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As filed with the Securities and Exchange Commission on October 15, 1996
Registration No. 333-11095
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
CWABS, Inc.
(Exact name of registrant as specified in its charter)
Delaware Applied For
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
----------------------
155 North Lake Avenue
Pasadena, California 91101-7139
(818) 584-2212
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------------
Sandor E. Samuels, Esq.
Countrywide Home Loans, Inc.
155 North Lake Avenue
Pasadena, California 91101-7139
(818) 304-8505
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------
With a copy to:
Edward J. Fine, Esq.
Brown & Wood LLP
One World Trade Center
New York, New York 10048-0557
----------------------
Approximate date of commencement of proposed sale to the public:
From time to time on or after the effective date of the registration
statement, as determined by market conditions.
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 of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. |X|
If this Form is filed to register additional securities for an offering
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, 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
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Proposed Proposed
Amount Maximum Maximum Amount of
Title of Each Class of to be Offering Price Aggregate Registration
Securities to Be Registered Registered Per Unit(1) Offering Price(1) Fee
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<S> <C> <C> <C> <C>
Asset Backed Notes and Asset Backed
Certificates.......................... $2,000,000,000(2) 100% $2,000,000,000 $606,060.61(3)
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</TABLE>
(1) Estimated for the purpose of calculating the registration fee.
(2) Not specified as to each class of Asset Backed Securities to be registered
pursuant to General Instruction II.D of Form S-3.
(3) Of this amount, $344.83 has previously been paid.
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 the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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Information contained herein is subject to completion or amendment. 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 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.
SUBJECT TO COMPLETION, DATED OCTOBER 15, 1996
PROSPECTUS SUPPLEMENT
(To Prospectus dated ______________, 199__)
$__________________
(Approximate)
Home Equity Loan Asset Backed Certificates, Series 199_-_
CWABS, Inc.
Depositor
[Countrywide Home Loans, Inc.]
Seller and Master Servicer
Each Home Equity Loan Asset Backed Certificate, Series 199_-_
(collectively, the "Certificates") will represent an undivided interest in the
[Countrywide] Home Equity Loan Trust 199_-_ (the "Trust Fund") to be formed
pursuant to a Pooling and Servicing Agreement among [Countrywide Home Loans,
Inc. ("Countrywide")], as Seller and Master Servicer, CWABS, Inc., as Depositor,
and [ ], as Trustee. The property of the Trust Fund will include a pool of
[adjustable rate] home equity revolving credit line loans made or to be made in
the future (the "Mortgage Loans") under certain home equity revolving credit
line loan agreements. The Mortgage Loans are secured by either first and second
deeds of trust or mortgages on one- to four-family residential properties. See
"Index of Defined Terms" on Page S-56 of this Prospectus Supplement and on Page
98 of the Prospectus for the location of the definitions of certain capitalized
terms.
The aggregate undivided interest in the Trust Fund represented by the
Certificates will, as of ____________, 199_ (the "Cut-off Date"), represent
approximately __% of the outstanding principal balances of the Mortgage Loans.
The remaining undivided interest in the Trust Fund not represented by the
Certificates (the "Transferor Interest") will initially be equal to
$_________________, which as of the Cut-off Date is _% of the outstanding
principal balances of the Mortgage Loans. Only the Certificates are offered
hereby.
Distributions of principal and interest on the Certificates will be made on
the __________th day of each month or, if such date is not a Business Day, then
on the succeeding Business Day (each, a "Distribution Date"), commencing
___________, 199_. On each Distribution Date, holders of the Certificates will
be entitled to receive, from and to the limited extent of funds available in the
Collection Account (as defined herein), distributions with respect to interest
and principal calculated as set forth under "Summary--Interest,"
"Summary--Principal Payments from Principal Collections" and "Description of the
Certificates--Distributions on the Certificates" herein. The Certificates are
not guaranteed by the Depositor, [Countrywide] or any affiliate thereof.
[However, the Certificates will be unconditionally and irrevocably guaranteed as
to the payment of the Guaranteed Distributions (as defined herein) on each
Distribution Date pursuant to the terms of a financial guaranty insurance policy
(the "Policy") to be issued by
[INSURER]
There is currently no market for the Certificates offered hereby and there
can be no assurance that such a market will develop or if it does develop that
it will continue. See "Risk Factors" herein and in the Prospectus.
----------------------
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION SET FORTH UNDER
"RISK FACTORS" ON PAGE S-16 HEREIN AND ON PAGE 12 IN THE
ACCOMPANYING PROSPECTUS.
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST FUND ONLY AND DO
NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE DEPOSITOR,
[COUNTRYWIDE], THE TRUSTEE OR ANY AFFILIATE THEREOF,
EXCEPT TO THE EXTENT PROVIDED HEREIN. NEITHER
THE CERTIFICATES NOR THE MORTGAGE LOANS 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.
<TABLE>
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Price to Underwriting Proceeds to
Public (1) Discount(2) the Depositor(3)
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<S> <C> <C> <C>
Per Certificate..................................................... % % %
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Total............................................................... $ $ $
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</TABLE>
(1) Plus accrued interest, if any, from _______________, 199_.
(2) The Depositor has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting expenses, estimated to be $_______________.
----------------------
The Certificates are offered subject to prior sale and subject to the
Underwriter's right to reject orders in whole or in part. It is expected that
delivery of the Certificates will be made in book-entry form only through the
facilities of The Depository Trust Company, CEDEL S.A. and the Euroclear System
on or about ______________, 199_ (the "Closing Date"). The Certificates will be
offered in Europe and the United States of America.
----------------------
[UNDERWRITER]
_____________, 199_
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
Until ninety 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 Prospectus.
This is in addition to the obligation of dealers acting as underwriters to
deliver a Prospectus Supplement and Prospectus with respect to their unsold
allotments or subscriptions.
----------------------
The Certificates offered hereby constitute part of a separate series of
Home Equity Loan Asset Backed Certificates being offered by CWABS, Inc. from
time to time pursuant to its Prospectus dated _______________, 199__. This
Prospectus Supplement does not contain complete information about the offering
of the Certificates. Additional information is contained in the Prospectus and
investors are urged to read both this Prospectus Supplement and the Prospectus
in full. Sales of the Certificates may not be consummated unless the purchaser
has received both this Prospectus Supplement and the Prospectus.
The Trustee on behalf of any Trust Fund will provide without charge to each
person to whom this Prospectus Supplement is delivered, on the written or oral
request of such person, a copy of any or all of the documents referred to in the
Prospectus under "Incorporation of Certain Documents by Reference" that have
been or may be incorporated by reference in the Prospectus (not including
exhibits to the information that is incorporated by reference unless such
exhibits are specifically incorporated by reference into the information that
the Prospectus incorporates). Such requests should be directed to the Corporate
Trust Office of the Trustee at _____________, telephone:_________, facsimile
number:_____________, attention:__________.
S-2
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SUMMARY
The following summary of certain pertinent information is qualified in its
entirety by reference to the detailed information appearing elsewhere in this
Prospectus Supplement and the accompanying Prospectus. Certain capitalized terms
used in the Summary are defined elsewhere in the Prospectus Supplement or in the
Prospectus. See "Index of Defined Terms" on Page S-56 of this Prospectus
Supplement and on Page 98 of the Prospectus for the location of the definitions
of certain capitalized terms.
Trust Fund.................. [Countrywide] Home Equity Loan Trust 199_-_ (the
"Trust Fund") will be formed pursuant to a pooling
and servicing agreement (the "Agreement") to be
dated as of ______________, 199_ (the "Cut-off
Date") among [Countrywide Home Loans, Inc.
("Countrywide")], as seller and servicer (together
with any successor in such capacity, the "Seller"
and the "Master Servicer", respectively), CWABS,
Inc., as depositor (the "Depositor"), and [ ], as
trustee (the "Trustee"). The property of the Trust
Fund will include: a pool of [adjustable rate]
home equity revolving credit line loans made or to
be made in the future (the "Mortgage Loans"),
under certain home equity revolving credit line
loan agreements (the "Credit Line Agreements") and
secured by either first or second mortgages on
residential properties that are one- to
four-family properties (the "Mortgaged
Properties"); the collections in respect of the
Mortgage Loans received after the Cut-off Date
(exclusive of payments in respect of accrued
interest due on or prior to the Cut-off Date or
due in the month of _____________); property that
secured a Mortgage Loan which has been acquired by
foreclosure or deed in lieu of foreclosure; an
irrevocable and unconditional limited financial
guaranty insurance policy (the "Policy"); an
assignment of the Depositor's rights under the
Purchase Agreement (as defined herein); rights
under certain hazard insurance policies covering
the Mortgaged Properties; and certain other
property, as described more fully under
"Description of the Certificates--General" herein.
The Trust Fund property will include the unpaid
principal balance of each Mortgage Loan as of the
Cut-off Date (the "Cut-off Date Principal
Balance") plus any additions thereto as a result
of new advances made pursuant to the applicable
Credit Line Agreement (the "Additional Balances")
during the life of the Trust Fund. With respect to
any date, the "Pool Balance" will be equal to the
aggregate of the Principal Balances of all
Mortgage Loans as of such date. The aggregate
Cut-off Date Principal Balance of the Mortgage
Loans is $____________________ (the "Cut-off Date
Pool Balance"). The "Principal Balance" of a
Mortgage Loan (other than a Liquidated Mortgage
Loan) on any day is equal to its Cut-off Date
Principal Balance, plus (i) any Additional
Balances in respect of such Mortgage Loan, minus
(ii) all collections credited against the
Principal Balance of such Mortgage Loan in
accordance with the related Credit Line Agreement
prior to
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S-3
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such day. The Principal Balance of a Liquidated
Mortgage Loan (as defined herein) after final
recovery of related Liquidation Proceeds (as
defined herein) shall be zero.
Securities Offered.......... Each of the Home Equity Loan Asset Backed
Certificates, Series 199_-_ offered hereby (the
"Certificates") represents an undivided interest
in the Trust Fund. Each Certificate represents the
right to receive payments of interest at the
variable rate described below (the "Certificate
Rate"), payable monthly, and payments of principal
at such time and to the extent provided herein
under "Description of the Certificates --
Distributions on the Certificates". The aggregate
undivided interest in the Trust Fund represented
by the Certificates as of the Closing Date will
equal $__________________ (the "Original Invested
Amount"), which represents __% of the Cut- off
Date Pool Balance. The "Original Certificate
Principal Balance" will equal $__________________.
Following the Closing Date, the "Invested Amount"
with respect to any date will be an amount equal
to the Original Invested Amount minus (i) the
amount of Investor Principal Collections (as
defined herein) previously distributed to
Certificateholders, and minus (ii) an amount equal
to the product of the Investor Floating Allocation
Percentage and the Liquidation Loss Amounts (each
as defined herein). The Transferor (as described
below) will own the remaining undivided interest
(the "Transferor Interest") in the Mortgage Loans,
which is equal to the Pool Balance minus the
Invested Amount and will initially equal
approximately __% of the Cut-off Date Pool
Balance. The Transferor (the "Transferor") as of
any date is the owner of the Transferor Interest
which initially will be [Countrywide].
The Certificates will be issued pursuant to the
Agreement. The principal amount of the outstanding
Certificates (the "Certificate Principal Balance")
on any date is equal to the Original Certificate
Principal Balance minus the aggregate of amounts
actually distributed as principal to the
Certificateholders. See "Description of the
Certificates" herein.
Removal of Certain
Mortgage Loans;
Additional Balances......... In order to permit the Transferor to remove
Mortgage Loans from the Trust Fund at such times,
if any, as the overcollateralization exceeds the
level required to maintain the ratings on the
Certificates, on any Distribution Date the
Transferor may, but shall not be obligated to,
remove from the Trust Fund certain Mortgage Loans
without notice to the Certificateholders. The
Transferor is permitted to designate the Mortgage
Loans to be removed. Mortgage Loans so designated
will only be removed upon satisfaction of the
following conditions (i) No Rapid Amortization
Event (as defined herein) has occurred; (ii) the
Transferor Interest as of the
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S-4
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Transfer Date (as defined herein) (after giving
effect to such removal) exceeds the Minimum
Transferor Interest (as defined below); (iii) the
transfer of any Mortgage Loans on any Transfer
Date during the Managed Amortization Period (as
defined herein) shall not, in the reasonable
belief of the Transferor, cause a Rapid
Amortization Event to occur or an event which with
notice or lapse of time or both would constitute a
Rapid Amortization Event; (iv) the Transferor
shall have delivered to the Trustee a "Mortgage
Loan Schedule" containing a list of all Mortgage
Loans remaining in the Trust Fund after such
removal; (v) the Transferor shall represent and
warrant that no selection procedures which are
adverse to the interests of the Certificateholders
or the Certificate Insurer were used by the
Transferor in selecting such Mortgage Loans; (vi)
in connection with the first such retransfer of
Mortgage Loans, the Rating Agencies (as defined
herein) shall have been notified of the proposed
transfer and prior to the Transfer Date shall not
have notified the Transferor in writing that such
transfer would result in a reduction or withdrawal
of the ratings assigned to the Certificates
without regard to the Policy; and (vii) the
Transferor shall have delivered to the Trustee and
the Certificate Insurer an officer's certificate
confirming the conditions set forth in clauses (i)
through (vi) above. See "Description of the
Certificates--Optional Transfers of Mortgage Loans
to the Transferor" herein.
The "Minimum Transferor Interest" as of any date
is an amount equal to the lesser of (a) __% of the
Pool Balance on such date and (b) the Transferor
Interest as of the Closing Date.
During the term of the Trust Fund, all Additional
Balances will be transferred to and become
property of the Trust Fund. The Pool Balance at
any time will generally fluctuate from day to day
because the amount of Additional Balances and the
amount of principal payments with respect to the
Mortgage Loans will usually differ from day to
day. Because the Transferor Interest is equal to
the Pool Balance minus the Invested Amount, the
amount of the Transferor Interest will fluctuate
from day to day as draws are made with respect to
the Mortgage Loans and as Principal Collections
are received.
The Mortgage Loans.......... The Mortgage Loans are secured by first and second
mortgages on Mortgaged Properties located in ___
states. On the Closing Date, [Countrywide] will
sell the Mortgage Loans to the Depositor, pursuant
to a purchase agreement (the "Purchase
Agreement").
The percentage of the Cut-off Date Principal
Balance of the Mortgage Loans secured by Mortgaged
Properties located in the states of __________,
________, __________, _______, ______ and ________
is approximately ____%, ____%, ____%, ____%, ____%
and ____%, respectively. The
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S-5
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"Combined Loan-to-Value Ratio" of each Mortgage
Loan is the ratio of (A) the sum of (i) the
maximum amount the borrower was permitted to draw
down under the related Credit Line Agreement (the
"Credit Limit") and (ii) the amounts of any
related senior mortgage loans (computed as of the
date of origination of each such Mortgage Loans)
to (B) the lesser of (i) the appraised value of
the Mortgaged Property or (ii) in the case of a
Mortgaged Property purchased within one year of
the origination of the related Mortgage Loan, the
purchase price of such Mortgaged Property. As of
the Cut-off Date the Combined Loan-to-Value Ratios
ranged from ____% to ______% and, as of the
Cut-off Date, the weighted average Combined
Loan-to-Value Ratio of the Mortgage Loans was
approximately ____%.
[Interest on each Mortgage Loan is payable monthly
and computed on the related daily outstanding
Principal Balance for each day in the billing
cycle at a variable rate per annum (the "Loan
Rate") equal at any time (subject to maximum
rates, as described herein under "Description of
the Mortgage Loans--Mortgage Loan Terms," and
further subject to applicable usury limitations)
to the sum of (i) the highest prime rate published
in the "Money Rates" section of The Wall Street
Journal and (ii) a Margin within the range of
____% to ____%]. As of the Cut-off Date, the
weighted average Margin was approximately ____%.
Loan Rates are adjusted monthly on the first
business day of the calendar month preceding the
Due Date. As to each Mortgage Loan, the "Due Date"
is the fifteenth day of each month. The Cut-off
Date Principal Balances ranged from zero to
$__________ and averaged approximately
$__________. Credit Limits under the Mortgage
Loans as of the Cut-off Date ranged from
$__________ to $__________ and averaged
approximately $__________. Each Mortgage Loan was
originated in the period from _______________,
199_ to ________________, 199_. As of the Cut-off
Date, the maximum Credit Limit Utilization Rate
(as defined herein) was 100% and the weighted
average Credit Limit Utilization Rate was
approximately ____%. As of the Cut-off Date,
approximately ____% by Cut-off Date Principal
Balance of the Mortgage Loans represented first
liens on the related Mortgaged Properties, while
approximately ____% of the Mortgage Loans
represented second liens. As of the Cut-off Date,
the Mortgage Loans had remaining terms to
scheduled maturity ranging from ___ months to ___
months and had a weighted average of approximately
___ months. See "Description of the Mortgage
Loans" herein.
Denominations.............. The Certificates will be offered for purchase in
denominations of $1,000 and multiples of $1 in
excess thereof. The interest in the Trust Fund
evidenced by a Certificate (the "Percentage
Interest") will be equal to the percentage derived
by dividing
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S-6
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the denomination of such Certificate by the
Original Certificate Principal Balance.
Registration of
Certificates................ The Certificates will initially be issued in
book-entry form. Persons acquiring beneficial
ownership interests in the Certificates
("Certificate Owners") may elect to hold their
Certificate interests through The Depository Trust
Company ("DTC"), in the United States, or Centrale
de Livraison de Valeurs Mobilieres S.A. ("CEDEL")
or the Euroclear System ("Euroclear"), in Europe.
Transfers within DTC, CEDEL or Euroclear, as the
case may be, will be in accordance with the usual
rules and operating procedures of the relevant
system. So long as the Certificates are Book-Entry
Certificates (as defined herein), such
Certificates will be evidenced by one or more
Certificates registered in the name of Cede & Co.
("Cede"), as the nominee of DTC or one of the
relevant depositaries (collectively, the "European
Depositaries"). Cross-market transfers between
persons holding directly or indirectly through
DTC, on the one hand, and counterparties holding
directly or indirectly through CEDEL or Euroclear,
on the other, will be effected in DTC through
Citibank N.A. ("Citibank") or The Chase Manhattan
Bank ("Chase"), the relevant depositaries of CEDEL
or Euroclear, respectively, and each a
participating member of DTC. The Certificates will
initially be registered in the name of Cede. The
interests of the Certificateholders will be
represented by book entries on the records of DTC
and participating members thereof. No Certificate
Owner will be entitled to receive a definitive
certificate representing such person's interest,
except in the event that Definitive Certificates
(as defined herein) are issued under the limited
circumstances described under "Description of the
Certificates--Book-Entry Certificates" herein. All
references in this Prospectus Supplement to any
Certificates reflect the rights of Certificate
Owners only as such rights may be exercised
through DTC and its participating organizations
for so long as such Certificates are held by DTC.
See "Risk Factors--Book-Entry Certificates",
"Description of the Certificates--Book-Entry
Certificates" herein and "Annex I" hereto.
Depositor.................. CWABS, Inc., a Delaware corporation and a limited
purpose finance subsidiary of Countrywide Credit
Industries, Inc., a Delaware corporation. The
principal executive offices of the Depositor are
located at 155 North Lake Avenue, Pasadena,
California 91101 (Telephone: (818) 584-2212). See
"The Depositor" in the Prospectus.
Master Servicer of the
Mortgage Loans............. [Countrywide Home Loans, Inc.,a New York
corporation headquartered in Pasadena, California.
The principal executive offices of the Master
Servicer are located at 155 North Lake Avenue,
Pasadena, California 91101 (Telephone: (818)
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S-7
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304-8400).] See "Servicing of the Mortgage
Loans--The Master Servicer" herein.
Collections................ All collections on the Mortgage Loans will
generally be allocated in accordance with the
Credit Line Agreements between amounts collected
in respect of interest and amounts collected in
respect of principal. As to any Distribution Date,
"Interest Collections" will be equal to the
amounts collected during the related Collection
Period, including the portion of Net Liquidation
Proceeds (as defined below) allocated to interest
pursuant to the terms of the Credit Line
Agreements less Servicing Fees for the related
Collection Period.
As to any Distribution Date, "Principal
Collections" will be equal to the sum of (i) the
amounts collected during the related Collection
Period, including the portion of Net Liquidation
Proceeds allocated to principal pursuant to the
terms of the Credit Line Agreements and (ii) any
Transfer Deposit Amounts (as defined herein).
"Net Liquidation Proceeds" with respect to a
Mortgage Loan are the proceeds (excluding amounts
drawn on the Policy) received in connection with
the liquidation of any Mortgage Loan, whether
through trustee's sale, foreclosure sale or
otherwise, reduced by related expenses, but not
including the portion, if any, of such amount that
exceeds the Principal Balance of the Mortgage Loan
plus any accrued and unpaid interest thereon to
the end of the Collection Period during which such
Mortgage Loan became a Liquidated Mortgage Loan.
With respect to any Distribution Date, the portion
of Interest Collections allocable to the
Certificates ("Investor Interest Collections")
will equal the product of (a) Interest Collections
for such Distribution Date and (b) the Investor
Floating Allocation Percentage. With respect to
any Distribution Date, the "Investor Floating
Allocation Percentage" is the percentage
equivalent of a fraction determined by dividing
the Invested Amount at the close of business on
the preceding Distribution Date (or at the Closing
Date in the case of the first Distribution Date)
by the Pool Balance at the beginning of the
related Collection Period. The remaining amount of
Interest Collections will be allocated to the
Transferor Interest as more fully described under
"Description of the Certificates--Allocations and
Collections" herein.
On each Distribution Date, the Investor Interest
Collections will be applied in the following order
of priority: (i) as payment to the Trustee for its
fee for services rendered pursuant to the
Agreement; (ii) as payment for the premium for the
Policy; (iii) as payment for the accrued interest
due and any overdue accrued interest (with
interest thereon) on the Certificate
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S-8
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Principal Balance of the Certificates; (iv) to pay
any Investor Loss Amount (as defined herein) for
such Distribution Date; (v) as payment for any
Investor Loss Amount for a previous Distribution
Date that was not previously (a) funded by
Investor Interest Collections allocable to the
Certificateholders, (b) absorbed by the
Overcollateralization Amount, (c) funded by
amounts on deposit in the Spread Account or (d)
funded by draws on the Policy; (vi) to reimburse
prior draws made from the Policy (with interest
thereon); (vii) to pay principal on the
Certificates until the Invested Amount exceeds the
Certificate Principal Balance by the Required
Overcollateralization Amount, each as defined
herein (such amount, if any, paid pursuant to this
clause (vii) being referred to herein as the
"Accelerated Principal Distribution Amount");
(viii) any other amounts required to be deposited
in an account for the benefit of the Certificate
Insurer and Certificateholders pursuant to the
Agreement or amounts owed to the Certificate
Insurer pursuant to the Insurance Agreement; (ix)
certain amounts that may be required to be paid to
the Master Servicer pursuant to the Agreement; and
(x) to the Transferor to the extent permitted as
described under "Description of the
Certificates--Distributions on the Certificates"
herein.
Investor Interest Collections available after the
payment of interest on the Certificates may be
insufficient to cover any Investor Loss Amount. If
such insufficiency results in the Certificate
Principal Balance exceeding the Invested Amount, a
draw in an amount equal to such difference will be
made on the Policy in accordance with the terms of
the Policy.
The "Overcollateralization Amount" on any date of
determination is the amount, if any, by which the
Invested Amount exceeds the Certificate Principal
Balance on such day. Payments to
Certificateholders pursuant to clause (iii) above
will be interest payments on the Certificates.
Payments to Certificateholders pursuant to clauses
(iv), (v) and (vii) will be principal payments on
the Certificates and will therefore reduce the
Certificate Principal Balance, however, payments
pursuant to clause (vii) will not reduce the
Invested Amount. The Accelerated Principal
Distribution Amount is not guaranteed by the
Policy.
"Liquidation Loss Amount" means with respect to
any Liquidated Mortgage Loan, the unrecovered
Principal Balance thereof at the end of the
related Collection Period in which such Mortgage
Loan became a Liquidated Mortgage Loan, after
giving effect to the Net Liquidation Proceeds in
connection therewith. The "Investor Loss Amount"
shall be the product of the Investor Floating
Allocation Percentage and the Liquidation Loss
Amount for such Distribution Date. See
"Description of the Certificates--Distributions on
the Certificates" herein.
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Principal Collections will be allocated between
the Certificateholders and the Transferor
("Investor Principal Collections" and "Transferor
Principal Collections", respectively) in
accordance with their percentage interests in the
Mortgage Loans of __% and __%, respectively, as of
the Cut-off Date (the "Fixed Allocation
Percentage"), but a lesser amount of Principal
Collections may be distributed to
Certificateholders during the Managed Amortization
Period, as described below. The "Investor Fixed
Allocation Percentage" shall be __%.
The Master Servicer will deposit Interest
Collections and Principal Collections in respect
of the Mortgage Loans in an account established
for such purpose under the Agreement (the
"Collection Account"). See "Description of the
Certificates--Payments on Mortgage Loans; Deposits
to Collection Account" herein.
Collection Period.......... As to any Distribution Date other than the first
Distribution Date, the "Collection Period" is the
calendar month preceding the month of such
Distribution Date. As to the first Distribution
Date, the "Collection Period" is the period
beginning after the Cut-off Date and ending on the
last day of _____________, 199_.
Interest................... Interest on the Certificates will be distributed
monthly on the fifteenth day of each month or, if
such day is not a Business Day, then the next
succeeding Business Day (each, a "Distribution
Date"), commencing on ______________, 199_, at the
Certificate Rate for the related Interest Period
(as defined below). The "Certificate Rate" for an
Interest Period will generally equal the sum of
[(a) the London Interbank offered rate for
one-month Eurodollar deposits ("LIBOR") appearing
on the Telerate Screen Page 3750, as of the second
LIBOR Business Day (as defined herein) prior to
the first day of such Interest Period (or as of
two LIBOR Business Days prior to the Closing Date,
in the case of the first Interest Period) and (b)
____%.] Notwithstanding the foregoing, in no event
will the amount of interest required to be
distributed in respect of the Certificates on any
Distribution Date exceed a rate equal to the
weighted average of the Loan Rates (net of the
Servicing Fee Rate, the fee payable to the Trustee
and the rate at which the premium payable to the
Certificate Insurer is calculated) weighted on the
basis of the daily balance of each Mortgage Loan
during the related billing cycle prior to the
Collection Period relating to such Distribution
Date. Interest on the Certificates in respect of
any Distribution Date will accrue from the
preceding Distribution Date (or in the case of the
first Distribution Date, from the date of the
initial issuance of the Certificates (the "Closing
Date") through the day preceding such Distribution
Date (each such period, an "Interest Period")
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on the basis of the actual number of days in the
Interest Period and a 360-day year.
Interest payments on the Certificates will be
funded from Investor Interest Collections, any
funds on deposit in the Spread Account and from
draws on the Policy. See "Description of the
Certificates" herein.
Principal Payments from
Principal Collections...... For the period beginning on the first Distribution
Date and, unless a Rapid Amortization Event (as
defined herein) shall have earlier occurred,
ending on the Distribution Date in _____________,
200_ (the "Managed Amortization Period"), the
amount of Principal Collections payable to
Certificateholders as of each Distribution Date
during the Managed Amortization Period will equal,
to the extent funds are available therefor, the
Scheduled Principal Collections Distribution
Amount for such Distribution Date. On any
Distribution Date during the Managed Amortization
Period, the "Scheduled Principal Collections
Distribution Amount" shall equal the lesser of (i)
the Maximum Principal Payment (as defined herein)
and (ii) the Alternative Principal Payment (as
defined herein). With respect to any Distribution
Date, the "Maximum Principal Payment" will equal
the product of the Investor Fixed Allocation
Percentage and Principal Collections for such
Distribution Date. With respect to any
Distribution Date, the "Alternative Principal
Payment" will equal the greater of (x) ____% of
the Certificate Principal Balance immediately
prior to such Distribution Date and (y) the
amount, but not less than zero, of Principal
Collections for such Distribution Date less the
aggregate of Additional Balances created during
the related Collection Period.
Beginning with the first Distribution Date
following the end of the Managed Amortization
Period, the amount of Principal Collections
payable to Certificateholders on each Distribution
Date will be equal to the Maximum Principal
Payment. See "Description of the
Certificates--Distributions on the Certificates"
herein.
In addition, to the extent funds are available
therefor (including funds available under the
Policy), on the Distribution Date in _____________
20__, Certificateholders will be entitled to
receive as payment of principal an amount equal to
the outstanding Certificate Principal Balance.
Distributions of Principal Collections based upon
the Investor Fixed Allocation Percentage may
result in distributions of principal to
Certificateholders in amounts that are greater
relative to the declining Pool Balance than would
be the case if the Investor Floating Allocation
Percentage were used to determine the percentage
of Principal Collections distributed in
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respect of the Invested Amount. The aggregate
distributions of principal to Certificateholders
will not exceed the Original Certificate Principal
Balance.
The Certificate Insurer.... [Insurer] (the "Certificate Insurer") is a
insurance company engaged exclusively in the
business of writing financial guaranty insurance,
principally in respect of securities offered in
domestic and foreign markets. The Certificate
Insurer's claims-paying ability is rated ____ by
_________________________________________ and
_____ by ________________________________________.
See "The Certificate Insurer" in this Prospectus
Supplement.
Policy..................... On or before the Closing Date, the Policy will be
issued by the Certificate Insurer pursuant to the
provisions of the Insurance and Indemnity
Agreement (the "Insurance Agreement") to be dated
as of _____________, 199_, among the Seller, the
Depositor, the Master Servicer and the Certificate
Insurer.
The Policy will irrevocably and unconditionally
guarantee payment on each Distribution Date to the
Trustee for the benefit of the Certificateholders
the full and complete payment of (i) the
Guaranteed Principal Distribution Amount (as
defined herein) with respect to the Certificates
for such Distribution Date and (ii) accrued and
unpaid interest due on the Certificates (together,
the "Guaranteed Distributions"), with such
Guaranteed Distributions having been calculated in
accordance with the original terms of the
Certificates or the Agreement except for
amendments or modifications to which the
Certificate Insurer has given its prior written
consent. The effect of the Policy is to guarantee
the timely payment of interest on, and the
ultimate payment of the principal amount of, all
of the Certificates.
The "Guaranteed Principal Distribution Amount" for
any Distribution Date shall be the amount by which
the Certificate Principal Balance (after giving
effect to all other amounts distributable and
allocable to principal on the Certificates on such
Distribution Date) exceeds the Invested Amount for
such Distribution Date. In addition, the Policy
will guarantee the payment of the outstanding
Certificate Principal Balance on the Distribution
Date in ____________, 20__ (after giving effect to
all other amounts distributable and allocable to
principal on such Distribution Date).
In accordance with the Agreement, the Trustee will
be required to establish and maintain an account
(the "Spread Account") for the benefit of the
Certificate Insurer and the Certificateholders.
The Trustee shall deposit the amounts into the
Spread Account as required by the Agreement.
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In the absence of payments under the Policy,
Certificateholders will directly bear the credit
and other risks associated with their undivided
interest in the Trust Fund. See "Description of
the Certificates--The Policy" herein.
Overcollateralization
Amount.................... The distribution of Accelerated Principal
Distribution Amounts, if any, to
Certificateholders may result in the Invested
Amount being greater than the Certificate
Principal Balance, thereby creating the
Overcollateralization Amount. The
Overcollateralization Amount, if any, will be
available to absorb any Investor Loss Amount not
covered by Investor Interest Collections. Payments
of Accelerated Principal Distribution Amounts are
not covered by the Policy. Any Investor Loss
Amounts not covered by such overcollateralization,
amounts on deposit in the Spread Account or
Investor Interest Collections will be covered by
draws on the Policy to the extent provided
therein.
Record Date............... The last day preceding a Distribution Date or, if
the Certificates are no longer Book-Entry
Certificates, the last day of the month preceding
a Distribution Date.
Servicing................. The Master Servicer will be responsible for
servicing, managing and making collections on the
Mortgage Loans. The Master Servicer will deposit
all collections in respect of the Mortgage Loans
into the Collection Account as described under
"Description of the Certificates--Payments on
Mortgage Loans; Deposits to Collection Account"
herein. On the third Business Day prior to each
Distribution Date (the "Determination Date"), the
Master Servicer will calculate, and instruct the
Trustee regarding the amounts available to be
paid, as described under "Description of the
Certificates--Payments on Mortgage Loans; Deposits
to Collection Account" herein, to the
Certificateholders on such Distribution Date. See
"Description of the Certificates--Distributions on
the Certificates" herein. With respect to each
Collection Period, the Master Servicer will
receive from collections in respect of interest on
the Mortgage Loans, on behalf of itself, a portion
of such collections as a monthly servicing fee
(the "Servicing Fee") in the amount of
approximately ____% per annum (the "Servicing Fee
Rate") on the aggregate Principal Balances of the
Mortgage Loans as of the first day of each such
Collection Period. See "Description of the
Certificates--Servicing Compensation and Payment
of Expenses" herein. In certain limited
circumstances, the Master Servicer may resign or
be removed, in which event either the Trustee or a
third-party servicer will be appointed as a
successor Master Servicer. See "Description of the
Certificates--Certain Matters Regarding the Master
Servicer and the Transferor" herein.
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Final Payment of
Principal; Termination..... The Trust Fund will terminate on the Distribution
Date following the later of (A) payment in full of
all amounts owing to the Certificate Insurer and
(B) the earliest of (i) the Distribution Date on
which the Certificate Principal Balance has been
reduced to zero, (ii) the final payment or other
liquidation of the last Mortgage Loan in the Trust
Fund, (iii) the optional retransfer to the
Transferor of the Certificates, as described below
and (iv) the Distribution Date in ______________,
20__. The Certificates will be subject to optional
retransfer to the Transferor on any Distribution
Date after the Certificate Principal Balance is
reduced to an amount less than or equal to
$________________ (__% of the Original Certificate
Principal Balance) and all amounts due and owing
to the Certificate Insurer and unreimbursed draws
on the Policy, together with interest thereon, as
provided under the Insurance Agreement, have been
paid. The retransfer price will be equal to the
sum of the outstanding Certificate Principal
Balance and accrued and unpaid interest thereon at
the Certificate Rate through the day preceding the
final Distribution Date. See "Description Of The
Certificates--Termination; Retirement of the
Certificates" herein and "The
Agreements--Termination; Optional Termination" in
the Prospectus.
In addition, the Trust Fund may be liquidated as a
result of certain events of bankruptcy, insolvency
or receivership relating to the Transferor. See
"Description of the Certificates--Rapid
Amortization Events" herein.
Trustee.................... [ ], a ____________________________ (the
"Trustee") will act as Trustee on behalf of the
Certificateholders.
Mandatory Retransfer of
Certain Mortgage Loans..... The Seller will make certain representations and
warranties in the Agreement with respect to the
Mortgage Loans. If the Seller breaches certain of
its representations and warranties with respect to
any Mortgage Loan and such breach materially and
adversely affects the interests of the
Certificateholders or the Certificate Insurer and
is not cured within the specified period, the
Mortgage Loan will be removed from the Trust Fund
upon the expiration of a specified period from the
date on which the Seller becomes aware or receives
notice of such breach and will be reassigned to
the Seller. See "Description of the
Certificates--Assignment of Mortgage Loans"
herein.
Federal Income Tax
Consequences............... Subject to the qualifications set forth in
"Federal Income Tax Consequences" herein, special
tax counsel to the Depositor is of the opinion
that, under existing law, a Certificate will be
treated as a debt instrument for Federal income
tax purposes as of the Closing Date. Under the
Agreement, the Transferor, the Depositor and the
Certificateholders will agree to treat the
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Certificates as indebtedness for Federal income
tax purposes. See "Federal Income Tax
Consequences" herein and in the Prospectus for
additional information concerning the application
of Federal income tax laws.
ERISA Considerations....... The acquisition of a Certificate by a pension or
other employee benefit plan (a "Plan") subject to
the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), could, in some
instances, result in a "prohibited transaction" or
other violation of the fiduciary responsibility
provisions of ERISA and Code Section 4975. Certain
exemptions from the prohibited transaction rules
could be applicable to the acquisition of the
Certificates. Any Plan fiduciary considering
whether to purchase any Certificate on behalf of a
Plan should consult with its counsel regarding the
applicability of the provisions of ERISA and the
Code. See "ERISA Considerations" herein and in the
Prospectus.
Legal Investment
Considerations............. The Certificates will not constitute "mortgage
related securities" for purposes of the Secondary
Mortgage Market Enhancement Act of 1984 ("SMMEA"),
because not all of the Mortgages securing the
Mortgage Loans are first mortgages. Accordingly,
many institutions with legal authority to invest
in comparably rated securities based solely on
first mortgages may not be legally authorized to
invest in the Certificates. See "Legal Investment
Considerations" herein and "Legal Investment" in
the Prospectus.
Certificate Rating......... It is a condition to the issuance of the
Certificates that they be rated "___" by _____ and
"___" by _________ (each a "Rating Agency"). In
general, ratings address credit risk and do not
address the likelihood of prepayments. See
"Ratings" herein and "Risk Factors--Rating of the
Securities" in the Prospectus.
Risk Factors............... For a discussion of certain risks associated with
an investment in the Certificates, see "Risk
Factors" on Page S-16 herein and on page 12 in the
Prospectus.
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RISK FACTORS
Investors should consider the following risks in connection with the
purchase of Certificates.
Consequences of Owning Book-Entry Certificates. Issuance of the
Certificates in book-entry form may reduce the liquidity of such Certificates in
the secondary trading market since investors may be unwilling to purchase
Certificates for which they cannot obtain physical certificates. See
"Description of the Certificates--Book-Entry Certificates" herein and "Risk
Factors-Book-Entry Registration" in the Prospectus.
Since transactions in the Certificates can be effected only through DTC,
CEDEL, Euroclear, participating organizations, indirect participants and certain
banks, the ability of a Certificate Owner to pledge a Certificate to persons or
entities that do not participate in the DTC, CEDEL or Euroclear system may be
limited due to lack of a physical certificate representing the Certificates. See
"Description of the Certificates--Book-Entry Certificates" herein and "Risk
Factors-Book-Entry Registration" in the Prospectus.
Certificate Owners may experience some delay in their receipt of
distributions of interest and principal on the Certificates since such
distributions will be forwarded by the Trustee to DTC and DTC will credit such
distributions to the accounts of its Participants (as defined herein) which will
thereafter credit them to the accounts of Certificate Owners either directly or
indirectly through indirect participants. See "Description of the
Certificates--Book-Entry Certificates" herein and "Risk Factors-Book-Entry
Registration" in the Prospectus.
Cash Flow Considerations and Risks. Minimum monthly payments on the
Mortgage Loans will at least equal and may exceed accrued interest. Even
assuming that the Mortgaged Properties provide adequate security for the
Mortgage Loans, substantial delays could be encountered in connection with the
liquidation of Mortgage Loans that are delinquent and resulting shortfalls in
distributions to Certificateholders could occur if the Certificate Insurer were
unable to perform on its obligations under the Policy. Further, liquidation
expenses (such as legal fees, real estate taxes, and maintenance and
preservation expenses) will reduce the proceeds payable to Certificateholders
and thereby reduce the security for the Mortgage Loans. In the event any of the
Mortgaged Properties fail to provide adequate security for the related Mortgage
Loans, Certificateholders could experience a loss if the Certificate Insurer
were unable to perform its obligations under the Policy.
Prepayment Considerations and Risks. Substantially all of the Mortgage
Loans may be prepaid in whole or in part at any time without penalty. Home
equity loans, such as the Mortgage Loans, have been originated in significant
volume only during the past few years and neither the Depositor nor the Master
Servicer is aware of any publicly available studies or statistics on the rate of
prepayment of such loans. Generally, home equity loans are not viewed by
borrowers as permanent financing. Accordingly, the Mortgage Loans may experience
a higher rate of prepayment than traditional loans. The Trust Fund's prepayment
experience may be affected by a wide variety of factors, including general
economic conditions, interest rates, the availability of alternative financing
and homeowner mobility. In addition, substantially all of the Mortgage Loans
contain due-on-sale provisions and the Master Servicer intends to enforce such
provisions unless (i) such enforcement is not permitted by applicable law or
(ii) the Master Servicer, in a manner consistent with reasonable commercial
practice, permits the purchaser of the related Mortgaged Property to assume the
Mortgage Loan. To the extent permitted by applicable law, such assumption will
not release the original borrower from its obligation under any such Mortgage
Loan. See "Description of the Certificates" herein and "Certain Legal Aspects of
Loans--Due-on-Sale Clauses" in the Prospectus for a description of certain
provisions of the Credit Line Agreements that may affect the prepayment
experience on the Mortgage Loans. The yield to maturity and weighted average
life of the Certificates will be affected primarily by the rate and timing of
prepayments on the Mortgage Loans. Any reinvestment risks resulting from a
faster or slower incidence of prepayment of Mortgage Loans will be borne
entirely by the Certificateholders. See "Maturity and Prepayment Considerations"
herein and "Yield and Prepayment Considerations" in the Prospectus.
Certificate Rating. The rating of the Certificates will depend primarily on
an assessment by the Rating Agencies of the Mortgage Loans and upon the
claims-paying ability of the Certificate Insurer. Any reduction in a rating
assigned to the claims-paying ability of the Certificate Insurer below the
rating initially given to the Certificates may result in a reduction in the
rating of the Certificates. The rating by the Rating Agencies of the
Certificates is not a recommendation to purchase, hold or sell the Certificates,
inasmuch as such rating does not comment as to the
S-16
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market price or suitability for a particular investor. There is no assurance
that the ratings will remain in place forany given period of time or that the
ratings will not be lowered or withdrawn by the Rating Agencies. In general, the
ratings address credit risk and do not address the likelihood of prepayments.
The ratings of the Certificates do not address the possibility of the imposition
of United States withholding tax with respect to non-U.S. persons.
Legal Considerations -- Lien Priority. The Mortgage Loans are secured by
mortgages (which generally are second mortgages). With respect to Mortgage Loans
that are secured by first mortgages, the Master Servicer has the power under
certain circumstances to consent to a new mortgage lien on the Mortgaged
Property having priority over such Mortgage Loan. Mortgage Loans secured by
second mortgages are entitled to proceeds that remain from the sale of the
related Mortgaged Property after any related senior mortgage loan and prior
statutory liens have been satisfied. In the event that such proceeds are
insufficient to satisfy such loans and prior liens in the aggregate and the
Certificate Insurer is unable to perform its obligations under the Policy, the
Certificateholders will bear (i) the risk of delay in distributions while a
deficiency judgment against the borrower is obtained and (ii) the risk of loss
if the deficiency judgment cannot be obtained or is not realized upon. See
"Certain Legal Aspects of the Loans" in the Prospectus.
Legal Considerations -- Security Interest. Under the terms of the
Agreement, so long as [Countrywide's] long-term senior unsecured debt is rated
at least "____" by ___ and "____" by _______, the Master Servicer will be
entitled to maintain possession of the documentation relating to each Mortgage
Loan sold by it, including the Credit Line Agreements and the Related Documents
or other evidence of indebtedness signed by the borrower, and the assignments of
the related mortgages to the Trust Fund will not be required to be recorded.
Failure to deliver the Related Documents to the Trustee will have the result in
most (if not all) of the states in which the Related Documents will be held, and
failure to record the assignments of the related mortgages to the Trustee will
have the result in certain states in which the Mortgaged Properties are located,
of making the sale of the Cut-off Date Principal Balances, Additional Balances
and Related Documents potentially ineffective against (i) any creditors of
[Countrywide], who may have been fraudulently or inadvertently induced to rely
on the Mortgage Loans as assets of [Countrywide], or (ii) any purchaser of a
Mortgage Loan who had no notice of the prior conveyance to the Trust Fund if
such purchaser perfects his interest in the Mortgage Loan by taking possession
of the Related Documents or other evidence of indebtedness or otherwise. In such
event, the Trust Fund would be an unsecured creditor of [Countrywide].
Bankruptcy and Insolvency Risks. The sale of the Mortgage Loans from
[Countrywide] to the Depositor pursuant to the Purchase Agreement will be
treated as a sale of the Mortgage Loans. However, in the event of an insolvency
of [Countrywide], the receiver of [Countrywide] may attempt to recharacterize
the sale of the Mortgage Loans as a borrowing by [Countrywide], secured by a
pledge of the applicable Mortgage Loans. If the receiver decided to challenge
such transfer, (i) if the Mortgage Loans have not been delivered to the Trustee,
the interest of the Trust Fund in the Mortgage Loans will be that of an
unperfected security interest and (ii) even if the Mortgage Loans have been
delivered to the Trustee, delays in payments of the Certificates and reductions
in the amounts thereof could occur. The Depositor will warrant in the Agreement
that the transfer of the Mortgage Loans by it to the Trust Fund is either a
valid transfer and assignment of such Mortgage Loans to the Trust Fund or the
grant to the Trust Fund of a security interest in such Mortgage Loans.
If a conservator, receiver or trustee were appointed for the Transferor, or
if certain other events relating to the bankruptcy or insolvency of the
Transferor were to occur, Additional Balances would not be sold to the Trust
Fund. In such an event, the Rapid Amortization Period would commence and the
Trustee would attempt to sell the Mortgage Loans (unless Certificateholders
holding Certificates evidencing undivided interests aggregating at least 51% of
the Certificate Principal Balance instruct otherwise), thereby causing early
payment of the Certificate Principal Balance. The net proceeds of such sale will
first be paid to the Certificate Insurer to the extent of unreimbursed draws
under the Policy and other amounts owing to the Certificate Insurer pursuant to
the Insurance Agreement. The Investor Fixed Allocation Percentage of remaining
amounts will be distributed to the Certificateholders and the Policy will cover
any amount by which such remaining net proceeds are insufficient to pay the
Certificate Principal Balance in full.
In the event of a bankruptcy or insolvency of the Master Servicer, the
bankruptcy trustee or receiver may have the power to prevent the Trustee or the
Certificateholders from appointing a successor Master Servicer.
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[Geographic Concentration. As of the Cut-off Date, approximately _____% (by
Cut-off Date Principal Balance) of the Mortgaged Properties are located in the
State of __________. An overall decline in the __________ residential real
estate market could adversely affect the values of the Mortgaged Properties
securing such Mortgage Loans such that the Principal Balances of the related
Mortgage Loans, together with any primary financing on such Mortgaged
Properties, could equal or exceed the value of such Mortgaged Properties. As the
residential real estate market is influenced by many factors, including the
general condition of the economy and interest rates, no assurances may be given
that the __________ residential real estate market will not weaken. If the
__________ residential real estate market should experience an overall decline
in property values after the dates of origination of the Mortgage Loans, the
rates of losses on the Mortgage Loans would be expected to increase, and could
increase substantially.]
Master Servicer's Ability to Change the Terms of the Mortgage Loans. The
Master Servicer may agree to changes in the terms of a Credit Line Agreement,
provided that such changes (i) do not adversely affect the interest of the
Certificateholders or the Certificate Insurer, and (ii) are consistent with
prudent business practice. There can be no assurance that changes in applicable
law or the marketplace for home equity loans or prudent business practice will
not result in changes in the terms of the Mortgage Loans. In addition, the
Agreement permits the Master Servicer, within certain limitations described
therein, to increase the Credit Limit of the related Mortgage Loan or reduce the
Margin for such Mortgage Loan. Any such increase in the Credit Line of a
Mortgage Loan would increase the Loan-to-Value Ratio of such Mortgage Loan and,
accordingly, would increase the risk of the Trust Fund's investment in such
Mortgage Loan. In addition, any reduction in the Margin of a Mortgage Loan would
reduce the excess cash flow available to absorb losses.
Delinquent Mortgage Loans. The Trust Fund will include Mortgage Loans which
are 89 or fewer days delinquent as of the Cut-off Date. The Cut-off Date
Principal Balance of Mortgage Loans which are between 30 days and 89 days
delinquent as of the Cut-off Date was $_________________. If there are not
sufficient funds from the Investor Interest Collections to cover the Investor
Loss Amounts for any Distribution Date, the Overcollateralization Amount and the
amount on deposit in the Spread Account have been reduced to zero, and the
Certificate Insurer fails to perform its obligations under the Policy, the
aggregate amount of principal returned to the Certificateholders may be less
than the Certificate Principal Balance on the day the Certificates are issued.
For a discussion of additional risks pertaining to the Certificates, see
"Risk Factors" in the Prospectus.
THE CERTIFICATE INSURER
The following information set forth in this section has been provided by
the Certificate Insurer. Accordingly, neither the Depositor nor the Master
Servicer makes any representation as to the accuracy and completeness of such
information.
[Description of Certificate Insurer]
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THE MASTER SERVICER
General
[The Master Servicer will service the Mortgage Loans in accordance with the
terms set forth in the Agreement. The Master Servicer may perform any of its
obligations under the Agreement through one or more subservicers.
Notwithstanding any such subservicing arrangement, the Master Servicer will
remain liable for its servicing duties and obligations under the Agreement as if
the Master Servicer alone were servicing the Mortgage Loans. As of the Closing
Date, the Master Servicer will service the Mortgage Loans without subservicing
arrangements.]
The Master Servicer
[Countrywide Home Loans, Inc. ("Countrywide"), a New York corporation and a
subsidiary of Countrywide Credit Industries, Inc., will act as Master Servicer
for the Mortgage Loans pursuant to the Agreement. Countrywide is engaged
primarily in the mortgage banking business, and as such, originates, purchases,
sells and services mortgage loans. Countrywide originates mortgage loans through
a retail branch system and through mortgage loan brokers and correspondents
nationwide. Countrywide's mortgage loans are principally first-lien, fixed or
adjustable rate mortgage loans secured by single-family residences. Countrywide
began servicing home equity lines of credit in ________________ 199_.
At ______________, 199_, Countrywide provided servicing for approximately
$____ billion aggregate principal amount of first-lien mortgage loans,
substantially all of which are being serviced for unaffiliated persons. At
___________, 199_, Countrywide provided servicing for approximately $___ million
aggregate principal amount of first and second lien mortgage loans originated
under home equity lines of credit.
The principal executive offices of Countrywide are located at 155 North
Lake Avenue, Pasadena, California 91101-7139. Its telephone number is (818)
304-8400. Countrywide conducts operations from its headquarters in Pasadena and
from offices located throughout the nation.]
