeeding month until
the thirtieth month, and a constant 6% per annum rate of prepayment thereafter
for the life of the mortgage loans.
Prepayment Interest Shortfall: As to any Distribution Date and any
Mortgage Loan (other than a Mortgage Loan relating to an REO Property) that was
the subject of (a) a Principal Prepayment in Full during the related Prepayment
Period, an amount equal to the excess of one month's interest at the Net
Mortgage Rate on the Stated Principal Balance of such Mortgage Loan over the
amount of interest (adjusted to the Net Mortgage Rate) paid by the Mortgagor for
such Prepayment Period to the date of such Principal Prepayment in Full or (b) a
Curtailment during the prior calendar month, an amount equal to one month's
interest at the Net Mortgage Rate on the amount of such Curtailment.
Prepayment Period: As to any Distribution Date, the calendar month
preceding the month of distribution.
Primary Insurance Policy: Each primary policy of mortgage guaranty
insurance or any replacement policy therefor referred to in clause (xii) of
Exhibit 3 to [each] [the] Mortgage Loan Purchase Agreement.
[Principal Only Certificates: The Class [list Classes] Certificates.]
Principal Prepayment: Any payment of principal or other recovery on a
Mortgage Loan, including a recovery that takes the form of Liquidation Proceeds
or Insurance Proceeds, which is received in advance of its scheduled Due Date
and is not accompanied by an amount as to interest representing scheduled
interest on such payment due on any date or dates in any month or months
subsequent to the month of prepayment.
Principal Prepayment in Full: Any Principal Prepayment made by a
Mortgagor of the entire principal balance of a Mortgage Loan.
Purchase Price: With respect to any Mortgage Loan (or REO Property)
required to be purchased on any date pursuant to Section 2.02 or 2.04, an amount
equal to the sum of (i) 100% of the Stated Principal Balance thereof plus the
principal portion of any related unreimbursed Advances and (ii) unpaid accrued
interest at the Net Mortgage Rate on the Stated Principal Balance thereof to the
first day of the month following the month of purchase from the Due Date to
which interest was last paid by the Mortgagor.
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Qualified Substitute Mortgage Loan: A Mortgage Loan substituted by
____________________ or the Seller for a Deleted Mortgage Loan which must, on
the date of such substitution, as confirmed in an Officers' Certificate
delivered to the Trustee, (i) have an outstanding principal balance, after
deduction of the principal portion of the monthly payment due in the month of
substitution (or in the case of a substitution of more than one Mortgage Loan
for a Deleted Mortgage Loan, an aggregate outstanding principal balance, after
such deduction), not in excess of the Stated Principal Balance of the Deleted
Mortgage Loan (the amount of any shortfall to be remitted by the applicable
Seller to the Master Servicer for deposit in the Custodial Account in the month
of substitution); (ii) have a Mortgage Rate and a Net Mortgage Rate no lower
than and not more than 1% per annum higher than the Mortgage Rate and Net
Mortgage Rate, respectively, of the Deleted Mortgage Loan as of the date of
substitution; (iii) have a Loan-to-Value Ratio at the time of substitution no
higher than that of the Deleted Mortgage Loan at the time of substitution; (iv)
have a remaining term to stated maturity not greater than (and not more than one
year less than) that of the Deleted Mortgage Loan; (v) comply with each
representation and warranty set forth in Exhibit 3 to the applicable Mortgage
Loan Purchase Agreement.
Rating Agency: [Fitch] [Moody's] [Standard & Poor's]. If either 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
Depositor, notice of which designation shall be given to the Trustee and the
Master Servicer.
Realized Loss: With respect to each Mortgage Loan (or REO Property) as
to which a Cash Liquidation or REO Disposition has occurred, an amount (not less
than zero) equal to (i) the Stated Principal Balance of the Mortgage Loan (or
REO Property) as of the date of Cash Liquidation or REO Disposition, plus (ii)
interest (and REO Imputed Interest, if any) at the Net Mortgage Rate from the
Due Date as to which interest was last paid or advanced to Certificateholders up
to the last day of the month in which the Cash Liquidation (or REO Disposition)
occurred on the Stated Principal Balance of such Mortgage Loan (or REO Property)
outstanding during each Due Period that such interest was not paid or advanced,
minus (iii) the proceeds, if any, received during the month in which such Cash
Liquidation (or REO Disposition) occurred, to the extent applied as recoveries
of interest at the Net Mortgage Rate and to principal of the Mortgage Loan, net
of the portion thereof reimbursable to the Master Servicer or any Subservicer
with respect to related Advances or expenses as to which the Master Servicer or
any Subservicer is entitled to reimbursement thereunder but which have not been
previously reimbursed. With respect to each Mortgage Loan which has become the
subject of a Deficient Valuation, the difference between the principal balance
of the Mortgage Loan outstanding immediately prior to such Deficient Valuation
and the principal balance of the Mortgage Loan as reduced by the Deficient
Valuation. With respect to each Mortgage Loan which has become the object of a
Debt Service Reduction, the amount of such Debt Service Reduction.
Record Date: With respect to each Distribution Date, the close of
business on the last Business Day of the month next preceding the month in which
the related Distribution Date occurs.
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[Regular Certificate: Any of the Certificates other than a Class R
Certificate.]
[REMIC: A "real estate mortgage investment conduit" within the meaning
of Section 860D of the Code.]
[REMIC Administrator: If _____________________________________________]
found by a court of competent jurisdiction to no longer be able to fulfill its
obligations as REMIC Administrator under this Agreement the Depositor shall
appoint a successor REMIC Administrator, subject to assumption of the REMIC
Administrator obligations under this Agreement.]
[REMIC Provisions: Provisions of the federal income tax law relating to
real estate mortgage investment conduits, which appear at Sections 860A through
860G of Subchapter M of Chapter 1 of the Code, and related provisions, and
temporary and final regulations (or, to the extent not inconsistent with such
temporary or final regulations, proposed regulations) and published rulings,
notices and announcements promulgated thereunder, as the foregoing may be in
effect from time to time.]
REO Acquisition: The acquisition by the Master Servicer on behalf of
the Trustee for the benefit of the Certificateholders of any REO Property
pursuant to Section 3.14.
REO Disposition: As to any REO Property, a determination by the Master
Servicer that it has received all Insurance Proceeds, Liquidation Proceeds, REO
Proceeds and other payments and recoveries (including proceeds of a final sale)
which the Master Servicer expects to be finally recoverable from the sale or
other disposition of the REO Property.
REO Imputed Interest: As to any REO Property, for any period, an amount
equivalent to interest (at the Net Mortgage Rate that would have been applicable
to the related Mortgage Loan had it been outstanding) on the unpaid principal
balance of the Mortgage Loan as of the date of acquisition thereof for such
period.
REO Proceeds: Proceeds, net of expenses, received in respect of any REO
Property (including, without limitation, proceeds from the rental of the related
Mortgaged Property) which proceeds are required to be deposited into the
Custodial Account only upon the related REO Disposition.
REO Property: A Mortgaged Property acquired by the Master Servicer
through foreclosure or deed in lieu of foreclosure in connection with a
defaulted Mortgage Loan.
Request for Release: A request for release, the forms of which are
attached as Exhibit G hereto.
Required Insurance Policy: With respect to any Mortgage Loan, any
insurance policy which is required to be maintained from time to time under this
Agreement or any related Subservicing Agreement in respect of such Mortgage
Loan.
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[Reserve Fund: Any fund established as the Credit Enhancement in an
amount equal to the sum of (i) the Special Hazard Amount, (ii) the Bankruptcy
Amount, and (iii) the Fraud Loss Amount, maintained pursuant to Section 3.____.]
Responsible Officer: When used with respect to the Trustee, any officer
of the Corporate Trust Department of the Trustee, including any Senior Vice
President, any Vice President, any Assistant Vice President, any Assistant
Secretary, any Trust Officer or Assistant Trust Officer, or any other officer of
the Trustee customarily performing functions similar to those performed by any
of the above designated officers to whom, with respect to a particular matter,
such matter is referred.
[Retained Yield: With respect to any Distribution Date, the aggregate
of one month's interest on the Stated Principal Balance of each Mortgage Loan at
the applicable Retained Yield Rate, calculated on the basis of a 360-day year
consisting of twelve 30-day months. Retained Yield on any Distribution Date will
be reduced by the interest shortfalls described in clauses (i) through (iv) of
the third sentence of the definition of Accrued Certificate Interest, to the
extent allocated thereto pursuant to the provisions of such definition.]
Seller: [The] [An] institution from which the Depositor purchased [the]
[any] Mortgage Loans pursuant to [a] [the] Mortgage Loan Purchase Agreement.
[Senior Percentage: As of any Distribution Date, the lesser of 100% and
a fraction, expressed as a percentage, the numerator of which is the aggregate
Certificate Principal Balance of the Class A Certificates [and Class R
Certificates] immediately prior to such Distribution Date and the denominator of
which is the aggregate Stated Principal Balance of all of the Mortgage Loans (or
related REO Properties) immediately prior to such Distribution Date.]
[Senior Principal Distribution Amount: As to any Distribution Date, the
balance of the Available Distribution Amount remaining after the distribution of
all amounts required to be distributed pursuant to Section 4.02(a)(ii).]
Servicing Accounts: The account or accounts created and maintained
pursuant to Section 3.08.
Servicing Advances: All customary, reasonable and necessary "out of
pocket" costs and expenses incurred in connection with a default, delinquency or
other unanticipated event by the Master Servicer in the performance of its
servicing obligations, including, but not limited to, the cost of (i) the
preservation, restoration and protection of a Mortgaged Property, (ii) any
enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of any REO Property and (iv) compliance with the
obligations under Sections 3.01, 3.08, 3.12(a) and 3.14.
Servicing Fee: With respect to any Mortgage Loan and Distribution Date,
the fee payable monthly to the Master Servicer in respect of master servicing
compensation that accrues at an annual rate designated on the Mortgage Loan
Schedule for such Mortgage
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Loan, as may be adjusted with respect to successor Master Servicers as provided
in Section 7.02.
Servicing Officer: Any officer of the Master Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature appear on a list of servicing officers furnished to
the Trustee by the Master Servicer, as such list may from time to time be
amended.
[Special Hazard Amount: [Description of amount of any credit
enhancement or allocation to subordinate certificates applicable to Special
Hazard Losses to be provided.]
[Special Hazard Insurance Policy: The special hazard insurance policy,
if any, a form of which is attached hereto as Exhibit ____, or any replacement
insurance policy obtained by the Master Servicer pursuant to Section 3.___, in
the total aggregate initial amount of $____________________. The initial
Mortgage Pool Insurance Policy shall be issued by __________________.]
Special Hazard Loss: Any Realized Loss not in excess of the cost of the
lesser of repair or replacement of a Mortgaged Property suffered by such
Mortgaged Property on account of direct physical loss, exclusive of (i) any loss
of a type covered by a hazard policy or a flood insurance policy required to be
maintained in respect of such Mortgaged Property pursuant to Section 3.12(a),
except to the extent of the portion of such loss not covered as a result of any
coinsurance provision and (ii) any Extraordinary Loss.
Standard & Poor's: Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, or its successor in interest.
Stated Principal Balance: With respect to any Mortgage Loan or related
REO Property, at any given time, (i) the Cut-off Date Principal Balance of the
Mortgage Loan, minus (ii) the sum of (a) the principal portion of the Monthly
Payments due with respect to such Mortgage Loan or REO Property during each Due
Period ending prior to the most recent Distribution Date which were received or
with respect to which an Advance was made, and (b) all Principal Prepayments
with respect to such Mortgage Loan or REO Property, and all Insurance Proceeds,
Liquidation Proceeds and REO Proceeds, to the extent applied by the Master
Servicer as recoveries of principal in accordance with Section 3.14 with respect
to such Mortgage Loan or REO Property, in each case which were distributed
pursuant to Section 4.02 on any previous Distribution Date, and (c) any Realized
Loss allocated to Certificateholders with respect thereto for any previous
Distribution Date.
[Subordinate Percentage: As of any Distribution Date, 100% minus the
Senior Percentage as of such Distribution Date.]
[Subordinate Principal Distribution Amount: With respect to any
Distribution Date and each Class of Class B Certificates, [describe distribution
among Classes of subordinate Certificates].
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Subserviced Mortgage Loan: Any Mortgage Loan that, at the time of
reference thereto, is subject to a Subservicing Agreement.
Subservicer: Any Person with whom the Master Servicer has entered into
a Subservicing Agreement.
Subservicer Advance: Any delinquent installment of principal and
interest on a Mortgage Loan which is advanced by the related Subservicer (net of
its Subservicing Fee) pursuant to a Subservicing Agreement.
Subservicing Account: An account established by a Subservicer in
accordance with Section 3.08.
Subservicing Agreement: The written contract between the Master
Servicer and any Subservicer relating to servicing and administration of certain
Mortgage Loans as provided in Section 3.02.
Subservicing Fee: As to any Mortgage Loan, the fee payable monthly to
the related Subservicer (or, in the case of a Nonsubserviced Mortgage Loan, to
the Master Servicer) in respect of subservicing and other compensation that
accrues at an annual rate equal to the excess of the Mortgage Rate borne by the
related Mortgage Note over the rate per annum designated on the Mortgage Loan
Schedule as the "[CURR NET]" for such Mortgage Loan.
[Targeted Amortization Class Certificates: The Class [list Classes]
Certificates.]
Tax Returns: The federal income tax return on Internal Revenue Service
Form [1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return,
including Schedule Q thereto, Quarterly Notice to Residual Interest Holders of
REMIC Taxable Income or Net Loss Allocation, or any successor forms, to be filed
on behalf of the Trust Fund due to its classification as a REMIC under the REMIC
Provisions], together with any and all other information, reports or returns
that may be required to be furnished to the Certificateholders or filed with the
Internal Revenue Service or any other governmental taxing authority under any
applicable provisions of federal, state or local tax laws.
Transfer: Any direct or indirect transfer, sale, pledge, hypothecation
or other form of assignment of any Ownership Interest in a Certificate.
Transferee: Any Person who is acquiring by Transfer any Ownership
Interest in a Certificate.
Transferor: Any Person who is disposing by Transfer of any Ownership
Interest in a Certificate.
Trust Fund: The segregated pool of assets[, with respect to which a
REMIC election is to be made,] consisting of:
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(i) the Mortgage Loans and the related Mortgage Files,
(ii) all payments on and collections in respect of the Mortgage
Loans due after the Cut-off Date as shall be on deposit in
the Custodial Account or in the Certificate Account and
identified as belonging to the Trust Fund,
(iii) property which secured a Mortgage Loan and which has been
acquired for the benefit of the Certificateholders by
foreclosure or deed in lieu of foreclosure, and
(iv) the hazard insurance policies and Primary Insurance Policies,
if any, and certain proceeds thereof.
Uninsured Cause: Any cause of damage to property subject to a Mortgage
such that the complete restoration of such property is not fully reimbursable by
the hazard insurance policies [, or any comparable provision of any Credit
Enhancement].
United States Person: A citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate or
trust whose income from sources without the United States is includible in gross
income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.
Voting Rights: The portion of the voting rights of all of the
Certificates which is allocated to any Certificate. 99.0% of all of the Voting
Rights shall be allocated among Holders of Certificates, respectively, other
than the Class R Certificates, in proportion to the outstanding Certificate
Principal Balances of their respective Certificates; 1% of all Voting Rights
shall be allocated to the Holders of the Class R Certificates, allocated among
the Certificates of such Class in accordance with their respective Percentage
Interests.
[Withdrawal: Any withdrawal from any Reserve Fund by the Trustee or its
Paying Agent for deposit into the Certificate Account.]
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ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of Mortgage Loans.
(a) The Depositor, concurrently with the execution and delivery hereof,
does hereby assign to the Trustee without recourse all the right, title and
interest of the Depositor in and to the Mortgage Loans, including all interest
and principal received on or with respect to the Mortgage Loans after the
Cut-off Date (other than payments of principal and interest due on the Mortgage
Loans on or before the Cut-off Date).
(b) In connection with such assignment, except as set forth in Section
2.01(c) below, the Depositor does hereby deliver to, and deposit with, the
Trustee, or to and with one or more Custodians, as the duly appointed agent or
agents of the Trustee for such purpose, the following documents or instruments
(or copies thereof as permitted by this Section):
(i) The original Mortgage Note, endorsed without
recourse to the order of the Trustee and showing an unbroken chain of
endorsements from the originator thereof to the Person endorsing it to
the Trustee;
(ii) The original Mortgage with evidence of recording
indicated thereon or a copy of the Mortgage certified by the public
recording office in which such Mortgage has been recorded;
(iii) An original Assignment of the Mortgage to the
Trustee with evidence of recording indicated thereon or a copy of such
assignment certified by the public recording office in which such
assignment has been recorded;
(iv) The original recorded assignment or assignments of
the Mortgage showing an unbroken chain of title from the originator
thereof to the Person assigning it to the Trustee or a copy of such
assignment or assignments of the Mortgage certified by the public
recording office in which such assignment or assignments have been
recorded; and
(v) The original of each modification, assumption
agreement or preferred loan agreement, if any, relating to such
Mortgage Loan or a copy of each modification, assumption agreement or
preferred loan agreement certified by the public recording office in
which such document has been recorded.
(c) The Depositor may, in lieu of delivering the documents set forth in
Section 2.01(b)(I)(iv) and (v) and Section (b)(II)(ii), (iv), (vii), (ix) and
(x) to the Trustee or the Custodian or Custodians, deliver such documents to the
Master Servicer, and the Master Servicer shall hold such documents in trust for
the use and benefit of all present and future
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Certificateholders until such time as is set forth below. Within ten Business
Days following the earlier of (i) the receipt of the original of each of the
documents or instruments set forth in Section 2.01(b)(I)(iv) and (v) and Section
(b)(II)(ii), (iv), (vii), (ix) and (x) (or copies thereof as permitted by such
Section) for any Mortgage Loan and (ii) a written request by the Trustee to
deliver those documents with respect to any or all of the Mortgage Loans then
being held by the Master Servicer, the Master Servicer shall deliver a complete
set of such documents to the Trustee or the Custodian or Custodians that are the
duly appointed agent or agents of the Trustee.
On the Closing Date, the Master Servicer shall certify that it has in
its possession an original or copy of each of the documents referred to in
Section 2.01(b)(I)(iv) and (v) and Section (b)(II)(ii), (iv), (vii), (ix) and
(x) which has been delivered to it by the Depositor. Every six months after the
Closing Date, for so long as the Master Servicer is holding documents pursuant
to this Section 2.01(c), the Master Servicer shall deliver to (i) Moody's if it
is one of the Rating Agencies, (ii) the Trustee and (iii) any Custodian a report
setting forth the status of the documents which it is holding.
(d) In the event that in connection with any Mortgage Loan the
Depositor cannot deliver the Mortgage, any assignment, modification, assumption
agreement or preferred loan agreement (or copy thereof certified by the public
recording office) with evidence of recording thereon concurrently with the
execution and delivery of this Agreement solely because of a delay caused by the
public recording office where such Mortgage, assignment, modification,
assumption agreement or preferred loan agreement as the case may be, has been
delivered for recordation, the Depositor shall deliver or cause to be delivered
to the Trustee or any respective Custodian a true and correct photocopy of such
Mortgage, assignment, modification, assumption agreement or preferred loan
agreement.
The Depositor shall promptly cause to be recorded in the appropriate
public office for real property records the Assignment referred to in clause
(I)(iii) of Section 2.01(b), except in states where, in the opinion of counsel
acceptable to the Trustee and the Master Servicer, such recording is not
required to protect the Trustee's interests in the Mortgage Loan against the
claim of any subsequent transferee or any successor to or creditor of the
Depositor or the originator of such Mortgage Loan and shall promptly cause to be
filed the Form UCC-3 assignment and UCC-1 financing statement referred to in
clause (II)(vii) and (x), respectively, of Section 2.01(b). If any Assignment,
Form UCC-3 or Form UCC-1, as applicable, is lost or returned unrecorded to the
Depositor because of any defect therein, the Depositor shall prepare a
substitute Assignment, Form UCC-3 or Form UCC-1, as applicable, or cure such
defect, as the case may be, and cause such Assignment to be recorded in
accordance with this paragraph. The Depositor shall promptly deliver or cause to
be delivered to the Trustee or the respective Custodian such Mortgage or
assignment or Form UCC-3 or Form UCC-1, as applicable, (or copy thereof
certified by the public recording office) with evidence of recording indicated
thereon upon receipt thereof from the public recording office or from the
related Subservicer.
(e) It is intended that the conveyances by the Depositor to the Trustee
of the Mortgage Loans as provided for in this Section 2.01 be construed as a
sale by the Depositor
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to the Trustee of the Mortgage Loans for the benefit of the Certificateholders.
Further, it is not intended that any such conveyance be deemed to be a pledge of
the Mortgage Loans by the Depositor to the Trustee to secure a debt or other
obligation of the Depositor. However, in the event that the Mortgage Loans are
held to be property of the Depositor or of the Seller, or if for any reason this
Agreement is held or deemed to create a security interest in the Mortgage Loans,
then it is intended that (a) this Agreement shall also be deemed to be a
security agreement within the meaning of Articles 8 and 9 of the __________
Uniform Commercial Code and the Uniform Commercial Code of any other applicable
jurisdiction; (b) the conveyance provided for in Section 2.01 shall be deemed to
be (1) a grant by the Depositor to the Trustee of a security interest in all of
the Depositor's right (including the power to convey title thereto), title and
interest, whether now owned or hereafter acquired, in and to (A) the Mortgage
Loans, including the related Mortgage Note, the Mortgage, any insurance policies
and all other documents in the related Mortgage File, (B) all amounts payable
pursuant to the Mortgage Loans in accordance with the terms thereof, (C) any and
all general intangibles consisting of, arising from or relating to any of the
foregoing, and all proceeds of the conversion, voluntary or involuntary, of the
foregoing into cash, instruments, securities or other property, including
without limitation all amounts from time to time held or invested in the
Certificate Account or the Custodial Account, whether in the form of cash,
instruments, securities or other property and (2) an assignment by the Depositor
to the Trustee of any security interest in any and all of the Seller's right
(including the power to convey title thereto), title and interest, whether now
owned or hereafter acquired, in and to the property described in the foregoing
clauses (1)(A), (B), (C) and (D) granted by the Seller to the Depositor pursuant
to the Mortgage Loan Purchase Agreement; (c) the possession by the Trustee, the
Custodian or any other agent of the Trustee of Mortgage Notes or such other
items of property as constitute instruments, money, negotiable documents or
chattel paper shall be deemed to be "possession by the secured party," or
possession by a purchaser or a person designated by such secured party, for
purposes of perfecting the security interest pursuant to the __________ Uniform
Commercial Code and the Uniform Commercial Code of any other applicable
jurisdiction (including, without limitation, Section 9-305, 8-313 or 8- 321
thereof); and (d) notifications to persons holding such property, and
acknowledgments, receipts or confirmations from persons holding such property,
shall be deemed notifications to, or acknowledgments, receipts or confirmations
from, financial intermediaries, bailees or agents (as applicable) of the Trustee
for the purpose of perfecting such security interest under applicable law.
The Depositor and, at the Depositor's direction, the Seller and the
Trustee shall, to the extent consistent with this Agreement, take such
reasonable actions as may be necessary to ensure that, if this Agreement were
deemed to create a security interest in the Mortgage Loans and the other
property described above, such security interest would be deemed to be a
perfected security interest of first priority under applicable law and will be
maintained as such throughout the term of this Agreement. Without limiting the
generality of the foregoing, the Depositor shall prepare and deliver to the
Trustee not less than 15 days prior to any filing date and, the Trustee shall
forward for filing, or shall cause to be forwarded for filing, at the expense of
the Depositor, all filings necessary to maintain the effectiveness of any
original filings necessary under the Uniform Commercial Code as in effect in any
jurisdiction to perfect the Trustee's security interest in or lien on the
Mortgage Loans, as
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evidenced by an Officer's Certificate of the Depositor, including without
limitation (x) continuation statements, and (y) such other statements as may be
occasioned by (1) any change of name of the Seller, the Depositor or the Trustee
(such preparation and filing shall be at the expense of the Trustee, if
occasioned by a change in the Trustee's name), (2) any change of location of the
place of business or the chief executive office of the Seller or (3) any
transfer of any interest of the Seller or the Depositor in any Mortgage Loan.
[(f) The Master Servicer hereby acknowledges the receipt by it
of cash in an amount equal to $______________ (the "Initial Monthly Payment
Fund"), representing scheduled principal amortization and interest at the Net
Mortgage Rate for the Due Date in __________ 199_, for those Mortgage Loans for
which the Trustee will not be entitled to receive such payment. The Master
Servicer shall hold such Initial Monthly Payment Fund in the Custodial Account
and shall include such Initial Monthly Payment Fund in the Available
Distribution Amount for the Distribution Date in __________ 199_.
Notwithstanding anything herein to the contrary, the Initial Monthly Payment
Fund shall not be an asset of the Trust Fund. To the extent that the Initial
Monthly Payment Fund constitutes a reserve fund for federal income tax purposes,
(1) it shall be an outside reserve fund and not an asset of the REMIC, (2) it
shall be owned by the Seller and (3) amounts transferred by the REMIC to the
Initial Monthly Payment Fund shall be treated as transferred to the Seller or
any successor, all within the meaning of Section 1.860G-2(h) of the Treasury
Regulations.]
Section 2.02. Acceptance by Trustee.
The Trustee acknowledges receipt (or, with respect to Mortgage Loans
subject to a Custodial Agreement, and based solely upon a receipt or
certification executed by the Custodian, receipt by the respective Custodian as
the duly appointed agent of the Trustee) of the documents referred to in Section
2.01(b)(i) through (iii) above (except that for purposes of such acknowledgement
only, a Mortgage Note may be endorsed in blank and an Assignment of Mortgage may
be in blank) and declares that it, or a Custodian as its agent, holds and will
hold such documents and the other documents constituting a part of the Mortgage
Files delivered to it, or a Custodian as its agent, in trust for the use and
benefit of all present and future Certificateholders. The Trustee or Custodian
(such Custodian being so obligated under a Custodial Agreement) agrees, for the
benefit of Certificateholders, to review each Mortgage File delivered to it
pursuant to Section 2.01(b) within 45 days after the Closing Date to ascertain
that all required documents (specifically as set forth in Section 2.01(b)), have
been executed and received, and that such documents relate to the Mortgage Loans
identified on the Mortgage Loan Schedule, as supplemented, that have been
conveyed to it. Upon delivery of the Mortgage Files by the Depositor or the
Seller, the Trustee shall acknowledge receipt (or, with respect to Mortgage
Loans subject to a Custodial Agreement, and based solely upon a receipt or
certification executed by the Custodian, receipt by the respective Custodian as
the duly appointed agent of the Trustee) of the documents referred to in Section
2.01(c) above. The Trustee or Custodian (such Custodian being so obligated under
a Custodial Agreement) agrees to review each Mortgage File delivered to it
pursuant to Section 2.01(c) within 45 days after receipt thereof to ascertain
that all documents required to be delivered pursuant to such Section have been
received, and that such documents relate
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to the Mortgage Loans identified on the Mortgage Loan Schedule, as supplemented,
that have been conveyed to it.
If the Trustee or a Custodian, as the Trustee's agent, finds any
document or documents constituting a part of a Mortgage File to be missing or
defective in any material respect, the Trustee shall promptly so notify the
Master Servicer and the Depositor. The Master Servicer shall promptly notify the
related Subservicer or Seller of such omission or defect and request that such
Subservicer or Seller correct or cure such omission or defect within 60 days
from the date the Master Servicer was notified of such omission or defect and,
if such Subservicer or Seller does not correct or cure such omission or defect
within such period, that such Subservicer or Seller purchase such Mortgage Loan
from the Trust Fund at its Purchase Price, in either case within 90 days from
the date the Master Servicer was notified of such omission or defect. The
Purchase Price for any such Mortgage Loan, whether purchased by the Seller or
the Subservicer, shall be deposited or caused to be deposited by the Master
Servicer in the Custodial Account maintained by it pursuant to Section 3.07 and,
upon receipt by the Trustee of written notification of such deposit signed by a
Servicing Officer, the Trustee or any Custodian, as the case may be, shall
release to the Master Servicer the related Mortgage File and the Trustee shall
execute and deliver such instruments of transfer or assignment prepared by the
Master Servicer, in each case without recourse, as shall be necessary to vest in
the Seller or its designee or the Subservicer or its designee, as the case may
be, any Mortgage Loan released pursuant hereto and thereafter such Mortgage Loan
shall not be part of the Trust Fund. It is understood and agreed that the
obligation of the Seller or the Subservicer, as the case may be, to so cure or
purchase any Mortgage Loan as to which a material defect in or omission of a
constituent document exists shall constitute the sole remedy respecting such
defect or omission available to Certificateholders or the Trustee on behalf of
Certificateholders.
Section 2.03. Representations, Warranties and Covenants of the Master
Servicer and the Depositor.
The Master Servicer hereby represents and warrants to the Trustee for
the benefit of Certificateholders that:
(i) The Master Servicer is a corporation duly
organized, validly existing and in good standing under the laws
governing its creation and existence and is or will be in compliance
with the laws of each state in which any Mortgaged Property is located
to the extent necessary to ensure the enforceability of each Mortgage
Loan in accordance with the terms of this Agreement;
(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 [Certificate of
Incorporation] [Articles of Association] or Bylaws or constitute a
default (or an event which, with notice or lapse of time, or both,
would constitute a material default) under, or result in the material
breach of, any material contract, agreement or other instrument to
which the Master
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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 Depositor, constitutes a
valid, legal and binding obligation of the Master Servicer, enforceable
against it in accordance with the terms hereof subject to 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 materially
adversely affect its performance hereunder;
(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;
(vi) The Master Servicer will comply in all material
respects in the performance of this Agreement with all reasonable rules
and requirements of each insurer under each Required Insurance Policy;
(vii) No information, certificate of an officer,
statement furnished in writing or report delivered to the Depositor,
any Affiliate of the Depositor or the Trustee by the Master Servicer
will, to the knowledge of the Master Servicer, contain any untrue
statement of a material fact or omit a material fact necessary to make
the information, certificate, statement or report not misleading; and
(viii) The Master Servicer has examined each existing,
and will examine each new, Subservicing Agreement and is or will be
familiar with the terms thereof. The terms of each existing
Subservicing Agreement and each designated Subservicer are acceptable
to the Master Servicer and any new Subservicing Agreements will comply
with the provisions of Section 3.02.
It is understood and agreed that the representations and warranties set forth in
this Section 2.03 shall survive delivery of the respective Mortgage Files to the
Trustee or any Custodian.
Upon discovery by either the Depositor, the Master Servicer, the
Trustee or any Custodian of a breach of any representation or warranty set forth
in this Section 2.03(a) which materially and adversely affects the interests of
the Certificateholders in any 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 90 days of its
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discovery or its receipt of notice of such breach, the Master Servicer shall
[either (i)] cure such breach in all material respects [or (ii) to the extent
that such breach is with respect to a Mortgage Loan or a related document,
purchase such Mortgage Loan from the Trust Fund at the Purchase Price and in the
manner set forth in Section 2.02]. The obligation of the Master Servicer to cure
such breach [or to so purchase such Mortgage Loan] shall constitute the sole
remedy in respect of a breach of a representation and warranty set forth in this
Section 2.03 available to the Certificateholders or the Trustee on behalf of the
Certificateholders.
Section 2.04. Representations and Warranties of Sellers.
The Depositor hereby assigns to the Trustee for the benefit of
Certificateholders all of its right, title and interest in respect of the
Mortgage Loan Purchase Agreement applicable to a Mortgage Loan. Insofar as such
Seller's Mortgage Loan Purchase Agreement relates to the representations and
warranties made by the related Seller in respect of such Mortgage Loan and any
remedies provided thereunder for any breach of such representations and
warranties, such right, title and interest may be enforced by the Master
Servicer on behalf of the Trustee and the Certificateholders. Upon the discovery
by the Depositor, the Master Servicer, the Trustee or any Custodian of a breach
of any of the representations and warranties made in a Mortgage Loan Purchase
Agreement (which, for purposes hereof, will be deemed to include any other cause
giving rise to a repurchase obligation under the Mortgage Loan Purchase
Agreement) in respect of any Mortgage Loan which materially and adversely
affects the interests of the Certificateholders in such 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). The Master
Servicer shall promptly notify the related Seller of such breach and request
that such Seller either (i) cure such breach in all material respects within 90
days from the date the Master Servicer was notified of such breach or (ii)
purchase such Mortgage Loan from the Trust Fund at the Purchase Price and in the
manner set forth in Section 2.02; provided that the Seller shall have the option
to substitute a Qualified Substitute Mortgage Loan or Loans for such Mortgage
Loan if such substitution occurs within two years following the Closing Date,
except that if the breach would cause the Mortgage Loan to be other than a
"qualified mortgage" as defined in Section 860G(a)(3) of the Code, any such
substitution must occur within 90 days from the date the Master Servicer was
notified of the breach if such 90 day period expires before two years following
the Closing Date. In the event that the Seller elects to substitute a Qualified
Substitute Mortgage Loan or Loans for a Deleted Mortgage Loan pursuant to this
Section 2.04, the Seller shall deliver to the Trustee for the benefit of the
Certificateholders with respect to such Qualified Substitute Mortgage Loan or
Loans, the original Mortgage Note, the Mortgage, an Assignment of the Mortgage
in recordable form, and such other documents and agreements as are required by
Section 2.01, with the Mortgage Note endorsed as required by Section 2.01. No
substitution will be made in any calendar month after the Determination Date for
such month. Monthly Payments due with respect to Qualified Substitute Mortgage
Loans in the month of substitution shall not be part of the Trust Fund and will
be retained by the Master Servicer and remitted by the Master Servicer to the
Seller on the next succeeding Distribution Date. For the month of substitution,
distributions to Certificateholders will include the Monthly Payment due on a
Deleted Mortgage Loan for such month and thereafter the Seller shall be
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entitled to retain all amounts received in respect of such Deleted Mortgage
Loan. The Master Servicer shall amend or cause to be amended the Mortgage Loan
Schedule for the benefit of the Certificateholders to reflect the removal of
such Deleted Mortgage Loan and the substitution of the Qualified Substitute
Mortgage Loan or Loans and the Master Servicer shall deliver the amended
Mortgage Loan Schedule to the Trustee. Upon such substitution, the Qualified
Substitute Mortgage Loan or Loans shall be subject to the terms of this
Agreement and any related Subservicing Agreement in all respects, the related
Seller shall be deemed to have made the representations and warranties with
respect to the Qualified Substitute Mortgage Loan contained in the related
Mortgage Loan Purchase Agreement as of the date of substitution, and the
Depositor and the Master Servicer shall be deemed to have made with respect to
any Qualified Substitute Mortgage Loan or Loans, as of the date of substitution,
the covenants, representations and warranties set forth in this Section 2.04.
In connection with the substitution of one or more Qualified Substitute
Mortgage Loans for one or more Deleted Mortgage Loans, the Master Servicer will
determine the amount (if any) by which the aggregate principal balance of all
such Qualified Substitute Mortgage Loans as of the date of substitution is less
than the aggregate Stated Principal Balance of all such Deleted Mortgage Loans
(in each case after application of the principal portion of the Monthly Payments
due in the month of substitution that are to be distributed to
Certificateholders in the month of substitution) and promptly shall collect such
amounts from each applicable Seller. The Master Servicer shall deposit the
amount of such shortfall into the Custodial Account on the day of substitution,
without any reimbursement therefor. The Master Servicer shall give notice in
writing to the Trustee of such event, which notice shall be accompanied by an
Officers' Certificate as to the calculation of such shortfall and by an Opinion
of Counsel to the effect that such substitution will not cause (a) any federal
tax to be imposed on the Trust Fund, including without limitation, any federal
tax imposed on "prohibited transactions" under Section 860F(a)(1) of the Code or
on "contributions after the startup date" under Section 860G(d)(1) of the Code
or (b) any portion of the Trust Fund to fail to qualify as a REMIC at any time
that any Certificate is outstanding.
It is understood and agreed that the obligation of the Seller, to cure
such breach or purchase (or to substitute for) such Mortgage Loan 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. If the Master Servicer is the Seller, then the Trustee
shall also have the right to give the notification and require the purchase or
substitution provided for in the second preceding paragraph in the event of such
a breach of a representation or warranty made by the Seller in the Mortgage Loan
Purchase Agreement. In connection with the purchase of or substitution for any
such Mortgage Loan by the Seller, the Trustee shall assign to the Seller all of
the right, title and interest in respect of the Mortgage Loan Purchase Agreement
applicable to such Mortgage Loan.
Section 2.05. Issuance of Certificates Evidencing Interests in the
Trust Fund.
The Trustee acknowledges the assignment to it of the Mortgage Loans and
the delivery of the Mortgage Files to it, or any Custodian on its behalf,
subject to any exceptions noted, together with the assignment to it of all other
assets included in the Trust Fund,
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receipt of which is hereby acknowledged. Concurrently with such delivery and in
exchange therefor, the Trustee, pursuant to the written request of the Depositor
executed by an officer of the Depositor has executed and caused to be
authenticated and delivered to or upon the order of the Depositor the
Certificates in authorized denominations which evidence ownership of the Trust
Fund. The rights of the Certificateholders to receive distributions from the
proceeds of the Trust Fund in respect of the Certificates, and all ownership
interests of the Certificateholders in such distributions, shall be as set forth
in this Agreement.
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ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
Section 3.01. Master Servicer to Act as Servicer.
(a) The Master Servicer shall service and administer the Mortgage Loans
in accordance with the terms of this Agreement and the respective Mortgage Loans
and shall have full power and authority, acting alone or through Subservicers as
provided in Section 3.02, to do any and all things which it may deem necessary
or desirable in connection with such servicing and administration. Without
limiting the generality of the foregoing, the Master Servicer in its own name or
in the name of a Subservicer is hereby authorized and empowered by the Trustee
when the Master Servicer or the Subservicer, as the case may be, believes it
appropriate in its best judgment, to execute and deliver, on behalf of the
Certificateholders and the Trustee or any of them, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge, or of
consent to assumption or modification in connection with a proposed conveyance,
or of assignment of any Mortgage and Mortgage Note in connection with the
repurchase of a Mortgage Loan and all other comparable instruments, or with
respect to the modification or re-recording of a Mortgage for the purpose of
correcting the Mortgage, the subordination of the lien of the Mortgage in favor
of a public utility company or government agency or unit with powers of eminent
domain, the taking of a deed in lieu of foreclosure, the completion of judicial
or non-judicial foreclosure, the conveyance of a Mortgaged Property to an
Insurer, the acquisition of any property acquired by foreclosure or deed in lieu
of foreclosure, or the management, marketing and conveyance of any property
acquired by foreclosure or deed in lieu of foreclosure with respect to the
Mortgage Loans and with respect to the Mortgaged Properties. Notwithstanding the
foregoing, subject to Section 3.07(a), the Master Servicer shall not permit any
modification with respect to any Mortgage Loan that would both constitute a sale
or exchange of such Mortgage Loan within the meaning of Section 1001 of the Code
and any proposed, temporary or final regulations promulgated thereunder (other
than in connection with a proposed conveyance or assumption of such Mortgage
Loan that is treated as a Principal Prepayment in Full pursuant to Section
3.13(d) hereof) and causing the Trust Fund to fail to qualify as such under the
Code. The Trustee shall furnish the Master Servicer with any powers of attorney
and other documents necessary or appropriate to enable the Master Servicer to
service and administer the Mortgage Loans. The Trustee shall not be liable for
any action taken by the Master Servicer or any Subservicer pursuant to such
powers of attorney.