THE HOME EQUITY LOAN PROGRAM
Underwriting Procedures Relating to Home Equity Loans
The following is a description of the underwriting procedures customarily
employed by the Seller with respect to home equity loans. The underwriting
process is intended to assess the applicant's credit standing and repayment
ability, and the value and adequacy of the real property security as collateral
for the proposed loan. Exceptions to the Seller's underwriting guidelines will
be made when compensating factors are present. Such factors include the
borrower's employment stability, credit history, disposable income, equity in
the related property and the nature of the underlying first mortgage loan.
Each applicant for a home equity loan is required to complete an
application which lists the applicant's assets, liabilities, income, credit and
employment history and other demographic and personal information. If
information in the loan application demonstrates that there is sufficient income
and equity in the real property to justify making a home equity loan, the Seller
will conduct a further credit investigation of the applicant. This investigation
includes obtaining and reviewing an independent credit bureau report on the
credit history of the applicant in order to evaluate the applicant's ability to
repay. The credit report typically contains information relating to such matters
as credit history with local merchants and lenders, installment debt payments
and any record of delinquencies, defaults, bankruptcy, collateral repossessions,
suits or judgments.
The Seller originates or acquires mortgage loans pursuant to alternative
sets of underwriting criteria under its Alternative Documentation Loan Program
(the "Alternative Documentation Program") and its Reduced Documentation Loan
Program (the "Reduced Documentation Program"). The Alternative Documentation
Program permits a borrower to provide W-2 forms instead of tax returns covering
the most recent two years, permits bank statements in lieu of verifications of
deposits and permits alternative methods of employment verification. Under the
Reduced Documentation Program, relatively more emphasis is placed on property
underwriting than on credit
S-19
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underwriting and certain credit underwriting documentation concerning income and
employment verification therefore is waived. Mortgage loans underwritten under
the Reduced Documentation Program generally are limited to self-employed
borrowers with credit histories that demonstrate an established ability to repay
indebtedness in a timely fashion.
Full appraisals are generally performed on all home equity loans which at
origination had a principal balance greater than $100,000. Such appraisals are
determined on the basis of a Seller-approved, independent third-party, fee-based
appraisal completed on forms approved by Federal National Mortgage Association
("FNMA") or Federal Home Loan Mortgage Corporation ("FHLMC"). For loans which
had at origination a principal balance equal to or less than $100,000, a
drive-by evaluation is generally completed by a state licensed, independent
third-party, professional appraiser on forms approved by either FNMA or FHLMC.
The drive-by evaluation is an exterior examination of the premises by the
appraiser to determine that the property is in good condition. The appraisal is
based on various factors, including the market value of comparable homes and the
cost of replacing the improvement and generally is required to have been made
not earlier than 150 days prior to the date of origination of the Mortgage Loan.
The minimum and maximum loan amounts for home equity loans are $10,000 and
$500,000, respectively. Borrowers may draw under the home equity loans in
minimum amounts of $250 and maximum amounts up to the remaining available credit
thereunder, in each case after giving effect to all prior draws and payments
thereon.
After obtaining all applicable employment, credit and property information,
the Seller uses a debt-to-income ratio to assist in determining whether the
prospective borrower has sufficient monthly income available to support the
payments of principal and interest on the home equity loan in addition to any
senior mortgage loan payments (including any escrows for property taxes and
hazard insurance premiums) and other monthly credit obligations. The
"debt-to-income ratio" is the ratio of the borrower's total monthly payments
(assumed to be based on the applicable fully indexed interest rate plus a margin
of 2%) to the borrower's gross monthly income. Based on the foregoing, for loans
with Combined Loan-to-Value Ratios of 90% or less, the maximum monthly
debt-to-income ratio is 45%. For loans with Combined Loan-to-Value Ratios
greater than 90%, the maximum monthly debt-to-income ratio is generally 38%.
Variations in the monthly debt-to-income ratios limits are permitted based on
compensating factors. The Seller currently offers home equity loan products
that allow maximum Combined Loan-to-Value Ratios of 70%, 80%, 90% and 100%.
It is generally the Seller's policy to require a title search before it
makes a home equity loan for amounts less than or equal to $100,000. In
addition, if the home equity loan has an original principal balance of $100,000
or more, the Seller requires that the borrower obtain an American Land Title
Association ("ALTA") policy, or other assurance of title customary in the
relevant jurisdiction. In addition, ALTA title policies are generally obtained
in situations where the property is on leased land or there has been a change in
title or such home equity loan is in first lien position.
Servicing of the Mortgage Loans
The Master Servicer has established standard policies for the servicing and
collection of the home equity loans. Servicing includes, but is not limited to,
(i) the collection and aggregation of payments relating to the Mortgage Loans;
(ii) the supervision of delinquent Mortgage Loans, loss mitigation efforts,
foreclosure proceedings and, if applicable, the disposition of Mortgaged
Properties; and (iii) the preparation of tax related information in connection
with the Mortgage Loans.
Billing statements are mailed monthly by the Master Servicer. The statement
details all debits and credits and specifies the minimum payment due and the
available credit line. Notice of changes in the applicable loan rate are
provided by the Master Servicer to the Mortgagor with such statements. All
payments are due by the fifteenth day of the month.
With respect to Mortgage Loans, the general policy of the Master Servicer
is to initiate foreclosure in the underlying property (i) after such loan is 75
days or more delinquent and satisfactory arrangements cannot be made with the
Mortgagor; or (ii) if a notice of default on a senior lien is received by the
Master Servicer. Foreclosure proceedings may be terminated if the delinquency is
cured. Mortgage Loans to borrowers in bankruptcy proceedings may be restructured
in accordance with law and with a view to maximizing recovery of such loans,
including any deficiencies.
Once foreclosure is initiated by the Master Servicer, a foreclosure
tracking system is used to monitor the progress of the proceedings. The system
includes state specific parameters to monitor whether proceedings are
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<PAGE>
progressing within the time frame typical for the state in which the property is
located. During the foreclosure proceeding, the Master Servicer determines the
amount of the foreclosure bid and whether to liquidate the loan.
After foreclosure, if the home equity loan is secured by a first mortgage
lien, the Master Servicer may liquidate the Mortgaged Property and charge off
the home equity loan balance which was not recovered through liquidation
proceeds. If the Mortgaged Property was subject to a senior lien, the Master
Servicer will either directly manage the foreclosure sale of the property and
satisfy such lien at the time of sale or take other action as deemed necessary
to protect the interest in the Mortgaged Property. If in the judgment of the
Master Servicer, the cost of maintaining or purchasing the senior lien position
exceeds the economic benefit of such action, the Master Servicer will generally
charge off the entire home equity loan and may seek a money judgment against the
borrower.
Servicing and charge-off policies and collection practices may change over
time in accordance with, among other things, the Master Servicer's business
judgment, changes in the portfolio and applicable laws and regulations.
Foreclosure and Delinquency Experience
The following table summarizes the delinquency and foreclosure experience,
respectively, on the dates indicated, of home equity loans serviced by the
Master Servicer. Since [Countrywide] only began servicing home equity loans in
__________________ 199_, the delinquency and foreclosure percentages may be
affected by the size and relative lack of seasoning of the servicing portfolio
because many of such loans were not outstanding long enough to give rise to some
or all of the periods of delinquency indicated in the chart below. Accordingly,
the information should not be considered as a basis for assessing the
likelihood, amount or severity of delinquency or losses on the Mortgage Loans
and no assurances can be given that the foreclosure and delinquency experience
presented in the table below will be indicative of such experience on the
Mortgage Loans:
Delinquency Status As Of ___________, 199__*
<TABLE>
<CAPTION>
Dollars Percent Units Percent
------------------ ------------ -------- ------------
<S> <C> <C> <C> <C>
Current.......................................... $
30-59 days.......................................
60-89 days.......................................
90+ days.........................................
------------------ ------------ -------- ------------
Total....................................... $ 100.00% 100.00%
================== ============ ======== ============
</TABLE>
- ----------
* Delinquencies are reported on a contractual basis.
As of ___________, 199_, loans with an aggregate balance of $_______ are in
bankruptcy and ____ loans with an aggregate balance of $___________ are in
foreclosure. Of the loans in foreclosure, there will be a _______, 199_ charge
off of $_______. [In addition to this charge off, there is an anticipated charge
off of approximately $ which may also be realized in _______________.]
DESCRIPTION OF THE MORTGAGE LOANS
General
The Mortgage Loans were originated pursuant to loan agreements and
disclosure statements (the "Credit Line Agreements") and are secured by
mortgages or deeds of trust, which are either first or second mortgages or deeds
of trust, on Mortgaged Properties located in ____ states. The Mortgaged
Properties securing the Mortgage Loans consist of residential properties that
are one- to four-family properties. See "--Mortgage Loan Terms" below.
The Cut-off Date Pool Balance is $______________, which is equal to the
aggregate Principal Balances of the Mortgage Loans as of the Cut-off Date. As of
the Cut-off Date, the Mortgage Loans were not more than 89 days delinquent. The
average Cut-off Date Principal Balance was approximately $ , the minimum
Cut-off Date
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<PAGE>
Principal Balance was zero, the maximum Cut-off Date Principal Balance was
$____________, the minimum Loan Rateand the maximum Loan Rate as of the Cut-off
Date were ___% and ___% per annum, respectively, and the weighted average Loan
Rate as of the Cut-off Date was approximately ___% per annum. As of the Cut-off
Date, the weighted average Credit Limit Utilization Rate was approximately %,
the minimum Credit Limit Utilization Rate was zero and the maximum Credit Limit
Utilization Rate was 100%. The "Credit Limit Utilization Rate" is determined by
dividing the Cut-off Date Principal Balance of a Mortgage Loan by the Credit
Limit of the related Credit Line Agreement. The remaining term to scheduled
maturity for the Mortgage Loans as of the Cut-off Date ranged from ___ months to
___ months and the weighted average remaining term to scheduled maturity was
approximately months. As of the Cut-off Date, the Combined Loan-to-Value Ratio
of the Mortgage Loans ranged from ___% to ___% and the weighted average Combined
Loan-to-Value Ratio was approximately %. The Combined Loan-to-Value Ratio for a
Mortgage Loan is the ratio (expressed as a percentage) of (A) the sum of (i) the
Credit Limit of the Mortgage Loan and (ii) any outstanding principal balances of
mortgage loans senior to such Mortgage Loan (calculated at the date of
origination of the Mortgage Loan) to (B) the lesser of (i) the appraised value
of the related Mortgaged Property as set forth in the loan files at such date of
origination or (ii) in the case of a Mortgaged Property purchased within one
year of the origination of the related Mortgage Loan, the purchase price of such
Mortgaged Property. Credit Limits under the Mortgage Loans as of the Cut-off
Date ranged from $________ to $________ and averaged approximately $________.
The weighted average second mortgage ratio (which is the Credit Limit for the
related Mortgage Loan, provided such Mortgage Loan was in the second lien
position, divided by the sum of such Credit Limit and the outstanding principal
balance of any mortgage loan senior to the related Mortgage Loan) was
approximately ___%. As of the Cut-off Date, approximately ___% by Cut-off Date
Principal Balance of the Mortgage Loans represented first liens on the related
Mortgaged Properties, while approximately % of the Mortgage Loans represented
second liens. As of the Cut-off Date, approximately ___% of the Mortgage Loans
are secured by Mortgaged Properties which are single-family residences and ___%
were owner-occupied. As of the Cut-off Date, approximately ___%, ___%, ___%,
__%, ___% and ___% by Cut-off Date Principal Balance are located in __________,
________, __________, _______, ______ and ________], respectively.
Mortgage Loan Terms
[A borrower may access a Mortgage Loan by writing a check in a minimum
amount of $250. The Mortgage Loans bear interest at a variable rate which
changes monthly on the first business day of the related month with changes in
the applicable Index Rate. The Mortgage Loans are subject to a maximum per annum
interest rate (the "Maximum Rate") ranging from [_____% to _____%] per annum and
subject to applicable usury limitations. As of the Cut-off Date, the weighted
average Maximum Rate was approximately ___%. See "Certain Legal Aspects of the
Loans--Applicability of Usury Laws" in the Prospectus. The daily periodic rate
on the Mortgage Loans (the "Loan Rate") is the sum of the Index Rate plus the
spread (the "Margin") which generally ranges between ____% and ____% and had a
weighted average, as of the Cut-off Date, of approximately %, divided by 365
days. The "Index Rate" is based on the highest "prime rate" published in the
'Money Rates' table of The Wall Street Journal as of the first business day of
each calendar month.]
[Countrywide] offers an introductory loan rate on home equity lines of
credit which are originated with Combined Loan-to-Value Ratios of 75% and 80%.
The introductory rate applies to any payments made during the first three months
after origination. After such three month period, the Loan Rate will adjust to
the Index plus the applicable Margin. As of the Cut-off Date, approximately % of
the Mortgage Loans by Cut-off Date Principal Balance were subject to an
introductory rate of ____% per annum.
In general, the home equity loans may be drawn upon for a period (the "Draw
Period") of either five years (which may be extendible for an additional five
years, upon [Countrywide's] approval) or three years. Home equity loans with an
initial Draw Period of five years, which constitute approximately ___% of the
Mortgage Loans by Cut-off Date Principal Balance, are subject to a fifteen year
repayment period (the "Repayment Period") following the end of the Draw Period
during which the outstanding principal balance of the loan will be repaid in
monthly installments equal to 1/180 of the outstanding principal balance as of
the end of the Draw Period. Mortgage Loans with a Draw Period of three years,
which constitute approximately ___% of the Mortgage Loans by Cut-off Date
Principal Balance, are subject to a ten year Repayment Period following the end
of the Draw Period during which the outstanding principal balance of the loan
will be paid in monthly installments equal to 1/120 of the outstanding principal
balance as of the end of the Draw Period.
S-22
<PAGE>
<PAGE>
The minimum payment due during the Draw Period will be equal to the finance
charges accrued on the outstanding principal balance of the home equity loan
during the related billing period. The minimum payment due during the repayment
period will be equal to the sum of the finance charges accrued on the
outstanding principal balance of the Mortgage Loan during the related billing
period and the principal payment described above.
Set forth below is a description of certain characteristics of the Mortgage
Loans as of the Cut-off Date:
PRINCIPAL BALANCES
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-off Date
Range of Principal Balances Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ------------------- -----------------
<S> <C> <C> <C>
$_______ to $_________............................. $ %
$_______ to $_________.............................
$_______ to $_________.............................
$_______ to $_________.............................
$_______ to $_________.............................
$_______ to $_________.............................
$_______ to $_________.............................
$_______ to $_________.............................
$_______ to $_________.............................
$_______ to $_________.............................
$_______ to $_________.............................
$_______ to $_________.............................
$_______ to $_________.............................
$_______ to $_________.............................
$_______ to $_________.............................
$_______ to $_________.............................
$_______ to $_________.............................
$_______ to $_________.............................
$_______ to $_________.............................
$_______ and over..................................
---------- ------------------- -----------------
Total......................................... $ 100.00%
========== =================== =================
</TABLE>
S-23
<PAGE>
<PAGE>
GEOGRAPHIC DISTRIBUTION(1)
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-off Date
State Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ------------------- -----------------
<S> <C> <C> <C>
$ %
---------- ------------------- -----------------
Total......................................... $ 100.00%
========== =================== =================
</TABLE>
- ----------
(1) Geographic location is determined by the address of the Mortgaged Property
securing the related Mortgage Loan.
S-24
<PAGE>
<PAGE>
COMBINED LOAN-TO-VALUE RATIOS(1)
<TABLE>
<CAPTION>
Number of Percent of Pool
Range of Combined Mortgage Cut-off Date by Cut-off Date
Loan-to-Value Ratios Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ------------------- -----------------
<S> <C> <C> <C>
_____% to ______%................................. $ %
______% to ______%.................................
______% to ______%.................................
______% to ______%.................................
______% to ______%.................................
______% to ______%.................................
______% to ______%.................................
______% to ______%.................................
______% to ______%.................................
______% to ______%.................................
---------- ------------------- -----------------
Total......................................... $ 100.00%
========== =================== =================
</TABLE>
- ----------
(1) The ratio (expressed as a percentage) of (A) the sum of (i) the Credit
Limit of the Mortgage Loans and (ii) any outstanding principal balances of
mortgage loans senior to the Mortgage Loans (calculated at the date of
origination of the Mortgage Loans) to (B) the lesser of (i) the appraised
value of the related Mortgaged Property as set forth in loan files at such
date of origination or (ii) in the case of a Mortgaged Property purchased
within one year of the origination of the related Mortgage Loan, the
purchase price of such Mortgaged Property.
PROPERTY TYPE
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-off Date
Property Type Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ------------------- -----------------
<S> <C> <C> <C>
Single Family...................................... $ %
Two- to Four-Family................................
Condominium........................................
PUD................................................
---------- ------------------- -----------------
Total......................................... $ 100.00%
========== =================== =================
</TABLE>
LIEN PRIORITY
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-off Date
Lien Priority Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ------------------- -----------------
<S> <C> <C> <C>
First Lien......................................... $ %
Second Lien........................................
---------- ------------------- -----------------
Total......................................... $ 100.00%
========== =================== =================
</TABLE>
S-25
<PAGE>
<PAGE>
LOAN RATES(1)
<TABLE>
<CAPTION>
Number of Percent of Pool
Range of Mortgage Cut-off Date by Cut-off Date
Loan Rates Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ------------------- -----------------
<S> <C> <C> <C>
_____% to _____%................................... $ %
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
---------- ------------------- -----------------
Total......................................... $ 100.00%
========== =================== =================
</TABLE>
- ----------
(1) Approximately % of the Mortgage Loans by Cut-Off Date Principal Balance are
subject to an introductory rate of _____% per annum.
S-26
<PAGE>
<PAGE>
MARGIN
<TABLE>
<CAPTION>
Number of Percent of Pool
Range of Mortgage Cut-off Date by Cut-off Date
Margins Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ------------------- -----------------
<S> <C> <C> <C>
_____% to _____%................................... $ %
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
---------- ------------------- -----------------
Total......................................... $ 100.00%
========== =================== =================
</TABLE>
CREDIT LIMIT UTILIZATION RATES
<TABLE>
<CAPTION>
Number of Percent of Pool
Range of Credit Limit Mortgage Cut-off Date by Cut-off Date
Utilization Rates Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ------------------- -----------------
<S> <C> <C> <C>
_____% to _____%................................... $ %
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
_____% to _____%...................................
---------- ------------------- -----------------
Total......................................... $ 100.00%
========== =================== =================
</TABLE>
S-27
<PAGE>
<PAGE>
CREDIT LIMITS
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-off Date
Range of Credit Limits Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ------------------- -----------------
<S> <C> <C> <C>
$__________to $_________........................... $ %
$_________ to $_________...........................
$_________ to $_________...........................
$_________ to $_________...........................
$_________ to $_________...........................
$_________ to $_________...........................
$_________ to $_________...........................
$_________ to $_________...........................
$_________ to $_________...........................
$_________ to $_________...........................
$_________ to $_________...........................
$_________ to $_________...........................
$_________ to $_________...........................
$_________ to $_________...........................
$_________ to $_________...........................
$_________ to $_________...........................
$_________ to $_________...........................
$_________ to $_________...........................
$_________ to $_________...........................
$_________ to $_________...........................
$_________ and over................................
---------- ------------------- -----------------
Total......................................... $ 100.00%
========== =================== =================
</TABLE>
MAXIMUM RATES
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-off Date
Maximum Rates Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ------------------- -----------------
<S> <C> <C> <C>
- -----%............................................. $ %
- -----%.............................................
- -----%.............................................
- -----%.............................................
---------- ------------------- -----------------
Total......................................... $ 100.00%
========== =================== =================
</TABLE>
S-28
<PAGE>
<PAGE>
MONTHS REMAINING TO SCHEDULED MATURITY(1)
<TABLE>
<CAPTION>
Number of Percent of Pool
Range of Months Mortgage Cut-off Date by Cut-off Date
Remaining to Scheduled Maturity Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ------------------- -----------------
<S> <C> <C> <C>
___ to ___......................................... $ %
___ to ___.........................................
___ to ___.........................................
___ to ___.........................................
___ to ___.........................................
___ to ___.........................................
___ to ___.........................................
___ to ___.........................................
___ to ___.........................................
___ to ___.........................................
---------- ------------------- -----------------
Total......................................... $ 100.00%
========== =================== =================
</TABLE>
- ----------
(1) Assumes that the Draw Period for Mortgage Loans with five year Draw Periods
will be extended for an additional five years.
ORIGINATION YEAR
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-off Date
Organization Year Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ------------------- -----------------
<S> <C> <C> <C>
- ----............................................... $ %
- ----...............................................
---------- ------------------- -----------------
Total......................................... $ 100.00%
========== =================== =================
</TABLE>
DELINQUENCY STATUS
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-off Date
Number of Days Delinquent Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ------------------- -----------------
<S> <C> <C> <C>
0 to 29 ........................................... $ %
30 to 59...........................................
---------- ------------------- -----------------
60 to 89...........................................
---------- ------------------- -----------------
Total......................................... $ 100.00%
========== =================== =================
</TABLE>
MATURITY AND PREPAYMENT CONSIDERATIONS
The Agreement, except as otherwise described herein, provides that the
Certificateholders will be entitled to receive on each Distribution Date
distributions of principal, in the amounts described under "Description of the
Certificates--Distributions on the Certificates" herein, until the Certificate
Principal Balance is reduced to zero. During the Managed Amortization Period,
Certificateholders will receive amounts from Principal Collections based upon
their Fixed Allocation Percentage subject to reduction as described below.
During the Rapid Amortization Period, Certificateholders will receive amounts
from Principal Collections based solely upon their Fixed Allocation
S-29
<PAGE>
<PAGE>
Percentage. Because prior distributions of Principal Collections to
Certificateholders serve to reduce the Investor Floating Allocation Percentage
but do not change their Fixed Allocation Percentage, allocations of Principal
Collections based on the Fixed Allocation Percentage may result in distributions
of principal to the Certificateholdersin amounts that are, in most cases,
greater relative to the declining balance of the Mortgage Loans than would be
the case if the Investor Floating Allocation Percentage were used to determine
the percentage of Principal Collections distributed to Certificateholders. This
is especially true during the Rapid Amortization Period when the
Certificateholders are entitled to receive Investor Principal Collections and
not a lesser amount. In addition, Investor Interest Collections may be
distributed as principal to Certificateholders in connection with the
Accelerated Principal Distribution Amount, if any. Moreover, to the extent of
losses allocable to the Certificateholders, Certificateholders may also receive
as payment of principal the amount of such losses either from Investor Interest
Collections or, in some instances, draws under the Policy. The level of losses
may therefore affect the rate of payment of principal on the Certificates.
To the extent obligors make more draws than principal payments, the
Transferor Interest may grow. Because during the Rapid Amortization Period the
Certificateholders share of Principal Collections is based upon its Fixed
Allocation Percentage (without reduction), an increase in the Transferor
Interest due to additional draws may also result in Certificateholders receiving
principal at a greater rate. The Agreement permits the Transferor, at its
option, but subject to the satisfaction of certain conditions specified in the
Agreement, including the conditions described below, to remove certain Mortgage
Loans from the Trust Fund at any time during the life of the Trust Fund, so long
as the Transferor Interest (after giving effect to such removal) is not less
than the Minimum Transferor Interest. Such removals may affect the rate at which
principal is distributed to Certificateholders by reducing the overall Pool
Balance and thus the amount of Principal Collections. See "Description of the
Certificates--Optional Retransfers of Mortgage Loans to the Transferor" herein.
All of the Mortgage Loans may be prepaid in full or in part at any time.
[However, Mortgage Loans secured by Mortgaged Properties in California are
subject to an account termination fee equal to the lesser of $350 and six months
interest on the amount prepaid, to the extent the prepaid amount exceeds 20% of
the unpaid principal balance, if the account is terminated on or before its
fifth year anniversary. In addition, Mortgage Loans secured by Mortgaged
Properties in other jurisdictions may be subject to account termination fees to
the extent permitted by law. In general, such account termination fees do not
exceed $350 and do not apply to accounts terminated subsequent to a date
designated in the related Mortgage Note which, depending on the jurisdiction,
ranges between six months and five years following origination.] The prepayment
experience with respect to the Mortgage Loans will affect the weighted average
life of the Certificates.
The rate of prepayment on the Mortgage Loans cannot be predicted. Neither
the Depositor nor the Master Servicer is aware of any publicly available studies
or statistics on the rate of prepayment of such Mortgage Loans. Generally, home
equity revolving credit lines are not viewed by borrowers as permanent
financing. Accordingly, the Mortgage Loans may experience a higher rate of
prepayment than traditional first mortgage loans. On the other hand, because the
Mortgage Loans amortize as described under "Description of the Mortgage
Loans--Mortgage Loan Terms" herein, rates of principal payment on the Mortgage
Loans will generally be slower than those of traditional fully-amortizing first
mortgages in the absence of prepayments on such Mortgage Loans. The prepayment
experience of the Trust Fund with respect to the Mortgage Loans may be affected
by a wide variety of factors, including general economic conditions, prevailing
interest rate levels, the availability of alternative financing, homeowner
mobility, the frequency and amount of any future draws on the Credit Line
Agreements and changes affecting the deductibility for Federal income tax
purposes of interest payments on home equity credit lines. Substantially all of
the Mortgage Loans contain "due-on-sale" provisions, and, with respect to the
Mortgage Loans, the Master Servicer intends to enforce such provisions, unless
such enforcement is not permitted by applicable law. The enforcement of a
"due-on-sale" provision will have the same effect as a prepayment of the related
Mortgage Loan. See "Certain Legal Aspects of The Loans--Due-on-Sale Clauses" in
the Prospectus.
The yield to an investor who purchases the Certificates in the secondary
market at a price other than par will vary from the anticipated yield if the
rate of prepayment on the Mortgage Loans is actually different than the rate
anticipated by such investor at the time such Certificates were purchased.
Collections on the Mortgage Loans may vary because, among other things,
borrowers may make payments during any month as low as the minimum monthly
payment for such month or as high as the entire outstanding principal balance
plus accrued interest and the fees and charges thereon. It is possible that
borrowers may fail to
S-30
<PAGE>
<PAGE>
make scheduled payments. Collections on the Mortgage Loans may vary due to
seasonal purchasing and payment habits of borrowers.
No assurance can be given as to the level of prepayments that will be
experienced by the Trust Fund and it can be expected that a portion of borrowers
will not prepay their Mortgage Loans to any significant degree. See "Yield and
Prepayment Considerations" in the Prospectus.
POOL FACTOR AND TRADING INFORMATION
The "Pool Factor" is a seven-digit decimal which the Master Servicer will
compute monthly expressing the Certificate Principal Balance of the Certificates
as of each Distribution Date (after giving effect to any distribution of
principal on such Distribution Date) as a proportion of the Original Certificate
Principal Balance. On the Closing Date, the Pool Factor will be 1.0000000. See
"Description of the Certificates--Distributions on the Certificates" herein.
Thereafter, the Pool Factor will decline to reflect reductions in the related
Certificate Principal Balance resulting from distributions of principal to the
Certificates and the Invested Amount of any unreimbursed Liquidation Loss
Amounts.
Pursuant to the Agreement, monthly reports concerning the Invested Amount,
the Pool Factor and various other items of information will be made available to
the Certificateholders. In addition, within 60 days after the end of each
calendar year, beginning with the 199_ calendar year, information for tax
reporting purposes will be made available to each person who has been a
Certificateholder of record at any time during the preceding calendar year. See
"Description of the Certificates--Book-Entry Certificates" and "--Reports to
Certificateholders" herein.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement. The form of the
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus Supplement and the Prospectus is a part. The following is a
description of the material provisions of the Agreement. Wherever particular
sections or defined terms of the Agreement are referred to, such sections or
defined terms are hereby incorporated herein by reference.
General
The Certificates will be issued in denominations of $1,000 and multiples of
$1 in excess thereof and will evidence specified undivided interests in the
Trust Fund. The property of the Trust Fund will consist of, to the extent
provided in the Agreement: (i) each of the Mortgage Loans that from time to time
are subject to the Agreement; (ii) collections on the Mortgage Loans received
after the Cut-off Date (exclusive of payments in respect of accrued interest due
on or prior to the Cut-off Date or due in the month of ); (iii) Mortgaged
Properties relating to the Mortgage Loans that are acquired by foreclosure or
deed in lieu of foreclosure; (iv) the Collection Account and the Security
Account for the Certificates (excluding net earnings thereon); (v) the Policy;
(vi) the Spread Account (for the benefit of the Certificate Insurer and the
Certificateholders); and (vii) an assignment of the Depositor's rights under the
Purchase Agreement. Definitive Certificates (as defined below), if issued, will
be transferable and exchangeable at the corporate trust office of the Trustee,
which will initially maintain the Security Register for the Certificates. See
"--Book-Entry Certificates" below. 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.
The aggregate undivided interest in the Trust Fund represented by the
Certificates as of the Closing Date will equal $ (the "Original Invested
Amount"), which represents __% of the Cut-off Date Pool Balance. The "Original
Certificate Principal Balance" will equal $ . Following the Closing Date, the
"Invested Amount" with respect to any Distribution Date will be an amount equal
to the Original Invested Amount minus (i) the amount of Investor Principal
Collections previously distributed to Certificateholders, and minus (ii) an
amount equal to the product of the Investor Floating Allocation Percentage and
the Liquidation Loss Amounts (each as defined herein). The principal amount of
the outstanding Certificates (the "Certificate Principal Balance") on any
Distribution Date is equal to the Original Certificate Principal Balance minus
the aggregate of amounts actually distributed as principal to the
Certificateholders. See "--Distributions on the Certificates" below. Each
Certificate
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represents the right to receive payments of interest at the Certificate Rate and
payments of principal as described below.
The Transferor will own the remaining undivided interest in the Mortgage
Loans (the "Transferor Interest"), which is equal to the Pool Balance less the
Invested Amount. The Transferor Interest will initially equal $________, which
represents _% of the Cut-off Date Pool Balance. The Transferor as of any date is
the owner of the Transferor Interest which initially will be the Seller. In
general, the Pool Balance will vary each day as principal is paid on the
Mortgage Loans, liquidation losses are incurred, Additional Balances are drawn
down by borrowers and Mortgage Loans are transferred to the Trust Fund.
The Transferor has the right to sell or pledge the Transferor Interest at
any time, provided (i) the Rating Agencies (as defined herein) have notified the
Transferor and the Trustee in writing that such action will not result in the
reduction or withdrawal of the ratings assigned to the Certificates, and (ii)
certain other conditions specified in the Agreement are satisfied.
Book-Entry Certificates
The Certificates will be book-entry Certificates (the "Book-Entry
Certificates"). Persons acquiring beneficial ownership interests in the
Certificates ("Certificate Owners") may elect to hold their Certificates through
the Depository Trust Company ("DTC") in the United States, or CEDEL or Euroclear
(in Europe) if they are participants of such systems, or indirectly through
organizations which are participants in such systems. The Book-Entry
Certificates will be issued in one or more certificates which equal the
aggregate principal balance of the Certificates and will initially be registered
in the name of Cede & Co., the nominee of DTC. CEDEL and Euroclear will hold
omnibus positions on behalf of their participants through customers' securities
accounts in CEDEL's and Euroclear's names on the books of their respective
depositaries which in turn will hold such positions in customers' securities
accounts in the depositaries' names on the books of DTC. Citibank will act as
depositary for CEDEL and Chase will act as depositary for Euroclear (in such
capacities, individually the "Relevant Depositary" and collectively the
"European Depositaries"). Investors may hold such beneficial interests in the
Book-Entry Certificates in minimum denominations representing Certificate
Principal Balances of $1,000 and in multiples of $1 in excess thereof. Except as
described below, no person acquiring a Book-Entry Certificate (each, a
"beneficial owner") will be entitled to receive a physical certificate
representing such Certificate (a "Definitive Certificate"). Unless and until
Definitive Certificates are issued, it is anticipated that the only
"Certificateholder" of the Certificates will be Cede & Co., as nominee of DTC.
Certificate Owners will not be Certificateholders as that term is used in the
Agreement. Certificate Owners are only permitted to exercise their rights
indirectly through the participating organizations that utilize the services of
DTC, including securities brokers and dealers, banks and trust companies and
clearing corporations and certain other organizations ("Participants") and DTC.
The beneficial owner's ownership of a Book-Entry Certificate will be
recorded on the records of the brokerage firm, bank, thrift institution or other
financial intermediary (each, a "Financial Intermediary") that maintains the
beneficial owner's account for such purpose. In turn, the Financial
Intermediary's ownership of such Book-Entry Certificate will be recorded on the
records of DTC (or of a participating firm that acts as agent for the Financial
Intermediary, whose interest will in turn be recorded on the records of DTC, if
the beneficial owner's Financial Intermediary is not a DTC participant and on
the records of CEDEL or Euroclear, as appropriate).
Certificate Owners will receive all distributions of principal of, and
interest on, the Certificates from the Trustee through DTC and DTC participants.
While the Certificates 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 Certificates and
is required to receive and transmit distributions of principal of, and interest
on, the Certificates. Participants and organizations which have indirect access
to the DTC system, 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") with whom Certificate Owners
have accounts with respect to Certificates are similarly required to make
book-entry transfers and receive and transmit such distributions on behalf of
their respective Certificate Owners. Accordingly, although Certificate Owners
will not possess certificates, the Rules provide a mechanism by which
Certificate Owners will receive distributions and will be able to transfer their
interest.
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Certificate Owners will not receive or be entitled to receive certificates
representing their respective interests in the Certificates, except under the
limited circumstances described below. Unless and until Definitive Certificates
are issued, Certificate Owners who are not Participants may transfer ownership
of Certificates only through Participants and Indirect Participants by
instructing such Participants and Indirect Participants to transfer
Certificates, by book-entry transfer, through DTC for the account of the
purchasers of such Certificates, which account is maintained with their
respective Participants. Under the Rules and in accordance with DTC's normal
procedures, transfers of ownership of Certificates will be executed through DTC
and the accounts of the respective Participants at DTC will be debited and
credited. Similarly, the Participants and Indirect Participants will make debits
or credits, as the case may be, on their records on behalf of the selling and
purchasing Certificate Owners.
Because of time zone differences, credits of securities received in CEDEL,
or Euroclear as a result of a transaction with a Participant will be made
during, subsequent securities settlement processing and dated the business day
following, the DTC settlement date. Such credits or any transactions in such
securities, settled during such processing will be reported to the relevant
Euroclear or, CEDEL Participants on such business day. Cash received in CEDEL or
Euroclear as, a result of sales of securities by or through a CEDEL Participant
(as defined, below) or Euroclear Participant (as defined below) 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 "Federal Income Tax
Consequences--Foreign Investors" and "--Backup Withholding" herein and "Global,
Clearance, Settlement And Tax Documentation Procedures--Certain U.S. Federal
Income Tax Documentation Requirements" in Annex I hereto.
Transfers between Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants and Euroclear Participants will occur in
accordance with their respective 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
Participants 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 the Relevant 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 and 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 the
Relevant Depositary to take action to effect final settlement on its behalf by
delivering or receiving securities 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 European Depositaries.
DTC which is a New York-chartered limited purpose trust company, performs
services for its participants, some of which (and/or their representatives) own
DTC. In accordance with its normal procedures, DTC is expected to record the
positions held by each DTC participant in the Book-Entry Certificates, whether
held for its own account or as a nominee for another person. In general,
beneficial ownership of Book-Entry Certificates will be subject to the rules,
regulations and procedures governing DTC and DTC participants as in effect from
time to time.
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 certificates. Transactions may be settled in CEDEL in any of 28
currencies, including United States dollars. CEDEL provides to its CEDEL
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. 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.
Euroclear was created in 1968 to hold securities for participants of
Euroclear ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery
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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 32 currencies, including United
States dollars. Euroclear includes various other services, including securities
lending and borrowing andinterfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York (the "Euroclear Operator"), under contract
with Euroclear Clearance Systems 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 and
other professional financial intermediaries. 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 which 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.
Securities 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 the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
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 on the Book-Entry Certificates will be made on each
Distribution Date by the Trustee to DTC. DTC will be responsible for crediting
the amount of such payments to the accounts of the applicable DTC participants
in accordance with DTC's normal procedures. Each DTC participant will be
responsible for disbursing such payments to the beneficial owners of the
Book-Entry Certificates that it represents and to each Financial Intermediary
for which it acts as agent. Each such Financial Intermediary will be responsible
for disbursing funds to the beneficial owners of the Book-Entry Certificates
that it represents.
Under a book-entry format, beneficial owners of the Book-Entry Certificates
may experience some delay in their receipt of payments, since such payments will
be forwarded by the Trustee to Cede. 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 system's
rules and procedures, to the extent received by the Relevant Depositary. Such
distributions will be subject to tax reporting in accordance with relevant
United States tax laws and regulations. See "Federal Income Tax
Consequences--Foreign Investors" and "--Backup Withholding" herein. Because DTC
can only act on behalf of Financial Intermediaries, the ability of a beneficial
owner to pledge Book-Entry Certificates to persons or entities that do not
participate in the Depository system, or otherwise take actions in respect of
such Book-Entry Certificates, may be limited due to the lack of physical
certificates for such Book-Entry Certificates. In addition, issuance of the
Book-Entry Certificates in book-entry form may reduce the liquidity of such
Certificates in the secondary market since certain potential investors may be
unwilling to purchase Certificates for which they cannot obtain physical
certificates.
Monthly and annual reports on the Trust Fund provided by the Master
Servicer to CEDE, as nominee of DTC, may be made available to beneficial owners
upon request, in accordance with the rules, regulations and procedures creating
and affecting the Depository, and to the Financial Intermediaries to whose DTC
accounts the Book-Entry Certificates of such beneficial owners are credited.
DTC has advised the Transferor and the Trustee that, unless and until
Definitive Certificates are issued, DTC will take any action permitted to be
taken by the holders of the Book-Entry Certificates under the Agreement only at
the direction of one or more Financial Intermediaries to whose DTC accounts the
Book-Entry Certificates are credited, to the extent that such actions are taken
on behalf of Financial Intermediaries whose holdings include such Book-Entry
Certificates. CEDEL or the Euroclear Operator, as the case may be, will take any
other action permitted to be taken by a Certificateholder under the Agreement on
behalf of a CEDEL Participant or Euroclear
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Participant only in accordance with its relevant rules and procedures and
subject to the ability of the Relevant Depositary to effect such actions on its
behalf through DTC. DTC may take actions, at the direction of the related
Participants, with respect to some Certificates which conflict with actions
taken with respect to other Certificates.
Definitive Certificates will be issued to beneficial owners of the
Book-Entry Certificates, or their nominees, rather than to DTC, only if (a) DTC
or the Transferor advises the Trustee in writing that DTC is no longer willing,
qualified or able to discharge properly its responsibilities as nominee and
depository with respect to the Book-Entry Certificates and the Transferor or the
Trustee is unable to locate a qualified successor, (b) the Transferor, at its
sole option, elects to terminate a book-entry system through DTC or (c) after
the occurrence of an Event of Servicing Termination (as defined herein),
beneficial owners having Percentage Interests aggregating not less than 51% of
the Certificate Principal Balance of the Book-Entry Certificates advise the
Trustee and DTC through the Financial Intermediaries and the DTC participants in
writing that the continuation of a book-entry system through DTC (or a successor
thereto) is no longer in the best interests of beneficial owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee will be required to notify all beneficial
owners of the occurrence of such event and the availability through DTC of
Definitive Certificates. Upon surrender by DTC of the global certificate or
certificates representing the Book-Entry Certificates and instructions for
re-registration, the Trustee will issue Definitive Certificates, and thereafter
the Trustee will recognize the holders of such Definitive Certificates as
Certificateholders under the Agreement.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Certificates among participants of DTC,
CEDEL and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
Assignment of Mortgage Loans
At the time of issuance of the Certificates, the Depositor will transfer to
the Trust Fund all of its right, title and interest in and to each Mortgage Loan
(including any Additional Balances arising in the future), related Credit Line
Agreements, mortgages and other related documents (collectively, the "Related
Documents"), including all collections received on or with respect to each such
Mortgage Loan after the Cut-off Date (exclusive of payments in respect of
accrued interest due on or prior to the Cut-off Date or due in the month of
_____). The Trustee, concurrently with such transfer, will deliver the
Certificates to the Depositor and the Transferor Certificate (as defined in the
Agreement) to the Transferor. Each Mortgage Loan transferred to the Trust Fund
will be identified on a schedule (the "Mortgage Loan Schedule") delivered to the
Trustee pursuant to the Agreement. Such schedule will include information as to
the Cut-off Date Principal Balance of each Mortgage Loan, as well as information
with respect to the Loan Rate.
The Agreement will permit the Seller to maintain possession of the Related
Documents and certain other documents relating to the Mortgage Loans (the
"Mortgage Files") and assignments of the Mortgage Loans to the Trustee will not
be required to be recorded for so long as the long-term senior unsecured debt of
[Countrywide] is rated at least "______" by ___ and "______" by _______. In the
event that [Countrywide's] long-term senior unsecured debt rating does not
satisfy the above-described standards (an "Assignment Event"), [Countrywide]
will have 90 days to record assignments of the mortgages for each such Mortgage
Loan in favor of the Trustee and 60 days to deliver the Mortgage Files
pertaining to each such Mortgage Loan to the Trustee (unless opinions of counsel
satisfactory to the Rating Agencies and the Certificate Insurer to the effect
that recordation of such assignments or delivery of such documentation is not
required in the relevant jurisdiction to protect the interest of [Countrywide]
and the Trustee in the Mortgage Loans). In lieu of delivery of original
documentation, [Countrywide] may deliver documents which have been imaged
optically upon delivery of an opinion of counsel that such documents do not
impair the enforceability of the transfer to the Trust Fund of the Mortgage
Loans.
Within 90 days of an Assignment Event, the Trustee will review the Mortgage
Loans and the Related Documents and if any Mortgage Loan or Related Document is
found to be defective in any material respect and such defect is not cured
within 90 days following notification thereof to the Seller and the Depositor by
the Trustee, the Seller will be obligated to accept the transfer of such
Mortgage Loan from the Trust Fund. Upon such transfer, the Principal Balance of
such Mortgage Loan will be deducted from the Pool Balance, thus reducing the
amount of the Transferor Interest. If the deduction would cause the Transferor
Interest to become less than the Minimum Transferor Interest at such time (a
"Transfer Deficiency"), the Seller will be obligated to either substitute an
Eligible
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Substitute Mortgage Loan or make a deposit into the Collection Account in the
amount (the "Transfer Deposit Amount") equal to the amount by which the
Transferor Interest would be reduced to less than the Minimum Transferor
Interest at such time. Any such deduction, substitution or deposit, will be
considered a payment in full of such Mortgage Loan. Any Transfer Deposit Amount
will be treated as a Principal Collection. Notwithstandingthe foregoing,
however, prior to all required deposits to the Collection Account being made no
such transfer shall be considered to have occurred unless such deposit is
actually made. The obligation of the Seller to accept a transfer of a Defective
Mortgage Loan is the sole remedy regarding any defects in the Mortgage Loans and
Related Documents available to the Trustee or the Certificateholders.
An "Eligible Substitute Mortgage Loan" is a mortgage loan substituted by
the Depositor for a Defective Mortgage Loan which must, on the date of such
substitution, (i) have an outstanding Principal Balance (or in the case of a
substitution of more than one Mortgage Loan for a Defective Mortgage Loan, an
aggregate Principal Balance), not __% more or less than the Transfer Deficiency
relating to such Defective Mortgage Loan; (ii) have a Loan Rate not less than
the Loan Rate of the Defective Mortgage Loan and not more than _% in excess of
the Loan Rate of such Defective Mortgage Loan; (iii) have a Loan Rate based on
the same Index with adjustments to such Loan Rate made on the same Interest Rate
Adjustment Date as that of the Defective Mortgage Loan; (iv) have a Margin that
is not less than the Margin of the Defective Mortgage Loan and not more than ___
basis points higher than the Margin for the Defective Mortgage Loan; (v) have a
mortgage of the same or higher level of priority as the mortgage relating to the
Defective Mortgage Loan; (vi) have a remaining term to maturity not more than
___ months earlier and not more than __ months later than the remaining term to
maturity of the Defective Mortgage Loan; (vii) comply with each representation
and warranty as to the Mortgage Loans set forth in the Agreement (deemed to be
made as of the date of substitution); (viii) in general, have an original
Combined Loan-to-Value Ratio not greater than that of the Defective Mortgage
Loan; and (ix) satisfy certain other conditions specified in the Agreement. To
the extent the Principal Balance of an Eligible Substitute Mortgage Loan is less
than the Principal Balance of the related Defective Mortgage Loan and to the
extent that the Transferor Interest would be reduced below the Minimum
Transferor Interest, the Seller will be required to make a deposit to the
Collection Account equal to such difference.
The Seller will make certain representations and warranties as to the
accuracy in all material respects of certain information furnished to the
Trustee with respect to each Mortgage Loan (e.g., Cut-off Date Principal Balance
and the Loan Rate). In addition, the Seller will represent and warrant on the
Closing Date that at the time of transfer to the Depositor, the Seller has
transferred or assigned all of its rights, title and interest in each Mortgage
Loan and the Related Documents, free of any lien (subject to certain
exceptions). Upon discovery of a breach of any such representation and warranty
which materially and adversely affects the interests of the Certificateholders
or the Certificate Insurer in the related Mortgage Loan and Related Documents,
the Seller will have a period of 90 days after discovery or notice of the breach
to effect a cure. If the breach cannot be cured within the 90-day period, the
Seller will be obligated to accept a transfer of the Defective Mortgage Loan
from the Trust Fund. The same procedure and limitations that are set forth in
the second preceding paragraph for the transfer of Defective Mortgage Loans will
apply to the transfer of a Mortgage Loan that is required to be transferred
because of such breach of a representation or warranty in the Agreement that
materially and adversely affects the interests of the Certificateholders.
Mortgage Loans required to be transferred to the Seller as described in the
preceding paragraphs are referred to as "Defective Mortgage Loans."
Pursuant to the Agreement, the Master Servicer will service and administer
the Mortgage Loans as more fully set forth above.
Amendments to Credit Line Agreements
Subject to applicable law, the Master Servicer may change the terms of the
Credit Line Agreements at any time provided that such changes (i) do not
adversely affect the interest of the Certificateholders or the Certificate
Insurer, and (ii) are consistent with prudent business practice. In addition,
the Agreement permits the Master Servicer, within certain limitations described
therein, to increase the Credit Limit of the related Mortgage Loan or reduce the
Margin for such Mortgage Loan.
Optional Transfers of Mortgage Loans to the Transferor
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In order to permit the Transferor to remove Mortgage Loans from the Trust
Fund at such times, if any, as the overcollateralization exceeds the level
required to maintain the ratings on the Certificates, on any Distribution Date
the Transferor may, but shall not be obligated to, remove on such Distribution
Date (the "Transfer Date") from the Trust Fund, certain Mortgage Loans without
notice to the Certificateholders. The Transferor is permitted to designate the
Mortgage Loans to be removed. Mortgage Loans so designated will only be removed
upon satisfaction of the following conditions: (i) No Rapid Amortization Event
(as defined herein) has occurred; (ii) the Transferor Interest as of such
Transfer Date (after giving effect to such removal) exceeds the Minimum
Transferor Interest; (iii) the transfer of any Mortgage Loans on any Transfer
Date during the Managed Amortization Period (as defined herein) shall not, in
the reasonable belief of the Transferor, cause a Rapid Amortization Event to
occur or an event which with notice or lapse of time or both would constitute a
Rapid Amortization Event; (iv) the Transferor shall have delivered to the
Trustee a "Mortgage Loan Schedule" containing a list of all Mortgage Loans
remaining in the Trust Fund after such removal; (v) the Transferor shall
represent and warrant that no selection procedures which the Transferor
reasonably believes are adverse to the interests of the Certificateholders or
the Certificate Insurer were used by the Transferor in selecting such Mortgage
Loans; (vi) in connection with the first such retransfer of Mortgage Loans, the
Rating Agencies shall have been notified of the proposed transfer and prior to
the Transfer Date shall not have notified the Transferor in writing that such
transfer would result in a reduction or withdrawal of the ratings assigned to
the Certificates without regard to the Policy; and (vii) the Transferor shall
have delivered to the Trustee and the Certificate Insurer an officer's
certificate confirming the conditions set forth in clauses (i) through (vi)
above.
As of any date of determination, the "Minimum Transferor Interest" is an
amount equal to the lesser of (a) _% of the Pool Balance on such date and (b)
the Transferor Interest as of the Closing Date.
Payments on Mortgage Loans; Deposits to Collection Account
The Trustee shall establish and maintain on behalf of the Master Servicer
an account (the "Collection Account") for the benefit of the Certificateholders
and the Transferor, as their interests may appear. The Collection Account will
be an Eligible Account (as defined herein). Subject to the investment provision
described in the following paragraphs, within two days of receipt by the Master
Servicer of amounts in respect of the Mortgage Loans (excluding amounts
representing administrative charges, annual fees, taxes, assessments, credit
insurance charges, insurance proceeds to be applied to the restoration or repair
of a Mortgaged Property or similar items), the Master Servicer will deposit such
amounts in the Collection Account. Amounts so deposited may be invested in
Eligible Investments (as described in the Agreement) maturing no later than one
Business Day prior to the date on which the amount on deposit therein is
required to be deposited in the Collection Account or on such Distribution Date
if approved by the Rating Agencies and the Certificate Insurer. Not later than
the third Business Day prior to each Distribution Date (the "Determination
Date"), the Master Servicer will notify the Trustee of the amount of such
deposit to be included in funds available for the related Distribution Date.
An "Eligible Account" is (i) an account that is maintained with a
depository institution whose debt obligations at the time of any deposit therein
have the highest short-term debt rating by the Rating Agencies, (ii) one or more
accounts with a depository institution having a minimum long-term unsecured debt
rating of "____" by _______ and "____" by ___, which accounts are fully insured
by either the Savings Association Insurance Fund ("SAIF") or the Bank Insurance
Fund ("BIF") of the Federal Deposit Insurance Corporation established by such
fund, (iii) a segregated trust account maintained with the Trustee or an
Affiliate of the Trustee in its fiduciary capacity or (iv) otherwise acceptable
to each Rating Agency and the Certificate Insurer as evidenced by a letter from
each Rating Agency and the Certificate Insurer to the Trustee, without reduction
or withdrawal of their then current ratings of the Certificates.