(b) All costs incurred by the Master Servicer or by Subservicers in
effecting the timely payment of taxes and assessments on the properties subject
to the Mortgage Loans shall not, for the purpose of calculating monthly
distributions to Certificateholders, be added to the amount owing under the
related Mortgage Loans, notwithstanding that the terms of such Mortgage Loan so
permit, and such costs shall be recoverable to the extent permitted by Section
3.10(a)(ii).
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Section 3.02. Subservicing Agreements Between Master Servicer and
Subservicers; Enforcement of Subservicers' and Sellers'
Obligations.
(a) The Master Servicer may continue in effect Subservicing Agreements
entered into by Sellers and Subservicers prior to the execution and delivery of
this Agreement, and may enter into new Subservicing Agreements with
Subservicers, for the servicing and administration of all or some of the
Mortgage Loans. Each Subservicer of a Mortgage Loan shall be entitled to receive
and retain, as provided in the related Subservicing Agreement and in Section
3.07, the related Subservicing Fee from payments of interest received on such
Mortgage Loan after payment of all amounts required to be remitted to the Master
Servicer in respect of such Mortgage Loan. For any Mortgage Loan that is a
Nonsubserviced Mortgage Loan, the Master Servicer shall be entitled to receive
and retain an amount equal to the Subservicing Fee from payments of interest.
Unless the context otherwise requires, references in this Agreement to actions
taken or to be taken by the Master Servicer in servicing the Mortgage Loans
include actions taken or to be taken by a Subservicer on behalf of the Master
Servicer. Each Subservicing Agreement will be upon such terms and conditions as
are not inconsistent with this Agreement and as the Master Servicer and the
Subservicer have agreed. With the approval of the Master Servicer, a Subservicer
may delegate its servicing obligations to third-party servicers, but such
Subservicer will remain obligated under the related Subservicing Agreement.
(b) As part of its servicing activities hereunder, the Master Servicer,
for the benefit of the Trustee and the Certificateholders, shall use its best
reasonable efforts to enforce the obligations of each Subservicer under the
related Subservicing Agreement and of each Seller under the related Mortgage
Loan Purchase Agreement, to the extent that the non-performance of any such
obligation would have a material and adverse effect on a Mortgage Loan,
including, without limitation, the obligation to purchase a Mortgage Loan on
account of defective documentation, as described in Section 2.02, or on account
of a breach of a representation or warranty, as described in Section 2.04. Such
enforcement, including, without limitation, the legal prosecution of claims,
termination of Subservicing Agreements or Mortgage Loan Purchase Agreements, as
appropriate, and the pursuit of other appropriate remedies, shall be in such
form and carried out to such an extent and at such time as the Master Servicer
would employ in its good faith business judgment and which are normal and usual
in its general mortgage servicing activities. The Master Servicer shall pay the
costs of such enforcement at its own expense, and shall be reimbursed therefor
only (i) from a general recovery resulting from such enforcement to the extent,
if any, that such recovery exceeds all amounts due in respect of the related
Mortgage Loan or (ii) from a specific recovery of costs, expenses or attorneys
fees against the party against whom such enforcement is directed.
Section 3.03. Successor Subservicers.
The Master Servicer shall be entitled to terminate any Subservicing
Agreement that may exist in accordance with the terms and conditions of such
Subservicing Agreement and without any limitation by virtue of this Agreement;
provided, however, that in the event of termination of any Subservicing
Agreement by the Master Servicer or the Subservicer, the
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Master Servicer shall either act as servicer of the related Mortgage Loan or
enter into a Subservicing Agreement with a successor Subservicer which will be
bound by the terms of the related Subservicing Agreement. If the Master Servicer
or any Affiliate of the Master Servicer acts as servicer, it will not assume
liability for the representations and warranties of the Subservicer which it
replaces. If the Master Servicer enters into a Subservicing Agreement with a
successor Subservicer, the Master Servicer shall use reasonable efforts to have
the successor Subservicer assume liability for the representations and
warranties made by the terminated Subservicer in respect of the related Mortgage
Loans and, in the event of any such assumption by the successor Subservicer, the
Master Servicer may, in the exercise of its business judgment, release the
terminated Subservicer from liability for such representations and warranties.
Section 3.04. Liability of the Master Servicer.
Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Master
Servicer or a Subservicer or reference to actions taken through a Subservicer or
otherwise, the Master Servicer shall remain obligated and liable to the Trustee
and Certificateholders for the servicing and administering of the Mortgage Loans
in accordance with the provisions of Section 3.01 without diminution of such
obligation or liability by virtue of such Subservicing Agreements or
arrangements or by virtue of indemnification from the Subservicer or the
Depositor and to the same extent and under the same terms and conditions as if
the Master Servicer alone were servicing and administering the Mortgage Loans.
The Master Servicer shall be entitled to enter into any agreement with a
Subservicer or Seller for indemnification of the Master Servicer and nothing
contained in this Agreement shall be deemed to limit or modify such
indemnification.
Section 3.05. No Contractual Relationship Between Subservicer and
Trustee or Certificateholders.
Any Subservicing Agreement that may be entered into and any other
transactions or services relating to the Mortgage Loans involving a Subservicer
in its capacity as such and not as an originator shall be deemed to be between
the Subservicer and the Master Servicer alone and the Trustee and
Certificateholders shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to the Subservicer in
its capacity as such except as set forth in Section 3.06. The foregoing
provision shall not in any way limit a Subservicer's obligation to cure an
omission or defect or to repurchase a Mortgage Loan as referred to in Section
2.02 hereof.
Section 3.06. Assumption or Termination of Subservicing Agreements by
Trustee.
(a) In the event the Master Servicer shall for any reason no longer be
the master servicer (including by reason of an Event of Default), the Trustee,
its designee or its successor shall thereupon assume all of the rights and
obligations of the Master Servicer under each Subservicing Agreement that may
have been entered into. The Trustee, its designee or the successor servicer for
the Trustee shall be deemed to have assumed all of the
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Master Servicer's interest therein and to have replaced the Master Servicer as a
party to the Subservicing Agreement to the same extent as if the Subservicing
Agreement had been assigned to the assuming party except that the Master
Servicer shall not thereby be relieved of any liability or obligations under the
Subservicing Agreement.
(b) The Master Servicer shall, upon request of the Trustee but at the
expense of the Master Servicer, deliver to the assuming party all documents and
records relating to each Subservicing Agreement and the Mortgage Loans then
being serviced and an accounting of amounts collected and held by it and
otherwise use its best efforts to effect the orderly and efficient transfer of
each Subservicing Agreement to the assuming party.
Section 3.07. Collection of Certain Mortgage Loan Payments; Deposits to
Custodial Account.
(a) The Master Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans, and
shall, to the extent such procedures shall be consistent with this Agreement and
the terms and provisions of any related Primary Insurance Policy, follow such
collection procedures as it would employ in its good faith business judgment and
which are normal and usual in its general mortgage servicing activities.
Consistent with the foregoing, the Master Servicer may in its discretion (i)
waive any late payment charge or any prepayment charge or penalty interest in
connection with the prepayment of a Mortgage Loan and (ii) extend the Due Date
for payments due on a Mortgage Loan; provided, however, that the Master Servicer
shall first determine that any such waiver or extension will not impair the
coverage of any related Primary Insurance Policy or materially adversely affect
the lien of the related Mortgage. Consistent with the terms of this Agreement,
the Master Servicer may also waive, modify or vary any term of any Mortgage Loan
or consent to the postponement of strict compliance with any such term or in any
manner grant indulgence to any Mortgagor if in the Master Servicer's
determination such waiver, modification, postponement or indulgence is not
materially adverse to the interests of the Certificateholders; provided,
however, that the Master Servicer may not modify materially or permit any
Subservicer to modify any Mortgage Loan, including without limitation any
modification that would change the Mortgage Rate, forgive the payment of any
principal or interest (unless in connection with the liquidation of the related
Mortgage Loan or except in connection with prepayments to the extent that such
reamortization is not inconsistent with the terms of the Mortgage Loan), or
extend the final maturity date of such Mortgage Loan, unless such Mortgage Loan
is in default or, in the judgment of the Master Servicer, such default is
reasonably foreseeable. In the event of any such arrangement, the Master
Servicer shall make timely advances on the related Mortgage Loan during the
scheduled period in accordance with the amortization schedule of such Mortgage
Loan without modification thereof by reason of such arrangements unless
otherwise agreed to by the Holders of the Classes of Certificates affected
thereby.
(b) The Master Servicer shall establish and maintain a Custodial
Account in which the Master Servicer shall deposit or cause to be deposited on a
daily basis, except as otherwise specifically provided herein, the following
payments and collections remitted by Subservicers or received by it in respect
of the Mortgage Loans subsequent to the Cut-off
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Date (other than in respect of principal and interest on the Mortgage Loans due
on or before the Cut-off Date):
(i) All payments on account of principal, including
Principal Prepayments made by Mortgagors on the Mortgage Loans and the
principal component of any Subservicer Advance or of any REO Proceeds
received in connection with an REO Property for which an REO
Disposition has occurred;
(ii) All payments on account of interest at the Adjusted
Mortgage Rate on the Mortgage Loans, including Buydown Funds, if any,
and the interest component of any Subservicer Advance or of any REO
Proceeds received in connection with an REO Property for which an REO
Disposition has occurred;
(iii) Insurance Proceeds, Credit Enhancement Collections
and Liquidation Proceeds (net of any related expenses of the
Subservicer);
(iv) All proceeds of any Mortgage Loans purchased
pursuant to Section 2.02 or 2.04 and all amounts required to be
deposited in connection with the substitution of a Qualified Substitute
Mortgage Loan pursuant to Section 2.04;
(v) Any amounts required to be deposited pursuant to
Section 3.07(c) or 3.21; and
(vi) All amounts transferred from the Certificate
Account to the Custodial Account in accordance with Section 4.02(a).
The foregoing requirements for deposit in the Custodial Account shall be
exclusive, it being understood and agreed that, without limiting the generality
of the foregoing, payments on the Mortgage Loans which are not part of the Trust
Fund (consisting of payments in respect of principal and interest on the
Mortgage Loans due on or before the Cut-off Date) and payments or collections in
the nature of prepayment charges or late payment charges or assumption fees may
but need not be deposited by the Master Servicer in the Custodial Account. In
the event any amount not required to be deposited in the Custodial Account is so
deposited, the Master Servicer may at any time withdraw such amount from the
Custodial Account, any provision herein to the contrary notwithstanding. The
Custodial Account may contain funds that belong to one or more trust funds
created for mortgage pass-through certificates of other series and may contain
other funds respecting payments on mortgage loans belonging to the Master
Servicer or serviced or master serviced by it on behalf of others.
Notwithstanding such commingling of funds, the Master Servicer shall keep
records that accurately reflect the funds on deposit in the Custodial Account
that have been identified by it as being attributable to the Mortgage Loans.
With respect to Insurance Proceeds, Liquidation Proceeds, REO Proceeds
and the proceeds of the purchase of any Mortgage Loan pursuant to Sections 2.02
and 2.04 received in any calendar month, the Master Servicer may elect to treat
such amounts as included in the Available Distribution Amount for the
Distribution Date in the month of receipt, but is
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not obligated to do so. If the Master Servicer so elects, such amounts will be
deemed to have been received (and any related Realized Loss shall be deemed to
have occurred) on the last day of the month prior to the receipt thereof.
(c) The Master Servicer shall use its best efforts to cause the
institution maintaining the Custodial Account to invest the funds in the
Custodial Account attributable to the Mortgage Loans in Permitted Investments
which shall mature not later than the Certificate Account Deposit Date next
following the date of such investment (with the exception of the Amount Held for
Future Distribution) and which shall not be sold or disposed of prior to their
maturities. All income and gain realized from any such investment shall be for
the benefit of the Master Servicer as additional servicing compensation 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 attributable to the
investment of amounts in respect of the Mortgage Loans shall be deposited in the
Custodial Account by the Master Servicer out of its own funds immediately as
realized.
(d) The Master Servicer shall give notice to the Trustee and the
Depositor of any change in the location of the Custodial Account and the
location of the Certificate Account prior to the use thereof.
Section 3.08. Subservicing Accounts; Servicing Accounts.
(a) In those cases where a Subservicer is servicing a Mortgage Loan
pursuant to a Subservicing Agreement, the Master Servicer shall cause the
Subservicer, pursuant to the Subservicing Agreement, to establish and maintain
one or more Subservicing Accounts which shall be an Eligible Account or, if such
account is not an Eligible Account, shall be otherwise acceptable to the Master
Servicer and each Rating Agency. The Subservicer will be required thereby to
deposit into the Subservicing Account on a daily basis all proceeds of Mortgage
Loans received by the Subservicer, less its Subservicing Fees and unreimbursed
advances and expenses, to the extent permitted by the Subservicing Agreement. If
the Subservicing Account is not an Eligible Account, the Master Servicer shall
be deemed to have received such monies upon receipt thereof by the Subservicer.
The Subservicer shall not be required to deposit in the Subservicing Account
payments or collections in the nature of prepayment charges or late charges or
assumption fees. On or before the date specified in the Subservicing Agreement,
but in no event later than the Determination Date, the Master Servicer shall
cause the Subservicer, pursuant to the Subservicing Agreement, to remit to the
Master Servicer for deposit in the Custodial Account all funds held in the
Subservicing Account with respect to each Mortgage Loan serviced by such
Subservicer that are required to be remitted to the Master Servicer. [The
Subservicer will also be required, pursuant to the Subservicing Agreement, to
advance on such scheduled date of remittance amounts equal to any scheduled
monthly installments of principal and interest less its Subservicing Fees on any
Mortgage Loans for which payment was not received by the Subservicer. This
obligation to advance with respect to each Mortgage Loan will continue up to and
including the first of the month following the date on which the related
Mortgaged Property is sold at a foreclosure sale or is acquired by the Trust
Fund by deed in lieu of foreclosure or otherwise.
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All such advances received by the Master Servicer shall be deposited promptly by
it in the Custodial Account.]
[(b) The Subservicer may also be required, pursuant to the Subservicing
Agreement, to remit to the Master Servicer for deposit in the Custodial Account
interest at the Adjusted Mortgage Rate on any Curtailment received by such
Subservicer in respect of a Mortgage Loan from the related Mortgagor during any
month that is to be applied by the Subservicer to reduce the unpaid principal
balance of the related Mortgage Loan as of the first day of such month, from the
date of application of such Curtailment to the first day of the following month.
Any amounts paid by a Subservicer pursuant to the preceding sentence shall be
for the benefit of the Master Servicer as additional servicing compensation and
shall be subject to its withdrawal or order from time to time pursuant to
Sections 3.10(a)(iv) and (v).]
(c) In addition to the Custodial Account and the Certificate Account,
the Master Servicer shall for any Nonsubserviced Mortgage Loan, and shall cause
the Subservicers for Subserviced Mortgage Loans to, establish and maintain one
or more Servicing Accounts and deposit and retain therein all collections from
the Mortgagors (or advances from Subservicers) for the payment of taxes,
assessments, hazard insurance premiums, Primary Insurance Policy premiums, if
applicable, or comparable items for the account of the Mortgagors. Each
Servicing Account shall satisfy the requirements for a Subservicing Account and,
to the extent acceptable to the Master Servicer, may also function as a
Subservicing Account. Withdrawals of amounts related to the Mortgage Loans from
the Servicing Accounts may be made only to effect timely payment of taxes,
assessments, hazard insurance premiums, Primary Insurance Policy premiums, if
applicable, or comparable items, to reimburse the Master Servicer or Subservicer
out of related collections for any payments made pursuant to Sections 3.11 (with
respect to the Primary Insurance Policy) and 3.12(a) (with respect to hazard
insurance), to refund to any Mortgagors any sums as may be determined to be
overages, to pay interest, if required, to Mortgagors on balances in the
Servicing Account or to clear and terminate the Servicing Account at the
termination of this Agreement in accordance with Section 9.01. As part of its
servicing duties, the Master Servicer shall, and the Subservicers will, pursuant
to the Subservicing Agreements, be required to pay to the Mortgagors interest on
funds in this account to the extent required by law.
(d) The Master Servicer shall advance the payments referred to in the
preceding subsection that are not timely paid by the Mortgagors or advanced by
the Subservicers on the date when the tax, premium or other cost for which such
payment is intended is due, but the Master Servicer shall be required so to
advance only to the extent that such advances, in the good faith judgment of the
Master Servicer, will be recoverable by the Master Servicer out of Insurance
Proceeds, Liquidation Proceeds or otherwise.
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Section 3.09. Access to Certain Documentation and Information Regarding
the Mortgage Loans.
In the event that compliance with this Section 3.09 shall make any
Class of Certificates legal for investment by federally insured savings and loan
associations, the Master Servicer shall provide, or cause the Subservicers to
provide, to the Trustee, the Office of Thrift Supervision or the FDIC and the
supervisory agents and examiners thereof access to the documentation regarding
the Mortgage Loans required by applicable regulations of the Office of Thrift
Supervision, such access being afforded without charge but only upon reasonable
request and during normal business hours at the offices designated by the Master
Servicer. The Master Servicer shall permit such representatives to photocopy any
such documentation and shall provide equipment for that purpose at a charge
reasonably approximating the cost of such photocopying to the Master Servicer.
Section 3.10. Permitted Withdrawals from the Custodial Account.
(a) The Master Servicer may, from time to time as provided herein, make
withdrawals from the Custodial Account of amounts on deposit therein pursuant to
Section 3.07 that are attributable to the Mortgage Loans for the following
purposes:
(i) to reimburse itself or the related Subservicer for
previously unreimbursed advances or expenses made pursuant to Sections
3.01, 3.08, 3.11, 3.12(a), 3.14 and 4.04 or otherwise reimbursable
pursuant to the terms of this Agreement, such withdrawal right being
limited to amounts received on particular Mortgage Loans (including,
for this purpose, REO Proceeds, Insurance Proceeds, Liquidation
Proceeds and proceeds from the purchase of a Mortgage Loan pursuant to
Section 2.02 or 2.04) which represent (A) Late Collections of Monthly
Payments for which any such advance was made in the case of Subservicer
Advances or Advances pursuant to Section 4.04 and (B) late recoveries
of the payments for which such advances were made in the case of
Servicing Advances;
(ii) to make deposits into the Certificate Account in
the amounts and in the manner provided for in Section 4.01;
(iii) to pay to itself or the related Subservicer (if not
previously retained by such Subservicer) out of each payment received
by the Master Servicer on account of interest on a Mortgage Loan as
contemplated by Sections 3.14 and 3.16, an amount equal to that
remaining portion of any such payment as to interest (but not in excess
of the Servicing Fee and the Subservicing Fee, if not previously
retained) which, when deducted, will result in the remaining amount of
such interest being interest at the Net Mortgage Rate on the amount
specified in the amortization schedule of the related Mortgage Loan as
the principal balance thereof at the beginning of the period respecting
which such interest was paid after giving effect to any previous
Curtailments;
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(iv) to pay to itself as additional servicing
compensation any interest or investment income earned on funds
deposited in the Custodial Account that it is entitled to withdraw
pursuant to Section 3.07(c);
(v) to pay to itself as additional servicing
compensation any Foreclosure Profits, and any amounts remitted by
Subservicers as interest in respect of Curtailments pursuant to Section
3.08(b);
(vi) to pay to itself, a Subservicer, a Seller, the
Depositor or any other appropriate Person, as the case may be, with
respect to each Mortgage Loan or property acquired in respect thereof
that has been purchased or otherwise transferred pursuant to Section
2.02, 2.04 or 9.01, all amounts received thereon and not required to be
distributed to Certificateholders as of the date on which the related
Stated Principal Balance or Purchase Price is determined;
(vii) to reimburse itself or any related Subservicer for
any Nonrecoverable Advance or Advances in the manner and to the extent
provided in subsection (c) below or any Advance reimbursable to the
Master Servicer pursuant to Section 4.02(a);
(viii) to reimburse itself or the Depositor for expenses
incurred by and reimbursable to it or the Depositor pursuant to
Sections 3.13, 3.14(c), 6.03, 10.01 or otherwise;
(ix) to reimburse itself for amounts expended by it (a)
pursuant to Section 3.14 in good faith in connection with the
restoration of property damaged by an Uninsured Cause, and (b) in
connection with the liquidation of a Mortgage Loan or disposition of an
REO Property to the extent not otherwise reimbursed pursuant to clause
(ii) or (viii) above; and
(x) to withdraw any amount deposited in the Custodial
Account that was not required to be deposited therein pursuant to
Section 3.07.
(b) Since, in connection with withdrawals pursuant to clauses (ii),
(iii), (v) and (vi), the Master Servicer's entitlement thereto is limited to
collections or other recoveries on the related Mortgage Loan, the Master
Servicer shall keep and maintain separate accounting, on a Mortgage Loan by
Mortgage Loan basis, for the purpose of justifying any withdrawal from the
Custodial Account pursuant to such clauses.
(c) The Master Servicer shall be entitled to reimburse itself or the
related Subservicer for any advance made in respect of a Mortgage Loan that the
Master Servicer determines to be a Nonrecoverable Advance by withdrawal from the
Custodial Account of amounts on deposit therein attributable to the Mortgage
Loans on any Certificate Account Deposit Date succeeding the date of such
determination. Such right of reimbursement in respect of a Nonrecoverable
Advance on any such Certificate Account Deposit Date shall be limited to an
amount not exceeding the portion of such advance previously paid to
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Certificateholders (and not theretofore reimbursed to the Master Servicer or the
related Subservicer).
Section 3.11. Maintenance of the Primary Insurance Policies;
Collections Thereunder.
(a) The Master Servicer shall not take, or permit any Subservicer to
take, any action which would result in non-coverage under any applicable Primary
Insurance Policy of any loss which, but for the actions of the Master Servicer
or Subservicer, would have been covered thereunder. To the extent coverage is
available, the Master Servicer shall keep or cause to be kept in full force and
effect each such Primary Insurance Policy until the principal balance of the
related Mortgage Loan secured by a Mortgaged Property is reduced to 80% or less
of the Appraised Value in the case of such a Mortgage Loan having a Loan-
to-Value Ratio at origination in excess of 80%, provided that such Primary
Insurance Policy was in place as of the Cut-off Date and the Depositor had
knowledge of such Primary Insurance Policy. In the event that the Depositor
gains knowledge that as of the Closing Date, a Mortgage Loan had a Loan-to-Value
Ratio at origination in excess of 80% and is not the subject of a Primary
Insurance Policy and that such Mortgage Loan has a current Loan- to-Value Ratio
in excess of 80% then the Master Servicer shall use its reasonable efforts to
obtain and maintain a Primary Insurance Policy to the extent that such a policy
is obtainable at a reasonable price. The Master Servicer shall not cancel or
refuse to renew any such Primary Insurance Policy applicable to a Nonsubserviced
Mortgage Loan, or consent to any Subservicer canceling or refusing to renew any
such Primary Insurance Policy applicable to a Mortgage Loan subserviced by it,
that is in effect at the date of the initial issuance of the Certificates and is
required to be kept in force hereunder unless the replacement Primary Insurance
Policy for such canceled or non-renewed policy is maintained with an insurer
whose claims-paying ability is acceptable to each Rating Agency for mortgage
pass-through certificates having a rating equal to or better than the lower of
the then-current rating or the rating assigned to the Certificates as of the
Closing Date by such Rating Agency.
(b) In connection with its activities as administrator and servicer of
the Mortgage Loans, the Master Servicer agrees to present or to cause the
related Subservicer to present, on behalf of the Master Servicer, the
Subservicer, if any, the Trustee and Certificateholders, claims to the Insurer
under any Primary Insurance Policies, in a timely manner in accordance with such
policies, and, in this regard, to take or cause to be taken such reasonable
action as shall be necessary to permit recovery under any Primary Insurance
Policies respecting defaulted Mortgage Loans. Pursuant to Section 3.07, any
Insurance Proceeds collected by or remitted to the Master Servicer under any
Primary Insurance Policies shall be deposited in the Custodial Account, subject
to withdrawal pursuant to Section 3.10.
Section 3.12. Maintenance of Fire Insurance and Omissions and Fidelity
Coverage.
(a) The Master Servicer shall cause to be maintained for each Mortgage
Loan fire insurance with extended coverage in an amount which is equal to the
lesser of the principal balance owing on such Mortgage Loan or 100 percent of
the insurable value of the improvements; provided, however, that such coverage
may not be less than the minimum amount required to fully compensate for any
loss or damage on a replacement cost basis. To
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the extent it may do so without breaching the related Subservicing Agreement,
the Master Servicer shall replace any Subservicer that does not cause such
insurance, to the extent it is available, to be maintained. The Master Servicer
shall also cause to be maintained on property acquired upon foreclosure, or deed
in lieu of foreclosure, of any Mortgage Loan, fire insurance with extended
coverage in an amount which is at least equal to the amount necessary to avoid
the application of any co-insurance clause contained in the related hazard
insurance policy. Pursuant to Section 3.07, any amounts collected by the Master
Servicer under any such policies (other than amounts to be applied to the
restoration or repair of the related Mortgaged Property or property thus
acquired or amounts released to the Mortgagor in accordance with the Master
Servicer's normal servicing procedures) shall be deposited in the Custodial
Account, subject to withdrawal pursuant to Section 3.10. Any cost incurred by
the Master Servicer in maintaining any such insurance shall not, for the purpose
of calculating monthly distributions to Certificateholders, be added to the
amount owing under the Mortgage Loan, notwithstanding that the terms of the
Mortgage Loan so permit. Such costs shall be recoverable by the Master Servicer
out of related late payments by the Mortgagor or out of Insurance Proceeds and
Liquidation Proceeds to the extent permitted by Section 3.10. It is understood
and agreed that no earthquake or other additional insurance is to be required of
any Mortgagor or maintained on property acquired in respect of a Mortgage Loan
other than pursuant to such applicable laws and regulations as shall at any time
be in force and as shall require such additional insurance. When the
improvements securing a Mortgage Loan are located at the time of origination of
such Mortgage Loan in a federally designated special flood hazard area, the
Master Servicer shall cause flood insurance (to the extent available) to be
maintained in respect thereof. Such flood insurance shall be in an amount equal
to the lesser of (i) the amount required to compensate for any loss or damage to
the Mortgaged Property on a replacement cost basis and (ii) the maximum amount
of such insurance available for the related Mortgaged Property under the
national flood insurance program (assuming that the area in which such Mortgaged
Property is located is participating in such program).
In the event that the Master Servicer shall obtain and maintain a
blanket fire insurance policy with extended coverage insuring against hazard
losses on all of the Mortgage Loans, it shall conclusively be deemed to have
satisfied its obligations as set forth in the first sentence of this Section
3.12(a), it being understood and agreed that such policy may contain a
deductible clause, in which case the Master Servicer shall, in the event that
there shall not have been maintained on the related Mortgaged Property a policy
complying with the first sentence of this Section 3.12(a) and there shall have
been a loss which would have been covered by such policy, deposit in the
Certificate Account the amount not otherwise payable under the blanket policy
because of such deductible clause. Any such deposit by the Master Servicer shall
be made on the Certificate Account Deposit Date next preceding the Distribution
Date which occurs in the month following the month in which payments under any
such policy would have been deposited in the Custodial Account. In connection
with its activities as administrator and servicer of the Mortgage Loans, the
Master Servicer agrees to present, on behalf of itself, the Trustee and
Certificateholders, claims under any such blanket policy.
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(b) The Master Servicer shall obtain and maintain at its own expense
and keep in full force and effect throughout the term of this Agreement a
blanket fidelity bond and an errors and omissions insurance policy covering the
Master Servicer's officers and employees and other persons acting on behalf of
the Master Servicer in connection with its activities under this Agreement. The
amount of coverage shall be at least equal to the coverage that would be
required by FNMA or FHLMC, whichever is greater, with respect to the Master
Servicer if the Master Servicer were servicing and administering the Mortgage
Loans for FNMA or FHLMC. In the event that any such bond or policy ceases to be
in effect, the Master Servicer shall obtain a comparable replacement bond or
policy from an issuer or insurer acceptable to the Depositor. Coverage of the
Master Servicer under a policy or bond obtained by an Affiliate of the Master
Servicer and providing the coverage required by this Section 3.12(b) shall
satisfy the requirements of this Section 3.12(b).
Section 3.13. Enforcement of Due-on-Sale Clauses; Assumption and
Modification Agreements; Certain Assignments.
(a) When any Mortgaged Property is conveyed by the Mortgagor, the
Master Servicer or Subservicer, to the extent it has knowledge of such
conveyance, shall enforce any due-on-sale clause contained in any Mortgage Note
or Mortgage, to the extent permitted under applicable law and governmental
regulations, but only to the extent that such enforcement will not adversely
affect or jeopardize coverage under any Required Insurance Policy.
Notwithstanding the foregoing:
(i) the Master Servicer shall not be deemed to be in
default under this Section 3.13(a) by reason of any transfer or
assumption which the Master Servicer is restricted by law from
preventing; and
(ii) if the Master Servicer determines that it is
reasonably likely that any Mortgagor will bring, or if any Mortgagor
does bring, legal action to declare invalid or otherwise avoid
enforcement of a due-on-sale clause contained in any Mortgage Note or
Mortgage, the Master Servicer shall not be required to enforce the
due-on-sale clause or to contest such action.
(b) Subject to the Master Servicer's duty to enforce any due-on-sale
clause to the extent set forth in Section 3.13(a), in any case in which a
Mortgaged Property is to be conveyed to a Person by a Mortgagor, and such Person
is to enter into an assumption or modification agreement or supplement to the
Mortgage Note or Mortgage which requires the signature of the Trustee, or if an
instrument of release signed by the Trustee is required releasing the Mortgagor
from liability on the Mortgage Loan, the Master Servicer is authorized, subject
to the requirements of the sentence next following, to execute and deliver, on
behalf of the Trustee, the assumption agreement with the Person to whom the
Mortgaged Property is to be conveyed and such modification agreement or
supplement to the Mortgage Note or Mortgage or other instruments as are
reasonable or necessary to carry out the terms of the Mortgage Note or Mortgage
or otherwise to comply with any applicable laws regarding assumptions or the
transfer of the Mortgaged Property to such Person; provided, however, none of
such terms and requirements shall both constitute a "significant
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modification" effecting an exchange or reissuance of such Mortgage Loan under
the Code (or final, temporary or proposed Treasury Regulations promulgated
thereunder) and cause the Trust Fund to fail to qualify as a REMIC under the
Code. The Master Servicer shall execute and deliver such documents only if it
reasonably determines that (i) its execution and delivery thereof will not
conflict with or violate any terms of this Agreement or cause the unpaid balance
and interest on the Mortgage Loan to be uncollectible in whole or in part, (ii)
any required consents of insurers under any Required Insurance Policies have
been obtained and (iii) subsequent to the closing of the transaction involving
the assumption or transfer (A) the Mortgage Loan will continue to be secured by
a first mortgage lien pursuant to the terms of the Mortgage, (B) such
transaction will not adversely affect the coverage under any Required Insurance
Policies, [(C) the Mortgage Loan will fully amortize over the remaining term
thereof,] (D) no material term of the Mortgage Loan (including the interest rate
on the Mortgage Loan) will be altered nor will the term of the Mortgage Loan be
changed and (E) if the seller/transferor of the Mortgaged Property is to be
released from liability on the Mortgage Loan, such release will not (based on
the Master Servicer's or Subservicer's good faith determination) adversely
affect the collectability of the Mortgage Loan. Upon receipt of appropriate
instructions from the Master Servicer in accordance with the foregoing, the
Trustee shall execute any necessary instruments for such assumption or
substitution of liability as directed by the Master Servicer. Upon the closing
of the transactions contemplated by such documents, the Master Servicer shall
cause the originals or true and correct copies of the assumption agreement, the
release (if any), or the modification or supplement to the Mortgage Note or
Mortgage to be delivered to the Trustee or the Custodian and deposited with the
Mortgage File for such Mortgage Loan. Any fee collected by the Master Servicer
or such related Subservicer for entering into an assumption or substitution of
liability agreement will be retained by the Master Servicer or such Subservicer
as additional servicing compensation.
(c) The Master Servicer or the related Subservicer, as the case may be,
shall be entitled to approve a request from a Mortgagor for a partial release of
the related Mortgaged Property, the granting of an easement thereon in favor of
another Person, any alteration or demolition of the related Mortgaged Property
or other similar matters if it has determined, exercising its good faith
business judgment in the same manner as it would if it were the owner of the
related Mortgage Loan, that the security for, and the timely and full
collectability of, such Mortgage Loan would not be adversely affected thereby
and that the Trust Fund would not fail to continue to qualify as a REMIC under
the Code as a result thereof. Any fee collected by the Master Servicer or the
related Subservicer for processing such a request will be retained by the Master
Servicer or such Subservicer as additional servicing compensation.
(d) Subject to any other applicable terms and conditions of this
Agreement, the Trustee and Master Servicer shall be entitled to approve an
assignment in lieu of satisfaction with respect to any Mortgage Loan, provided
the obligee with respect to such Mortgage Loan following such proposed
assignment provides the Trustee and Master Servicer with a "Lender Certification
for Assignment of Mortgage Loan" in the form attached hereto as Exhibit L, in
form and substance satisfactory to the Trustee and Master Servicer, providing
the following: (i) that the Mortgage Loan is secured by Mortgaged Property
located in a jurisdiction in
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which an assignment in lieu of satisfaction is required to preserve lien
priority, minimize or avoid mortgage recording taxes or otherwise comply with,
or facilitate a refinancing under, the laws of such jurisdiction; (ii) that the
substance of the assignment is, and is intended to be, a refinancing of such
Mortgage Loan and that the form of the transaction is solely to comply with, or
facilitate the transaction under, such local laws; (iii) that the Mortgage Loan
following the proposed assignment will have a rate of interest at least 0.25
percent below or above the rate of interest on such Mortgage Loan prior to such
proposed assignment; and (iv) that such assignment is at the request of the
borrower under the related Mortgage Loan. Upon approval of an assignment in lieu
of satisfaction with respect to any Mortgage Loan, the Master Servicer shall
receive cash in an amount equal to the unpaid principal balance of and accrued
interest on such Mortgage Loan and the Master Servicer shall treat such amount
as a Principal Prepayment in Full with respect to such Mortgage Loan for all
purposes hereof.
Section 3.14. Realization Upon Defaulted Mortgage Loans.
(a) The Master Servicer shall foreclose upon or otherwise comparably
convert (which may include an REO Acquisition) the ownership of properties
securing such of the Mortgage Loans as come into and continue in default and as
to which no satisfactory arrangements can be made for collection of delinquent
payments pursuant to Section 3.07. In connection with such foreclosure or other
conversion, the Master Servicer shall, consistent with Section 3.11, follow such
practices and procedures as it shall deem necessary or advisable, as shall be
normal and usual in its general mortgage servicing activities; provided that the
Master Servicer shall not be liable in any respect hereunder if the Master
Servicer is acting in connection with any such foreclosure or other conversion
in a manner that is consistent with the provisions of this Agreement. The Master
Servicer, however, shall not be required to expend its own funds in connection
with any foreclosure, or attempted foreclosure which is not completed, or
towards the restoration of any property unless it shall determine (i) that such
restoration and/or foreclosure will increase the proceeds of liquidation of the
Mortgage Loan to Holders of Certificates of one or more Classes after
reimbursement to itself for such expenses and (ii) that such expenses will be
recoverable to it through Liquidation Proceeds, Insurance Proceeds, or REO
Proceeds (respecting which it shall have priority for purposes of withdrawals
from the Custodial Account pursuant to Section 3.10, whether or not such
expenses are actually recoverable from related Liquidation Proceeds, Insurance
Proceeds or REO Proceeds). In the event of a determination by the Master
Servicer pursuant to this Section 3.14(a), the Master Servicer shall be entitled
to reimbursement of its funds so expended pursuant to Section 3.10. Concurrently
with the foregoing, the Master Servicer may pursue any remedies that may be
available in connection with a breach of a representation and warranty with
respect to any such Mortgage Loan in accordance with Section 2.04. However, the
Master Servicer is not required to continue to pursue both foreclosure (or
similar remedies) with respect to the Mortgage Loans and remedies in connection
with a breach of a representation and warranty if the Master Servicer determines
in its reasonable discretion that one such remedy is more likely to result in a
greater recovery as to the Mortgage Loan. Upon the occurrence of a Cash
Liquidation or REO Disposition, following the deposit in the Custodial Account
of all Insurance Proceeds, Liquidation Proceeds and other payments and
recoveries referred to in the definition of
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"Cash Liquidation" or "REO Disposition," as applicable, upon receipt by the
Trustee of written notification of such deposit signed by a Servicing Officer,
the Trustee or any Custodian, as the case may be, shall release to the Master
Servicer the related Mortgage File and the Trustee shall execute and deliver
such instruments of transfer or assignment prepared by the Master Servicer, in
each case without recourse, as shall be necessary to vest in the Master Servicer
or its designee, as the case may be, the related Mortgage Loan, and thereafter
such Mortgage Loan shall not be part of the Trust Fund. Notwithstanding the
foregoing or any other provision of this Agreement, in the Master Servicer's
sole discretion with respect to any defaulted Mortgage Loan or REO Property as
to either of the following provisions, (i) a Cash Liquidation or REO Disposition
may be deemed to have occurred if substantially all amounts expected by the
Master Servicer to be received in connection with the related defaulted Mortgage
Loan or REO Property have been received, and (ii) for purposes of determining
the amount of any Liquidation Proceeds, Insurance Proceeds, REO Proceeds or any
other unscheduled collections or the amount of any Realized Loss, the Master
Servicer may take into account minimal amounts of additional receipts expected
to be received or any estimated additional liquidation expenses expected to be
incurred in connection with the related defaulted Mortgage Loan or REO Property.
(b) In the event that title to any Mortgaged Property is acquired by
the Trust Fund as an REO Property by foreclosure or by deed in lieu of
foreclosure, the deed or certificate of sale shall be issued to the Trustee or
to its nominee on behalf of Certificateholders. Notwithstanding any such
acquisition of title and cancellation of the related Mortgage Loan, such REO
Property shall (except as otherwise expressly provided herein) be considered to
be an Outstanding Mortgage Loan held in the Trust Fund until such time as the
REO Property shall be sold. Consistent with the foregoing for purposes of all
calculations hereunder so long as such REO Property shall be considered to be an
Outstanding Mortgage Loan it shall be assumed that, notwithstanding that the
indebtedness evidenced by the related Mortgage Note shall have been discharged,
such Mortgage Note and the related amortization schedule in effect at the time
of any such acquisition of title (after giving effect to any previous
Curtailments and before any adjustment thereto by reason of any bankruptcy or
similar proceeding or any moratorium or similar waiver or grace period) remain
in effect.
(c) In the event that the Trust Fund acquires any REO Property as
aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, the Master Servicer shall dispose of such REO Property within two
years after its acquisition by the Trust Fund for purposes of Section 860G(a)(8)
of the Code or, at the expense of the Trust Fund, request, more than 60 days
before the day on which the two-year grace period would otherwise expire, an
extension of the two-year grace period unless the Master Servicer obtains for
the Trustee an Opinion of Counsel, addressed to the Trustee and the Master
Servicer, to the effect that the holding by the Trust Fund of such REO Property
subsequent to such two-year period will not result in the imposition of taxes on
"prohibited transactions" as defined in Section 860F of the Code or cause the
Trust Fund to fail to qualify as a REMIC at any time that any Certificates are
outstanding, in which case the Trust Fund may continue to hold such REO Property
(subject to any conditions contained in such Opinion of Counsel). The Master
Servicer shall be entitled to be reimbursed from the Custodial Account for any
costs incurred in obtaining such Opinion of Counsel, as provided in Section
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3.10. Notwithstanding any other provision of this Agreement, no REO Property
acquired by the Trust Fund shall be rented (or allowed to continue to be rented)
or otherwise used by or on behalf of the Trust Fund in such a manner or pursuant
to any terms that would (i) cause such REO Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code or
(ii) subject the Trust Fund to the imposition of any federal income taxes on the
income earned from such REO Property, including any taxes imposed by reason of
Section 860G(c) of the Code, unless the Master Servicer has agreed to indemnify
and hold harmless the Trust Fund with respect to the imposition of any such
taxes.