Eligible Investments are specified in the Agreement and are limited to (i)
obligations of the United States or any agency thereof, provided such
obligations are backed by the full faith and credit of the United States; (ii)
general obligations of or obligations guaranteed by any state of the United
States or the District of Columbia receiving the highest long-term debt rating
of each Rating Agency rating the Certificates, or such lower rating as will not
result in the downgrading or withdrawal of the ratings then assigned to the
Certificates by
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each such Rating Agency; (iii) commercial or finance company paper (including,
without limitation, commercial paper issued by Countrywide Home Loans, Inc. or
any of its affiliates) which is then receiving the highest commercial or finance
company paper rating of each such Rating Agency, or such lower rating as will
not result in the downgrading or withdrawal of the ratings then assigned to the
Certificates by each such Rating Agency; (iv) certificates of deposit, demand or
time deposits, or bankers' acceptances issued by any depository institution or
trust company incorporated under the laws of the United States or of any state
thereof and subject to supervision and examination by federal and/or state
banking authorities, provided that the commercial paper and/or long term
unsecured debt obligations of such depository institution or trust company (or
in the case of the principal depository institution in a holding company system,
the commercial paper or long-term unsecured debt obligations of such holding
company, but only if Moody's Investors Service, Inc. ("Moody's") is not a Rating
Agency) are then rated one of the two highest long-term and the highest
short-term ratings of each such Rating Agency for such securities, or such lower
ratings as will not result in the downgrading or withdrawal of the rating then
assigned to the Certificates by any such Rating Agency; (iv) demand or time
deposits or certificates of deposit issued by any bank or trust company or
savings institution to the extent that such deposits are fully insured by the
FDIC; (v) guaranteed reinvestment agreements issued by any bank, insurance
company or other corporation containing, at the time of the issuance of such
agreements, such terms and conditions as will not result in the downgrading or
withdrawal of the rating then assigned to the Certificates by any such Rating
Agency; (vi) repurchase obligations with respect to any security described in
clauses (i) and (ii) above, in either case entered into with a depository
institution or trust company (acting as principal) described in clause (iv)
above; (vii) securities (other than stripped bonds, stripped coupons or
instruments sold at a purchase price in excess of 115% of the face amount
thereof) bearing interest or sold at a discount issued by any corporation
incorporated under the laws of the United States or any state thereof which, at
the time of such investment, have one of the two highest ratings of each Rating
Agency (except if the Rating Agency is Moody's, such rating shall be the highest
commercial paper rating of Moody's for any such securities), or such lower
rating as will not result in the downgrading or withdrawal of the rating then
assigned to the Certificates by any such Rating Agency, as evidenced by a signed
writing delivered by each such Rating Agency; and (viii) such other investments
having a specified stated maturity and bearing interest or sold at a discount
acceptable to each Rating Agency as will not result in the downgrading or
withdrawal of the rating then assigned to the Certificates by any such Rating
Agency, as evidenced by a signed writing delivered by each such Rating Agency;
provided that no such instrument shall be a Permitted Investment if such
instrument evidences the right to receive interest only payments with respect to
the obligations underlying such instrument.
Allocations and Collections
All collections on the Mortgage Loans will generally be allocated in
accordance with the Credit Line Agreements between amounts collected in respect
of interest and amounts collected in respect of principal. As to any
Distribution Date, "Interest Collections" will be equal to the amounts collected
during the related Collection Period, including such portion of Net Liquidation
Proceeds allocated to interest pursuant to the terms of the Credit Line
Agreements less Servicing Fees for the related Collection Period.
As to any Distribution Date, "Principal Collections" will be equal to the
sum of (i) the amounts collected during the related Collection Period, including
such portion of Net Liquidation Proceeds allocated to principal pursuant to the
terms of the Credit Line Agreements and (ii) any Transfer Deposit Amounts. "Net
Liquidation Proceeds" with respect to a Mortgage Loan are equal to the
Liquidation Proceeds, reduced by related expenses, but not including the
portion, if any, of such amount that exceeds the Principal Balance of the
Mortgage Loan plus accrued and unpaid interest thereon to the end of the
Collection Period during which such Mortgage Loan became a Liquidated Mortgage
Loan. "Liquidation Proceeds" are the proceeds (excluding any amounts drawn on
the Policy) received in connection with the liquidation of any Mortgage Loan,
whether through trustee's sale, foreclosure sale or otherwise.
With respect to any Distribution Date, the portion of Interest Collections
allocable to the Certificates ("Investor Interest Collections") will equal the
product of (a) Interest Collections for such Distribution Date and (b) the
Investor Floating Allocation Percentage. With respect to any Distribution Date,
the "Investor Floating Allocation Percentage" is the percentage equivalent of a
fraction determined by dividing the Invested Amount at the close of business on
the preceding Distribution Date (or the Closing Date in the case of the first
Distribution Date) by the Pool Balance at the beginning of the related
Collection Period. The remaining amount of Interest Collections will be
allocated to the Transferor Interest.
Principal Collections will be allocated between the Certificateholders and
the Transferor ("Investor Principal Collections" and "Transferor Principal
Collections", respectively) as described herein.
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The Trustee will deposit any amounts drawn under the Policy into the
Collection Account.
With respect to any date, the "Pool Balance" will be equal to the aggregate
of the Principal Balances of all Mortgage Loans as of such date. The Principal
Balance of a Mortgage Loan (other than a Liquidated Mortgage Loan) on any day is
equal to the Cut-off Date Principal Balance thereof, plus (i) any Additional
Balances in respect of such Mortgage Loan minus (ii) all collections credited
against the Principal Balance of such Mortgage Loan in accordance with the
related Credit Line Agreement prior to such day. The Principal Balance of a
Liquidated Mortgage Loan after final recovery of related Liquidation Proceeds
shall be zero.
Distributions on the Certificates
Beginning with the first Distribution Date (which will occur on __________,
199_), distributions on the Certificates will be made by the Trustee or the
Paying Agent on each Distribution Date to the persons in whose names such
Certificates are registered at the close of business on the day prior to each
Distribution Date or, if the Certificates are no longer Book-Entry Certificates,
at the close of business on the last day of the month preceding such
Distribution Date (the "Record Date"). The term "Distribution Date" means the
fifteenth day of each month or, if such day is not a Business Day, then the next
succeeding Business Day. Distributions will be made by check or money order
mailed (or upon the request of a Certificateholder owning Certificates having
denominations aggregating at least $_________, by wire transfer or otherwise) to
the address of the person entitled thereto (which, in the case of Book-Entry
Certificates, will be DTC or its nominee) as it appears on the Certificate
Register in amounts calculated as described herein on the Determination Date.
However, the final distribution in respect of the Certificates will be made only
upon presentation and surrender thereof at the office or the agency of the
Trustee specified in the notice to Certificateholders of such final
distribution. For purposes of the Agreement, a "Business Day" is any day other
than (i) a Saturday or Sunday or (ii) a day on which banking institutions in New
York State are required or authorized by law to be closed.
Application of Interest Collections. On each Distribution Date, the Trustee
or the Paying Agent will apply the Investor Interest Collections in the
following manner and order of priority:
(i) as payment to the Trustee for its fee for services rendered
pursuant to the Agreement;
(ii) as payment for the premium for the Policy;
(iii) as payment for the accrued interest due and any overdue accrued
interest (with interest thereon to the extent permitted by law) on the
Certificate Principal Balance of the Certificates;
(iv) to pay Certificateholders the Investor Loss Amount for such
Distribution Date;
(v) as payment for any Investor Loss Amount for a previous
Distribution Date that was not previously (a) funded by Investor Interest
Collections, (b) absorbed by the Overcollateralization Amount, (c) funded
by amounts on deposit in the Spread Account or (d) funded by draws on the
Policy;
(vi) to reimburse prior draws made from the Policy (with interest
thereon);
(vii) to pay principal on the Certificates until the Invested Amount
exceeds the Certificate Principal Balance by the Required
Overcollateralization Amount (such amount so paid, the "Accelerated
Principal Distribution Amount");
(viii) any other amounts required to be deposited in an account for
the benefit of the Certificate Insurer and the Certificateholders or owed
to the Certificate Insurer pursuant to the Insurance Agreement;
(ix) certain amounts that may be required to be paid to the Master
Servicer pursuant to the Agreement; and
(x) to the Transferor to the extent permitted as described herein.
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Payments to Certificateholders pursuant to clause (iii) will be interest
payments on the Certificates. Payments to Certificateholders pursuant to clauses
(iv), (v) and (vii) will be principal payments on the Certificates and will
therefore reduce the Certificate Principal Balance, however, payments pursuant
to clause (vii) will not reduce the Invested Amount. The Accelerated Principal
Distribution Amount is not guaranteed by the Policy.
To the extent that Investor Interest Collections are applied to pay the
interest on the Certificates, Investor Interest Collections may be insufficient
to cover Investor Loss Amounts. If such insufficiency results in the Certificate
Principal Balance exceeding the Invested Amount, a draw will be made on the
Policy in accordance with the terms of the Policy.
The "Required Overcollateralization Amount" shall be an amount set forth in
the Agreement. "Liquidation Loss Amount" means with respect to any Liquidated
Mortgage Loan, the unrecovered Principal Balance thereof during the Collection
Period in which such Mortgage Loan became a Liquidated Mortgage Loan, after
giving effect to the Net Liquidation Proceeds in connection therewith. The
"Investor Loss Amount" shall be the product of the Investor Floating Allocation
Percentage and the Liquidation Loss Amount for such Distribution Date.
A "Liquidated Mortgage Loan" means, as to any Distribution Date, any
Mortgage Loan in respect of which the Master Servicer has determined, based on
the servicing procedures specified in the Agreement, as of the end of the
preceding Collection Period that all Liquidation Proceeds which it expects to
recover with respect to the disposition of the related Mortgaged Property have
been recovered. The Investor Loss Amount will be allocated to the
Certificateholders.
As to any Distribution Date other than the first Distribution Date, the
"Collection Period" is the calendar month preceding each Distribution Date. As
to the first Distribution Date, the "Collection Period" is the period beginning
after the Cut-off Date and ending on the last day of _______________ 199_.
Interest will be distributed on each Distribution Date at the Certificate
Rate for the related Interest Period (as defined below). The "Certificate Rate"
for a Distribution Date will generally equal the sum of [(a) LIBOR, calculated
as specified below, as of the second LIBOR Business Day prior to the immediately
preceding Distribution Date (or as of two LIBOR Business Days prior to the
Closing Date, in the case of the first Distribution Date) plus (b) ____% per
annum.] Notwithstanding the foregoing, in no event will the amount of interest
required to be distributed in respect of the Certificates on any Distribution
Date exceed a rate equal to the weighted average of the Loan Rates (net of the
Servicing Fee Rate, the fee payable to the Trustee and the rate at which the
premium payable to the Certificate Insurer is calculated) weighted on the basis
of the daily balance of each Mortgage Loan during the related billing cycle
prior to the Collection Period relating to such Distribution Date.
Interest on the Certificates in respect of any Distribution Date will
accrue on the Certificate Principal Balance from the preceding Distribution Date
(or in the case of the first Distribution Date, from the date of the initial
issuance of the Certificates (the "Closing Date")) through the day preceding
such Distribution Date (each such period, an "Interest Period") on the basis of
the actual number of days in the Interest Period and a 360-day year. Interest
payments on the Certificates will be funded from Investor Interest Collections
and, if necessary, from draws on the Policy.
[Calculation of the LIBOR Rate. On each Distribution Date, LIBOR shall be
established by the Trustee and as to any Interest Period, LIBOR will equal the
rate for United States dollar deposits for one month which appears on the
Telerate Screen Page 3750 as of 11:00 A.M., London time, on the second LIBOR
Business Day prior to the first day of such Interest Period. "Telerate Screen
Page 3750" means the display designated as page 3750 on the Telerate Service (or
such other page as may replace page 3750 on that service for the purpose of
displaying London interbank offered rates of major banks). If such rate does not
appear on such page (or such other page as may replace that page on that
service, or if such service is no longer offered, such other service for
displaying LIBOR or comparable rates as may be selected by the Depositor after
consultation with the Trustee), the rate will be the Reference Bank Rate. The
"Reference Bank Rate" will be determined on the basis of the rates at which
deposits in U.S. Dollars are offered by the reference banks (which shall be
three major banks that are engaged in transactions in the London interbank
market, selected by the Depositor after consultation with the Trustee) as of
11:00 A.M., London time, on the day that is two LIBOR Business Days prior to the
immediately preceding Distribution Date to prime banks in the London interbank
market for a period of one month in amounts approximately equal to the principal
amount of the Certificates then outstanding. The Trustee will request the
principal London office of each
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of the reference banks to provide a quotation of its rate. If at least two such
quotations are provided, the rate will be the arithmetic mean of the quotations.
If on such date fewer than two quotations are provided as requested, the rate
will be the arithmetic mean of the rates quoted by one or more major banks in
New York City, selected by the Depositor after consultation with the Trustee, as
of 11:00 A.M., New York City time, on such date for loans in U.S. Dollars to
leading European banks for a period of one month in amounts approximately equal
to the principal amount of the Certificates then outstanding. If no such
quotations can be obtained, the rate will be LIBOR for the prior Distribution
Date. "LIBOR Business Day" means 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 in the
city of London, England are required or authorized by law to be closed.]
Transferor Collections. Collections allocable to the Transferor Interest
that are not distributed to Certificateholders will be distributed to the
Transferor only to the extent that such distribution will not reduce the amount
of the Transferor Interest as of the related Distribution Date below the Minimum
Transferor Interest. Amounts not distributed to the Transferor because of such
limitations will be retained in the Collection Account until the Transferor
Interest exceeds the Minimum Transferor Interest, at which time such excess
shall be released to the Transferor. If any such amounts are still retained in
the Collection Account upon the commencement of the Rapid Amortization Period,
such amounts will be paid to the Certificateholders as a reduction of the
Certificate Principal Balance.
Overcollateralization. The distribution of the aggregate Accelerated
Principal Distribution Amount, if any, to Certificateholders may result in the
Invested Amount being greater than the Certificate Principal Balance, thereby
creating overcollateralization. The Overcollateralization Amount, if any, will
be available to absorb any Investor Loss Amount that is not covered by Investor
Interest Collections.
Distributions of Principal Collections. For the period beginning on the
first Distribution Date and, unless a Rapid Amortization Event shall have
earlier occurred, ending on the Distribution Date in ______________ 20__ (the
"Managed Amortization Period"), the amount of Principal Collections payable to
Certificateholders as of each Distribution Date during the Managed Amortization
Period will equal, to the extent funds are available therefor, the Scheduled
Principal Collections Distribution Amount for such Distribution Date. On any
Distribution Date during the Managed Amortization Period, the "Scheduled
Principal Collections Distribution Amount" shall equal the lesser of (i) the
Maximum Principal Payment (as defined herein) and (ii) the Alternative Principal
Payment (as defined herein). With respect to any Distribution Date, the "Maximum
Principal Payment" will equal the product of the Investor Fixed Allocation
Percentage and Principal Collections for such Distribution Date. With respect to
any Distribution Date, the "Alternative Principal Payment" will equal the
greater of (x) 0___% of the Certificate Principal Balance immediately prior to
such Distribution Date and (y) the amount, but not less than zero, of Principal
Collections for such Distribution Date less the aggregate of Additional Balances
created during the related Collection Period.
Beginning with the first Distribution Date following the end of the Managed
Amortization Period, the amount of Principal Collections payable to
Certificateholders on each Distribution Date will be equal to the Maximum
Principal Payment.
The amount of Principal Collections to be distributed to Certificateholders
on the first Distribution Date will reflect Principal Collections and Additional
Balances during the first Collection Period which is the period beginning after
the Cut-off Date through the last day of __________ 199_.
Distributions of Principal Collections based upon the Investor Fixed
Allocation Percentage may result in distributions of principal to
Certificateholders in amounts that are greater relative to the declining Pool
Balance than would be the case if the Investor Floating Allocation Percentage
were used to determine the percentage of Principal Collections distributed in
respect of the Invested Amount. Principal Collections not allocated to the
Certificateholders will be allocated to the Transferor Interest. The aggregate
distributions of principal to the Certificateholders will not exceed the
Original Certificate Principal Balance.
In addition, to the extent of funds available therefor (including funds
available under the Policy), on the Distribution Date in ____________ 20__,
Certificateholders will be entitled to receive as a payment of principal an
amount equal to the outstanding Certificate Principal Balance.
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The Paying Agent. The Paying Agent shall initially be the Trustee, together
with any successor thereto in such capacity (the "Paying Agent"). The Paying
Agent shall have the revocable power to withdraw funds from the Collection
Account for the purpose of making distributions to the Certificateholders.
Rapid Amortization Events
As described above, the Managed Amortization Period will continue through
the Distribution Date in 20 , unless a Rapid Amortization Event occurs prior to
such date in which case the Rapid Amortization Period will commence prior to
such date. "Rapid Amortization Event" refers to any of the following events:
(a) failure on the part of the Seller (i) to make a payment or deposit
required under the Agreement within three Business Days after the date such
payment or deposit is required to be made or (ii) to observe or perform in
any material respect any other covenants or agreements of the Seller set
forth in the Agreement, which failure continues unremedied for a period of
60 days after written notice;
(b) any representation or warranty made by the Seller in the Agreement
proves to have been incorrect in any material respect when made and
continues to be incorrect in any material respect for a period of 60 days
after written notice and as a result of which the interests of the
Certificateholders are materially and adversely affected; provided,
however, that a Rapid Amortization Event shall not be deemed to occur if
the Seller has purchased or made a substitution for the related Mortgage
Loan or Mortgage Loans if applicable during such period (or within an
additional 60 days with the consent of the Trustee) in accordance with the
provisions of the Agreement;
(c) the occurrence of certain events of bankruptcy, insolvency or
receivership relating to the Transferor; or
(d) the Trust Fund becomes subject to regulation by the Securities and
Exchange Commission as an investment company within the meaning of the
Investment Company Act of 1940, as amended.
In the case of any event described in clause (a) or (b), a Rapid
Amortization Event will be deemed to have occurred only if, after the applicable
grace period, if any, described in such clauses, either the Trustee or
Certificateholders holding Certificates evidencing more than 51% of the
Percentage Interests or the Certificate Insurer (so long as there is no default
by the Certificate Insurer in the performance of its obligations under the
Policy), by written notice to the Depositor and the Master Servicer (and to the
Trustee, if given by the Certificateholders) declare that a Rapid Amortization
Event has occurred as of the date of such notice. In the case of any event
described in clause (c) or (d), a Rapid Amortization Event will be deemed to
have occurred without any notice or other action on the part of the Trustee or
the Certificateholders immediately upon the occurrence of such event.
In addition to the consequences of a Rapid Amortization Event discussed
above, if the Transferor voluntarily files a bankruptcy petition or goes into
liquidation or any person is appointed a receiver or bankruptcy trustee of the
Transferor, on the day of any such filing or appointment no further Additional
Balances will be transferred to the Trust Fund, the Transferor will immediately
cease to transfer Additional Balances to the Trust Fund and the Transferor will
promptly give notice to the Trustee of any such filing or appointment. Within 15
days, the Trustee will publish a notice of the liquidation or the filing or
appointment stating that the Trustee intends to sell, dispose of or otherwise
liquidate the Mortgage Loans in a commercially reasonable manner and to the best
of its ability. Unless otherwise instructed within a specified period by
Certificateholders representing undivided interests aggregating more than 51% of
the aggregate principal amount of the Certificates, the Trustee will sell,
dispose of or otherwise liquidate the Mortgage Loans in a commercially
reasonable manner and on commercially reasonable terms. Any proceeds will be
treated as collections allocable to the Certificateholders and the Investor
Fixed Allocation Percentage of such remaining proceeds and will be distributed
to the Certificateholders on the date such proceeds are received (the
"Dissolution Distribution Date"). If the portion of such proceeds allocable to
the Certificateholders are not sufficient to pay in full the remaining amount
due on the Certificates, the Policy will cover such shortfall.
Notwithstanding the foregoing, if a conservator, receiver or
trustee-in-bankruptcy is appointed for the Transferor and no Rapid Amortization
Event exists other than such conservatorship, receivership or insolvency of
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the Transferor, the conservator, receiver or trustee-in-bankruptcy may have the
power to prevent the commencement of the Rapid Amortization Period or the sale
of Mortgage Loans described above.
The Policy
[On or before the Closing Date, the Policy will be issued by the
Certificate Insurer pursuant to the provisions of the Agreement and the
Insurance and Indemnity Agreement (the "Insurance Agreement") to be dated as of
____________, 199_, among the Seller, the Depositor, the Master Servicer and the
Certificate Insurer.
The Policy will irrevocably and unconditionally guarantee payment on each
Distribution Date to the Trustee for the benefit of the Certificateholders the
full and complete payment of (i) the Guaranteed Principal Distribution Amount
(as defined herein) with respect to the Certificates for such Distribution Date
and (ii) accrued and unpaid interest due on the Certificates (together, the
"Guaranteed Distributions"), with such Guaranteed Distributions having been
calculated in accordance with the original terms of the Certificates or the
Agreement except for amendments or modifications to which the Certificate
Insurer has given its prior written consent. The effect of the Policy is to
guarantee the timely payment of interest on, and the ultimate payment of the
principal amount of, all of the Certificates.
The "Guaranteed Principal Distribution Amount" shall be the amount, if any,
by which the Certificate Principal Balance (after giving effect to all other
amounts distributable and allocable to principal on the Certificates) exceeds
the Invested Amount as of such Distribution Date (after giving effect to all
other amounts distributable and allocable to principal on the Certificates for
such Distribution Date). In addition, the Policy will guarantee the payment of
the outstanding Certificate Principal Balance on the Distribution Date in
______________ 20__ (after giving effect to all other amounts distributable and
allocable to principal on such Distribution Date).
In accordance with the Agreement, the Trustee will be required to establish
and maintain an account (the "Spread Account") for the benefit of the
Certificate Insurer and the Certificateholders. The Trustee shall deposit the
amounts into the Spread Account as required by the Agreement.
Payment of claims on the Policy will be made by the Certificate Insurer
following Receipt by the Certificate Insurer of the appropriate notice for
payment on the later to occur of (i) 12:00 noon, New York City time, on the
second Business Day following Receipt of such notice for payment and (ii) 12:00
noon, New York City time, on the relevant Distribution Date.
If payment of any amount guaranteed by the Certificate Insurer pursuant to
the Policy is avoided as a preference payment under applicable bankruptcy,
insolvency, receivership or similar law, the Certificate Insurer will pay such
amount out of the funds of the Certificate Insurer on the later of (a) the date
when due to be paid pursuant to the Order referred to below or (b) the first to
occur of (i) the fourth Business Day following Receipt by the Certificate
Insurer from the Trustee of (A) a certified copy of the order (the "Order") of
the court or other governmental body which exercised jurisdiction to the effect
that the Certificateholder is required to return the amount of any Guaranteed
Distributions distributed with respect to the Certificates during the term of
the related Policy because such distributions were avoidable preference payments
under applicable bankruptcy law, (B) a certificate of the Certificateholder that
the Order has been entered and is not subject to any stay and (C) an assignment
duly executed and delivered by the Certificateholder, in such form as is
reasonably required by the Certificate Insurer and provided to the
Certificateholder by the Certificate Insurer, irrevocably assigning to the
Certificate Insurer all rights and claims of the Certificateholder relating to
or arising under the Certificates against the debtor which made such preference
payment or otherwise with respect to such preference payment, or (ii) the date
of Receipt by the Certificate Insurer from the Trustee of the items referred to
in clauses (A), (B) and (C) above if, at least four Business Days prior to such
date of Receipt, the Certificate Insurer shall have Received written notice from
the Trustee that such items were to be delivered on such date and such date was
specified in such notice. Such payment shall be disbursed to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order
and not to the Trustee or any Certificateholder directly (unless a
Certificateholder has previously paid such amount to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order in which case
such payment shall be disbursed to the Trustee for distribution to such
Certificateholder upon proof of such payment reasonably satisfactory to the
Certificate Insurer).
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The terms "Receipt" and "Received", with respect to the Policy, mean actual
delivery to the Certificate Insurer and to its fiscal agent appointed by the
Certificate Insurer at its option, if any, prior to 12:00 noon, New York City
time, on a Business Day; delivery either on a day that is not a Business Day or
after 12:00 noon, New York City time, shall be deemed to be Receipt on the next
succeeding Business Day. If any notice or certificate given under the Policy by
the Trustee is not in proper form or is not properly completed, executed or
delivered it shall be deemed not to have been Received, and the Certificate
Insurer or the fiscal agent shall promptly so advise the Trustee and the Trustee
may submit an amended notice.
Under the Policy, "Business Day" means any day other than (i) a Saturday or
Sunday or (ii) a day on which banking institutions in The City of New York, New
York are authorized or obligated by law or executive order to be closed.
The Certificate Insurer's obligations under the Policy in respect of
Guaranteed Distributions shall be discharged to the extent funds are transferred
to the Trustee as provided in the Policy, whether or not such funds are properly
applied by the Trustee.
The Certificate Insurer shall be subrogated to the rights of each
Certificateholder to receive payments of principal and interest, as applicable,
with respect to distributions on the Certificates to the extent of any payment
by the Certificate Insurer under the Policy. To the extent the Certificate
Insurer makes Guaranteed Distributions, either directly or indirectly (as by
paying through the Trustee), to the Certificateholders, the Certificate Insurer
will be subrogated to the rights of the Certificateholders, as applicable, with
respect to such Guaranteed Distributions, shall be deemed to the extent of the
payments so made to be a registered Certificateholder for purposes of payment
and shall receive all future Guaranteed Distributions until all such Guaranteed
Distributions by the Certificate Insurer have been fully reimbursed, provided
that the Certificateholders have received the full amount of the Guaranteed
Distributions.
The terms of the Policy cannot be modified, altered or affected by any
other agreement or instrument, or by the merger, consolidation or dissolution of
the Seller. The Policy by its terms may not be cancelled or revoked.
The Policy is governed by the laws of the State of ________.
The Policy is not covered by the Property/Casualty Insurance Security fund
specified in Article 76 of the New York Insurance Law. The Policy is not covered
by the Florida Insurance Guaranty Association created under Part II of Chapter
631 of the Florida Insurance Code. In the event the Certificate Insurer were to
become insolvent, any claims arising under the Policy are excluded from coverage
by the California Insurance Guaranty Association, established pursuant to
Article 14.2 of Chapter 1 of part 2 of Division 1 of the California Insurance
Code.
Pursuant to the terms of the Agreement, unless a Certificate Insurer
default exists, the Certificate Insurer shall be deemed to be the Holder of the
Certificates for certain purposes (other than with respect to payment on the
Certificates), will be entitled to exercise all rights of the Certificateholders
thereunder, without the consent of such Holders and the Holders of the
Certificates may exercise such rights only with the prior written consent of the
Certificate Insurer. In addition, the Certificate Insurer will have certain
additional rights as third party beneficiary to the Agreement.
In the absence of payments under the Policy, Certificateholders will bear
directly the credit and other risks associated with their undivided interest in
the Trust Fund.]
Reports to Certificateholders
Concurrently with each distribution to the Certificateholders, the Master
Servicer will forward to the Trustee for mailing to such Certificateholder a
statement setting forth among other items:
(i) the Investor Floating Allocation Percentage for the preceding
Collection Period;
(ii) the amount being distributed to Certificateholders;
(iii) the amount of interest included in such distribution and the
related Certificate Rate;
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(iv) the amount, if any, of overdue accrued interest included in such
distribution (and the amount of interest thereon);
(v) the amount, if any, of the remaining overdue accrued interest
after giving effect to such distribution;
(vi) the amount, if any, of principal included in such distribution;
(vii) the amount, if any, of the reimbursement of previous Liquidation
Loss Amounts included in such distribution;
(viii) the amount, if any, of the aggregate unreimbursed Liquidation
Loss Amounts after giving effect to such distribution;
(ix) the Servicing Fee for such Distribution Date;
(x) the Invested Amount and the Certificate Principal Balance, each
after giving effect to such distribution;
(xi) the Pool Balance as of the end of the preceding Collection
Period;
(xii) the number and aggregate Principal Balances of the Mortgage
Loans as to which the minimum monthly payment is delinquent for 30-59 days,
60-89 days and 90 or more days, respectively, as of the end of the
preceding Collection Period;
(xiii) the book value of any real estate which is acquired by the
Trust Fund through foreclosure or grant of deed in lieu of foreclosure; and
(xiv) the amount of any draws on the Policy.
In the case of information furnished pursuant to clauses (iii), (iv), (v),
(vi), (vii) and (viii) above, the amounts shall be expressed as a dollar amount
per Certificate with a $1,000 denomination.
Within 60 days after the end of each calendar year commencing in 1996, the
Master Servicer will be required to forward to the Trustee a statement
containing the information set forth in clauses (iii) and (vi) above aggregated
for such calendar year.
Collection and Other Servicing Procedures on Mortgage Loans
The Master Servicer will make reasonable efforts to collect all payments
called for under the Mortgage Loans and will, consistent with the Agreement,
follow such collection procedures as it follows from time to time with respect
to the home equity loans in its servicing portfolio comparable to the Mortgage
Loans. Consistent with the above, the Master Servicer may in its discretion
waive any late payment charge or any assumption or other fee or charge that may
be collected in the ordinary course of servicing the Mortgage Loans.
With respect to the Mortgage Loans, the Master Servicer may arrange with a
borrower a schedule for the payment of interest due and unpaid for a period,
provided that any such arrangement is consistent with the Master Servicer's
policies with respect to the home equity mortgage loans it owns or services. In
accordance with the terms of the Agreement, the Master Servicer may consent
under certain circumstances to the placing of a subsequent senior lien in
respect of a Mortgage Loan.
Hazard Insurance
The Agreement provides that the Master Servicer maintain certain hazard
insurance on the Mortgaged Properties relating to the Mortgage Loans. While the
terms of the related Credit Line Agreements generally require borrowers to
maintain certain hazard insurance, the Master Servicer will not monitor the
maintenance of such insurance.
The Agreement requires the Master Servicer to maintain for any Mortgaged
Property relating to a Mortgage Loan acquired upon foreclosure of a Mortgage
Loan, or by deed in lieu of such foreclosure, hazard insurance with
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extended coverage in an amount equal to the lesser of (a) the maximum insurable
value of such Mortgaged Property or (b) the outstanding balance of such Mortgage
Loan plus the outstanding balance on any mortgage loan senior to such Mortgage
Loan at the time of foreclosure or deed in lieu of foreclosure, plus accrued
interest and the Master Servicer's good faith estimate of the related
liquidation expenses to be incurred in connection therewith. The 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 such Mortgaged Properties. If such blanket policy contains a
deductible clause, the Master Servicer will be obligated to deposit in the
Collection Account the sums which would have been deposited therein but for such
clause. The Master Servicer will satisfy these requirements by maintaining a
blanket policy. As set forth above, all amounts collected by the Master Servicer
(net of any reimbursements to the Master Servicer) under any hazard policy
(except for amounts to be applied to the restoration or repair of the Mortgaged
Property) will ultimately be deposited in the Collection Account.
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 and hail, and the like, 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 and therefore will not contain identical terms and
conditions, the basic terms thereof are dictated by state laws and most of 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 or an
exact description of the insurance policies relating to the Mortgaged
Properties.
Realization Upon Defaulted Mortgage Loans
The Master Servicer will foreclose upon or otherwise comparably convert to
ownership Mortgaged Properties securing such of the Mortgage Loans as come into
default when, in accordance with applicable servicing procedures under the
Agreement, no satisfactory arrangements can be made for the collection of
delinquent payments. In connection with such foreclosure or other conversion,
the Master Servicer will follow such practices as it deems necessary or
advisable and as are in keeping with its general subordinate mortgage servicing
activities, provided the Master Servicer will not be required to expend its own
funds in connection with foreclosure or other conversion, correction of default
on a related senior mortgage loan or restoration of any property unless, in its
sole judgment, such foreclosure, correction or restoration will increase Net
Liquidation Proceeds. The Master Servicer will be reimbursed out of Liquidation
Proceeds for advances of its own funds as liquidation expenses before any Net
Liquidation Proceeds are distributed to Certificateholders or the Transferor.
Optional Purchase of Defaulted Loan
The Master Servicer may, at its option, purchase from the Trust Fund any
Mortgage Loan which is delinquent in payment by 91 days or more. Any such
purchase shall be at a price equal to 100% of the Principal Balance of such
Mortgage Loan plus accrued interest thereon at the applicable Loan Rate from the
date through which interest was last paid by the related mortgagor to the first
day of the month in which such amount is to be distributed to
Certificateholders.
Servicing Compensation and Payment of Expenses
With respect to each Collection Period, the Master Servicer will receive
from interest collections in respect of the Mortgage Loans a portion of such
interest collections as a monthly Servicing Fee in the amount equal to
approximately 0.50% per annum ("Servicing Fee Rate") on the aggregate Principal
Balances of the Mortgage Loans as of the first day of the related Collection
Period (or at the Cut-off Date for the first Collection Period). All assumption
fees, late payment charges and other fees and charges, to the extent collected
from borrowers, will be retained by the Master Servicer as additional servicing
compensation.
The Master Servicer will pay certain ongoing expenses associated with the
Trust Fund and incurred by it in connection with its responsibilities under the
Agreement. In addition, the Master Servicer will be entitled to
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reimbursement for certain expenses incurred by it in connection with defaulted
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 Net Liquidation Proceeds.
Evidence as to Compliance
The Agreement provides for delivery on or before ___________ in each year,
beginning in ___________, 199_, to the Trustee of an annual statement signed by
an officer of the Master Servicer to the effect that the Master Servicer has
fulfilled its material obligations under the Agreement throughout the preceding
fiscal year, except as specified in such statement.
On or before _____________ of each year, beginning ___________, 199_, the
Master Servicer will furnish a report prepared by a firm of nationally
recognized independent public accountants (who may also render other services to
the Master Servicer or the Transferor) to the Trustee, the Certificate Insurer
and the Rating Agencies to the effect that such firm has examined certain
documents and the records relating to servicing of the Mortgage Loans under the
Agreement and that, on the basis of such examination, such firm believes that
such servicing was conducted in compliance with the Agreement except for (a)
such exceptions as such firm believes to be immaterial and (b) such other
exceptions as shall be set forth in such report.
Certain Matters Regarding the Master Servicer and the Transferor
The Agreement provides that the Master Servicer may not resign from its
obligations and duties thereunder, except in connection with a permitted
transfer of servicing, unless (i) such duties and obligations are no longer
permissible under applicable law or are in material conflict by reason of
applicable law with any other activities of a type and nature presently carried
on by it or its affiliate or (ii) upon the satisfaction of the following
conditions: (a) the Master Servicer has proposed a successor servicer to the
Trustee in writing and such proposed successor servicer is reasonably acceptable
to the Trustee; (b) the Rating Agencies have confirmed to the Trustee that the
appointment of such proposed successor servicer as the Master Servicer will not
result in the reduction or withdrawal of the then current rating of the
Certificates; and (c) such proposed successor servicer is reasonably acceptable
to the Certificate Insurer. No such resignation will become effective until the
Trustee or a successor servicer has assumed the Master Servicer's obligations
and duties under the Agreement.
The Master Servicer may perform any of its duties and obligations under the
Agreement through one or more subservicers or delegates, which may be affiliates
of the Master Servicer. Notwithstanding any such arrangement, the Master
Servicer will remain liable and obligated to the Trustee and the
Certificateholders for the Master Servicer's duties and obligations under the
Agreement, without any diminution of such duties and obligations and as if the
Master Servicer itself were performing such duties and obligations.
The Agreement provides that the Master Servicer will indemnify the Trust
Fund and the Trustee from and against any loss, liability, expense, damage or
injury suffered or sustained as a result of the Master Servicer's actions or
omissions in connection with the servicing and administration of the Mortgage
Loans which are not in accordance with the provisions of the Agreement. Under
the Agreement, the Transferor will indemnify an injured party for the entire
amount of any losses, claims, damages or liabilities arising out of or based on
the Agreement (other than losses resulting from defaults under the Mortgage
Loans). In the event of an Event of Servicing Termination (as defined below)
resulting in the assumption of servicing obligations by a successor Master
Servicer, the successor Master Servicer will indemnify the Transferor for any
losses, claims, damages and liabilities of the Transferor as described in this
paragraph arising from the successor Master Servicer's actions or omissions. The
Agreement provides that neither the Depositor, the Transferor nor the Master
Servicer nor their directors, officers, employees or agents will be under any
other liability to the Trust Fund, the Trustee, the Certificateholders or any
other person for any action taken or for refraining from taking any action
pursuant to the Agreement. However, neither the Depositor, the Transferor nor
the Master Servicer will be protected against any liability which would
otherwise be imposed by reason of willful misconduct, bad faith or gross
negligence of the Depositor, the Transferor or the Master Servicer in the
performance of its duties under the Agreement or by reason of reckless disregard
of its obligations thereunder. In addition, the Agreement provides that the
Master Servicer will not be under any obligation to appear in, prosecute or
defend any legal action which is not incidental to its servicing
responsibilities under the Agreement and which in its opinion may expose it to
any expense or liability. The Master Servicer may,
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in its sole discretion, undertake any such legal action which it may deem
necessary or desirable with respect to the Agreement and the rights and duties
of the parties thereto and the interest of the Certificateholders thereunder.
Any corporation into which the Master Servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Master Servicer shall be a party, or any corporation
succeeding to the business of the Master Servicer shall be the successor of the
Master Servicer hereunder, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything in the Agreement
to the contrary notwithstanding.
Events of Servicing Termination
"Events of Servicing Termination" will consist of: (i) any failure by the
Master Servicer to deposit in the Collection Account any deposit required to be
made under the Agreement, which failure continues unremedied for five business
days after the giving of written notice of such failure to the Master Servicer
by the Trustee, or to the Master Servicer and the Trustee by the Certificate
Insurer or Certificateholders evidencing an aggregate, undivided interest in the
Trust Fund of at least 25% of the Certificate Principal Balance; (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 Agreement which, in each
case, materially and adversely affects the interests of the Certificateholders
or the Certificate Insurer and continues unremedied for 60 days after the giving
of written notice of such failure to the Master Servicer by the Trustee, or to
the Master Servicer and the Trustee by the Certificate Insurer or
Certificateholders evidencing an aggregate, undivided interest in the Trust Fund
of at least 25% of the Certificate Principal Balance; or (iii) certain events of
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings relating to the Master Servicer and certain actions by the
Master Servicer indicating insolvency, reorganization or inability to pay its
obligations. Under certain other circumstances, the Certificate Insurer with the
consent of holders of Investor Certificates evidencing an aggregate, undivided
interest in the Trust Fund of at least 51% of the Certificate Principal Balance
may deliver written notice to the Master Servicer terminating all the rights and
obligations of the Master Servicer under the Agreement.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (i) above for a period of ten Business Days or referred
to under clause (ii) above for a period of 60 Business Days, shall not
constitute an Event of Servicing Termination if such delay or failure could not
be prevented by the exercise of reasonable diligence by the Master Servicer and
such delay or failure was caused by an act of God or other similar occurrence.
Upon the occurrence of any such event the Master Servicer shall not be relieved
from using its best efforts to perform its obligations in a timely manner in
accordance with the terms of the Agreement and the Master Servicer shall provide
the Trustee, the Depositor, the Transferor, the Certificate Insurer and the
Certificateholders prompt notice of such failure or delay by it, together with a
description of its efforts to so perform its obligations.
Rights Upon an Event of Servicing Termination
So long as an Event of Servicing Termination remains unremedied, either the
Trustee, or Certificateholders evidencing an aggregate, undivided interest in
the Trust Fund of at least 51% of the Certificate Principal Balance or the
Certificate Insurer, may terminate all of the rights and obligations of the
Master Servicer under the Agreement and in and to the Mortgage Loans, whereupon
the Trustee will succeed to all the responsibilities, duties and liabilities of
the Master Servicer under the 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 or unable so to act, it may
appoint, or petition a court of competent jurisdiction for the appointment of, a
housing and home finance institution or other mortgage loan or home equity loan
servicer with all licenses and permits required to perform its obligations under
the Agreement and having a net worth of at least $__________ and acceptable to
the Certificate Insurer to act as successor to the Master Servicer under the
Agreement. Pending such appointment, the Trustee will be obligated to act in
such capacity unless prohibited by law. Such successor will be entitled to
receive the same compensation that the Master Servicer would otherwise have
received (or such lesser compensation as the Trustee and such successor may
agree). A receiver or conservator for the Master Servicer may be empowered to
prevent the termination and replacement of the Master Servicer where the only
Event of Servicing Termination that has occurred is an Insolvency Event.
Amendment
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The Agreement may be amended from time to time by the Seller, the Master
Servicer, the Depositor and the Trustee and with the consent of the Certificate
Insurer, but without the consent of the Certificateholders, to cure any
ambiguity, to correct or supplement any provisions therein which may be
inconsistent with any other provisions of the Agreement, to add to the duties of
the Depositor, the Seller, the Transferor or the Master Servicer or to add or
amend any provisions of the Agreement as required by the Rating Agencies in
order to maintain or improve any rating of the Certificates (it being understood
that, after obtaining the ratings in effect on the Closing Date, neither the
Transferor, the Trustee nor the Master Servicer is obligated to obtain,
maintain, or improve any such rating) or to add any other provisions with
respect to matters or questions arising under the Agreement which shall not be
inconsistent with the provisions of the Agreement, provided that such action
will not, as evidenced by an opinion of counsel, materially and adversely affect
the interests of any Certificateholder or the Certificate Insurer; provided,
that any such amendment will not be deemed to materially and adversely affect
the Certificateholders and no such opinion will be required to be delivered if
the person requesting such amendment obtains a letter from the Rating Agencies
stating that such amendment would not result in a downgrading of the then
current rating of the Certificates. The Agreement may also be amended from time
to time by the Seller, the Master Servicer, the Depositor, and the Trustee, with
the consent of Certificateholders evidencing an aggregate, undivided interest in
the Trust Fund of at least 51% of the Certificate Principal Balance and the
Certificate Insurer for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of the Agreement or of modifying
in any manner the rights of the Certificateholders, provided that no such
amendment will (i) reduce in any manner the amount of, or delay the timing of,
collections of payments on the Certificates or distributions or payments under
the Policy which are required to be made on any Certificate without the consent
of the holder of such Certificate or (ii) reduce the aforesaid percentage
required to consent to any such amendment, without the consent of the holders of
all Certificates then outstanding.
Termination; Retirement of the Certificates
The Trust Fund will terminate on the Distribution Date following the later
of (A) payment in full of all amounts owing to the Certificate Insurer and (B)
the earliest of (i) the Distribution Date on which the Certificate Principal
Balance has been reduced to zero, (ii) the final payment or other liquidation of
the last Mortgage Loan in the Trust Fund, (iii) the optional transfer to the
Transferor of the Certificates, as described below and (iv) the Distribution
Date in ____________ 20__.
The Certificates will be subject to optional transfer to the Transferor on
any Distribution Date after the Certificate Principal Balance is reduced to an
amount less than or equal to __% of the Original Certificate Principal Balance
and all amounts due and owing to the Certificate Insurer and unreimbursed draws
on the Policy, together with interest thereon, as provided under the Insurance
Agreement, have been paid. The transfer price will be equal to the sum of the
outstanding Certificate Principal Balance and accrued and unpaid interest
thereon at the Certificate Rate through the day preceding the final Distribution
Date. In no event, however, will the Trust Fund created by the Agreement
continue for more than 21 years after the death of certain individuals named in
the Agreement. Written notice of termination of the 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.
In addition, the Trust Fund may be liquidated as a result of certain events
of bankruptcy, insolvency or receivership relating to the Transferor. See
"--Rapid Amortization Events" herein.
The Trustee
[________], a ____________________________ with its principal place of
business in ________, has been named Trustee pursuant to the Agreement.
The commercial bank or trust company serving as Trustee may own
Certificates and have normal banking relationships with the Depositor, the
Master Servicer, the Seller and the Certificate Insurer and/or their affiliates.
The Trustee may resign at any time, in which event the Depositor will be
obligated to appoint a successor Trustee, as approved by the Certificate
Insurer. The Depositor may also remove the Trustee if the Trustee ceases to be
eligible to continue as such under the Agreement or if the Trustee becomes
insolvent. Upon becoming aware of such circumstances, the Depositor will be
obligated to appoint a successor Trustee, as approved by the Certificate
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Insurer. 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.
No holder of a Certificate will have any right under the Agreement to
institute any proceeding with respect to the Agreement unless such holder
previously has given to the Trustee written notice of default and unless
Certificateholders evidencing an aggregate, undivided interest in the Trust Fund
of at least 51% of the Certificate Principal Balance have made written requests
upon the Trustee to institute such proceeding in its own name as Trustee
thereunder and have offered to the Trustee reasonable indemnity and the Trustee
for 60 days has neglected or refused to institute any such proceeding. The
Trustee will be under no obligation to exercise any of the trusts or powers
vested in it by the Agreement or to make any investigation of matters arising
thereunder or to institute, conduct or defend any litigation thereunder or in
relation thereto at the request, order or direction of any of the
Certificateholders, unless such Certificateholders have offered to the Trustee
reasonable security or indemnity against the cost, expenses and liabilities
which may be incurred therein or thereby.
Certain Activities
The Trust Fund will not: (i) borrow money; (ii) make loans; (iii) invest in
securities for the purpose of exercising control; (iv) underwrite securities;
(v) except as provided in the Agreement, engage in the purchase and sale (or
turnover) of investments; (vi) offer securities in exchange for property (except
Certificates for the Mortgage Loans); or (vii) repurchase or otherwise reacquire
its securities. See "--Evidence as to Compliance" above for information
regarding reports as to the compliance by the Master Servicer with the terms of
the Agreement.
DESCRIPTION OF THE PURCHASE AGREEMENT
The Mortgage Loans to be transferred to the Trust Fund by the Depositor
will be purchased by the Depositor from [Countrywide] pursuant to the Purchase
Agreement to be entered into between the Depositor, as purchaser of the Mortgage
Loans, and [Countrywide], as Seller of the Mortgage Loans. Under the Purchase
Agreement, the Seller will agree to transfer the Mortgage Loans and related
Additional Balances to the Depositor. Pursuant to the Agreement, the Mortgage
Loans will be immediately transferred by the Depositor to the Trust Fund, and
the Depositor will assign its rights in, to and under the Purchase Agreement to
the Trust Fund. The following is a description of the material provisions of the
Purchase Agreement.
Transfers of Mortgage Loans
Pursuant to the Purchase Agreement, the Seller will transfer and assign to
the Depositor, all of its right, title and interest in and to the Mortgage Loans
and all of the Additional Balances thereafter created. The purchase price of the
Mortgage Loans is a specified percentage of the face amount thereof as of the
time of transfer and is payable by the Depositor in cash. The purchase price of
each Additional Balance comprising the Principal Balance of a Mortgage Loan is
the amount such Additional Balance.
Representations and Warranties
The Seller will represent and warrant to the Depositor that, among other
things, as of the Closing Date, it is duly organized and in good standing and
that it has the authority to consummate the transactions contemplated by the
Purchase Agreement. The Seller will also represent and warrant to the Depositor
that, among other things, immediately prior to the sale of the Mortgage Loans to
the Depositor, the Seller was the sole owner and holder of the Mortgage Loans
free and clear of any and all liens and security interests. The Seller will make
similar representations and warranties in the Agreement. The Seller will also
represent and warrant to the Depositor that, among other things, as of the
Closing Date, (a) the Purchase Agreement constitutes a legal, valid and binding
obligation of the Seller and (b) the Purchase Agreement constitutes a valid sale
to the Depositor of all right, title and interest of the Seller in and to the
Mortgage Loans and the proceeds thereof.
Assignment to Trust Fund
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The Seller expressly acknowledges and consents to the Depositor's transfer
of its rights relating to the Mortgage Loans under the Agreement to the Trust
Fund. The Seller also agrees to perform its obligations under the Purchase
Agreement for the benefit of the Trust Fund.
Termination
The Purchase Agreement will terminate upon the termination of the Trust
Fund.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates will be
applied by the Depositor towards the purchase of the Mortgage Loans.
FEDERAL INCOME TAX CONSEQUENCES
General
The following discussion, which summarizes the material U.S. federal income
tax aspects of the purchase, ownership and disposition of the Certificates, is
based on the provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), the Treasury Regulations thereunder, and published rulings and court
decisions in effect as of the date hereof, all of which are subject to change,
possibly retroactively. This discussion does not address every aspect of the
U.S. federal income tax laws which may be relevant to Certificate Owners in
light of their personal investment circumstances or to certain types of
Certificate Owners subject to special treatment under the U.S. federal income
tax laws (for example, banks and life insurance companies). Accordingly,
investors should consult their tax advisors regarding U.S. federal, state,
local, foreign and any other tax consequences to them of investing in the
Certificates.
Characterization of the Certificates as Indebtedness
Based on the application of existing law to the facts as set forth in the
Agreement and other relevant documents and assuming compliance with the terms of
the Agreement as in effect on the date of issuance of the Certificates, Brown &
Wood llp, special tax counsel to the Depositor ("Tax Counsel"), is of the
opinion that the Certificates will be treated as debt instruments for Federal
income tax purposes as of such date. Accordingly, upon issuance, the
Certificates will be treated as "Debt Securities" as described in the
Prospectus. See "Federal Income Tax Consequences" in the Prospectus.
The Transferor and the Certificateholders express in the Agreement their
intent that, for applicable tax purposes, the Certificates will be indebtedness
secured by the Mortgage Loans. The Transferor, the Depositor and the
Certificateholders, by accepting the Certificates, and each Certificate Owner by
its acquisition of a beneficial interest in a Certificate, have agreed to treat
the Certificates as indebtedness for U.S. federal income tax purposes. However,
because different criteria are used to determine the non-tax accounting
characterization of the transaction, the Transferor intends to treat this
transaction as a sale of an interest in the Asset Balances of the Mortgage Loans
for financial accounting and certain regulatory purposes.
In general, whether for U.S. federal income tax purposes a transaction
constitutes a sale of property or a loan, the repayment of which is secured by
property, is a question of fact, the resolution of which is based upon the
economic substance of the transaction rather than its form or the manner in
which it is labeled. While the Internal Revenue Service (the "IRS") and the
courts have set forth several factors to be taken into account in determining
whether the substance of a transaction is a sale of property or a secured loan,
the primary factor in making this determination is whether the transferee has
assumed the risk of loss or other economic burdens relating to the property and
has obtained the benefits of ownership thereof. Tax Counsel has analyzed and
relied on several factors in reaching its opinion that the weight of the
benefits and burdens of ownership of the Mortgage Loans has been retained by the
Transferor and has not been transferred to the Certificate Owners.
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In some instances, courts have held that a taxpayer is bound by the
particular form it has chosen for a transaction, even if the substance of the
transaction does not accord with its form. Tax Counsel has advised that the
rationale of those cases will not apply to this transaction, because the form of
the transaction as reflected in the operative provisions of the documents either
accords with the characterization of the Certificates as debt or otherwise makes
the rationale of those cases inapplicable to this situation.
Taxation of Interest Income of Certificate Owners
Assuming that the Certificate Owners are holders of debt obligations for
U.S. federal income tax purposes, the Certificates generally will be taxable as
Debt Securities. See "Federal Income Tax Consequences" in the Prospectus.
While it is not anticipated that the Certificates will be issued at a
greater than de minimis discount, under Treasury regulations (the "OID
Regulations") it is possible that the Certificates could nevertheless be deemed
to have been issued with original issue discount ("OID") if the interest were
not treated as "unconditionally payable" under the OID Regulations. If such
regulations were to apply, all of the taxable income to be recognized with
respect to the Certificates would be includible in income of Certificate Owners
as OID, but would not be includible again when the interest is actually
received. See "Federal Income Tax Consequences--Taxation of Debt Securities;
Interest and Acquisition Discount" in the Prospectus for a discussion of the
application of the OID rules if the Certificates are in fact issued at a greater
than de minimis discount or are treated as having been issued with OID under the
OID Regulations. For purposes of calculating OID, it is likely that the
Certificates will be treated as Pay-Through Securities.
Possible Classification of the Certificates as a Partnership or Association
Taxable as a Corporation
The opinion of Tax Counsel is not binding on the courts or the IRS. It is
possible that the IRS could assert that, for purposes of the Code, the
transaction contemplated by this Prospectus with respect to the Certificates
constitutes a sale of the Mortgage Loans (or an interest therein) to the
Certificate Owners and that the proper classification of the legal relationship
between the Transferor and the Certificate Owners resulting from this
transaction is that of a partnership, a publicly traded partnership treated as a
corporation, or an association taxable as a corporation. Since Tax Counsel has
advised that the Certificates will be treated as indebtedness in the hands of
the Certificateholders for U.S. federal income tax purposes, the Transferor will
not attempt to comply with U.S. federal income tax reporting requirements
applicable to partnerships or corporations as such requirements would apply if
the Certificates were treated as indebtedness.
If it were determined that this transaction created an entity classified as
a corporation (including a publicly traded partnership taxable as a
corporation), the Trust Fund would be subject to U.S. federal income tax at
corporate income tax rates on the income it derives from the Mortgage Loans,
which would reduce the amounts available for distribution to the Certificate
Owners. Cash distributions to the Certificate Owners generally would be treated
as dividends for tax purposes to the extent of such corporation's earnings and
profits.
If the transaction were treated as creating a partnership between the
Certificate Owners and the Transferor, the partnership itself would not be
subject to U.S. federal income tax (unless it were to be characterized as a
publicly traded partnership taxable as a corporation); rather, the Transferor
and each Certificate Owner would be taxed individually on their respective
distributive shares of the partnership's income, gain, loss, deductions and
credits. The amount and timing of items of income and deductions of the
Certificate Owner could differ if the Certificates were held to constitute
partnership interests rather than indebtedness.
Possible Classification as a Taxable Mortgage Pool
In relevant part, Section 7701(i) of the Code provides that any entity (or
a portion of an entity) that is a "taxable mortgage pool" will be classified as
a taxable corporation and will not be permitted to file a consolidated U.S.
federal income tax return with another corporation. Subject to a grandfather
provision for existing entities, any entity (or a portion of any entity) will be
a taxable mortgage pool if (i) substantially all of its assets consist of debt
instruments, more than 50% of which are real estate mortgages, (ii) the entity
is the obligor under debt obligations with two or more maturities, and (iii)
under the terms of the entity's debt obligations (or an underlying arrangement),
payments on such debt obligations bear a relationship to the debt instruments
held by the entity.
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Assuming that all of the provisions of the Agreement, as in effect on the
date of issuance, are complied with, Tax Counsel is of the opinion that the
arrangement created by the Agreement will not be a taxable mortgage pool under
Section 7701(i) of the Code because only one class of indebtedness secured by
the Mortgage Loans is being issued.
The opinion of Tax Counsel is not binding on the IRS or the courts. If the
IRS were to contend successfully (or future regulations were to provide) that
the arrangement created by the Agreement is a taxable mortgage pool, such
arrangement would be subject to U.S. federal corporate income tax on its taxable
income generated by ownership of the Mortgage Loans. Such a tax might reduce
amounts available for distributions to Certificate Owners. The amount of such a
tax would depend upon whether distributions to Certificate Owners would be
deductible as interest expense in computing the taxable income of such an
arrangement as a taxable mortgage pool.
Foreign Investors
In general, subject to certain exceptions, interest (including OID) paid on
a Certificate to a nonresident alien individual, foreign corporation or other
non-United States person is not subject to U.S. federal income tax, provided
that such interest is not effectively connected with a trade or business of the
recipient in the United States and the Certificate Owner provides the required
foreign person information certification. See "Federal Income Tax
Consequences--Tax Treatment of Foreign Investors" in the Prospectus.
If the interests of the Certificate Owners were deemed to be partnership
interests, the partnership would be required, on a quarterly basis, to pay
withholding tax equal to the product, for each foreign partner, of such foreign
partner's distributive share of "effectively connected" income of the
partnership multiplied by the highest rate of tax applicable to that foreign
partner. In addition, such foreign partner would be subject to branch profits
tax. Each non-foreign partner would be required to certify to the partnership
that it is not a foreign person. The tax withheld from each foreign partner
would be credited against such foreign partner's U.S. income tax liability.
If the Trust Fund were taxable as a corporation, distributions to foreign
persons, to the extent treated as dividends, would generally be subject to
withholding at the rate of 30%, unless such rate were reduced by an applicable
tax treaty.
Backup Withholding
Certain Certificate Owners may be subject to backup withholding at the rate
of 31% with respect to interest paid on the Certificates if the Certificate
Owners, upon issuance, fail to supply the Trustee or his broker with his
taxpayer identification number, furnish an incorrect taxpayer identification
number, fail to report interest, dividends, or other "reportable payments" (as
defined in the Code) properly, or, under certain circumstances, fail to provide
the Trustee or his broker with a certified statement, under penalty of perjury,
that he is not subject to backup withholding.
The Trustee will be required to report annually to the IRS, and to each
Certificateholder of record, the amount of interest paid (and OID accrued, if
any) on the Certificates (and the amount of interest withheld for U.S. federal
income taxes, if any) for each calendar year, except as to exempt holders
(generally, holders that are corporations, certain tax-exempt organizations or
nonresident aliens who provide certification as to their status as
nonresidents). As long as the only "Certificateholder" of record is Cede, as
nominee for DTC, Certificate Owners and the IRS will receive tax and other
information including the amount of interest paid on the Certificates owned from
Participants and Indirect Participants rather than from the Trustee. (The
Trustee, however, will respond to requests for necessary information to enable
Participants, Indirect Participants and certain other persons to complete their
reports.) Each non-exempt Certificate Owner will be required to provide, under
penalty of perjury, a certificate on IRS Form W-9 containing his or her name,
address, correct Federal taxpayer identification number and a statement that he
or she is not subject to backup withholding. Should a nonexempt Certificate
Owner fail to provide the required certification, the Participants or Indirect
Participants (or the Paying Agent) will be required to withhold 31% of the
interest (and principal) otherwise payable to the holder, and remit the withheld
amount to the IRS as a credit against the holder's Federal income tax liability.
STATE TAXES
S-53
<PAGE>
<PAGE>
The Depositor makes no representations regarding the tax consequences of
purchase, ownership or disposition of the Certificates under the tax laws of any
state. Investors considering an investment in the Certificates should consult
their own tax advisors regarding such tax consequences.
All investors should consult their own tax advisors regarding the Federal,
state, local or foreign income tax consequences of the purchase, ownership and
disposition of the Certificates.
ERISA CONSIDERATIONS
Any Plan fiduciary which proposes to cause a Plan to acquire any of the
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 the Code, of the Plans acquisition and ownership of such
Certificates. See "ERISA Considerations" in the Prospectus.
The U.S. Department of Labor has granted to _________________
("Underwriter") Prohibited Transaction Exemption _____ (the "Exemption") which
exempts from the application of the prohibited transaction rules transactions
relating to (1) the acquisition, sale and holding by Plans of certain
certificates representing an undivided interest in certain asset-backed
pass-through trusts, with respect to which Underwriter or any of its affiliates
is the sole underwriter or the manager or co-manager of the underwriting
syndicate; and (2) the servicing, operation and management of such asset-backed
pass-through trusts, provided that the general conditions and certain other
conditions set forth in the Exemption are satisfied. The Exemption will apply to
the acquisition, holding and resale of the Certificates by a Plan provided that
certain conditions are met.
For a general description of the Exemption and the conditions that must be
satisfied for the Exemption to apply, see "ERISA Considerations" in the
Prospectus.
The Underwriter believes that the Exemption will apply to the acquisition
and holding of the Certificates by Plans and that all conditions of the
Exemption other than those within the control of the investors will be met.
Any Plan fiduciary considering whether to purchase any Certificates on
behalf of a Plan should consult with its counsel regarding the applicability of
the fiduciary responsibility and prohibited transaction provisions of ERISA and
the Code to such investment. Among other things, before purchasing any
Certificates, a fiduciary of a Plan subject to the fiduciary responsibility
provisions of ERISA or an employee benefit plan subject to the prohibited
transaction provisions of the Code should make its own determination as to the
availability of the exemptive relief provided in the Exemption, and also
consider the availability of any other prohibited transaction exemptions.
LEGAL INVESTMENT CONSIDERATIONS
Although, as a condition to their issuance, the Certificates will be rated
in the highest rating category of the Rating Agencies, the Certificates will not
constitute "mortgage related securities" for purposes of the Secondary Mortgage
Market Enhancement Act of 1984 ("SMMEA"), because not all of the Mortgages
securing the Mortgage Loans are first mortgages. Accordingly, many institutions
with legal authority to invest in comparably rated securities based on first
mortgage loans may not be legally authorized to invest in the Certificates,
which because they evidence interests in a pool that includes junior mortgage
loans are not "mortgage related securities" under SMMEA. See "Legal Investment"
in the Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement, dated ___________, 199_ (the "Underwriting Agreement"), among the
Depositor and [Underwriter] (the "Underwriter"), the Depositor has agreed to
sell to the Underwriter, and the Underwriter has agreed to purchase from the
Depositor all the Certificates.
In the Underwriting Agreement, the Underwriter has agreed, subject to the
terms and conditions set forth therein, to purchase all the Certificates offered
hereby if any of the Certificates are purchased.
S-54
<PAGE>
<PAGE>
The Depositor has been advised by the Underwriter that it proposes
initially to offer the Certificates to the public in Europe and the United
States at the offering price set forth on the cover page hereof and to certain
dealers at such price less a discount not in excess of ____% of the Certificate
denominations. The Underwriter may allow and such dealers may reallow a discount
not in excess of _____% of the Certificate denominations to certain other
dealers. After the initial public offering, the public offering price, such
concessions and such discounts may be changed.
The Underwriting Agreement provides that the Depositor will indemnify the
Underwriter against certain civil liabilities, including liabilities under the
Act.
LEGAL MATTERS
Certain legal matters with respect to the Certificates will be passed upon
for the Depositor by Brown & Wood llp, New York, New York and for the
Underwriter by Strook & Strook & Lavan, New York, New York.
EXPERTS
The consolidated balance sheets of [Insurer] and Subsidiaries as of
___________, 199_ and 199_ and the related consolidated statements of income,
changes in shareholder's equity, and cash flows for each of the three years in
the period ended ___________, 199_, incorporated by reference in this Prospectus
Supplement, have been incorporated herein in reliance on the report of
________________________, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
RATINGS
It is a condition to issuance that the Certificates be rated "___" by _____
and "___" by _________.
A securities rating addresses the likelihood of the receipt by
Certificateholders of distributions on the Mortgage Loans. The rating takes into
consideration the characteristics of the Mortgage Loans and the structural,
legal and tax aspects associated with the Certificates. The ratings on the
Certificates do not, however, constitute statements regarding the likelihood or
frequency of prepayments on the Mortgage Loans or the possibility that
Certificateholders might realize a lower than anticipated yield.
The ratings assigned to the Certificates will depend primarily upon the
creditworthiness of the Certificate Insurer. Any reduction in a rating assigned
to the claims-paying ability of the Certificate Insurer below the ratings
initially assigned to the Certificates may result in a reduction of one or more
of the ratings assigned to the Certificates.
A securities rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning rating
organization. Each securities rating should be evaluated independently of
similar ratings on different securities.
The Depositor has not requested a rating of the Certificates by any rating
agency other than the Rating Agencies; there can be no assurance, however, as to
whether any other rating agency will rate the Certificates or, if it does, what
rating would be assigned by such other rating agency. The rating assigned by
such other rating agency to the Certificates could be lower than the respective
ratings assigned by the Rating Agencies.
S-55
<PAGE>
<PAGE>
INDEX OF DEFINED TERMS
Page
----
Accelerated Principal Distribution Amount.....................S-9, S-39
Additional Balances.................................................S-3
Agreement...........................................................S-3
ALTA ..........................................................S-20
Alternative Documentation Program..................................S-19
Alternative Principal Payment................................S-11, S-41
Assignment Event...................................................S-35
BIF ..........................................................S-37
Book-Entry Certificates............................................S-32
Business Day.................................................S-39, S-44
Cede ...........................................................S-7
CEDEL ...........................................................S-7
CEDEL Participants.................................................S-33
Certificate Insurer................................................S-12
Certificate Owners............................................S-7, S-32
Certificate Principal Balance.................................S-4, S-31
Certificate Rate........................................S-4, S-10, S-40
Certificateholder............................................S-32, S-53
Certificates...................................................S-1, S-4
Chase ...........................................................S-7
Citibank ...........................................................S-7
Closing Date............................................S-1, S-10, S-40
Code ..........................................................S-51
Collection Account...........................................S-10, S-37
Collection Period............................................S-10, S-40
Combined Loan-to-Value Ratio........................................S-6
Cooperative........................................................S-34
[Countrywide]............................................S-1, S-3, S-19
Credit Limit........................................................S-6
Credit Limit Utilization Rate......................................S-22
Credit Line Agreements........................................S-3, S-21
Cut-off Date...................................................S-1, S-3
Cut-off Date Pool Balance...........................................S-3
Cut-off Date Principal Balance......................................S-3
Debt Securities....................................................S-51
debt-to-income ratio...............................................S-20
Defective Mortgage Loans...........................................S-36
Definitive Certificate.............................................S-32
Depositor...........................................................S-3
Determination Date...........................................S-13, S-37
Dissolution Distribution Date......................................S-42
Distribution Date.......................................S-1, S-10, S-39
Draw Period........................................................S-22
DTC ...............................................S-7, S-32, S-60
Due Date ...........................................................S-6
Eligible Account...................................................S-37
Eligible Substitute Mortgage Loan..................................S-36
ERISA ....................................................S-15, S-54
Euroclear...........................................................S-7
Euroclear Operator.................................................S-33
Euroclear Participants.............................................S-33
European Depositaries.........................................S-7, S-32
S-56
<PAGE>
<PAGE>
Page
----
Events of Servicing Termination....................................S-48
Exemption..........................................................S-54
FHLMC ..........................................................S-20
Financial Intermediary.............................................S-32
Fixed Allocation Percentage........................................S-10
FNMA ..........................................................S-20
Guaranteed Distributions.....................................S-12, S-43
Guaranteed Principal Distribution Amount.....................S-12, S-43
Index Rate.........................................................S-22
Insurance Agreement..........................................S-12, S-43
Interest Collections..........................................S-8, S-38
Interest Period..............................................S-10, S-40
Invested Amount...............................................S-4, S-31
Investor Fixed Allocation Percentage...............................S-10
Investor Floating Allocation Percentage.......................S-8, S-38
Investor Interest Collections.................................S-8, S-38
Investor Loss Amount..........................................S-9, S-40
Investor Principal Collections...............................S-10, S-38
IRS ..........................................................S-51
LIBOR ..........................................................S-10
LIBOR Business Day.................................................S-40
Liquidated Mortgage Loan...........................................S-40
Liquidation Loss Amount.......................................S-9, S-40
Liquidation Proceeds...............................................S-38
Loan Rate.....................................................S-6, S-22
Managed Amortization Period..................................S-11, S-41
Margin ..........................................................S-22
Master Servicer.....................................................S-3
Maximum Principal Payment....................................S-11, S-41
Maximum Rate.......................................................S-22
Minimum Transferor Interest...................................S-5, S-37
Money Rates.........................................................S-6
Mortgage Files.....................................................S-35
Mortgage Loan Schedule..................................S-5, S-35, S-37
Mortgage Loans.................................................S-1, S-3
Mortgaged Properties................................................S-3
Moody's ..........................................................S-37
Net Liquidation Proceeds......................................S-8, S-38
OID ..........................................................S-52
OID Regulations....................................................S-52
Order ..........................................................S-43
Original Certificate Principal Balance........................S-4, S-31
Original Invested Amount......................................S-4, S-31
Overcollateralization Amount........................................S-9
Paying Agent.......................................................S-11
Percentage Interest.................................................S-6
Plan ..........................................................S-15
Policy ......................................................S-1, S-3
Pool Balance..................................................S-3, S-38
Pool Factor........................................................S-31
Principal Balance...................................................S-3
Principal Collections.........................................S-8, S-38
Purchase Agreement..................................................S-5
Rapid Amortization Event...........................................S-42
S-57
<PAGE>
<PAGE>
Page
----
Rating Agency......................................................S-15
Receipt ..........................................................S-43
Received ..........................................................S-43
Record Date........................................................S-39
Reduced Documentation Program......................................S-19
Reference Bank Rate................................................S-40
Related Documents..................................................S-35
Relevant Depositary................................................S-32
Repayment Period...................................................S-22
Required Overcollateralization Amount..............................S-40
Rules ..........................................................S-32
SAIF ..........................................................S-37
Scheduled Principal Collections Distribution Amount..........S-11, S-41
Seller ...........................................................S-3
Servicing Fee......................................................S-13
Servicing Fee Rate...........................................S-13, S-46
SMMEA ....................................................S-15, S-54
Spread Account...............................................S-12, S-43
Tax Counsel........................................................S-51
Telerate Screen Page 3750..........................................S-40
Terms and Conditions...............................................S-34
Transfer Date......................................................S-36
Transfer Deficiency................................................S-35
Transfer Deposit Amount............................................S-35
Transferor..........................................................S-4
Transferor Interest......................................S-1, S-4, S-32
Transferor Principal Collections.............................S-10, S-38
Trust Fund.....................................................S-1, S-3
Trustee .....................................................S-3, S-14
Underwriter........................................................S-54
Underwriting Agreement.............................................S-54
S-58
<PAGE>
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Home Equity
Loan Asset Backed Certificates, Series 199_-_ (the "Global Securities") will be
available only in book-entry form. Investors in the Global Securities may hold
such Global Securities through any of The Depository Trust Company ("DTC"),
CEDEL or Euroclear. The Global Securities will be tradeable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through CEDEL and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations and prior Home Equity Loan Asset Backed
Certificates issues.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of CEDEL and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, CEDEL and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to prior Home Equity Loan Asset Backed
Certificates issues. Investor securities custody accounts will be credited with
their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior Home
Equity Loan Asset Backed Certificates issues in same-day funds.
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
S-59
<PAGE>
<PAGE>
Trading between DTC seller and CEDEL or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a CEDEL Participant or a Euroclear Participant, the purchaser will
send instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. CEDEL or Euroclear
will instruct the respective Depositary, as the case may be, to receive the
Global Securities against payment. Payment will include interest accrued on the
Global Securities from and including the last coupon payment date to and
excluding the settlement date, on the basis of the actual number of days in such
accrual period and a year assumed to consist of 360 days. For transactions
settling on the 31st of the month, payment will include interest accrued to and
excluding the first day of the following month. Payment will then be made by the
respective Depositary of the DTC Participant's account against delivery of the
Global Securities. After settlement has been completed, the Global Securities
will be credited to the respective clearing system and by the clearing system,
in accordance with its usual procedures, to the CEDEL Participant's or Euroclear
Participant's account. The securities credit will appear the next day (European
time) and the cash debt will be back-valued to, and the interest on the Global
Securities will accrue from, the value date (which would be the preceding day
when settlement occurred in New York). If settlement is not completed on the
intended value date (i.e., the trade fails), the CEDEL or Euroclear cash debt
will be valued instead as of the actual settlement date.
CEDEL Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within CEDEL or Euroclear. Under this approach,
they may take on credit exposure to CEDEL or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL Participants or Euroclear Participants can elect not to preposition
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, CEDEL Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each CEDEL Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective European Depositary for the benefit of CEDEL Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller on
the settlement date. Thus, to the DTC Participants a cross-market transaction
will settle no differently than a trade between two DTC Participants.
Trading between CEDEL or Euroclear Seller and DTC Purchaser. Due to time
zone differences in their favor, CEDEL Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depositary, to a DTC Participant. The seller will send instructions
to CEDEL or Euroclear through a CEDEL Participant or Euroclear Participant at
least one business day prior to settlement. In these cases CEDEL or Euroclear
will instruct the respective Depositary, as appropriate, to deliver the Global
Securities to the DTC Participant's account against payment. Payment will
include interest accrued on the Global Securities from and including the last
coupon payment to and excluding the settlement date on the basis of the actual
number of days in such accrual period and a year assumed to consist of 360 days.
For transactions settling on the 31st of the month, payment will include
interest accrued to and excluding the first day of the following month. The
payment will then be reflected in the account of the CEDEL Participant or
Euroclear Participant the following day, and receipt of the cash proceeds in the
CEDEL Participant's or Euroclear Participant's account would be back-valued to
the value date (which would be the preceding day, when settlement occurred in
New York). Should the CEDEL Participant or Euroclear Participant have a line of
credit with its respective clearing system and elect to be in debt in
anticipation of receipt of the sale proceeds in its account, the back-valuation
will extinguish any overdraft incurred over that one-day period. If settlement
is not completed on the intended value date (i.e., the trade fails), receipt of
the cash proceeds in the CEDEL Participant's or Euroclear Participant's account
would instead be valued as of the actual settlement date.
S-60
<PAGE>
<PAGE>
Finally, day traders that use CEDEL or Euroclear and that purchase Global
Securities from DTC Participants for delivery to CEDEL Participants or Euroclear
Participants should note that these trades would automatically fail on the sale
side unless affirmative action were taken. At least three techniques should be
readily available to eliminate this potential problem:
(a) borrowing through CEDEL or Euroclear for one day (until the purchase
side of the day trade is reflected in their CEDEL or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global Securities
sufficient time to be reflected in their CEDEL or Euroclear account in order to
settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC Participant is at least one
day prior to the value date for the sale to the CEDEL Participant or Euroclear
Participant.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through CEDEL or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Global
Securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001). Non-U.S. Persons that are Certificate Owners residing in a country
that has a tax treaty with the United States can obtain an exemption or reduced
tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the Certificate Owners
or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof or (iii) an estate or trust
the income of which is includible in gross income for United States tax
purposes, regardless of its source. This summary does not deal with all aspects
of U.S. Federal income tax withholding that may be relevant to foreign holders
of the Global Securities. Investors are advised to consult their own tax
advisors for specific tax advice concerning their holding and disposing of the
Global Securities.
S-61
<PAGE>
<PAGE>
================================================================================
No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained in this Prospectus
Supplement or the Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by the Company
or [Underwriter]. This Prospectus Supplement and the Prospectus do not
constitute an offer of any securities other than those to which they relate or
an offer to sell, or a solicitation of an offer to buy, to any person in any
jurisdiction where such an offer or solicitation would be unlawful. Neither the
delivery of this Prospectus Supplement and the Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that the
information contained herein is correct as of any time subsequent to their
respective dates.
----------------------
TABLE OF CONTENTS
Page
----
Prospectus Supplement
Summary ................................................................. S-3
Risk Factors ............................................................ S-16
The Certificate Insurer ................................................. S-18
The Master Servicer ..................................................... S-19
The Home Equity Loan Program ............................................ S-19
Description of the Mortgage Loans ....................................... S-21
Maturity and Prepayment Considerations .................................. S-29
Pool Factor and Trading Information ..................................... S-31
Description of the Certificates ......................................... S-31
Description of the Purchase Agreement ................................... S-50
Use of Proceeds ......................................................... S-51
Federal Income Tax Consequences ......................................... S-51
State Taxes ............................................................. S-53
ERISA Considerations .................................................... S-54
Legal Investment Considerations ......................................... S-54
Underwriting ............................................................ S-54
Legal Matters ........................................................... S-55
Experts ................................................................. S-55
Ratings ................................................................. S-55
Index of Defined Terms .................................................. S-56
Annex I ................................................................. S-59
Prospectus
Prospectus Supplement or Current Report on Form 8K ...................... 2
Available Information ................................................... 2
Incorporation of Certain Documents by Reference ......................... 2
Reports to Securityholders .............................................. 3
Summary of Terms ........................................................ 4
Risk Factors ............................................................ 11
The Trust Fund .......................................................... 17
Use of Proceeds ......................................................... 21
The Depositor ........................................................... 22
Loan Program ............................................................ 22
Description of the Securities ........................................... 24
Credit Enhancement ...................................................... 38
Yield and Prepayment Considerations ..................................... 43
The Agreements .......................................................... 45
Certain Legal Aspects of the Loans ...................................... 57
Federal Income Tax
Consequences .......................................................... 71
State Tax Considerations ................................................ 90
ERISA Considerations .................................................... 90
Legal Investment ........................................................ 93
Method of Distribution .................................................. 94
Legal Matters ........................................................... 95
Financial Information ................................................... 95
Ratings ................................................................. 95
Index of Defined Terms .................................................. 97
================================================================================
[COUNTRYWIDE] HOME
EQUITY LOAN TRUST 199__-__
$_______________
(Approximate)
Home Equity Loan
Asset Backed Certificates
Series 199__-__
CWABS, Inc.
Depositor
[Countrywide Home Loans, Inc.]
Seller and Master Servicer
---------------------------
PROSPECTUS SUPPLEMENT
____________, 199__
---------------------------
[UNDERWRITER]
================================================================================
<PAGE>
<PAGE>
Information contained herein is subject to completion or amendment. 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 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.
SUBJECT TO COMPLETION, DATED OCTOBER 15, 1996
PROSPECTUS SUPPLEMENT
(To Prospectus dated __________, 1996)
$
(Approximate)
Mortgage Pass-Through Certificates, Series 19__-__
Distributions payable on the ____ day of each month, commencing in _____ 19__
CWABS, Inc.
Depositor
[Countrywide Home Loans, Inc.]
Seller and Master Servicer
-------------------
The Mortgage Pass-Through Certificates, Series 199__-__ (collectively, the
"Certificates") will represent the entire beneficial interest in a Trust Fund
consisting of a pool (the "Mortgage Pool") of [fixed-rate] sub-prime Mortgage
Loans secured by first liens on one- to four-family residential properties. Only
the Classes of Certificates identified in the table below (collectively, the
"Offered Certificates") are offered hereby. See "Index of Defined Terms" on Page
S-57 of this Prospectus Supplement and on Page 98 of the Prospectus for the
location of the definitions of certain capitalized terms.
-------------------
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION SET FORTH UNDER "RISK
FACTORS" ON PAGE S-12 HEREIN AND ON PAGE 12 IN THE ACCOMPANYING PROSPECTUS.
THE CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE
DEPOSITOR, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR
RESPECTIVE AFFILIATES. NEITHER THE CERTIFICATES NOR THE MORTGAGE LOANS ARE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL ENTITY, THE DEPOSITOR, THE SELLER, THE
MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES OR ANY OTHER PERSON.
DISTRIBUTIONS ON THE CERTIFICATES WILL BE PAYABLE SOLELY FROM THE ASSETS
TRANSFERRED TO THE TRUST FUND FOR THE BENEFIT OF CERTIFICATEHOLDERS.
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.
<TABLE>
<CAPTION>
==================================================================================================================
Initial Class
Certificate
Balance (1) Pass-Through Rate
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A- $ %
- ------------------------------------------------------------------------------------------------------------------
Class $ %
- ------------------------------------------------------------------------------------------------------------------
Class PO $ (2)
- ------------------------------------------------------------------------------------------------------------------
Class X (3) (4)
- ------------------------------------------------------------------------------------------------------------------
Class A-R $ %
- ------------------------------------------------------------------------------------------------------------------
Class B- $ %
- ------------------------------------------------------------------------------------------------------------------
Class $ %
- ------------------------------------------------------------------------------------------------------------------
Class $ %
==================================================================================================================
</TABLE>
(1) Subject to the permitted variance described under "Summary of
Terms--Offered Certificates" herein.
(2) The Class PO Certificates will be Principal Only Certificates and will not
bear interest.
(3) The Class X Certificates will be Notional Amount Certificates, will have no
principal balance and will bear interest on their Notional Amount
(initially expected to be approximately $ ).
(4) The Pass-Through Rate for the Class X Certificates for any Distribution
Date will be equal to the excess of (a) the weighted average of the Net
Mortgage Rates of the Non-Discount Mortgage Loans over (b) % per annum. The
Pass-Through Rate for the Class X Certificates for the first Distribution
Date is expected to be approximately % per annum.
The Senior Certificates, other than the Class PO and Class X Certificates
(the "Underwritten Senior Certificates"), will be purchased by _________ and the
Class ___ Certificates (together with the Underwritten Senior Certificates, the
"Underwritten Certificates") offered hereby will be purchased by _________
(each, an "Underwriter") from the Depositor and will be offered by the
Underwriters from time to time in negotiated transactions or otherwise at
varying prices to be determined at the time of sale. Proceeds to the Depositor
from the sale of the Underwritten Certificates are expected to be approximately
$_________, plus accrued interest, before deducting issuance expenses payable by
the Depositor. The Class , Class PO and Class X Certificates will be issued to
the Depositor on or about _________, 19__ as partial consideration for the sale
of the Mortgage Loans to the Trust Fund.
The Underwritten Certificates are offered by the respective Underwriters,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters and subject to their right to reject orders in whole or in part. It
is expected that delivery of the Underwritten
<PAGE>
<PAGE>
Senior Certificates, other than the Class A-R Certificates, will be made in
book-entry form only through the facilities of The Depository Trust Company,
that the Class A-R Certificates will be delivered at the offices of
_________________ in New York, New York and that the Class Certificates will be
delivered at the offices of_______________ in New York, New York, in each case
on or about _________, 19__.
[Underwriters]
<PAGE>
<PAGE>
The Mortgage Loans will be sold to the Depositor by [Countrywide Home
Loans, Inc. ("Countrywide")].
An election will be made to treat the Trust Fund as a "real estate mortgage
investment conduit" (the "REMIC") for federal income tax purposes. As described
more fully herein and in the Prospectus, Offered Certificates, other than the
Class A-R Certificates, will constitute "regular interests" in the REMIC. The
Class A-R Certificates will constitute the sole class of "residual interest" in
the REMIC. Prospective investors are cautioned that a Class A-R
Certificateholder's REMIC taxable income and the tax liability thereon will
exceed cash distributions in certain periods, in which event such holder must
have sufficient alternative sources of funds to pay such tax liability. See
"Federal Income Tax Consequences" herein and in the Prospectus.
The Class A-R Certificates will be subject to certain transfer
restrictions. See "Description of the Certificates -- Restrictions on Transfer
of the Class A-R Certificates" herein.
The yield to investors on each Class of Offered Certificates will be
sensitive in varying degrees to, among other things, the rate and timing of
principal payments (including prepayments) of the Mortgage Loans, which may vary
significantly over time. The yield to maturity of a Class of Offered
Certificates purchased at a discount or premium will be more sensitive to the
rate and timing of payments thereon. Holders of the Offered Certificates should
consider, in the case of any such Certificates purchased at a discount, and
particularly the Principal Only Certificates, the risk that a slower than
anticipated rate of principal payments on the Mortgage Loans could result in an
actual yield that is lower than the anticipated yield and, in the case of any
Offered Certificates purchased at a premium and particularly the Interest Only
Certificates, the risk that a faster than anticipated rate of principal payments
on the Mortgage Loans could result in an actual yield that is lower than the
anticipated yield. Holders of the Interest Only Certificates should carefully
consider the risk that a rapid rate of principal payments on the Mortgage Loans
could result in the failure of such holders to recover their initial
investments. The yield to investors in the Offered Certificates, and
particularly the Class ____ Certificates, also will be adversely affected by Net
Interest Shortfalls and by Realized Losses. No representation is made as to the
anticipated rate of prepayments on the Mortgage Loans, the amount and timing of
Net Interest Shortfalls or Realized Losses, or as to the resulting yield to
maturity of any Class of Certificates.
Each Underwriter intends to make a secondary market in the Classes of
Underwritten Certificates being purchased by it, but no Underwriter has an
obligation to do so. There is currently no secondary market for the Offered
Certificates and there can be no assurance that such a market will develop or,
if it does develop, that it will continue or that it will provide
Certificateholders with a sufficient level of liquidity of investment.
Until ninety days after the date of this Prospectus Supplement, all dealers
effecting transactions in the Offered Certificates, whether or not participating
in this distribution, may be required to deliver a Prospectus Supplement and the
Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus Supplement and the Prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
-------------------
This Prospectus Supplement does not contain complete information about the
offering of the Offered Certificates. Additional information is contained in the
Prospectus of the Depositor dated _________, 1996 (the "Prospectus") and
purchasers are urged to read both this Prospectus Supplement and the Prospectus
in full. Sales of the Offered Certificates may not be consummated unless the
purchaser has received both this Prospectus Supplement and the Prospectus.
The Trustee on behalf of any Trust Fund will provide without charge to each
person to whom this Prospectus Supplement is delivered, on the written or oral
request of such person, a copy of any or all of the documents referred to in the
Prospectus under "Incorporation of Certain Documents by Reference" that have
been or may be incorporated by reference in the Prospectus (not including
exhibits to the information that is incorporated by reference unless such
exhibits are specifically incorporated by reference into the information that
the Prospectus incorporates). Such requests should be directed to the Corporate
Trust Office of the Trustee at _____________, telephone:_________, facsimile
number:_____________, attention:__________.
S-2
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF TERMS
This Summary of Terms is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the accompanying Prospectus. Certain capitalized terms used in this Summary of
Terms are defined elsewhere in this Prospectus Supplement or in the Prospectus.
See "Index of Defined Terms" on Page S-57 of this Prospectus Supplement and on
Page 98 of the Prospectus for the location of the definitions of certain
capitalized terms.
Title of Certificates........... Mortgage Pass-Through Certificates, Series
199 - (the "Certificates").
Offered Certificates............ Class A-__, Class _____, Class PO, Class X,
Class A-R, Class B-__ and Class _____
Certificates. Only the Offered Certificates
are offered hereby. The aggregate initial
Class Certificate Balances of the
Certificates will be subject to a permitted
variance in the aggregate of plus or minus
__%. Variances in the Class Certificate
Balances may result in variances in the
Notional Amount of the Class of Notional
Amount Certificates.
The Notional Amount of the Class X
Certificates for any Distribution Date will
be equal to the aggregate of the Stated
Principal Balances of the Non-Discount
Mortgage Loans with respect to such
Distribution Date. The initial Notional
Amount of the Class X Certificates will be
equal to the aggregate of the Stated
Principal Balances of the Non-Discount
Mortgage Loans as of the Cut-off Date.
Certificates other than the
Offered Certificates.......... In addition to the Offered Certificates, the
following Classes of Certificates will be
issued in the indicated approximate initial
Class Certificate Balances and will bear
interest at the indicated Pass-Through
Rates, but are not offered hereby:
Initial Class
Certificate Pass-Through
Balance Rate
---------- ------------
Class (1)... $ %
Class (1)... $ %
Class (1)... $ %
--------
(1) The Class _________, Class __________
and Class _________ Certificates will
provide limited credit support to the Senior
Certificates and the other Subordinated
Certificates, as described under
"Description of the
Certificates--Principal--Subordinated
Principal Distribution Amount" and "Credit
Enhancement--Subordination of Certain
Classes" herein.
- --------------------------------------------------------------------------------
S-3
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
Any information contained herein with
respect to the Class _____, Class _____ and
Class _____ Certificates is provided only to
permit a better understanding of the Offered
Certificates.
Designations
Regular Certificates.......... All Classes of Certificates other than the
Class A-R Certificates.
Residual Certificates......... Class A-R Certificates.
Senior Certificates........... Class A-__, Class __________, Class PO,
Class X and Class A-R Certificates.
Subordinated Certificates..... Class B-__, Class __________, and Class
_________ Certificates.
Principal Only Certificates... Class PO Certificates.
Interest Only Certificates.... Class X Certificates.
Notional Amount
Certificates................ Class X Certificates.
Fixed Rate Certificates....... All Classes of Certificates other than the
Class PO and Class X Certificates.
Variable Rate Certificates.... Class X Certificates.
Physical Certificates......... Class PO, Class X and Class A-R Certificates
and the Subordinated Certificates.
Book-Entry Certificates....... All Classes of Certificates other than the
Physical Certificates.
Trust Fund...................... The Certificates will represent the entire
beneficial ownership interest in the Trust
Fund, which will consist of the Mortgage
Pool.
Pooling and Servicing
Agreement..................... The Certificates will be issued pursuant to
a Pooling and Servicing Agreement dated as
of ________, 19 (the "Agreement"), among the
Depositor, the Seller, the Master Servicer
and the Trustee.
Depositor....................... CWABS, Inc. (the "Depositor"), a Delaware
corporation and a limited purpose finance
subsidiary of Countrywide Credit Industries,
Inc. See "The Depositor" in the Prospectus.
- --------------------------------------------------------------------------------
S-4
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
Seller and Master Servicer...... [Countrywide Home Loans, Inc.
("Countrywide"] or the "Seller" and, in its
capacity as master servicer of the Mortgage
Loans, the "Master Servicer"). See
"Servicing of Mortgage Loans -- The Master
Servicer" herein. The Mortgage Loans were
originated or acquired in the normal course
of its business by the Seller and will be
acquired by the Depositor in a privately
negotiated transaction. The Master Servicer
will be responsible for the servicing of the
Mortgage Loans and will receive the Master
Servicing Fee from interest collected on the
Mortgage Loans. See "Servicing of Mortgage
Loans -- Servicing Compensation and Payment
of Expenses" herein.
Trustee......................... __________________, a _____________________
organized under the laws of
_____________________ (the "Trustee").
Cut-off Date.................... ___________, 19__.
Closing Date.................... On or about ___________, 19__.
Determination Date.............. The ________ day of each month or, if such
day is not a business day, the preceding
business day; provided that the
Determination Date in each month will be at
least two business days prior to the related
Distribution Date.
Mortgage Loans.................. The Mortgage Pool will consist of 30-year
conventional [fixed-rate] mortgage loans
secured by first liens on one- to
four-family residential properties.
Distributions of principal and interest on
the Certificates will be based solely on
payments received on the Mortgage Loans, as
described under "Description of the
Certificates" herein. See "The Mortgage
Pool" herein.
Distribution Date............... The _________ day of each month or, if such
day is not a business day, on the first
business day thereafter, commencing in
___________ 19 (each, a "Distribution
Date"). Distributions on each Distribution
Date will be made to Certificateholders of
record as of the related Record Date, except
that the final distribution on the
Certificates will be made only upon
presentment and surrender of the
Certificates at the Corporate Trust Office
of the Trustee.
Record Date..................... The Record Date for each Distribution Date
will be the last business day of the month
preceding the month of such Distribution
Date.
Priority of Distributions....... Distributions will be made on each
Distribution Date from Available Funds in
the following order of priority: (i) to
interest
- --------------------------------------------------------------------------------
S-5
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
on each interest bearing Class of Senior
Certificates; (ii) to principal on the
Classes of Senior Certificates then entitled
to receive distributions of principal, in
the order and subject to the priorities set
forth herein under "Description of the
Certificates -- Principal," in each case in
an aggregate amount up to the maximum amount
of principal to be distributed on such
Classes on such Distribution Date; (iii) to
any Class PO Deferred Amounts with respect
to the Class PO Certificates, but only from
amounts that would otherwise be
distributable on such Distribution Date as
principal of the Subordinated Certificates;
and (iv) to interest on and then principal
of each Class of Subordinated Certificates,
in the order of their numerical Class
designations, beginning with the Class __
Certificates, in each case subject to the
limitations set forth herein under
"Description of the Certificates --
Principal."
Under certain circumstances, distributions
from Available Funds for a Distribution Date
that would otherwise be made on the
Subordinated Certificates may be distributed
instead on the Senior Certificates. See
"Description of the Certificates --
Allocation of Losses" herein.
Distributions of Interest....... To the extent funds are available therefor,
each interest bearing Class of Certificates
will be entitled to receive interest in the
amount of the Interest Distribution Amount
for such Class. The Class PO Certificates
are Principal Only Certificates and will not
bear interest. See "Description of the
Certificates -- Interest" herein.
A. Interest Distribution
Amount...................... For each interest bearing Class of
Certificates, the amount of interest accrued
during the related Interest Accrual Period
at the applicable Pass-Through Rate on the
related Class Certificate Balance or
Notional Amount, as the case may be.
B. Pass-Through Rate.......... The Pass-Through Rate for each interest
bearing Class of Offered Certificates for
each Distribution Date will be as set forth
or described on the cover page hereof.
The Pass-Through Rate for the Class X
Certificates for any Distribution Date will
be equal to the excess of (a) the weighted
average of the Net Mortgage Rates of the
Non-Discount Mortgage Loans over (b) ____%
per annum. The Pass-Through Rate for the
Class X Certificates for the first
Distribution Date is expected to be
approximately ___% per annum.
- --------------------------------------------------------------------------------
S-6
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
With respect to each Distribution Date, the
"Interest Accrual Period" for each interest
bearing Class of Certificates will be the
calendar month preceding the month of such
Distribution Date.
Distributions of Principal...... On each Distribution Date, to the extent
funds are available therefor, principal
distributions in reduction of the Class
Certificate Balances of each Class of
Certificates (other than the Notional Amount
Certificates) will be made in the order and
subject to the priorities set forth herein
under "Description of the Certificates --
Principal" in an aggregate amount equal to
such Class' allocable portion of the Senior
Principal Distribution Amount, the Class PO
Principal Distribution Amount or the
Subordinated Principal Distribution Amount,
as applicable. The Notional Amount
Certificates do not have principal balances
and are not entitled to any distributions in
respect of principal of the Mortgage Loans.
See "Description of the Certificates --
Principal" herein.
Credit Enhancement -- General... Credit enhancement for the Senior
Certificates will be provided by the
Subordinated Certificates and credit
enhancement for each Class of Subordinated
Certificates will be provided by the Class
or Classes of Subordinated Certificates with
higher numerical Class ______ designations,
as described below. The aggregate of the
initial Class Certificate Balances of the
Class _____, Class and Class ______
Certificates, which are the only
Certificates supporting the Class
Certificates, is expected to be
approximately $_________.
Subordination................... The rights of holders of the Subordinated
Certificates to receive distributions with
respect to the Mortgage Loans in the Trust
Fund will be subordinated to such rights of
holders of the Senior Certificates, and the
rights of the holders of each Class of
Subordinated Certificates (other than the
Class _______ Certificates) to receive such
distributions will be further subordinated
to such rights of the Class or Classes of
Subordinated Certificates with lower
numerical Class designations, in each case
only to the extent described under "Credit
Enhancement--Subordination of Certain
Classes" herein.
The subordination of the Subordinated
Certificates to the Senior Certificates, and
the further subordination within the
Subordinated Certificates, is intended to
increase the likelihood of timely receipt by
the holders of Certificates with higher
relative payment priority of the maximum
amount to which they are entitled on any
Distribution Date and to provide such
holders
- --------------------------------------------------------------------------------
S-7
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
protection against losses on the Mortgage
Loans to the extent described under
"Description of Certificates--Allocation of
Losses" herein. The Subordinated
Certificates also provide protection, to a
lesser extent, against Special Hazard
Losses, Bankruptcy Losses and Fraud Losses.
However, in certain circumstances the amount
of available subordination (including the
limited subordination provided for certain
types of losses) may be exhausted and
shortfalls in distributions on the
Certificates could result. Holders of the
Senior Certificates will bear their
proportionate share of any losses realized
on the Mortgage Loans in excess of the
available subordination amount. See
"Description of the Certificates -- Priority
of Distributions Among Certificates," " --
Allocation of Losses," and "Credit
Enhancement -- Subordination of Certain
Classes" herein.
In addition, Realized Losses on the Mortgage
Loans will reduce the Class Certificate
Balances of the applicable Class of
Subordinated Certificates to the extent of
any losses allocated thereto (as described
under "Description of the Certificates --
Allocation of Losses" herein), without the
receipt of cash attributable to such
reduction. As a result of such reductions,
less interest will accrue on such Class of
Subordinated Certificates than otherwise
would be the case. The yield to maturity of
the Subordinated Certificates will also be
affected by the disproportionate allocation
of principal prepayments to the Senior
Certificates, Net Interest Shortfalls, other
cash shortfalls in Available Funds and
distribution of funds to Class PO
Certificateholders otherwise available for
distribution on the Subordinated
Certificates to the extent of reimbursement
for Class PO Deferred Amounts. See
"Description of the Certificates --
Allocation of Losses" herein.
Advances........................ The Master Servicer is obligated to make
cash advances ("Advances") with respect to
delinquent payments of principal of and
interest on any Mortgage Loan to the extent
described under "Servicing of Mortgage
Loans--Advances" herein. The Trustee will be
obligated to make any such Advance if the
Master Servicer fails in its obligation to
do so, to the extent provided in the
Agreement. See "Servicing of Mortgage Loans
-- Advances" herein.
Prepayment Considerations and
Risks; Reinvestment Risk...... The rate of principal payments on the
Offered Certificates, the aggregate amount
of distributions on the Offered Certificates
and the yield to maturity of the Offered
Certificates will be related
- --------------------------------------------------------------------------------
S-8
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
to the rate and timing of payments of
principal on the Mortgage Loans.
Since the rate of payment of principal on
the Mortgage Loans will depend on future
events and a variety of factors, no
assurance can be given as to such rate or
the rate of principal prepayments. The
extent to which the yield to maturity of a
Class of Offered Certificates may vary from
the anticipated yield may 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, liquidations and purchases
of the Mortgage Loans. Further, an investor
should consider the risk that, in the case
of the Principal Only Certificates and any
other Offered Certificate purchased at a
discount, a slower than anticipated rate of
principal payments (including prepayments)
on the Mortgage Loans could result in an
actual yield to such investor that is lower
than the anticipated yield and, in the case
of the Interest Only Certificates and any
other Offered Certificate purchased at a
premium, a faster than anticipated rate of
principal payments could result in an actual
yield to such investor that is lower than
the anticipated yield. Investors in the
Interest Only Certificates should carefully
consider the risk that a rapid rate of
principal payments on the Mortgage Loans
could result in the failure of such
investors to recover their initial
investments.
Because the Mortgage Loans may be prepaid at
any time, it is not possible to predict the
rate at which distributions of principal of
the Offered Certificates will be received.
Since prevailing interest rates are subject
to fluctuation, there can be no assurance
that investors in the Offered Certificates
will be able to reinvest the distributions
thereon at yields equaling or exceeding the
yields on such Offered Certificates. It is
possible that yields on any such
reinvestments will be lower, and may be
significantly lower, than the yields on the
Offered Certificates. See "Risk
Factors--Prepayment Considerations and
Risks" and "Yield, Prepayment and Maturity
Considerations" herein.
Optional Termination............ On any Distribution Date on which the Pool
Principal Balance is less than 10% of the
Cut-off Date Pool Principal Balance, the
Master Servicer will have the option to
purchase, in whole, the Mortgage Loans and
the REO Property, if any, remaining in the
Trust Fund. See "Description of the
Certificates -- Optional Termination"
herein.
Federal Income Tax
- --------------------------------------------------------------------------------
S-9
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
Consequences.................. An election will be made to treat the Trust
Fund as a "real estate mortgage investment
conduit" ("REMIC") for federal income tax
purposes. The Regular Certificates will
constitute "regular interests" in the REMIC
and the Residual Certificates will
constitute the sole class of "residual
interest" in the REMIC. The Class A-_, Class
PO and Class X Certificates will, and
depending on their respective issue prices
certain other Classes of Offered
Certificates may, be issued with original
issue discount ("OID") for federal income
tax purposes. See "Federal Income Tax
Consequences" herein and in the Prospectus.
The holders of the Class A-R Certificates
will be subject to special federal income
tax rules that may significantly reduce the
after-tax yield of such Certificates.
Further, significant restrictions apply to
the transfer of the Class A-R Certificates.
See "Description of the
Certificates--Restrictions on Transfer of
the Class A-R Certificates" herein.
The Interest Only Certificates and the
Principal Only Certificates will, and
certain other Classes of Offered
Certificates may, be issued with original
issue discount for federal income tax
purposes. See "Federal Income Tax
Consequences" herein and "Federal Income Tax
Consequences" in the Prospectus.
ERISA Considerations............ The acquisition of an Offered Certificate by
a pension or other employee benefit plan (a
"Plan") subject to the Employee Retirement
Income Security Act of 1974, as amended
("ERISA"), could, in some instances, result
in a prohibited transaction or other
violation of the fiduciary responsibility
provisions of ERISA and Section 4975 of the
Internal Revenue Code of 1986, as amended
(the "Code").
Subject to the considerations and conditions
described under "ERISA Considerations"
herein, it is expected that the Senior
Certificates (other than the Class PO, Class
X and Class A-R Certificates) may be
purchased by a Plan.