(d) The proceeds of any Cash Liquidation, REO Disposition or purchase
or repurchase of any Mortgage Loan pursuant to the terms of this Agreement, as
well as any recovery resulting from a collection of Liquidation Proceeds,
Insurance Proceeds or REO Proceeds, will be applied in the following order of
priority: first, to reimburse the Master Servicer or the related Subservicer in
accordance with Section 3.10(a)(ii); second, to the Certificateholders to the
extent of accrued and unpaid interest on the Mortgage Loan, and any related REO
Imputed Interest, at the Net Mortgage Rate to the Due Date prior to the
Distribution Date on which such amounts are to be distributed; third, to the
Certificateholders as a recovery of principal on the Mortgage Loan (or REO
Property); fourth, to all Servicing Fees and Subservicing Fees payable therefrom
(and the Master Servicer and the Subservicer shall have no claims for any
deficiencies with respect to such fees which result from the foregoing
allocation); and fifth, to Foreclosure Profits.
Section 3.15. Trustee to Cooperate; Release of Mortgage Files.
(a) Upon becoming aware of the payment in full of any Mortgage Loan, or
upon 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
will immediately notify the Trustee (if it holds the related Mortgage File) or
the Custodian by a certification of a Servicing Officer (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 Custodial Account pursuant to Section 3.07 have been or will be so
deposited), substantially in one of the forms attached hereto as Exhibit G
requesting delivery to it of the Mortgage File. Upon receipt of such
certification and request, the Trustee shall promptly release, or cause the
Custodian to release, the related Mortgage File to the Master Servicer. The
Master Servicer is authorized to execute and deliver to the Mortgagor the
request for reconveyance, deed of reconveyance or release or satisfaction of
mortgage or such instrument releasing the lien of the Mortgage, together with
the Mortgage Note with, as appropriate, written evidence of cancellation
thereon. No expenses incurred in connection with any instrument of satisfaction
or deed of reconveyance shall be chargeable to the Custodial Account or the
Certificate Account.
(b) From time to time as is appropriate for the servicing or
foreclosure of any Mortgage Loan, the Master Servicer shall deliver to the
Trustee (if it holds the related Mortgage File) or the Custodian, with a copy to
the Trustee, a certificate of a Servicing Officer substantially in one of the
forms attached as Exhibit G hereto, requesting that possession of all, or any
document constituting part of, the Mortgage File be released to the
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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 under any Required Insurance Policy. Upon receipt of the
foregoing, the Trustee shall deliver, or cause the Custodian to deliver, the
Mortgage File or any document therein to the Master Servicer. The Master
Servicer shall cause each Mortgage File or any document therein so released to
be returned to the Trustee, or the Custodian as agent for the Trustee when the
need therefor by the Master Servicer no longer exists, unless (i) the Mortgage
Loan has been liquidated and the Liquidation Proceeds relating to the Mortgage
Loan have been deposited in the Custodial Account or (ii) the Mortgage File or
such document has been delivered directly or through a Subservicer 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 directly or through a Subservicer to the
Trustee a certificate of a Servicing Officer certifying as to the name and
address of the Person to which such Mortgage File or such document was delivered
and the purpose or purposes of such delivery. In the event of the liquidation of
a Mortgage Loan, the Trustee shall deliver the Request for Release with respect
thereto to the Master Servicer upon deposit of the related Liquidation Proceeds
in the Custodial Account.
(c) The Trustee or the Master Servicer on the Trustee's behalf shall
execute and deliver to the Master Servicer, if necessary, any court pleadings,
requests for trustee's sale or other documents necessary to the foreclosure or
trustee's sale in respect of a Mortgaged Property or to any legal action brought
to obtain judgment against any Mortgagor on the Mortgage Note or Mortgage or to
obtain a deficiency judgment, or to enforce any other remedies or rights
provided by the Mortgage Note or Mortgage or otherwise available at law or in
equity. Together with such documents or pleadings (if signed by the Trustee),
the Master Servicer shall deliver to the Trustee a certificate of a Servicing
Officer requesting that such pleadings or documents be executed by the Trustee
and certifying as to the reason such documents or pleadings are required and
that the execution and delivery thereof by the Trustee will not invalidate any
insurance coverage under any Required Insurance Policy or invalidate or
otherwise affect the lien of the Mortgage, except for the termination of such a
lien upon completion of the foreclosure or trustee's sale.
Section 3.16. Servicing and Other Compensation; Compensating Interest.
(a) The Master Servicer, as compensation for its activities hereunder,
shall be entitled to receive on each Distribution Date the amounts provided for
by clauses (iii), (iv), (v) and (vi) of Section 3.10(a), subject to clause (e)
below. The amount of servicing compensation provided for in such clauses shall
be accounted for on a Mortgage Loan-by- Mortgage Loan basis. In the event that
Liquidation Proceeds, Insurance Proceeds and REO Proceeds (net of amounts
reimbursable therefrom pursuant to Section 3.10(a)(ii)) in respect of a Cash
Liquidation or REO Disposition exceed the unpaid principal balance of such
Mortgage Loan plus unpaid interest accrued thereon (including REO Imputed
Interest) at the related Net Mortgage Rate, the Master Servicer shall be
entitled to retain therefrom and to pay to itself and/or the related Subservicer
any Servicing Fee or Subservicing Fee considered to be accrued but unpaid.
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(b) Additional servicing compensation in the form of prepayment
charges, assumption fees, late payment charges, investment income on amounts in
the Custodial Account or the Certificate Account or otherwise shall be retained
by the Master Servicer or the Subservicer to the extent provided herein, subject
to clause (e) below.
(c) The Master Servicer shall be required to pay, or cause to be paid,
all expenses incurred by it in connection with its servicing activities
hereunder (including payment of premiums for the Primary Insurance Policies, if
any, to the extent such premiums are not required to be paid by the related
Mortgagors, and the fees and expenses of the Trustee and any Custodian) and
shall not be entitled to reimbursement therefor except as specifically provided
in Sections 3.10 and 3.14.
(d) The Master Servicer's right to receive servicing compensation may
not be transferred in whole or in part except in connection with the transfer of
all of its responsibilities and obligations of the Master Servicer under this
Agreement.
(e) Notwithstanding any other provision herein, the amount of servicing
compensation that the Master Servicer shall be entitled to receive for its
activities hereunder for the period ending on each Distribution Date shall be
reduced (but not below zero) by an amount equal to Compensating Interest (if
any) for such Distribution Date. Such reduction shall be applied during such
period as follows: first, to any Servicing Fee or Subservicing Fee to which the
Master Servicer is entitled pursuant to Section 3.10(a)(iii); second, to any
income or gain realized from any investment of funds held in the Custodial
Account or the Certificate Account to which the Master Servicer is entitled
pursuant to Sections 3.07(c) or 4.01(b), respectively; and third, to any amounts
of servicing compensation to which the Master Servicer is entitled pursuant to
Section 3.10(a)(v) or (vi). In making such reduction, the Master Servicer (i)
will not withdraw from the Custodial Account any such amount representing all or
a portion of the Servicing Fee to which it is entitled pursuant to Section
3.10(a)(iii); (ii) will not withdraw from the Custodial Account or Certificate
Account any such amount to which it is entitled pursuant to Section 3.07(c) or
4.01(b) and (iii) will not withdraw from the Custodial Account any such amount
of servicing compensation to which it is entitled pursuant to Section 3.10(a)(v)
or (vi).
Section 3.17. Reports to the Trustee and the Depositor.
Not later than [fifteen] days after each Distribution Date, the Master
Servicer shall forward to the Trustee and the Depositor a statement, certified
by a Servicing Officer, setting forth the status of the Custodial Account as of
the close of business on such Distribution Date as it relates to the Mortgage
Loans and showing, for the period covered by such statement, the aggregate of
deposits in or withdrawals from the Custodial Account in respect of the Mortgage
Loans for each category of deposit specified in Section 3.07 and each category
of withdrawal specified in Section 3.10.
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Section 3.18. Annual Statement as to Compliance.
The Master Servicer will deliver to the Depositor and the Trustee on or
before __________ of each year, beginning with the first __________ that occurs
at least six months after the Cut-off Date, an Officers' Certificate stating, as
to each signer thereof, that (i) a review of the activities of the Master
Servicer during the preceding calendar year and of its performance under the
pooling and servicing agreements, including this Agreement, has been made under
such officers' supervision, (ii) to the best of such officers' knowledge, based
on such review, the Master Servicer has fulfilled all of its material
obligations in all material respects throughout such year, or, if there has been
a default in the fulfillment in all material respects of any such obligation
relating to this Agreement, specifying each such default known to such officer
and the nature and status thereof and (iii) to the best of such officers'
knowledge, each Subservicer has fulfilled its material obligations under its
Subservicing Agreement in all material respects, or if there has been a material
default in the fulfillment of such obligations relating to this Agreement,
specifying such default known to such officer and the nature and status thereof.
Section 3.19. Annual Independent Public Accountants' Servicing Report.
On or before __________ of each year, beginning with the first
__________ that occurs at least six months after the Cut-off Date, the Master
Servicer at its expense shall cause a firm of Independent public accountants
which is a member of the American Institute of Certified Public Accountants to
furnish a statement to the Depositor and the Trustee to the effect that such
firm has examined certain documents and records relating to the servicing of the
mortgage loans under pooling and servicing agreements (including this Agreement)
substantially similar one to another (such statement to have attached thereto a
schedule setting forth the pooling and servicing agreements covered thereby,
including this Agreement) and that, on the basis of such examination conducted
substantially in compliance with the Uniform Single Audit Program for Mortgage
Bankers or the Audit Program for Mortgages serviced for FHLMC, such servicing
has been conducted in compliance with such pooling and servicing agreements
except for such significant exceptions or errors in records that, in the opinion
of such firm, the Uniform Single Audit Program for Mortgage Bankers or the Audit
Program for Mortgages serviced for FHLMC requires it to report. In rendering
such statement, such firm may rely, as to matters relating to direct servicing
of mortgage loans by Subservicers, upon comparable statements for examinations
conducted substantially in compliance with the Uniform Single Audit Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC (rendered
within one year of such statement) of Independent public accountants with
respect to the related Subservicer. For purposes of such statement, such firm
may conclusively assume that all pooling and servicing agreements among the
Depositor, the Master Servicer and the Trustee relating to Mortgage Pass-Through
Certificates evidencing an interest in first mortgage loans are substantially
similar one to another except for any such pooling and servicing agreement
which, by its terms, specifically states otherwise.
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Section 3.20. Rights of the Depositor in Respect of the Master
Servicer.
The Master Servicer shall afford the Depositor, upon reasonable notice,
during normal business hours access to all records maintained by the Master
Servicer in respect of its rights and obligations hereunder and access to
officers of the Master Servicer responsible for such obligations. Upon request,
the Master Servicer shall furnish the Depositor with its most recent financial
statements and such other information as the Master Servicer possesses regarding
its business, affairs, property and condition, financial or otherwise. The
Master Servicer shall also cooperate with all reasonable requests for
information including, but not limited to, notices, tapes and copies of files,
regarding itself, the Mortgage Loans or the Certificates from any Person or
Persons identified by the Depositor or the Master Servicer. The Depositor may,
but is not obligated to, enforce the obligations of the Master Servicer
hereunder and may, but is not obligated to, perform, or cause a designee to
perform, any defaulted obligation of the Master Servicer hereunder or exercise
the rights of the Master Servicer hereunder; provided that the Master Servicer
shall not be relieved of any of its obligations hereunder by virtue of such
performance by the Depositor or its designee. The Depositor shall not have any
responsibility or liability for any action or failure to act by the Master
Servicer and is not obligated to supervise the performance of the Master
Servicer under this Agreement or otherwise.
Section 3.21. Administration of Buydown Funds.
(a) With respect to any Buydown Mortgage Loan, the Master Servicer
or the related Subservicer has deposited Buydown Funds in an account that
satisfies the requirements for the Custodial Account (the "Buydown Account").
Upon receipt from the Mortgagor of the amount due on a Due Date for each Buydown
Mortgage Loan, the Master Servicer or the related Subservicer, as applicable,
will withdraw from the Buydown Account the predetermined amount that, when added
to the amount due on such date from the Mortgagor, equals the full Monthly
Payment and deposit that amount in the Custodial Account in accordance with the
terms hereof or transmit that amount in accordance with the terms of the
Subservicing Agreement to the Master Servicer, in either case together with the
related payment made by the Mortgagor or advanced by the Subservicer.
(b) If the Mortgagor on a Buydown Mortgage Loan prepays such loan
in its entirety during the period (the "Buydown Period") when Buydown Funds are
required to be applied to such Buydown Mortgage Loan, the Master Servicer or the
related Subservicer shall be required to withdraw from the Buydown Account and
remit any Buydown Funds remaining in the Buydown Account in accordance with the
related buydown agreement. The amount of Buydown Funds which may be remitted in
accordance with the related buydown agreement may reduce the amount required to
be paid by the Mortgagor to fully prepay the related Mortgage Loan. If the
Mortgagor on a Buydown Mortgage Loan defaults on such Mortgage Loan during the
Buydown Period and the property securing such Buydown Mortgage Loan is sold in
the liquidation thereof (either by the Master Servicer or the insurer under any
related Primary Insurance Policy), the Master Servicer or the related
Subservicer shall be required to withdraw from the Buydown Account the Buydown
Funds for such Buydown Mortgage Loan still held in the Buydown Account and
deposit that amount in the
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Custodial Account in accordance with the terms hereof or remit the same to the
Master Servicer in accordance with the terms of the Subservicing Agreement for
deposit in the Custodial Account, as applicable, or pay to the insurer under any
related Primary Insurance Policy if the Mortgaged Property is transferred to
such insurer and such insurer pays all of the loss incurred in respect of such
default. Any amount so remitted pursuant to the preceding sentence will be
deemed to reduce the amount owed on the Mortgage Loan.
[Section 3.22. Maintenance of the Mortgage Pool Insurance Policy;
Collections Thereunder.
The Master Servicer agrees to exercise its best reasonable efforts to
maintain and keep the Mortgage Pool Insurance Policy in full force and effect
throughout the term of this Agreement. The Master Servicer agrees to pay the
premium for the Mortgage Pool Insurance Policy on a timely basis. In the event
that the Mortgage Pool Insurer shall cease to be a Qualified Insurer, the Master
Servicer acting for the Trustee shall exercise its best reasonable efforts to
obtain from another Qualified Insurer a replacement policy comparable to the
Mortgage Pool Insurance Policy with a total coverage which is equal to the then
existing coverage of the Mortgage Pool Insurance Policy; provided, however, that
if the cost of any such replacement policy shall be greater than the cost of the
Mortgage Pool Insurance Policy, the amount of coverage of such replacement
policy may be reduced to a level such that the premium rate therefor shall not
exceed [150]% of the premium rate on the Mortgage Pool Insurance Policy. The
coverage provided by the Mortgage Pool Insurance Policy may be cancelled or
reduced, provided that any ratings will not be adversely affected thereby.
Not later than the ______ day of each month (or the previous Business
Day if such _______ day is not a Business Day), the Master Servicer shall notify
the Trustee by telephone, confirmed on such day by telecopy or telegram, as to
whether or not the Master Servicer has notified the Mortgage Pool Insurer of a
claim under the Mortgage Pool Insurance Policy. In the event the Trustee lacks
actual knowledge of having received such notice from the Master Servicer as
required, the Trustee shall determine whether or not a notice of a claim under
the Mortgage Pool Insurance Policy is required to be given to the Mortgage Pool
Insurer, and whether the Master Servicer has made such notification. If the
Trustee determines that the Master Servicer has not made such notice to the
Mortgage Pool Insurer, and that such notice to the Mortgage Pool Insurer is
required, consistent with the provisions hereof, then the Trustee shall provide
such notice to the Mortgage Pool Insurer. The Trustee shall be entitled to rely
upon the representations of the Master Servicer as to whether a claim under the
Mortgage Pool Insurance Policy is necessary and whether such claim has been made
by the Master Servicer.
An advance claims endorsement (the "Advance Claims Endorsement") and a
settlement with primary insurer endorsement will be issued to the Mortgage Pool
Insurance Policy. The Advance Claims Endorsement will provide that the Mortgage
Pool Insurer will, within five days of written notification by the Master
Servicer, make advances of monthly principal and interest payments on Mortgage
Loans as to which [the applicable Subservicer] [it] has not received a payment
from the related Mortgagor, if [neither the applicable Subservicer nor] the
Master Servicer has advanced such payment. Such advances will be
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paid to the Master Servicer on behalf of the Trustee and for the benefit of the
Certificateholders. Simultaneously with such notification to the Mortgage Pool
Insurer, the Master Servicer shall notify the Trustee by telephone, confirmed on
such day by telex, telecopy, or telegram, as to whether or not a claim under the
Advance Claims Endorsement is required under this Section 3.___. In the event
the Master Servicer fails to provide such notice to the Trustee as required, the
Trustee shall determine whether or not the Master Servicer has notified the
Mortgage Pool Insurer that a claim under Advance Claims Endorsement is necessary
and whether the Master Servicer has made such claim. If the Trustee determines
that the Master Servicer has not provided such notice to the Mortgage Pool
Insurer, and that such notice to the Mortgage Pool Insurer is required, then the
Trustee shall provide such notice to the Mortgage Pool Insurer. The Trustee
shall be entitled to rely upon the representations of the Master Servicer as to
whether a claim under the Advance Claims Endorsement is necessary and whether
such claim has been made by the Master Servicer.
In connection with its activities hereunder, the Master Servicer agrees
to present, on behalf of the Trustee and Certificateholders, claims to the
Mortgage Pool Insurer under the Mortgage Pool Insurance Policy and the Advance
Claims Endorsement as set forth above, and, in this regard, to take such
reasonable action as shall be necessary to permit recovery under the Mortgage
Pool Insurance Policy respecting defaulted Mortgage Loans. The Master Servicer
shall collect all amounts relating to the Certificates under the Mortgage Pool
Insurance Policy and shall deposit such amounts in the Custodial Account or in
the Certificate Account until distributed in accordance with Section 4.02 or
withdrawn in accordance with Section 3.10 of this Agreement.]
[Section 3.23. Maintenance of the Credit Enhancement; Credit
Enhancement Collections.
Except as provided below, the Master Servicer covenants and agrees to
exercise its best reasonable efforts to maintain and keep the Credit Enhancement
described below, in full force and effect throughout the term of this Agreement
with respect to all Mortgage Loans.
Simultaneously with the conveyance of the Mortgage Loans to the Trustee
pursuant to Section 2.01 of this Agreement, the Master Servicer shall deliver
the Credit Enhancement to the Trustee. Such Credit Enhancement shall be held by
the Trustee for the benefit of the Certificateholders and shall provide that the
Trustee may make, or cause to be made, Credit Enhancement Collections with
respect to a Bankruptcy Loss, Fraud Loss, or Special Hazard Loss. The Trustee
shall make, or cause to be made, any such Credit Enhancement Collection. The
Credit Enhancement shall be maintained in the amount of Special Hazard Amount,
Bankruptcy Amount and Fraud Amount, as applicable, with respect to each category
of loss. In addition, the Master Servicer may cause to be established an
alternate Credit Enhancement (and have the Credit Enhancement released to it)
or, if such alternate Credit Enhancement has been established, cause a Credit
Enhancement to be established (and terminate the alternate Credit Enhancement)
at any time if it delivers to the Trustee simultaneously with such establishment
written confirmation from the Rating Agency that the ratings will not be
adversely affected thereby. Amounts on deposit in the Reserve Fund, if
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any, shall only be invested in Eligible Investments, at the written direction of
the Master Servicer; provided that such Eligible Investments shall mature not
later than the Business Day prior to the next day on which a Credit Enhancement
Collection is required. If such Eligible Investment is an obligation of the
Trustee, then such Eligible Investment shall mature not later than such day),
and any such Eligible Investments shall not be sold or disposed of prior to
maturity.
Trustee shall make, or cause to be made, Credit Enhancement
Collections according to the standards set forth herein, and in this regard,
shall take such reasonable actions as shall be necessary to make, or cause to be
made, such Credit Enhancement Collections respecting defaulted Mortgage Loans.
The proceeds of any Credit Enhancement Collection, except a Draw of the entire
remaining Letter of Credit Amount by the Trustee in connection with the
non-renewal of any Letter of Credit, shall be deposited in the [Custodial]
[Certificate] Account.
Upon termination of the trust pursuant to Article IX herein, any Letter
of Credit or Certificate Insurance Policy, or all funds remaining in any Reserve
Fund will be released to [______________________________].
The Master Servicer hereby agrees that on or before the Business Day
five Business Days prior to the last Business Day on which any Letter of Credit
is in effect, it shall provide a renewal or replacement Letter of Credit
substantially similar to such Letter of Credit and acceptable to the Rating
Agency or establish a Reserve Fund. If, for any reason, the Master Servicer
fails to provide a renewal or replacement Letter of Credit on or before the
Business Day five Business Days prior to the last Business Day on which such
Letter of Credit is in effect (or within the time period specified in the
definition of "Letter of Credit" in Article I in connection with an adverse
change in the long-term unsecured debt rating of the Letter of Credit Bank), the
Trustee shall on the next Business Day draw under the Letter of Credit the
remaining amounts available thereunder (as permitted by the Letter of Credit),
and immediately deposit, as directed by the Master Servicer, the proceeds of
such draw in a separate trust account acceptable to the Rating Agency which
shall not be a part of the Trust Fund. Any such trust account shall be
established pursuant to an agreement which provides that all withdrawals from
and deposits to such account shall be made only by the Trustee at the direction
of the Master Servicer in the same manner as drawings under the Letter of Credit
and such trust account shall thereafter be substituted for the Letter of Credit
in the performance of this Agreement.
The Master Servicer or its designee shall provide written notice to the
Trustee (a) of any adverse change in the rating of the long-term unsecured debt
of the banking institution issuing any Letter of Credit or (b) 30 days before
expiration of any Letter of Credit, of nonrenewal of such Letter of Credit, if
such Letter of Credit will not be renewed, and, in either such case, either (i)
the Master Servicer or its designee shall immediately, and in any event (x) no
later than 30 days after providing the notice set forth in item (a) above (but
in no event later than the Business Day five Business Days prior to the last
Business Day on which the Letter of Credit is in effect), or (y) no later than
the Business Day which is five Business Days prior to the last Business Day on
which such Letter of Credit is in effect, if
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such Letter of Credit will not be renewed, provide (i) either (x) a substitute
Letter of Credit in accordance with this Section 3.23, or (y) an alternate
Credit Enhancement, or (ii) the Trustee shall draw upon the Letter of Credit
pursuant to Section 3.23 hereof.]
[Section 3.24. Special Hazard Coverage under the Credit Enhancement.
Special Hazard Coverage under the Credit Enhancement will be
established as of the Closing Date in the Special Hazard Amount.
Except as provided below, the Master Servicer covenants and agrees to
exercise its best reasonable efforts to maintain and administer Special Hazard
coverage under the Credit Enhancement throughout the term of this Agreement with
respect to all Mortgage Loans covered thereby, subject to this Section 3.24.
In the event that the amount reserved under the Credit Enhancement
exceeds the Special Hazard Amount required pursuant to this Section 3.24, the
Trustee shall, at the written direction of the Master Service, reduce the
Special Hazard coverage provided by the Credit Enhancement in the amount of such
excess, and, if the Credit Enhancement is a Reserve Fund, release funds in the
amount of such reduction to the Master Servicer.
The Trustee agrees, as applicable and in accordance with the provisions
of this Section 3.24 to make, or cause to be made, Credit Enhancement
Collections with respect to Special Hazard coverage according to the standards
set forth herein, and in this regard, to cause the Master Servicer to take such
reasonable actions as shall be necessary to permit recovery under the Credit
Enhancement with respect to Special Hazard coverage in connection with defaulted
Mortgage Loans. Proceeds of any Credit Enhancement Collection with respect to
Special Hazard coverage shall be deposited in the Custodial Account.
[Section 3.25. Bankruptcy Coverage Under the Credit Enhancement
The Master Servicer covenants and agrees to exercise its best
reasonable efforts to maintain and keep Bankruptcy coverage under the Credit
Enhancement in full force and effect throughout the required term as set forth
in the Prospectus, unless the Bankruptcy coverage thereunder has been exhausted
through payment of claims. Bankruptcy coverage under the Credit Enhancement may
be cancelled or reduced by the Master Servicer to the extent permitted by the
Rating Agency, provided that the ratings will not be adversely affected thereby.
In the event that the amount reserved under any [Letter of Credit]
[Bankruptcy Bond] [Reserve Fund] for the Bankruptcy Coverage exceeds the amount
of Bankruptcy coverage required pursuant to this Section 3.25, the Trustee
shall, at the written direction of the Master Servicer, reduce the Bankruptcy
coverage provided by such [Letter of Credit] [Bankruptcy Bond] [Reserve Fund] in
the amount of such excess, or release funds from any Reserve Fund in the amount
of such reduction to the Master Servicer.
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The Trustee agrees to make, or cause to be made, Credit Enhancement
Collections and, in this regard, to cause the Master Servicer to take such
reasonable actions as shall be necessary to permit recovery under the Credit
Enhancement with respect to Bankruptcy coverage. Credit Enhancement Collections
with respect to Bankruptcy coverage shall be deposited in the Custodial Account.
[Section 3.26. Fraud Coverage under the Credit Enhancement.
Fraud coverage under the Credit Enhancement will be established as of
the Closing Date in the Fraud Loss Amount. Fraud coverage under the Credit
Enhancement will terminate [____] years after the Cut-Off Date.
The Master Servicer covenants and agrees to exercise its best
reasonable efforts to maintain and keep Fraud coverage under the Credit
Enhancement in full force and effect throughout the required term as set forth
above. Fraud coverage under the Credit Enhancement may be cancelled or reduced
by the Master Servicer to the extent permitted by the Rating Agency, provided
that the ratings will not be adversely affected thereby.
If the Rating Agency so advises the Master Servicer that the Fraud
coverage under the Credit Enhancement may be reduced, then the Master Servicer
shall notify the Trustee of the permitted reduction and the Trustee, at the
Master Servicer's written direction, shall reduce the Credit Enhancement in an
amount equal to the permitted reduction of the Fraud coverage.
In the event that the amount reserved under the Credit Enhancement for
the Fraud coverage exceeds the amount of Fraud coverage required pursuant to
this Section 3.26, the Trustee shall, at the written direction of the Master
Servicer, reduce the Fraud coverage provided by the Credit Enhancement in the
amount of such excess, and if the Credit Enhancement is a Reserve Fund, release
funds in the amount of such reduction to the Master Servicer.
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ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
Section 4.01. Certificate Account.
(a) The Master Servicer on behalf of the Trustee shall establish
and maintain a Certificate Account in which the Master Servicer shall cause to
be deposited on behalf of the Trustee on or before [____ P.M. New York time] on
each Certificate Account Deposit Date by wire transfer of immediately available
funds an amount equal to the sum of (i) any Advance for the immediately
succeeding Distribution Date, (ii) any amount required to be deposited in the
Certificate Account pursuant to Section 3.12(a), (iii) any amount required to be
deposited in the Certificate Account pursuant to Section 3.16(e), (iv) any
amount required to be paid pursuant to Section 9.01 and (v) all other amounts
constituting the Available Distribution Amount for the immediately succeeding
Distribution Date.
(b) The Trustee shall, upon written request from the Master
Servicer, invest or cause the institution maintaining the Certificate Account to
invest the funds in the Certificate Account in Permitted Investments designated
in the name of the Trustee for the benefit of the Certificateholders, which
shall mature not later than the Business Day next preceding the Distribution
Date next following the date of such investment (except that (i) any investment
in the institution with which the Certificate Account is maintained may mature
on such Distribution Date and (ii) any other investment may mature on such
Distribution Date if the Trustee shall advance funds on such Distribution Date
to the Certificate Account in the amount payable on such investment on such
Distribution Date, pending receipt thereof to the extent necessary to make
distributions on the Certificates) and shall not be sold or disposed of prior to
maturity. Subject to Section 3.16(e), 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 Certificate Account
by the Master Servicer out of its own funds immediately as realized without any
right of reimbursement.
Section 4.02. Distributions.
(a) On each Distribution Date the Master Servicer on behalf of the
Trustee or the Paying Agent appointed by the Trustee, shall distribute to the
Master Servicer, in the case of a distribution pursuant to Section 4.02(a)(i),
the amount required to be distributed to the Master Servicer or a Subservicer
pursuant to Section 4.02(a)(i), and to each Certificateholder of record on the
next preceding Record Date (other than as provided in Section 9.01 respecting
the final distribution) either in immediately available funds (by wire transfer
or otherwise) to the account of such Certificateholder at a bank or other entity
having appropriate facilities therefor, if such Certificateholder has so
notified the Master Servicer or the Paying Agent, as the case may be, or, if
such Certificateholder has not so notified the Master Servicer or the Paying
Agent by the Record Date, by check mailed to such Certificateholder at the
address of such Holder appearing in the Certificate Register such
Certificateholder's share (based on the aggregate of the Percentage Interests
represented by
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Certificates of the applicable Class held by such Holder) of the following
amounts, in the following order of priority, in each case to the extent of the
Available Distribution Amount:
[(i) to the Master Servicer or a Subservicer, by
remitting for deposit to the Custodial Account, to the extent of and in
reimbursement for any Advances or Subservicer Advances previously made
with respect to any Mortgage Loan or REO Property which remain
unreimbursed in whole or in part following the Cash Liquidation or REO
Disposition of such Mortgage Loan or REO Property, minus any such
Advances that were made with respect to delinquencies that ultimately
constituted Excess Special Hazard Losses, Excess Fraud Losses, Excess
Bankruptcy Losses or Extraordinary Losses;
[(ii) to the [Class A] Certificates, the
[Class A] Distribution;
[(iii) to the [Class B] Certificates, the
[Class B] Distribution; and]
[(iv) to the Class R Certificates, the Class R
Certificate Distribution.]
(b) In addition to the foregoing distributions, with respect to
any Mortgage Loan that was previously the subject of a Cash Liquidation or an
REO Disposition that resulted in a Realized Loss, in the event that within two
years of the date on which such Realized Loss was determined to have occurred
the Master Servicer receives amounts, which the Master Servicer reasonably
believes to represent subsequent recoveries (net of any related liquidation
expenses), or determines that it holds surplus amounts previously reserved to
cover estimated expenses, specifically related to such Mortgage Loan (including,
but not limited to, recoveries in respect of the representations and warranties
made by the related Seller pursuant to the applicable Mortgage Loan Purchase
Agreement), the Master Servicer shall distribute such amounts to the applicable
Certificateholders of the Class or Classes to which such Realized Loss was
allocated (with the amounts to be distributed allocated among such Classes in
the same proportions as such Realized Loss was allocated), subject to the
following: No such distribution shall be in an amount that would result in total
distributions on the Certificates of any such Class in excess of the total
amounts of principal and interest that would have been distributable thereon if
such Cash Liquidation or REO Disposition had occurred but had resulted in a
Realized Loss equal to zero. Any amount to be so distributed with respect to the
Certificates of any Class shall be distributed by the Master Servicer to the
Certificateholders of record as of the Record Date immediately preceding the
date of such distribution, on a pro rata basis based on the Percentage Interest
represented by each Certificate of such Class as of such Record Date. Any
amounts to be so distributed shall not be remitted to or distributed from the
Trust Fund, and shall constitute subsequent recoveries with respect to Mortgage
Loans that are no longer assets of the Trust Fund.
(c) Each distribution with respect to a Book-Entry Certificate
shall be paid to the Depository, as Holder thereof, and the Depository shall be
responsible for crediting the amount of such distribution to the accounts of its
Depository Participants in accordance with its normal procedures. Each
Depository Participant shall be responsible for disbursing such distribution to
the Certificate Owners that it represents and to each indirect participating
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brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. None of the Trustee, the
Certificate Registrar, the Depositor or the Master Servicer shall have any
responsibility therefor except as otherwise provided by this Agreement or
applicable law.
(d) Except as otherwise provided in Section 9.01, if the Master
Servicer anticipates that a final distribution with respect to any Class of
Certificates will be made on the next Distribution Date, the Master Servicer
shall, no later than the Determination Date in the month of such final
distribution, notify the Trustee and the Trustee shall, no later than two (2)
Business Days after such Determination Date, mail on such date to each Holder of
such Class of Certificates a notice to the effect that: (i) the Trustee
anticipates that the final distribution with respect to such Class of
Certificates will be made on such Distribution Date but only upon presentation
and surrender of such Certificates at the office of the Trustee or as otherwise
specified therein, and (ii) no interest shall accrue on such Certificates from
and after the end of the prior calendar month. In the event that
Certificateholders required to surrender their Certificates pursuant to Section
9.01(c) do not surrender their Certificates for final cancellation, the Trustee
shall cause funds distributable with respect to such Certificates to be
withdrawn from the Certificate Account and credited to a separate escrow account
for the benefit of such Certificateholders as provided in Section 9.01(d).
Section 4.03. Statements to Certificateholders.
(a) Concurrently with each distribution charged to the Certificate
Account and with respect to each Distribution Date the Trustee shall forward by
mail to each Holder and the Depositor a statement setting forth the following
information as to each Class of Certificates to the extent applicable:
(i) (a) the amount of such distribution to the
Certificateholders of such Class applied to reduce the Certificate
Principal Balance thereof, and (b) the aggregate amount included
therein representing Principal Prepayments;
(ii) the amount of such distribution to Holders
of such Class of Certificates allocable to interest;
(iii) if the distribution to the Holders of such
Class of Certificates is less than the full amount that would be
distributable to such Holders or Owner if there were sufficient funds
available therefor, the amount of the shortfall;
(iv) the amount of any Advance by the Master
Servicer pursuant to Section 4.04;
(v) the number and Pool Stated Principal Balance
of the Mortgage Loans after giving effect to the distribution of
principal on such Distribution Date;
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(vi) the aggregate Certificate Principal Balance
of each Class of Certificates, and each of the Senior and Class B
Percentages, after giving effect to the amounts distributed on such
Distribution Date, separately identifying any reduction thereof due to
Realized Losses other than pursuant to an actual distribution of
principal;
(vii) the related Subordinate Principal
Distribution Amount;
(viii) on the basis of the most recent reports
furnished to it by Subservicers, if applicable, the number and
aggregate principal balances of Mortgage Loans that are delinquent (A)
one month, (B) two months and (C) three months and the number and
aggregate principal balance of Mortgage Loans that are in foreclosure;
(ix) the number, aggregate principal balance and
book value of any REO Properties;
(x) the aggregate Accrued Certificate Interest
remaining unpaid, if any, for each Class of Certificates, after giving
effect to the distribution made on such Distribution Date;
(xi) the Special Hazard Amount, Fraud Loss
Amount and Bankruptcy Amount as of the close of business on such
Distribution Date and a description of any change in the calculation
of such amounts;
[(xii) the occurrence of the Credit Support
Depletion Date;]
[(xiii) the Senior Percentage for such Distribution
Date;]
(xiv) the aggregate amount of Realized Losses for
such Distribution Date;
(xvi) the aggregate amount of any recoveries on
previously foreclosed loans from Sellers due to a breach of
representation or warranty;
(xvii) the weighted average remaining term to
maturity of the Mortgage Loans after giving effect to the amounts
distributed on such Distribution Date; and
(xviii) the weighted average Mortgage Rates of the
Mortgage Loans after giving effect to the amounts distributed on such
Distribution Date.
In the case of information furnished pursuant to clauses (i) and (ii) above, the
amounts shall be expressed as a dollar amount per Certificate with a $1,000
denomination.
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(b) Within a reasonable period of time after the end of each
calendar year, the Master Servicer shall prepare, or cause to be prepared, and
shall forward, or cause to be forwarded, to each Person who at any time during
the calendar year was the Holder of a Certificate, other than a Class R
Certificate, a statement containing the information set forth in clauses (i) and
(ii) of subsection (a) above aggregated for such calendar year or applicable
portion thereof during which such Person was a 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.
(c) Within a reasonable period of time after the end of each
calendar year, the Master Servicer shall prepare, or cause to be prepared, and
shall forward, or cause to be forwarded, to each Person who at any time during
the calendar year was the Holder of a Class R Certificate, a statement
containing the applicable distribution information provided pursuant to this
Section 4.03 aggregated for such calendar year or applicable portion thereof
during which such Person was the Holder of a Class R Certificate. 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.
(d) Upon the written request of any Certificateholder, the Master
Servicer, as soon as reasonably practicable, shall provide the requesting
Certificateholder with such information as is necessary and appropriate, in the
Master Servicer's sole discretion, for purposes of satisfying applicable
reporting requirements under Rule 144A.
Section 4.04. Distribution of Reports to the Trustee and the
Depositor; Advances by the Master Servicer.
(a) Prior to the close of business on the Business Day next
succeeding each Determination Date, the Master Servicer shall furnish a written
statement to the Trustee, any Paying Agent and the Depositor (the information in
such statement to be made available to Certificateholders by the Master Servicer
on request) setting forth (i) the Available Distribution Amount and (ii) the
amounts required to be withdrawn from the Custodial Account and deposited into
the Certificate Account on the immediately succeeding Certificate Account
Deposit Date pursuant to clause (iii) of Section 4.01(a). 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
shall be protected in relying upon the same without any independent check or
verification.
(b) On or before [2:00 P.M. New York time] on each Certificate
Account Deposit Date, the Master Servicer shall either (i) deposit in the
Certificate Account from its own funds, or funds received therefor from the
Subservicers, an amount equal to the Advances to be made by the Master Servicer
in respect of the related Distribution Date, which shall be in an aggregate
amount equal to the aggregate amount of Monthly Payments (with each interest
portion thereof adjusted to the Net Mortgage Rate), less the amount of any
related Debt Service Reductions or reductions in the amount of interest
collectable from the Mortgagor
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pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940, as amended, or
similar legislation or regulations then in effect, on the Outstanding Mortgage
Loans as of the related Due Date, which Monthly Payments were delinquent as of
the close of business as of the related Determination Date; provided that no
Advance shall be made if it would be a Nonrecoverable Advance, (ii) withdraw
from amounts on deposit in the Custodial Account and deposit in the Certificate
Account all or a portion of the Amount Held for Future Distribution in discharge
of any such Advance, or (iii) make advances in the form of any combination of
(i) and (ii) aggregating the amount of such Advance. Any portion of the Amount
Held for Future Distribution so used shall be replaced by the Master Servicer by
deposit in the Certificate Account on or before [11:00 A.M. New York time] on
any future Certificate Account Deposit Date to the extent that funds
attributable to the Mortgage Loans that are available in the Custodial Account
for deposit in the Certificate Account on such Certificate Account Deposit Date
shall be less than payments to Certificateholders required to be made on the
following Distribution Date. The Master Servicer shall be entitled to use any
Advance made by a Subservicer as described in Section 3.07(b) that has been
deposited in the Custodial Account on or before such Distribution Date as part
of the Advance made by the Master Servicer pursuant to this Section 4.04. The
amount of any reimbursement pursuant to Section 4.02(a)(i) in respect of
outstanding Advances on any Distribution Date shall be allocated to specific
Monthly Payments due but delinquent for previous Due Periods, which allocation
shall be made, to the extent practicable, to Monthly Payments which have been
delinquent for the longest period of time. Such allocations shall be conclusive
for purposes of reimbursement to the Master Servicer from recoveries on related
Mortgage Loans pursuant to Section 3.10.
The determination by the Master Servicer that it has made a
Nonrecoverable Advance or that any proposed Advance, if made, would constitute a
Nonrecoverable Advance, shall be evidenced by a certificate of a Servicing
Officer delivered to the Seller and the Trustee.