Any Plan fiduciary considering whether to
purchase any Offered Certificates on behalf
of a Plan should consult with its counsel
regarding the applicability of the
provisions of ERISA and the Code. See "ERISA
Considerations" herein.
Legal Investment................ The Senior Certificates and the Class _____
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
one of the two highest
- --------------------------------------------------------------------------------
S-10
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
rating categories by at least one nationally
recognized statistical rating organization
and, as such, are legal investments for
certain entities to the extent provided for
in SMMEA.
It is anticipated that the Class _____ and
Class _____ Certificates will not be rated
in one of the two highest rating categories
by a nationally recognized statistical
rating organization and, therefore, will not
constitute "mortgage related securities" for
purposes of SMMEA.
Institutions whose investment activities are
subject to review by federal or state
regulatory authorities should consult with
their counsel or the applicable authorities
to determine whether an investment in the
Offered Certificates complies with
applicable guidelines, policy statements or
restrictions. See "Legal Investment" in the
Prospectus.
Ratings......................... It is a condition to the issuance of the
Senior Certificates that they be rated
______ by ("______") and ______ by ("______"
and, together with ______, the "Rating
Agencies"). See ______, "Ratings" herein. It
is a condition to the issuance of the Class
______, Class ______ and Class ______
Certificates that they be rated at least
______, and ______, respectively, by ______.
The ratings of the Offered Certificates of
any Class should be evaluated independently
from similar ratings on other types of
securities. A rating is not a recommendation
to buy, sell or hold securities and may be
subject to revision or withdrawal at any
time by either of the Rating Agencies. See
"Risk Factors--Certificate Rating" and
"Ratings" herein.
Risk Factors.................... For a discussion of certain risks associated
with an investment in the Certificates, see
"Risk Factors" on Page S-12 herein and on
Page S-12 in the Prospectus.
- --------------------------------------------------------------------------------
S-11
<PAGE>
<PAGE>
RISK FACTORS
Investors should consider the following risks in connection with the
purchase of the Certificates.
Consequences of Owning Book-Entry Certificates. Issuance of the
Certificates in book-entry form may reduce the liquidity of such Certificates in
the secondary trading market since investors may be unwilling to purchase
Certificates for which they cannot obtain physical certificates. See
"Description of the Certificates--Book-Entry Certificates" herein and "Risk
Factors--Book-Entry Registration" in the Prospectus.
Since transactions in the Certificates can be effected only through DTC,
CEDEL, Euroclear, participating organizations, indirect participants and certain
banks, the ability of a Certificate Owner to pledge a Certificate to persons or
entities that do not participate in the DTC, CEDEL or Euroclear system may be
limited due to lack of a physical certificate representing the Certificates. See
"Description of the Certificates--Book-Entry Certificates" herein and "Risk
Factors--Book-Entry Registration" in the Prospectus.
Certificate Owners may experience some delay in their receipt of
distributions of interest and principal on the Certificates since such
distributions will be forwarded by the Trustee to DTC and DTC will credit such
distributions to the accounts of its Participants (as defined herein) which will
thereafter credit them to the accounts of Certificate Owners either directly or
indirectly through indirect participants. See "Description of the
Certificates--Book-Entry Certificates" herein and "Risk Factors--Book-Entry
Registration" in the Prospectus.
Cash Flow Considerations and Risks. Minimum monthly payments on the
Mortgage Loans will at least equal and may exceed accrued interest. Even
assuming that the Mortgaged Properties provide adequate security for the
Mortgage Loans, substantial delays could be encountered in connection with the
liquidation of Mortgage Loans that are delinquent and resulting shortfalls in
distributions to Certificateholders could occur. Further, liquidation expenses
(such as legal fees, real estate taxes, and maintenance and preservation
expenses) will reduce the proceeds payable to Certificateholders and thereby
reduce the security for the Mortgage Loans. In the event any of the Mortgaged
Properties fail to provide adequate security for the related Mortgage Loans,
Certificateholders could experience a loss.
Prepayment Considerations and Risks. Substantially all of the Mortgage
Loans may be prepaid in whole or in part at any time without penalty. The
Trust's prepayment experience may be affected by a wide variety of factors,
including general economic conditions, interest rates, the availability of
alternative financing and homeowner mobility. In addition, substantially all of
the Mortgage Loans contain due-on-sale provisions and the Master Servicer
intends to enforce such provisions unless (i) such enforcement is not permitted
by applicable law or (ii) the Master Servicer, in a manner consistent with
reasonable commercial practice, permits the purchaser of the related Mortgaged
Property to assume the Mortgage Loan. To the extent permitted by applicable law,
such assumption will not release the original borrower from its obligation under
any such Mortgage Loan. See "Yield, Prepayment and Maturity
Considerations--Prepayment Considerations and Risks" herein and "Certain Legal
Aspects of the Loans--Due-on-Sale Clauses" in the Prospectus for a description
of certain provisions of the Mortgage Loans that may affect the prepayment
experience thereof. The yield to maturity and weighted average life of the
Certificates will be affected primarily by the rate and timing of prepayment on
the Mortgage Loans. Any reinvestment risks resulting from a faster or slower
incidence of prepayment of Mortgage Loans will be borne entirely by the
Certificateholders. See
S-12
<PAGE>
<PAGE>
"Yield, Prepayment and Maturity Considerations" herein and "Yield and Prepayment
Considerations" in the Prospectus.
Certificate Rating. The rating of the Certificates will depend primarily on
an assessment by the Rating Agencies of the Mortgage Loans. The rating by the
Rating Agencies of the Certificates is not a recommendation to purchase, hold or
sell the Certificates, inasmuch as such rating does not comment as to the market
price or suitability for a particular investor. There is no assurance that the
ratings will remain in place for any given period of time or that the ratings
will not be lowered or withdrawn by the Rating Agencies. In general, the ratings
address credit risk and do not address the likelihood of prepayments. The
ratings of the Certificates do not address the possibility of the imposition of
United States withholding tax with respect to non-U.S. persons.
Bankruptcy and Insolvency Risks. The sale of the Mortgage Loans from
[Countrywide] to the Depositor will be treated as a sale of the Mortgage Loans.
However, in the event of an insolvency of [Countrywide], the receiver of
[Countrywide] may attempt to recharacterize the sale of the Mortgage Loans as a
borrowing by [Countrywide], secured by a pledge of the applicable Mortgage
Loans. If the receiver decided to challenge such transfer, delays in payments of
the Certificates and reductions in the amounts thereof could occur. The
Depositor will warrant in the Agreement that the transfer of the Mortgage Loans
by it to the Trust is either a valid transfer and assignment of such Mortgage
Loans to the Trust or the grant to the Trust of a security interest in such
Mortgage Loans.
In the event of a bankruptcy or insolvency of the Master Servicer, the
bankruptcy trustee or receiver may have the power to prevent the Trustee or the
Certificateholders from appointing a successor Master Servicer.
[Geographic Concentration. As of the Cut-off Date, approximately _____% (by
Cut-off Date Pool Principal Balance) of the Mortgaged Properties are located in
the State of __________. An overall decline in the __________ residential real
estate market could adversely affect the values of the Mortgaged Properties
securing such Mortgage Loans such that the Principal Balances of the related
Mortgage Loans could equal or exceed the value of such Mortgaged Properties. As
the residential real estate market is influenced by many factors, including the
general condition of the economy and interest rates, no assurances may be given
that the __________ residential real estate market will not weaken. If the
__________ residential real estate market should experience an overall decline
in property values after the dates of origination of the Mortgage Loans, the
rates of losses on the Mortgage Loans would be expected to increase, and could
increase substantially.]
Delinquent Mortgage Loans. The Trust will include Mortgage Loans which are
89 or fewer days delinquent as of the Cut-off Date. The Cut-off Date Pool
Principal Balance of Mortgage Loans which are between 30 days and 89 days
delinquent as of the Cut-off Date was $_________________. If there are not
sufficient Available Funds on any Distribution Dates, the aggregate amount of
principal returned to the Certificateholders may be less than the respective
Class Certificate Principal Balances on the day the Certificates were issued.
Risks of Holding Subordinated Certificates. The subordination of the
Subordinated Certificates to the Senior Certificates, and the further
subordination within the Subordinated Certificates, is intended to increase the
likelihood of timely receipt by the holders of Certificates with higher relative
payment priority of the maximum amount to which they are entitled on any
Distribution Date and to provide such holders protection against losses on the
Mortgage Loans to the extent described under
S-13
<PAGE>
<PAGE>
"Description of the Certificates--Allocation of Losses" and "Credit
Enhancement--Subordination of Certain Classes". However, in certain
circumstances the amount of available subordination (including the limited
subordination provided for certain types of losses) may be exhausted and
shortfalls in distributions on the Certificates could result. Holders of the
Senior Certificates will bear their proportionate share of any losses realized
on the Mortgage Loans in excess of the available subordination amount.
In addition, the weighted average life of, and the yield to maturity on,
the Subordinated Certificates, in increasing order of their numerical Class
designation, will be progressively more sensitive to the rate and timing of
mortgagor defaults and the severity of ensuing losses on the Mortgage Loans. If
the actual rate and severity of losses on the Mortgage Loans is higher than
those assumed by a holder of a Subordinated Certificate, the actual yield to
maturity of such Certificate may be lower than the yield expected by such holder
based on such assumption. The timing of losses on Mortgage Loans will also
affect an investor's actual yield to maturity, even if the rate of defaults and
severity of losses over the life of the Mortgage Pool are consistent with an
investor's expectations. Realized Losses on the Mortgage Loans will reduce the
Class Certificate Balances of the applicable Class of Subordinated Certificates
to the extent of any losses allocated thereto (as described under "Description
of the Certificates--Allocation of Losses" herein), without the receipt of cash
attributable to such reduction. As a result of such reductions, less interest
will accrue on such Class of Subordinated Certificates than otherwise would be
the case. The yield to maturity of the Subordinated Certificates will also be
affected by the disproportionate allocation of principal prepayments to the
Senior Certificates, Net Interest Shortfalls, other cash shortfalls in Available
Funds and distribution of funds to Class PO Certificateholders otherwise
available for distribution on the Subordinated Certificates to the extent of
reimbursement for Class PO Deferred Amounts. See "Description of the
Certificates--Allocation of Losses" and "Yield, Prepayment and Maturity
Considerations--The Subordinated Certificates" herein.
For a discussion of additional risks pertaining to the Certificates, see
"Risk Factors" in the Prospectus.
S-14
<PAGE>
<PAGE>
THE MORTGAGE POOL
General
The Depositor will purchase the Mortgage Loans from [Countrywide] pursuant
to the Pooling and Servicing Agreement dated as of the Cut-off Date among
[Countrywide], as Seller and Master Servicer, the Depositor and the Trustee (the
"Agreement") and will cause the Mortgage Loans to be assigned, without recourse,
to the Trustee for the benefit of the holders of the Certificates (the
"Certificateholders").
Under the Agreement, the Seller will make certain representations,
warranties and covenants to the Depositor relating to, among other things, the
due execution and enforceability of the Agreement and certain characteristics of
the Mortgage Loans and, subject to the limitations described below under " --
Assignment of the Mortgage Loans," will be obligated to repurchase or substitute
a similar mortgage loan for any Mortgage Loan as to which there exists deficient
documentation or an uncured material breach of any such representation, warranty
or covenant. The Seller will represent and warrant to the Depositor in the
Agreement that the Mortgage Loans were selected from among the outstanding one-
to four-family mortgage loans in the Seller's portfolio as to which the
representations and warranties set forth in the Agreement can be made and that
such selection was not made in a manner that would adversely affect the
interests of the Certificateholders. See "Loan Program -- Representations by
Sellers; Repurchases" in the Prospectus. Under the Agreement, the Depositor will
assign all its right, title and interest in and to such representations,
warranties and covenants (including the Seller's repurchase obligation) to the
Trustee for the benefit of Certificateholders. The Depositor will make no
representations or warranties with respect to the Mortgage Loans and will have
no obligation to repurchase or substitute Mortgage Loans with deficient
documentation or which are otherwise defective. [Countrywide] is selling the
Mortgage Loans without recourse and will have no obligation with respect to the
Certificates in its capacity as Seller other than the repurchase obligation
described above. The obligations of [Countrywide], as Master Servicer, with
respect to the Certificates are limited to the Master Servicer's contractual
servicing obligations under the Agreement.
Certain information with respect to the Mortgage Loans expected to be
included in the Mortgage Pool is set forth below. Prior to the Closing Date,
Mortgage Loans may be removed from the Mortgage Pool and other Mortgage Loans
may be substituted therefor. The Depositor believes that the information set
forth herein under "The Mortgage Pool" with respect to the Mortgage Pool as
presently constituted is representative of the characteristics of the Mortgage
Pool as it will be constituted at the Closing Date, although certain
characteristics of the Mortgage Loans in the Mortgage Pool may vary. Unless
otherwise indicated, information presented herein under "The Mortgage Pool"
expressed as a percentage (other than rates of interest) are approximate
percentages based on the Stated Principal Balances of the Mortgage Loans as of
the Cut-off Date.
As of the Cut-off Date, the aggregate of the Stated Principal Balances of
the Mortgage Loans is expected to be approximately $ (the "Cut-off Date Pool
Principal Balance"). The Mortgage Loans provide for the amortization of the
amount financed over a series of substantially equal monthly payments. All the
Mortgage Loans provide for payments due as of the first day of each month (the
"Due Date"). At origination, substantially all of the Mortgage Loans had stated
terms to maturity of 30 years. The Mortgage Loans to be included in the Mortgage
Pool were originated or purchased by [Countrywide] and were originated
substantially in accordance with [Countrywide's] underwriting criteria for
sub-prime ("B&C") quality mortgage loans described under "The Mortgage
Pool--Underwriting Standards" herein. Sub-prime mortgage loans are generally
first mortgage loans made to borrowers with prior credit difficulties.
S-15
<PAGE>
<PAGE>
Scheduled monthly payments made by the Mortgagors on the Mortgage Loans
("Scheduled Payments") either earlier or later than the scheduled Due Dates
thereof will not affect the amortization schedule or the relative application of
such payments to principal and interest. [All of the Mortgage Notes provide for
a ________ (__) day grace period for monthly payments. Any Mortgage Loan may be
prepaid in full or in part at any time; however, approximately ____% of the
Mortgage Loans provide for the payment by the borrower of a prepayment charge in
limited circumstances on full prepayments made within ____ years from the date
of execution of the related Mortgage Note. In general, the Mortgage Note
provides that a prepayment charge will apply if, during the first ____ years
from the date of origination of such Mortgage Loan, the borrower prepays such
Mortgage Loan in full. The amount of the prepayment charge will generally be
equal to ____ months' advance interest calculated on the basis of the rate in
effect at the time of such prepayment on the amount prepaid in excess of __% of
the original balance of such Mortgage Loan.]
Each Mortgage Loan was originated after __________________.
The latest stated maturity date of any Mortgage Loan is ____________. The
earliest stated maturity date of any Mortgage Loan is ____________.
As of the Cut-off Date, no Mortgage Loan was delinquent more than 89 days.
[No] Mortgage Loan will be subject to a buydown agreement. [No] Mortgage
Loan provides for deferred interest or negative amortization.
[No Mortgage Loan had a Loan-to-Value Ratio at origination of more than
95%. Each Mortgage Loan with a Loan-to-Value Ratio at origination of greater
than 80% is covered by a primary mortgage guaranty insurance policy issued by a
mortgage insurance company acceptable to FNMA or FHLMC, which policy provides
coverage in an amount equal to the excess of the original principal balance of
the related Mortgage Loan over 75% of the value of the related Mortgaged
Property, plus accrued interest thereon and related foreclosure expenses.
The Loan-to-Value Ratio of a Mortgage Loan is equal to (i) the principal
balance of such Mortgage Loan at the date of origination, divided by (ii) the
Collateral Value of the related Mortgaged Property. The Collateral Value of a
Mortgaged Property is the lesser of (x) the appraised value based on an
appraisal made for [Countrywide] by an independent fee appraiser at the time of
the origination of the related Mortgage Loan, and (y) the sales price of such
Mortgaged Property at such time of origination. With respect to a Mortgage Loan
the proceeds of which were used to refinance an existing mortgage loan, the
Collateral Value is the appraised value of the Mortgaged Property based upon the
appraisal obtained at the time of refinancing. No assurance can be given that
the values of the Mortgaged Properties have remained or will remain at their
levels as of the dates of origination of the related Mortgage Loans. If the
residential real estate market should experience an overall decline in property
values such that the outstanding balances of the Mortgage Loans become equal to
or greater than the value of the Mortgaged Properties, actual losses on the
Mortgage Loans could be higher than losses now generally experienced in the
mortgage lending industry.
The following information sets forth in tabular format certain information,
as of the Cut-off Date, as to the Mortgage Loans. Other than with respect to
rates of interest, percentages (approximate) are stated by Stated Principal
Balance of the Mortgage Loans as of the Cut-off Date and have been rounded in
order to total 100%.
S-16
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Mortgage Rates(1)
-----------------
Number of Mortgage Aggregate Principal Balance
Mortgage Rates (%) Loans Outstanding Percent of Mortgage Pool
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
6.250....................... $ %
6.750.......................
6.875.......................
7.000.......................
7.125.......................
7.250.......................
7.375.......................
7.500.......................
7.625.......................
7.750.......................
7.875.......................
8.000.......................
8.125.......................
8.250.......................
8.375.......................
8.500.......................
8.625.......................
8.750.......................
8.875.......................
9.000.......................
9.125.......................
9.250.......................
9.375.......................
9.500.......................
9.875.......................
10.000.......................
---------- ----------- ------
Totals....................... $ 100.00%
---------- ----------- ------
---------- ----------- ------
</TABLE>
- ----------
(1) As of the Cut-off Date, the weighted average Mortgage Rate of the Mortgage
Loans (as so adjusted) is expected to be approximately ______%. Without
such adjustment, the weighted average Mortgage Rate of the Mortgage Loans
is expected to be approximately ______% per annum.
S-17
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Original Loan-to-Value Ratios(1)
--------------------------------
Original Loan-to-Value Number of Mortgage Aggregate Principal Balance
Rates (%) Loans Outstanding Percent of Mortgage Pool
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
50.00 and below.............. $ %
50.01 to 55.00...............
55.01 to 60.00...............
60.01 to 65.00...............
65.01 to 70.00...............
70.01 to 75.00...............
75.01 to 80.00...............
80.01 to 85.00...............
85.01 to 90.00...............
90.01 to 95.00...............
---------- ----------- ------
Totals....................... $ 100.00%
---------- ----------- ------
---------- ----------- ------
</TABLE>
- ----------
(1) The weighted average original Loan-to-Value Ratio of the Mortgage Loans is
expected to be approximately %.
<TABLE>
<CAPTION>
Current Mortgage Loan Principal Balances(1)
-------------------------------------------
Current Mortgage Loan Number of Mortgage Aggregate Principal Balance
Amounts Loans Outstanding Percent of Mortgage Pool
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 0 - $ 50,000...... $ %
$ 50,001 - $ 100,000.........
$100,001 - $ 150,000.........
$150,001 - $ 200,000.........
$200,001 - $ 250,000.........
$250,001 - $ 300,000.........
$300,001 - $ 350,000.........
$350,001 - $ 400,000.........
$400,001 - $ 450,000.........
$450,001 - $ 500,000.........
$500,001 - $ 550,000.........
$550,001 - $ 600,000.........
$600,001 - $ 650,000.........
$650,001 - $ 750,000.........
$750,001 - $1,000,000........
---------- ----------- ------
Totals....................... $ 100.00%
---------- ----------- ------
---------- ----------- ------
</TABLE>
S-18
<PAGE>
<PAGE>
- ----------
(1) As of the Cut-off Date, the average current Mortgage Loan principal balance
is expected to be approximately $ .
<TABLE>
<CAPTION>
Documentation Program for Mortgage Loans
----------------------------------------
Type of Program Number of Mortgage Aggregate Principal Balance
Loans Outstanding Percent of Mortgage Pool
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Full......................... $ %
Alternative..................
Reduced......................
Streamlined..................
---------- ----------- ------
Totals....................... $ 100.00%
---------- ----------- ------
---------- ----------- ------
</TABLE>
<TABLE>
<CAPTION>
Type of Mortgaged Properties
----------------------------
Property Type Number of Mortgage Aggregate Principal Balance
Loans Outstanding Percent of Mortgage Pool
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Single Family................ $ %
Condominium..................
Two- to Four-Family.........
Planned Unit Development.....
---------- ----------- ------
Totals....................... $ 100.00%
---------- ----------- ------
---------- ----------- ------
</TABLE>
<TABLE>
<CAPTION>
Occupancy Types(1)
------------------
Occupancy Type Number of Mortgage Aggregate Principal Balance
Loans Outstanding Percent of Mortgage Pool
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Primary Residence............ $ %
Investor Property............
Second Residence.............
---------- ----------- ------
Totals....................... $ 100.00%
---------- ----------- ------
---------- ----------- ------
</TABLE>
S-19
<PAGE>
<PAGE>
- ----------
(1) Based upon representations of the related mortgagors at the time of
origination.
<TABLE>
<CAPTION>
State Distribution of Mortgaged Properties(1)
---------------------------------------------
State Number of Mortgage Aggregate Principal Balance
Loans Outstanding Percent of Mortgage Pool
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ %
Other (less than [2]%).......
---------- ----------- ------
Totals....................... $ 100.00%
---------- ----------- ------
---------- ----------- ------
</TABLE>
- ----------
(1) Other includes other states with under [2]% concentrations individually. No
more than approximately % of the Mortgage Loans will be secured by
Mortgaged Properties located in any one postal zip code area.
<TABLE>
<CAPTION>
Purpose of Mortgage Loans
-------------------------
Loan Purpose Number of Mortgage Aggregate Principal Balance
Loans Outstanding Percent of Mortgage Pool
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchase..................... $ %
Refinance (rate/term)........
Refinance (cash out).........
-- ----------- ------------
Totals....................... $ 100.00%
-- ----------- ------------
-- ----------- ------------
</TABLE>
S-20
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Remaining Terms to Maturity(1)
------------------------------
Remaining Term to Maturity Number of Mortgage Aggregate Principal Balance
(Months) Loans Outstanding Percent of Mortgage Pool
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
360..........................
359..........................
358..........................
357..........................
356..........................
355..........................
354..........................
353..........................
352..........................
351..........................
349..........................
348..........................
347..........................
345..........................
344..........................
343..........................
342..........................
341..........................
338..........................
335..........................
334..........................
333..........................
332..........................
328..........................
326..........................
325..........................
321..........................
320..........................
319..........................
318..........................
314..........................
297..........................
293..........................
259..........................
240..........................
238..........................
237..........................
---------- ----------- ------
Totals....................... $ 100.00%
---------- ----------- ------
---------- ----------- ------
</TABLE>
- ----------
S-21
<PAGE>
<PAGE>
(1) As of the Cut-off Date, the weighted average remaining term to maturity of
the Mortgage Loans is expected to be approximately months.
Assignment of the Mortgage Loans
Pursuant to the Agreement, the Depositor on the Closing Date will sell,
transfer, assign, set over and otherwise convey without recourse to the Trustee
in trust for the benefit of the Certificateholders all right, title and interest
of the Depositor in and to each Mortgage Loan and all right, title and interest
in and to all other assets included in the Trust Fund described under "Credit
Enhancement" herein, including all principal and interest received on or with
respect to the Mortgage Loans, exclusive of principal and interest due on or
prior to the Cut-off Date.
In connection with such transfer and assignment, the Depositor will deliver
or cause to be delivered to the Trustee, or a custodian for the Trustee, among
other things, the original promissory note (the "Mortgage Note") (and any
modification or amendment thereto) endorsed in blank without recourse, the
original instrument creating a first lien on the related Mortgaged Property (the
"Mortgage") with evidence of recording indicated thereon, an assignment in
recordable form of the Mortgage, the title policy with respect to the related
Mortgaged Property and, if applicable, all recorded intervening assignments of
the Mortgage and any riders or modifications to such Mortgage Note and Mortgage
(except for any such documents not returned from the public recording office,
which will be delivered to the Trustee as soon as the same is available to the
Depositor) (collectively, the "Mortgage File"). Assignments of the Mortgage
Loans to the Trustee (or its nominee) will be recorded in the appropriate public
office for real property records, except in states such as California where in
the opinion of counsel 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 Seller.
The Trustee will review each Mortgage File within 90 days of the Closing
Date (or promptly after the Trustee's receipt of any document permitted to be
delivered after the Closing Date) and if any document in a Mortgage File is
found to be missing or defective in a material respect and the Seller does not
cure such defect within 90 days of notice thereof from the Trustee (or within
such longer period not to exceed ___ days after the Closing Date as provided in
the Agreement in the case of missing documents not returned from the public
recording office), the Seller will be obligated to repurchase the related
Mortgage Loan from the Trust Fund. Rather than repurchase the Mortgage Loan as
provided above, the Seller may remove such Mortgage Loan (a "Deleted Mortgage
Loan") from the Trust Fund and substitute in its place another mortgage loan (a
"Replacement Mortgage Loan"); however, such substitution is permitted only
within two years of the Closing Date and may not be made unless an opinion of
counsel is provided to the Trustee to the effect that such substitution will not
disqualify the REMIC or result in a prohibited transaction tax under the Code.
Any Replacement Mortgage Loan generally will, on the date of substitution, among
other characteristics set forth in the Agreement, (i) have a principal balance,
after deduction of all Scheduled Payments due in the month of substitution, not
in excess of, and not more than 10% less than, the Stated Principal Balance of
the Deleted Mortgage Loan (the amount of any shortfall to be deposited by the
Seller in the Certificate Account and held for distribution to the
Certificateholders on the related Distribution Date (a "Substitution Adjustment
Amount")), (ii) have a Mortgage Rate not lower than, and not more than 1% per
annum higher than, that of the Deleted Mortgage Loan, (iii) have a Loan-to-Value
Ratio not higher than that of the Deleted Mortgage Loan, (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 Agreement as of the date of substitution. This cure,
repurchase or substitution obligation constitutes the sole
S-22
<PAGE>
<PAGE>
remedy available to Certificateholders or the Trustee for omission of, or a
material defect in, a Mortgage Loan document.
Underwriting Standards
The following is a description of the underwriting procedures customarily
employed by [Countrywide] with respect to B&C quality mortgage loans.
Countrywide produces its B&C quality mortgage loans through its Wholesale
Lending Division, which works with mortgage brokers and other entities located
throughout the United States. Prior to the funding of any B&C quality mortgage
loan, Countrywide underwrites the related mortgage loan in accordance with the
underwriting standards established by Countrywide. The mortgage loans are
underwritten centrally by a specialized group of underwriters who are familiar
with the unique characteristics of B&C mortgage loans. As a matter of policy,
Countrywide does not purchase any B&C quality mortgage loan that it has not
itself underwritten.
Countrywide's underwriting standards are primarily intended to evaluate the
value and adequacy of the mortgaged property as collateral for the proposed
mortgage loan but also take into consideration the borrower's credit standing
and repayment ability. On a case by case basis, Countrywide may determine that,
based upon compensating factors, a prospective borrower not strictly qualifying
under the underwriting risk category guidelines described below warrants an
underwriting exception. Compensating factors may include, low loan-to-value
ratio, low debt-to-income ratio, stable employment, and time in the same
residence. It is expected that a substantial number of the Mortgage Loans to be
included in the Mortgage Pool will have been originated based on such
underwriting exceptions.
Each prospective borrower completes an application which includes
information with respect to the applicant's liabilities, income, credit history
and employment history, as well as certain other personal information. As part
of its quality control system, Countrywide reverifies information with respect
to the foregoing matters that has been provided by the mortgage brokerage
company prior to funding a loan and periodically audits files based on a random
sample of closed loans. If the loan-to-value ratio is greater than 70%,
Countrywide generally verifies the source funds for the down-payment;
Countrywide does not verify the source of such funds if the loan-to-value ratio
is 70% or less. Countrywide requires an independent credit bureau report on the
credit history of each applicant in order to evaluate the applicant's ability to
repay. The report typically contains information relating to such matters as
credit history with local and national merchants and lenders, installment debt
payments and any record of defaults, bankruptcy, repossession, suits or
judgments.
After obtaining all applicable employment, credit and property information,
the Seller uses a debt-to-income ratio to assist in determining whether the
prospective borrower has sufficient monthly income available to support the
payments of principal and interest on the mortgage loan in addition to any
other monthly credit obligations. The "debt-to income ratio" is the ratio of
the borrower's total monthly payments to the borrower's gross monthly income.
The maximum monthly debt-to-income ratio varies depending upon a borrower's
credit grade and documentation level (as described below) but does not generally
exceed 55%. Variations in the monthly debt-to-income ratio limit are permitted
based on compensating factors.
Countrywide's underwriting standards require an independent appraisal of
the mortgaged property which conforms to Federal Home Loan Mortgage Corporation
("FHLMC") and Federal National Mortgage Corporation ("FNMA") standards. Each
appraisal includes a market data analysis based on recent sales of
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comparable homes in the area and, where deemed appropriate, replacement cost
analysis based on the current cost of constructing a similar home and generally
is required to have been made not earlier than 180 days prior to the date of
origination of the mortgage loan. Every independent appraisal is reviewed by
a Countrywide representative before the loan is funded, and an additional
drive-by appraisal is generally performed in connection with loan amounts over
$350,000 with 80% or higher loan-to-value ratios. A drive-by appraisal is an
exterior examination of the premises by the appraiser to determine that the
property is in good condition. In most cases, properties that are not in good
condition (including properties requiring major deferred maintenance) are not
acceptable as collateral for a B&C loan. The maximum loan amount varies
depending upon a borrower's credit grade and documentation level but does not
generally exceed $500,000. Variations in maximum loan amount limits are
permitted based on compensating factors.
Countrywide's underwriting standards permit loans with loan-to-value ratios
at origination of up to 85% depending on the program, type and use of the
property, creditworthiness of the borrower and debt-to-income ratio. The maximum
combined loan-to-value ratio for purchase money mortgage loans, including any
second deeds of trust subordinate to Countrywide's first deed of trust, is 90%.
Countrywide requires title insurance on all B&C quality mortgage loans.
Countrywide also requires that fire and extended coverage casualty insurance be
maintained on the mortgaged property in an amount at least equal to the
principal balance or the replacement cost of the mortgaged property, whichever
is less.
Countrywide's B&C mortgage loan underwriting standards are less stringent
than the standards generally acceptable to FNMA and FHLMC with regard to the
borrower's credit standing and repayment ability because the standards focus
more on the value of the mortgaged property. Borrowers who qualify generally
have payment histories and debt-to-income ratios which would not satisfy FNMA
and FHLMC underwriting guidelines and may have a record of major derogatory
credit items such as outstanding judgments or prior bankruptcies. Countrywide's
B&C mortgage loan underwriting guidelines establish the maximum permitted
loan-to-value ratio for each loan type based upon these and other risk factors
with more risk factors resulting in lower loan-to-value ratios.
Countrywide underwrites or originates B&C quality mortgage loans pursuant
to alternative sets of underwriting criteria under its Full Documentation Loan
Program (the "Full Doc Program"), Simple Documentation Loan Program (the "Simple
Doc Program") and Stated Income Loan Program (the "Stated Income Program").
Under each of the underwriting programs, Countrywide verifies the loan
applicant's sources of income (except under the Stated Income Program),
calculates the amount of income from all sources indicated on the loan
application, reviews the credit history of the applicant, calculates the
debt-to-income ratio to determine the applicant's ability to repay the loan,
and reviews the appraisal of the mortgaged property for compliance with
Countrywide's underwriting standards.
The Simple Doc Program is an alternative documentation program whereby
income is verified using methods other than those employed by FNMA and FHLMC.
Under the Simple Doc Program, acceptable documentation of income consists of six
months' bank statements. In the case of self-employed individuals, acceptable
alternative documentation consists of a profit and loss statement supported by a
record of bank statements. Maximum loan-to-value ratios and maximum loan amounts
are generally lower than those permitted under the Full Doc Program.
Under the Stated Income Program, the borrower's employment and income
sources must be stated on the borrower's application. The borrower's income as
stated must be reasonable for the related occupation and such determination as
to reasonableness is subject to the loan underwriter's discretion. However, the
borrower's income as stated on the application is not independently verified.
Maximum loan-to-value ratios
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are generally lower than those permitted under the Full Doc Program. Except
as otherwise stated above, the same mortgage credit, consumer credit and
collateral related underwriting guidelines apply.
Under the Full Doc, Simple Doc, and Stated Income Programs, various risk
categories are used to grade the likelihood that the mortgagor will satisfy the
repayment conditions of the mortgage loan. These risk categories establish the
maximum permitted loan-to-value ratio and loan amount, given the occupancy
status of the mortgaged property and the borrower's credit history and
debt-to-income ratio. In general, higher debt-to-income ratios and more (or more
recent) major derogatory credit items such as outstanding judgments or prior
bankruptcies result in a loan being graded in a higher credit risk category.
SERVICING OF MORTGAGE LOANS
General
The Master Servicer will service the Mortgage Loans in accordance with the
terms set forth in the Pooling and Servicing Agreement. The Master Servicer may
perform any of its obligations under the Pooling and Servicing Agreement through
one or more subservicers. Notwithstanding any such subservicing arrangement, the
Master Servicer will remain liable for its servicing duties and obligations
under the Pooling and Servicing Agreement as if the Master Servicer alone were
servicing the Mortgage Loans. [As of the Closing Date, the Master Servicer will
service the Mortgage Loans without subservicing arrangements.]
The information set forth in the following section through and including
the section captioned "Delinquency Status as of _____________, 199_" has been
provided by [Countrywide]. No representation is made by the Depositor or any of
its affiliates as to the accuracy or completeness of any such information.
The Master Servicer
[Countrywide Home Loans, Inc. ("Countrywide"), a New York corporation and a
subsidiary of Countrywide Credit Industries, Inc., will act as the Master
Servicer of the Mortgage Loans pursuant to the Pooling and Servicing Agreement.
Countrywide is engaged primarily in the mortgage banking business, and as such,
originates, purchases, sells and services mortgage loans. Countrywide originates
mortgage loans through a retail branch system and through mortgage loan brokers
and correspondents nationwide. Countrywide's mortgage loans are principally
first-lien, fixed or adjustable rate mortgage loans secured by single-family
residences.
As of __________, 199_, Countrywide provided servicing for approximately
$__________ million in B&C quality mortgages. As of ___________, 199_,
Countrywide also provided servicing for prime quality mortgage loans with an
aggregate principal balance of approximately $__________ billion, substantially
all of which are being serviced for unaffiliated persons.
The principal executive offices of Countrywide are located at 155 North
Lake Avenue, Pasadena, California 91101-7139. Its telephone number is (818)
304-8400. Countrywide conducts operations from its headquarters in Pasadena and
from offices throughout the nation.]
Loan Servicing
Countrywide services substantially all of the mortgage loans it originates
or acquires. Countrywide has established standard policies for the servicing and
collection of B&C quality mortgage loans. Servicing includes, but is not limited
to, collecting and remitting mortgage loan payments, accounting for principal
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and interest, holding escrow (impound) funds for payment of taxes and insurance,
making inspections as required of the mortgaged properties, preparation of tax
related information in connection with the mortgage loans, supervision of
delinquent mortgage loans, loss mitigation efforts, foreclosure proceedings and,
if applicable, the disposition of mortgaged properties, and generally
administering the mortgage loans, for which it receives servicing fees.
Billing statements with respect to B&C mortgage loans are mailed monthly by
Countrywide. The statement details all debits and credits and specifies the
payment due. Notice of changes in the applicable loan rate are provided by
Countrywide to the mortgagor with such statements. All payments are due by the
first day of the month.
Collection Procedures
When a mortgagor fails to make a payment on a mortgage loan, Countrywide
attempts to cause the deficiency to be cured by corresponding with the
mortgagor. In most cases, deficiencies are cured promptly. Pursuant to
Countrywide's B&C servicing procedures, Countrywide generally mails to the
mortgagor a notice of intent to foreclose after the loan becomes 31 days past
due (two payments due but not received) and, within 60 days thereafter, if the
loan remains delinquent, institutes appropriate legal action to foreclose on the
mortgaged property. Foreclosure proceedings may be terminated if the delinquency
is cured. Mortgage loans to borrowers in bankruptcy proceedings may be
restructured in accordance with law and with a view to maximizing recovery of
such loans, including any deficiencies.
Once foreclosure is initiated by Countrywide, a foreclosure tracking system
is used to monitor the progress of the proceedings. The system includes state
specific parameters to monitor whether proceedings are progressing within the
time frame typical for the state in which the mortgaged property is located.
During the foreclosure proceeding, Countrywide determines the amount of the
foreclosure bid and whether to liquidate the mortgage loan.
After foreclosure, Countrywide may liquidate the mortgaged property and
charge-off the loan balance which was not recovered through liquidation
proceeds. If foreclosed, the mortgaged property is sold at a public or private
sale and may be purchased by Countrywide.
Servicing and charge-off policies and collection practices may change over
time in accordance with, among other things, Countrywide's business judgment,
changes in the servicing portfolio and applicable laws and regulations.
Foreclosure and Delinquency Experience
The following table summarizes the delinquency experience of Countrywide's
B&C quality mortgage loans as of _________, 199_. A mortgage loan is
characterized as delinquent if the borrower has not paid the minimum payment due
by the due date. The table below excludes mortgage loans where the mortgage loan
is in foreclosure or the borrower has filed for bankruptcy. Since Countrywide
only began servicing B&C quality mortgage loans in August 1995, the delinquency
percentages may be affected by the size and relative lack of seasoning of the
servicing portfolio because many of such loans were not outstanding long enough
to give rise to some or all of the periods of delinquency indicated in the chart
below. Accordingly, the information should not be considered as a basis for
assessing the likelihood, amount, or severity of delinquency or losses on the
Mortgage Loans, and no assurances can be given that the foreclosure experience
presented in the second paragraph below the table will be indicative of such
experience on the Mortgage Loans.
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Delinquency Status as of __________, 199_
Dollars Percent Units Percent
Current $_________ ____% ____ ____%
30-59 Days $_________ ____% ____ ____%
60-89 Days $_________ ____% ____ ____%
90+ Days $_________ ____% ____ ____%
Total $_________ 100.00% ____ 100.00%
[This table does not include ________ mortgage loans with principal
balances aggregating $_____________ that were sold, but were being serviced on
an interim basis pending transfer of servicing, as of ___________, 199_. As of
the date hereof, servicing with respect to such mortgage loans has been
transferred.]
Delinquencies are reported on a contractual basis. As of _____________,
199_, __________ mortgage loans with an aggregate principal balance of
$______________ were in foreclosure and, there were ___________ loans in
bankruptcy with a combined loan balance of $______________.
Historically, a variety of factors, including the appreciation of real
estate values, have limited the loss and delinquency experience on B&C quality
mortgage loans. There can be no assurance that factors beyond Countrywide's
control, such as national or local economic conditions or downturn in the real
estate markets of its lending areas, will not result in increased rates of
delinquencies and foreclosure losses in the future.
[Over the last several years, there has been a general deterioration of the
real estate market and weakening economy in many regions of the country,
including __________. The general deterioration of the real estate market has
been reflected in increases in delinquencies of loans secured by real estate,
slower absorption rates of real estate into the market and lower sales prices
for real estate. The general weakening of the economy has been reflected in
decreases in the financial strength of borrowers and decreases in the value of
collateral serving as security for loans. If the real estate market and economy
continue to decline, Countrywide may experience an increase in delinquencies on
the loans it services and higher net losses on liquidated B&C loans.]
Servicing Compensation and Payment of Expenses
[The Master Servicer will be paid a monthly fee from interest collected
with respect to each Mortgage Loan (as well as from any liquidation proceeds
from a Liquidated Mortgage Loan that are applied to accrued and unpaid interest)
equal to one-twelfth of the Stated Principal Balance thereof multiplied by the
Servicing Fee Rate (such product, the "Servicing Fee"). The Servicing Fee Rate
for each Mortgage Loan will equal ________% per annum. The amount of the monthly
Servicing Fee is subject to adjustment with respect to prepaid Mortgage Loans,
as described herein under "--Adjustment to Master Servicing Fee in Connection
with Certain Prepaid Mortgage Loans." The Master Servicer is also entitled to
receive, as additional servicing compensation, amounts in respect of interest
paid on Principal Prepayments (as defined below) received from the 2nd day
through the 15th day of a month ("Prepayment Interest Excess"), all late payment
fees, assumption fees, prepayment penalties and other similar charges and all
reinvestment income earned on amounts on deposit in the Certificate Account and
Distribution Account. The Master Servicer is obligated
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to pay certain ongoing expenses associated with the Mortgage Loans and incurred
by the Trustee in connection with its responsibilities under the Pooling and
Servicing Agreement.]
Adjustment to Master Servicing Fee in Connection with Certain Prepaid Mortgage
Loans
When a borrower prepays a Mortgage Loan between Due Dates, the borrower is
required to pay interest on the amount prepaid only to the date of prepayment
and not thereafter. Except with respect to the month of the Cut-off Date,
principal prepayments by borrowers received by the Master Servicer from the
first day through the fifteenth day of a calendar month will be distributed to
Certificateholders on the Distribution Date in the same month in which such
prepayments are received and, accordingly, no shortfall in the amount of
interest to be distributed to Certificateholders with respect to the prepaid
Mortgage Loans results. Conversely, principal prepayments by borrowers received
by the Master Servicer from the sixteenth day (or, in the case of the first
Distribution Date, from the Cut-off Date) through the last day of a calendar
month will be distributed to Certificateholders on the Distribution Date in the
month following the month of receipt and, accordingly, a shortfall in the amount
ofinterest to be distributed to Certificateholders with respect to such prepaid
Mortgage Loans would result. Pursuant to the Agreement, the Master Servicing
Fee for any month will be reduced, but not by more than [one-half] of such
Master Servicing Fee, by an amount sufficient to pass through to
Certificateholders the full amount of interest to which they would be entitled
in respect of each such prepaid Mortgage Loan on the related Distribution Date.
If shortfalls in interest as a result of prepayments in any Prepayment Period
exceed an amount equal to one-half of the Master Servicing Fee otherwise
payable on the related Distribution Date, the amount of interest available to
be distributed to Certificateholders will be reduced by the amount of such
excess. See "Description of the Certificates -- Interest" herein.
Advances
Subject to the following limitations, the Master Servicer will be required
to advance prior to each Distribution Date, from its own funds or funds in the
Certificate Account that do not constitute Available Funds for such Distribution
Date, an amount equal to the aggregate of payments of principal and interest on
the Mortgage Loans (net of the Master Servicing Fee with respect to the related
Mortgage Loans) which were due on the related Due Date and which were delinquent
on the related Determination Date, together with an amount equivalent to
interest on each Mortgage Loan as to which the related Mortgaged Property has
been acquired by the Trust Fund through foreclosure or deed-in-lieu of
foreclosure ("REO Property") (any such advance, an "Advance").
Advances are intended to maintain a regular flow of scheduled interest and
principal payments on the Certificates rather than to guarantee or insure
against losses. The Master Servicer is obligated to make Advances with respect
to delinquent payments of principal of or interest on each Mortgage Loan to the
extent that such Advances are, in its reasonable judgment, recoverable from
future payments and collections or insurance payments or proceeds of liquidation
of the related Mortgage Loan. If the Master Servicer determines on any
Determination Date to make an Advance, such Advance will be included with the
distribution to Certificateholders on the related Distribution Date. Any failure
by the Master Servicer to make an Advance as required under the Agreement with
respect to the Certificates will constitute an Event of Default thereunder, in
which case the Trustee or the successor master servicer will be obligated to
make any such Advance, in accordance with the terms of the Agreement.
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DESCRIPTION OF THE CERTIFICATES
General
The Certificates will be issued pursuant to the Agreement. Set forth below
are descriptions of the material terms and provisions pursuant to which the
Certificates will be issued. When particular provisions or terms used in the
Agreement are referred to, the actual provisions (including definitions of
terms) are incorporated by reference.
The Mortgage Pass-Through Certificates, Series 199_ - __ will consist of
the Class A-__, Class ______, Class PO, Class X and Class A-R Certificates
(collectively, the "Senior Certificates") and the Class B-__, Class ______ and
Class ______ Certificates (collectively, the "Subordinated Certificates"). The
Senior Certificates and Subordinated Certificates are collectively referred to
herein as the "Certificates." Only the Classes of Certificates listed on the
cover page hereof (collectively, the "Offered Certificates") are offered hereby.
The Classes of Offered Certificates will have the respective initial Class
Certificate Balances or initial Notional Amounts (subject to the permitted
variance) and Pass-Through Rates set forth or described on the cover hereof.
The Class Certificate Balance of any Class of Certificates as of any
Distribution Date is the initial Class Certificate Balance thereof (A) reduced
by the sum of (i) all amounts previously distributed to holders of Certificates
of such Class as payments of principal, (ii) the amount of Realized Losses
(including Excess Losses) allocated to such Class and (iii) in the case of any
Class of Subordinated Certificates, any amounts allocated to such Class in
reduction of its Class Certificate Balance in respect of payments of Class PO
Deferred Amounts, as described below under " -- Allocation of Losses". In
addition, the Class Certificate Balance of the Class of Subordinated
Certificates then outstanding with the highest numerical Class designation will
be reduced if and to the extent that the aggregate of the Class Certificate
Balances of all Classes of Certificates, following all distributions and the
allocation of Realized Losses on a Distribution Date, exceeds the Pool Principal
Balance as of the Due Date occurring in the month of such Distribution Date. The
Notional Amount Certificates do not have principal balances and are not entitled
to any distributions in respect of principal of the Mortgage Loans.
The Notional Amount of the Class X Certificates for any Distribution Date
will be equal to the aggregate of the Stated Principal Balances of the
Non-Discount Mortgage Loans with respect to such Distribution Date. A
"Non-Discount Mortgage Loan" is any Mortgage Loan with a Net Mortgage Rate equal
to or greater than __%. The initial Notional Amount of the Class X Certificates
will be equal to the aggregate of the Stated Principal Balance of the
Non-Discount Mortgage Loans as of the Cut-off Date.
The Senior Certificates will have an initial aggregate principal balance of
approximately $__________ and will evidence in the aggregate an initial
beneficial ownership interest of approximately ______% in the Trust Fund. The
Class B-__, Class B-__, Class B-__, Class B-__, Class B-__ and Class B-__
Certificates will each evidence in the aggregate an initial beneficial ownership
interest of approximately ___%, ___%, ___%, ___%, ___%, and ___%, respectively,
in the Trust Fund.
The Book-Entry Certificates will be issuable in book-entry form only. The
Physical Certificates will be issued in fully registered certificated form. The
Physical Certificates (other than Class A-R Certificates) offered hereby will be
issued in minimum dollar denominations of $25,000 and integral multiples of
$1,000 in excess thereof. A single Certificate of each such Class may be issued
in an amount different than described above. The Class A-R Certificates will be
issued as a single Certificate in a denomination of $1,000.
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Book-Entry Certificates
Each Class of Book-Entry Certificates will be issued in one or more
certificates which equal the aggregate initial Class Certificate Balance of each
such Class of Certificates and which will be held by a nominee of The Depository
Trust Company (together with any successor depository selected by the Depositor,
the "Depository"). Beneficial interests in the Book-Entry Certificates will be
held indirectly by investors through the book-entry facilities of the
Depository, as described herein. Investors may hold such beneficial interests in
the Book-Entry Certificates in minimum denominations representing an original
principal amount of $25,000 and integral multiples of $1,000 in excess thereof.
One investor of each Class of Book-Entry Certificates may hold a beneficial
interest therein that is not an integral multiple of $1,000. The Depositor has
been informed by the Depository that its nominee will be CEDE & Co. ("CEDE").
Accordingly, CEDE is expected to be the holder of record of the Book-Entry
Certificates. Except as described in the Prospectus under "Description of the
Certificates -- Book-Entry Certificates," no person acquiring a Book-Entry
Certificate (each, a "beneficial owner") will be entitled to receive a physical
certificate representing such Certificate (a "Definitive Certificate").
Unless and until Definitive Certificates are issued, it is anticipated that
the only "Certificateholder" of the Book-Entry Certificates will be CEDE, as
nominee of the Depository. Beneficial owners of theBook-Entry Certificates will
not be Certificateholders, as that term is used in the Agreement. Beneficial
owners are only permitted to exercise the rights of Certificateholders
indirectly through Financial Intermediaries and the Depository. Monthly and
annual reports on the Trust Fund provided to CEDE, as nominee of the Depository,
may be made available to beneficial owners upon request, in accordance with the
rules, regulations and procedures creating and affecting the Depository, and to
the Financial Intermediaries to whose Depository accounts the Book-Entry
Certificates of such beneficial owners are credited.
For a description of the procedures generally applicable to the Book-Entry
Certificates, see "Description of the Securities -- Book-Entry Registration of
Securities" in the Prospectus.
Payments on Mortgage Loans; Accounts
On or prior to the Closing Date, the Master Servicer will establish an
account (the "Certificate Account"), which will be maintained in trust for the
benefit of the Certificateholders. Funds credited to the Certificate Account may
be invested for the benefit and at the risk of the Master Servicer in Permitted
Investments that are scheduled to mature on or prior to the business day
preceding the next Distribution Date. On or prior to the business day
immediately preceding each Distribution Date, the Master Servicer will withdraw
from the Certificate Account the amount of Available Funds and will deposit such
Available Funds in an account established and maintained with the Trustee on
behalf of the Certificateholders (the "Distribution Account").
"Permitted Investments" will be specified in the Agreement and will be
limited to (i) obligations of the United States or any agency thereof, provided
such obligations are backed by the full faith and credit of the United States;
(ii) general obligations of or obligations guaranteed by any state of the United
States or the District of Columbia receiving the highest long-term debt rating
of each Rating Agency rating the Certificates, or such lower rating as will not
result in the downgrading or withdrawal of the ratings then assigned to the
Certificates by each such Rating Agency; (iii) commercial or finance company
paper (including, without limitation, commercial paper issued by Countrywide
Home Loans, Inc. or any of its affiliates) which is then receiving the highest
commercial or finance company paper
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rating of each such Rating Agency, or such lower rating as will not result
in the downgrading or withdrawal of the ratings then assigned to the
Certificates by each such Rating Agency; (iv) certificates of deposit, demand
or time deposits, or bankers' acceptances issued by any depository institution
or trust company incorporated under the laws of the United States or of any
state thereof and subject to supervision and examination by federal and/or
state banking authorities, provided that the commercial paper and/or long-term
unsecured debt obligations of such depository institution or trust company
(or in the case of the principal depository institution in a holding
company system, the commercial paper or long-term unsecured debt obligations
of such holding company, but only if Moody's Investors Service, Inc.
("Moody's") is not a Rating Agency) are then rated one of the two highest
long-term and the highest short-term ratings of each such Rating Agency for such
securities, or such lower ratings as will not result in the downgrading or
withdrawal of the rating then assigned to the Certificates by any such Rating
Agency; (iv) demand or time deposits or certificates of deposit issued by any
bank or trust company or savings institution to the extent that such deposits
are fully insured by the FDIC; (v) guaranteed reinvestment agreements issued
by any bank, insurance company or other corporation containing, at the time
of the issuance of such agreements, such terms and conditions as will not
result in the downgrading or withdrawal of the rating then assigned to the
Certificates by any such Rating Agency; (vi) repurchase obligations with
respect to any security described in clauses (i) and (ii) above, in either
case entered into with a depository institution or trust company (acting as
principal) described in clause (iv) above; (vii) securities (other than
stripped bonds, stripped coupons or instruments sold at a purchase price in
excess of 115% of the face amount thereof) bearing interest or sold at a
discountissued by any corporation incorporated under the laws of the United
States or any state thereof which, at the time of such investment, have one of
the two highest ratings of each Rating Agency (except if the Rating Agency is
Moody's, such rating shall be the highest commercial paper rating of Moody's for
any such securities), or such lower rating as will not result in the downgrading
or withdrawal of the rating then assigned to the Certificates by any such Rating
Agency, as evidenced by a signed writing delivered by each such Rating Agency;
and (viii) such other investments having a specified stated maturity and bearing
interest or sold at a discount acceptable to each Rating Agency as will not
result in the downgrading or withdrawal of the rating then assigned to the
Certificates by any such Rating Agency, as evidenced by a signed writing
delivered by each such Rating Agency; provided that no such instrument shall be
a Permitted Investment if such instrument evidences the right to receive
interest only payments with respect to the obligations underlying such
instrument.
Distributions
Distributions on the Certificates will be made by the Trustee on the __th
day of each month, or if such day is not a business day, on the first business
day thereafter, commencing in ________ 199_ (each, a "Distribution Date"), to
the persons in whose names such Certificates are registered at the close of
business on the last business day of the month preceding the month of such
Distribution Date (the "Record Date").
Distributions on each Distribution Date will be made by check mailed to the
address of the person entitled thereto as it appears on the applicable
certificate register or, in the case of a Certificateholder who holds 100% of a
Class of Certificates or who holds Certificates with an aggregate initial
Certificate Balance of $1,000,000 or more or who holds an Interest Only
Certificate and who has so notified the Trustee in writing in accordance with
the Agreement, by wire transfer in immediately available funds to the account of
such Certificateholder at a bank or other depository institution having
appropriate wire transfer facilities; provided, however, that the final
distribution in retirement of the Certificates will be made only upon
presentment and surrender of such Certificates at the Corporate Trust Office of
the Trustee.
Priority of Distributions Among Certificates
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As more fully described under "Description of the Certificates--Interest",
"--Principal" and "--Allocation of Losses" herein, distributions will be made on
each Distribution Date from Available Funds in the following order of priority:
(i) to interest on each interest bearing Class of Senior Certificates; (ii) to
principal on the Classes of Senior Certificates then entitled to receive
distributions of principal, in the order and subject to the priorities set forth
herein under " -- Principal," in each case in an aggregate amount up to the
maximum amount of principal to be distributed on such Classes on such
Distribution Date; (iii) to any Class PO Deferred Amounts with respect to the
Class PO Certificates, but only from amounts that would otherwise be distributed
on such Distribution Date as principal of the Subordinated Certificates; and
(iv) to interest on and then principal of each Class of Subordinated
Certificates, in the order of their numerical Class designations, beginning with
the Class _____ Certificates, in each case subject to the limitations set forth
herein under "Description of the Certificates -- Principal."
"Available Funds" with respect to any Distribution Date will be equal to
the sum of (i) all scheduled installments of interest (net of the related
Expense Fees) and principal due on the Due Date in the month in which such
Distribution Date occurs and received prior to the related Determination Date,
together with any Advances in respect thereof; (ii) all proceeds of any primary
mortgage guaranty insurance policies and any other insurance policies with
respect to the Mortgage Loans, to the extent such proceeds are not applied to
the restoration of the related Mortgaged Property or released to the Mortgagor
in accordance with the Master Servicer's normal servicing procedures
(collectively, "Insurance Proceeds") and all other cash amounts received and
retained in connection with the liquidation of defaulted Mortgage Loans, by
foreclosure or otherwise ("Liquidation Proceeds") during the calendar month
preceding the month of such Distribution Date (in each case, net of unreimbursed
expenses incurred in connection with a liquidation or foreclosure and
unreimbursed Advances, if any); (iii) all partial or full prepayments received
during the month preceding the month of such Distribution Date; and (iv) amounts
received with respect to such Distribution Date as the Substitution Adjustment
Amount or purchase price in respect of a Deleted Mortgage Loan or a Mortgage
Loan repurchased by the Seller or the Master Servicer as of such Distribution
Date, reduced by amounts in reimbursement for Advances previously made and other
amounts as to which the Master Servicer is entitled to be reimbursed from the
Certificate Account pursuant to the Agreement.
With respect to any Distribution Date, the Class PO Deferred Amount is the
aggregate of the applicable PO Percentage of each Realized Loss, other than any
Excess Loss, to be allocated to the Class PO Certificates on such Distribution
Date on or prior to the Senior Credit Support Depletion Date or previously
allocated to the Class PO Certificates and not yet paid to the holders of the
Class PO Certificates.
Interest
The Classes of Offered Certificates will have the respective Pass-Through
Rates set forth or described on the cover hereof.
The Pass-Through Rate for the Class X Certificates for any Distribution
Date will be equal to the excess of (a) the average of the Net Mortgage Rates of
the Non-Discount Mortgage Loans, weighted on the basis of the Stated Principal
Balances thereof, over (b) ___% per annum. The Pass-Through Rate for the Class X
Certificates for the first Distribution Date is expected to be approximately
___% per annum. The Net Mortgage Rate for each Mortgage Loan is the interest
rate thereon (the "Mortgage Rate") less the Expense Fee Rate for such Mortgage
Loan.
On each Distribution Date, to the extent of funds available therefor, each
interest bearing Class of Certificates will be entitled to receive an amount
allocable to interest (as to each such Class, the "Interest
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Distribution Amount") with respect to the related Interest Accrual Period. The
Interest Distribution Amount for any interest bearing Class will be equal to the
sum of (i) interest at the applicable Pass-Through Rate on the related Class
Certificate Balance or Notional Amount, as the case may be, and (ii) the sum of
the amounts, if any, by which the amount described in clause (i) above on each
prior Distribution Date exceeded the amount actually distributed as interest on
such prior Distribution Dates and not subsequently distributed ("Unpaid Interest
Amounts"). The Class PO Certificates are Principal Only Certificates and will
not bear interest.
With respect to each Distribution Date, the "Interest Accrual Period" for
each interest bearing Class of Certificates will be the calendar month preceding
the month of such Distribution Date.
The interest entitlement described above for each Class of Certificates for
any Distribution Date will be reduced by the amount of "Net Interest Shortfalls"
for such Distribution Date. With respect to any Distribution Date, the "Net
Interest Shortfall" is equal to (i) the amount of interest that would otherwise
have been received with respect to any Mortgage Loan that was the subject of (x)
a Relief Act Reduction or (y) a Special Hazard Loss, Fraud Loss, Debt Service
Reduction or Deficient Valuation, after the exhaustion of the respective amounts
of coverage provided by the Subordinated Certificates for such types of losses
and (ii) any Net Prepayment Interest Shortfalls with respect to such
Distribution Date. A "Relief Act Reduction" is a reduction in the amount of
monthly interest payment on a Mortgage Loan pursuant to the Soldiers' and
Sailors' Civil Relief Act of 1940. See "Certain Legal Aspects of the Loans --
Soldiers' and Sailors' Civil Relief Act" in the Prospectus. With respect to any
Distribution Date, a "Net Prepayment Interest Shortfall" is the amount by which
the aggregate of Prepayment Interest Shortfalls during the calendar month
preceding the month of such Distribution Date exceeds the aggregate amount
payable on such Distribution Date by the Master Servicer as described under
"Servicing of Mortgage Loans -- Adjustment to Master Servicing Fee in Connection
with Certain Prepaid Mortgage Loans." A "Prepayment Interest Shortfall" is the
amount by which interest paid by a borrower in connection with a prepayment of
principal on a Mortgage Loan is less than one month's interest at the related
Mortgage Rate on the Stated Principal Balance of such Mortgage Loan. Each Class'
pro rata share of such Net Interest Shortfalls will be based on the amount of
interest such Class otherwise would have been entitled to receive on such
Distribution Date.
Accrued interest to be distributed on any Distribution Date will be
calculated, in the case of each interest bearing Class of Certificates, on the
basis of the related Class Certificate Balance or Notional Amount, as
applicable, immediately prior to such Distribution Date. Interest will be
calculated and payable on the basis of a 360-day year divided into twelve 30-day
months.
In the event that, on a particular Distribution Date, Available Funds in
the Certificate Account applied in the order described above under " -- Priority
of Distributions Among Certificates" are not sufficient to make a full
distribution of the interest entitlement on the Certificates, interest will be
distributed on each Class of Certificates of equal priority based on the amount
of interest each such Class would otherwise have been entitled to receive in the
absence of such shortfall. Any Unpaid Interest Amount will be carried forward
and added to the amount holders of each such Class of Certificates will be
entitled to receive on the next Distribution Date. Such a shortfall could occur,
for example, if losses realized on the Mortgage Loans were exceptionally high or
were concentrated in a particular month. Any Unpaid Interest Amount so carried
forward will not bear interest.
Principal
General. All payments and other amounts received in respect of principal of
the Mortgage Loans will be allocated between (i) the Senior Certificates (other
than the Notional Amount Certificates and the Class
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PO Certificates) and the Subordinated Certificates and (ii) the Class PO
Certificates, in each case based on the applicable Non-PO Percentage and
the applicable PO Percentage, respectively, of such amounts.
The Non-PO Percentage with respect to any Mortgage Loan with a Net Mortgage
Rate ("NMR") less than ___% (each such Mortgage Loan, a "Discount Mortgage
Loan") will be equal to NMR / ___%. The Non-PO Percentage with respect to any
Non-Discount Mortgage Loan will be 100%. The PO Percentage with respect to any
Discount Mortgage Loan will be equal to (___% - NMR) / ___%. The PO Percentage
with respect to any Non-Discount Mortgage Loan will be 0%.
Non-PO Formula Principal Amount. On each Distribution Date, the Non-PO
Formula Principal Amount will be distributed as principal of the Senior
Certificates (other than the Notional Amount Certificates and the Class
PO Certificates) and the Subordinated Certificates, to the extent of the
amount available from Available Funds for the distribution of principal on
such respective Classes, as described below.
The Non-PO Formula Principal Amount for any Distribution Date will equal
the sum of the applicable Non-PO Percentage of (a) all monthly payments of
principal due on each Mortgage Loan on the related Due Date, (b) the principal
portion of the purchase price of each Mortgage Loan that was repurchased by the
Seller or another person pursuant to the Agreement as of such Distribution Date,
(c) the Substitution Adjustment Amount in connection with any Deleted Mortgage
Loan received with respect to such Distribution Date, (d) any Insurance Proceeds
or Liquidation Proceeds allocable to recoveries of principal of Mortgage Loans
that are not yet Liquidated Mortgage Loans received during the calendar month
preceding the month of such Distribution Date, (e) with respect to each Mortgage
Loan that became a Liquidated Mortgage Loan during the calendar month preceding
the month of such Distribution Date, the amount of the Liquidation Proceeds
allocable to principal received with respect to such Mortgage Loan and (f) all
partial and full principal prepayments by borrowers received during the related
Prepayment Period.
Senior Principal Distribution Amount. On each Distribution Date prior to
the Senior Credit Support Depletion Date, the Non-PO Formula Principal Amount,
up to the amount of the Senior Principal Distribution Amount for such
Distribution Date, will be distributed as principal of the following Classes of
Senior Certificates in the following order of priority:
(i) to the Class A-R Certificates until the Class Certificate Balance
thereof has been reduced to zero;
(ii) concurrently, to the Class _____ and Class _____ Certificates,
pro rata based on their respective Class Certificate Balances, until the
Class _____ Certificate Balances thereof have been reduced to zero;
(iii) sequentially, to the Class _____ and Class _____ Certificates,
in that order, until the respective Class Certificate Balances thereof have
been reduced to zero;
(iv) sequentially, to the Class _____ and Class _____ Certificates, in
that order, until the respective Class Certificate Balances thereof have
been reduced to zero; and
(v) to the Class _____ Certificates until the Class Certificate
Balance thereof has been reduced to zero.
Notwithstanding the foregoing, on each Distribution Date on and after the
Senior Credit Support Depletion Date, the Non-PO Formula Principal Amount will
be distributed, concurrently as principal of the Classes of Senior Certificates
(other than the Notional Amount Certificates and the Class PO Certificates), pro
rata, in accordance with their respective Class Certificate Balances immediately
prior to such Distribution Date.
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The Senior Credit Support Depletion Date is the date on which the Class
Certificate Balance of each Class of Subordinated Certificates has been reduced
to zero.
The Senior Principal Distribution Amount for any Distribution Date will
equal the sum of (i) the Senior Percentage of the applicable Non-PO Percentage
of all amounts described in clauses (a) through (d) of the definition of "Non-PO
Formula Principal Amount" for such Distribution Date, (ii) with respect to each
Mortgage Loan that became a Liquidated Mortgage Loan during the calendar month
preceding the month of such Distribution Date, the lesser of (x) the Senior
Percentage of the applicable Non-PO Percentage of the Stated Principal Balance
of such Mortgage Loan and (y) either (A) the Senior Prepayment Percentage or (B)
if an Excess Loss was sustained with respect to such Liquidated Mortgage Loan
during such preceding calendar month, the Senior Percentage of the applicable
Non-PO Percentage of the amount of the Liquidation Proceeds allocable to
principal received with respect to such Mortgage Loan, and (iii) the Senior
Prepayment Percentage of the applicable Non-PO Percentage of amounts described
in clause (f) of the definition of "Non-PO Formula Principal Amount" for such
Distribution Date; provided, however, that if a Bankruptcy Loss that is an
Excess Loss is sustained with respect to a Mortgage Loan that is not a
Liquidated Mortgage Loan, the Senior Principal Distribution Amount will be
reduced on the related Distribution Date by the Senior Percentage of the
applicable Non-PO Percentage of the principal portion of such Bankruptcy Loss.
"Stated Principal Balance" means as to any Mortgage Loan and Due Date, the
unpaid principal balance of such Mortgage Loan as of such Due Date, as specified
in the amortization schedule at the time relating thereto (before any adjustment
to such amortization schedule by reason of any moratorium or similar waiver or
grace period), after giving effect to any previous partial prepayments and
Liquidation Proceeds received and to the payment of principal due on such Due
Date and irrespective of any delinquency in payment by the related Mortgagor.
The Pool Principal Balance with respect to any Distribution Date equals the
aggregate of the Stated Principal Balances of the Mortgage Loans outstanding on
the Due Date in the month preceding the month of such Distribution Date.
The Senior Percentage for any Distribution Date is the percentage
equivalent of a fraction the numerator of which is the aggregate of the Class
Certificate Balances of each Class of Senior Certificates (other than the Class
PO Certificates) immediately prior to such date and the denominator of which is
the aggregate of the Class Certificate Balances of all Classes of Certificates,
other than the Class PO Certificates, immediately prior to such date.
The Senior Prepayment Percentage for any Distribution Date occurring during
the ____ years beginning on the first Distribution Date will equal 100%.
Thereafter, the Senior Prepayment Percentage will, except as described below, 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 which receive these unscheduled payments of principal (other than
the Class PO Certificates) while, in the absence of Realized Losses, increasing
the interest in the Pool Principal Balance evidenced by the Subordinated
Certificates. Increasing the respective interest of the Subordinated
Certificates relative to that of the Senior Certificates is intended to preserve
the availability of the subordination provided by the Subordinated Certificates.
The Senior Prepayment Percentage for any Distribution Date occurring on or
after the _____ anniversary of the first Distribution Date will be as follows:
for any Distribution Date in the _____ year thereafter, the Senior Percentage
plus __% of the Subordinated Percentage for such Distribution Date; for any
Distribution Date in the ______ year thereafter, the Senior Percentage plus __%
of the Subordinated Percentage for such Distribution Date; for any Distribution
Date in the _____ year thereafter, the Senior Percentage plus __% of the
Subordinated Percentage for such Distribution Date; for any Distribution Date in
the ______ year thereafter, the Senior Percentage plus __% of the Subordinated
Percentage for such Distribution Date; and
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for any Distribution Date thereafter, the Senior Percentage for such
Distribution Date (unless on any of the foregoing Distribution Dates the
Senior Percentage exceeds the initial Senior Percentage, in which case the
Senior Prepayment Percentage for such Distribution Date will once again equal
100%). Notwithstanding the foregoing, no decrease in the Senior Prepayment
Percentage will occur if (i) the outstanding principal balance of all Mortgage
Loans delinquent __ days or more (averaged over the preceding _________
period), as a percentage of the aggregate principal balance of the Subordinated
Certificates (averaged over the preceding _________ period), is equal to or
greater than __%, or (ii) cumulative Realized Losses with respect to the
Mortgage Loans exceed (a) with respect to the Distribution Date on the _____
anniversary of the first Distribution Date, __% of the aggregate of the
principal balances of the Subordinated Certificates as of the Cut-off Date (the
"Original Subordinated Principal Balance"), (b) with respect to the Distribution
Date on the ____ anniversary of the first Distribution Date, __% of the Original
Subordinated Principal Balance, (c) with respect to the Distribution Date on the
_______ anniversary of the first Distribution Date, __% of the Original
Subordinated Principal Balance, (d) with respect to the Distribution Date on the
______ anniversary of the first Distribution Date, __% of the Original
Subordinated Principal Balance, and (e) with respect to the Distribution Date on
the _____ anniversary of the first Distribution Date, __% of the Original
Subordinated Principal Balance. The Subordinated Prepayment Percentage as of any
Distribution Date will be calculated as the difference between 100% and the
Senior Prepayment Percentage for such date.
If on any Distribution Date the allocation to the Class of Senior
Certificates then entitled to distributions of principal of full and partial
principal prepayments and other amounts in the percentage required above would
reduce the outstanding Class Certificate Balance of such Class below zero, the
distribution to such Class of Certificates of the Senior Prepayment Percentage
of such amounts for such Distribution Date will be limited to the percentage
necessary to reduce the related Class Certificate Balance to zero.
Subordinated Principal Distribution Amount. On each Distribution Date, to
the extent of Available Funds therefor, the Non-PO Formula Principal Amount, up
to the amount of the Subordinated Principal Distribution Amount for such
Distribution Date, will be distributed as principal of the Subordinated
Certificates. Except as provided in the next paragraph, each Class of
Subordinated Certificates will be entitled to receive its pro rata share of the
Subordinated Principal Distribution Amount (based on its respective Class
Certificate Balance), in each case to the extent of the amount available from
Available Funds for distribution of principal. Distributions of principal of the
Subordinated Certificates will be made sequentially to the Classes of
Subordinated Certificates in the order of their numerical Class designations,
beginning with the Class ___ Certificates, until the respective Class
Certificate Balances thereof are reduced to zero. The Subordinated Percentage
for any Distribution Date will be calculated as the difference between 100% and
the Senior Percentage.
With respect to each Class of Subordinated Certificates, if on any
Distribution Date the sum of the related Class Subordination Percentages of such
Class and all Classes of Subordinated Certificates which have higher numerical
Class designations than such Class (the "Applicable Credit Support Percentage")
is less than the Applicable Credit Support Percentage for such Class on the date
of issuance of the Certificates (the "Original Applicable Credit Support
Percentage"), no distribution of partial principal prepayments and principal
prepayments in full will be made to any such Classes (the "Restricted Classes")
and the amount of partial principal prepayments and principal prepayments in
full otherwise distributable to the Restricted Classes will be allocated among
the remaining Classes of Subordinated Certificates, pro rata, based upon their
respective Class Certificate Balances, and distributed in the sequential order
described above.
The Class Subordination Percentage with respect to any Distribution Date
and each Class of Subordinated Certificates, will equal the fraction (expressed
as a percentage) the numerator of which is the Class Certificate Balance of such
Class of Subordinated Certificates immediately prior to such Distribution Date
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and the denominator of which is the aggregate of the Class Certificate Balances
of all Classes of Certificates immediately prior to such Distribution Date.
The approximate Original Applicable Credit Support Percentages for the
Subordinated Certificates on the date of issuance of the Certificates are
expected to be as follows:
Class ....................................................... %
Class ....................................................... %
Class ....................................................... %
Class ....................................................... %
Class ....................................................... %
Class ....................................................... %
The Subordinated Principal Distribution Amount for any Distribution Date
will equal (A) the sum of (i) the Subordinated Percentage of the applicable
Non-PO Percentage of all amounts described in clauses (a) through (d) of the
definition of "Non-PO Formula Principal Amount" for such Distribution Date, (ii)
with respect to each Mortgage Loan that became a Liquidated Mortgage Loan during
the calendar month preceding the month of such Distribution Date, the applicable
Non-PO Percentage of the Liquidation Proceeds allocable to principal received
with respect to such Mortgage Loan, after application of such amounts pursuant
to clause (ii) of the definition of Senior Principal Distribution Amount, up to
the Subordinated Percentage of the applicable Non-PO Percentage of the Stated
Principal Balance of such Mortgage Loan and (iii) the Subordinated Prepayment
Percentage of the applicable Non-PO Percentage of the amounts described in
clause (f) of the definition of "Non-PO Formula Principal Amount" for such
Distribution Date reduced by (B) the amount of any payments in respect of Class
PO Deferred Amounts on the related Distribution Date.
Residual Certificates. The Class A-R Certificates will remain outstanding
for so long as the Trust Fund shall exist, whether or not they are receiving
current distributions of principal or interest. In addition to distributions of
interest and principal as described above, on each Distribution Date, the
holders of the Class A-R Certificates will be entitled to receive any Available
Funds remaining after payment of interest and principal on the Senior
Certificates and Class PO Deferred Amounts on the Class PO Certificates and
interest and principal on the Subordinated Certificates, as described above. It
is not anticipated that there will be any significant amounts remaining for any
such distribution.
Class PO Principal Distribution Amount. On each Distribution Date,
distributions of principal of the Class PO Certificates will be made in an
amount (the "Class PO Principal Distribution Amount") equal to the lesser of (x)
the PO Formula Principal Amount for such Distribution Date and (y) the product
of (i) Available Funds remaining after distribution of interest on the Senior
Certificates and (ii) a fraction, the numerator of which is the PO Formula
Principal Amount and the denominator of which is the sum of the PO Formula
Principal Amount and the Senior Principal Distribution Amount.
If the Class PO Principal Distribution Amount on a Distribution Date is
calculated as provided in clause (y) above, principal distributions to holders
of the Senior Certificates (other than the Class PO Certificates) will be in an
amount equal to the product of (i) Available Funds remaining after distribution
of interest on the Senior Certificates and (ii) a fraction, the numerator of
which is the Senior Principal Distribution Amount and the denominator of which
is the sum of the Senior Principal Distribution Amount and the PO Formula
Principal Amount.
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The PO Formula Principal Amount for any Distribution Date will equal the
sum of the applicable PO Percentage of (a) all monthly payments of principal due
on each Mortgage Loan on the related Due Date, (b) the principal portion of the
purchase price of each Mortgage Loan that was repurchased by the Seller or
another person pursuant to the Agreement as of such Distribution Date, (c) the
Substitution Adjustment Amount in connection with any Deleted Mortgage Loan
received with respect to such Distribution Date, (d) any Insurance Proceeds or
Liquidation Proceeds allocable to recoveries of principal of Mortgage Loans that
are not yet Liquidated Mortgage Loans received during the calendar month
preceding the month of such Distribution Date, (e) with respect to each Mortgage
Loan that became a Liquidated Mortgage Loan during the calendar month preceding
the month of such Distribution Date, the amount of Liquidation Proceeds
allocable to principal received with respect to such Mortgage Loan and (f) all
partial and full principal prepayments by borrowers received during the related
Prepayment Period; provided, however, that if a Bankruptcy Loss that is an
Excess Loss is sustained with respect to a Discount Mortgage Loan that is
not a Liquidated Mortgage Loan, the PO Formula Principal Amount will be reduced
on the related Distribution Date by the applicable PO Percentage of the
principal portion of such Bankruptcy Loss.
Allocation of Losses
On each Distribution Date, the applicable PO Percentage of any Realized
Loss, including any Excess Loss, on a Discount Mortgage Loan will be allocated
to the Class PO Certificates until the Class Certificate Balance thereof is
reduced to zero. The amount of any such Realized Loss, other than an Excess
Loss, allocated on or prior to the Senior Credit Support Depletion Date will be
treated as a Class PO Deferred Amount. To the extent funds are available on such
Distribution Date or on any future Distribution Date from amounts that would
otherwise be allocable to the Subordinated Principal Distribution Amount, Class
PO Deferred Amounts will be paid on the Class PO Certificates prior to
distributions of principal on the Subordinated Certificates. Any distribution of
Available Funds in respect of unpaid Class PO Deferred Amounts will not further
reduce the Class Certificate Balance of the Class PO Certificates. The Class PO
Deferred Amounts will not bear interest. The Class Certificate Balance of the
Class of Subordinated Certificates then outstanding with the highest numerical
Class designation will be reduced by the amount of any payments in respect of
Class PO Deferred Amounts. After the Senior Credit Support Depletion Date, no
new Class PO Deferred Amounts will be created.
On each Distribution Date, the applicable Non-PO Percentage of any Realized
Loss, other than any Excess Loss, will be allocated first to the Subordinated
Certificates, in the reverse order of their numerical Class designations
(beginning with the Class of Subordinated Certificates then outstanding with the
highest numerical Class designation), in each case until the Class Certificate
Balance of the respective Class of Certificates has been reduced to zero, and
then to the Senior Certificates (other than the Notional Amount Certificates and
the Class PO Certificates) pro rata, based upon their respective Class
Certificate Balances.
On each Distribution Date, the applicable Non-PO Percentage of Excess
Losses will be allocated pro rata among the Classes of Senior Certificates
(other than the Notional Amount Certificates and the Class PO Certificates) and
the Subordinated Certificates based upon their respective Class Certificate
Balances.
Because principal distributions are paid to certain Classes of Certificates
(other than the Class PO Certificates) before other Classes of Certificates,
holders of such Certificates that are entitled to receive principal later bear a
greater risk of being allocated Realized Losses on the Mortgage Loans than
holders of Classes that are entitled to receive principal earlier.
Realized Losses allocated to a Class of Certificates comprised of multiple
payment Components will be allocated pro rata among the Components of such Class
of Certificates based on their respective Component Balances.
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In general, a "Realized Loss" means, with respect to a Liquidated Mortgage
Loan, the amount by which the remaining unpaid principal balance of the Mortgage
Loan exceeds the amount of Liquidation Proceeds applied to the principal balance
of the related Mortgage Loan. "Excess Losses" are (i) Special Hazard Losses in
excess of the Special Hazard Loss Coverage Amount, (ii) Bankruptcy Losses in
excess of the Bankruptcy Loss Coverage Amount and (iii) Fraud Losses in excess
of the Fraud Loss Coverage Amount. "Bankruptcy Losses" are losses that are
incurred as a result of Debt Service Reductions and Deficient Valuations.
"Special Hazard Losses" are Realized Losses in respect of Special Hazard
Mortgage Loans. "Fraud Losses" are losses sustained on a Liquidated Mortgage
Loan by reason of a default arising from fraud, dishonesty or misrepresentation.
See "Credit Enhancement -- Subordination of Certain Classes" herein.
A "Liquidated Mortgage Loan" is a defaulted Mortgage Loan as to which the
Master Servicer has determined that all recoverable liquidation and insurance
proceeds have been received. A "Special Hazard Mortgage Loan" is a Liquidated
Mortgage Loan as to which the ability to recover the full amount due thereunder
was substantially impaired by a hazard not insured against under a standard
hazard insurance policy of the type described in the Prospectus under "Credit
Enhancement -- Special Hazard Insurance Policies." See "Credit Enhancement --
Subordination of Certain Classes" herein.
Structuring Assumptions
Unless otherwise specified, the information in the tables in this
Prospectus Supplement has been prepared on the basis of the following assumed
characteristics of the Mortgage Loans and the following additional assumptions
(collectively, the "Structuring Assumptions"): (i) the Mortgage Pool consists of
Mortgage Loans with the following characteristics:
<TABLE>
<CAPTION>
Original Term to Remaining Term to
Principal Balance Mortgage Rate Net Mortgage Rate Maturity (in months) Maturity (in months) Loan Age
- ----------------- -------------- ----------------- ------------------- ------------------- -----------
<S> <C> <C> <C> <C> <C>
$ % %
$ % %
</TABLE>
(ii) the Mortgage Loans prepay at the specified constant percentages of SPA,
(iii) no defaults in the payment by Mortgagors of principal of and interest on
the Mortgage Loans are experienced, (iv) scheduled payments on the Mortgage
Loans are received on the first day of each month commencing in the calendar
month following the Closing Date and are computed prior to giving effect to
prepayments received on the last day of the prior month, (v) prepayments are
allocated as described herein without giving effect to loss and delinquency
tests, (vi) there are no Net Interest Shortfalls and prepayments represent
prepayments in full of individual Mortgage Loans and are received on the last
day of each month, commencing in the calendar month of the Closing Date, (vii)
the scheduled monthly payment for each Mortgage Loan has been calculated such
that each Mortgage Loan will amortize in amounts sufficient to repay the current
balance of such Mortgage Loan by its respective remaining term to maturity,
(viii) the initial Class Certificate Balance or Notional Amount, as applicable,
of each Class of Certificates is as set forth on the cover page hereof and under
"Summary of Terms -- Certificates other than the Offered Certificates", (ix)
interest accrues on each interest bearing Class of Certificates at the
applicable interest rate set forth or described on the cover hereof and as
described under "Description of the Certificates--Interest" herein, (x)
distributions in respect of the Certificates are received in cash on the day of
each month commencing in the calendar month following the Closing Date, (xi) the
closing date of the sale of the Offered Certificates is the date set forth under
"Summary of Terms -- Closing Date," (xii) the Seller is not required to
repurchase or substitute for any Mortgage Loan, (xiii) the Master Servicer does
not exercise the option to repurchase the Mortgage Loans
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described herein under " -- Optional Purchase of Defaulted Loans" and
" -- Optional Termination" and (xiv) no Class of Certificates becomes a
Restricted Class. While it is assumed that each of the Mortgage Loans prepays
at the specified constant percentages of SPA, this is not likely to be the case.
Moreover, discrepancies may exist between the characteristics of the actual
Mortgage Loans which will be delivered to the Trustee and characteristics of the
Mortgage Loans used in preparing the tables herein.
Prepayments of mortgage loans commonly are measured relative to a
prepayment standard or model. The model used in this Prospectus Supplement is
the Standard Prepayment Assumption ("SPA"), which represents an assumed rate of
prepayment each month of the then outstanding principal balance of a pool of new
mortgage loans. SPA does not purport to be either a historical description of
the prepayment experience of any pool of mortgage loans or a prediction of the
anticipated rate of prepayment of any pool of mortgage loans, including the
Mortgage Loans. 100% SPA assumes prepayment rates of 0.2% per annum of the
then unpaid principal balance of such pool of mortgage loans in the first
month of the life of such mortgage loans and an additional 0.2% per annum
in each month thereafter (for example, 0.4% per annum in the second month)
until the 30th month. Beginning in the 30th month and in each month thereafter
during the life of such mortgage loans, 100% SPA assumes a constant prepayment
rate of 6% per annum. Multiples may be calculated from this prepayment rate
sequence. For example, ___% SPA assumes prepayment rates will be ___% per annum
in month one, ___% per annum in month two, and increasing by ___% in each
succeeding month until reaching a rate of ___% per annum in month 30 and
remaining constant at ___% per annum thereafter. 0% SPA assumes no prepayments.
There is no assurance that prepayments will occur at any SPA rate or at any
other constant rate.
Optional Purchase of Defaulted Loans
The Master Servicer may, at its option, purchase from the Trust Fund any
Mortgage Loan which is delinquent in payment by 91 days or more. Any such
purchase shall be at a price equal to 100% of the Stated Principal Balance of
such Mortgage Loan plus accrued interest thereon at the applicable Mortgage Rate
from the date through which interest was last paid by the related mortgagor or
advanced (and not reimbursed) to the first day of the month in which such amount
is to be distributed.
Optional Termination
The Master Servicer will have the right to repurchase all remaining
Mortgage Loans and REO Properties in the Mortgage Pool and thereby effect early
retirement of the Certificates, subject to the Pool Principal Balance of such
Mortgage Loans and REO Properties at the time of repurchase being less than or
equal to 10% of the Cut-off Date Pool Principal Balance. In the event the Master
Servicer exercises such option, the purchase price distributed with respect to
each Certificate will be 100% of its then outstanding principal balance plus any
Class PO Deferred Amounts in the case of the Class PO Certificates and, in the
case of an interest bearing Certificate, any unpaid accrued interest thereon at
the applicable Pass-Through Rate (in each case subject to reduction as provided
in the Agreement if the purchase price is based in part on the appraised value
of any REO Properties and such appraised value is less than the Stated Principal
Balance of the related Mortgage Loans). Distributions on the Certificates in
respect of any such optional termination will first be paid to the Senior
Certificates and then to the Subordinated Certificates. The proceeds from any
such distribution may not be sufficient to distribute the full amount to which
each Class of Certificates is entitled if the purchase price is based in part on
the appraised value of any REO Property and such appraised value is less than
the Stated Principal Balance of the related Mortgage Loan.
The Trustee
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______________________ will be the Trustee under the Agreement. The
Depositor and the Master Servicer may maintain other banking relationships in
the ordinary course of business with ___________________. Offered Certificates
may be surrendered at the Corporate Trust Office of the Trustee located at
_______________________________, Attention: _____________________ or at such
other addresses as the Trustee may designate from time to time.
Restrictions on Transfer of the Class A-R Certificates
The Class A-R Certificates will be subject to the restrictions on transfer
described in the Prospectus under "Federal Income Tax Consequences -- REMIC
Certificates -- Tax-Related Restrictions on Transfers of Residual Certificates
- -- Disqualified Organizations," " -- Noneconomic Residual Interests" and "
- -- Foreign Investors." The Agreement provides that the Class A-R Certificates
(in addition to certain other Classes of Certificates) may not be acquired by an
ERISA Plan. See "ERISA Considerations" herein. Each Class A-R Certificate will
contain a legend describing the foregoing restrictions.
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS
General
The effective yield to the holders of the interest bearing Certificates
will be lower than the yield otherwise produced by the applicable rate at which
interest is passed through to such holders and the purchase price of such
Certificates because monthly distributions will not be payable to such holders
until the ____ day (or, if such day is not a business day, the following
business day) of the month following the month in which interest accrues on the
Mortgage Loans (without any additional distribution of interest or earnings
thereon in respect of such delay).
Delinquencies on the Mortgage Loans which are not advanced by or on behalf
of the Master Servicer (because amounts, if advanced, would be nonrecoverable),
will adversely affect the yield on the Certificates. Because of the priority of
distributions, shortfalls resulting from delinquencies not so advanced will be
borne first by the Subordinated Certificates, in the reverse order of their
numerical Class designations, and then by the Senior Certificates. If, as a
result of such shortfalls, the aggregate of the Class Certificate Balances of
all Classes of Certificates exceeds the Pool Principal Balance, the Class
Certificate Balance of the Class of Subordinated Certificates then outstanding
with the highest numerical Class designation will be reduced by the amount of
such excess.
Net Interest Shortfalls will adversely affect the yields on the Offered
Certificates. In addition, although all losses initially will be borne by the
Subordinated Certificates, in the reverse order of their numerical Class
designations (either directly or through distributions in respect of Class PO
Deferred Amounts on the Class PO Certificates), Excess Losses will be borne by
all Classes of Certificates (other than the Notional Amount Certificates) on a
pro rata basis. Moreover, since the Subordinated Principal Distribution Amount
for each Distribution Date will be reduced by the amount of any distributions on
such Distribution Date in respect of Class PO Deferred Amounts, the amount
distributable as principal on each such Distribution Date to each Class of
Subordinated Certificates then entitled to a distribution of principal will be
less than it otherwise would be in the absence of such Class PO Deferred
Amounts. As a result, the yields on the Offered Certificates will depend on the
rate and timing of Realized Losses, including Excess Losses. Excess Losses could
occur at a time when one or more Classes of Subordinated Certificates are still
outstanding and otherwise available to absorb other types of Realized Losses.
S-41
<PAGE>
<PAGE>
Prepayment Considerations and Risks
The rate of principal payments on the Offered Certificates, the aggregate
amount of distributions on the Offered Certificates and the yield to maturity of
the Offered Certificates will be related to the rate and timing of payments of
principal on the Mortgage Loans. The rate of principal payments on the Mortgage
Loans will in turn be affected by the amortization schedules of the Mortgage
Loans and by the rate of principal prepayments (including for this purpose
prepayments resulting from refinancing, liquidations of the Mortgage Loans due
to defaults, casualties, condemnations and repurchases by the Seller or Master
Servicer). The Mortgage Loans may be prepaid by the Mortgagors at any time
without a prepayment penalty. The Mortgage Loans are subject to the
"due-on-sale" provisions included therein. See "The Mortgage Pool" herein.
Prepayments, liquidations and purchases of the Mortgage Loans (including
any optional purchase by the Master Servicer of a defaulted Mortgage Loan and
any optional repurchase of the remaining Mortgage Loans in connection with the
termination of the Trust Fund, in each case as described under "Description of
the Certificates--Optional Purchase of Defaulted Loans" and "--Optional
Termination" herein) will result in distributions on the Offered Certificates of
principal amounts which would otherwise be distributed over the remaining terms
of the Mortgage Loans. Since the rate of payment of principal of the Mortgage
Loans will depend on future events and a variety of factors, no assurance can be
given as to such rate or the rate of principal prepayments. The extent to which
the yield to maturity of a Class of Offered Certificates may vary from the
anticipated yield will depend upon the degree to which such Offered Certificate
is purchased at a discount or premium, and the degree to which the timing of
payments thereon is sensitive to prepayments, liquidations and purchases of the
Mortgage Loans. Further, an investor should consider the risk that, in the case
of the Principal Only Certificates and any other Offered Certificate purchased
at a discount, a slower than anticipated rate of principal payments (including
prepayments) on the Mortgage Loans could result in an actual yield to such
investor that is lower than the anticipated yield and, in the case of the
Interest Only Certificates and any other Offered Certificate purchased at a
premium, a faster than anticipated rate of principal payments could result in an
actual yield to such investor that is lower than the anticipated yield.
Investors in the Interest Only Certificates should carefully consider the risk
that a rapid rate of principal payments on the Mortgage Loans could result in
the failure of such investors to recover their initial investments.
The rate of principal payments (including prepayments) on pools of mortgage
loans may vary significantly over time and may be influenced by a variety of
economic, geographic, social and other factors, including changes in mortgagors'
housing needs, job transfers, unemployment, mortgagors' net equity in the
mortgaged properties and servicing decisions. In general, if prevailing interest
rates were to fall significantly below the Mortgage Rates on the Mortgage Loans,
the Mortgage Loans could be subject to higher prepayment rates than if
prevailing interest rates were to remain at or above the Mortgage Rates on the
Mortgage Loans. Conversely, if prevailing interest rates were to rise
significantly, the rate of prepayments on the Mortgage Loans would generally be
expected to decrease. No assurances can be given as to the rate of prepayments
on the Mortgage Loans in stable or changing interest rate environments.
As described herein under "Description of the Certificates -- Principal,"
the Senior Prepayment Percentage of the applicable Non-PO Percentage of all
principal prepayments will be initially distributed to the Classes of Senior
Certificates (other than the Class PO Certificates) then entitled to receive
principal prepayment distributions. This may result in all (or a
disproportionate percentage) of such principal prepayments being distributed to
holders of such Classes of Senior Certificates and none (or less than their pro
rata share) of such principal prepayments being distributed to holders of the
Subordinated Certificates during the periods of time described in the definition
of "Senior Prepayment Percentage."
S-42
<PAGE>
<PAGE>
The timing of changes in the rate of prepayments on the Mortgage Loans may
significantly affect an investor's actual yield to maturity, even if the average
rate of principal payments is consistent with an investor's expectation. In
general, the earlier a prepayment of principal on the Mortgage Loans, the
greater the effect on an investor's yield to maturity. The effect on an
investor's yield as a result of principal payments occurring at a rate higher
(or lower) than the rate anticipated by the investor during the period
immediately following the issuance of the Offered Certificates may not be offset
by a subsequent like decrease (or increase) in the rate of principal payments.
The tables below indicate the sensitivity of the pre-tax corporate bond
equivalent yields to maturity of certain Classes of Certificates to various
constant percentages of SPA. The yields set forth in the tables were calculated
by determining the monthly discount rates that, when applied to the assumed
streams of cash flows to be paid on the applicable Classes of Certificates,
would cause the discounted present value of such assumed streams of cash flows
to equal the assumed aggregate purchase prices of such Classes and converting
such monthly rates to corporate bond equivalent rates. Such calculations do
not take into account variations that may occur in the interest rates at which
investors may be able to reinvest funds received by them as distributions on
such Certificates and consequently do not purport to reflect the return on any
investment in any such Class of Certificate when such reinvestment rates
are considered.
Sensitivity of the Interest Only Certificates
As indicated in the table below, the yield to investors in the Class X
Certificates will be sensitive to the rate of principal payments (including
prepayments) of the Non-Discount Mortgage Loans (particularly those with high
Net Mortgage Rates), which generally can be prepaid at any time. On the basis of
the assumptions described below, the yield to maturity on the Class X
Certificates would be approximately 0% if prepayments were to occur at a
constant rate of approximately ___% SPA. If the actual prepayment rate of the
Non-Discount Mortgage Loans were to exceed the foregoing level for as little as
one month while equaling such level for the remaining months, the investors in
the Class X Certificates would not fully recoup their initial investments.
As described above under "Description of the Certificates -- General," the
Pass-Through Rate of the Class X Certificates in effect from time to time is
calculated by reference to the Net Mortgage Rates of the Non-Discount Mortgage
Loans. The Non-Discount Mortgage Loans will have higher Net Mortgage Rates (and
higher Mortgage Rates) than the other Mortgage Loans. In general, mortgage loans
with higher mortgage rates tend to prepay at higher rates than mortgage loans
with relatively lower mortgage rates in response to a given change in market
interest rates. As a result, the Non-Discount Mortgage Loans may prepay at
higher rates, thereby reducing the Pass-Through Rate and Notional Amount of the
Class X Certificates.
The information set forth in the following table has been prepared on the
basis of the Structuring Assumptions and on the assumption that the purchase
price of the Class X Certificates (expressed as a percentage of initial Notional
Amount) is as follows:
Class Price*
------ ------
Class X...................... %
- ----------
* The price does not include accrued interest. Accrued interest has been
added to such price in calculating the yields set forth in the table below.
S-43
<PAGE>
<PAGE>
Sensitivity of the Interest Only Certificates to Prepayments
(Pre-Tax Yields to Maturity)
<TABLE>
<CAPTION>
SFA Prepayment /Assumption
--------------------------
Class 0% % % % % %
- ------------------- --------------- -------------- -------------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Class X % % % % % %
</TABLE>
It is unlikely that the Non-Discount Mortgage Loans will have the precise
characteristics described herein or that the Non-Discount Mortgage Loans will
all prepay at the same rate until maturity or that all of the Non-Discount
Mortgage Loans will prepay at the same rate or time. As a result of these
factors, the pre-tax yields on the Class X Certificates are likely to
differ from those shown in the table above, even if all of the Mortgage Loans
prepay at the indicated percentages of SPA. No representation is made as to the
actual rate of principal payments on the Mortgage Loans for any period or over
the lives of the Class X Certificates or as to the yield on the Class X
Certificates. Investors must make their own decisions as to the appropriate
prepayment assumptions to be used in deciding whether to purchase the Class X
Certificates.
Sensitivity of the Principal Only Certificates
The Class PO Certificates will be "principal only" certificates and will
not bear interest. As indicated in the table below, a lower than anticipated
rate of principal payments (including prepayments) on the Discount Mortgage
Loans will have a negative effect on the yield to investors in the Principal
Only Certificates.
As described above under "Description of the Certificates -- Principal,"
the Class PO Principal Distribution Amount is calculated by reference to the
principal payments (including prepayments) on the Discount Mortgage Loans. The
Discount Mortgage Loans will have lower Net Mortgage Rates (and lower Mortgage
Rates) than the other Mortgage Loans. In general, mortgage loans with higher
mortgage rates tend to prepay at higher rates than mortgage loans with
relatively lower mortgage rates in response to a given change in market interest
rates. As a result, the Discount Mortgage Loans may prepay at lower rates,
thereby reducing the rate of payment of principal and the resulting yield of the
Class PO Certificates.
S-44
<PAGE>
<PAGE>
The information set forth in the following table has been prepared on the
basis of the Structuring Assumptions and on the assumption that the aggregate
purchase price of the Principal Only Certificates (expressed as a percentage of
initial Class Certificate Balance) is as follows:
Class Price*
----- ------
Class PO..................... %
Sensitivity of the Principal Only Certificates to Prepayments
(Pre-Tax Yields to Maturity)
<TABLE>
<CAPTION>
SFA Prepayment /Assumption
--------------------------
Class 0% % % % % %
- ------------------- --------------- -------------- -------------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Class PO % % % % % %
Class PO......................... % % % % % %
</TABLE>
It is unlikely that the Discount Mortgage Loans will have the precise
characteristics described herein or that the Discount Mortgage Loans will all
prepay at the same rate until maturity or that all of such Discount Mortgage
Loans will prepay at the same rate or time. As a result of these factors, the
pre-tax yield on the Principal Only Certificates is likely to differ from those
shown in the table above, even if all of the Mortgage Loans prepay at the
indicated percentages of SPA. No representation is made as to the actual rate of
principal payments on the Mortgage Loans for any period or over the life of the
Principal Only Certificates or as to the yield on the Principal Only
Certificates. Investors must make their own decisions as to the appropriate
prepayment assumptions to be used in deciding whether to purchase the
Principal Only Certificates.
Additional Information
The Depositor intends to file certain additional yield tables and other
computational materials with respect to one or more Classes of Underwritten
Certificates with the Commission in a report on Form 8-K to be dated
___________, 19__. Such tables and materials were prepared by each Underwriter
at the request of certain prospective investors, based on assumptions provided
by, and satisfying the special requirements of, such prospective investors. Such
tables and assumptions may be based on assumptions that differ from the
Structuring Assumptions. Accordingly, such tables and other materials may not be
relevant to or appropriate for investors other than those specifically
requesting them.
Weighted Average Lives of the Offered Certificates
The weighted average life of an Offered Certificate is determined by (a)
multiplying the amount of the net reduction, if any, of the Class Certificate
Balance of such Certificate on each Distribution Date by the number of years
from the date of issuance to such Distribution Date, (b) summing the results and
(c) dividing the sum by the aggregate amount of the net reductions in Class
Certificate Balance of such Certificate referred to in clause (a).
S-45
<PAGE>
<PAGE>
For a discussion of the factors which may influence the rate of payments
(including prepayments) of the Mortgage Loans, see " -- Prepayment
Considerations and Risks" herein and "Yield and Prepayment Considerations" in
the Prospectus.
In general, the weighted average lives of the Offered Certificates will be
shortened if the level of prepayments of principal of the Mortgage Loans
increases. However, the weighted average lives of the Offered Certificates will
depend upon a variety of other factors, including the timing of changes in such
rate of principal payments and the priority sequence of distributions of
principal of the Classes of Certificates and the distribution of principal of
the Planned Principal Classes and the Targeted Principal Classes in accordance
with the Principal Balance Schedules herein. In particular, if the amount
available for distribution as principal of the Senior Certificates (other than
the Class PO Certificates) on any Distribution Date exceeds the amount required
to reduce the principal balances of the Planned Principal Classes and the
Targeted Principal Classes then entitled to receive a distribution of principal
to their respective scheduled balances as set forth in the Principal Balance
Schedules, such excess principal will be distributed on the remaining Classes of
Senior Certificates (other than the Class PO Certificates) on such Distribution
Date. Conversely, if the amount available for distribution of principal of the
Senior Certificates (other than the Class PO Certificates) on any Distribution
Date is less than the amount so required to reduce the Planned Principal Classes
and the Targeted Principal Classes then entitled to receive a distribution of
principal to their respective scheduled balances, no principal will be
distributed on such other Classes of Senior Certificates on such Distribution
Date. Accordingly, the rate of principal payments on the Mortgage Loans is
expected to have a greater effect on the weighted average life of the Support
Classes and under certain prepayment scenarios, the weighted average lives of
the Targeted Principal Classes, than on the weighted average lives of the
Planned Principal Classes.
The interaction of the foregoing factors may have different effects on
various Classes of Offered Certificates and the effects on any Class may vary at
different times during the life of such Class. Accordingly, no assurance can be
given as to the weighted average life of any Class of Offered Certificates.
Further, to the extent the prices of the Offered Certificates represent
discounts or premiums to their respective original Class Certificate Balances,
variability in the weighted average lives of such Classes of Offered
Certificates will result in variability in the related yields to maturity.
For an example of how the weighted average lives of the Classes of Offered
Certificates may be affected at various constant percentages of SPA, see
the Decrement Tables below.