In the event that the Master Servicer determines as of the Business Day
preceding any Certificate Account Deposit Date that it will be unable to deposit
in the Certificate Account an amount equal to the Advance required to be made
for the immediately succeeding Distribution Date, it shall give notice to the
Trustee of its inability to advance (such notice may be given by telecopy), not
later than [3:00 P.M., New York time], on such Business Day, specifying the
portion of such amount that it will be unable to deposit. Not later than [3:00
P.M., New York time], on the Certificate Account Deposit Date the Trustee shall,
unless by [12:00 Noon, New York time], on such day the Trustee shall have been
notified in writing (by telecopy) that the Master Servicer shall have directly
or indirectly deposited in the Certificate Account such portion of the amount of
the Advance as to which the Master Servicer shall have given notice pursuant to
the preceding sentence, pursuant to Section 7.01, (a) terminate all of the
rights and obligations of the Master Servicer under this Agreement in accordance
with Section 7.01 and (b) assume the rights and obligations of the Master
Servicer hereunder, including the obligation to deposit in the Certificate
Account an amount equal to the Advance for the immediately succeeding
Distribution Date.
The Trustee shall deposit all funds it receives pursuant to this
Section 4.04 into the Certificate Account.
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[Section 4.05. Allocation of Realized Losses.
Prior to each Distribution Date, the Master Servicer shall determine
the total amount of Realized Losses, if any, that resulted from any Cash
Liquidation, Debt Service Reduction, Deficient Valuation or REO Disposition that
occurred during the related Prepayment Period. The amount of each Realized Loss
shall be evidenced by an Officers' Certificate. All Realized Losses, other than
Excess Special Hazard Losses, Extraordinary Losses, Excess Bankruptcy Losses or
Excess Fraud Losses, shall be allocated by the Trustee as follows: [list
Certificates in reverse order of priority for payment] Any Excess Special Hazard
Losses, Excess Bankruptcy Losses, Excess Fraud Losses and Extraordinary Losses
on the Mortgage Loans will be allocated among the Class A, Class B and Class R
Certificates on a pro rata basis.
As used herein, an allocation of a Realized Loss on a "pro rata basis"
among two or more specified Classes of Certificates means an allocation on a pro
rata basis, among the various Classes so specified, to each such Class of
Certificates on the basis of their then outstanding Certificate Principal
Balances prior to giving effect to distributions to be made on such Distribution
Date in the case of the principal portion of a Realized Loss or based on the
Accrued Certificate Interest thereon payable on such Distribution Date (without
regard to any Compensating Interest for such Distribution Date) in the case of
an interest portion of a Realized Loss. Except as provided in the following
sentence, any allocation of the principal portion of Realized Losses (other than
Debt Service Reductions) to a Class of Certificates shall be made by reducing
the Certificate Principal Balance thereof by the amount so allocated, which
allocation shall be deemed to have occurred on such Distribution Date. Any
allocation of the principal portion of Realized Losses (other than Debt Service
Reductions) to the Class B Certificates then outstanding with the highest
numerical designation shall be made by operation of the definition of
"Certificate Principal Balance" and by operation of the provisions of Section
4.02(a). Allocations of the interest portions of Realized Losses shall be made
by operation of the definition of "Accrued Certificate Interest" and by
operation of the provisions of Section 4.02(a). Allocations of the principal
portion of Debt Service Reductions shall be made by operation of the provisions
of Section 4.02(a). All Realized Losses and all other losses allocated to a
Class of Certificates hereunder will be allocated among the Certificates of such
Class in proportion to the Percentage Interests evidenced thereby.]
Section 4.06. Reports of Foreclosures and Abandonment of Mortgaged
Property.
The Master Servicer or the Subservicers shall file information returns
with respect to the receipt of mortgage interests received in a trade or
business, the reports of foreclosures and abandonments of any Mortgaged Property
and the information returns relating to cancellation of indebtedness income with
respect to any Mortgaged Property required by Sections 6050H, 6050J and 6050P,
respectively, of the Code, and deliver to the Trustee an Officers' Certificate
on or before __________ of each year stating that such reports have been filed.
Such reports shall be in form and substance sufficient to meet the reporting
requirements imposed by Sections 6050H, 6050J and 6050P of the Code.
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ARTICLE V
THE CERTIFICATES
Section 5.01. The Certificates.
(a) The Class A, Class B and Class R Certificates, respectively,
shall be substantially in the forms set forth in Exhibits A, B and C and shall,
on original issue, be executed and delivered by the Trustee to the Certificate
Registrar for authentication and delivery to or upon the order of the Depositor
upon receipt by the Trustee or one or more Custodians of the documents specified
in Section 2.01. The Certificates, other than the Class R Certificates, shall be
issuable in minimum dollar denominations of $__________ (or $__________ in the
case of the Class ____ Certificates) and integral multiples of $1 (in the case
of the Class ____ Certificates) and $1,000 (in the case of all other Classes of
Certificates) in excess thereof, except that one Certificate of each of the
Class ____ Certificates may be issued in a denomination equal to the
denomination set forth as follows for such Class or the sum of such denomination
and an integral multiple of $1,000:
[Class ____ $ __________
Class ____ $ __________
Class ____ $ __________]
The Class R Certificates shall be issuable in minimum denominations of
not less than a 20% Percentage Interest; provided, however, that one Class R
Certificate will be issuable to the REMIC Administrator as "tax matters person"
pursuant to Section 10.01(c) and (e) in a minimum denomination representing a
Percentage Interest of not less than 0.01%.
The Certificates shall be executed by manual or facsimile signature on
behalf of an authorized officer of the Trustee. 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 Certificate or did not hold such offices at the date of such
Certificates. No Certificate shall be entitled to any benefit under this
Agreement, or be valid for any purpose, unless there appears on such Certificate
a certificate of authentication substantially in the form provided for herein
executed by the Certificate Registrar by manual signature, and such certificate
upon any Certificate shall be conclusive evidence, and the only evidence, that
such Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication.
[(b) The Class A Certificates shall initially be issued as one or
more Certificates registered in the name of the Depository or its nominee and,
except as provided below, registration of such Certificates may not be
transferred by the Trustee except to another Depository that agrees to hold such
Certificates for the respective Certificate Owners with
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Ownership Interests therein. The Certificate Owners shall hold their respective
Ownership Interests in and to each of the Class A Certificates through the
book-entry facilities of the Depository and, except as provided below, shall not
be entitled to Definitive Certificates in respect of such Ownership Interests.
All transfers by Certificate Owners of their respective Ownership Interests in
the Book-Entry Certificates shall be made in accordance with the procedures
established by the Depository Participant or brokerage firm representing such
Certificate Owner. Each Depository Participant shall transfer the Ownership
Interests only in the Book-Entry Certificates of Certificate Owners it
represents or of brokerage firms for which it acts as agent in accordance with
the Depository's normal procedures.
The Trustee, the Master Servicer and the Depositor may for all purposes
(including the making of payments due on the respective Classes of Book-Entry
Certificates) deal with the Depository as the authorized representative of the
Certificate Owners with respect to the respective Classes of Book-Entry
Certificates for the purposes of exercising the rights of Certificateholders
hereunder. The rights of Certificate Owners with respect to the respective
Classes of Book-Entry Certificates shall be limited to those established by law
and agreements between such Certificate Owners and the Depository Participants
and brokerage firms representing such Certificate Owners. Multiple requests and
directions from, and votes of, the Depository as Holder of any Class of
Book-Entry Certificates with respect to any particular matter shall not be
deemed inconsistent if they are made with respect to different Certificate
Owners. The Trustee may establish a reasonable record date in connection with
solicitations of consents from or voting by Certificateholders and shall give
notice to the Depository of such record date.
If (i)(A) the Depositor advises the Trustee in writing that the
Depository is no longer willing or able to properly discharge its
responsibilities as Depository and (B) the Depositor is unable to locate a
qualified successor or (ii) the Depositor at its option advises the Trustee in
writing that it elects to terminate the book-entry system through the
Depository, the Trustee shall notify all Certificate Owners, through the
Depository, of the occurrence of any such event and of the availability of
Definitive Certificates to Certificate Owners requesting the same. Upon
surrender to the Trustee of the Book-Entry Certificates by the Depository,
accompanied by registration instructions from the Depository for registration of
transfer, the Trustee shall issue the Definitive Certificates. Neither the
Depositor, the Master Servicer nor the Trustee shall be liable for any actions
taken by the Depository or its nominee, including, without limitation, any delay
in delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Certificates all references herein to obligations imposed upon or to be
performed by the Depositor in connection with the issuance of the Definitive
Certificates pursuant to this Section 5.01 shall be deemed to be imposed upon
and performed by the Trustee, and the Trustee and the Master Servicer shall
recognize the Holders of the Definitive Certificates as Certificateholders
hereunder.
Section 5.02. Registration of Transfer and Exchange of Certificates.
(a) The Trustee shall cause to be kept at one of the offices or
agencies to be appointed by the Trustee in accordance with the provisions of
Section 8.12 a Certificate
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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 is initially
appointed Certificate Registrar for the purpose of registering Certificates and
transfers and exchanges of Certificates as herein provided. The Certificate
Registrar, or the Trustee, shall provide the Master Servicer with a certified
list of Certificateholders as of each Record Date prior to the related
Determination Date.
(b) Upon surrender for registration of transfer of any Certificate
at any office or agency of the Trustee maintained for such purpose pursuant to
Section 8.12 and, in the case of any Class B or Class R Certificate, upon
satisfaction of the conditions set forth below, the Trustee shall execute and
the Certificate Registrar shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of a like
Class and aggregate Percentage Interest.
(c) At the option of the Certificateholders, Certificates may be
exchanged for other Certificates of authorized denominations of a like Class and
aggregate Percentage Interest, 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 the Certificate Registrar
shall authenticate and deliver the Certificates of such Class which the
Certificateholder making the exchange is entitled to receive. Every Certificate
presented or surrendered for transfer or exchange shall (if so required by the
Trustee or the Certificate Registrar) be duly endorsed by, or be accompanied by
a written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by, the Holder thereof or his attorney duly
authorized in writing.
(d) No transfer, sale, pledge or other disposition of a Class B
Certificate shall be made unless such transfer, sale, pledge or other
disposition 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 a transfer of a Class B
Certificate is to be made either (i)(A) the Trustee shall require a written
Opinion of Counsel acceptable to and in form and substance satisfactory to the
Trustee and the Depositor 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 Depositor or the Master
Servicer and (B) the Trustee shall require the transferee to execute a
representation letter, substantially in the form of Exhibit I hereto, and the
Trustee shall require the transferor to execute a representation letter,
substantially in the form of Exhibit J hereto, each acceptable to and in form
and substance satisfactory to the Depositor and the Trustee certifying to the
Depositor and the Trustee the facts surrounding such transfer, which
representation letters shall not be an expense of the Trustee, the Depositor or
the Master Servicer or (ii) the prospective transferee of such a Certificate
shall be required to provide the Trustee, the Depositor and the Master Servicer
with an investment letter substantially in the form of Exhibit K attached hereto
(or such other form as the Depositor in its sole discretion deems acceptable),
which investment letter shall not be an expense of the Trustee, the Depositor or
the Master Servicer, and which investment letter states that, among other
things, such transferee (A) is a "qualified institutional buyer" as defined
under Rule 144A,
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acting for its own account or the accounts of other "qualified institutional
buyers" as defined under Rule 144A, and (B) is aware that the proposed
transferor intends to rely on the exemption from registration requirements under
the Securities Act of 1933, as amended, provided by Rule 144A. The Holder of any
such Certificate desiring to effect any such transfer, sale, pledge or other
disposition shall, and does hereby agree to, indemnify the Trustee, the
Depositor, the Master Servicer and the Certificate Registrar against any
liability that may result if the transfer, sale, pledge or other disposition is
not so exempt or is not made in accordance with such federal and state laws.
(e) In the case of any Class B or Class R Certificate presented
for registration in the name of an employee benefit plan or other plan subject
to the prohibited transaction provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code (or
comparable provisions of any subsequent enactments) or any Person (including an
investment manager, a named fiduciary or a trustee of any such plan) who is
using "plan assets" of any such plan to effect such acquisition, unless
otherwise directed by the Depositor, the Trustee shall require an Opinion of
Counsel acceptable to and in form and substance satisfactory to the Trustee, the
Depositor and the Master Servicer to the effect that the purchase or holding of
a Class B or Class R Certificate is permissible under applicable law, will not
constitute or result in any non-exempt prohibited transaction under Section 406
of ERISA or Section 4975 of the Code, and will not subject the Trustee, the
Depositor or the Master Servicer to any obligation or liability (including
obligations or liabilities under ERISA or Section 4975 of the Code) in addition
to those undertaken in this Agreement, which Opinion of Counsel shall not be an
expense of the Trustee, the Depositor or the Master Servicer. The Trustee may
(unless otherwise directed by the Depositor) require that any prospective
transferee of a Class B or Class R Certificate provide either a certification to
the effect set forth in paragraph six of Exhibit I, which the Trustee may rely
upon without further inquiry or investigation, or such other certifications as
the Trustee may deem desirable or necessary in order to establish that such
transferee or the Person in whose name such registration is requested is not an
employee benefit plan or other plan subject to the prohibited transaction
provisions of ERISA or Section 4975 of the Code, or any Person (including an
investment manager, a named fiduciary or a trustee of any such plan) who is
using "plan assets" of any such plan to effect such acquisition. [So long as the
Class ____ Certificates are Book-Entry Certificates, any purchaser of a Class
____ Certificate will be deemed to have represented by such purchase that either
(a) such purchaser is not an employee benefit plan or other plan subject to the
prohibited transaction provisions of ERISA or Section 4975 of the Code and is
not purchasing such Certificates on behalf of or with "plan assets" of any Plan
or (b) the purchase of any such Certificate by or on behalf of or with "plan
assets" of any Plan is permissible under applicable law, will not result in any
non-exempt prohibited transaction under ERISA or Section 4975 of the Code, and
will not subject the Master Servicer, the Depositor or the Trustee to any
obligation in addition to those undertaken in this Agreement.]
(f) (i) Each Person who has or who acquires any Ownership Interest
in a Class R Certificate shall be deemed by the acceptance or acquisition of
such Ownership Interest to have agreed to be bound by the following provisions
and to have irrevocably authorized the Trustee or its designee under clause
(iii)(A) below to deliver payments to a Person other than
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such Person and to negotiate the terms of any mandatory sale under clause
(iii)(B) below and to execute all instruments of transfer and to do all other
things necessary in connection with any such sale. The rights of each Person
acquiring any Ownership Interest in a Class R Certificate are expressly subject
to the following provisions:
(A) Each Person holding or acquiring any Ownership
Interest in a Class R Certificate shall be a Permitted Transferee and
shall promptly notify the Trustee of any change or impending change in
its status as a Permitted Transferee.
(B) In connection with any proposed Transfer of any
Ownership Interest in a Class R Certificate, the Trustee shall require
delivery to it, and shall not register the Transfer of any Class R
Certificate until its receipt of, (I) an affidavit and agreement (a
"Transfer Affidavit and Agreement," in the form attached hereto as
Exhibit H-1) from the proposed Transferee, in form and substance
satisfactory to the Master Servicer, representing and warranting, among
other things, that it is a Permitted Transferee, that it is not
acquiring its Ownership Interest in the Class R Certificate that is the
subject of the proposed Transfer as a nominee, trustee or agent for any
Person who is not a Permitted Transferee, that for so long as it
retains its Ownership Interest in a Class R Certificate, it will
endeavor to remain a Permitted Transferee, and that it has reviewed the
provisions of this Section 5.02(f) and agrees to be bound by them, and
(II) a certificate, in the form attached hereto as Exhibit H-2, from
the Holder wishing to transfer the Class R Certificate, in form and
substance satisfactory to the Master Servicer, representing and
warranting, among other things, that no purpose of the proposed
Transfer is to impede the assessment or collection of tax.
(C) Notwithstanding the delivery of a Transfer Affidavit
and Agreement by a proposed Transferee under clause (B) above, if a
Responsible Officer of the Trustee who is assigned to this Agreement
has actual knowledge that the proposed Transferee is not a Permitted
Transferee, no Transfer of an Ownership Interest in a Class R
Certificate to such proposed Transferee shall be effected.
(D) Each Person holding or acquiring any Ownership
Interest in a Class R Certificate shall agree (x) to require a Transfer
Affidavit and Agreement from any other Person to whom such Person
attempts to transfer its Ownership Interest in a Class R Certificate
and (y) not to transfer its Ownership Interest unless it provides a
certificate to the Trustee in the form attached hereto as Exhibit H-2.
(E) Each Person holding or acquiring an Ownership
Interest in a Class R Certificate, by purchasing an Ownership Interest
in such Certificate, agrees to give the Trustee written notice that it
is a "pass-through interest holder" within the meaning of Temporary
Treasury Regulations Section 1.67-3T(a)(2)(i)(A) immediately upon
acquiring an Ownership Interest in a Class R Certificate, if it is, or
is holding an Ownership Interest in a Class R Certificate on behalf of,
a "pass-through interest holder."
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(ii) The Trustee will register the Transfer of any Class R
Certificate only if it shall have received the Transfer Affidavit and Agreement,
a certificate of the Holder requesting such transfer in the form attached hereto
as Exhibit H-2 and all of such other documents as shall have been reasonably
required by the Trustee as a condition to such registration. Transfers of the
Class R Certificates to Non-United States Persons and Disqualified Organizations
(as defined in Section 860E(e)(5) of the Code) are prohibited.
(iii) (A) If any Disqualified Organization shall become a
holder of a Class R Certificate, then the last preceding Permitted Transferee
shall be restored, to the extent permitted by law, to all rights and obligations
as Holder thereof retroactive to the date of registration of such Transfer of
such Class R Certificate. If a Non-United States Person shall become a holder of
a Class R Certificate, then the last preceding United States Person shall be
restored, to the extent permitted by law, to all rights and obligations as
Holder thereof retroactive to the date of registration of such Transfer of such
Class R Certificate. If a transfer of a Class R Certificate is disregarded
pursuant to the provisions of Treasury Regulations Section 1.860E-1 or Section
1.860G-3, then the last preceding Permitted Transferee shall be restored, to the
extent permitted by law, to all rights and obligations as Holder thereof
retroactive to the date of registration of such Transfer of such Class R
Certificate. The Trustee shall be under no liability to any Person for any
registration of Transfer of a Class R Certificate that is in fact not permitted
by this Section 5.02(f) or for making any payments due on such Certificate to
the holder thereof or for taking any other action with respect to such holder
under the provisions of this Agreement.
(B) If any purported Transferee shall become a Holder of
a Class R Certificate in violation of the restrictions in this Section 5.02(f)
and to the extent that the retroactive restoration of the rights of the Holder
of such Class R Certificate as described in clause (iii)(A) above shall be
invalid, illegal or unenforceable, then the Master Servicer shall have the
right, without notice to the holder or any prior holder of such Class R
Certificate, to sell such Class R Certificate to a purchaser selected by the
Master Servicer on such terms as the Master Servicer may choose. Such purported
Transferee shall promptly endorse and deliver each Class R Certificate in
accordance with the instructions of the Master Servicer. Such purchaser may be
the Master Servicer itself or any Affiliate of the Master Servicer. The proceeds
of such sale, net of the commissions (which may include commissions payable to
the Master Servicer or its Affiliates), expenses and taxes due, if any, will be
remitted by the Master Servicer to such purported Transferee. The terms and
conditions of any sale under this clause (iii)(B) shall be determined in the
sole discretion of the Master Servicer, and the Master Servicer shall not be
liable to any Person having an Ownership Interest in a Class R Certificate as a
result of its exercise of such discretion.
(iv) The Master Servicer, on behalf of the Trustee, shall
make available, upon written request from the Trustee, all information necessary
to compute any tax imposed (A) as a result of the Transfer of an Ownership
Interest in a Class R Certificate to any Person who is a Disqualified
Organization, including the information regarding "excess inclusions" of such
Class R Certificates required to be provided to the Internal Revenue Service and
certain Persons as described in Treasury Regulations Sections 1.860D-1(b)(5) and
1.860E-2(a)(5), and (B) as a result of any regulated investment company, real
estate
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investment trust, common trust fund, partnership, trust, estate or organization
described in Section 1381 of the Code that holds an Ownership Interest in a
Class R Certificate having as among its record holders at any time any Person
who is a Disqualified Organization. Reasonable compensation for providing such
information may be required by the Master Servicer from such Person.
(v) The provisions of this Section 5.02(f) set forth
prior to this clause (v) may be modified, added to or eliminated, provided that
there shall have been delivered to the Trustee the following:
(A) written notification from each Rating Agency to the
effect that the modification, addition to or elimination of such
provisions will not cause such Rating Agency to downgrade its
then-current ratings, if any, of any Class of the Class A, Class B or
Class R Certificates below the lower of the then-current rating or the
rating assigned to such Certificates as of the Closing Date by such
Rating Agency; and
(B) a certificate of the Master Servicer stating that the
Master Servicer has received an Opinion of Counsel, in form and
substance satisfactory to the Master Servicer, to the effect that such
modification, addition to or absence of such provisions will not cause
the Trust Fund to cease to qualify as a REMIC and will not cause (x)
the Trust Fund to be subject to an entity-level tax caused by the
Transfer of any Class R Certificate to a Person that is a Disqualified
Organization or (y) a Certificateholder or another Person to be subject
to a REMIC-related tax caused by the Transfer of a Class R Certificate
to a Person that is not a Permitted Transferee.
(g) No service charge shall be made for any transfer or exchange
of Certificates of any Class, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
(h) All Certificates surrendered for transfer and exchange shall
be destroyed by the Certificate Registrar.
Section 5.03. Mutilated, Destroyed, Lost or Stolen Certificates.
If (i) any mutilated Certificate is surrendered to the Certificate
Registrar, or the Trustee and the Certificate Registrar receive evidence to
their satisfaction of the destruction, loss or theft of any Certificate, and
(ii) there is delivered to the Trustee and the Certificate Registrar such
security or indemnity as may be required by them to save each of them harmless,
then, in the absence of notice to the Trustee or the Certificate Registrar that
such Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute and the Certificate Registrar shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like tenor, Class and Percentage Interest but
bearing a number not contemporaneously outstanding. Upon the issuance of any new
Certificate under this Section, the Trustee may require the payment of a
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sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses (including the fees and expenses of
the Trustee and the Certificate Registrar) connected therewith. Any duplicate
Certificate issued pursuant to this Section shall constitute complete and
indefeasible evidence of ownership in the Trust Fund, as if originally issued,
whether or not the lost, stolen or destroyed Certificate shall be found at any
time.
Section 5.04. Persons Deemed Owners.
Prior to due presentation of a Certificate for registration of
transfer, the Depositor, the Master Servicer, the Trustee, the Certificate
Registrar and any agent of the Depositor, 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 4.02 and for all other purposes whatsoever,
and neither the Depositor, the Master Servicer, the Trustee, the Certificate
Registrar nor any agent of the Depositor, the Master Servicer, the Trustee or
the Certificate Registrar shall be affected by notice to the contrary except as
provided in Section 5.02(f).
Section 5.05. Appointment of Paying Agent.
The Trustee may appoint a Paying Agent for the purpose of making
distributions to Certificateholders pursuant to Section 4.02. In the event of
any such appointment, on or prior to each Distribution Date the Master Servicer
on behalf of the Trustee shall deposit or cause to be deposited with the Paying
Agent a sum sufficient to make the payments to Certificateholders in the amounts
and in the manner provided for in Section 4.02, such sum to be held in trust for
the benefit of Certificateholders.
The Trustee shall cause each Paying Agent to execute and deliver to the
Trustee an instrument in which such Paying Agent shall agree with the Trustee
that such Paying Agent will hold all sums held by it for the payment to
Certificateholders in trust for the benefit of the Certificateholders entitled
thereto until such sums shall be paid to such Certificateholders. Any sums so
held by such Paying Agent shall be held only in Eligible Accounts to the extent
such sums are not distributed to the Certificateholders on the date of receipt
by such Paying Agent.
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ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
Section 6.01. Respective Liabilities of the Depositor and the Master
Servicer.
The Depositor and the Master Servicer shall each be liable in
accordance herewith only to the extent of the obligations specifically and
respectively imposed upon and undertaken by the Depositor and the Master
Servicer herein. By way of illustration and not limitation, the Depositor is not
liable for the servicing and administration of the Mortgage Loans, nor is it
obligated by Section 7.01 or Section 10.01 to assume any obligations of the
Master Servicer or to appoint a designee to assume such obligations, nor is it
liable for any other obligation hereunder that it may, but is not obligated to,
assume unless it elects to assume such obligation in accordance herewith.
Section 6.02. Merger or Consolidation of the Depositor or the
Master Servicer; Assignment of Rights and
Delegation of Duties by Master Servicer.
(a) The Depositor and the Master Servicer will each keep in full
effect its existence, rights and franchises as a corporation under the laws of
the state of its incorporation, and will each 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.
(b) Any Person into which the Depositor or the Master Servicer may
be merged or consolidated, or any corporation resulting from any merger or
consolidation to which the Depositor or the Master Servicer shall be a party, or
any Person succeeding to the business of the Depositor or the Master Servicer,
shall be the successor of the Depositor or the Master Servicer, as the case may
be, hereunder, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor or surviving Person to
the Master Servicer shall be qualified to service mortgage loans on behalf of
FNMA or FHLMC; and provided further that each Rating Agency's ratings, if any,
of the Class A, Class B or Class R Certificates in effect immediately prior to
such merger or consolidation will not be qualified, reduced or withdrawn as a
result thereof (as evidenced by a letter to such effect from each Rating
Agency).
(c) Notwithstanding anything else in this Section 6.02 and Section
6.04 to the contrary, the Master Servicer may assign its rights and delegate its
duties and obligations under this Agreement; provided that the Person accepting
such assignment or delegation shall be a Person which is qualified to service
mortgage loans on behalf of FNMA or FHLMC, is reasonably satisfactory to the
Trustee and the Depositor, is willing to service the Mortgage Loans and executes
and delivers to the Depositor and the Trustee an agreement, in form and
substance reasonably satisfactory to the Depositor and the Trustee, which
contains an assumption by such Person of the due and punctual performance and
observance of each
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covenant and condition to be performed or observed by the Master Servicer under
this Agreement; provided further that each Rating Agency's rating of the Classes
of Certificates that have been rated in effect immediately prior to such
assignment and delegation will not be qualified, reduced or withdrawn as a
result of such assignment and delegation (as evidenced by a letter to such
effect from each Rating Agency). In the case of any such assignment and
delegation, the Master Servicer shall be released from its obligations under
this Agreement, except that the Master Servicer shall remain liable for all
liabilities and obligations incurred by it as Master Servicer hereunder prior to
the satisfaction of the conditions to such assignment and delegation set forth
in the next preceding sentence.
Section 6.03. Limitation on Liability of the Depositor, the Master
Servicer and Others.
Neither the Depositor, the Master Servicer nor any of the directors,
officers, employees or agents of the Depositor or the Master Servicer shall be
under any liability to the Trust Fund or the Certificateholders for any action
taken or for refraining from the taking of any action in good faith pursuant to
this Agreement, or for errors in judgment; provided, however, that this
provision shall not protect the Depositor, the Master Servicer or any such
Person against any breach of warranties or representations made herein or 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 Depositor, the Master
Servicer and any director, officer, employee or agent of the Depositor or the
Master Servicer may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder. The Depositor, the Master Servicer and any director, officer,
employee or agent of the Depositor or the Master Servicer shall be indemnified
by the Trust Fund and 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 related to any specific
Mortgage Loan or Mortgage Loans (except as any such loss, liability or expense
shall be otherwise reimbursable pursuant to this Agreement) and any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
gross negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties hereunder.
Neither the Depositor nor the Master Servicer shall be under any
obligation to appear in, prosecute or defend any legal or administrative action,
proceeding, hearing or examination that is not incidental to its respective
duties under this Agreement and which in its opinion may involve it in any
expense or liability; provided, however, that the Depositor or the Master
Servicer may in its discretion undertake any such action, proceeding, hearing or
examination that it may deem necessary or desirable in respect to this Agreement
and the rights and duties of the parties hereto and the interests of the
Certificateholders hereunder. In such event, the legal expenses and costs of
such action, proceeding, hearing or examination and any liability resulting
therefrom shall be expenses, costs and liabilities of the Trust Fund, and the
Depositor and the Master Servicer shall be entitled to be reimbursed therefor
out of amounts attributable to the Mortgage Loans on deposit in the Custodial
Account as provided by Section 3.10 and, on the Distribution Date(s) following
such
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reimbursement, the aggregate of such expenses and costs shall be allocated in
reduction of the Accrued Certificate Interest on each Class entitled thereto in
the same manner as if such expenses and costs constituted a Prepayment Interest
Shortfall.
Section 6.04. Company and Master Servicer Not to Resign.
Subject to the provisions of Section 6.02, neither the Depositor nor
the Master Servicer shall resign from its respective obligations and duties
hereby imposed on it except upon determination that its duties hereunder are no
longer permissible under applicable law. Any such determination permitting the
resignation of the Depositor or the Master Servicer shall be evidenced by an
Opinion of Counsel to such effect delivered to the Trustee. No such resignation
by the Master Servicer shall become effective until the Trustee or a successor
servicer shall have assumed the Master Servicer's responsibilities and
obligations in accordance with Section 7.02.
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ARTICLE VII
DEFAULT
Section 7.01. Events of Default.
Event of Default, wherever used herein, means any one of the following
events (whatever reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) the Master Servicer shall fail to distribute or cause
to be distributed to the Holders of Certificates of any Class any
distribution required to be made under the terms of the Certificates of
such Class and this Agreement and, in either case, such failure shall
continue unremedied for a period of 5 days after the date upon which
written notice of such failure, requiring such failure to be remedied,
shall have been given to the Master Servicer by the Trustee or the
Depositor or to the Master Servicer, the Depositor and the Trustee by
the Holders of Certificates of such Class evidencing Percentage
Interests aggregating not less than 25%; or
(ii) the Master Servicer shall fail to observe or perform
in any material respect any other of the covenants or agreements on
the part of the Master Servicer contained in the Certificates of any
Class or in this Agreement and such failure shall continue unremedied
for a period of 30 days (except that such number of days shall be 15
in the case of a failure to pay the premium for any Required
Insurance Policy) 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 the Depositor, or to
the Master Servicer, the Depositor and the Trustee by the Holders of
Certificates of any Class evidencing, in the case of any such
Class, Percentage Interests aggregating not less than 25%; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an involuntary case
under any present or future federal or state bankruptcy, insolvency or
similar law or appointing a conservator or receiver or liquidator in
any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Master
Servicer and such decree or order shall have remained in force
undischarged or unstayed for a period of 60 days; or
(iv) the Master Servicer shall consent to the appointment
of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities, or similar
proceedings of, or relating to, the Master Servicer or of, or relating
to, all or substantially all of the property of the Master Servicer; or
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(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, or commence a voluntary case under, any
applicable insolvency or reorganization statute, make an assignment for
the benefit of its creditors, or voluntarily suspend payment of its
obligations; or
(vi) the Master Servicer shall notify the Trustee pursuant
to Section 4.04(b) that it is unable to deposit in the Certificate
Account an amount equal to the Advance.
If an Event of Default described in clauses (i)-(v) of this Section
shall occur, then, and in each and every such case, so long as such Event of
Default shall not have been remedied, either the Depositor or the Trustee may,
and at the direction of Holders of Certificates entitled to at least 51% of the
Voting Rights, the Trustee shall, by notice in writing to the Master Servicer
(and to the Depositor if given by the Trustee or to the Trustee if given by the
Depositor), terminate all of the rights and obligations of the Master Servicer
under this Agreement and in and to the Mortgage Loans and the proceeds thereof,
other than its rights as a Certificateholder hereunder. If an Event of Default
described in clause (vi) hereof shall occur, the Trustee shall, by notice to the
Master Servicer and the Depositor, immediately terminate all of the rights and
obligations of the Master Servicer under this Agreement and in and to the
Mortgage Loans and the proceeds thereof, other than its rights as a
Certificateholder hereunder as provided in Section 4.04(b). On or after the
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 (other than as a Holder thereof) or the Mortgage Loans or
otherwise, shall subject to Section 7.02 pass to and be vested in the Trustee or
the Trustee's designee appointed pursuant to Section 7.02; 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, including, without limitation,
the transfer to the Trustee or its designee for administration by it of all cash
amounts which shall at the time be credited to the Custodial Account or the
Certificate Account or thereafter be received with respect to the Mortgage
Loans. No such termination shall release the Master Servicer for any liability
that it would otherwise have hereunder for any act or omission prior to the
effective time of such termination.
Section 7.02. Trustee or Company to Act; Appointment of Successor.
On and after the time the Master Servicer receives a notice of
termination pursuant to Section 7.01 or resigns in accordance with Section 6.04,
the Trustee or, upon notice to the Depositor and with the Depositor's consent
(which shall not be unreasonably withheld) a designee (which meets the standards
set forth below) of the Trustee, shall be the successor in all respects to the
Master Servicer in its capacity as servicer under this Agreement and the
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transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Master
Servicer (except for the responsibilities, duties and liabilities contained in
Sections 2.02 and 2.03, excluding the duty to notify related Subservicers or
Sellers as set forth in such Sections, and its obligations to deposit amounts in
respect of losses incurred prior to such notice or termination on the investment
of funds in the Custodial Account or the Certificate Account pursuant to
Sections 3.07(c) and 4.01(b) by the terms and provisions hereof); provided,
however, that any failure to perform such duties or responsibilities caused by
the preceding Master Servicer's failure to provide information required by
Section 4.04 shall not be considered a default by the Trustee hereunder. As
compensation therefor, the Trustee shall be entitled to all funds relating to
the Mortgage Loans which the Master Servicer would have been entitled to charge
to the Custodial Account or the Certificate Account if the Master Servicer had
continued to act hereunder and, in addition, shall be entitled to the income
from any Permitted Investments made with amounts attributable to the Mortgage
Loans held in the Custodial Account or the Certificate Account. If the Trustee
has become the successor to the Master Servicer in accordance with Section 6.04
or Section 7.01, then notwithstanding the above, the Trustee may, if it shall be
unwilling to so act, or shall, if it is unable to so act, appoint, or petition a
court of competent jurisdiction to appoint, any established housing and home
finance institution, which is also a FNMA- or FHLMC-approved mortgage servicing
institution, having a net worth of not less than $10,000,000 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.
Pending appointment of a successor to the Master Servicer hereunder, the Trustee
shall become successor to the Master Servicer and shall act in such capacity as
hereinabove provided. In connection with such appointment and assumption, the
Trustee may make such arrangements for the compensation of such successor out of
payments on Mortgage Loans as it and such successor shall agree; provided,
however, that no such compensation shall be in excess of that permitted the
initial Master Servicer hereunder. The Depositor, the Trustee, the Custodian, if
any, and such successor shall take such action, consistent with this Agreement,
as shall be necessary to effectuate any such succession.
Section 7.03. Notification to Certificateholders.
(a) Upon any such termination or appointment of a successor to the
Master Servicer, the Trustee shall give prompt written notice thereof to
Certificateholders at their respective addresses appearing in the Certificate
Register.
(b) Within 60 days after the occurrence of any Event of Default,
the Trustee shall transmit by mail to all Holders of Certificates notice of each
such Event of Default hereunder known to the Trustee, unless such Event of
Default shall have been cured or waived.
Section 7.04. Waiver of Events of Default.
The Holders representing at least 66% of the Voting Rights affected by
a default or Event of Default hereunder, may waive such default or Event of
Default; provided, however, that (a) a default or Event of Default under clause
(i) of Section 7.01 may be waived only by
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all of the Holders of Certificates affected by such default or Event of Default
and (b) no waiver pursuant to this Section 7.04 shall affect the Holders of
Certificates in the manner set forth in Section 11.01(b)(i), (ii) or (iii). Upon
any such waiver of a default or Event of Default by the Holders representing the
requisite percentage of Voting Rights affected by such default or Event of
Default, such default or Event of Default shall cease to exist and shall be
deemed to have been remedied for every purpose hereunder. No such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon except to the extent expressly so waived.
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ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.01. Duties of Trustee.
(a) 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 or waived), the Trustee shall exercise such of the rights and powers
vested in it by this Agreement, and use the same degree of care and skill in
their exercise as a prudent investor would exercise or use under the
circumstances in the conduct of such investor's own affairs.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement. The Trustee shall notify the
Certificateholders of any such documents which do not materially conform to the
requirements of this Agreement in the event that the Trustee, after so
requesting, does not receive satisfactorily corrected documents.
The Trustee shall forward or cause to be forwarded in a timely fashion
the notices, reports and statements required to be forwarded by the Trustee
pursuant to Sections 4.03, 4.06, 7.03 and 10.01. The Trustee shall furnish in a
timely fashion to the Master Servicer such information as the Master Servicer
may reasonably request from time to time for the Master Servicer to fulfill its
duties as set forth in this Agreement. The Trustee covenants and agrees that it
shall perform its obligations hereunder in a manner so as to maintain the status
of the Trust Fund as a REMIC under the REMIC Provisions and to prevent the
imposition of any federal, state or local income, prohibited transaction,
contribution or other tax on the Trust Fund to the extent that maintaining such
status and avoiding such taxes are reasonably within the control of the Trustee
and are reasonably within the scope of its duties under this Agreement.
(c) No provision of this Agreement shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct; provided, however, that:
(i) Prior to the occurrence of an Event of
Default, and after the curing or waiver 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,
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upon any certificates or opinions furnished to the Trustee by the
Depositor or the Master Servicer and which on their face, do not
contradict the requirements of this Agreement;
(ii) The Trustee shall not be personally liable
for an error of judgment made in good faith by a Responsible Officer or
Responsible Officers of the Trustee, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(iii) 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 Certificateholders of
any Class holding Certificates which evidence, as to such Class,
Percentage Interests aggregating not less than 25% as 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;
(iv) The Trustee shall not be charged with
knowledge of any default (other than a default in payment to the
Trustee) specified in clauses (i) and (ii) of Section 7.01 or an Event
of Default under clauses (iii), (iv) and (v) of Section 7.01 unless a
Responsible Officer of the Trustee assigned to and working in the
Corporate Trust Office obtains actual knowledge of such failure or
event or the Trustee receives written notice of such failure or event
at its Corporate Trust Office from the Master Servicer, the Depositor
or any Certificateholder; and
(v) Except to the extent provided in Section
7.02, no provision in this Agreement shall require the Trustee to
expend or risk its own funds (including, without limitation, the making
of any Advance) or otherwise incur any personal financial liability in
the performance of any of its duties as Trustee hereunder, or in the
exercise of any of its rights or powers, if the Trustee shall have
reasonable grounds for believing that repayment of funds or adequate
indemnity against such risk or liability is not reasonably assured to
it.
(d) The Trustee shall timely pay, from its own funds, the amount
of any and all federal, state and local taxes imposed on the Trust Fund or its
assets or transactions including, without limitation, (A) "prohibited
transaction" penalty taxes as defined in Section 860F of the Code, if, when and
as the same shall be due and payable, (B) any tax on contributions to a REMIC
after the Closing Date imposed by Section 860G(d) of the Code and (C) any tax on
"net income from foreclosure property" as defined in Section 860G(c) of the
Code, but only if such taxes arise out of a breach by the Trustee of its
obligations hereunder, which breach constitutes negligence or willful misconduct
of the Trustee.
Section 8.02. Certain Matters Affecting the Trustee.