Decrement Tables
The following tables indicate the percentages of the initial Class
Certificate Balances of the Classes of Offered Certificates (other than the
Notional Amount Certificates) that would be outstanding after each of the dates
shown at various constant percentages of SPA and the corresponding weighted
average lives of such Classes. The tables have been prepared on the basis of the
Structuring Assumptions. It is not likely that (i) the Mortgage Loans will have
the precise characteristics described herein or (ii) all of the Mortgage Loans
will prepay at a constant percentage of SPA. Moreover, the diverse remaining
terms to maturity of the Mortgage Loans could produce slower or faster principal
distributions than indicated in the tables, which have been prepared using the
specified constant percentages of SPA, even if the remaining term to maturity of
the Mortgage Loans is consistent with the remaining terms to maturity of the
Mortgage Loans specified in the Structuring Assumptions.
S-46
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Percent of Initial Class Certificate
Balances Outstanding*
Class A-
--------
Distribution Date 0% % % % % % %
- -------------------------------- ------------ ------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Initial......................... % % % % % %
19..........................
19..........................
19..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
-- -- -- -- -- --
Weighted Average
Life (in years)**..........
</TABLE>
S-47
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Class
-----
Distribution Date 0% % % % % % %
- -------------------------------- ------------ ------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Initial......................... % % % % % %
19..........................
19..........................
19..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
20..........................
-- -- -- -- -- --
Weighted Average
Life (in years)**..........
</TABLE>
- ---------
* Rounded to the nearest whole percentage.
** Determined as specified under "Weighted Average Lives of the Offered
Certificates" herein.
Last Scheduled Distribution Date
S-48
<PAGE>
<PAGE>
The Last Scheduled Distribution Date for each Class of Offered Certificates
is the Distribution Date in ___________, 20__, which is the Distribution Date in
the __________ month following the latest scheduled maturity date for any of the
Mortgage Loans. Since the rate of distributions in reduction of the Class
Certificate Balance or Notional Amount of each Class of Offered Certificates
will depend on the rate of payment (including prepayments) of the Mortgage
Loans, the Class Certificate Balance or Notional Amount of any such Class could
be reduced to zero significantly earlier or later than the Last Scheduled
Distribution Date. The rate of payments on the Mortgage Loans will depend on
their particular characteristics, as well as on prevailing interest rates from
time to time and other economic factors, and no assurance can be given as to the
actual payment experience of the Mortgage Loans. See "Yield, Prepayment and
Maturity Considerations -- Prepayment Considerations and Risks" and " --
Weighted Average Lives of the Offered Certificates" herein and "Yield and
Prepayment Considerations" in the Prospectus.
The Subordinated Certificates
The weighted average life of, and the yield to maturity on, the
Subordinated Certificates, in increasing order of their numerical Class
designation, will be progressively more sensitive to the rate and timing of
mortgagor defaults and the severity of ensuing losses on the Mortgage Loans. If
the actual rate and severity of losses on the Mortgage Loans is higher than
those assumed by a holder of a Subordinated Certificate, the actual yield to
maturity of such Certificate may be lower than the yield expected by such holder
based on such assumption. The timing of losses on Mortgage Loans will also
affect an investor's actual yield to maturity, even if the rate of defaults and
severity of losses over the life of the Mortgage Pool are consistent with an
investor's expectations. In general, the earlier a loss occurs, the greater the
effect on an investor's yield to maturity. Realized Losses on the Mortgage Loans
will reduce the Class Certificate Balances of the applicable Class of
Subordinated Certificates to the extent of any losses allocated thereto (as
described under "Description of the Certificates -- Allocation of Losses"
herein), without the receipt of cash attributable to such reduction. In
addition, shortfalls in cash available for distributions on the Subordinated
Certificates will result in a reduction in the Class Certificate Balance of the
Class of Subordinated Certificates then outstanding with the highest numerical
Class designation if and to the extent that the aggregate of the Class
Certificate Balances of all Classes of Certificates, following all distributions
and the allocation of Realized Losses on a Distribution Date, exceeds the Pool
Principal Balance as of the Due Date occurring in the month of such Distribution
Date. As a result of such reductions, less interest will accrue on such Class of
Subordinated Certificates than otherwise would be the case. The yield to
maturity of the Subordinated Certificates will also be affected by the
disproportionate allocation of principal prepayments to the Senior Certificates,
Net Interest Shortfalls, other cash shortfalls in Available Funds and
distribution of funds to Class PO Certificateholders otherwise available for
distribution on the Subordinated Certificates to the extent of reimbursement for
Class PO Deferred Amounts. See "Description of the Certificates -- Allocation of
Losses" herein.
If on any Distribution Date, the Applicable Credit Support Percentage for
any Class of Subordinated Certificates is less than its Original Applicable
Credit Support Percentage, all partial principal prepayments and principal
prepayments in full available for distribution on the Subordinated Certificates
will be allocated solely to such Class and all other Classes of Subordinated
Certificates with lower numerical Class designations, thereby accelerating the
amortization thereof relative to that of the Restricted Classes and reducing the
weighted average lives of such Classes of Subordinated Certificates receiving
such distributions. Accelerating the amortization of the Classes of Subordinated
Certificates with lower numerical Class designations relative to the other
Classes of Subordinated Certificates is intended to preserve the availability of
the subordination provided by such other Classes.
CREDIT ENHANCEMENT
S-49
<PAGE>
<PAGE>
Subordination of Certain Classes
The rights of the holders of the Subordinated Certificates to receive
distributions with respect to the Mortgage Loans will be subordinated to such
rights of the holders of the Senior Certificates and the rights of the holders
of each Class of Subordinated Certificates (other than the Class B-1
Certificates) to receive such distributions will be further subordinated to such
rights of the Class or Classes of Subordinated Certificates with lower numerical
Class designations, in each case only to the extent described herein. The
subordination of the Subordinated Certificates to the Senior Certificates and
the subordination of the Classes of Subordinated Certificates with higher
numerical Class designations to those with lower numerical Class designations is
intended to increase the likelihood of receipt, respectively, by the Senior
Certificateholders and the holders of Subordinated Certificates with lower
numerical Class designations of the maximum amount to which they are entitled on
any Distribution Date and to provide such holders protection against Realized
Losses, other than Excess Losses. In addition, the Subordinated Certificates
will provide limited protection against Special Hazard Losses, Bankruptcy Losses
and Fraud Losses up to the Special Hazard Loss Coverage Amount, Bankruptcy Loss
Coverage Amount and Fraud Loss Coverage Amount, respectively, as described
below. The applicable Non-PO Percentage of Realized Losses, other than Excess
Losses, will be allocated to the Class of Subordinated Certificates then
outstanding with the highest numerical Class designation. In addition, the Class
Certificate Balance of such Class of Subordinated Certificates will be reduced
by the amount of distributions on the Class PO Certificates in reimbursement for
Class PO Deferred Amounts.
The Subordinated Certificates will provide limited protection to the
Classes of Certificates of higher relative priority against (i) Special Hazard
Losses in an initial amount expected to be up to approximately $_________ (the
"Special Hazard Loss Coverage Amount"), (ii) Bankruptcy Losses in an initial
amount expected to be up to approximately $_________ (the "Bankruptcy Loss
Coverage Amount") and (iii) Fraud Losses in an initial amount expected to be up
to approximately $_________ (the "Fraud Loss Coverage Amount").
The Special Hazard Loss Coverage Amount will be reduced, from time to time,
to be an amount equal on any Distribution Date to the lesser of (a) the greatest
of (i) __% of the aggregate of the principal balances of the Mortgage Loans,
(ii) _____ the principal balance of the largest Mortgage Loan and (iii) the
aggregate principal balances of the Mortgage Loans secured by Mortgaged
Properties located in the single California postal zip code area having the
highest aggregate principal balance of any such zip code area and (b) the
Special Hazard Loss Coverage Amount as of the Closing Date less the amount, if
any, of losses attributable to Special Hazard Mortgage Loans incurred since the
Closing Date. All principal balances for the purpose of this definition will be
calculated as of the first day of the month preceding such Distribution Date
after giving effect to scheduled installments of principal and interest on the
Mortgage Loans then due, whether or not paid.
The Fraud Loss Coverage Amount will be reduced, from time to time, by the
amount of Fraud Losses allocated to the Certificates. In addition, on each
anniversary of the Cut-off Date, the Fraud Loss Coverage Amount will be reduced
as follows: (a) on the _____, ______, _____ and ______ anniversaries of the
Cut-off Date, to an amount equal to the lesser of (i) __% of the then current
Pool Principal Balance and (ii) the excess of the Fraud Loss Coverage Amount as
of the preceding anniversary of the Cut-off Date over the cumulative amount of
Fraud Losses allocated to the Certificates since such preceding anniversary and
(b) on the _____ anniversary of the Cut-off Date, to zero.
The Bankruptcy Loss Coverage Amount will be reduced, from time to time, by
the amount of Bankruptcy Losses allocated to the Certificates.
S-50
<PAGE>
<PAGE>
The amount of coverage provided by the Subordinated Certificates for
Special Hazard Losses, Bankruptcy Losses and Fraud Losses may be cancelled or
reduced from time to time for each of the risks covered, provided that the then
current ratings of the Certificates assigned by the Rating Agencies are not
adversely affected thereby. In addition, a reserve fund or other form of credit
enhancement may be substituted for the protection provided by the Subordinated
Certificates for Special Hazard Losses, Bankruptcy Losses and Fraud Losses.
As used herein, a "Deficient Valuation" is a bankruptcy proceeding whereby
the bankruptcy court may establish the value of the Mortgaged Property at an
amount less than the then outstanding principal balance of the Mortgage Loan
secured by such Mortgaged Property or may reduce the outstanding principal
balance of a Mortgage Loan. In the case of a reduction in the value of the
related Mortgaged Property, the amount of the secured debt could be reduced to
such value, and the holder of such Mortgage Loan thus would become an unsecured
creditor to the extent the outstanding principal balance of such Mortgage Loan
exceeds the value so 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 the reduction (a "Debt Service
Reduction") of the amount of the monthly payment on the related Mortgage Loan.
Notwithstanding the foregoing, no such occurrence shall be considered a Debt
Service Reduction or Deficient Valuation so long as the Master Servicer is
pursuing any other remedies that may be available with respect to the related
Mortgage Loan and (i) such Mortgage Loan is not in default with respect to
payment due thereunder or (ii) scheduled monthly payments of principal and
interest are being advanced by the Master Servicer without giving effect to any
Debt Service Reduction or Deficient Valuation.
USE OF PROCEEDS
The Depositor will apply the net proceeds of the sale of the Certificates
against the purchase price of the Mortgage Loans.
FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes, an election will be made to treat the
Trust Fund as a REMIC. Assuming such an election is timely made and the terms of
the Pooling and Servicing Agreement are complied with, Brown & Wood LLP, special
tax counsel to the Depositor ("Tax Counsel") is of the opinion that the Trust
Fund will qualify as a REMIC within the meaning of the Code. The Regular
Certificates will constitute the regular interests in the REMIC. The Residual
Certificates will constitute the sole class of "residual interest" in the REMIC.
See "Federal Income Tax Consequences" in the Prospectus.
The Regular Certificates generally will be treated as debt instruments
issued by the REMIC for federal income tax purposes. Income on the Regular
Certificates must be reported under an accrual method of accounting.
In the opinion of Tax Counsel, the Principal Only Certificates will be
treated for federal income tax purposes as having been issued with an amount of
Original Issue Discount ("OID") equal to the difference between their principal
balance and their issue price. Although the tax treatment is not entirely
certain, Notional Amount Certificates will be treated as having been issued with
OID for federal income tax purposes equal to the excess of all expected payments
of interest on such Certificates over their issue price. Although unclear, a
holder of a Notional Amount Certificate may be entitled to deduct a loss to the
extent that its
S-51
<PAGE>
<PAGE>
remaining basis exceeds the maximum amount of future payments to which such
Certificateholder would be entitled if there were no further prepayments of the
Mortgage Loans. The remaining Classes of Regular Certificates, depending on
their respective issue prices (as described in the Prospectus under "Federal
Income Tax Consequences"), may be treated as having been issued with OID for
federal income tax purposes. For purposes of determining the amount and rate of
accrual of OID and market discount, the Trust Fund intends to assume that there
will be prepayments on the Mortgage Loans at a rate equal to % SPA (the
"Prepayment Assumption"). No representation is made as to whether the Mortgage
Loans will prepay at the foregoing rate or any other rate. See "Yield,
Prepayment and Maturity Considerations" herein and "Federal Income Tax
Consequences" in the Prospectus. Computing accruals of OID in the manner
described in the Prospectus may (depending on the actual rate of prepayments
during the accrual period) result in the accrual of negative amounts of OID on
the Certificates issued with OID in an accrual period. Holders will be entitled
to offset negative accruals of OID only against future OID accrual on such
Certificates.
If the holders of any Regular Certificates are treated as holding such
Certificates at a premium, such holders should consult their tax advisors
regarding the election to amortize bond premium and the method to be employed.
As is described more fully under "Federal Income Tax Consequences" in the
Prospectus, the Offered Certificates will represent qualifying assets under
Sections 593(d), 856(c)(5)(A) and 7701(a)(19)(C) of the Code, and net interest
income attributable to the Offered Certificates will be "interest on obligations
secured by mortgages on real property" within the meaning of Section
856(c)(3)(B) of the Code, to the extent the assets of the Trust Fund are assets
described in such sections. The Regular Certificates will represent qualifying
assets under Section 860G(a)(3) if acquired by a REMIC within the prescribed
time periods of the Code.
The holders of the Residual Certificates must include the taxable income of
the REMIC in their federal taxable income. The resulting tax liability of the
holders may exceed cash distributions to such holders during certain periods.
All or a portion of the taxable income from a Residual Certificate recognized by
a holder may be treated as "excess inclusion" income, which with limited
exceptions, is subject to U.S federal income tax.
Prospective purchasers of a Residual Certificate should consider carefully
the tax consequences of an investment in Residual Certificates discussed in the
Prospectus and should consult their own tax advisors with respect to those
consequences. See "Federal Income Tax Consequences -- REMIC Certificates -- b.
Residual Certificates" in the Prospectus. Specifically, prospective holders of
Residual Certificates should consult their tax advisors regarding whether, at
the time of acquisition, a Residual Certificate will be treated as a
"noneconomic" residual interest, a "non-significant value" residual interest and
a "tax avoidance potential" residual interest. See "Federal Income Tax
Consequences -- Tax-Related Restrictions on Transfer of Residual Certificates --
Noneconomic Residual Certificates -- Residual Certificates -- Mark to Market
Rules -- Residual Certificates -- Excess Inclusions and -- Tax-Related
Restrictions on Transfers of Residual Certificates -- Foreign Investors" in the
Prospectus. Additionally, for information regarding Prohibited Transactions and
Treatment of Realized Losses, see "Federal Income Tax Consequences -- Prohibited
Transactions and Other Taxes" and " -- REMIC Certificates -- a. Regular
Certificates -- Treatment of Realized Losses" in the Prospectus.
ERISA CONSIDERATIONS
S-52
<PAGE>
<PAGE>
Any Plan fiduciary which proposes to cause a Plan (as defined below) to
acquire any of the 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/or the Code, of the Plan's
acquisition and ownership of such Certificates. See "ERISA Considerations" in
the Prospectus. Section 406 of ERISA prohibits "parties in interest" with
respect to an employee benefit plan subject to ERISA and/or the excise tax
provisions set forth under Section 4975 of the Code (a "Plan") from engaging in
certain transactions involving such Plan and its assets unless a statutory or
administrative exemption applies to the transaction. Section 4975 of the Code
imposes certain excise taxes on prohibited transactions involving Plans and
other arrangements (including, but not limited to, individual retirement
accounts) described under that Section; ERISA authorizes the imposition of civil
penalties for prohibited transactions involving Plans not subject to the
requirements of Section 4975 of the Code.
Certain employee benefit plans, including governmental plans and certain
church plans, are not subject to ERISA's requirements. Accordingly, assets of
such plans may be invested in the Offered Certificates without regard to the
ERISA considerations described herein and in the Prospectus, subject to the
provisions of other applicable federal and state law. Any such plan that is
qualified and exempt from taxation under Sections 401(a) and 501(a) of the Code
may nonetheless be subject to the prohibited transaction rules set forth in
Section 503 of the Code.
Except as noted above, investments by Plans are subject to ERISA's general
fiduciary requirements, including the requirement of investment prudence and
diversification and the requirement that a Plan's investments be made in
accordance with the documents governing the Plan. A fiduciary that decides to
invest the assets of a Plan in the Offered Certificates should consider, among
other factors, the extreme sensitivity of the investment to the rate of
principal payments (including prepayments) on the Mortgage Loans.
The U.S. Department of Labor has granted an individual administrative
exemption to (Prohibited Transaction Exemption , Exemption Application No.
D-_____, Fed. Reg. (_____) (_____) (the "Exemption") from certain of the
prohibited transaction rules of ERISA and the related excise tax provisions of
Section 4975 of the Code with respect to the initial purchase, the holding and
the subsequent resale by Plans of certificates in pass-through trusts that
consist of certain receivables, loans and other obligations that meet the
conditions and requirements of the Exemption. The Exemption applies to mortgage
loans such as the Mortgage Loans in the Trust Fund.
For a general description of the Exemption and the conditions that must be
satisfied for the Exemption to apply, see "ERISA Considerations" in the
Prospectus.
It is expected that the Exemption will apply to the acquisition and holding
by Plans of the Senior Certificates (other than the Class _____, Class PO, Class
X and Class A-R Certificates) and that all conditions of the Exemption other
than those within the control of the investors will be met. In addition, as of
the date hereof, there is no single Mortgagor that is the obligor on five
percent (5%) of the Mortgage Loans included in the Trust Fund by aggregate
unamortized principal balance of the assets of the Trust Fund. Because the Class
, Class PO and Class X Certificates are not being purchased by either
Underwriter, such Classes of Certificates do not currently meet the requirements
of the Exemption or any comparable individual administrative exemption granted
to either Underwriter. Consequently, the sale or exchange of the Class , Class
PO and Class X Certificates may be made only under the conditions set forth for
the Class B-, Class B- and Class B-Certificates below.
Because the characteristics of the Class B-__, Class B-__, Class B-__ and
Class __ A-R Certificates may not meet the requirements of PTCE 83-1, the
Exemption or any other issued exemption under ERISA, the
S-53
<PAGE>
<PAGE>
purchase and holding of the Class B-__, Class B-__, Class B-__ and Class A-R
Certificates by a Plan or by individual retirement accounts or other plans
subject to Section 4975 of the Code may result in prohibited transactions or the
imposition of excise taxes or civil penalties. Consequently, transfers of the
Class B-__, Class B-__, Class B-__ and Class A-R Certificates will not be
registered by the Trustee unless the Trustee receives: (i) a representation from
the transferee of such Certificate, acceptable to and in form and substance
satisfactory to the Trustee, to the effect that such transferee is not an
employee benefit plan subject to Section 406 of ERISA or a plan or arrangement
subject to Section 4975 of the Code, nor a person acting on behalf of any such
plan or arrangement nor using the assets of any such plan or arrangement to
effect such transfer; (ii) if the purchaser is an insurance company, a
representation that the purchaser is an insurance company which is purchasing
such Certificates with funds contained in an "insurance company general account"
(as such term is defined in Section V(e) of Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60")) and that the purchase and holding of such
Certificates are covered under PTCE 95-60; or (iii) an opinion of counsel
satisfactory to the Trustee that the purchase or holding of such Certificate by
a Plan, any person acting on behalf of a Plan or using such Plan's assets, will
not result in the assets of the Trust Fund being deemed to be "plan assets" and
subject to the prohibited transaction requirements of ERISA and the Code and
will not subject the Trustee to any obligation in addition to those undertaken
in the Agreement. Such representation as described above shall be deemed to have
been made to the Trustee by the transferee's acceptance of a Class B-__, Class
B-__ or Class B-Certificate. In the event that such representation is violated,
or any attempt to transfer to a plan or person acting on behalf of a Plan or
using such Plan's assets is attempted without such opinion of counsel, such
attempted transfer or acquisition shall be void and of no effect.
Prospective Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code, the applicability of PTCE 83-1
described in the Prospectus and the Exemption, and the potential consequences in
their specific circumstances, prior to making an investment in any of the
Offered Certificates. Moreover, each Plan fiduciary should determine whether
under the general fiduciary standards of investment prudence and
diversification, an investment in any of the Offered Certificates is appropriate
for the Plan, taking into account the overall investment policy of the Plan and
the composition of the Plan's investment portfolio.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting Agreement
between the Depositor and the Underwriters, the Depositor has agreed to sell to
the Underwriters, and each Underwriter has agreed to purchase from the Depositor
the respective Classes of Underwritten Certificates indicated on the cover page
hereof to be purchased by it. Distribution of the Underwritten Certificates will
be made by the respective Underwriters in each case from time to time in
negotiated transactions or otherwise at varying prices to be determined at the
time of sale. In connection with the sale of the Underwritten Certificates, the
Underwriters may be deemed to have received compensation from the Depositor in
the form of underwriting discounts.
Each Underwriter intends to make a secondary market in the Classes of
Underwritten Certificates being purchased by it, but no Underwriter has any
obligation to do so. There can be no assurance that a secondary market for the
Offered Certificates will develop or, if it does develop, that it will continue
or that it will provide Certificateholders with a sufficient level of liquidity
of investment.
S-54
<PAGE>
<PAGE>
The Depositor has agreed to indemnify the Underwriters against, or make
contributions to the Underwriters with respect to, certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
The Class X and Class PO Certificates may be offered by the Depositor from
time to time directly or through underwriters or agents (either of which may
include Countrywide Securities Corporation, an affiliate of the Depositor and
the Master Servicer) in one or more negotiated transactions, or otherwise, at
varying prices to be determined at the time of sale, in one or more separate
transactions at prices to be negotiated at the time of each sale. Proceeds to
the Depositor from any sale of the Class X or Class PO Certificates will equal
the purchase price paid by the purchaser thereof, net of any expenses payable by
the Depositor and any compensation payable to any such underwriter or agent. Any
underwriters or agents that participate in the distribution of the Class X or
Class PO Certificates may be deemed to be "underwriters" within the meaning of
the Securities Act of 1933 and any profit on the sale of such Certificates by
them and any discounts, commissions, concessions or other compensation received
by any such underwriter or agent may be deemed to be underwriting discounts and
commissions under such Act.
LEGAL MATTERS
The validity of the Certificates, including certain federal income tax
consequences with respect thereto, will be passed upon for the Depositor by
Brown & Wood LLP, New York, New York. Strook & Strook & Lavan, New York, New
York, will pass upon certain legal matters on behalf of the Underwriters.
RATINGS
It is a condition to the issuance of the Senior Certificates that they be
rated ______ by ("_____") and, by ("______" and, together with ______, the
"Rating Agencies"). It is a condition to the issuance of the Class B-__, Class
B-__ and Class B-__ Certificates that they be rated at least _____, and _____,
respectively, by _____.
The ratings assigned by ________ to mortgage pass-through certificates
address the likelihood of the receipt of all distributions on the mortgage loans
by the related certificateholders under the agreements pursuant to which such
certificates are issued. _______'s ratings take into consideration the credit
quality of the related mortgage pool, including any credit support providers,
structural and legal aspects associated with such certificates, and the extent
to which the payment stream on the mortgage pool is adequate to make the
payments required by such certificates. _______ratings on such certificates do
not, however, constitute a statement regarding frequency of payments of the
mortgage loans.
The ratings assigned by ________ to mortgage pass-through certificates
address the likelihood of the receipt of all distributions on the mortgage loans
by the related certificateholders under the agreements pursuant to which such
certificates are issued. _______'s ratings take into consideration the credit
quality of the related mortgage pool, including any credit support providers,
structural and legal aspects associated with such certificates, and the extent
to which the payment stream on such mortgage pool is adequate to make payments
required by such certificates. _______'s ratings on such certificates do not,
however, constitute a statement regarding frequency of prepayments on the
related mortgage loans.
The ratings of the Rating Agencies do not address the possibility that, as
a result of principal prepayments, Certificateholders may receive a lower than
anticipated yield.
S-55
<PAGE>
<PAGE>
The security ratings assigned to the Offered Certificates should be
evaluated independently from similar ratings on other types of securities. 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 Rating Agencies.
The Depositor has not requested a rating of the Offered Certificates by any
rating agency other than the Rating Agencies; there can be no assurance,
however, as to whether any other rating agency will rate the Offered
Certificates or, if it does, what rating would be assigned by such other rating
agency. The rating assigned by such other rating agency to the Offered
Certificates could be lower than the respective ratings assigned by the Rating
Agencies.
S-56
<PAGE>
<PAGE>
INDEX OF DEFINED TERMS
Page
----
Advance..............................................................S-8, S-28
Agreement............................................................S-4, S-15
Applicable Credit Support Percentage......................................S-35
Available Funds...........................................................S-31
B&C.......................................................................S-15
Bankruptcy Losses.........................................................S-38
Bankruptcy Loss Coverage Amount...........................................S-48
Beneficial Owner..........................................................S-29
Book-Entry Certificates....................................................S-4
CEDE......................................................................S-29
Certificate Account.......................................................S-30
Certificateholder...................................................S-15, S-29
Certificates..........................................................S-1, S-3
Class PO Principal Distribution Amount....................................S-36
Class Subordination Percentage............................................S-35
Closing Date...............................................................S-5
Code......................................................................S-10
Corporate Trust Office.....................................................S-2
Countrywide.....................................................S-2, S-4, S-25
Cut-off Date Pool Principal Balance.......................................S-15
Cut-Off Date...............................................................S-5
Debt Service Reduction....................................................S-49
Deficient Valuation.......................................................S-49
Definitive Certificate....................................................S-29
Deleted Mortgage Loan.....................................................S-22
Depositor..................................................................S-4
Depository................................................................S-29
Determination Date.........................................................S-5
Discount Mortgage Loan....................................................S-33
Distribution Account......................................................S-30
Distribution Date....................................................S-5, S-31
ERISA...............................................................S-10, S-50
Excess Losses.............................................................S-37
Exemption.................................................................S-51
FHLMC.....................................................................S-23
Fixed Rate Certificates....................................................S-4
FNMA......................................................................S-23
Fraud Loss Coverage Amount................................................S-48
Fraud Losses..............................................................S-38
Full Doc Program..........................................................S-24
Insurance Proceeds........................................................S-31
Interest Distribution Amount.........................................S-6, S-32
Interest Only Certificates.................................................S-4
Interest Accrual Period....................................................S-6
Last Scheduled Distribution Date..........................................S-46
S-57
<PAGE>
<PAGE>
Page
----
Liquidated Mortgage Loan..................................................S-38
Liquidation Proceeds......................................................S-31
Loan-to-Value Ratio.......................................................S-16
Master Servicer............................................................S-4
Moody's...................................................................S-30
Mortgage..................................................................S-22
Mortgage File.............................................................S-22
Mortgage Loans.............................................................S-5
Mortgage Note.............................................................S-22
Mortgage Pool........................................................S-1, S-15
Mortgage Rate.............................................................S-32
Net Prepayment Interest Shortfall.........................................S-32
Net Interest Shortfall....................................................S-32
NMR.......................................................................S-33
Non-Discount Mortgage Loan................................................S-29
Non-PO Percentage.........................................................S-33
Non-PO Formula Principal Amount...........................................S-33
Notional Amount Certificates...............................................S-4
Notional Amount...........................................................S-29
Offered Certificates............................................S-1, S-3, S-28
OID..................................................................S-9, S-49
Original Subordinated Principal Balance...................................S-35
Original Applicable Credit Support Percentage.............................S-35
Pass-Through Rate..........................................................S-6
Permitted Investments.....................................................S-30
Physical Certificates......................................................S-4
Plan................................................................S-10, S-50
Pool Principal Balance....................................................S-34
PO Formula Principal Amount.........................................S-36, S-37
PO Percentage.............................................................S-33
Prepayment Assumption.....................................................S-49
Prepayment Interest Excess................................................S-27
Prepayment Interest Shortfall.............................................S-32
Principal Only Certificates................................................S-4
Prospectus.................................................................S-2
PTCE 95-60................................................................S-51
Rating Agencies.....................................................S-10, S-53
Realized Loss.............................................................S-37
Record Date..........................................................S-5, S-31
Regular Certificates.......................................................S-4
Regular Interests.....................................................S-2, S-9
Relief Act Reduction......................................................S-32
REMIC.................................................................S-2, S-9
REO Property..............................................................S-28
Replacement Mortgage Loan.................................................S-22
Residual Certificates......................................................S-4
Residual Interest.....................................................S-2, S-9
Restricted Classes........................................................S-35
S-58
<PAGE>
<PAGE>
Page
----
Scheduled Payments........................................................S-15
Seller.....................................................................S-4
Senior Credit Support Depletion Date......................................S-34
Senior Prepayment Percentage..............................................S-34
Senior Certificates..................................................S-4, S-28
Senior Principal Distribution Amount......................................S-33
Senior Percentages........................................................S-34
Senior Credit Support Depletion Date......................................S-34
Servicing Fee.............................................................S-27
Simple Doc Program........................................................S-24
SMMEA.....................................................................S-10
SPA.......................................................................S-39
Special Hazard Mortgage Loan..............................................S-38
Special Hazard Losses.....................................................S-38
Special Hazard Loss Coverage Amount.......................................S-48
Stated Income Program.....................................................S-24
Stated Principal Balance..................................................S-34
Subordinated Prepayment Percentage........................................S-35
Subordinated Certificates............................................S-4, S-28
Subordinated Principal Distribution Amount................................S-35
Substitution Adjustment Amount............................................S-22
Trust Fund.................................................................S-4
Trustee....................................................................S-5
Underwriter................................................................S-1
Underwritten Senior Certificates...........................................S-1
Underwritten Certificates..................................................S-1
Unpaid Interest Amounts...................................................S-32
Variable Rate Certificates.................................................S-4
S-59
<PAGE>
<PAGE>
================================================================================
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus Supplement or the
Prospectus and, if given or made, such information or representations must not
be relied upon. This Prospectus Supplement and the Prospectus do not constitute
an offer to sell or a solicitation of an offer to buy any of the securities
offered hereby, nor an offer of Offered Certificates in any state or
jurisdiction in which, or to any person to whom, such offer would be unlawful.
The delivery of this Prospectus Supplement or the Prospectus at any time does
not imply that the information contained herein or therein is correct as of any
time subsequent to its date; however, if any material change occurs while this
Prospectus Supplement or Prospectus is required by law to be delivered, this
Prospectus Supplement or the Prospectus will be amended or supplemented
accordingly.
_______________
TABLE OF CONTENTS
Page
----
Prospectus Supplement
Summary of Terms ..................................................... S-3
Risk Factors ......................................................... S-12
The Mortgage Pool .................................................... S-15
Servicing of Mortgage Loans .......................................... S-24
Description of the Certificates ...................................... S-28
Yield, Prepayment and Maturity Considerations ........................ S-40
Credit Enhancement ................................................... S-47
Use of Proceeds ...................................................... S-49
Federal Income Tax Consequences ...................................... S-49
ERISA Considerations ................................................. S-50
Method of Distribution ............................................... S-52
Legal Matters ........................................................ S-53
Ratings .............................................................. S-53
Index of Defined Terms ............................................... S-54
PROSPECTUS
Prospectus Supplement or Current Report on Form 8-K .................. 2
Available Information ................................................ 2
Incorporation of Certain Document by Reference ....................... 2
Reports to Securityholders ........................................... 3
Summary of Terms ..................................................... 4
Risk Factors ......................................................... 11
The Trust Fund ....................................................... 17
Use of Proceeds ...................................................... 21
The Depositor ........................................................ 22
Loan Program ......................................................... 22
Description of the Securities ........................................ 24
Credit Enhancement ................................................... 38
Yield and Prepayment Considerations .................................. 43
The Agreements ....................................................... 45
Certain Legal Aspects of the Loans ................................... 57
Federal Income Tax Consequences ...................................... 71
State Tax Considerations ............................................. 90
ERISA Considerations ................................................. 90
Legal Investment ..................................................... 93
Method of Distribution ............................................... 94
Legal Matters ........................................................ 95
Financial Information ................................................ 95
Rating ............................................................... 95
Index of Defined Terms ............................................... 97
================================================================================
$[_____________]
(Approximate)
Mortgage Pass-Through
Certificates,
Series 199_ - _
CWABS, Inc.
Depositor
[Countrywide Home Loans, Inc.]
Seller and Master Servicer
-----------------------------
PROSPECTUS SUPPLEMENT
[_________, 199_]
-----------------------------
================================================================================
S-60
<PAGE>
<PAGE>
Information contained herein is subject to completion or amendment. 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 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.
SUBJECT TO COMPLETION, DATED OCTOBER 15, 1996
PROSPECTUS SUPPLEMENT
(To Prospectus dated ___________, 1996)
$___________
[COUNTRYWIDE] HOME EQUITY LOAN TRUST 199___
$___________ HOME EQUITY LOAN ASSET BACKED NOTES, SERIES 199_-_
$__________ HOME EQUITY LOAN ASSET BACKED CERTIFICATES, SERIES 199_-_
The [Countrywide] Home Equity Loan Trust 199__ (the "Trust Fund") will be
formed pursuant to a trust agreement to be dated as of ______, 199_ (the "Trust
Agreement") and entered into by CWABS, Inc. (the "Depositor"), ________________
and _____________, as owner trustee (the "Owner Trustee"). The Trust Fund will
issue $___________ aggregate principal amount of Home Equity Loan Asset Backed
Notes (the "Notes"). The Notes will be issued pursuant to an indenture to be
dated as of __________ __, 199_ (the "Indenture"), between the Trust Fund and
____________, as indenture trustee (the "Indenture Trustee"). The Trust Fund
will also issue $____________ aggregate principal amount of Home Equity Loan
Asset Backed Certificates, Series 199_-_ (the "Certificates" and, together with
the Notes, the "Securities"). See "Index of Defined Terms" on Page S-45 of this
Prospectus Supplement and on Page 98 of the Prospectus for the location of the
definitions of certain capitalized terms.
The property of the Trust Fund will include a pool of [adjustable rate]
home equity revolving credit line loans made or to be made in the future (the
"Mortgage Loans") under certain home equity revolving credit line loan
agreements. The Mortgage Loans are secured by first and second deeds of trust or
mortgages on one- to four-family residential properties. [In addition, the
Securities will have the benefit of an irrevocable and unconditional limited
financial guaranty insurance policy (the "Policy") issued by ______________ (the
"Certificate Insurer") covering [describe].]
Distributions of principal and interest on the Notes will be made on the
_________ day of each month or, if such date is not a Business Day, then on the
succeeding Business Day (each a "Distribution Date"), commencing on ________,
199_ to the extent described under "Summary of Terms--Description of the
Securities" and "Description of the Securities" herein. Interest will accrue on
the Notes at a rate (the "Note Rate") equal to ___% per annum from the Closing
Date to the first Distribution Date and at [a floating rate equal to [LIBOR] (as
defined herein) plus ___% per annum] [___% per annum] thereafter.
The Certificates will represent fractional undivided interests in the Trust
Fund. Distribution of principal and interest on the Certificates will be made on
each Distribution Date to the extent described herein. Interest will accrue on
the Certificates at a rate (the "Pass-Through Rate") equal to ___% per annum
from the Closing Date to the first Distribution Date and at [a floating rate
equal to [LIBOR] plus ___% per annum] [___% per annum] thereafter.
Payments of interest and principal on the Notes will have equal priority
with payments of principal and interest (and will be made pro rata) on the
Certificates.
There is currently no market for the Securities offered hereby and there
can be no assurance that such a market will develop or if it does develop that
it will continue. See "Risk Factors" herein.
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION SET FORTH UNDER
"RISK FACTORS" ON PAGE S-12 HEREIN AND ON PAGE 12 IN THE
ACCOMPANYING PROSPECTUS.
----------
<PAGE>
<PAGE>
THE SECURITIES REPRESENT INTERESTS IN OR OBLIGATIONS OF THE TRUST ONLY
AND DO NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE DEPOSITOR,
OWNER TRUSTEE, INDENTURE TRUSTEE OR ANY AFFILIATE THEREOF, EXCEPT TO
THE EXTENT PROVIDED HEREIN. THE SECURITIES ARE NOT 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
SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Securities offered hereby will be purchased by [ ] (the "Underwriter")
from the Depositor and will, in each case, be offered by the Underwriter from
time to time to the public in negotiated transactions or otherwise at varying
prices to be determined at the time of sale. The aggregate proceeds to the
Depositor from the sale of the Notes are expected to be $_____________ and from
the sale of the Certificates are expected to be $__________ before deducting
expenses payable by the Depositor of $_______.
The Securities are offered subject to prior sale and subject to the
Underwriters' right to reject orders in whole or in part. It is expected that
the Notes will be delivered in book-entry form through the facilities of The
Depository Trust Company, [Cedel, S.A. and the Euroclear System] on or about
_______, 199_. The Securities will be offered in [Europe and] the United States
of America.
----------
Until ninety days after the date of this Prospectus Supplement, all dealers
effecting transactions in the Securities, whether or not participating in this
distribution, may be required to deliver a Prospectus Supplement and Prospectus
to investors. This is in addition to the obligation of dealers acting as
Underwriters to deliver a Prospectus Supplement and Prospectus with respect to
their unsold allotments or subscriptions.
----------
Each Series of Securities offered hereby constitute part of a separate
Series of Asset Backed Securities being offered by the Underwriter from time to
time pursuant to the Prospectus dated ____________, 199_. This Prospectus
Supplement does not contain complete information about the offering of the
Securities. Additional information is contained in the Prospectus and investors
are urged to read both this Prospectus Supplement and the Prospectus in full.
Sales of the Securities may not be consummated unless the purchaser has received
both this Prospectus Supplement and the Prospectus.
The Trustee on behalf of any Trust Fund will provide without charge to each
person to whom this Prospectus Supplement is delivered, on the written or oral
request of such person, a copy of any or all of the documents referred to in the
Prospectus under "Incorporation of Certain Documents by Reference" that have
been or may be incorporated by reference in the Prospectus (not including
exhibits to the information that is incorporated by reference unless such
exhibits are specifically incorporated by reference into the information that
the Prospectus incorporates). Such requests should be directed to the Corporate
Trust Office of the Trustee at _____________, telephone:_________, facsimile
number:_____________, attention:__________.
----------
[UNDERWRITER]
_______________, 199_
S-2
<PAGE>
<PAGE>
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SUMMARY OF TERMS
The following summary of certain pertinent information is qualified in its
entirety by reference to the detailed information appearing elsewhere in this
Prospectus Supplement and in the accompanying Prospectus. Certain capitalized
terms used herein are defined elsewhere in the Prospectus Supplement or in the
Prospectus. See "Index of Defined Terms" on Page S-45 of this Prospectus
Supplement and on Page 98 of the Prospectus for the location of the definitions
of certain capitalized terms.
Title of Securities .................. Home Equity Loan Asset Backed Notes,
Series 199__-__(the "Notes") and Home
Equity Loan Asset Backed Certificates,
Series 199__-__ (the "Certificates" and,
together with the Notes, the
"Securities").
Securities Offered ................... All of the Securities, including the
Class ___, Class __ and Class __ Notes
and the Class __, Class __ and Class __
Certificates. Each Security represents
the right to receive payments of
interest at the variable rate described
below, payable monthly, and payments of
principal at such time and to the extent
provided below.
Trust Fund............................ [Countrywide] Home Equity Loan Trust
199_-_ (the "Trust Fund" or the
"Issuer"), a Delaware business trust
established pursuant to the Trust
Agreement (as defined herein), dated as
of ___, 199_ (the "Cut-off Date"). The
property of the Trust Fund will include:
a pool of [adjustable rate] home equity
revolving credit line loans made or to
be made in the future (the "Mortgage
Loans"), under certain home equity
revolving credit line loan agreements
(the "Credit Line Agreements") and
secured by either first or second
mortgages on residential properties that
are one- to four-family properties (the
"Mortgaged Properties"); the collections
in respect of the Mortgage Loans
received after the Cut-off Date
(exclusive of payments in respect of
accrued interest due on or prior to the
Cut-off Date or due in the month of
_____________); property that secured a
Mortgage Loan which has been acquired by
foreclosure or deed in lieu of
foreclosure; [an irrevocable and
unconditional limited financial guaranty
insurance policy (the "Policy")]; an
assignment of the Depositor's rights
under the Purchase Agreement (as defined
herein); rights under certain hazard
insurance policies covering the
Mortgaged Properties; and certain other
property, as described more fully under
"The Trust Fund" herein.
The Trust Fund will include the unpaid
principal balance of each Mortgage Loan
as of the Cut-off Date (the "Cut-off
Date Principal Balance") plus any
additions thereto as a result of new
advances made pursuant to the applicable
Credit Line Agreement (the "Additional
Balances") during the life of the Trust
Fund. With respect to any date, the
"Pool Balance"
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will be equal to the aggregate of the
Principal Balances of all Mortgage Loans
as of such date. The "Principal Balance"
of a Loan (other than a Liquidated Loan)
on any day is equal to its Cut-off Date
Principal Balance, plus (i) any
Additional Balances in respect of such
Mortgage Loan, minus (ii) all
collections credited against the
Principal Balance of such Mortgage Loan
in accordance with the related Credit
Line Agreement prior to such day. The
Principal Balance of a Liquidated Loan
after the final recovery of related
Liquidation Proceeds shall be zero.
Indenture ........................... The Notes will be issued pursuant to an
indenture dated as of _________, 199_
(the "Indenture") between the Trust Fund
and the Indenture Trustee. The Indenture
Trustee will allocate distributions of
principal and interest to holders of the
Notes (the "Noteholders") in accordance
with the Indenture.
Trust Agreement....................... Pursuant to a trust agreement dated as
of ________ 1, 199_ (the "Trust
Agreement"), among the Depositor,
________ and the Owner Trustee, the
Trust Fund will issue the Certificates
in an initial aggregate amount of
$__________. The Certificates will
represent fractional undivided interests
in the Trust Fund.
Depositor............................. CWABS, Inc. a Delaware corporation and a
limited purpose finance subsidiary of
Countrywide Credit Industries, Inc., a
Delaware corporation.
Master Servicer....................... [Countrywide Home Loans, Inc.
("Countrywide") and, in its capacity as
Master Servicer of the Mortgage Loans,
the "Master Servicer". The Master
Servicer will service the Mortgage Loans
pursuant to a Master Servicing Agreement
dated _________ 1, 199_ between the
Issuer and the Master Servicer.
Indenture Trustee..................... _______________ (the "Indenture
Trustee").
Owner Trustee......................... _______________ (the "Owner Trustee").
Cut-off Date.......................... __________ 1, 199__.
Closing Date.......................... On or about __________ __, 199__.
Determination Date.................... The ___ business day, but no later than
the ___ calendar day, of each month (the
"Determination Date").
The Mortgage Loans.................... The Mortgage Loans are secured by first
and second mortgages on Mortgaged
Properties. The Mortgage Loans were
originated or acquired in the normal
course of its business by [Countrywide]
(in such capacity, the "Seller").
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On the Closing Date, [Countrywide] will
sell the Mortgage Loans to the
Depositor, pursuant to a purchase
agreement (the "Purchase Agreement").
The aggregate Principal Balance of the
Mortgage loans as of the Cut-off Date is
$___________ (the "Cut-off Date Pool
Principal Balance").
The percentage of the Cut-off Date
Principal Balance of the Mortgage Loans
secured by Mortgaged Properties located
in the states of [__________, _________,
_________, _______, ______ and ________]
is approximately ____%, ____%, ____%,
____%, ____% and ____%, respectively.
The "Combined Loan-to-Value Ratio" of
each Mortgage Loan is the ratio of (A)
the sum of (i) the maximum amount the
borrower was permitted to draw down
under the related Credit Line Agreement
(the "Credit Limit") and (ii) the
amounts of any related senior mortgage
loans (computed as of the date of
origination of each such Mortgage Loans)
to (B) the lesser of (i) the appraised
value of the Mortgaged Property or (ii)
in the case of a Mortgaged Property
purchased within one year of the
origination of the related Mortgage
Loan, the purchase price of such
Mortgaged Property. As of the Cut-off
Date the Combined Loan-to-Value Ratios
ranged from ____% to ______% and, as of
the Cut-off Date, the weighted average
Combined Loan-to-Value Ratio of the
Mortgage Loans was approximately ____%.
Interest on each Mortgage Loan is
payable monthly and computed on the
related daily outstanding Principal
Balance for each day in the billing
cycle at a variable rate per annum (the
"Loan Rate") equal at any time (subject
to maximum rates, as described herein
under "The Home Equity Lending
Program--Mortgage Loan Terms," and
further subject to applicable usury
limitations) to the sum of [(i) the
highest prime rate published in the
"Money Rates" section of The Wall Street
Journal] and (ii) a Margin within the
range of ___% to ___%. As of the Cut-off
Date, the weighted average Margin was
approximately %. Loan Rates are adjusted
monthly on the first business day of the
calendar month preceding the Due Date.
As to each Mortgage Loan, the "Due Date"
is the ___ day of each month. The
Cut-off Date Principal Balances ranged
from zero to $________ and averaged
approximately $_______. Credit Limits
under the Mortgage Loans as of the
Cut-off Date ranged from $________ to
$________ and averaged approximately
$________. Each Mortgage Loan was
originated in the period from __________
__, 19__ to __________ __, 19__. As of
the Cut-off Date, the maximum Credit
Limit Utilization Rate (as defined
herein) was 100% and the weighted
average Credit Limit Utilization Rate
was approximately %. As of the Cut-off
Date,
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approximately ___% by Cut-off Date
Principal Balance of theMortgage Loans
represented first liens on the related
Mortgaged Properties, while
approximately ___% of the Mortgage Loans
represented second liens. As of the
Cut-off Date, the Mortgage Loans had
remaining terms to scheduled maturity
ranging from ___ months to ___ months
and had a weighted average of
approximately ___ months. See "The Home
Equity Lending Program" and "Description
of the Mortgage Loans" herein.
Distribution Date..................... The ____ day of each month or, if such
day is not a Business Day, the next
succeeding Business Day, commencing with
_______, 199_. A "Business Day" is any
day other than a Saturday or Sunday or
another day on which banking
institutions in New York, New York [and
____________] are authorized or
obligated by law, regulations or
executive order to be closed.
Final Scheduled
Distribution Dates............... With respect to the Certificates,
___________________. To the extent not
previously paid, the principal balance
(the "Security Principal Balance") of
the Notes will be due on the
Distribution Date in _______, 199_.
Failure to pay the full principal
balance of Notes on or before the
applicable final scheduled payment dates
constitutes an Event of Default under
the Indenture.
Record Date........................... The last day preceding a Distribution
Date or, if the Securities are no longer
Book-Entry Securities, the last day of
the month preceding a Distribution Date.
Collections........................... All collections on the Mortgage Loans
will be allocated by the Master Servicer
in accordance with the Loan Agreements
between amounts collected in respect of
interest ("Interest Collections") and
amounts collected in respect of
principal ("Principal Collections" and
collectively with Interest Collections,
the "Collections"). The Master Servicer
will generally deposit Collections
distributable to the Holders in an
account established for such purpose
under the Servicing Agreement (the
"Collection Account"). See "Description
of the Master Servicing Agreement --
Allocations and Collections" herein and
"The Agreements -- Payments on Loans;
Deposits to Security Account" and "--
Collection Procedures" in the
Prospectus.
Description of the Securities.........
A. Distributions...................On each Distribution Date, collections
on the Mortgage Loans will be applied in
the following order of priority:
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(i) to the Master Servicer, the
Servicing Fee;
(ii) as payment for the accruedinterest
due and any overdue accrued
interest (with interest thereon)
on the respective Security
Principal Balances of the Notes
and the Certificates;
(iii) as principal on the
Securities, the excess of
Principal Collections over
Additional Balances created during
the preceding Collection Period,
such amount to be allocated
between the Notes and
Certificates, pro rata, based on
their respective Security
Principal Balances;
(iv) as principal on the
Securities, as payment for any
Liquidation Loss Amounts on the
Mortgage Loans;
(v) as payment for the premium on
the Policy;
(vi) to reimburse prior draws made
on the Policy; and
(vii) any remaining amounts to the
Seller.
As to any Distribution Date, the
"Collection Period" is the calendar
month preceding the month of such
Distribution Date.
"Liquidation Loss Amount" means with
respect to any Liquidated Mortgage
Loan, the unrecovered Principal Balance
thereof at the end of the related
Collection Period in which such Mortgage
Loan became a Liquidated Mortgage Loan
after giving effect to the Net
Liquidation Proceeds in connection
therewith.
B. Note Rate.......................... Interest will accrue on the unpaid
Security Principal Balance of the Notes
at the per annum rate (the "Note Rate")
equal to ___% per annum from the Closing
Date to the first Distribution Date and
thereafter interest will accrue on the
Notes from and including the preceding
Distribution Date to but excluding such
current Distribution Date (each, an
"Interest Accrual Period") at [a
floating rate equal to LIBOR (as defined
herein) plus ___%] [___%]. [Interest
will be calculated on the basis of the
actual number of days in each Interest
Accrual Period divided by 360.] A
failure to pay interest on any Notes on
any Distribution Date that continues for
five days constitutes an Event of
Default under the Indenture.
C. Pass-Through Rate.................. Interest will accrue on the unpaid
Principal Balance of the Certificates at
the per annum rate (the "Pass-Through
Rate") equal to ___% per annum from the
Closing Date to the first
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Distribution Date and thereafter
interest will accrue on the Certificates
for each Interest Accrual Period at [a
floating rateequal to LIBOR (as defined
herein) plus ___%] [___%]. [Interest
will be calculated on the basis of the
actual number of days in each Interest
Accrual Period divided by 360.] A
failure to pay interest on any
Certificates on any Distribution Date
that continues for five days constitutes
an Event of Default under the Trust
Agreement.
D. Form and Registration.............. The Securities will initially be
delivered in book-entry form
("Book-Entry Securities"). Holders of
such Securities may elect to hold their
interests through The Depository Trust
Company ("DTC"), [in the United States,
or Centrale de Livraison de Valeurs
Mobilieres S.A. ("Cedel") or the
Euroclear System ("Euroclear"), in
Europe]. Transfers within DTC [, Cedel
or Euroclear, as the case may be,] will
be in accordance with the usual rules
and operating procedures of the relevant
system. So long as the Securities are
Book-Entry Securities, such Securities
will be evidenced by one or more
securities registered in the name of
Cede & Co. ("Cede"), as the nominee of
DTC [or one of the relevant depositaries
(collectively, the "European
Depositaries")]. Cross-market transfers
between persons holding directly or
indirectly through DTC[, on the one
hand, and counterparties holding
directly or indirectly through Cedel or
Euroclear, on the other,] will be
effected in DTC through Citibank N.A.