(a) Except as otherwise provided in Section 8.01:
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(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 be under no obligation to
exercise any of the trusts or powers vested in it by this Agreement or
to institute, conduct or defend any litigation hereunder or in relation
hereto at the request, order or direction of any of the
Certificateholders, pursuant to the provisions of this Agreement,
unless such Certificateholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby; nothing contained
herein shall, however, relieve the Trustee of the obligation, upon the
occurrence of an Event of Default (which has not been cured), to
exercise such of the rights and powers vested in it by this Agreement,
and to use the same degree of care and skill in their exercise as a
prudent investor would exercise or use under the circumstances in the
conduct of such investor's own affairs;
(iv) The Trustee shall not be personally liable
for any action taken, suffered or omitted by it in good faith and
believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Agreement;
(v) Prior to the occurrence of 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, approval, bond or other paper or document, unless
requested in writing so to do by Holders of Certificates of any Class
evidencing, as to such Class, Percentage Interests, aggregating not
less than 50%; 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
examination shall be paid by the Master Servicer, if an Event of
Default shall have occurred and is continuing, and otherwise by the
Certificateholder requesting the investigation;
(vi) The Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents or attorneys; and
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(vii) To the extent authorized under the Code and
the regulations promulgated thereunder, each Holder of a Class R
Certificate hereby irrevocably appoints and authorizes the Trustee to
be its attorney-in-fact for purposes of signing any Tax Returns
required to be filed on behalf of the Trust Fund. The Trustee shall
sign on behalf of the Trust Fund and deliver to the Master Servicer in
a timely manner any Tax Returns prepared by or on behalf of the Master
Servicer that the Trustee is required to sign as determined by the
Master Servicer pursuant to applicable federal, state or local tax
laws, provided that the Master Servicer shall indemnify the Trustee for
signing any such Tax Returns that contain errors or omissions.
(b) Following the issuance of the Certificates, the Trustee shall
not accept any contribution of assets to the Trust Fund unless it shall have
obtained or been furnished with an Opinion of Counsel to the effect that such
contribution will not (i) cause the Trust Fund to fail to qualify as a REMIC at
any time that any Certificates are outstanding or (ii) cause the Trust Fund to
be subject to any federal tax as a result of such contribution (including the
imposition of any federal tax on "prohibited transactions" imposed under Section
860F(a) of the Code).
Section 8.03. Trustee Not Liable for Certificates or Mortgage Loans.
The recitals contained herein and in the Certificates (other than the
execution of the Certificates and relating to the acceptance and receipt of the
Mortgage Loans) shall be taken as the statements of the Depositor or the Master
Servicer as the case may be, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Agreement or of the Certificates (except that the
Certificates shall be duly and validly executed and authenticated by it as
Certificate Registrar) or of any Mortgage Loan or related document. Except as
otherwise provided herein, the Trustee shall not be accountable for the use or
application by the Depositor or the Master Servicer of any of the Certificates
or of the proceeds of such Certificates, or for the use or application of any
funds paid to the Depositor or the Master Servicer in respect of the Mortgage
Loans or deposited in or withdrawn from the Custodial Account or the Certificate
Account by the Depositor or the Master Servicer.
Section 8.04. Trustee May Own Certificates.
The Trustee 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.
Section 8.05. Master Servicer to Pay Trustee's Fees and Expenses;
Indemnification.
(a) The Master Servicer covenants and agrees to pay to the Trustee
and any co-trustee from time to time, and the Trustee and any co-trustee shall
be entitled to, 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 each of them in the execution of the trusts hereby
created and in the exercise and performance of any of the
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powers and duties hereunder of the Trustee and any co-trustee, and the Master
Servicer will pay or reimburse the Trustee and any co-trustee upon request for
all reasonable expenses, disbursements and advances incurred or made by the
Trustee or any co-trustee in accordance with any of the provisions of this
Agreement (including the reasonable compensation and the expenses and
disbursements of its counsel and of all persons not regularly in its employ, and
the expenses incurred by the Trustee or any co-trustee in connection with the
appointment of an office or agency pursuant to Section 8.12) except any such
expense, disbursement or advance as may arise from its negligence or bad faith.
(b) The Master Servicer agrees to indemnify the Trustee for, and
to hold the Trustee harmless against, any loss, liability or expense incurred
without negligence or willful misconduct on its part, arising out of, or in
connection with, the acceptance and administration of the Trust Fund, including
the costs and expenses (including reasonable legal fees and expenses) of
defending itself against any claim in connection with the exercise or
performance of any of its powers or duties under this Agreement, provided that:
(i) with respect to any such claim, the Trustee shall
have given the Master Servicer written notice thereof promptly after
the Trustee shall have actual knowledge thereof;
(ii) while maintaining control over its own defense, the
Trustee shall cooperate and consult fully with the Master Servicer in
preparing such defense; and
(iii) notwithstanding anything in this Agreement to the
contrary, the Master Servicer shall not be liable for settlement of any
claim by the Trustee entered into without the prior consent of the
Master Servicer which consent shall not be unreasonably withheld.
No termination of this Agreement shall affect the obligations created by this
Section 8.05(b) of the Master Servicer to indemnify the Trustee under the
conditions and to the extent set forth herein.
Notwithstanding the foregoing, the indemnification provided by the
Master Servicer in this Section 8.05(b) shall not pertain to any loss, liability
or expense of the Trustee, including the costs and expenses of defending itself
against any claim, incurred in connection with any actions taken by the Trustee
at the direction of Certificateholders pursuant to the terms of this Agreement.
Section 8.06. Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a corporation or a national
banking association having its principal office in a state and city acceptable
to the Depositor and organized and doing business under the laws of such state
or the United States of America, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by federal or state
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authority. If such corporation or national banking association publishes reports
of condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section the combined capital and surplus of such corporation 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, the Trustee shall
resign immediately in the manner and with the effect specified in Section 8.07.
Section 8.07. Resignation and Removal of the Trustee.
(a) The Trustee may at any time resign and be discharged from the
trusts hereby created by giving written notice thereof to the Depositor. Upon
receiving such notice of resignation, the Depositor shall promptly appoint a
successor trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Trustee and one copy to the
successor trustee. If no successor trustee shall have been so appointed and 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.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.06 and shall fail to resign after
written request therefor by the Depositor, or if at any time the Trustee shall
become incapable of acting, or shall be adjudged bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Depositor may 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. In addition, in the
event that the Depositor determines that the Trustee has failed (i) to
distribute or cause to be distributed to Certificateholders any amount required
to be distributed hereunder, if such amount is held by the Trustee or its Paying
Agent (other than the Master Servicer or the Depositor) for distribution or (ii)
to otherwise observe or perform in any material respect any of its covenants,
agreements or obligations hereunder, and such failure shall continue unremedied
for a period of 5 days (in respect of clause (i) above) or 30 days (in respect
of clause (ii) above) after the date on which written notice of such failure,
requiring that the same be remedied, shall have been given to the Trustee by the
Depositor, then the Depositor may remove the Trustee and appoint a successor
trustee by written instrument delivered as provided in the preceding sentence.
In connection with the appointment of a successor trustee pursuant to the
preceding sentence, the Depositor shall, on or before the date on which any such
appointment becomes effective, obtain from each Rating Agency written
confirmation that the appointment of any such successor trustee will not result
in the reduction of the ratings on any class of Certificates below the lesser of
the then current or original ratings on such Certificates.
(c) The Holders of Certificates entitled to at least 51% of the
Voting Rights may at any time remove the Trustee and appoint a successor trustee
by written instrument or instruments, in triplicate, signed by such Holders or
their attorneys-in-fact duly authorized,
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one complete set of which instruments shall be delivered to the Depositor, one
complete set to the Trustee so removed and one complete set to the successor so
appointed.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 8.08.
Section 8.08. Successor Trustee.
(a) Any successor trustee appointed as provided in Section 8.07
shall execute, acknowledge and deliver to the Depositor and to its predecessor
trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee shall become effective and such successor trustee,
without any further act, deed or conveyance, shall become fully vested with all
the rights, powers, duties and obligations of its predecessor hereunder, with
the like effect as if originally named as trustee herein. The predecessor
trustee shall deliver to the successor trustee all Mortgage Files and related
documents and statements held by it hereunder (other than any Mortgage Files at
the time held by a Custodian, which shall become the agent of any successor
trustee hereunder), and the Depositor, the Master Servicer and the predecessor
trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for more fully and certainly vesting and confirming
in the successor trustee all such rights, powers, duties and obligations.
(b) No successor trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 8.06.
(c) Upon acceptance of appointment by a successor trustee as
provided in this Section, the Depositor shall mail notice of the succession of
such trustee hereunder to all Holders of Certificates at their addresses as
shown in the Certificate Register. If the Depositor fails to mail such notice
within 10 days after acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Depositor.
Section 8.09. Merger or Consolidation of Trustee.
Any corporation or national banking association into which the Trustee
may be merged or converted or with which it may be consolidated or any
corporation or national banking association resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation or national banking association succeeding to the business of the
Trustee, shall be the successor of the Trustee hereunder, provided such
corporation or national banking association shall be eligible under the
provisions of Section 8.06, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding. The Trustee shall mail notice of any such merger or
consolidation to the Certificateholders at their address as shown in the
Certificate Register.
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Section 8.10. Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions hereof, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust Fund or property securing the same may at the time be located,
the Master Servicer and the Trustee acting jointly shall have the power and
shall execute and deliver all instruments to appoint one or more Persons
approved by the Trustee to act as co-trustee or co-trustees, jointly with the
Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and to vest in such Person or Persons, in such capacity, such title
to the Trust Fund, or any part thereof, and, subject to the other provisions of
this Section 8.10, such powers, duties, obligations, rights and trusts as the
Master Servicer and the Trustee may consider necessary or desirable. If the
Master Servicer shall not have joined in such appointment within 15 days after
the receipt by it of a request so to do, or in case an Event of Default shall
have occurred and be continuing, the Trustee alone shall have the power to make
such appointment. No co-trustee or separate trustee hereunder shall be required
to meet the terms of eligibility as a successor trustee under Section 8.06
hereunder and no notice to Holders of Certificates of the appointment of
co-trustee(s) or separate trustee(s) shall be required under Section 8.08
hereof.
(b) In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 8.10 all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee, and such separate trustee or co-trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed (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 Fund or any
portion thereof in any such jurisdiction) shall be exercised and performed by
such separate trustee or co-trustee at the direction of the Trustee.
(c) Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VIII. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee.
(d) Any separate trustee or co-trustee may, at any time,
constitute the Trustee, its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
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exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
[Section 8.11. Appointment of Custodians.
The Trustee may, with the consent of the Master Servicer and the
Depositor, appoint one or more Custodians who are not Affiliates of the
Depositor, the Master Servicer or any Seller to hold all or a portion of the
Mortgage Files as agent for the Trustee, by entering into a Custodial Agreement.
Subject to 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 $15,000,000 and shall be
qualified to do business in the jurisdiction in which it holds any Mortgage
File. Each Custodial Agreement may be amended only as provided in Section 11.01.
The Trustee shall notify the Certificateholders of the appointment of any
Custodian (other than the Custodian appointed as of the Closing Date) pursuant
to this Section 8.11.]
Section 8.12. Appointment of Office or Agency.
The Trustee will maintain an office or agency in the City of New York
where Certificates may be surrendered for registration of transfer or exchange.
The Trustee initially designates its offices located at
________________________________________ for the purpose of keeping the
Certificate Register. The Trustee will maintain an office at the address stated
in Section 11.05(c) hereof where notices and demands to or upon the Trustee in
respect of this Agreement may be served.
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ARTICLE IX
TERMINATION
Section 9.01. Termination Upon Purchase by the Master Servicer or the
Depositor or Liquidation of All Mortgage Loans.
(a) Subject to Section 9.02, the respective obligations and
responsibilities of the Depositor, the Master Servicer and the Trustee created
hereby in respect of the Certificates (other than the obligation of the Trustee
to make certain payments after the Final Distribution Date to Certificateholders
and the obligation of the Depositor to send certain notices as hereinafter set
forth) 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 later of the final payment or other
liquidation (or any Advance with respect thereto) of the last Mortgage
Loan remaining in the Trust Fund or the disposition of all property
acquired upon foreclosure or deed in lieu of foreclosure of any
Mortgage Loan, or
(ii) the purchase by the Master Servicer or the
Depositor of all Mortgage Loans and all property acquired in respect of
any Mortgage Loan remaining in the Trust Fund at a price equal to 100%
of the unpaid principal balance of each Mortgage Loan or, if less than
such unpaid principal balance, the fair market value of the related
underlying property of such Mortgage Loan with respect to Mortgage
Loans as to which title has been acquired if such fair market value is
less than such unpaid principal balance (net of any unreimbursed
Advances attributable to principal) on the day of repurchase plus
accrued interest thereon at the Net Mortgage Rate to, but not
including, the first day of the month in which such repurchase price is
distributed, 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 and provided further that the purchase price set
forth above shall be increased as is necessary, as determined by the
Master Servicer, to avoid disqualification of the Trust Fund as a
REMIC.
The right of the Master Servicer or the Depositor to purchase all the
assets of the Trust Fund pursuant to clause (ii) above is conditioned upon the
Pool Stated Principal Balance as of the Final Distribution Date being less than
____________ percent of the Cutoff Date Principal Balance of the Mortgage Loans.
If such right is exercised by the Master Servicer, the Master Servicer shall be
deemed to have been reimbursed for the full amount of any unreimbursed Advances
theretofore made by it with respect to the Mortgage Loans. In addition, the
Master Servicer or the Depositor, as applicable, shall provide to the Trustee
the certification required by Section 3.15 and the Trustee and any Custodian
shall, promptly following payment of the purchase price, release to the Master
Servicer or the Depositor, as applicable, the Mortgage Files pertaining to the
Mortgage Loans being purchased.
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(b) The Master Servicer or, in the case of a final distribution as
a result of the exercise by the Depositor of its right to purchase the assets of
the Trust Fund, the Depositor shall give the Trustee not less than 60 days'
prior notice of the Distribution Date on which the Master Servicer or the
Depositor, as applicable, anticipates that the final distribution will be made
to Certificateholders (whether as a result of the exercise by the Master
Servicer or the Depositor of its right to purchase the assets of the Trust Fund
or otherwise). Notice of any termination, specifying the anticipated 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 (if so required by the terms hereof) for payment of the final
distribution and cancellation, shall be given promptly by the Master Servicer or
the Depositor, as applicable (if it is exercising its right to purchase the
assets of the Trust Fund), or by the Trustee (in any other case) by letter to
Certificateholders mailed not earlier than the ____th day and not later than the
____th day of the month next preceding the month of such final distribution
specifying:
(i) the anticipated Final Distribution Date upon
which final payment of the Certificates is anticipated to be made upon
presentation and surrender of Certificates at the office or agency of
the Trustee therein designated,
(ii) the amount of any such final payment, if
known, and
(iii) that the Record Date otherwise applicable to
such Distribution Date is not applicable and that payment will be made
only upon presentation and surrender of the Certificates at the office
or agency of the Trustee therein specified.
If the Master Servicer or the Depositor, as applicable, is obligated to give
notice to Certificateholders as aforesaid, it shall give such notice to the
Certificate Registrar at the time such notice is given to Certificateholders. In
the event such notice is given by the Master Servicer or the Depositor, the
Master Servicer or the Depositor, as applicable, shall deposit in the
Certificate Account before the Final Distribution Date in immediately available
funds an amount equal to the purchase price for the assets of the Trust Fund
computed as above provided.
(c) Upon presentation and surrender of the Certificates by the
Certificateholders thereof, the Trustee shall distribute to the
Certificateholders (i) the amount otherwise distributable on such Distribution
Date, if not in connection with the Master Servicer's or the Depositor's
election to repurchase, or (ii) if the Master Servicer or the Depositor elected
to so repurchase, an amount determined as follows: (A) with respect to each
Certificate the outstanding Certificate Principal Balance thereof, plus one
month's Accrued Certificate Interest and any previously unpaid Accrued
Certificate Interest, subject to the priority set forth in Section 4.02(a), and
(B) with respect to the Class R Certificates, any excess of the amounts
available for distribution (including the repurchase price specified in clause
(ii) of subsection (a) of this Section) over the total amount distributed under
the immediately preceding clause (A).
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(d) In the event that any Certificateholders shall not surrender
their Certificates for final payment and cancellation on or before the Final
Distribution Date (if so required by the terms hereof), the Trustee shall on
such date cause all funds in the Certificate Account not distributed in 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 or
the Depositor, as applicable (if it exercised its right to purchase the assets
of the Trust Fund), 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 six months after the second notice any Certificate shall not
have been surrendered for cancellation, the Trustee shall take appropriate steps
as directed by the Master Servicer or the Depositor, as applicable, to contact
the remaining Certificateholders concerning surrender of their Certificates. The
costs and expenses of maintaining the escrow account and of contacting
Certificateholders shall be paid out of the assets which remain in the escrow
account. If within nine months after the second notice any Certificates shall
not have been surrendered for cancellation, the Trustee shall pay to the Master
Servicer or the Depositor, as applicable, all amounts distributable to the
holders thereof and the Master Servicer or the Depositor, as applicable, shall
thereafter hold such amounts until distributed to such holders. No interest
shall accrue or be payable to any Certificateholder on any amount held in the
escrow account or by the Master Servicer or the Depositor, as applicable, as a
result of such Certificateholder's failure to surrender its Certificate(s) for
final payment thereof in accordance with this Section 9.01.
Section 9.02. Additional Termination Requirements.
(a) The Trust Fund shall be terminated in accordance with the
following additional requirements, unless the Trustee and the Master Servicer
have received an Opinion of Counsel (which Opinion of Counsel shall not be an
expense of the Trustee) to the effect that the failure of the Trust Fund to
comply with the requirements of this Section 9.02 will not (i) result in the
imposition on the Trust of taxes on "prohibited transactions," as described in
Section 860F of the Code, or (ii) cause the Trust Fund to fail to qualify as a
REMIC at any time that any Certificate is outstanding:
(i) The Master Servicer shall establish a 90-day
liquidation period for the Trust Fund, and specify the first day of
such period in a statement attached to the Trust Fund's final Tax
Return pursuant to Treasury regulations Section 1.860F-1. The Master
Servicer also shall satisfy all of the requirements of a qualified
liquidation for the Trust Fund, under Section 860F of the Code and
regulations thereunder;
(ii) The Master Servicer shall notify the Trustee
at the commencement of such 90-day liquidation period and, at or prior
to the time of making of the final payment on the Certificates, the
Trustee shall sell or otherwise dispose of all of the remaining assets
of the Trust Fund in accordance with the terms hereof; and
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(iii) If the Master Servicer is exercising its
right to purchase the assets of the Trust Fund, the Master Servicer
shall, during the 90-day liquidation period and at or prior to the
Final Distribution Date, purchase all of the assets of the Trust Fund
for cash; provided, however, that in the event that a calendar quarter
ends after the commencement of the 90-day liquidation period but prior
to the Final Distribution Date, the Master Servicer shall not purchase
any of the assets of the Trust Fund prior to the close of that calendar
quarter.
(b) Each Holder of a Certificate and the Trustee hereby
irrevocably approves and appoints the Master Servicer as its attorney-in-fact to
adopt a plan of complete liquidation for the Trust Fund at the expense of the
Trust Fund in accordance with the terms and conditions of this Agreement.
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[ARTICLE X
REMIC PROVISIONS
Section 10.01. REMIC Administration.
(a) The REMIC Administrator shall make an election to
treat the Trust Fund as a REMIC under the Code and, if necessary, under
applicable state law. Each such election will be made on Form 1066 or other
appropriate federal tax or information return (including Form 8811) or any
appropriate state return for the taxable year ending on the last day of the
calendar year in which the Certificates are issued. For the purposes of the
REMIC election in respect of the Trust Fund, the Class A and Class B
Certificates and shall be designated as the "regular interests" and the Class R
Certificates shall be designated as the sole class of "residual interests" in
the REMIC. The REMIC Administrator and the Trustee shall not permit the creation
of any "interests" (within the meaning of Section 860G of the Code) in the Trust
Fund other than the Class A, Class B and Class R Certificates.
(b) The Closing Date is hereby designated as the "startup
day" of the Trust Fund within the meaning of Section 860G(a)(9) of the Code.
(c) The REMIC Administrator shall hold a Class R
Certificate representing a 0.01% Percentage Interest of the Class R Certificates
and shall be designated as "the tax matters person" with respect to the REMIC in
the manner provided under Treasury regulations section 1.860F-4(d) and temporary
Treasury regulations section 301.6231(a)(7)-1T. ____________________, as tax
matters person, shall (i) act on behalf of the Trust Fund in relation to any tax
matter or controversy involving the Trust Fund and (ii) represent the Trust Fund
in any administrative or judicial proceeding relating to an examination or audit
by any governmental taxing authority with respect thereto. The legal expenses,
including without limitation attorneys' or accountants' fees, and costs of any
such proceeding and any liability resulting therefrom shall be expenses of the
Trust Fund and the REMIC Administrator shall be entitled to reimbursement
therefor out of amounts attributable to the Mortgage Loans on deposit in the
Custodial Account as provided by Section 3.10 unless such legal expenses and
costs are incurred by reason of the REMIC Administrator's willful misfeasance,
bad faith or gross negligence.
(d) The REMIC Administrator shall prepare or cause to be
prepared all of the Tax Returns that it determines are required with respect to
the Trust Fund created hereunder and shall sign and file such Tax Returns in a
timely manner. The expenses of preparing such returns shall be borne by the
REMIC Administrator without any right of reimbursement therefor. The Master
Servicer shall promptly provide the REMIC Administrator with such information as
the REMIC Administrator may from time to time request for the purpose of
enabling the REMIC Administrator to prepare Tax Returns.
(e) The REMIC Administrator shall provide (i) to any
Transferor of a Class R Certificate such information as is necessary for the
application of any tax relating to the transfer of a Class R Certificate to any
Person who is not a Permitted Transferee, (ii) to
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the Trustee and the Trustee shall forward to the Certificateholders such
information or reports as are required by the Code or the REMIC Provisions
including reports relating to interest, original issue discount and market
discount or premium (using the Prepayment Assumption) and (iii) to the Internal
Revenue Service the name, title, address and telephone number of the person who
will serve as the representative of the Trust Fund.
(f) The Master Servicer and the REMIC Administrator shall
take such actions and shall cause the Trust Fund created hereunder to take such
actions as are reasonably within the Master Servicer's or the REMIC
Administrator's control and the scope of its duties more specifically set forth
herein as shall be necessary or desirable to maintain the status thereof as a
REMIC under the REMIC Provisions (and the Trustee shall assist the Master
Servicer and the REMIC Administrator, to the extent reasonably requested by the
Master Servicer and the REMIC Administrator to do so). The Master Servicer and
the REMIC Administrator shall not knowingly or intentionally take any action,
cause the Trust Fund to take any action or fail to take (or fail to cause to be
taken) any action reasonably within its control and the scope of duties more
specifically set forth herein, that, under the REMIC Provisions, if taken or not
taken, as the case may be, could (i) endanger the status of the Trust Fund as a
REMIC or (ii) result in the imposition of a tax upon the Trust Fund (including
but not limited to the tax on prohibited transactions as defined in Section
860F(a)(2) of the Code and the tax on contributions to a REMIC set forth in
Section 860G(d) of the Code) (either such event, an "Adverse REMIC Event")
unless the Master Servicer or the REMIC Administrator, as applicable, has
received an Opinion of Counsel (at the expense of the party seeking to take such
action or, if such party fails to pay such expense, and the Master Servicer or
the REMIC Administrator, as applicable, determines that taking such action is in
the best interest of the Trust Fund and the Certificateholders, at the expense
of the Trust Fund, but in no event at the expense of the Master Servicer, the
REMIC Administrator or the Trustee) to the effect that the contemplated action
will not, with respect to the REMIC created hereunder, endanger such status or,
unless the Master Servicer or the REMIC Administrator, as applicable, determines
in its sole discretion to indemnify the Trust Fund against such tax, result in
the imposition of such a tax. The Trustee shall not take or fail to take any
action (whether or not authorized hereunder) as to which the Master Servicer or
the REMIC Administrator, as applicable, has advised it in writing that it has
received an Opinion of Counsel to the effect that an Adverse REMIC Event could
occur with respect to such action. In addition, prior to taking any action with
respect to the Trust Fund or its assets, or causing the Trust Fund to take any
action, which is not expressly permitted under the terms of this Agreement, the
Trustee will consult with the Master Servicer or the REMIC Administrator, as
applicable, or its designee, in writing, with respect to whether such action
could cause an Adverse REMIC Event to occur with respect to the Trust Fund, and
the Trustee shall not take any such action or cause the Trust Fund to take any
such action as to which the Master Servicer or the REMIC Administrator, as
applicable, has advised it in writing that an Adverse REMIC Event could occur.
The Master Servicer or the REMIC Administrator, as applicable, may consult with
counsel to make such written advice, and the cost of same shall be borne by the
party seeking to take the action not expressly permitted by this Agreement, but
in no event at the expense of the Master Servicer or the REMIC Administrator. At
all times as may be required by the Code, the Master Servicer will to the extent
within its control and the scope of its duties more specifically set forth
herein,
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maintain substantially all of the assets of the Trust Fund as "qualified
mortgages" as defined in Section 860G(a)(3) of the Code and "permitted
investments" as defined in Section 860G(a)(5) of the Code.
(g) In the event that any tax is imposed on "prohibited
transactions" of the Trust Fund created hereunder as defined in Section
860F(a)(2) of the Code, on "net income from foreclosure property" of the Trust
Fund as defined in Section 860G(c) of the Code, on any contributions to the
Trust Fund after the Startup Day therefor pursuant to Section 860G(d) of the
Code, or any other tax is imposed by the Code or any applicable provisions of
state or local tax laws, such tax shall be charged (i) to the Master Servicer,
if such tax arises out of or results from a breach by the Master Servicer of any
of its obligations under this Agreement or the Master Servicer has in its sole
discretion determined to indemnify the Trust Fund against such tax, (ii) to the
Trustee, if such tax arises out of or results from a breach by the Trustee of
any of its obligations under this Article X, or (iii) otherwise against amounts
on deposit in the Custodial Account as provided by Section 3.10 and on the
Distribution Date(s) following such reimbursement the aggregate of such taxes
shall be allocated in reduction of the Accrued Certificate Interest on each
Class entitled thereto in the same manner as if such taxes constituted a
Prepayment Interest Shortfall.
(h) The Trustee and the Master Servicer shall, for
federal income tax purposes, maintain books and records with respect to the
Trust Fund on a calendar year and on an accrual basis or as otherwise may be
required by the REMIC Provisions.
(i) Following the Startup Day, neither the Master
Servicer nor the Trustee shall accept any contributions of assets to the Trust
Fund unless the Master Servicer and the Trustee shall have received an Opinion
of Counsel (at the expense of the party seeking to make such contribution) to
the effect that the inclusion of such assets in the Trust Fund will not cause
the Trust Fund to fail to qualify as a REMIC at any time that any Certificates
are outstanding or subject the Trust Fund to any tax under the REMIC Provisions
or other applicable provisions of federal, state and local law or ordinances.
(j) Neither the Master Servicer nor the Trustee shall
enter into any arrangement by which the Trust Fund will receive a fee or other
compensation for services nor permit either such REMIC to receive any income
from assets other than "qualified mortgages" as defined in Section 860G(a)(3) of
the Code or "permitted investments" as defined in Section 860G(a)(5) of the
Code.
(k) Solely for the purposes of Section
1.860G-1(a)(4)(iii) of the Treasury Regulations, the "latest possible maturity
date" by which Certificate Principal Balance of each Class of Certificates
representing a regular interest in the Trust Fund would be reduced to zero is
______________, 20__, which is the Distribution Date immediately following the
latest scheduled maturity of any Mortgage Loan.
(l) Within 30 days after the Closing Date, the REMIC
Administrator shall prepare and file with the Internal Revenue Service Form
8811, "Information Return for Real
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Estate Mortgage Investment Conduits (REMIC) and Issuers of Collateralized Debt
Obligations" for the Trust Fund.
(m) Neither the Trustee nor the Master Servicer shall
sell, dispose of or substitute for any of the Mortgage Loans (except in
connection with (i) the default, imminent default or foreclosure of a Mortgage
Loan, including but not limited to, the acquisition or sale of a Mortgaged
Property acquired by deed in lieu of foreclosure, (ii) the bankruptcy of the
Trust Fund, (iii) the termination of the Trust Fund pursuant to Article IX of
this Agreement or (iv) a purchase of Mortgage Loans pursuant to Article II or
III of this Agreement) nor acquire any assets for the Trust Fund, nor sell or
dispose of any investments in the Custodial Account or the Certificate Account
for gain nor accept any contributions to the Trust Fund after the Closing Date
unless it has received an Opinion of Counsel that such sale, disposition,
substitution or acquisition will not (a) affect adversely the status of the
Trust Fund as a REMIC or (b) unless the Master Servicer has determined in its
sole discretion to indemnify the Trust Fund against such tax, cause the Trust
Fund to be subject to a tax on "prohibited transactions" or "contributions"
pursuant to the REMIC Provisions.
Section 10.02. Master Servicer and Trustee Indemnification.
(a) The Trustee agrees to indemnify the Trust Fund, the
Depositor, the REMIC Administrator and the Master Servicer for any taxes and
costs including, without limitation, any reasonable attorneys fees imposed on or
incurred by the Trust Fund, the Depositor or the Master Servicer, as a result of
a breach of the Trustee's covenants set forth in Article VIII or this Article X.
(b) The REMIC Administrator agrees to indemnify the Trust
Fund, the Depositor and the Trustee for any taxes and costs (including, without
limitation, any reasonable attorneys' fees) imposed on or incurred by the Trust
Fund, the Depositor or the Trustee, as a result of a breach of the REMIC
Administrator's covenants set forth in this Article X with respect to compliance
with the REMIC Provisions, including without limitation, any penalties arising
from the Trustee's execution of Tax Returns prepared by the REMIC Administrator
that contain errors or omissions; provided, however, that such liability will
not be imposed to the extent such breach is a result of an error or omission in
information provided to the REMIC Administrator by the Master Servicer in which
case Section 10.02(c) will apply.
(c) The Master Servicer agrees to indemnify the Trust
Fund, the Depositor, the REMIC Administrator and the Trustee for any taxes and
costs (including, without limitation, any reasonable attorneys' fees) imposed on
or incurred by the Trust Fund, the Depositor or the Trustee, as a result of a
breach of the Master Servicer's covenants set forth in this Article X or in
Article III with respect to compliance with the REMIC Provisions, including
without limitation, any penalties arising from the Trustee's execution of Tax
Returns prepared by the Master Servicer that contain errors or omissions.]
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ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Amendment.
(a) This Agreement or any Custodial Agreement may be amended from
time to time by the Depositor, the Master Servicer and the Trustee, without the
consent of any of the Certificateholders:
(i) to cure any ambiguity,
(ii) to correct or supplement any provisions
herein or therein, which may be inconsistent with any other provisions
herein or therein or to correct any error,
(iii) to modify, eliminate or add to any of its
provisions to such extent as shall be necessary or desirable to
maintain the qualification of the Trust Fund as a REMIC at all times
that any Certificate is outstanding or to avoid or minimize the risk of
the imposition of any tax on the Trust Fund pursuant to the Code that
would be a claim against the Trust Fund, provided that the Trustee has
received an Opinion of Counsel to the effect that (A) 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
will not adversely affect in any material respect the interests of any
Certificateholder,
(iv) to change the timing and/or nature of
deposits into the Custodial Account or the Certificate Account or to
change the name in which the Custodial Account is maintained, provided
that (A) the Certificate Account Deposit Date shall in no event be
later than the related Distribution Date, (B) such change shall not, as
evidenced by an Opinion of Counsel, adversely affect in any material
respect the interests of any Certificateholder and (C) such change
shall not result in a reduction of the rating assigned to any Class of
Certificates below the lower of the then-current rating or the rating
assigned to such Certificates as of the Closing Date, 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(f) or any other provision hereof restricting
transfer of the Class R Certificates by virtue of their being the
"residual interests" in the Trust Fund, provided that (A) such change
shall not result in reduction of the rating assigned to any such Class
of Certificates below the lower of the then-current rating or the
rating assigned to such Certificates as of the Closing Date, as
evidenced by a letter from each Rating Agency to such effect, and (B)
such change shall not, as evidenced by an Opinion of Counsel (at the
expense of the party seeking so to modify, eliminate or add such
provisions), cause either the Trust Fund or any of the
Certificateholders (other than the transferor)
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to be subject to a federal tax caused by a transfer to a Person that is
not a Permitted Transferee, or
(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.
(b) This Agreement or any Custodial Agreement may also be amended
from time to time by the Depositor, the Master Servicer and the Trustee with the
consent of the Holders of Certificates evidencing in the aggregate not less than
66% of the Percentage 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 which are required to be distributed on any
Certificate without the consent of the Holder of such Certificate,
(ii) reduce the aforesaid percentage of
Certificates of any Class the Holders of which are required to consent
to any such amendment, in any such case without the consent of the
Holders of all Certificates of such Class then outstanding.
(c) 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 (at the expense of the party seeking
such amendment) to the effect that such amendment or the exercise of any power
granted to the Master Servicer, the Depositor or the Trustee in accordance with
such amendment will not result in the imposition of a federal tax on the Trust
Fund or cause the Trust Fund to fail to qualify as a REMIC at any time that any
Certificate is outstanding.
(d) Promptly after the execution of any such amendment 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 11.01 to approve the particular form of
any proposed amendment, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable regulations as the Trustee may prescribe.
Section 11.02. Recordation of Agreement; Counterparts.
(a) 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
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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 (pursuant to the request of Holders of Certificates
entitled to at least 25% of the Voting Rights), 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.
(b) For the purpose of facilitating the recordation of this
Agreement as herein provided and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and such counterparts shall
constitute but one and the same instrument.
Section 11.03. Limitation on Rights of Certificateholders.
(a) The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the
Trust Fund, nor otherwise affect the rights, obligations and liabilities of any
of the parties hereto.
(b) No Certificateholder shall have any right to vote (except as
expressly provided herein) or in any manner otherwise control the operation and
management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of the Certificates,
be construed so as to constitute the Certificateholders from time to time as
partners 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.
(c) No Certificateholder shall have any right by virtue of any
provision of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of default
and of the continuance thereof, as hereinbefore provided, and unless also the
Holders of Certificates of any Class evidencing in the aggregate not less than
25% of the related Percentage Interests of such Class, shall have made written
request upon the Trustee to institute such action, suit or proceeding in its own
name as Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee, for 60 days after its receipt of
such notice, request and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding it being understood and intended,
and being expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
of any Class shall have any right in any manner whatever by virtue of any
provision of this Agreement to affect, disturb or prejudice the rights of the
Holders of any other of such Certificates of such Class or any other Class, or
to obtain or seek to obtain priority over or preference to any other such
Holder, or to enforce any right under this Agreement, except in the manner
herein provided and for the common benefit of Certificateholders of such Class
or all Classes, as the case may be. For the protection and enforcement of the
provisions of this Section 11.03, each
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and every Certificateholder and the Trustee shall be entitled to such relief as
can be given either at law or in equity.
Section 11.04. Governing Law.
This agreement and the Certificates shall be governed by and construed
in accordance with the laws of the State of __________ and the obligations,
rights and remedies of the parties hereunder shall be determined in accordance
with such laws.
Section 11.05. Notices.
All demands and notices hereunder shall be in writing and shall be
deemed to have been duly given if personally delivered at or mailed by
registered mail, postage prepaid (except for notices to the Trustee which shall
be deemed to have been duly given only when received), to (a) in the case of the
Depositor,_____________________________________________________________________,
Attention: __________, or such other address as may hereafter be furnished to
the Master Servicer and the Trustee in writing by the Depositor, (b) in the case
of the Master Servicer,_________________________________________________________
_______ ____, Attention: __________ or such other address as may be hereafter
furnished to the Depositor and the Trustee by the Master Servicer in writing,
(c) in the case of the Trustee, _____________________________________________,
Attention: ____________________________________________ or such other address
as may hereafter be furnished to the Depositor and the Master Servicer in
writing by the Trustee, (d) in the case of [Rating Agency],_____________________
_________, or such other address as may hereafter be furnished to the
Depositor, the Trustee and the Master Servicer in writing by [such Rating
Agency] and (e) in the case of ________________________________, _______________
_________________________ or such other address as may be hereafter furnished
to the Depositor, Trustee, and Master Servicer by [such Rating Agency]. Any
notice required or permitted to be mailed to a Certificateholder shall be given
by first class mail, postage prepaid, at the address of such holder as shown in
the Certificate Register. Any notice so mailed within the time prescribed in
this Agreement shall be conclusively presumed to have been duly given, whether
or not the Certificateholder receives such notice.
Section 11.06. Notices to Rating Agency.
The Depositor, the Master Servicer or the Trustee, as applicable, shall
notify each Rating Agency and any Subservicers at such time as it is otherwise
required pursuant to this Agreement to give notice of the occurrence of, any of
the events described in clause (a), (b), (c), (d), (g), (h), (i) or (j) below or
provide a copy to each Rating Agency at such time as otherwise required to be
delivered pursuant to this Agreement of any of the statements described in
clauses (e) and (f) below:
(a) a material change or amendment to this Agreement,
102
<PAGE> 113
(b) the occurrence of an Event of Default,
(c) the termination or appointment of a successor Master
Servicer or Trustee or a change in the majority ownership of the
Trustee,
(d) the filing of any claim under the Master Servicer's
blanket fidelity bond and the errors and omissions insurance policy
required by Section 3.12 or the cancellation or modification of
coverage under any such instrument,
(e) the statement required to be delivered to the Holders
of each Class of Certificates pursuant to Section 4.03,
(f) the statements required to be delivered pursuant to
Sections 3.18 and 3.19,
(g) a change in the location of the Custodial Account or
the Certificate Account,
(h) the occurrence of any monthly cash flow shortfall to
the Holders of any Class of Certificates resulting from the failure by
the Master Servicer to make an Advance pursuant to Section 4.04,
(i) the occurrence of the Final Distribution Date, and
(j) the repurchase of or substitution for any Mortgage
Loan,
provided, however, that with respect to notice of the occurrence of the events
described in clauses (d), (g) or (h) above, the Master Servicer shall provide
prompt written notice to each Rating Agency and any Subservicers of any such
event known to the Master Servicer.
Section 11.07. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions 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.
103
<PAGE> 114
IN WITNESS WHEREOF, the Depositor, the Master Servicer and the Trustee
have caused their names to be signed hereto by their respective officers
thereunto duly authorized and their respective seals, duly attested, to be
hereunto affixed, all as of the day and year first above written.
BANKAMERICA MORTGAGE SECURITIES, INC.
[Seal]
By:_________________________________
Name:
Title:
Attest:___________________________
Name:
Title:
BANK OF AMERICA [NATIONAL TRUST
AND SAVINGS ASSOCIATION] [, FEDERAL
SAVINGS BANK], as Master Servicer
[Seal]
By:_________________________________
Name:
Title:
Attest:___________________________
Name:
Title:
____________________________________,
as Trustee
[Seal]
By:_________________________________
Name:
Title:
Attest:___________________________
Name:
Title:
<PAGE> 115
STATE OF __________ )
) ss.:
COUNTY OF __________ )
On the ____ day of __________, 19__ before me, a notary public
in and for said State, personally appeared _____________, known to me to be a
______________ of BankAmerica Mortgage Securities, Inc., one of the corporations
that executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
_____________________________________________
Notary Public
[Notarial Seal]
<PAGE> 116
STATE OF __________ )
) ss.:
COUNTY OF __________ )
On the ____ day of __________, 19__ before me, a notary public
in and for said State, personally appeared _______________, known to me to be a
__________ of Bank of America [National Trust and Savings Association] [,
Federal Savings Bank], the [national banking association] [federal savings bank]
that executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
______________________________________
Notary Public
[Notarial Seal]
<PAGE> 117
STATE OF )
) ss.:
COUNTY OF )
On the ____ day of __________, 19__ before me, a notary public
in and for said State, personally appeared ________________, known to me to be a
______________ of ____________________, the [national banking association]
[corporation] that executed the within instrument, and also known to me to be
the person who executed it on behalf of said [association] [corporation], and
acknowledged to me that such [association] [corporation] executed the within
instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
________________________________________
Notary Public
[Notarial Seal]
<PAGE> 118
EXHIBIT A
FORM OF CLASS A CERTIFICATE
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986.
[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 AGREEMENT.]
[THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE PURPOSES OF
APPLYING THE U.S. FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES TO
THIS CERTIFICATE. THE ISSUE DATE OF THIS CERTIFICATE IS ____________, 19__.
ASSUMING THAT THE MORTGAGE LOANS PREPAY AT ____% OF THE STANDARD PREPAYMENT
ASSUMPTION (AS DESCRIBED IN THE PROSPECTUS SUPPLEMENT), [AND ASSUMING A CONSTANT
PASS- THROUGH RATE EQUAL TO THE INITIAL PASS-THROUGH RATE,] THIS CERTIFICATE HAS
BEEN ISSUED WITH NO MORE THAN $_____ OF OID PER $1,000 OF INITIAL CERTIFICATE
PRINCIPAL BALANCE, THE YIELD TO MATURITY IS ___% AND THE AMOUNT OF OID
ATTRIBUTABLE TO THE INITIAL ACCRUAL PERIOD IS NO MORE THAN $_______ PER $1,000
OF INITIAL CERTIFICATE PRINCIPAL BALANCE, COMPUTED USING THE APPROXIMATE METHOD.
NO REPRESENTATION IS MADE THAT THE MORTGAGE LOANS WILL PREPAY AT A RATE BASED ON
THE STANDARD PREPAYMENT ASSUMPTION OR AT ANY OTHER RATE OR AS TO THE CONSTANCY
OF THE PASS-THROUGH RATE.]
<PAGE> 119
Certificate No. ____ [___%] Pass-Through Rate
Class A-__ Senior
Date of Pooling and Servicing
Agreement and Cut-off Date:
__________ 1, 19__ Aggregate Initial Certificate Principal
Balance of the Class A-__ Certificates:
First Distribution Date:
__________, ____
Master Servicer: Initial Certificate Principal
Balance of this
Certificate: $_____________]
Assumed Final
Distribution Date: CUSIP ____________
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES __________
evidencing a percentage interest in the distributions allocable to the
Class A-__ Certificates with respect to a Trust Fund consisting
primarily of a pool of conventional one- to four-family [fixed]
[adjustable] interest rate first mortgage loans formed and sold by
BANKAMERICA MORTGAGE SECURITIES, INC.
This Certificate is payable solely from the assets of the Trust Fund,
and does not represent an obligation of or interest in BankAmerica Mortgage
Securities, Inc., the Master Servicer, the Trustee referred to below or any of
their affiliates. Neither this Certificate nor the underlying Mortgage Loans are
guaranteed or insured by any governmental agency or instrumentality or by
BankAmerica Mortgage Securities, Inc., the Master Servicer, the Trustee or any
of their affiliates. None of the Depositor, the Master Servicer or any of their
affiliates will have any obligation with respect to any certificate or other
obligation secured by or payable from payments on the Certificates.
This certifies that _____________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate [(obtained by
dividing the Initial Certificate Principal Balance of this Certificate by the
aggregate Initial Certificate Principal Balance of all Class A-___ Certificates,
both as specified above)] in certain distributions with respect to the Trust
Fund consisting primarily of an interest in a pool of conventional one- to
four-family [fixed] [adjustable] interest rate first mortgage loans (the
"Mortgage Loans"), formed and sold by BankAmerica Mortgage Securities, Inc.
(hereinafter called the "Company," which term includes any successor entity
under the Agreement referred to below). The Trust Fund was
A-2
<PAGE> 120
created pursuant to a Pooling and Servicing Agreement dated as specified above
(the "Agreement") among the Depositor, the Master Servicer and
____________________, as trustee (the "Trustee"), a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned 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 ____ day of each month or, if such ____ day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing as
described in the Agreement, to the Person in whose name this Certificate is
registered at the close of business on the last day (or if such last day is not
a Business Day, the Business Day immediately preceding such last day) of the
month immediately preceding the month of such distribution (the "Record Date"),
from the Available Distribution Amount in an amount equal to the product of the
Percentage Interest evidenced by this Certificate and the amount [(of interest
and principal, if any)] required to be distributed to Holders of Class A-__
Certificates on such Distribution Date.
Distributions on this Certificate will be made either by the Master
Servicer acting on behalf of the Trustee or by a Paying Agent appointed by the
Trustee in immediately available funds (by wire transfer or otherwise) for the
account of the Person entitled thereto if such Person shall have so notified the
Master Servicer or such Paying Agent, or 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 appointed
by the Trustee for that purpose in the City and State of New York. The Initial
Certificate Principal Balance of this Certificate is set forth above. The
Certificate Principal Balance hereof will be reduced to the extent of
distributions allocable to principal and any Realized Losses allocable hereto.
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 Master Servicer funds are advanced
with respect to any Mortgage Loan, such advance is reimbursable to the Master
Servicer, 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 Custodial Account
and/or 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
A-3
<PAGE> 121
purposes including without limitation reimbursement to the Depositor and the
Master Servicer of advances made, or certain expenses incurred, by either of
them.
The Agreement permits, with certain exceptions therein provided, the
amendment of the Agreement and the modification of the rights and obligations of
the Depositor, the Master Servicer and the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer and the Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 66% of the Percentage 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 herefor 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 and, in certain additional circumstances, without the
consent of the Holders of certain Classes of 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
offices or agencies appointed by the Trustee in the City and State of New York,
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.
The Certificates are issuable only as registered Certificates without
coupons in Classes and in 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 may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Depositor, the Master Servicer, the Trustee and the Certificate
Registrar and any agent of the Depositor, 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 Depositor, the
Master Servicer, the Trustee nor any such agent shall be affected by notice to
the contrary.
This Certificate shall be governed by and construed in accordance with
the laws of the State of ____________________.
A-4
<PAGE> 122
The obligations created by the Agreement in respect of the Certificates
and the Trust Fund created thereby shall terminate upon the payment to
Certificateholders of all amounts held by or on behalf of the Trustee and
required to be paid to them pursuant to the Agreement following the earlier of
(i) the maturity or other liquidation 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 Master Servicer or
the Depositor from the Trust Fund of all remaining Mortgage Loans and all
property acquired in respect of such Mortgage Loans, thereby effecting early
retirement of the Certificates. The Agreement permits, but does not require, the
Master Servicer or the Depositor to purchase at a price determined as provided
in the Agreement all remaining Mortgage Loans and all property acquired in
respect of any Mortgage Loan; provided, that such option may only be exercised
if the Pool Stated Principal Balance of the Mortgage Loans as of the
Distribution Date upon which the proceeds of any such purchase are distributed
is less than ____________ percent of the Cut-off Date Principal Balance of the
Mortgage Loans.
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 the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
A-5
<PAGE> 123
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: ______________________________,
as Trustee
By:___________________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-__ Certificates referred to in the
within-mentioned Agreement.
______________________________,
as Certificate Registrar
By:_______________________________
Authorized Signatory
A-6
<PAGE> 124
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) a Percentage 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 Fund.
I (We) further direct the Certificate Registrar to issue a new
Certificate of a like denomination and Class, to the above named assignee and
deliver such Certificate to the following address:_____________________________
_______________________________________________________________________________
Dated:
_________________________________________________
Signature by or on behalf of assignor
__________________________________
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of distribution:
Distributions shall be made, 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.
<PAGE> 125
EXHIBIT B
FORM OF CLASS B CERTIFICATE
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A CERTIFICATES
AND CLASS R CERTIFICATES AS DESCRIBED IN THE AGREEMENT (AS DEFINED 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 AGREEMENT.
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO AN EMPLOYEE BENEFIT OR OTHER PLAN
SUBJECT TO THE PROHIBITED TRANSACTION PROVISIONS OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE"), OR TO ANY PERSON WHO IS USING "PLAN
ASSETS" OF ANY SUCH PLAN TO ACQUIRE THIS CERTIFICATE, UNLESS THE TRANSFEREE
PROVIDES AN OPINION OF COUNSEL OR CERTIFICATION PURSUANT TO SECTION 5.02(e) OF
THE AGREEMENT SATISFACTORY TO THE MASTER SERVICER, THE DEPOSITOR AND THE TRUSTEE
THAT THE PURCHASE OF THIS CERTIFICATE BY, ON BEHALF OF, OR WITH "PLAN ASSETS" OF
SUCH PLAN IS PERMISSIBLE UNDER APPLICABLE LAW, WILL NOT CONSTITUTE OR RESULT IN
A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975
OF THE CODE AND WILL NOT SUBJECT THE MASTER SERVICER, THE DEPOSITOR OR THE
TRUSTEE TO ANY OBLIGATION OR LIABILITY IN ADDITION TO THOSE UNDERTAKEN IN THE
AGREEMENT.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE CODE. THE FOLLOWING
INFORMATION IS PROVIDED SOLELY FOR THE PURPOSES OF APPLYING THE U.S. FEDERAL
INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES TO THIS CERTIFICATE. THE ISSUE
DATE OF THIS CERTIFICATE IS _____________, 19__. ASSUMING THAT THE MORTGAGE
LOANS PREPAY AT ____% OF THE STANDARD PREPAYMENT ASSUMPTION (AS DESCRIBED IN THE
PROSPECTUS SUPPLEMENT), THIS CERTIFICATE HAS BEEN ISSUED WITH NO MORE THAN $___
OF OID PER $1,000 OF INITIAL CERTIFICATE PRINCIPAL BALANCE, THE YIELD TO
MATURITY IS ____% AND THE AMOUNT OF OID ATTRIBUTABLE TO THE INITIAL ACCRUAL
PERIOD IS NO MORE THAN $____ PER $1,000 OF INITIAL CERTIFICATE PRINCIPAL
BALANCE, COMPUTED UNDER THE APPROXIMATE METHOD. NO REPRESENTATION IS MADE THAT
THE MORTGAGE
<PAGE> 126
LOANS WILL PREPAY AT A RATE BASED ON THE STANDARD PREPAYMENT ASSUMPTION OR AT
ANY OTHER RATE.
B-2
<PAGE> 127
Certificate No. __ [____%] Pass-Through Rate
Class B-__ Subordinate Aggregate Certificate
Principal Balance
of the Class B-__
Certificates as of
Date of Pooling and Servicing the Cut-off Date:
Agreement and Cut-off Date: $_______________
____________, 19__
Initial Certificate Principal
Balance of this Certificate:
First Distribution Date: $_______________
__________, 19__
Master Servicer:
Assumed Final Distribution Date:
_____________, 20__
MORTGAGE PASS-THROUGH CERTIFICATE,
SERIES __________
evidencing a percentage interest in any distributions allocable to the
Class B-__ Certificates with respect to the Trust Fund consisting
primarily of a pool of conventional one- to four-family [fixed]
[adjustable] interest rate first mortgage loans formed and sold by
BANKAMERICA MORTGAGE SECURITIES, INC.
This Certificate is payable solely from the assets of the Trust Fund,
and does not represent an obligation of or interest in BankAmerica Mortgage
Securities, Inc., the Master Servicer, the Trustee referred to below or any of
their affiliates. Neither this Certificate nor the underlying Mortgage Loans are
guaranteed or insured by any governmental agency or instrumentality or by
BankAmerica Mortgage Securities, Inc., the Master Servicer, the Trustee or any
of their affiliates. None of the Depositor, the Master Servicer or any of their
affiliates will have any obligation with respect to any certificate or other
obligation secured by or payable from payments on the Certificates.
This certifies that ______________________________ ______________ is
the registered owner of the Percentage Interest evidenced by this Certificate
(obtained by dividing the Certificate Principal Balance of this Certificate by
the aggregate Certificate Principal Balance of all Class B-__ Certificates, both
as specified above) in certain distributions with respect to a Trust Fund
consisting primarily of a pool of conventional one- to four-family [fixed]
[adjustable] interest rate first mortgage loans (the "Mortgage Loans"), formed
and sold by BankAmerica Mortgage Securities, Inc. (hereinafter called the
"Depositor," which term includes any successor entity under the Agreement
referred to below). The Trust Fund was created
B-3
<PAGE> 128
pursuant to a Pooling and Servicing Agreement dated as specified above (the
"Agreement") among the Depositor, the Master Servicer and ____________________,
as trustee (the "Trustee"), a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned 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 ____ day of each month or, if such ____ 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 day (or if such
last day is not a Business Day, the Business Day immediately preceding such last
day) of the month next preceding the month of such distribution (the "Record
Date"), from the Available Distribution Amount in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount (of
interest and principal, if any) required to be distributed to Holders of Class B
Certificates on such Distribution Date.
Distributions on this Certificate will be made either by the Master
Servicer acting on behalf of the Trustee or by a Paying Agent appointed by the
Trustee in immediately available funds (by wire transfer or otherwise) for the
account of the Person entitled thereto if such Person shall have so notified the
Master Servicer or such Paying Agent, or 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 appointed
by the Trustee for that purpose in the City and State of __________. The Initial
Certificate Principal Balance of this Certificate is set forth above. The
Certificate Principal Balance hereof will be reduced to the extent of the
distributions allocable to principal and any Realized Losses allocable hereto.
No transfer of this Class B 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 to be
made, (i) the Trustee or the Depositor may require an opinion of counsel
acceptable to and in form and substance satisfactory to the Trustee and the
Depositor 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 and (ii) the transferee shall execute an investment letter
in the form described by the Agreement. The Holder hereof desiring to effect
such transfer shall, and does hereby agree to, indemnify the Trustee, the
Depositor, the Master Servicer and the Certificate Registrar 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 by the Agreement, stating that
the transferee is not an employee benefit or
B-4
<PAGE> 129
other plan subject to the prohibited transaction provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or Section 4975 of
the Internal Revenue Code (the "Code"), an investment manager, a named fiduciary
or any other person using "plan assets" of any such plan to effect such
acquisition (a "Plan Investor") or (ii) if such transferee is a Plan Investor,
an opinion of counsel acceptable to and in form and substance satisfactory to
the Trustee, the Depositor and the Master Servicer with respect to the
permissibility of such transfer under ERISA and Section 4975 of the Code and
stating, among other things, that the transferee's acquisition of a Class B
Certificate will not constitute or result in a non-exempt prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code.
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 Master Servicer funds are advanced
with respect to any Mortgage Loan, such advance is reimbursable to the Master
Servicer, 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 Custodial Account
and/or 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 without limitation
reimbursement to the Depositor and the Master Servicer of advances made, or
certain expenses incurred, by either of them.
The Agreement permits, with certain exceptions therein provided, the
amendment of the Agreement and the modification of the rights and obligations of
the Depositor, the Master Servicer and the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer and the Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 66% of the Percentage 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 herefor 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 and, in certain additional circumstances, without the
consent of the Holders of certain Classes of 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
offices or agencies appointed by the Trustee in the City and State of New York,
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
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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.
The Certificates are issuable only as registered Certificates without
coupons in Classes and in 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 may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Depositor, the Master Servicer, the Trustee and the Certificate
Registrar and any agent of the Depositor, 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 Depositor, the
Master Servicer, the Trustee nor any such agent shall be affected by notice to
the contrary.
This Certificate shall be governed by and construed in accordance with
the laws of the State of ________________.
The obligations created by the Agreement in respect of the Certificates
and the Trust Fund created thereby shall terminate upon the payment to
Certificateholders of all amounts held by or on behalf of the Trustee and
required to be paid to them pursuant to the Agreement following the earlier of
(i) the maturity or other liquidation 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 Master Servicer or
the Depositor from the Trust Fund of all remaining Mortgage Loans and all
property acquired in respect of such Mortgage Loans, thereby effecting early
retirement of the Certificates. The Agreement permits, but does not require, the
Master Servicer or the Depositor to purchase at a price determined as provided
in the Agreement all remaining Mortgage Loans and all property acquired in
respect of any Mortgage Loan; provided, that such option may only be exercised
if the Pool Stated Principal Balance of the Mortgage Loans as of the
Distribution Date upon which the proceeds of any such purchase are distributed
is less than ____________ percent of the Cut-off Date Principal Balance of the
Mortgage Loans.
Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
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IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: ______________________________,
as Trustee
By:___________________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class B-__ Certificates referred to in the
within-mentioned Agreement.
______________________________,
as Certificate Registrar
By:___________________________
Authorized Signatory
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<PAGE> 132
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) a Percentage 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 Fund.
I (We) further direct the Certificate Registrar to issue a new
Certificate of a like denomination and Class, to the above named assignee and
deliver such Certificate to the following address:_____________________________
_______________________________________________________________________________
Dated: _____________________________________________
Signature by or on behalf of assignor
__________________________________
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of distribution:
Distributions shall be made, 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.
<PAGE> 133
EXHIBIT C
FORM OF CLASS R CERTIFICATE
THIS CERTIFICATE MAY NOT BE HELD BY OR TRANSFERRED TO A NON-UNITED STATES PERSON
OR A DISQUALIFIED ORGANIZATION (AS DEFINED BELOW).
SOLELY 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 AND 860D OF THE INTERNAL REVENUE CODE OF
1986 (THE "CODE").
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO AN EMPLOYEE BENEFIT PLAN SUBJECT
TO THE PROHIBITED TRANSACTION PROVISIONS OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED, ("ERISA"), OR SECTION 4975 OF THE CODE, OR TO
ANY PERSON WHO IS USING "PLAN ASSETS" OF ANY SUCH PLAN TO ACQUIRE THIS
CERTIFICATE, UNLESS THE TRANSFEREE PROVIDES AN OPINION OF COUNSEL SATISFACTORY
TO THE MASTER SERVICER, THE DEPOSITOR AND THE TRUSTEE THAT THE PURCHASE OF THIS
CERTIFICATE BY, ON BEHALF OF, OR WITH "PLAN ASSETS" OF SUCH PLAN IS PERMISSIBLE
UNDER APPLICABLE LAW, WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED
TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE AND WILL NOT
SUBJECT THE MASTER SERVICER, THE DEPOSITOR OR THE TRUSTEE TO ANY OBLIGATION OR
LIABILITY IN ADDITION TO THOSE UNDERTAKEN IN THE AGREEMENT.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY BE MADE ONLY
IF THE PROPOSED TRANSFEREE PROVIDES A TRANSFER AFFIDAVIT TO THE MASTER SERVICER
AND THE TRUSTEE THAT (1) SUCH TRANSFEREE IS NOT (A) THE UNITED STATES, ANY STATE
OR POLITICAL SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL
ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE FOREGOING, (B) ANY
ORGANIZATION (OTHER THAN A COOPERATIVE DESCRIBED IN SECTION 521 OF THE CODE)
WHICH IS EXEMPT FROM THE TAX IMPOSED BY CHAPTER 1 OF THE CODE UNLESS SUCH
ORGANIZATION IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE, (C) ANY
ORGANIZATION DESCRIBED IN SECTION 1381(a)(2)(C) OF THE CODE, (ANY SUCH PERSON
DESCRIBED IN THE FOREGOING CLAUSES (A), (B) OR (C) BEING HEREIN REFERRED TO AS A
"DISQUALIFIED ORGANIZATION") OR (D) AN AGENT OF A DISQUALIFIED ORGANIZATION, (2)
NO PURPOSE OF SUCH TRANSFER IS TO IMPEDE THE ASSESSMENT OR COLLECTION OF TAX AND
(3) SUCH TRANSFEREE SATISFIES CERTAIN ADDITIONAL CONDITIONS RELATING TO THE
FINANCIAL CONDITION OF THE PROPOSED TRANSFEREE. NOTWITHSTANDING THE REGISTRATION
IN THE CERTIFICATE REGISTER OR ANY TRANSFER, SALE OR OTHER DISPOSITION OF THIS
CERTIFICATE TO A DISQUALIFIED ORGANIZATION OR AN AGENT OF A DISQUALIFIED
ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE
<PAGE> 134
OF NO LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE DEEMED TO BE
A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER, INCLUDING, BUT NOT LIMITED TO,
THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE. EACH HOLDER OF THIS
CERTIFICATE BY ACCEPTANCE OF THIS CERTIFICATE SHALL BE DEEMED TO HAVE CONSENTED
TO THE PROVISIONS OF THIS PARAGRAPH.
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Certificate No. ___ [____%] Pass-Through Rate
Class R Senior Aggregate Initial Certificate
Principal Balance of the Class R
Date of Pooling and Servicing Certificates: $100.00
Agreement and Cut-off Date:
_________________, 19__
Initial Certificate Principal
Balance of this Certificate:
First Distribution Date: $_______________
__________, 19__
Percentage Interest:
Master Servicer: _______%
CUSIP ____________
Assumed Final Distribution Date:
_____________, 20__
MORTGAGE PASS-THROUGH CERTIFICATE,
SERIES __________
evidencing a percentage interest in any distributions allocable to the
Class R Certificates with respect to a Trust Fund consisting primarily
of a pool of conventional one- to four-family [fixed] [adjustable]
interest rate first mortgage loans formed and sold by BANKAMERICA
MORTGAGE SECURITIES, INC.
This Certificate is payable solely from the assets of the Trust Fund,
and does not represent an obligation of or interest in BankAmerica Mortgage
Securities, Inc., the Master Servicer, the Trustee referred to below or any of
their affiliates. Neither this Certificate nor the underlying Mortgage Loans are
guaranteed or insured by any governmental agency or instrumentality or by
BankAmerica Mortgage Securities, Inc., the Master Servicer, the Trustee or any
of their affiliates. None of the Depositor, the Master Servicer or any of their
affiliates will have any obligation with respect to any certificate or other
obligation secured by or payable from payments on the Certificates.
This certifies that _________________________ is the registered owner
of the Percentage Interest evidenced by this Certificate (obtained by dividing
the Initial Certificate Principal Balance of this Certificate by the aggregate
Initial Certificate Principal Balance of all Class R Certificates, both as
specified above) in certain distributions with respect to the Trust Fund
consisting primarily of a pool of conventional one- to four-family [fixed]
[adjustable] interest rate first mortgage loans (the "Mortgage Loans"), formed
and sold by BankAmerica Mortgage Securities, Inc. (hereinafter called the
"Depositor," which term includes any successor entity under the Agreement
referred to below). The Trust Fund was created pursuant to a Pooling and
Servicing Agreement dated as specified above (the "Agreement") among the
Depositor, the Master Servicer and ____________________, as trustee (the
"Trustee"), a summary of certain of the pertinent provisions of which is set
forth hereafter. To the extent not defined herein, the
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<PAGE> 136
capitalized terms used herein have the meanings assigned 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 ____ day of each month or, if such ____ day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing as
described in the Agreement, to the Person in whose name this Certificate is
registered at the close of business on the last day (or if such last day is not
a Business Day, the Business Day immediately preceding such last day) of the
month immediately preceding the month of such distribution (the "Record Date"),
from the Available Distribution Amount in an amount equal to the product of the
Percentage Interest evidenced by this Certificate and the amount (of interest
and principal, if any) required to be distributed to Holders of Class R
Certificates on such Distribution Date.
Distributions on this Certificate will be made either by the Master
Servicer acting on behalf of the Trustee or by a Paying Agent appointed by the
Trustee in immediately available funds (by wire transfer or otherwise) for the
account of the Person entitled thereto if such Person shall have so notified the
Master Servicer or such Paying Agent, or 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 appointed
by the Trustee for that purpose in the City and State of New York. The Initial
Certificate Principal Balance of this Certificate is set forth above. The
Certificate Principal Balance hereof will be reduced to the extent of
distributions allocable to principal and any Realized Losses allocable hereto.
Notwithstanding the reduction of the Certificate Principal Balance hereof to
zero, this Certificate will remain outstanding under the Agreement and the
Holder hereof may have additional obligations with respect to this Certificate,
including tax liabilities, and may be entitled to certain additional
distributions hereon, in accordance with the terms and provisions of the
Agreement.
Each Holder of this Certificate will be deemed to have agreed to be
bound by the restrictions set forth in the Agreement to the effect that (i) each
person holding or acquiring any Ownership Interest in this Certificate must be a
United States Person and a Permitted Transferee, (ii) the transfer of any
Ownership Interest in this Certificate will be conditioned upon the delivery to
the Trustee of, among other things, an affidavit to the effect that it is a
United States Person and Permitted Transferee, (iii) any attempted or purported
transfer of any Ownership Interest in this Certificate in violation of such
restrictions will be absolutely null and void and will vest no rights in the
purported transferee, and (iv) if any person other than a United States Person
and a Permitted Transferee acquires any Ownership Interest in this Certificate
in violation of such restrictions, then the Depositor will have the right, in
its sole discretion and without notice to the Holder of this Certificate, to
sell this Certificate to a purchaser selected by the Depositor, which purchaser
may be the Depositor, or any affiliate of the Depositor, on such terms and
conditions as the Depositor may choose.
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<PAGE> 137
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 Master Servicer funds are advanced
with respect to any Mortgage Loan, such advance is reimbursable to the Master
Servicer, 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 Custodial Account
and/or 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 without limitation
reimbursement to the Depositor and the Master Servicer of advances made, or
certain expenses incurred, by either of them.
The Agreement permits, with certain exceptions therein provided, the
amendment of the Agreement and the modification of the rights and obligations of
the Depositor, the Master Servicer and the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer and the Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 66% of the Percentage 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 herefor 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 and, in certain additional circumstances, without the
consent of the Holders of certain Classes of 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
offices or agencies appointed by the Trustee in the City and State of New York,
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.
The Certificates are issuable only as registered Certificates without
coupons in Classes and in 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.
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<PAGE> 138
No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Depositor, the Master Servicer, the Trustee and the Certificate
Registrar and any agent of the Depositor, 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 Depositor, the
Master Servicer, the Trustee nor any such agent shall be affected by notice to
the contrary.
This Certificate shall be governed by and construed in accordance with
the laws of the State of ____________________.
The obligations created by the Agreement in respect of the Certificates
and the Trust Fund created thereby shall terminate upon the payment to
Certificateholders of all amounts held by or on behalf of the Trustee and
required to be paid to them pursuant to the Agreement following the earlier of
(i) the maturity or other liquidation 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 Master Servicer or
the Depositor from the Trust Fund of all remaining Mortgage Loans and all
property acquired in respect of such Mortgage Loans, thereby effecting early
retirement of the Certificates. The Agreement permits, but does not require, the
Master Servicer or the Depositor to purchase at a price determined as provided
in the Agreement all remaining Mortgage Loans and all property acquired in
respect of any Mortgage Loan; provided, that such option may only be exercised
if the Pool Stated Principal Balance of the Mortgage Loans as of the
Distribution Date upon which the proceeds of any such purchase are distributed
is less than ____________________ percent of the Cut-off Date Principal Balance
of the Mortgage Loans.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purpose
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
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<PAGE> 139
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: ______________________________,
as Trustee
By:______________________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class R Certificates referred to in the
within-mentioned Agreement.
______________________________,
as Certificate Registrar
By:___________________________
Authorized Signatory
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<PAGE> 140
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) a Percentage 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 Fund.
I (We) further direct the Certificate Registrar to issue a new
Certificate of a like denomination and Class, to the above named assignee and
deliver such Certificate to the following address:_____________________________
_______________________________________________________________________________
Dated:
_____________________________________
Signature by or on behalf of assignor
_______________________
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of distribution:
Distributions shall be made, 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.
<PAGE> 141
EXHIBIT D
CUSTODIAL AGREEMENT
THIS CUSTODIAL AGREEMENT (as amended and supplemented from time to
time, the "Agreement"), dated as of ____________, 19__, by and among
____________________, as Trustee (including its successors under the Pooling
Agreement defined below, the "Trustee"), BANKAMERICA MORTGAGE SECURITIES, INC.
(together with any successor in interest, the "Depositor"), ____________________
__________, as master servicer (together with any successor in interest or
successor under the Pooling Agreement referred to below, the "Master Servicer"),
and ______________________________ _____________ (together with any successor in
interest or any successor appointed hereunder, the "Custodian").
WITNESSETH THAT:
WHEREAS, the Depositor, the Master Servicer, and the Trustee have
entered into a Pooling and Servicing Agreement dated as of ____________, 19__,
relating to the issuance of BankAmerica Mortgage Securities, Inc., Mortgage
Pass-Through Certificates, Series __________ (as in effect on the date of this
agreement, the "Original Pooling Agreement," and as amended and supplemented
from time to time, the "Pooling 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 Depositor and the Master Servicer under the Pooling 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
Depositor, 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 Agreement, unless otherwise
required by the context herein.
<PAGE> 142
ARTICLE II
Custody of Mortgage Documents
Section 2.1. Custodian to Act as Agent; Acceptance of Mortgage Files.
The Custodian, as the duly appointed agent of the Trustee for these purposes,
acknowledges receipt of the Mortgage Files relating to the Mortgage Loans
identified on the schedule attached hereto (the "Mortgage Files") and declares
that it holds and will hold the Mortgage 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 Mortgage 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 Depositor for the purpose of recording it in the appropriate
public office for real property records, and the Depositor, 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 Mortgage Files.
(a) On or prior to the Closing Date, the Custodian shall deliver to the
Trustee an Initial Certification in the form annexed hereto as Exhibit One
evidencing receipt of a Mortgage File for each Mortgage Loan listed on the
Schedule attached hereto (the "Mortgage Loan Schedule").
(b) Within 45 days of the initial issuance of the Certificates, the
Custodian agrees, for the benefit of Certificateholders, to review, in
accordance with the provisions of Section 2.02 of the Pooling Agreement, each
Mortgage File, and shall deliver to the Trustee an Interim Certification in the
form annexed hereto as Exhibit Two to the effect that all documents required to
be delivered pursuant to Section 2.01(b) of the Pooling Agreement have been
executed and received and that such documents relate to the Mortgage Loans
identified on the Mortgage Loan Schedule, except for any exceptions listed on
Schedule A attached to such Interim Certification. Within 45 days of receipt of
the documents required to be delivered pursuant to Section 2.01(c) of the
Pooling Agreement, the Custodian agrees, for the benefit of Certificateholders,
to review, in accordance with the provisions of Section 2.02 of the Pooling
Agreement, each such document, and shall deliver to the Trustee either (i) an
Interim Certification in the form attached hereto as Exhibit Two to the effect
that all such documents relate to the Mortgage Loans identified on the Mortgage
Loan Schedule, except for any exceptions listed on Schedule A attached to such
Interim Certification or (ii) a Final Certification as set forth in subsection
(c) below. The Custodian shall be under no duty or obligation to inspect, review
or examine said documents, instruments, certificates or other papers to
determine that the same are genuine, enforceable, or appropriate for the
represented purpose or that they have actually been recorded or that they are
other than what they purport to be on their face. If in performing the review
required by this Section 2.3 the Custodian finds any document or documents
constituting a part of a Mortgage File to be defective in any material respect,
the Custodian shall promptly so notify the Depositor, the Master Servicer and
the Trustee. Upon receipt of written notification from the Master Servicer,
signed by a Servicing Officer, that the Master Servicer or a
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<PAGE> 143
Subservicer, as the case may be, has made a deposit into the Certificate Account
in payment for the purchase of the related Mortgage Loan in an amount equal to
the Purchase Price for such Mortgage Loan, the Custodian shall release to the
Master Servicer the related Mortgage File.
(c) Upon receipt of all documents required to be in the Mortgage Files
the Custodian shall deliver to the Trustee a Final Certification in the form
annexed hereto as Exhibit Three evidencing the completeness of the Mortgage
Files.
Upon receipt of written request from the Trustee, the Custodian shall
as soon as practicable supply the Trustee with a list of all of the documents
relating to the Mortgage Loans then contained in the Mortgage Files.
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 Master Servicer as set forth in the Pooling Agreement or by
a Seller in a Mortgage Loan Purchase Agreement with respect to a Mortgage Loan
relating to a Mortgage File, the Custodian shall give prompt written notice to
the Depositor, the Master Servicer and the Trustee.
Section 2.5. Custodian to Cooperate; Release of Mortgage Files. Upon
the repurchase or substitution of any Mortgage Loan pursuant to Article II of
the Pooling Agreement or 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 Custodial Account
pursuant to Section 3.07 of the Pooling Agreement have been or will be so
deposited) of a Servicing Officer and shall request delivery to it of the
Mortgage File. The Custodian agrees, upon receipt of such certification and
request, promptly to release to the Master Servicer the related Mortgage File.
The Master Servicer shall deliver to the Custodian and the Custodian agrees to
accept the Mortgage Note and other documents constituting the Mortgage File with
respect to any Qualified Substitute Mortgage Loan.
From time to time as is appropriate for the servicing or foreclosures
of any Mortgage Loan, including, for this purpose, collection under any Primary
Insurance Policy or any Mortgage Pool Insurance Policy, 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 Mortgage 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 under any of the Required Insurance
Policies. With such certificate, the Master Servicer shall deliver to the
Custodian a trust receipt signed by a Servicing Officer on behalf of the Master
Servicer, and upon receipt of the foregoing, the Custodian shall deliver the
Mortgage File or such document to the Master Servicer. The Master Servicer shall
cause each Mortgage 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 Loan has been liquidated and the Liquidation Proceeds
relating to the Mortgage Loan have been deposited in the Custodial Account or
(ii) the Mortgage File or such document has been delivered to an
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<PAGE> 144
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
Mortgage File or such document was delivered and the purpose or purposes of such
delivery. In the event of the liquidation of a Mortgage Loan, the Custodian
shall deliver the Trust Receipt with respect thereto to the Master Servicer upon
deposit of the related Liquidation Proceeds in the Custodial Account as provided
in the Pooling 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 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 shall be added to the related Mortgage File and, for all
purposes, shall be considered a part of such Mortgage 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 Mortgage
File which are delivered to the Custodian, the Custodian is exclusively the
bailee and agent of the Trustee and has no instructions to hold any Mortgage
Note or Mortgage for the benefit of any person other than 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
Mortgage File shall be delivered by the Custodian to the Depositor or the Master
Servicer or otherwise released from the possession of the Custodian.
Section 3.2. Indemnification. The Depositor 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 reason 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 Depositor, 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, fee 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.
D-4
<PAGE> 145
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] [Trustee] to Pay Custodian's Fees and
Expenses. The [Master Servicer] [Trustee] 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] [Trustee] 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 Mortgage Files itself and give prompt notice thereof to the
Depositor, 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 Mortgage
Files and no successor Custodian shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of 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 and
shall be unaffiliated with the Master Servicer or the Depositor.
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 Depositor and the Master Servicer of the
appointment of any successor Custodian. No successor Custodian shall be
appointed by the Trustee without the prior approval of the Depositor 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.
D-5
<PAGE> 146
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 authority, has a combined capital and surplus
of at least $10,000,000 and is qualified to do business in the jurisdictions in
which it will hold any Mortgage File.
D-6
<PAGE> 147
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 Depositor, the Master Servicer nor
the Trustee shall enter into any amendment hereof except as permitted by the
Pooling Agreement. The Trustee shall give prompt notice to the Custodian of any
amendment or supplement to the Pooling 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 __________ and shall be construed and
enforced in accordance with and governed by the laws of the State of __________.
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 (pursuant to the request of holders of Certificates
evidencing undivided interests in the aggregate of not less than 25% of the
Trust Fund), but only upon direction accompanied by an Opinion of Counsel
reasonably satisfactory to the Master Servicer to the effect that the failure to
effect such recordation is likely to materially and adversely affect 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.
D-7
<PAGE> 148
IN WITNESS WHEREOF, this Agreement is executed as of the date first
above written.
Address: ______________________________,
as Trustee
By:____________________________
Name:
Title:
Address: BANKAMERICA MORTGAGE
SECURITIES, INC.
By:____________________________
Name:
Title:
Address: BANK OF AMERICA [NATIONAL TRUST
AND SAVINGS ASSOCIATION]
[, FEDERAL SAVINGS BANK],
as Master Servicer
By:____________________________
Name:
Title:
Address: ______________________________,
as Custodian
By:____________________________
Name:
Title:
D-8
<PAGE> 149
STATE OF __________ )
) ss.:
COUNTY OF __________ )
On the ____ day of __________, 19__, before me, a notary public in and
for said State, personally appeared _______________________, known to me to be a
______________ of Bank of America [National Trust and Savings Association] [,
Federal Savings Bank], a [__________ banking corporation] [national banking
association] that executed the within instrument, and also known to me to be the
person who executed it on behalf of said [corporation] [association] and
acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
______________________________
Notary Public
[SEAL]
<PAGE> 150
STATE OF __________ )
) ss.:
COUNTY OF __________ )
On the ____ day of __________, 19__, before me, a notary public in and
for said State, personally appeared ____________________, known to me to be a
_____________ of ____________________________________________, a [__________
banking corporation] [national banking association] that executed the within
instrument, and also known to me to be the person who executed it on behalf of
said [corporation] [association], and acknowledged to me that such [corporation]
[association] executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
_________________________________
Notary Public
[SEAL]
<PAGE> 151
STATE OF __________ )
) ss.:
COUNTY OF __________ )
On the ____ day of __________, 19__, before me, a notary public in and
for said State, personally appeared ________________, known to me to be a
______________ of BankAmerica Mortgage Securities, Inc., one of the corporations
that executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
_______________________________________
Notary Public
[Notarial Seal]
STATE OF __________ )
) ss:
COUNTY OF __________ )
On the ____ day of __________, 19__, before me, a notary public in and
for said State, personally appeared ________________, known to me to be a
__________ of ________________________________________, one of the corporations
that executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
_________________________________
Notary Public
[Notarial Seal]
<PAGE> 152
EXHIBIT ONE
FORM OF CUSTODIAN
INITIAL CERTIFICATION
_____________, 19__
[name and address
of Trustee]
Re: Custodial Agreement dated as of ____________, 19__, by and
among ____________________, BankAmerica Mortgage Securities,
Inc., __________ ____________________, and
____________________, ____________________, Mortgage
Pass-Through Certificates, Series __________
Ladies and Gentlemen:
In accordance with Section 2.3 of the above-captioned Custodial
Agreement, and subject to Section 2.02 of the Pooling Agreement, the
undersigned, as Custodian, hereby certifies that it has received a Mortgage File
(which contains an original Mortgage Note) to the extent required in Section
2.01(b) of the Pooling Agreement with respect to each Mortgage Loan listed in
the Mortgage Loan Schedule.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Custodial Agreement.
[name of Custodian]
By:__________________________
Name:________________________
Title:_______________________
<PAGE> 153
EXHIBIT TWO
FORM OF CUSTODIAN INTERIM CERTIFICATION
________________ ____, 19__
[name and address
of Trustee]
Re: Custodial Agreement dated as of ____________, 19__, by and
among ____________________, BankAmerica Mortgage Securities,
Inc., ____________________ __________ and
___________________________________ __________, Mortgage Pass-
Through Certificates, Series ____________________
Ladies and Gentlemen:
In accordance with Section 2.3 of the above-captioned Custodial
Agreement, the undersigned, as Custodian, hereby certifies that it has received
a Mortgage File to the extent required pursuant to Section 2.01(b) of the
Pooling Agreement with respect to each Mortgage Loan listed in the Mortgage Loan
Schedule, and it has reviewed the Mortgage File and the Mortgage Loan Schedule
and has determined that: all required documents have been executed and received
and that such documents related to the Mortgage Loans identified on the Mortgage
Loan Schedule, with any exceptions listed on Schedule A attached hereto.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Custodial Agreement.
[name of Custodian]
By:_________________________
Name:_______________________
Title:______________________
<PAGE> 154
EXHIBIT THREE
FORM OF CUSTODIAN FINAL CERTIFICATION
_____________ ___, 19__
[name and address
of Trustee]
Re: Custodial Agreement dated as of ____________, 19__, by and
among ____________________, BankAmerica Mortgage Securities,
Inc., ____________________ __________ and
___________________________________ __________, Mortgage Pass-
Through Certificates, Series __________
Ladies and Gentlemen:
In accordance with Section 2.3 of the above-captioned Custodial
Agreement, the undersigned, as Custodian, hereby certifies that it has received
a Mortgage File with respect to each Mortgage Loan listed in the Mortgage Loan
Schedule containing with respect to each such Mortgage Loan:
(i) The original Mortgage Note, endorsed without recourse to the
order of the Trustee and showing an unbroken chain of endorsements from
the originator thereof to the Person endorsing it to the Trustee;
(ii) The original Mortgage with evidence of recording indicated
thereon or a copy of the Mortgage certified by the public recording
office in which such mortgage has been recorded;
(iii) An original Assignment of the Mortgage to the Trustee with
evidence of recording indicated thereon or a copy of such assignment
certified by the public recording office in which such assignment has
been recorded;
(iv) With respect to each Mortgage Loan other than a Cooperative
Loan, the original recorded assignment or assignments of the Mortgage
showing an unbroken chain of title from the originator thereof to the
Person assigning it to the Trustee or a
<PAGE> 155
copy of such assignment or assignments of the Mortgage certified by the
public recording office in which such assignment or assignments have
been recorded; and
(v) The original of each modification, assumption agreement or
preferred loan agreement, if any, relating to such Mortgage Loan or a
copy of each modification, assumption agreement or preferred loan
agreement certified by the public recording office in which such
document has been recorded.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Custodial Agreement.
[name of Custodian]
By:_______________________________
Name:_____________________________
Title:____________________________
2
<PAGE> 156
EXHIBIT E
MORTGAGE LOAN SCHEDULE
E-1
<PAGE> 157
EXHIBIT F
FORM OF MORTGAGE LOAN PURCHASE AGREEMENT
<PAGE> 158
BANKAMERICA MORTGAGE SECURITIES, INC.,
DEPOSITOR
AND
____________________,
SELLER
MORTGAGE LOAN PURCHASE AGREEMENT
DATED ____________, 19__
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES __________
<PAGE> 159
MORTGAGE LOAN PURCHASE AGREEMENT
Mortgage Loan Purchase Agreement ("Agreement"), dated ____________,
19__, between BankAmerica Mortgage Securities, Inc., a Delaware corporation (the
"Depositor"), and ____________________, a ____________________ (the "Seller").
PRELIMINARY STATEMENT
The Seller intends to sell certain Mortgage Loans (as defined below) to
the Depositor as provided herein. The Depositor intends to deposit such mortgage
loans into a trust fund (the "Trust Fund") evidenced by mortgage pass-through
certificates (the "Certificates"). The Certificates will be issued pursuant to a
Pooling and Servicing Agreement (the "Pooling Agreement") among the Depositor,
Bank of America [National Trust and Savings Association] [, Federal Savings
Bank], as Master Servicer, and ______________________________, as Trustee (the
"Trustee") dated as of ___________, 19__ (the "Cut-Off Date"). The Certificates
are described more fully in the related Prospectus Supplement (the "Prospectus
Supplement") dated _____________, 199__. Capitalized terms used herein and not
otherwise defined shall have the meanings assigned in the Pooling Agreement.
In consideration of the mutual agreements herein contained, the
Depositor and the Seller hereby agree as follows:
SECTION 1. Agreement to Purchase. The Seller agrees to sell, and the
Depositor agrees to purchase, the mortgage loans (the "Mortgage Loans"),
identified on the schedule annexed hereto as Exhibit 1 (the "Mortgage Loan
Schedule"). The Mortgage Loans will be conventional [fixed] [adjustable] rate
one- to four-family residential mortgage loans with original terms to maturity
of not more than __ years. The Mortgage Loans will have an aggregate outstanding
principal balance as of the close of business on the Cut-Off Date, after giving
effect to any payments due on or before such date whether or not received, of
approximately $______________ (plus or minus 2.5%), or such other amount
acceptable to the Depositor as evidenced by the actual aggregate outstanding
principal balance of the Mortgage Loans accepted by the Depositor for deposit
into the Trust Fund. The sale of the Mortgage Loans shall take place on or prior
to ____________, 19__ or such other date as shall be mutually acceptable to the
parties hereto (the "Closing Date"), subject to the deposit of the Mortgage
Loans into the Trust Fund, the issuance of the Certificates and the sale of the
Certificates by the Depositor pursuant to the Underwriting Agreement (the
"Underwriting Agreement") [and Purchase Agreement (the "Purchase Agreement"),
each] to be entered into between the Depositor and ________________________ (the
"Underwriter"). The purchase price for the Mortgage Loans (the "Purchase Price")
shall be equal to _____% of the aggregate outstanding principal balances thereof
as of the close of business on the Cut-Off Date, together with interest accrued
on such principal balance at a per annum rate equal to ______% from the Cut-Off
Date to but not including the Closing Date. The Purchase Price shall be paid to
the Seller by wire transfer in immediately available funds on the Closing Date
by the Depositor, or as otherwise agreed by the Depositor and the Seller.
<PAGE> 160
Pursuant to the terms of the Pooling Agreement, the Depositor shall
assign to the Trustee all of its right, title and interest in and to the
Mortgage Loans, and other rights and obligations under this Agreement (except
with respect to its rights to either indemnification or notice) and the Trustee
shall succeed to such right, title and interest and rights and obligations
hereunder of the Depositor.
SECTION 2. Conveyance of Mortgage Loans. The Seller hereby agrees to
transfer, assign, set over and otherwise convey to the Depositor, without
recourse but subject to the terms of this Agreement, on the Closing Date and as
of the Cut-Off Date, all the right, title and interest of the Seller in and to
the Mortgage Loans identified on the Mortgage Loan Schedule as of the Closing
Date. The Mortgage Loan Schedule shall conform to the requirements of the
Depositor as set forth in this Agreement and the Pooling Agreement. The Mortgage
Loan Schedule, as amended on the Closing Date if necessary to reflect the actual
Mortgage Loans accepted by the Depositor on the Closing Date in accordance with
Section 3 hereof, shall be used as the Mortgage Loan Schedule under the Pooling
Agreement. In connection with such transfer and assignment, the Seller shall
deliver, or cause to be delivered, to the Trustee or any Custodian designated by
the Trustee (the "Custodian"), the documents or instruments specified in Section
2.01 of the Pooling Agreement with respect to each Mortgage Loan (each such set
of documents, a "Mortgage File"). At least two days prior to the Closing Date,
each Mortgage File shall have been delivered by the Seller to the Trustee or
Custodian, as applicable. All Mortgage Files so delivered will be held by the
Trustee or Custodian in escrow at all times prior to the Closing Date.
In the event that any assignment is lost or returned unrecorded because
of a defect therein, the Seller shall prepare a substitute assignment or cure
such defect and deliver such cured or substituted assignment to the Trustee, as
the case may be, and the Trustee shall, at the expense of the Seller, record and
deliver such assignment in accordance with this Section 2. The Seller will also
pay the fees of the Trustee incurred in connection with the removal and
replacement of each assignment of Mortgage delivered for recording, as well as
the fees of the Trustee incurred in connection with the addition of any title
insurance policy or recorded Mortgage to the related Mortgage File.
Upon sale of the Mortgage Loans by the Seller to the Depositor
hereunder, the ownership of each Mortgage Note, the Mortgage and the contents of
the related Mortgage File is vested in the Depositor and the ownership of all
records and documents with respect to the related Mortgage Loan prepared by or
that come into the possession of the Seller shall immediately vest in the
Depositor. The Seller's records shall accurately reflect the sale of each
Mortgage Loan to the Depositor. In the event that any original document held by
the Seller is required pursuant to the terms of this Section to be a part of a
Mortgage File, such document shall be delivered promptly to the Depositor or its
designee.
SECTION 3. Examination of Mortgage Files and Due Diligence Review. On
or before the Closing Date, the Seller shall either, as specified by the
Depositor, deliver to the Depositor, or its designee, in escrow, or make
available, or cause to be made available, for examination during normal business
hours, all credit files, underwriting documentation and
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<PAGE> 161
Mortgage Files relating to the Mortgage Loans. The fact that the Depositor has
conducted or has failed to conduct any partial or complete examination of the
credit files, underwriting documentation or Mortgage Files relating to the
Mortgage Loans shall not affect the Depositor's, the Trustee's or any holder of
the Certificates' right to demand repurchase of or substitution for the Mortgage
Loans or other relief as provided under this Agreement or to be provided under
the Pooling Agreement.
In addition to the foregoing examination of the Mortgage Files and
related documents, the Seller agrees to allow the Depositor, or its designee,
any representative of a statistical Rating Agency, or the Underwriter, to
examine and audit all books, records and files pertaining to the Mortgage Loans,
the Seller's underwriting procedures and the Seller's ability to perform or
observe all of the terms, covenants and conditions of this Agreement. Such
examinations and audits shall take place at one or more offices of the Seller
during normal business hours and in the course of such examinations and audits,
the Seller will make available to the Depositor, or its designee, adequate
facilities, as well as the assistance of a sufficient number of knowledgeable
and responsible individuals who are familiar with the Mortgage Loans and the
terms of this Agreement and the Seller shall cooperate fully with any such
review in all respects. The Seller agrees to provide the Depositor, its designee
and any representative of a Rating Agency or the Underwriter with all material
information regarding the Seller (including its financial condition), and to
provide access to knowledgeable financial or accounting officers for the purpose
of answering questions with respect to the Seller's financial condition,
financial statements or other developments affecting the Seller. The Depositor
shall, upon reasonable prior notice, also have the right to perform such
examinations and audits or to obtain such material information regarding the
Seller's financial condition and access to the officers described above
following the Closing Date.
The Seller understands and agrees that any information, including but
not limited to financial information, the Seller's mortgage loan underwriting
standards, information regarding the status of the Seller with respect to any
regulatory body or entity and information as to the loss, foreclosure and
delinquency experience of loans originated or acquired by the Seller, obtained
in the examination and review described in the foregoing paragraph may be
disclosed in the Prospectus Supplement. In addition, the Seller will provide at
its own expense a letter from an independent nationally recognized accounting
firm verifying any financial information referred to in the previous sentence as
is reasonably required to be disclosed in such Prospectus Supplement. The
Depositor assumes no responsibility with respect to information referred to in
this paragraph.
SECTION 4. Representations, Warranties and Covenants of the Seller. In
order to induce the Depositor to enter into this Agreement, the Seller hereby
represents, warrants and covenants to the Depositor, and any assignee of the
Depositor, that as of the date hereof and as of the Closing Date (or such other
date specifically provided herein):
(i) The Seller is a corporation, duly organized, validly
existing and in good standing under the laws of the State of
____________________ with full power and authority to carry on its business as
presently conducted by it. The Seller had the full power
F-3
<PAGE> 162
and authority and legal right to originate or acquire the Mortgage Loans. The
Seller has the full power and authority and legal right to own the Mortgage
Loans and to transfer and convey the Mortgage Loans to the Depositor and has the
full power and authority and legal right to execute and deliver, engage in the
transactions contemplated by, and perform and observe the terms and conditions
of, this Agreement.
(ii) This Agreement has been duly and validly authorized,
executed and delivered by the Seller, all requisite corporate action has been or
will have been taken, and (assuming the due authorization, execution and
delivery hereof by the Depositor) constitutes or will constitute the valid,
legal and binding agreements of the Seller, enforceable in accordance with its
terms, except as such enforcement may be limited by (i) laws relating to
bankruptcy, insolvency, reorganization, receivership or moratorium, (ii) other
laws relating to or affecting the rights of creditors generally and by general
equity principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law) or (iii) public policy considerations underlying
the securities laws, to the extent that such public policy considerations limit
the enforceability of the provisions of this Agreement which purport to provide
indemnification from liabilities under applicable securities laws.
(iii) Either (a) no consent, approval, authorization or order
of, registration or filing with, or notice to, any governmental authority or
court is required, under federal or state laws, for the execution, delivery and
performance of or compliance by the Seller with this Agreement or the
consummation by the Seller of any other transaction contemplated hereby or (b)
such consent, approval, authorization or order has been obtained, or such
registration, filing or notice has been made.
(iv) Neither the transfer of the Mortgage Loans to the
Depositor, nor the execution, delivery or performance of this Agreement by the
Seller, conflicts or will conflict with, or results or will result in a breach
of, or constitutes or will constitute a default under (a) any term or provision
of the documents governing the Seller's organization, or (b) any term or
provision of any material agreement, contract, instrument or indenture, to which
the Seller is a party or is bound, or (c) any law, rule, regulation, order,
judgment, writ, injunction or decree of any court or governmental authority
having jurisdiction over the Seller, or results or will result in the creation
or imposition of any lien, charge or encumbrance which, in any of the foregoing
cases, would have a material adverse effect upon the Mortgage Loans or any
documents or instruments evidencing or securing the Mortgage Loans.
(v) There are no actions or proceedings against, or
investigations of, the Seller pending or, to the Seller's knowledge, threatened
against the Seller before any court, administrative agency or other tribunal,
which would reasonably be expected to adversely affect the transfer of the
Mortgage Loans, the issuance of the Certificates, the execution, delivery or
enforceability of this Agreement or have a material adverse effect on the
financial condition of the Seller.
(vi) The information set forth on the Mortgage Loan Schedule
with respect to each Mortgage Loan was true and correct as of the Cut-Off Date.
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<PAGE> 163
(vii) The Seller represents and warrants that each of the
representations and warranties contained in Exhibit 3 hereto is true and correct
and will be true and correct as of the Closing Date.
(viii) The Seller covenants to (a) provide in a timely manner
all of the information regarding itself and the Mortgage Loans as the Depositor
may reasonably request in connection with the preparation of the Prospectus
Supplement, (b) fully cooperate with, and supply all information requested by
the Rating Agencies to the extent practicable, and (c) dedicate adequate
personnel and resources as may be required to comply with all of the terms and
conditions of this Agreement.
(ix) As of the date of the Prospectus Supplement and as of the
Closing Date, the information contained in the Prospectus Supplement with
respect to the Seller's Information (as defined in Section 9(a)) will be true
and accurate and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they are made,
not misleading.
(x) Other than in connection with solicitations or promotions
directed at the general public, the Seller agrees that it will not solicit the
mortgagor with respect to any Mortgage Loan for the purpose of refinancing such
Mortgage Loan.
SECTION 5. Cure, Repurchase and Indemnity Obligations of the Seller.
Each of the representations, warranties and covenants contained in or required
to be made pursuant to Section 4 of this Agreement shall survive the sale of the
Mortgage Loans and shall continue in full force and effect, notwithstanding any
restrictive or qualified endorsement on the mortgage notes and notwithstanding
subsequent termination of this Agreement or the Pooling Agreement. The
representations, warranties and covenants contained in or required to be made
pursuant to Section 4 of this Agreement shall not be impaired by any review or
examination of the Mortgage Files or other documents evidencing or relating to
the Mortgage Loans or any failure on the part of the Depositor to review or
examine such documents and shall inure to the benefit of any transferee of the
Mortgage Loans from the Depositor including, without limitation, the Trustee for
the benefit of the Certificateholders.
If the Depositor or its assignee finds any document or documents
constituting a part of a Mortgage File not to have been executed or received, or
to be unrelated to the Mortgage Loans identified in the Mortgage Loan Schedule,
the Depositor or its assignee shall promptly so notify the Seller. The Seller
hereby covenants and agrees that, if any such defect cannot be corrected or
cured, the Seller shall either (i) repurchase the related Mortgage Loan from the
Depositor or its assignee at the Purchase Price, or (ii) substitute for any
Mortgage Loan to which such defect relates a Qualified Substitute Mortgage Loan,
in either case in accordance with Section 2.04 of the Pooling Agreement.
It is understood and agreed that the representations and warranties set
forth in Exhibit 3 hereto shall survive delivery of the respective Mortgage
Files to the Depositor or its assignee and shall continue throughout the term of
this Agreement. The Seller hereby
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covenants and agrees that if there is a breach of any such representation or
warranty which materially and adversely affects the interests of the Depositor
or its assigns in the related Mortgage Loans, the Seller shall either (i)
repurchase the related Mortgage Loan from the Depositor or its assignee at the
Purchase Price, or (ii) substitute for any Mortgage Loan to which such defect
relates a Qualified Substitute Mortgage Loan, in either case in accordance with
Section 2.04 of the Pooling Agreement. If the aggregate of the principal
balances of the Qualified Substitute Mortgage Loans substituted for a Mortgage
Loan is less than the Principal Balance of such Mortgage Loan, the Seller shall
pay the difference in cash to the Depositor or its assignee, and such payment by
the Seller shall be treated in the same manner as proceeds of the repurchase by
the Seller of a Mortgage Loan. Furthermore, such Qualified Substitute Mortgage
Loan shall otherwise have such characteristics so that the representations and
warranties of the Depositor set forth in Exhibit 3 hereto would not have been
incorrect had such Qualified Substitute Mortgage Loan originally been a Mortgage
Loan. A Qualified Substitute Mortgage Loan may be substituted for a defective
Mortgage Loan whether or not such defective Mortgage Loan is itself a Qualified
Substitute Mortgage Loan.
The Purchase Price for each repurchased Mortgage Loan shall be payable
to the Depositor or its assignee by wire transfer of immediately available funds
to the account specified by the Depositor or its assignee, as applicable, and,
upon receipt by the Depositor or its assignee of written notification of such
deposit signed by an authorized officer, the Depositor or its assignee shall
release to the Seller the related Mortgage 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 Seller or its designee or assignee title to
any Mortgage Loan released pursuant hereto. The obligation of the Seller to
repurchase or substitute any Mortgage Loan as to which such a defect in a
constituent document exists or a breach of the Seller's representations with
respect to the Mortgage Loans which materially and adversely affects the
interests of the Depositor or the Certificateholders in any Mortgage Loan shall
constitute the sole remedy respecting such defects available to the Depositor or
its assignee on behalf of the Certificateholders; provided that this limitation
shall not in any way limit the Depositor's rights or remedies upon breach of any
representation or warranty herein.
SECTION 6. Representations and Warranties of the Depositor. In order to
induce the Seller to enter into this Agreement, the Depositor hereby represents
and warrants to the Seller that as of the [date hereof and as of] the Closing
Date:
(i) The Depositor is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Delaware with full
power and authority to carry on its business as presently conducted by it. The
Depositor has the full power and authority and legal right to execute and
deliver, engage in the transactions contemplated by, and perform and observe the
terms and conditions of, this Agreement.
(ii) This Agreement has been duly and validly authorized,
executed and delivered by the Depositor, all requisite corporate action has been
or will have been taken, and (assuming the due authorization, execution and
delivery hereof by the Seller) constitutes or will constitute the valid, legal
and binding agreement of the Depositor, enforceable in
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accordance with its terms, except as such enforcement may be limited by (i) laws
relating to bankruptcy, insolvency, reorganization, receivership or moratorium,
(ii) other laws relating to or affecting the rights of creditors generally and
by general equity principles (regardless of whether such enforcement is
considered in a proceeding in equity or at law) or (iii) public policy
considerations underlying the securities laws, to the extent that such public
policy considerations limit the enforceability of the provisions of this
Agreement which purport to provide indemnification from liabilities under
applicable securities laws.
(iii) Either (a) no consent, approval, authorization or order
of, registration or filing with, or notice to, any governmental authority or
court is required, under federal or state laws, for the execution, delivery and
performance of or compliance by the Depositor with this Agreement, or the
consummation by the Depositor of any other transaction contemplated hereby or
(b) such consent, approval, authorization or order has been obtained, or such
registration, filing or notice has been made.
(iv) The execution, delivery or performance of this Agreement
by the Depositor does not conflict or will not conflict with, or result or will
result in a breach of, or constitute or will constitute a default under (a) any
term or provision of the documents governing the Depositor's organization, or
(b) any term or provision of any material agreement, contract, instrument or
indenture, to which the Depositor is a party or is bound, or (c) any law, rule,
regulation, order, judgment, writ, injunction or decree of any court or
governmental authority having jurisdiction over the Depositor.
(v) There are no actions or proceedings against, or
investigations of, the Depositor pending or, to the Depositor's knowledge,
threatened against the Depositor before any court, administrative agency or
other tribunal, which would reasonably be expected to adversely affect the
transfer of the Mortgage Loans, the issuance of the Certificates, the execution,
delivery or enforceability of this Agreement or have a material adverse effect
on the financial condition of the Depositor.
SECTION 7. Closing. The closing of the sale of the Mortgage Loans shall
be held by mail on the Closing Date.
The closing shall be subject to each of the following conditions:
(a) All of the representations and warranties of the Seller
and the Depositor shall be true and correct in all material respects as
of the Closing Date;
(b) All Closing Documents specified in Section 8 of this
Agreement, in such forms as are agreed upon and acceptable to the
Depositor and the Seller, shall be duly executed and delivered by all
signatories as required pursuant to the respective terms thereof;
(c) The Seller shall have delivered and released to the
Depositor or its designee, all documents required to be delivered to
the Depositor pursuant to Section 2 of this Agreement;
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(d) The result of the examination and audit performed by the
Depositor pursuant to Section 3 hereof shall be satisfactory to the
Depositor in its sole determination and the parties shall have agreed
to the form and content of the Seller's information (as defined in
Section 9 hereof) to be disclosed in the Prospectus Supplement;
(e) All other terms and conditions of this Agreement required
to be complied with on or before the Closing Date shall have been
complied with and the Seller and the Depositor shall have the ability
to comply with all terms and conditions and perform all duties and
obligations required to be complied with or performed after the Closing
Date; and
(f) All of the terms and conditions of the Underwriting
Agreement [and the Purchase Agreement] required to be complied with on
or before the Closing Date shall have been complied with.
SECTION 8. Closing Documents. The Closing Documents shall consist of
the following:
(a) The Underwriting Agreement duly executed by the Depositor
and the Underwriter, and all exhibits thereto duly executed by all
applicable signatories;
[(b) The Purchase Agreement duly executed by the Depositor and
the Underwriter, and all exhibits thereto duly executed by all
applicable signatories;]
(c) This Agreement duly executed by the Depositor and the
Seller;
(d) A written opinion of the General counsel for the Seller,
substantially in the form of Exhibit 2 annexed hereto, with any
modifications required by any Rating Agency rating the Certificates,
dated the Closing Date and such other written opinions as may be
required by any Rating Agency rating the Certificates;
(e) A letter from ____________________, certified public
accountants, dated the date of the Prospectus Supplement and
satisfactory in form and substance to the Seller, the Depositor, the
Underwriter and their respective counsels, to the effect that they have
performed certain specified procedures, all of which have been agreed
to by the Depositor and the Underwriter, as a result of which they have
determined that certain information of an accounting, financial or
statistical nature set forth in the Prospectus Supplement under the
caption "____________________ ________________________" agrees with the
records of the Seller, excluding any questions of legal interpretation;
and
(f) A cross-receipt dated the Closing Date duly executed by
the Seller and the Depositor.
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SECTION 9. Indemnification. (a) The Seller agrees to indemnify and hold
harmless the Depositor, the Underwriter, their respective officers and
directors, and each person, if any, who controls the Depositor or the
Underwriter within the meaning of either Section 15 of the Securities Act of
1933, as amended (the "1933 Act") or Section 20 of the Securities Exchange Act
of 1934, as amended (the "1934 Act"), against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject under the 1933 Act, the 1934 Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based in whole or in part upon any untrue statement or alleged untrue
statement of a material fact contained in the Prospectus Supplement, or any
omission or alleged omission to state in the Prospectus Supplement a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading, or any
such untrue statement or omission or alleged untrue statement or alleged
omission made in any amendment of or supplement to the Prospectus Supplement, or
elsewhere in reliance upon any information furnished to the Depositor by the
Seller or approved by the Seller, or upon a defective document or a breach or
alleged breach of the representations, warranties, covenants or agreements of
the Seller as set forth in this Agreement or in any exhibit hereto
(collectively, the "Seller's Information"), it being acknowledged that all
statements set forth in the Prospectus Supplement under the caption
"____________________ ____________________________________" or elsewhere in the
Prospectus Supplement with respect to the subjects discussed under such captions
will be made in reliance upon information furnished or approved by the Seller.
The Seller acknowledges that the Underwriter will enter into the Underwriting
Agreement in reliance upon this indemnity agreement of the Seller. This
indemnity agreement will be in addition to any liability which the Seller may
otherwise have.
(b) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 9(a) above, such person (the "indemnified party")
shall promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the reasonable
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the reasonable fees and expenses of such counsel shall be at the
expense of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm for all such indemnified parties. The
indemnifying party may, at its option, at any time upon written notice to the
indemnified party, assume the defense of any proceeding and may designate
counsel satisfactory to the indemnifying party in connection therewith provided
that the counsel so designated would
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have no actual or potential conflict of interest in connection with such
representation. Unless it shall assume the defense of any proceeding, the
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. If the indemnifying party assumes the defense of
any proceeding, it shall be entitled to settle such proceeding with the consent
of the indemnified party or, if such settlement provides for release of the
indemnified party in connection with all matters relating to the proceeding
which have been asserted against the indemnified party in such proceeding by the
other parties to such settlement, without the consent of the indemnified party.
(c) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party under Section 9(a) hereof or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
the indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities, in such proportion as is
appropriate to reflect the relative fault of the indemnified and indemnifying
parties in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the indemnified and indemnifying parties
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by such parties.
(d) The Depositor and the Seller agree that it would not be just and
equitable if contribution pursuant to Section 9(c) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the considerations referred to in Section 9(c) above. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in this Section 9 shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim, except where the indemnified party is required to bear such
expenses pursuant to this Section 9, which expenses the indemnifying party shall
pay as and when incurred, at the request of the indemnified party, to the extent
that the indemnifying party will be ultimately obligated to pay such expenses.
In the event that any expenses so paid by the indemnifying party are
subsequently determined to not be required to be borne by the indemnifying party
hereunder, the party which received such payment shall promptly refund the
amount so paid to the party which made such payment. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
(e) The indemnity and contribution agreements contained in this Section
9 shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by the Depositor or
any person controlling the Depositor or by or on behalf of the Seller and their
respective directors or officers or any person controlling the Seller, and (iii)
acceptance of and payment for any of the Certificates.
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SECTION 10. Costs. The Seller shall pay directly all of its own
expenses, including out-of-pocket expenses, the expenses of the preparation and
recording of assignments of Mortgage pursuant to Section 2 hereof and the
delivery of documents required pursuant to Section 2 hereof to the Trustee and
its attorney fees.
SECTION 11. Servicing. The Mortgage Loans are to be delivered free and
clear of any servicing agreements with third party servicers.
SECTION 12. Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered or mailed by registered mail, postage prepaid, return receipt
requested, to the following addresses: if to the Depositor, addressed to the
Depositor at ________________________________________________
______________________________ Attention: ____________________ or to such other
address as the Depositor may designate in writing to the Seller; or if to the
Seller, addressed to the Seller at ___________________________________________,
Attention: ________________, or to such other addresses as the Seller may
designate in writing to the Depositor.
SECTION 13. Severability of Provisions. Any part, provision,
representation, warranty or covenant of this Agreement that is prohibited or
that is held to be void or unenforceable shall be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any part, provision, representation or warranty of this
Agreement that is prohibited or unenforceable or is held to be void or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof.
SECTION 14. Further Assurances. The Seller and the Depositor each agree
to execute and deliver such instruments and take such actions as the other may,
from time to time, reasonably request in order to effectuate the purpose and to
carry out the terms of this Agreement.
SECTION 15. Survival; Third Party Beneficiary. The Seller and the
Depositor agree that the representations, warranties and agreements made herein
and in any certificate or other instrument delivered pursuant hereto shall be
deemed to be relied upon by the other party, notwithstanding any investigation
heretofore or hereafter made by such party or on such party's behalf, and that
the representations, warranties and agreements made by the Seller and the
Depositor herein or in any such certificate or other instrument shall survive
the delivery of and payment for the Mortgage Loans. The parties hereto agree
that the Underwriter is the intended third party beneficiary of Section 9
hereof, and that the Underwriter may enforce such provision to the same extent
as if the Underwriter were a party to this Agreement.
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SECTION 16. Miscellaneous. (a) This Agreement is to be governed by, and
construed in accordance with, the laws of the State of __________. The rights
and obligations of the Seller under this Agreement shall not be assigned by the
Seller without the prior written consent of the Depositor. The Depositor has the
right to assign its interest under this Agreement, in whole or in part, to the
Trustee as may be required to effect the purposes of the Pooling Agreement, by
written notice to the Seller, without the consent of Seller, and the Trustee
shall thereupon succeed to the rights and obligations hereunder of the
Depositor. Notwithstanding any such assignment of the Depositor's interest under
this Agreement, the Depositor shall be entitled to indemnification from the
Seller in the circumstances and to the extent described in Section 9. Notice is
hereby given to the Seller by the Depositor that the representations and
warranties made by the Seller and contained in Exhibit 3 of this Agreement are
or will be assigned by the Depositor to the Trustee for the benefit of the
Certificateholders, together with such additional representations and warranties
as the Depositor shall specify. The Seller, without any further action on its
part, hereby consents to such assignment. Subject to the foregoing, this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns. This Agreement supersedes all prior
agreements and understandings relating to the subject matter hereof. Neither
this Agreement nor any term hereof may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or termination is
sought. The headings in this Agreement are for purposes of reference only and
shall not limit or otherwise affect the meaning hereof.
It is the express intent of the parties hereto that the conveyance of
the Mortgage Loans by the Seller to the Depositor as provided in Section 2
hereof be, and be construed as, a sale of the Mortgage Loans by the Seller to
the Depositor and not as a pledge of the Mortgage Loans by the Seller to the
Depositor to secure a debt or other obligation of the Seller. However, in the
event that, notwithstanding the aforementioned intent of the parties, the
Mortgage Loans are held to be property of the Seller, then (a) it is the express
intent of the parties that such conveyance be deemed a pledge of the Mortgage
Loans by the Seller to the Depositor to secure a debt or other obligation of the
Seller and (b) (1) this Agreement shall also be deemed to be a security
agreement within the meaning of Articles 8 and 9 of the applicable Uniform
Commercial Code; (2) the conveyance provided for in Section 2 of this Agreement
shall be deemed to be a grant by the Seller to the Depositor of a security
interest in or lien on all of the Seller's right, title and interest in and to
the Mortgage Loans and all amounts payable to the holders of the Mortgage Loans
in accordance with the terms thereof and all proceeds of the conversion,
voluntary or involuntary, of the foregoing into cash, instruments, securities or
other property, including without limitation all amounts, other than investment
earnings, from time to time held or invested in the Custodial Account or the
Certificate Account (each as defined in the Pooling Agreement) whether in the
form of cash, instruments, securities or other property; (3) the possession by
the Depositor or its agent of mortgage notes, the related mortgages and such
other items of property as constitute instruments, money, negotiable documents
or chattel paper shall be deemed to be "possession by the secured party" for
purposes of perfecting the security interest pursuant to Section 9-305 of the
applicable Uniform Commercial Code; and (4) notifications to persons holding
such property, and acknowledgments, receipts or confirmations from persons
holding such
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<PAGE> 171
property, shall be deemed notifications to, or acknowledgment, receipts or
confirmations from, financial intermediaries, bailees or agents (as applicable)
of the Depositor for the purpose of perfecting such security interest or lien
under applicable law. Any assignment of the interest of the Depositor pursuant
to Section 1 hereof shall also be deemed to be an assignment of any security
interest created hereby. The Seller and the Depositor shall, to the extent
consistent with this Agreement, take such actions as may be necessary to ensure
that, if this Agreement were deemed to create a security interest in or lien on
the Mortgage Loans, such security interest or lien would be deemed to be a
perfected security interest or lien of first priority under applicable law and
will be maintained as such throughout the term of the Agreement.
If the Underwriter does not purchase the Certificates on the Closing
Date, the Seller shall repurchase the Mortgage Loans upon the demand of the
Depositor, for an amount equal to __________% of the aggregate outstanding
principal balances thereof as of the close of business on the Cut-Off Date,
together with interest accrued on such principal balance at a per annum rate
equal to ________% from the Cut-Off Date to but not including such the date of
repurchase. Such amount shall be paid to the Depositor by wire transfer in
immediately available funds to the account designated by the Depositor.
SECTION 17. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall constitute an original but all of which,
when taken together, shall constitute but one legal instrument. It shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
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IN WITNESS WHEREOF, the Seller and the Depositor have caused their
names to be signed by their respective officers thereunto duly authorized as of
the date first above written.
_____________________________,
the Seller
By:__________________________
Name:
Title:
BANKAMERICA MORTGAGE
SECURITIES, INC.,
the Depositor
By:__________________________
Name:
Title:
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<PAGE> 173
EXHIBIT 1
MORTGAGE LOAN SCHEDULE
<PAGE> 174
EXHIBIT 2
Opinion of Seller's General Counsel
<PAGE> 175
EXHIBIT 3
SELLER REPRESENTATIONS AND WARRANTIES
Seller's Representations to be Assigned by Depositor to Trustee
The Seller hereby represents and warrants to the Depositor, as to each
Mortgage Loan, that as of the Closing Date or as of such other date specifically
provided herein:
(i) The information set forth on the Mortgage Loan Schedule with
respect to each Mortgage Loan is true and correct in all material respects as of
the Closing Date;
(ii) As of the Closing Date, each Mortgage is a valid first lien
on an unencumbered estate in fee simple in the related Mortgaged Property
subject only to (a) liens for current real property taxes and special
assessments; (b) covenants, conditions and restrictions, rights of way,
easements and other matters of public record as of the date of recording of such
Mortgage, such exceptions appearing of record being acceptable to mortgage
lending institutions generally or specifically reflected in the appraisal
obtained in connection with the origination of the Mortgage Loan; (c) exceptions
set forth in the title insurance policy relating to such Mortgage, such
exceptions being acceptable to mortgage lending institutions generally; and (d)
other matters to which like properties are commonly subject which do not
materially interfere with the benefits of the security intended to be provided
by the Mortgage;
(iii) As of the Closing Date, the Seller had good title to, and was
the sole owner of, each Mortgage Loan free and clear of any encumbrance or lien,
and immediately upon the transfer and assignment herein contemplated, the
Depositor shall have good title to, and will be the sole legal owner of, each
Mortgage Loan, free and clear of any encumbrance or lien (other than any lien
under this Agreement);
(iv) As of the day prior to the Cut-Off Date, all payments due on
each Mortgage Loan had been made and no Mortgage Loan had been delinquent (i.e.,
was more than 30 days past due) more than once in the preceding 12 months and
any such delinquency lasted for no more than 30 days;
(v) As of the Closing Date, there is no delinquent tax or
assessment lien against any Mortgaged Property;
(vi) As of the Closing Date, there is no offset, defense or
counterclaim to any Mortgage Note, including the obligation of the Mortgagor to
pay the unpaid principal or interest on such Mortgage Note except as may be
provided under the Relief Act and except to the extent that the Buydown
Agreement for a Buydown Loan forgives certain indebtedness of a Mortgagor;
(vii) As of the Closing Date, each Mortgaged Property is free of
damage and in good repair, ordinary wear and tear excepted;
<PAGE> 176
(viii) Each Mortgage Loan at the time it was made complied with all
applicable state and federal laws, including, without limitation, usury, equal
credit opportunity, disclosure and recording laws;
(ix) Each Mortgage Loan was originated by a savings and loan
association, savings bank, credit union, insurance company, or similar
institution which is supervised and examined by a federal or state authority or
by a mortgagee approved by the FHA;
(x) As of the Closing Date, except for Mortgage Loans for which
the related Mortgaged Properties are located in areas where such policies are
generally not available, each Mortgage Loan is covered by an ALTA form or CLTA
form of mortgagee title insurance policy or other form of policy of insurance
which, as of the Closing Date, is acceptable to FNMA or FHLMC, and has been
issued by, and is the valid and binding obligation of, a title insurer
acceptable to FNMA and FHLMC and qualified to do business in the state in which
the related Mortgaged Property is located. Such policy insures the originator of
the Mortgage Loan, its successors and assigns as to the first priority lien of
the Mortgage in the original principal amount of the Mortgage Loan subject to
the exceptions set forth in such policy. With respect to each Mortgage Loan for
which the related Mortgage Property is located in an area where such policies
are generally not available, an attorney's certificate of title was obtained at
origination. Such policy (or certificate of title) is in full force and effect
and will be in full force and effect and inure to the benefit of the
Certificateholders upon the consummation of the transactions contemplated by
this Agreement and the Pooling Agreement and no claims have been made under such
policy (or certificate of title), 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 policy (or certificate of title);
(xi) As of the Closing Date, each Mortgage Loan which had a
Loan-to-Value Ratio at the time of the origination of the Mortgage Loan in
excess of 80% was covered by a Primary Insurance Policy or an FHA insurance
policy or a VA guaranty, and such policy or guaranty is valid and remains in
full force and effect, except for any Mortgage Loan for which the outstanding
Principal Balance thereof at any time subsequent to origination was 80% or less
of the then current value of the related Mortgaged Property (as determined by an
appraisal obtained subsequent to origination);
(xii) Each insurer issuing a Primary Insurance Policy will hold a
rating acceptable to the Rating Agency, and any such policy which is issued to
replace a prior such policy on a Mortgage Loan will be issued by an insurer
which holds a rating by the Rating Agency which will not, and the obtaining of
such replacement policy will not, impair the Ratings;
(xiii) Each Mortgage was documented by appropriate FNMA/FHLMC
mortgage instruments in effect at the time of origination, or other instruments
approved by the Seller;
(xiv) The Mortgaged Property securing each Mortgage is improved
with a one- to four-family dwelling unit, including units in a duplex,
condominium project, townhouse, a planned unit development or a de minimis
planned unit development;
<PAGE> 177
(xv) Each Mortgage and Mortgage Note is the legal, valid and
binding obligation of the maker thereof and is enforceable in accordance with
its terms, except only as such enforcement may be limited by laws affecting the
enforcement of creditors' rights generally;
(xvi) As of the date of origination, as to Mortgaged Properties
which are units in condominiums or planned unit developments, all of such units
met FNMA requirements, are located in a condominium or planned unit development
projects which have received FNMA approval, or are approvable by FNMA;
(xvii) No more than __ of the Mortgage Loans are Buydown Loans;
(xviii) As of the Cut-Off Date, all but approximately ____% (by
Principal Balance) of the Mortgage Loans will be secured by owner-occupied
Mortgaged Properties which are the primary residences of the related Mortgagors,
based solely on representations of the Mortgagors obtained at the origination of
the related Mortgage Loans and approximately ____% (by Principal Balance) of the
Mortgage Loans will be secured by owner-occupied Mortgaged Properties which were
second or vacation homes of the Mortgagors, based solely on such
representations, and ____% (by Principal Balance) of the Mortgage Loans will be
secured by Mortgaged Properties which were investor properties of the related
Mortgagors, based solely on such representations;
(xix) Prior to origination or refinancing, an appraisal of each
Mortgaged Property was made by an appraiser on a form satisfactory to FNMA and
FHLMC;
(xx) The Mortgage Loans have been underwritten substantially in
accordance with the [applicable underwriting standards specified here];
(xxi) All of the Mortgage Loans have due-on-sale clauses; by the
terms of the Mortgage Notes, however, the due on sale provisions may not be
exercised at the time of a transfer if prohibited by federal law; and
(xxii) The Seller used no adverse selection procedures in selecting
the Mortgage Loans from among the outstanding fixed-rate conventional mortgage
loans originated or purchased by it which were available for inclusion in the
Mortgage Pool and as to which the representations and warranties in this Exhibit
could be made.
<PAGE> 178
EXHIBIT G
FORMS OF REQUEST FOR RELEASE
DATE:
TO:
RE: REQUEST FOR RELEASE OF DOCUMENTS
In connection with the administration of the pool of Mortgage Loans held by you
for the referenced pool, we request the release of the Mortgage Loan File
described below.
Pooling and Servicing Agreement Dated:
Series#:
Account#:
Pool#:
Loan#:
Borrower Name(s):
Reason for Document Request: (circle one) Mortgage Loan Prepaid in Full
Mortgage Loan Repurchased
"We hereby certify that all amounts received or to be received in connection
with such payments which are required to be deposited have been or will be so
deposited as provided in the Pooling and Servicing Agreement."
- ----------------------------------
[name of Master Servicer]
Authorized Signature
****************************************************************
TO CUSTODIAN/TRUSTEE: Please acknowledge this request, and check off documents
being enclosed with a copy of this form. You should retain this form for your
files in accordance with the terms of the Pooling and Servicing Agreement.
Enclosed Documents: [ ] Promissory Note
[ ] Primary Insurance Policy
[ ] Mortgage or Deed of Trust
[ ] Assignment(s) of Mortgage or Deed
of Trust
[ ] Title Insurance Policy
[ ] Other:
-----------------------------
- --------------------------------------
Name
- --------------------------------------
Title
- --------------------------------------
Date
<PAGE> 179
EXHIBIT H-1
FORM OF TRANSFER AFFIDAVIT AND AGREEMENT
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 Owner] (record or
beneficial owner of the Mortgage Pass-Through Certificates, Series __________,
Class R (the "Owner")), a [savings institution] [corporation] duly organized and
existing under the laws of [the State of __________________] [the United
States], on behalf of which he makes this affidavit and agreement.
2. That the Owner (i) is not and will not be a "disqualified
organization" as of [date of transfer] within the meaning of Section 860E(e)(5)
of the Internal Revenue Code of 1986, as amended (the "Code"), (ii) will
endeavor to remain other than a disqualified organization for so long as it
retains its ownership interest in the Class R Certificates, and (iii) is
acquiring the Class R Certificates for its own account or for the account of
another Owner from which it has received an affidavit and agreement in
substantially the same form as this affidavit and agreement. (For this purpose,
a "disqualified organization" means the United States, any state or political
subdivision thereof, any agency or instrumentality of any of the foregoing
(other than an instrumentality all of the activities of which are subject to tax
and, except for the Federal Home Loan Mortgage Corporation, a majority of whose
board of directors is not selected by any such governmental entity) or any
foreign government, international organization or any agency or instrumentality
of such foreign government or organization, any rural electric or telephone
cooperative, or any organization (other than certain farmers' cooperatives) that
is generally exempt from federal income tax unless such organization is subject
to the tax on unrelated business taxable income).
3. That the Owner is aware (i) of the tax that would be imposed on
transfers of Class R Certificates to disqualified organizations under the Code,
that applies to all transfers of Class R Certificates after March 31, 1988; (ii)
that such tax would be on the transferor, or, if such transfer is through an
agent (which person includes a broker, nominee or middleman) for a disqualified
organization, on the agent; (iii) that the person otherwise liable for the tax
shall be relieved of liability for the tax if the transferee furnishes to such
person an affidavit that the transferee is not a disqualified organization and,
at the time of transfer, such person does not have actual knowledge that the
affidavit is false; and (iv) that the Class R Certificates may be "noneconomic
residual interests" within the meaning of Treasury regulations promulgated
pursuant to the Code and that the transferor of a noneconomic residual interest
will remain liable for any taxes due with respect to the income on such residual
interest, unless no significant purpose of the transfer was to impede the
assessment or collection of tax.
<PAGE> 180
4. That the Owner is aware of the tax imposed on a "pass-through
entity" holding Class R Certificates if at any time during the taxable year of
the pass-through entity a disqualified organization is the record holder of an
interest in such entity. (For this purpose, a "pass through entity" includes a
regulated investment company, a real estate investment trust or common trust
fund, a partnership, trust or estate, and certain cooperatives.)
5. The Purchaser is not an employee benefit plan or other plan subject
to the prohibited transaction provisions 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 an investment manager, named
fiduciary or a trustee of any such plan, or any other Person acting, directly or
indirectly, on behalf of or purchasing any Certificate with "plan assets" of any
such plan.
6. That the Owner is aware that the Trustee will not register the
transfer of any Class R Certificates unless the transferee, or the transferee's
agent, delivers to it an affidavit and agreement, among other things, in
substantially the same form as this affidavit and agreement. The Owner expressly
agrees that it will not consummate any such transfer if it knows or believes
that any of the representations contained in such affidavit and agreement are
false.
7. That the Owner has reviewed the restrictions set forth on the face
of the Class R Certificates and the provisions of Section 5.02(f) of the Pooling
and Servicing Agreement under which the Class R Certificates were issued (in
particular, clause (iii)(A) and (iii)(B) of Section 5.02(f) which authorize the
Trustee to deliver payments to a person other than the Owner and negotiate a
mandatory sale by the Trustee in the event the Owner holds such Certificates in
violation of Section 5.02(f)). The Owner expressly agrees to be bound by and to
comply with such restrictions and provisions.
8. That the Owner consents to any additional restrictions or
arrangements that shall be deemed necessary upon advice of counsel to constitute
a reasonable arrangement to ensure that the Class R Certificates will only be
owned, directly or indirectly, by an Owner that is not a disqualified
organization.
9. The Owner's Taxpayer Identification Number is ______________.
10. This affidavit and agreement relates only to the Class R
Certificates held by the Owner and not to any other holder of the Class R
Certificates. The Owner understands that the liabilities described herein relate
only to the Class R Certificates.
11. That no purpose of the Owner relating to the transfer of any of the
Class R Certificates by the Owner is or will be to impede the assessment or
collection of any tax.
12. That the Owner has no present knowledge or expectation that it will
be unable to pay any United States taxes owed by it so long as any of the
Certificates remain outstanding. In this regard, the Owner hereby represents to
and for the benefit of the person
H-1-2
<PAGE> 181
from whom it acquired the Class R Certificate that the Owner intends to pay
taxes associated with holding such Class R Certificate as they become due, fully
understanding that it may incur tax liabilities in excess of any cash flows
generated by the Class R Certificate.
13. That the Owner has no present knowledge or expectation that it will
become insolvent or subject to a bankruptcy proceeding for so long as any of the
Class R Certificates remain outstanding.
14. The Owner is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate or
trust whose income from sources without the United States is includible in gross
income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.
H-1-3
<PAGE> 182
IN WITNESS WHEREOF, the Owner has caused this instrument to be executed
on its behalf, pursuant to the authority of its Board of Directors, by its
[Title of Officer] and its corporate seal to be hereunto attached, attested by
its [Assistant] Secretary, this day of , 199 .
[NAME OF OWNER]
By:
---------------------------------
[Name of Officer]
[Title of Officer]
[Corporate Seal]
ATTEST:
- ----------------------------------
[Assistant] Secretary
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 Owner, and acknowledged to me that he
executed the same as his free act and deed and the free act and deed of the
Owner.
Subscribed and sworn before me this day of ,
199 .
------------------------------------
NOTARY PUBLIC
COUNTY OF
---------------------------
STATE OF
----------------------------
My Commission expires the day of
, 19 .
H-1-4
<PAGE> 183
EXHIBIT H-2
FORM OF TRANSFEROR CERTIFICATE
__________________, 19__
BankAmerica Mortgage Securities, Inc.
__________________________________
__________________________________
[name and address
of Trustee]
Attention: BankAmerica Mortgage Securities, Inc., Series __________
Re: Mortgage Pass-Through Certificates,
Series __________, Class R
Ladies and Gentlemen:
This letter is delivered to you in connection with the transfer by
_______________________________ (the "Seller") to
_______________________________ (the "Purchaser") of $_____________ Initial
Certificate Principal Balance of Mortgage Pass-Through Certificates, Series
__________ Class R (the "Certificates"), pursuant to Section 5.02 of the Pooling
and Servicing Agreement (the "Pooling and Servicing Agreement"), dated as
________________, 19__ among BankAmerica Mortgage Securities, Inc., as depositor
(the "Depositor"), Bank of America [National Trust and Savings Association] [,
Federal Savings Bank], as master servicer, and ____________________, as trustee
(the "Trustee"). All terms used herein and not otherwise defined shall have the
meanings set forth in the Pooling and Servicing Agreement. The Seller hereby
certifies, represents and warrants to, and covenants with, the Depositor and the
Trustee that:
1. No purpose of the Seller relating to the transfer of the Certificate
by the Seller to the Purchaser is or will be to impede the assessment or
collection of any tax.
2. The Seller understands that the Purchaser has delivered to the
Trustee and the Master Servicer a transfer affidavit and agreement in the form
attached to the Pooling and Servicing Agreement as Exhibit H-1. The Seller does
not know or believe that any representation contained therein is false.
3. The Seller has at the time of the transfer conducted a reasonable
investigation of the financial condition of the Purchaser as contemplated by
Treasury Regulations Section 1.860E-1(c)(4)(i) and, as a result of that
investigation, the Seller has determined that the Purchaser has historically
paid its debts as they become due and has
<PAGE> 184
found no significant evidence to indicate that the Purchaser will not continue
to pay its debts as they become due in the future. The Seller understands that
the transfer of a Class R Certificate may not be respected for United States
income tax purposes (and the Seller may continue to be liable for United States
income taxes associated therewith) unless the Seller has conducted such an
investigation.
4. The Seller has no actual knowledge that the proposed Transferee is
not both a United States Person and a Permitted Transferee.
Very truly yours,
------------------------------------
(Seller)
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
H-2-2
<PAGE> 185
EXHIBIT I
FORM OF INVESTOR REPRESENTATION LETTER
______________, 19__
BankAmerica Mortgage Securities, Inc.
__________________________________
__________________________________
__________________________________
[name and address of Trustee]
__________________________________
__________________________________
Attention: BankAmerica Mortgage Securities, Inc., Series __________
RE: Mortgage Pass-Through Certificates,
Series __________, Class B- ______
Ladies and Gentlemen:
_________________________ (the "Purchaser") intends to purchase from
___________________________ (the "Seller") $_____________ Initial Certificate
Principal Balance of Mortgage Pass-Through Certificates, Series __________,
Class __ (the "Certificates"), issued pursuant to the Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement"), dated as of ______________,
19__ among BankAmerica Mortgage Securities, Inc., as depositor (the
"Depositor"), Bank of America [National Trust and Savings Association] [,
Federal Savings Bank], as master servicer, and ____________________, as trustee
(the "Trustee"). All terms used herein and not otherwise defined shall have the
meanings set forth in the Pooling and Servicing Agreement. The Purchaser hereby
certifies, represents and warrants to, and covenants with, the Depositor and the
Trustee that:
1. The Purchaser understands that (a) the Certificates have
not been and will not be registered or qualified under the Securities
Act of 1933, as amended (the "Act") or any state securities law, (b)
the Depositor is not required to so register or qualify the
Certificates, (c) the Certificates may be resold only if registered and
qualified pursuant to the provisions of the Act or any state securities
law, or if an exemption from such registration and qualification is
available, (d) the Pooling and Servicing Agreement contains
restrictions regarding the transfer of the Certificates and (e) the
Certificates will bear a legend to the foregoing effect.
2. The Purchaser is acquiring the Certificates for its own
account for investment only and not with a view to or for sale in
connection with any
<PAGE> 186
distribution thereof in any manner that would violate the Act or any
applicable state securities laws.
3. The Purchaser is (a) a substantial, sophisticated
institutional investor having such knowledge and experience in
financial and business matters, and, in particular, in such matters
related to securities similar to the Certificates, such that it is
capable of evaluating the merits and risks of investment in the
Certificates, (b) able to bear the economic risks of such an
investment and (c) an "accredited investor" within the meaning of
Rule 501(a) promulgated pursuant to the Act.
4. The Purchaser has been furnished with, and has had an
opportunity to review (a) [a copy of the Private Placement Memorandum,
dated ___________________, 19__, relating to the Certificates (b)] a
copy of the Pooling and Servicing Agreement and [b] [c] such other
information concerning the Certificates, the Mortgage Loans and the
Depositor as has been requested by the Purchaser from the Depositor or
the Seller and is relevant to the Purchaser's decision to purchase the
Certificates. The Purchaser has had any questions arising from such
review answered by the Depositor or the Seller to the satisfaction of
the Purchaser. [If the Purchaser did not purchase the Certificates
from the Seller in connection with the initial distribution of the
Certificates and was provided with a copy of the Private Placement
Memorandum (the "Memorandum") relating to the original sale (the
"Original Sale") of the Certificates by the Depositor, the Purchaser
acknowledges that such Memorandum was provided to it by the Seller,
that the Memorandum was prepared by the Depositor solely for use in
connection with the Original Sale and the Depositor did not
participate in or facilitate in any way the purchase of the
Certificates by the Purchaser from the Seller, and the Purchaser
agrees that it will look solely to the Seller and not to the Depositor
with respect to any damage, liability, claim or expense arising out
of, resulting from or in connection with (a) error or omission, or
alleged error or omission, contained in the Memorandum, or (b) any
information, development or event arising after the date of the
Memorandum.]
5. The Purchaser has not and will not nor has it authorized or
will it authorize any person to (a) offer, pledge, sell, dispose of or
otherwise transfer any Certificate, any interest in any Certificate or
any other similar security to any person in any manner, (b) solicit any
offer to buy or to accept a pledge, disposition of other transfer of
any Certificate, any interest in any Certificate or any other similar
security from any person in any manner, (c) otherwise approach or
negotiate with respect to any Certificate, any interest in any
Certificate or any other similar security with any person in any
manner, (d) make any general solicitation by means of general
advertising or in any other manner or (e) take any other action, that
(as to any of (a) through (e) above) would constitute a distribution of
any Certificate under the Act, that would render the disposition of any
Certificate a violation of Section 5 of the Act or any state securities
law, or that would require registration or
I-2
<PAGE> 187
qualification pursuant thereto. The Purchaser will not sell or
otherwise transfer any of the Certificates, except in compliance with
the provisions of the Pooling and Servicing Agreement.
6. The Purchaser is not an employee benefit or other plan
subject to the prohibited transaction provisions 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 any other person (including an investment manager, a named
fiduciary or a trustee of any such plan) acting, directly or
indirectly, on behalf of or purchasing any Certificate with "plan
assets" of any such plan, and understands that registration of transfer
of any Certificate to any such plan, or to any person acting on behalf
of or purchasing any Certificate with "plan assets" of any such plan,
may not be made unless such plan or person delivers an opinion of its
counsel, addressed and satisfactory to the Trustee, the Depositor and
the Master Servicer, to the effect that the purchase and holding of a
Certificate by, on behalf of, or with "plan assets" of any such plan is
permissible under applicable law, will not constitute or result in any
non-exempt prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code, and will not subject the Depositor, the
Master Servicer or the Trustee to any obligation or liability
(including obligations or liabilities under ERISA or Section 4975 of
the Code) in addition to those undertaken in the Pooling and Servicing
Agreement.
7. The Purchaser is not a non-United States person.
Very truly yours,
-----------------------------------
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
I-3
<PAGE> 188
EXHIBIT J
FORM OF TRANSFEROR REPRESENTATION LETTER
_________, 19__
BankAmerica Mortgage Securities, Inc.
__________________________________
__________________________________
__________________________________
[name and address of Trustee]
__________________________________
__________________________________
Attention: BankAmerica Mortgage Securities, Inc., Series __________
Re: Mortgage Pass-Through Certificates,
Series __________, Class B- _________
Ladies and Gentlemen:
In connection with the sale by ____________ (the "Seller") to
_____________ (the "Purchaser") of $________ Initial Certificate Principal
Balance of Mortgage Pass-Through Certificates, Series __________, Class_ (the
"Certificates"), issued pursuant to the Pooling and Servicing Agreement (the
"Pooling and Servicing Agreement"), dated as of ____________, 19__ among
______________________________BankAmerica Mortgage Securities, Inc., as
depositor (the "Depositor"), Bank of America [National Trust and Savings
Association] [, Federal Savings Bank], as master servicer, and
____________________, as trustee (the "Trustee"). The Seller hereby certifies,
represents and warrants to, and covenants with, the Depositor and the Trustee
that:
Neither the Seller nor anyone acting on its behalf has (a) offered,
pledged, sold, disposed of or otherwise transferred any Certificate, any
interest in any Certificate or any other similar security to any person in any
manner, (b) has solicited any offer to buy or to accept a pledge, disposition or
other transfer of any Certificate, any interest in any Certificate or any other
similar security from any person in any manner, (c) has otherwise approached or
negotiated with respect to any Certificate, any interest in any Certificate or
any other similar security with any person in any manner, (d) has made any
general solicitation by means of general advertising or in any other manner, or
(e) has taken any other action, that (as to any of (a) through (e) above) would
constitute a distribution of the Certificates under the Securities Act of 1933
(the "Act"), that would render the disposition of
<PAGE> 189
any Certificate a violation of Section 5 of the Act or any state securities law,
or that would require registration or qualification pursuant thereto. The Seller
will not act, in any manner set forth in the foregoing sentence with respect to
any Certificate. The Seller has not and will not sell or otherwise transfer any
of the Certificates, except in compliance with the provisions of the Pooling and
Servicing Agreement.
Very truly yours,
-----------------------------------
(Seller)
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
J-2
<PAGE> 190
EXHIBIT K
[FORM OF RULE 144A INVESTMENT REPRESENTATION]
Description of Rule 144A Securities, including numbers:
_______________________________________________________
_______________________________________________________
_______________________________________________________
_______________________________________________________
The undersigned seller, as registered holder (the "Seller"),
intends to transfer the Rule 144A Securities described above to the undersigned
buyer (the "Buyer").
1. In connection with such transfer and in accordance with the
agreements pursuant to which the Rule 144A Securities were issued, the Seller
hereby certifies the following facts: Neither the Seller nor anyone acting on
its behalf has offered, transferred, pledged, sold or otherwise disposed of the
Rule 144A Securities, any interest in the Rule 144A Securities or any other
similar security to, or solicited any offer to buy or accept a transfer, pledge
or other disposition of the Rule 144A Securities, any interest in the Rule 144A
Securities or any other similar security from, or otherwise approached or
negotiated with respect to the Rule 144A Securities, any interest in the Rule
144A Securities or any other similar security with, any person in any manner, or
made any general solicitation by means of general advertising or in any other
manner, or taken any other action, that would constitute a distribution of the
Rule 144A Securities under the Securities Act of 1933, as amended (the "1933
Act"), or that would render the disposition of the Rule 144A Securities a
violation of Section 5 of the 1933 Act or require registration pursuant thereto,
and that the Seller has not offered the Rule 144A Securities to any person other
than the Buyer or another "qualified institutional buyer" as defined in Rule
144A under the 1933 Act.
2. The Buyer warrants and represents to, and covenants with, the
Depositor, the Trustee and the Master Servicer pursuant to Section 5.02 of the
Pooling and Servicing Agreement, dated as of ____________, 19__ among
BankAmerica Mortgage Securities I, Inc., as Depositor, Bank of America,
[National Trust and Savings Association] [, Federal Savings Bank], as Master
Servicer and as Trustee, as follows:
a. The Buyer understands that the Rule 144A Securities
have not been registered under the 1933 Act or the securities laws of
any state.
b. The Buyer considers itself a substantial,
sophisticated institutional investor having such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of investment in the Rule 144A
Securities.
<PAGE> 191
c. The Buyer has been furnished with all information
regarding the Rule 144A Securities that it has requested from the
Seller, the Trustee or the Master Servicer.
d. Neither the Buyer nor anyone acting on its behalf
has offered, transferred, pledged, sold or otherwise disposed of the
Rule 144A Securities, any interest in the Rule 144A Securities or any
other similar security to, or solicited any offer to buy or accept a
transfer, pledge or other disposition of the Rule 144A Securities, any
interest in the Rule 144A Securities or any other similar security
from, or otherwise approached or negotiated with respect to the Rule
144A Securities, any interest in the Rule 144A Securities or any other
similar security with, any person in any manner, or made any general
solicitation by means of general advertising or in any other manner, or
taken any other action, that would constitute a distribution of the
Rule 144A Securities under the 1933 Act or that would render the
disposition of the Rule 144A Securities a violation of Section 5 of the
1933 Act or require registration pursuant thereto, nor will it act, nor
has it authorized or will it authorize any person to act, in such
manner with respect to the Rule 144A Securities.
e. The Buyer is a "qualified institutional buyer" as
that term is defined in Rule 144A under the 1933 Act and has completed
either of the forms of certification to that effect attached hereto as
Annex 1 or Annex 2. The Buyer is aware that the sale to it is being
made in reliance on Rule 144A. The Buyer is acquiring the Rule 144A
Securities for its own account or the accounts of other qualified
institutional buyers, understands that such Rule 144A Securities may be
resold, pledged or transferred only (i) to a person reasonably believed
to be a qualified institutional buyer that purchases for its own
account or for the account of a qualified institutional buyer to whom
notice is given that the resale, pledge or transfer is being made in
reliance on Rule 144A, or (ii) pursuant to another exemption from
registration under the 1933 Act.
[3. The Buyer warrants and represents to, and covenants with, the
Seller, the Trustee, Master Servicer and the Depositor that either (1) the Buyer
is (A) not an employee benefit plan (within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), or a
plan (within the meaning of Section 4975(e)(1) of the Internal Revenue Code of
1986 ("Code")), which (in either case) is subject to ERISA or Section 4975 of
the Code (both a "Plan"), and (B) is not directly or indirectly purchasing the
Rule 144A Securities on behalf of, as investment manager of, as named fiduciary
of, as trustee of, or with "plan assets" of a Plan, or (2) the Buyer understands
that registration of transfer of any Rule 144A Securities to any Plan, or to any
Person acting on behalf of or purchasing any such Certificate with "plan assets"
of any Plan, may not be made unless such Plan or Person, including the Buyer,
delivers an opinion of its counsel, addressed and satisfactory to the Trustee,
the Depositor and the Master Servicer, to the effect that the purchase and
holding of the Rule 144A Securities by, on behalf of or with "plan assets" of
such Plan is permissible under applicable law, will not constitute or result in
any non-exempt prohibited transaction under Section 406 of ERISA or Section 4975
of the Code, and will not subject the Depositor, the Master Servicer or the
Trustee to any obligation or liability
K-2
<PAGE> 192
(including liabilities under ERISA or Section 4975 of the Code) in addition to
those undertaken in the Pooling and Servicing Agreement.]
4. This document may be executed in one or more counterparts and
by the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same document.
IN WITNESS WHEREOF, each of the parties has executed this document
as of the date set forth below.
- ---------------------------------- ------------------------------------
Print Name of Seller Print Name of Buyer
By: By:
------------------------------- ---------------------------------
Name: Name:
Title: Title:
Taxpayer Identification: Taxpayer Identification:
No. No.
------------------------------- ---------------------------------
Date: Date:
----------------------------- -------------------------------
K-3
<PAGE> 193
ANNEX 1 TO EXHIBIT K
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers Other Than Registered Investment Companies]
The undersigned hereby certifies as follows in connection with the
Rule 144A Investment Representation to which this Certification is attached:
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Buyer.
2. In connection with purchases by the Buyer, the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933 ("Rule 144A") because (i) the Buyer owned and/or invested
on a discretionary basis $______________________ in securities (except for the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year (such amount being calculated in accordance with Rule 144A) and (ii)
the Buyer satisfies the criteria in the category marked below.
___ Corporation, etc. The Buyer is a corporation (other than a bank,
savings and loan association or similar institution), Massachusetts
or similar business trust, partnership, or charitable organization
described in Section 501(c)(3) of the Internal Revenue Code.
___ Bank. The Buyer (a) is a national bank or banking institution
organized under the laws of any State, territory or the District of
Columbia, the business of which is substantially confined to
banking and is supervised by the State or territorial banking
commission or similar official or is a foreign bank or equivalent
institution, and (b) has an audited net worth of at least
$25,000,000 as demonstrated in its latest annual financial
statements, a copy of which is attached hereto.
___ Savings and Loan. The Buyer (a) is a savings and loan association,
building and loan association, cooperative bank, homestead
association or similar institution, which is supervised and
examined by a State or Federal authority having supervision over
any such institutions or is a foreign savings and loan association
or equivalent institution and (b) has an audited net worth of at
least $25,000,000 as demonstrated in its latest annual financial
statements.
___ Broker-Dealer. The Buyer is a dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934.
K-4
<PAGE> 194
___ Insurance Company. The Buyer is an insurance company whose primary
and predominant business activity is the writing of insurance or
the reinsuring of risks underwritten by insurance companies and
which is subject to supervision by the insurance commissioner or a
similar official or agency of a State or territory or the District
of Columbia.
___ State or Local Plan. The Buyer is a plan established and maintained
by a State, its political subdivisions, or any agency or
instrumentality of the State or its political subdivisions, for the
benefit of its employees.
___ ERISA Plan. The Buyer is an employee benefit plan within the
meaning of Title I of the Employee Retirement Income Security Act
of 1974.
___ Investment Adviser. The Buyer is an investment adviser registered
under the Investment Advisers Act of 1940.
___ SBIC. The Buyer is a Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or (d)
of the Small Business Investment Act of 1958.
___ Business Development Company. The Buyer is a business development
company as defined in Section 202(a)(22) of the Investment Advisers
Act of 1940.
___ Trust Fund. The Buyer is a trust fund whose trustee is a bank or
trust company and whose participants are exclusively (a) plans
established and maintained by a State, its political subdivisions,
or any agency or instrumentality of the State or its political
subdivisions, for the benefit of its employees, or (b) employee
benefit plans within the meaning of Title I of the Employee
Retirement Income Security Act of 1974, but is not a trust fund
that includes as participants individual retirement accounts or
H.R. 10 plans.
3. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer, (ii) securities that
are part of an unsold allotment to or subscription by the Buyer, if the Buyer is
a dealer, (iii) bank deposit notes and certificates of deposit, (iv) loan
participations, (v) repurchase agreements, (vi) securities owned but subject to
a repurchase agreement and (vii) currency, interest rate and commodity swaps.
4. For purposes of determining the aggregate amount of securities
owned and/or invested on a discretionary basis by the Buyer, the Buyer used the
cost of such securities to the Buyer and did not include any of the securities
referred to in the preceding paragraph. Further, in determining such aggregate
amount, the Buyer may have included securities owned by subsidiaries of the
Buyer, but only if such subsidiaries are consolidated with the Buyer in its
financial statements prepared in accordance with generally accepted accounting
principles and if the investments of such subsidiaries are managed under the
Buyer's direction. However, such securities were not included if the Buyer is a
majority-owned,
K-5
<PAGE> 195
consolidated subsidiary of another enterprise and the Buyer is not itself a
reporting company under the Securities Exchange Act of 1934.
5. The Buyer acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the Certificates
are relying and will continue to rely on the statements made herein because one
or more sales to the Buyer may be in reliance on Rule 144A.
_____ ____ Will the Buyer be purchasing the Rule 144A
Yes No Securities only for the Buyer's own account?
6. If the answer to the foregoing question is "no", the Buyer
agrees that, in connection with any purchase of securities sold to the Buyer for
the account of a third party (including any separate account) in reliance on
Rule 144A, the Buyer will only purchase for the account of a third party that at
the time is a "qualified institutional buyer" within the meaning of Rule 144A.
In addition, the Buyer agrees that the Buyer will not purchase securities for a
third party unless the Buyer has obtained a current representation letter from
such third party or taken other appropriate steps contemplated by Rule 144A to
conclude that such third party independently meets the definition of "qualified
institutional buyer" set forth in Rule 144A.
7. The Buyer will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice is given, the Buyer's purchase of Rule 144A Securities will
constitute a reaffirmation of this certification as of the date of such
purchase.
----------------------------------------------
Print Name of Buyer
By:
-----------------------------------------
Name:
Title:
Date:
-----------------------------------------
K-6
<PAGE> 196
ANNEX 2 TO EXHIBIT K
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers That Are Registered Investment Companies]
The undersigned hereby certifies as follows in connection with the
Rule 144A Investment Representation to which this Certification is attached:
1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the Buyer or, if the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933 ("Rule 144A") because Buyer is part of a Family of
Investment Companies (as defined below), is such an officer of the Adviser.
2. In connection with purchases by Buyer, the Buyer is a
"qualified institutional buyer" as defined in SEC Rule 144A because (i) the
Buyer is an investment company registered under the Investment Company Act of
1940, and (ii) as marked below, the Buyer alone, or the Buyer's Family of
Investment Companies, owned at least $100,000,000 in securities (other than the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year. For purposes of determining the amount of securities owned by the
Buyer or the Buyer's Family of Investment Companies, the cost of such securities
was used.
___ The Buyer owned $___________________ in securities (other than the
excluded securities referred to below) as of the end of the
Buyer's most recent fiscal year (such amount being calculated in
accordance with Rule 144A).
___ The Buyer is part of a Family of Investment Companies which
owned in the aggregate $______________ in securities (other
than the excluded securities referred to below) as of the end
of the Buyer's most recent fiscal year (such amount being
calculated in accordance with Rule 144A).
3. The term "Family of Investment Companies" as used herein means
two or more registered investment companies (or series thereof) that have the
same investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).
4. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer or are part of the
Buyer's Family of Investment Companies, (ii) bank deposit notes and certificates
of deposit, (iii) loan participations, (iv) repurchase agreements, (v)
securities owned but subject to a repurchase agreement and (vi) currency,
interest rate and commodity swaps.
K-7
<PAGE> 197
5. The Buyer is familiar with Rule 144A and understands that each
of the parties to which this certification is made are relying and will continue
to rely on the statements made herein because one or more sales to the Buyer
will be in reliance on Rule 144A. In addition, the Buyer will only purchase for
the Buyer's own account.
6. The undersigned will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice, the Buyer's purchase of Rule 144A Securities will constitute
a reaffirmation of this certification by the undersigned as of the date of such
purchase.
------------------------------
Print Name of Buyer
By:
---------------------------
Name:
----------------------
Title:
---------------------
IF AN ADVISER:
------------------------------
Print Name of Buyer
Date:
-------------------------
K-8
<PAGE> 198
EXHIBIT L
FORM OF LENDER CERTIFICATION FOR ASSIGNMENT OF MORTGAGE LOAN
__________________, 19____
BankAmerica Mortgage Securities, Inc.
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
Attention: BankAmerica Mortgage Securities, Inc., Series __________
Re: Mortgage Pass-Through Certificates, Series __________
Assignment of Mortgage Loan
Ladies and Gentlemen:
This letter is delivered to you in connection with the assignment
by _________________ (the "Trustee") to _______________________ (the "Lender")
of _______________ (the "Mortgage Loan") pursuant to Section 3.13(d) of the
Pooling and Servicing Agreement (the "Pooling and Servicing Agreement"), dated
as of _____________, 19__ among BankAmerica Mortgage Securities, Inc., as
depositor, Bank of America [National Trust and Savings Association] [, Federal
Savings Bank], as master servicer (the "Master Servicer"), and
____________________, as trustee (the "Trustee"). All terms used herein and not
otherwise defined shall have the meanings set forth in the Pooling and Servicing
Agreement. The Lender hereby certifies, represents and warrants to, and
covenants with, the Master Servicer and the Trustee that:
(i) the Mortgage Loan is secured by Mortgaged Property located in
a jurisdiction in which an assignment in lieu of satisfaction is required to
preserve lien priority, minimize or avoid mortgage recording taxes or otherwise
comply with, or facilitate a refinancing under, the laws of such jurisdiction;
(ii) the substance of the assignment is, and is intended to be, a
refinancing of such Mortgage Loan and the form of the transaction is solely to
comply with, or facilitate the transaction under, such local laws;
<PAGE> 199
(iii) the Mortgage Loan following the proposed assignment will be
modified to have a rate of interest at least 0.25 percent below or above the
rate of interest on such Mortgage Loan prior to such proposed assignment; and
(iv) such assignment is at the request of the borrower under the
related Mortgage Loan.
Very truly yours,
------------------------------
(Lender)
By:
---------------------------
Name:
-------------------------
Title:
------------------------
L-2
<PAGE> 1
EXHIBIT 5.1
June 4, 1996
BankAmerica Mortgage Securities, Inc.
345 Montgomery Street
Lower Level #2, Unit #8152
San Francisco, California 94104
Ladies and Gentlemen:
We have acted as counsel to BankAmerica Mortgage Securities,
Inc., a Delaware corporation (the "Registrant"), in connection with the
preparation and filing with the Securities and Exchange Commission (the
"Commission") of the Registration Statement on Form S-3 filed by the Registrant
with the Commission (the "Registration Statement"), in connection with the
registration under the Securities Act of 1933, as amended (the "Act"), of its
Mortgage Pass-Through Certificates (the "Certificates"). The Certificates are
issuable in series (each, a "Series") under separate Pooling and Servicing
Agreements (each, a "Pooling Agreement") by and among the Registrant, one of the
Master Servicers named therein and the Trustee selected for each Series. The
Certificates of each Series are to be sold as described in the Registration
Statement and the prospectus and prospectus supplement relating to such Series.
We have examined such instruments, documents and records as we
deemed relevant and necessary as a basis for our opinion hereinafter expressed.
In such examination, we have assumed the following: (a) the authenticity of
original documents and the genuineness of all signatures; (b) the conformity to
the originals of all documents submitted to us as copies; and (c) the truth,
accuracy and completeness of the information, representations and warranties
contained in the records, documents, instruments and certificates we have
reviewed.
Based on such examination, we are of the opinion that when the
issuance of each Series of Certificates has been duly authorized by appropriate
corporate action and the Certificates of such Series have been duly executed,
authenticated and delivered in accordance with the terms of the Pooling
Agreement relating to such Series and sold in the manner described in the
Registration Statement and the prospectus and prospectus supplement relating
thereto, the Certificates of such Series will be legally issued, fully paid,
binding obligations of the trust
<PAGE> 2
BankAmerica Mortgage Securities, Inc.
June 3, 1996
Page 2
created by each Pooling Agreement, and the holders of the Certificates of such
Series will be entitled to the benefits of the Pooling Agreement, except as
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, arrangement, fraudulent conveyance, moratorium, or other laws
relating to or affecting the rights of creditors generally and general
principles of equity, including concepts of materiality, reasonableness, good
faith and fair dealing, and the possible unavailability of specific performance
or injunctive relief, regardless of whether such enforceability is considered in
a proceeding in equity or at law.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the use of our name wherever it appears in
the Registration Statement and the prospectus contained therein. In giving such
consent, we do not consider that we are "experts," within the meaning of the
term as used in the Act or the rules and regulations of the Commission issued
thereunder, with respect to any part of the Registration Statement, including
this opinion as an exhibit or otherwise.
Very truly yours,
/s/ Orrick, Herrington & Sutcliffe
ORRICK, HERRINGTON & SUTCLIFFE
<PAGE> 1
EXHIBIT 8.1
June 4, 1996
BankAmerica Mortgage Securities, Inc.
345 Montgomery Street
Lower Level #2, Unit #8152
San Francisco, California 94104
Ladies and Gentlemen:
We have advised BankAmerica Mortgage Securities, Inc. (the
"Company") with respect to certain federal income tax aspects of the issuance by
the Company of its Mortgage Pass-Through Certificates (the "Certificates"). Such
advice conforms to the description of selected federal income tax consequences
for holders of the Certificates that appears under the headings "Summary of
Prospectus -- Certain Federal Income Tax Consequences" and "Certain Federal
Income Tax Consequences" in the Prospectus forming a part of the Registration
Statement on Form S-3 to which this letter is an exhibit (the "Registration
Statement"), filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act"), for the registration of the
Certificates under the Act. Such description does not purport to discuss all
possible income tax ramifications of the proposed issuance, but with respect to
those tax consequences which are discussed, insofar as such discussion contains
statements of law or legal conclusions, in our opinion such discussion is
accurate in all material respects.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement.
Very truly yours,
/s/ Orrick, Herrington & Sutcliffe
ORRICK, HERRINGTON & SUTCLIFFE
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
I hereby appoint ANDREA B. SUDMANN and DANIEL G. WEISS, and
each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of BankAmerica Mortgage Securities, Inc. and file with
the Securities and Exchange Commission pursuant to the Securities Act of 1933
registration statements covering the public offering, on a delayed or continuous
basis, of one or more series of pass-through certificates and/or participation
certificates or other securities representing interests in, or backed or secured
by, a separate pool of mortgage loans secured primarily by deeds of trust or
mortgages on residential properties, and any amendment and supplemental
prospectus to any such registration statement.
This power of attorney, unless earlier revoked or terminated,
will terminate on January 31, 1997.
Date: May 29, 1996
/s/ Jacqueline Legorreta Erdman
--------------------------------
Jacqueline Legorreta Erdman
<PAGE> 2
POWER OF ATTORNEY
I hereby appoint ANDREA B. SUDMANN and DANIEL G. WEISS, and
each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of BankAmerica Mortgage Securities, Inc. and file with
the Securities and Exchange Commission pursuant to the Securities Act of 1933
registration statements covering the public offering, on a delayed or continuous
basis, of one or more series of pass-through certificates and/or participation
certificates or other securities representing interests in, or backed or secured
by, a separate pool of mortgage loans secured primarily by deeds of trust or
mortgages on residential properties, and any amendment and supplemental
prospectus to any such registration statement.
This power of attorney, unless earlier revoked or terminated,
will terminate on January 31, 1997.
Date: May 29, 1996
/s/ Shaun M. Maguire
--------------------
Shaun M. Maguire
<PAGE> 3
POWER OF ATTORNEY
I hereby appoint ANDREA B. SUDMANN and DANIEL G. WEISS, and
each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of BankAmerica Mortgage Securities, Inc. and file with
the Securities and Exchange Commission pursuant to the Securities Act of 1933
registration statements covering the public offering, on a delayed or continuous
basis, of one or more series of pass-through certificates and/or participation
certificates or other securities representing interests in, or backed or secured
by, a separate pool of mortgage loans secured primarily by deeds of trust or
mortgages on residential properties, and any amendment and supplemental
prospectus to any such registration statement.
This power of attorney, unless earlier revoked or terminated,
will terminate on January 31, 1997.
Date: May 30, 1996
/s/ Claus H. Lund
-----------------
Claus H. Lund
<PAGE> 4
POWER OF ATTORNEY
I hereby appoint ANDREA B. SUDMANN and DANIEL G. WEISS, and
each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of BankAmerica Mortgage Securities, Inc. and file with
the Securities and Exchange Commission pursuant to the Securities Act of 1933
registration statements covering the public offering, on a delayed or continuous
basis, of one or more series of pass-through certificates and/or participation
certificates or other securities representing interests in, or backed or secured
by, a separate pool of mortgage loans secured primarily by deeds of trust or
mortgages on residential properties, and any amendment and supplemental
prospectus to any such registration statement.
This power of attorney, unless earlier revoked or terminated,
will terminate on January 31, 1997.
Date: May 30, 1996
/s/ James G. Jones
------------------
James G. Jones
<PAGE> 5
POWER OF ATTORNEY
I hereby appoint ANDREA B. SUDMANN and DANIEL G. WEISS, and
each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as the Chief Financial Officer of BankAmerica Mortgage Securities,
Inc. and file with the Securities and Exchange Commission pursuant to the
Securities Act of 1933 registration statements covering the public offering, on
a delayed or continuous basis, of one or more series of pass-through
certificates and/or participation certificates or other securities representing
interests in, or backed or secured by, a separate pool of mortgage loans secured
primarily by deeds of trust or mortgages on residential properties, and any
amendment and supplemental prospectus to any such registration statement.
This power of attorney, unless earlier revoked or terminated,
will terminate on January 31, 1997.
Date: May 30, 1996
/s/ John D. Kelleghan
----------------------
John D. Kelleghan