("Citibank") or The Chase Manhattan Bank
("Chase") the relevant depositaries of
Cedel and Euroclear, respectively, and
each a participating member of DTC. The
Securities will initially be registered
in the name of Cede. The interests of
such Holders will be represented by book
entries on the records of DTC and
participating members thereof. No Holder
of a Security will be entitled to
receive a definitive note representing
such person's interest, except in the
event that Securities in fully
registered, certificated form
("Definitive Securities") are issued
under the limited circumstances
described in "Description of the
Securities ___ Book-Entry Registration
of Securities" in the Prospectus. All
references in this Prospectus Supplement
to Securities reflect the rights of
Holders of such Notes only as such
rights may be exercised through DTC and
its participating organizations for so
long as such Securities are held by DTC.
See "Risk Factors -- Book-Entry
Securities" herein.
E. Denominations...................... The Securities will be issued in minimum
denominations of $[________] and
integral multiples thereof.
[Final Payment of Principal;
Termination..................... The Trust Fund will terminate on the
Distribution Date following the earlier
of (i) _________________________ and
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(ii) the final payment or other
liquidation of the last Mortgage Loan in
the Trust Fund. The Mortgage Loans will
be subjectto optional repurchase by the
Master Servicer on any Distribution Date
after the Principal Balance is reduced
to an amount less than or equal to $
(____% of the initial Principal
Balance). The repurchase price will be
equal to the sum of the outstanding
Principal Balance and accrued and unpaid
interest thereon at the weighted average
of the Loan Rates through the day
preceding the final Distribution Date.
See "Description of the Securities --
Optional Termination" herein and "The
Agreements -- Termination; Optional
Termination" in the Prospectus.
[Letter of Credit]
[Surety Bond]
Issuer........................ _________________ (the "[Letter of
Credit] [Surety Bond] Issuer"). See "The
[Letter of Credit] [Surety Bond] Issuer"
herein.
[Letter of Credit]
[Surety Bond]................... On the Closing Date, the [Letter of
Credit] [Surety Bond] Issuer will issue
a [letter of credit] [surety bond] (the
"[Letter of Credit] [Surety Bond]") in
favor of the Owner Trustee on behalf of
the Trust Fund. In the event that, on
any Distribution Date, available amounts
on deposit in the Collection Account
with respect to the preceding Collection
Period are insufficient to provide for
the payment of the amount required to be
distributed to the Holders and the
Master Servicer on such Distribution
Date, the Trustee will draw on the
[Letter of Credit] [Surety Bond], to the
extent of the [Letter of Credit] [Surety
Bond] Amount for such Distribution Date,
in an amount equal to such deficiency.
See "Description of the Securities --
Distributions" herein and "Credit
Enhancement" in the Prospectus.
[[Letter of Credit]
[Surety Bond]
Amount......................... The amount available under the [Letter
of Credit] [Surety Bond] (the "[Letter
of Credit] [Surety Bond] Amount") for
the initial Distribution Date will be
$_______. For each Distribution Date
thereafter, the [Letter of Credit]
[Surety Bond] Amount will equal the
lesser of (i) ___% of the Pool Balance
as of the first day of the preceding
Collection Period (after giving effect
to any amounts distributed with respect
to principal of the Mortgage Loans on
the Distribution Date occurring in such
preceding Collection Period) and (ii)
the [Letter of Credit] [Surety Bond]
Amount as of the first day of the
preceding Collection Period, minus any
amounts drawn under the [Letter of
Credit] [Surety Bond] during such
preceding Collection Period, plus any
amounts paid to the [Letter of Credit]
[Surety Bond] Issuer on the Distribution
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Date occurring in such preceding
Collection Period up to theamount of any
previous draws on the [Letter of Credit]
[Surety Bond].]
Federal Income Tax
Consequences.................... In the opinion of Tax Counsel (as
defined herein), for federal income tax
purposes, the Securities will be
characterized as indebtedness, and the
Trust Fund will not be characterized as
an association (or publicly traded
partnership) taxable as a corporation.
Each holder of a Security, by the
acceptance of a Security, will agree to
treat the Security as indebtedness for
federal, state and local income and
franchise tax purposes. See "Federal
Income Tax Consequences" and "State Tax
Consequences" herein and "Federal Income
Tax Consequences" and "State Tax
Considerations" in the Prospectus
concerning the application of federal,
state and local tax laws.
ERISA Considerations.................. Generally, plans that are subject to the
requirements of ERISA and the Code are
permitted to purchase instruments like
the Notes that are debt under applicable
state law and have no "substantial
equity features" without reference to
the prohibited transaction requirements
of ERISA and the Code. In the opinion of
ERISA Counsel (as defined herein), the
Notes will be classified as indebtedness
without substantial equity features for
ERISA purposes. However, if the Notes
are deemed to be equity interests and no
statutory, regulatory or administrative
exemption applies, the Trust Fund will
hold plan assets by reason of a Plan's
investment in the Notes. Accordingly,
any Plan fiduciary considering whether
to purchase the Notes on behalf of a
Plan should consult with its counsel
regarding the applicability of the
provisions of ERISA and the Code and the
availability of any exemptions. Under
current law the purchase and holding of
the Certificates by or on behalf of any
employee benefit plan (a "Plan") subject
to the fiduciary responsibility
provisions of the Employee Retirement
Income Security Act of 1974, as amended
("ERISA"), may result in a "prohibited
transaction" within the meaning of ERISA
and the Code or other violation of the
fiduciary responsibility provisions of
ERISA and Section 4975 of the Code.
[Consequently, Certificates may not be
transferred to a proposed transferee
that is a Plan subject to ERISA or that
is described in Section 4975(e)(1) of
the Code, or a person acting on behalf
of any such Plan or using the assets of
such plan unless the Owner Trustee and
the Depositor receive the opinion of
counsel reasonably satisfactory to the
Owner Trustee and the Depositor to the
effect that the purchase and holding of
such Certificate will not result in the
assets of the Trust Fund being deemed to
be "plan assets" for ERISA purposes and
will not be a prohibited
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transaction under ERISA or Section 4975
of the Code.] See "ERISA Considerations"
herein and in the Prospectus.
Legal Investment...................... The Securities will not constitute
"mortgage related securities" for
purposes of the Secondary Mortgage
Market Enhancement Act of 1984
("SMMEA"), because some of the Mortgages
securing the Mortgage Loans are not
first mortgages. Accordingly, many
institutions with legal authority to
invest in comparably rated securities
based solely on first mortgages may not
be legally authorized to invest in the
Certificates. See "Legal Investment
Considerations" herein and "Legal
Investment" in the Prospectus.
Rating................................ It is a condition to the issuance of the
Securities that they be rated _________
by at least ____ nationally recognized
statistical rating organizations (each a
"Rating Agency"). In general, ratings
address credit risk and do not address
the likelihood of prepayments. A
security rating is not a recommendation
to buy, sell or hold securities.
Risk Factors.......................... For a discussion of certain risks
associated with an investment in the
Securities, see "Risk Factors" on Page
S-12 herein and on Page 12 in the
Prospectus.
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RISK FACTORS
Investors should consider the following risks in connection with the
Purchase of the Securities.
Consequences of Owning Book-Entry Securities
Issuance of the Securities in book-entry form may reduce the liquidity of
such Securities in the secondary trading market since investors may be unwilling
to purchase Securities for which they cannot obtain physical securities. See
"Description of the Securities--Book-Entry Securities" herein and "Risk
Factors-- Book-Entry Registration" in the Prospectus.
Since transactions in the Securities can be effected only through DTC,
CEDEL, Euroclear, participating organizations, indirect participants and certain
banks, the ability of a Security Owner to pledge a Security to persons or
entities that do not participate in the DTC, CEDEL or Euroclear system may be
limited due to lack of a physical security representing the Securities. See
"Description of the Securities--Book-Entry Securities" herein and "Risk
Factors--Book-Entry Registration" in the Prospectus.
Security Owners may experience some delay in their receipt of distributions
of interest and principal on the Securities since such distributions will be
forwarded by the Trustee to DTC and DTC will credit such distributions to the
accounts of its Participants (as defined herein) which will thereafter credit
them to the accounts of Security Owners either directly or indirectly through
indirect participants. See "Description of the Securities--Book-Entry
Securities" herein and "Risk Factors--Book-Entry Registration" in the
Prospectus.
Cash Flow Considerations and Risks
Minimum monthly payments will at least equal and may exceed accrued
interest. Even assuming that the Mortgaged Properties provide adequate security
for the Mortgage Loans, substantial delay could be encountered in connection
with the liquidation of Mortgage Loans that are delinquent and corresponding
delays in the receipt of related proceeds by Holders could occur if the [Letter
of Credit] [Surety Bond] provider were unable to perform on its obligations
under the [Letter of Credit] [Surety Bond]. Further, liquidation expenses (such
as legal fees, real estate taxes, and maintenance and preservation expenses)
will reduce the proceeds payable to Holders and thereby reduce the security for
the Mortgage Loans. In the event any of the Mortgaged Properties fail to provide
adequate security for the related Mortgage Loans, Holders could experience a
loss if the [Letter of Credit] [Surety Bond] provider were unable to perform its
obligations under the [Letter of Credit] [Surety Bond].]
Prepayment Considerations and Risks
Substantially all of the Mortgage Loans may be prepaid in whole or in part
at any time without penalty. Home equity loans, such as the Mortgage Loans, have
been originated in significant volume only during the past few years and neither
the Depositor nor the Master Servicer is aware of any publicly available studies
or statistics on the rate of prepayment of such loans. Generally, home equity
loans are not viewed by borrowers as permanent financing. Accordingly, the
Mortgage Loans may experience a higher rate of prepayment than traditional
loans. The Trust Fund's prepayment experience may be affected by a wide variety
of factors, including general economic conditions, interest rates, the
availability of alternative financing and homeowner mobility. In addition,
substantially all of the Mortgage Loans contain due-on-sale provisions and the
Master Servicer intends to enforce such provisions unless (i) such enforcement
is not permitted by applicable law or (ii) the Master Servicer, in a manner
consistent with reasonable commercial practice, permits the purchaser of the
related Mortgaged Property to assume the Mortgage Loan. To the extent permitted
by applicable law, such assumption will not release the original borrower from
its obligation under any such Mortgage Loan. See "Certain Legal Aspects of the
Loans--Due-on-Sale Clauses" in the Prospectus for a description of certain
provisions of the Credit Line Agreements that may affect the prepayment
experience
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on the Mortgage Loans. The yield to maturity and weighted average life of the
Securities will be affected primarily by the rate and timing of prepayments on
the Mortgage Loans. Any reinvestment risks resulting from a faster or slower
incidence of prepayment of Mortgage Loans will be borne entirely by the
Securityholders.
Certificate Rating. The rating of the Securities will depend primarily on
an assessment by the Rating Agencies of the Loans and upon the claims-paying
ability [Letter of Credit] [Surety Bond] provider. Any reduction in a rating
assigned to the claims-paying ability of the [Letter of Credit][Surety Bond]
provider below the rating initially given to the Securities may result in a
reduction in the rating of the Securities. The rating by the Rating Agencies of
the Securities is not a recommendation to purchase, hold or sell the Securities,
inasmuch as such rating does not comment as to the market price or suitability
for a particular investor. There is no assurance that the ratings will remain in
place for any given period of time or that the ratings will not be lowered or
withdrawn by the Rating Agencies. In general, the ratings address credit risk
and do not address the likelihood of prepayments. The ratings of the Securities
do not address the possibility of the imposition of United States withholding
tax with respect to non-U.S. persons.
Legal Considerations--Lien Priority
The Mortgage Loans are secured by deeds of trust or mortgages (which
generally are second mortgages). With respect to Mortgage Loans that are secured
by first mortgages, the Master Servicer has the power under certain
circumstances to consent to a new mortgage lien on the Mortgaged Property having
priority over such Mortgage Loan. Mortgage Loans secured by second mortgages are
entitled to proceeds that remain from the sale of the related Mortgage Property
after any related senior mortgage loan and prior statutory liens have been
satisfied. In the event that such proceeds are insufficient to satisfy such
loans and prior liens in the aggregate [and the [Letter of Credit] [Surety Bond]
provider is unable to perform its obligations under the [Letter of Credit]
[Surety Bond] or if the coverage under the [Letter of Credit] [Surety Bond] is
exhausted] the Trust Fund and, accordingly, the Holders, bear (i) the risk of
delay in distributions while a deficiency judgment against the borrower is
obtained and (ii) the risk of loss if the deficiency judgment cannot be obtained
or is not realized upon. See "Certain Legal Aspects of the Mortgage Loans" in
the Properties.
Legal Considerations--Security Interest
Under the terms of the Purchase Agreement, so long as [Countrywide's]
long-term senior unsecured debt is rated at least "____" by ____ and "________"
by ______, the Master Servicer will be entitled to maintain possession of the
documentation relating to each Mortgage Loan sold by it, including the Credit
Line Agreements and the Related Documents or other evidence of indebtedness
signed by the borrower, and the assignments of the related mortgages to the
Trust will not be required to be recorded. Failure to deliver the Related
Documents to the Owner Trustee will have the result in most (if not all) of the
states in which the Related Documents will be held, and failure to record the
assignments of the related mortgages to the Owner Trustee will have the result
in certain states in which the Mortgaged Properties are located, of making the
sale of the Cut-off Date Principal Balances, Additional Balances and Related
Documents potentially ineffective against (i) any creditors of [Countrywide],
who may have been fraudulently or inadvertently induced to rely on the Mortgage
Loans as assets of [Countrywide], or (ii) any purchaser of a Mortgage Loan who
had no notice of the prior conveyance to the Trust Fund if such purchaser
perfects his interest in the Mortgage Loan by taking possession of the Related
Documents or other evidence of indebtedness or otherwise. In such event, the
Trust Fund would be an unsecured creditor of [Countrywide].
Bankruptcy and Insolvency Risks
The sale of the Mortgage Loans from the Seller to the Depositor pursuant to
the Purchase Agreement will be treated as a sale of the Mortgage Loans. The
Seller will warrant that such transfer is either a sale of
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its interest in the Mortgage Loans or a grant of a first priority perfected
security interest therein. In the event of an insolvency of the Seller, the
receiver of the Seller may attempt to recharacterize the sale of the Mortgage
Loans as a borrowing by the Seller secured by a pledge of the Mortgage Loans. If
the receiver decided to challenge such transfer, delays in payments of the
Securities and possible reductions in the amount thereof could occur. The
Depositor will warrant in the Trust Agreement that the transfer of its interest
in the Mortgage Loans to the Trust Fund is a valid transfer and assignment of
such interest.
If a conservator, receiver or trustee were appointed for the Seller, or if
certain other events relating to the bankruptcy or insolvency of the Seller were
to occur, Additional Balances would not be transferred by the Seller to the
Trust Fund. In such an event, an Event of Default under the Pooling and
Servicing Agreement and Indenture would occur and the Owner Trustee would
attempt to sell the Mortgage Loans (unless Holders holding Securities evidencing
undivided interests aggregating at least 51% of each of the Security Principal
Balance of the Notes and the Certificates instruct otherwise), thereby causing
early payment of the Security Principal Balance of the Notes and the
Certificates.
In the event of a bankruptcy or insolvency of the Master Servicer, the
bankruptcy trustee or receiver may have the power to prevent the applicable
Trustee or the Holders from appointing a successor Master Servicer.
[Geographic Concentration. As of the Cut-off Date, approximately _____% (by
Cut-off Date Principal Balance) of the Mortgaged Properties are located in the
State of __________. An overall decline in the __________ residential real
estate market could adversely affect the values of the Mortgaged Properties
securing such Mortgage Loans such that the Principal Balances of the related
Mortgage Loans, together with any primary financing on such Mortgaged
Properties, could equal or exceed the value of such Mortgaged Properties. As the
residential real estate market is influenced by many factors, including the
general condition of the economy and interest rates, no assurances may be given
that the __________ residential real estate market will not weaken. If the
__________ residential real estate market should experience an overall decline
in property values after the dates of origination of the Mortgage Loans, the
rates of losses on the Mortgage Loans would be expected to increase, and could
increase substantially.]
Master Servicer's Ability to Change the Terms of the Mortgage Loans
The Master Servicer may agree to changes in the terms of a Credit Line
Agreement, provided that such changes (i) do not adversely affect the interest
of the Holders or the [Letter of Credit] [Surety Bond] provider, and (ii) are
consistent with prudent business practice. There can be no assurance that
changes in applicable law or the marketplace for home equity loans or prudent
business practice will not result in changes in the terms of the Mortgage Loans.
In addition, the Master Servicing Agreement permits the Master Servicer, within
certain limitations described therein, to increase the Credit Limit of the
related Mortgage Loan or reduce the Margin for such Mortgage Loan. Any such
increase in the Credit Limit of a Mortgage Loan would increase the Loan-to-Value
Ratio of such Mortgage Loan and, accordingly, would increase the risk of the
Trust Fund's investment in such Mortgage Loan. In addition, any reduction in the
Margin of a Mortgage Loan would reduce the excess cash flow available to absorb
losses.
Delinquent Mortgage Loans
The Trust Fund will include Mortgage Loans which are __ or fewer days
delinquent. The Cut-off Date Principal Balance of such delinquent Mortgage Loans
was $______________.]
For a discussion of additional risks pertaining to the Securities, see
"Risk Factors" in the Prospectus.
S-14
<PAGE>
<PAGE>
THE TRUST FUND
General
The Issuer, [Countrywide] Home Equity Loan Trust 199_, is a business trust
formed under the laws of the State of Delaware pursuant to the Trust Agreement
for the transactions described in this Prospectus Supplement. The Trust
Agreement constitutes the "governing instrument" under the laws of the State of
Delaware relating to business trusts. After its formation, the Issuer will not
engage in any activity other than (i) acquiring, holding and managing the
Mortgage Loans and the other assets of the Trust Fund and proceeds therefrom,
(ii) issuing the Notes and the Certificates, (iii) making payments on the Notes
and the Certificates and (iv) engaging in other activities that are necessary,
suitable or convenient to accomplish the foregoing or are incidental thereto or
connected therewith.
The property of the Trust Fund will consist of: (i) each of the Mortgage
Loans that are _________; (ii) collections on the Mortgage Loans received after
the Cut-off Date; (iii) Mortgaged Properties relating to the Mortgage Loans that
are acquired by foreclosure or deed in lieu of foreclosure; (iv) the Collection
Account and the Distribution Account (excluding net earnings thereon); (v) the
[Letter of Credit] [Surety Bond]; and (vi) an assignment of the Depositor's
rights under the Purchase Agreement, including all rights of the Depositor to
purchase Additional Balances.
The Trust Fund's principal offices are in __________, Delaware, in care of
________________________, as Owner Trustee, at [ ].
THE [LETTER OF CREDIT][SURETY BOND] ISSUER
The following information with respect to _________ ("_______") has been
furnished by __________. Accordingly, none of the Issuer, the Depositor or the
Master Servicer makes any representation as to the accuracy and completeness of
such information.
[Description of Letter of Credit/Surety Issuer]
THE MASTER SERVICER
General
The Master Servicer will service the Mortgage Loans in accordance with the
terms set forth in the Master Servicing Agreement. The Master Servicer may
perform any of its obligations under the Master Servicing Agreement through one
or more subservicers. Notwithstanding any such subservicing arrangement, the
Master Servicer will remain liable for its servicing duties and obligations
under the Master Servicing Agreement as if the Master Servicer alone were
servicing the Mortgage Loans. As of the Closing Date, the Master Servicer will
service the Mortgage Loans without subservicing arrangements.
The Master Servicer
[Countrywide Home Loans, Inc. ("Countrywide"), a New York corporation and a
subsidiary of Countrywide Credit Industries, Inc., will act as Master Servicer
for the Mortgage Loans pursuant to the Master Servicing Agreement. Countrywide
is engaged primarily in the mortgage banking business, and as such, originates,
purchases, sells and services mortgage loans. Countrywide originates mortgage
loans through a retail branch system and through mortgage loan brokers and
correspondents nationwide.
S-15
<PAGE>
<PAGE>
Countrywide's mortgage loans are principally first-lien, fixed or adjustable
rate mortgage loans secured by single-family residences. Countrywide began
servicing home equity lines of credit in _______ 19__.
At ______________, 199_, Countrywide provided servicing for approximately
$______ billion aggregate principal amount of first-lien mortgage loans,
substantially all of which are being serviced for unaffiliated persons. At
_____________, 199_, Countrywide provided servicing for approximately $______
million aggregate principal amount of first and second lien mortgage loans
originated under home equity lines of credit.
The principal executive offices of Countrywide are located at 155 North
Lake Avenue, Pasadena, California 91101-7139. Its telephone number is (818)
304-8400. Countrywide conducts operations from its headquarters in Pasadena and
from offices located through the nation.]
THE HOME EQUITY LOAN PROGRAM
Underwriting Procedures Relating to Home Equity Loans
The following is a description of the underwriting procedures customarily
employed by the Seller with respect to home equity loans. The underwriting
process is intended to assess the applicant's credit standing and repayment
ability, and the value and adequacy of the real property security as collateral
for the proposed loan. Exceptions to the Seller's underwriting guidelines will
be made when compensating factors are present. Such factors include the
borrower's employment stability, credit history, disposable income, equity in
the related property and the nature of the underlying first mortgage loan.
Each applicant for a home equity loan is required to complete an
application which lists the applicant's assets, liabilities, income, credit and
employment history and other demographic and personal information. If
information in the loan application demonstrates that there is sufficient income
and equity in the real property to justify making a home equity loan, the Seller
will conduct a further credit investigation of the applicant. This investigation
includes obtaining and reviewing an independent credit bureau report on the
credit history of the applicant in order to evaluate the applicant's ability to
repay. The credit report typically contains information relating to such matters
as credit history with local merchants and lenders, installment debt payments
and any record of delinquencies, defaults, bankruptcy, collateral repossessions,
suits or judgments.
The Seller originates or acquires mortgage loans pursuant to alternative
sets of underwriting criteria under its Alternative Documentation Loan Program
(the "Alternative Documentation Program") and its Reduced Documentation Loan
Program (the "Reduced Documentation Program"). The Alternative Documentation
Program permits a borrower to provide W-2 forms instead of tax returns covering
the most recent two years, permits bank statements in lieu of verifications of
deposits and permits alternative methods of employment verification. Under the
Reduced Documentation Program, relatively more emphasis is placed on property
underwriting than on credit underwriting and certain credit underwriting
documentation concerning income and employment verification therefore is waived.
Mortgage loans underwritten under the Reduced Documentation Program generally
are limited to self-employed borrowers with credit histories that demonstrate an
established ability to repay indebtedness in a timely fashion.
Full appraisals are generally performed on all home equity loans which at
origination had a principal balance greater than $100,000. Such appraisals are
determined on the basis of a Seller-approved, independent third-party, fee-based
appraisal completed on forms approved by Federal National Mortgage Association
("FNMA") or Federal Home Loan Mortgage Corporation ("FHLMC"). For loans which
had at origination a principal balance equal to or less than $100,000, a
drive-by evaluation is generally completed by a state licensed, independent
third-party, professional appraiser on forms approved by either FNMA or FHLMC.
S-16
<PAGE>
<PAGE>
The drive-by evaluation is an exterior examination of the premises by the
appraiser to determine that the property is in good condition. The appraisal is
based on various factors, including the market value of comparable homes and the
cost of replacing the improvement and generally is required to have been made
not earlier than 150 days prior to the date of origination of the Mortgage Loan.
The minimum and maximum loan amounts for home equity loans are $10,000 and
$500,000, respectively. Borrowers may draw under the home equity loans in
minimum amounts of $250 and maximum amounts up to the remaining available
credit thereunder, in each case after giving effect to all prior draws and
payments thereon.
After obtaining all applicable employment, credit and property information,
the Seller uses a debt-to-income ratio to assist in determining whether the
prospective borrower has sufficient monthly income available to support the
payments of principal and interest on the home equity loan in addition to any
senior mortgage loan payments (including any escrows for property taxes and
hazard insurance premiums) and other monthly credit obligations. The
"debt-to-income ratio" is the ratio of the borrower's total monthly payments
(assumed to be based on the applicable fully indexed interest rate plus a margin
of 2%) to the borrower's gross monthly income. Based on the foregoing, for loans
with Combined Loan-to-Value Ratios of 90% or less, the maximum monthly
debt-to-income ratio is 45%. For loans with Combined Loan-to-Value Ratios
greater than 90%, the maximum monthly debt-to-income ratio is generally 38%.
Variations in the monthly debt-to-income ratios limits are permitted based on
compensating factors. The Seller currently offers home equity loan products
that allow maximum Combined Loan-to-Value Ratios of 70%, 80%, 90% and 100%.
It is generally the Seller's policy to require a title search before it
makes a home equity loan for amounts less than or equal to $100,000. In
addition, if the home equity loan has an original principal balance of $100,000
or more, the Seller requires that the borrower obtain an American Land Title
Association ("ALTA") policy, or other assurance of title customary in the
relevant jurisdiction. In addition, ALTA title policies are generally obtained
in situations where the property is on leased land or there has been a change in
title or such home equity loan is in first lien position.
Servicing of the Mortgage Loans
The Master Servicer has established standard policies for the servicing and
collection of the home equity loans. Servicing includes, but is not limited to,
(i) the collection and aggregation of payments relating to the Mortgage Loans;
(ii) the supervision of delinquent Mortgage Loans, loss mitigation efforts,
foreclosure proceedings and, if applicable, the disposition of Mortgaged
Properties; and (iii) the preparation of tax related information in connection
with the Mortgage Loans.
Billing statements are mailed monthly by the Master Servicer. The statement
details all debits and credits and specifies the minimum payment due and the
available credit line. Notice of changes in the applicable loan rate are
provided by the Master Servicer to the Mortgagor with such statements. All
payments are due by the fifteenth day of the month.
With respect to Mortgage Loans, the general policy of the Master Servicer
is to initiate foreclosure in the underlying property (i) after such loan is 75
days or more delinquent and satisfactory arrangements cannot be made with the
Mortgagor; or (ii) if a notice of default on a senior lien is received by the
Master Servicer. Foreclosure proceedings may be terminated if the delinquency is
cured. Mortgage Loans to borrowers in bankruptcy proceedings may be restructured
in accordance with law and with a view to maximizing recovery of such loans,
including any deficiencies.
Once foreclosure is initiated by the Master Servicer, a foreclosure
tracking system is used to monitor the progress of the proceedings. The system
includes state specific parameters to monitor whether proceedings are
progressing within the time frame typical for the state in which the property is
located. During the foreclosure proceeding, the Master Servicer determines the
amount of the foreclosure bid and whether to liquidate the loan.
After foreclosure, if the home equity loan is secured by a first mortgage
lien, the Master Servicer may liquidate the Mortgaged Property and charge off
the home equity loan balance which was not recovered through liquidation
proceeds. If the Mortgaged Property was subject to a senior lien, the Master
Servicer will
S-17
<PAGE>
<PAGE>
either directly manage the foreclosure sale of the property and satisfy such
lien at the time of sale or take other action as deemed necessary to protect the
interest in the Mortgaged Property. If in the judgment of the Master Servicer,
the cost of maintaining or purchasing the senior lien position exceeds the
economic benefit of such action, the Master Servicer will generally charge off
the entire home equity loan and may seek a money judgment against the borrower.
Servicing and charge-off policies and collection practices may change over
time in accordance with, among other things, the Master Servicer's business
judgment, changes in the portfolio and applicable laws and regulations.
Foreclosure and Delinquency Experience
The following table summarizes the delinquency and foreclosure experience,
respectively, on the dates indicated, of home equity loans serviced by the
Master Servicer. Since [Countrywide] only began servicing home equity loans in
_______ 199_, the delinquency and foreclosure percentages may be affected by the
size and relative lack of seasoning of the servicing portfolio because many of
such loans were not outstanding long enough to give rise to some or all of the
periods of delinquency indicated in the chart below. Accordingly, the
information should not be considered as a basis for assessing the likelihood,
amount or severity of delinquency or losses on the Mortgage Loans and no
assurances can be given that the foreclosure and delinquency experience
presented in the table below will be indicative of such experience on the
Mortgage Loans:
Delinquency Status as of _____________, 199_*
Dollars Percent Units Percent
------- ------- ----- -------
Current............................. $______ ______% _____ _______%
30-59 days.......................... ______ ______ _____ _______
60-89 days.......................... ______ ______ _____ _______
90+ days............................
------ ------ ----- -------
Total $ 100.00% 100.00%
======== ====== ====== =======
- ----------
* Delinquencies are reported on a contractual basis.
As of _____________, 199_, ______ loans with an aggregate balance of
$___________ are in bankruptcy and ________ loans with an aggregate balance of
$___________ are in foreclosure. Of the loans in foreclosure, there will be a
____________ 199_ charge off of $________. In addition to this charge off, there
is an anticipated charge off of approximately $_____________ which may also be
realized in --------------.]
DESCRIPTION OF THE MORTGAGE LOANS
General
The Mortgage Loans were originated pursuant to loan agreements and
disclosure statements (the "Credit Line Agreements") and are secured by
mortgages or deeds of trust, which are either first or second
S-18
<PAGE>
<PAGE>
mortgages or deeds of trust, on Mortgaged Properties located in [__] states. The
Mortgaged Propertiessecuring the Mortgage Loans consist of residential
properties that are one- to four-family properties. See "--Mortgage Loan Terms"
below.
The Cut-off Date Pool Balance is $______________, which is equal to the
aggregate Principal Balances of the Mortgage Loans as of the Cut-off Date. As of
the Cut-off Date, the Mortgage Loans were not more than 89 days delinquent. The
average Cut-off Date Principal Balance was approximately $_________, the minimum
Cut-off Date Principal Balance was zero, the maximum Cut-off Date Principal
Balance was $________, the minimum Loan Rate and the maximum Loan Rate as of the
Cut-off Date were ___% and ___% per annum, respectively, and the weighted
average Loan Rate as of the Cut-off Date was approximately ___% per annum. As of
the Cut-off Date, the weighted average Credit Limit Utilization Rate was
approximately ___%, the minimum Credit Limit Utilization Rate was zero and the
maximum Credit Limit Utilization Rate was 100%. The "Credit Limit Utilization
Rate" is determined by dividing the Cut-off Date Principal Balance of a Mortgage
Loan by the Credit Limit of the related Credit Line Agreement. The remaining
term to scheduled maturity for the Mortgage Loans as of the Cut-off Date ranged
from ___ months to ___ months and the weighted average remaining term to
scheduled maturity was approximately months. As of the Cut-off Date, the
Combined Loan-to-Value Ratio of the Mortgage Loans ranged from ___% to ______%
and the weighted average Combined Loan-to-Value Ratio was __%. The Combined
Loan-to-Value Ratio for a Mortgage Loan is the ratio (expressed as a percentage)
of (A) the sum of (i) the Credit Limit of the Mortgage Loan and (ii) any
outstanding principal balances of mortgage loans senior to such Mortgage Loan
(calculated at the date of origination of the Mortgage Loan) to (B) the lesser
of (i) the appraised value of the related Mortgaged Property as set forth in the
loan files at such date of origination or (ii) in the case of a Mortgaged
Property purchased within one year of the origination of the related Mortgage
Loan, the purchase price of such Mortgaged Property. Credit Limits under the
Mortgage Loans as of the Cut-off Date ranged from $________ to $________ and
averaged approximately $________. The weighted average second mortgage ratio
(which is the Credit Limit for the related Mortgage Loan, provided such Mortgage
Loan was in the second lien position, divided by the sum of such Credit Limit
and the outstanding principal balance of any mortgage loan senior to the related
Mortgage Loan) was approximately ___%. As of the Cut-off Date, approximately %
by Cut-off Date Principal Balance of the Mortgage Loans represented first liens
on the related Mortgaged Properties, while approximately ___% of the Mortgage
Loans represented second liens. As of the Cut-off Date, approximately ___% of
the Mortgage Loans are secured by Mortgaged Properties which are single-family
residences and ___% were owner-occupied. As of the Cut-off Date, approximately
___%, ___%, ___%, ___%, ___% and ___% by Cut-off Date Principal Balance are
located in [__________, ________, __________, _______, ______ and ________],
respectively.
Mortgage Loan Terms
[A borrower may access a Mortgage Loan by writing a check in a minimum
amount of $250. The Mortgage Loans bear interest at a variable rate which
changes monthly on the first business day of the related month with changes in
the applicable Index Rate. The Mortgage Loans are subject to a maximum per annum
interest rate (the "Maximum Rate") ranging from _____% to _____% per annum and
subject to applicable usury limitations. As of the Cut-off Date, the weighted
average Maximum Rate was approximately ___%. See "Certain Legal Aspects of the
Loans--Applicability of Usury Laws" in the Prospectus. The daily periodic rate
on the Mortgage Loans (the "Loan Rate") is the sum of the Index Rate plus the
spread (the "Margin") which generally ranges between ____% and ____% and had a
weighted average, as of the Cut-off Date, of approximately ___%, divided by 365
days. The "Index Rate" is based on the highest "prime rate" published in the
'Money Rates' table of The Wall Street Journal as of the first business day of
each calendar month.]
[Countrywide] offers an introductory loan rate on home equity lines of
credit which are originated with Combined Loan-to-Value Ratios of 75% and 80%.
The introductory rate applies to any payments made during the first three months
after origination. After such three month period, the Loan Rate will adjust to
S-19
<PAGE>
<PAGE>
the Index plus the applicable Margin. As of the Cut-off Date, approximately ___%
of the Mortgage Loans by Cut-off Date Principal Balance were subject to an
introductory rate of ____% per annum.
In general, the home equity loans may be drawn upon for a period (the "Draw
Period") of either five years (which may be extendible for an additional five
years, upon [Countrywide's] approval) or three years. Home equity loans with an
initial Draw Period of five years, which constitute approximately ___% of the
Mortgage Loans by Cut-off Date Principal Balance, are subject to a fifteen year
repayment period (the "Repayment Period") following the end of the Draw Period
during which the outstanding principal balance of the loan will be repaid in
monthly installments equal to [1/180] of the outstanding principal balance as of
the end of the Draw Period. Mortgage Loans with a Draw Period of three years,
which constitute approximately ___% of the Mortgage Loans by Cut-off Date
Principal Balance, are subject to a ten year Repayment Period following the end
of the Draw Period during which the outstanding principal balance of the loan
will be paid in monthly installments equal to [1/120] of the outstanding
principal balance as of the end of the Draw Period.
The minimum payment due during the Draw Period will be equal to the finance
charges accrued on the outstanding principal balance of the home equity loan
during the related billing period. The minimum payment due during the repayment
period will be equal to the sum of the finance charges accrued on the
outstanding principal balance of the Mortgage Loan during the related billing
period and the principal payment described above.
Set forth below is a description of certain characteristics of the Mortgage
Loans as of the Cut-off Date:
PRINCIPAL BALANCES
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-off Date
Range of Principal Balances Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ----------------- ----------------
<S> <C> <C> <C> <C>
$ ______ to $ ___________.......................... $
$ ______ to $ ___________..........................
$ ______ to $ ___________..........................
$ ______ to $ ___________..........................
$ ______ to $ ___________..........................
$ ______ to $ ___________..........................
$ ______ to $ ___________..........................
$ ______ to $ ___________..........................
$ ______ to $ ___________..........................
$ ______ to $ ___________..........................
$ ______ to $ ___________..........................
$ ______ to $ ___________..........................
$ ______ to $ ___________..........................
$ ______ to $ ___________..........................
$ ______ to $ ___________..........................
$ ______ to $ ___________..........................
$ ______ to $ ___________..........................
$ ______ to $ ___________..........................
$ ______ to $ ___________..........................
$ ______ to $ ___________..........................
$ ______ to $ ___________..........................
--------- ----------------- ----------------
$ ______ to $ ___________..........................
Total......................................... $ 100.00%
========== ================= ================
</TABLE>
S-20
<PAGE>
<PAGE>
GEOGRAPHIC DISTRIBUTION(1)
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-off Date
State Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ----------------- ----------------
<S> <C> <C> <C>
$
---------- ------------------ -----------------
Total......................................... $ 100.00%
=========== ================== =================
</TABLE>
- ----------
(1) Geographic location is determined by the address of the Mortgaged Property
securing the related Mortgage Loan.
S-21
<PAGE>
<PAGE>
COMBINED LOAN-TO-VALUE RATIOS(1)
<TABLE>
<CAPTION>
Number of Percent of Pool
Range of Combined Mortgage Cut-off Date by Cut-off Date
Loan-to-Value Ratios Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ----------------- ----------------
<S> <C> <C> <C> <C>
____% to ________%.................................
____% to ________%.................................
____% to ________%.................................
____% to ________%.................................
____% to ________%.................................
____% to ________%.................................
____% to ________%.................................
____% to ________%.................................
____% to ________%.................................
____% to ________%.................................
____% to ________%.................................
---------- ----------------- ----------------
____% to ________%.................................
Total......................................... $ 100.00%
========== ================= ================
</TABLE>
- ----------
(1) The ratio (expressed as a percentage) of (A) the sum of (i) the Credit
Limit of the Mortgage Loans and (ii) any outstanding principal balances of
mortgage loans senior to the Mortgage Loans (calculated at the date of
origination of the Mortgage Loans) to (B) the lesser of (i) the appraised
value of the related Mortgaged Property as set forth in loan files at such
date of origination or (ii) in the case of a Mortgaged Property purchased
within one year of the origination of the related Mortgage Loan, the
purchase price of such Mortgaged Property.
PROPERTY TYPE
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-off Date
Property Type Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ----------------- -----------------
<S> <C> <C> <C>
Single Family...................................... $ %
Two- to Four-Family................................
Condominium........................................
PUD................................................
---------- ------------------ -----------------
Total......................................... $ 100.00%
========== ================== =================
</TABLE>
S-22
<PAGE>
<PAGE>
LIEN PRIORITY
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-off Date
Lien Priority Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ----------------- -----------------
<S> <C> <C> <C>
First Lien......................................... $ %
Second Lien........................................
---------- ----------------- ----------------
Total......................................... $ 100.00%
========== ================== ================
</TABLE>
LOAN RATES(1)
<TABLE>
<CAPTION>
Number of Percent of Pool
Range of Mortgage Cut-off Date by Cut-off Date
Loan Rates Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ----------------- -----------------
<S> <C> <C> <C> <C>
______% to ________%...............................
______% to ________%............................... $ %
______% to ________%...............................
______% to ________%...............................
______% to ________%...............................
______% to ________%...............................
______% to ________%...............................
______% to ________%...............................
______% to ________%...............................
______% to ________%...............................
______% to ________%...............................
______% to ________%...............................
______% to ________%...............................
______% to ________%...............................
______% to ________%...............................
______% to ________%...............................
______% to ________%...............................
______% to ________%...............................
______% to ________%...............................
______% to ________%...............................
______% to ________%...............................
______% to ________%...............................
---------- ----------------- ----------------
Total......................................... $ 100.00%
========== ================= ================
</TABLE>
- ----------
(1) Approximately ___% of the Mortgage Loans by Cut-Of Date Principal Balance
are subject to an introductory rate of ____% per annum.
S-23
<PAGE>
<PAGE>
MARGIN
<TABLE>
<CAPTION>
Number of Percent of Pool
Range of Mortgage Cut-off Date by Cut-off Date
Margins Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ----------------- -----------------
<S> <C> <C> <C> <C>
____% to ______%................................... $
____% to ______%...................................
____% to ______%...................................
____% to ______%...................................
____% to ______%...................................
____% to ______%...................................
____% to ______%...................................
____% to ______%...................................
____% to ______%...................................
____% to ______%...................................
____% to ______%...................................
____% to ______%...................................
____% to ______%...................................
____% to ______%...................................
____% to ______%...................................
____% to ______%...................................
____% to ______%...................................
____% to ______%...................................
____% to ______%...................................
____% to ______%...................................
---------- ----------------- ----------------
Total......................................... $ 100.00%
========== ================= ================
</TABLE>
CREDIT LIMIT UTILIZATION RATES
<TABLE>
<CAPTION>
Number of Percent of Pool
Range of Credit Limit Mortgage Cut-off Date by Cut-off Date
Utilization Rates Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ----------------- -----------------
<S> <C> <C> <C> <C>
____% to _____% ................................... $
____% to _____% ................................... %
____% to _____% ...................................
____% to _____% ...................................
____% to _____% ...................................
____% to _____% ...................................
____% to _____% ...................................
____% to _____% ...................................
____% to _____% ...................................
____% to _____% ...................................
____% to _____% ...................................
---------- ----------------- ----------------
Total......................................... $ 100.00%
========== ================= ================
</TABLE>
S-24
<PAGE>
<PAGE>
CREDIT LIMITS
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-off Date
Range of Credit Limits Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ----------------- -----------------
<S> <C> <C> <C> <C>
$________ to $________ ............................ $
$________ to $________ ............................ %
$________ to $________ ............................
$________ to $________ ............................
$________ to $________ ............................
$________ to $________ ............................
$________ to $________ ............................
$________ to $________ ............................
$________ to $________ ............................
$________ to $________ ............................
$________ to $________ ............................
$________ to $________ ............................
$________ to $________ ............................
$________ to $________ ............................
$________ to $________ ............................
$________ to $________ ............................
$________ to $________ ............................
$________ to $________ ............................
$________ to $________ ............................
$________ to $________ ............................
$________ to $________ ............................
$________ to $________ ............................
---------- ----------------- ----------------
Total......................................... $ 100.00%
========== ================= ================
</TABLE>
MAXIMUM RATES
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-off Date
Maximum Rates Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ----------------- -----------------
<S> <C> <C> <C>
- -----%............................................. $ %
- -----%.............................................
- -----%.............................................
- -----%.............................................
---------- ----------------- ----------------
Total......................................... $ 100.00%
========== ================= ================
</TABLE>
S-25
<PAGE>
<PAGE>
MONTHS REMAINING TO SCHEDULED MATURITY(1)
<TABLE>
<CAPTION>
Number of Percent of Pool
Range of Months Mortgage Cut-off Date by Cut-off Date
Remaining to Scheduled Maturity Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ----------------- -----------------
<S> <C> <C> <C> <C>
___ to _____ ...................................... $
___ to _____ ...................................... %
___ to _____ ......................................
___ to _____ ......................................
___ to _____ ......................................
___ to _____ ......................................
___ to _____ ......................................
___ to _____ ......................................
___ to _____ ......................................
___ to _____ ......................................
___ to _____ ......................................
---------- ----------------- ----------------
Total......................................... $ 100.00%
========== ================= ================
</TABLE>
- ----------
(1) Assumes that the Draw Period for Mortgage Loans with five year Draw Periods
will be extended for an additional five years.
ORIGINATION YEAR
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-off Date
Origination Year Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ----------------- -----------------
<S> <C> <C> <C>
- ----............................................... $ %
- ----...............................................
---------- ----------------- ----------------
Total......................................... $ 100.00%
========== ================= ================
</TABLE>
DELINQUENCY STATUS
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-off Date
Number of Days Delinquent Loans Principal Balance Principal Balance
- --------------------------------------------------- ---------- ----------------- -----------------
<S> <C> <C> <C>
0 to 29............................................ $ %
30 to 59...........................................
60 to 89...........................................
---------- ----------------- ----------------
Total......................................... $ 100.00%
========== ================= ================
</TABLE>
S-26
<PAGE>
<PAGE>
Assignment of Mortgage Loans
At the time of issuance of the Securities, the Depositor will transfer to
the Trust Fund all of its right, title and interest in and to each Mortgage Loan
(including its right to purchase any Additional Balances arising in the future),
related Credit Line Agreements, mortgages and other related documents
(collectively, the "Related Documents"), without recourse, including all
collections received on or with respect to each such Mortgage Loan after the
Cut-off Date (exclusive of payments in respect of accrued interest due on or
prior to the Cut-off Date or due in the month of ______). The Owner Trustee,
concurrently with such transfer, will deliver the Securities. Each Mortgage Loan
transferred to the Trust Fund will be identified on a schedule delivered to the
Owner Trustee pursuant to the Purchase Agreement. Such schedule will include
information as to the Cutoff Date Principal Balance of each Mortgage Loan, as
well as information with respect to the Loan Rate.
The Purchase Agreement will permit the Seller to maintain possession of the
Related Documents and certain other documents relating to the Mortgage Loans
(the "Mortgage Files") and assignments of the Mortgage Loans to the Owner
Trustee will not be required to be recorded for so long as the long-term senior
unsecured debt of [Countrywide] is rated at least "________" by ___ and
"________" by _______. In the event that [Countrywide's] long-term senior
unsecured debt rating does not satisfy the above-described standards (an
"Assignment Event"), [Countrywide] will have 90 days to record assignments of
the mortgages for each such Mortgage Loan in favor of the Owner Trustee and 60
days to deliver the Mortgage Files pertaining to each such Mortgage Loan to the
Owner Trustee (unless opinions of counsel satisfactory to the Rating Agencies
and the [Letter of Credit][Surety Bond] provider to the effect that recordation
of such assignments or delivery of such documentation is not required in the
relevant jurisdiction to protect the interest of [Countrywide] and the Owner
Trustee in the Mortgage Loans). In lieu of delivery of original documentation,
[Countrywide] may deliver documents which have been imaged optically upon
delivery of an opinion of counsel that such documents do not impair the
enforceability of the transfer to the Trust Fund of the Mortgage Loans.
Within 90 days of on Assignment Event the Owner Trustee will review the
Mortgage Loans and the Related Documents and if any Mortgage Loan or Related
Document is found to be defective in any material respect and such defect is not
cured within 90 days following notification thereof to the Seller and the
Depositor by the Owner Trustee, the Seller will be obligated to repurchase the
Mortgage Loan and to deposit the Repurchase Price into the Collection Account.
Upon such retransfer, the Principal Balance of such Mortgage Loan will be
deducted from the Pool Balance. In lieu of any such repurchase, the Seller may
substitute an Eligible Substitute Mortgage Loan. Any such repurchase or
substitution will be considered a payment in full of such Mortgage Loan. The
obligation of the Seller to accept a transfer of a Defective Mortgage Loan is
the sole remedy regarding any defects in the Mortgage Loans and Related
Documents available to the Owner Trustee or the Holders.
With respect to any Mortgage Loan, the "Repurchase Price" is equal to the
Principal Balance of such Mortgage Loan at the time of any transfer described
above plus accrued and unpaid interest thereon to the date of repurchase.
An "Eligible Substitute Mortgage Loan" is a mortgage loan substituted by
the Depositor for a Defective Mortgage Loan which must, on the date of such
substitution, (i) have an outstanding Principal Balance (or in the case of a
substitution of more than one Mortgage Loan for a Defective Mortgage Loan, an
aggregate Principal Balance), not __% more or less than the Transfer Deficiency
relating to such Defective Mortgage Loan; (ii) have a Loan Rate not less than
the Loan Rate of the Defective Mortgage Loan and not more than 1% in excess of
the Loan Rate of such Defective Mortgage Loan; (iii) have a Loan Rate based on
the same Index with adjustments to such Loan Rate made on the same Interest Rate
Adjustment Date as that of the Defective Mortgage Loan; (iv) have a Margin that
is not less than the Margin of the Defective Mortgage Loan and not more than ___
basis points higher than the Margin for the Defective Mortgage Loan; (v) have a
mortgage of the same or higher level of priority as the mortgage relating to the
Defective Mortgage Loan; (vi) have a remaining term to maturity not more than
___ months earlier and not more than __ months later
S-27
<PAGE>
<PAGE>
than the remaining term to maturity of the Defective Mortgage Loan; (vii) comply
with each representation and warranty as to the Mortgage Loans set forth in the
Purchase Agreement (deemed to be made as of the date of substitution); (viii) in
general, have an original Combined Loan-to-Value Ratio not greater than that of
the Defective Mortgage Loans; and (ix) satisfy certain other conditions
specified in the Purchase Agreement. To the extent the Principal Balance of an
Eligible Substitute Mortgage Loan is less than the Principal Balance of the
related Defective Mortgage Loan, the Seller will be required to make a deposit
to the Collection Account equal to such difference.
The Seller will make certain representations and warranties as to the
accuracy in all material respects of certain information furnished to the Owner
Trustee with respect to each Mortgage Loan (e.g., Cut-off Date Principal Balance
and the Loan Rate). In addition, the Seller will represent and warrant on the
Closing Date that at the time of transfer to the Depositor, the Seller has
transferred or assigned all of its right, title and interest in each Mortgage
Loan and the Related Documents, free of any lien (subject to certain
exceptions). Upon discovery of a breach of any such representation and warranty
which materially and adversely affects the interests of the Holders or the
[Letter of Credit][Surety Bond] provider in the Related Mortgage Loan and
Related Documents, the Seller will have a period of 90 days after discovery or
notice of the breach to effect a cure. If the breach cannot be cured within the
90-day period, the Seller will be obligated to repurchase or substitute the
Defective Mortgage Loan from the Trust Fund. The same procedure and limitations
that are set forth above for the repurchase or substitution of Defective
Mortgage Loans will apply to the transfer of a Mortgage Loan that is required to
be repurchased or substituted because of a breach of a representation or
warranty in the Purchase Agreement that materially and adversely affects the
interests of the Holders.
Mortgage Loans required to be transferred to the Seller as described in the
preceding paragraphs are referred to as "Defective Mortgage Loans."
MATURITY AND PREPAYMENT CONSIDERATIONS
[All of the Mortgage Loans may be prepaid in full or in part at any time.]
However, Mortgage Loans secured by Mortgaged Properties in California are
subject to an account termination fee equal to the lesser of $350 and six months
interest on the amount prepaid, to the extent the prepaid amount exceeds 20% of
the unpaid principal balance, if the account is terminated on or before its
fifth year anniversary. In addition, Mortgage Loans secured by Mortgaged
Properties in other jurisdictions may be subject to account termination fees to
the extent permitted by law. In general, such account termination fees do not
exceed $350 and do not apply to accounts terminated subsequent to a date
designated in the related Mortgage Note which, depending on the jurisdiction,
ranges between [six months and five years] following origination.] The
prepayment experience with respect to the Mortgage Loans will affect the
weighted average life of the Securities.
The rate of prepayment on the Mortgage Loans cannot be predicted. Neither
the Depositor nor the Master Servicer is aware of any publicly available studies
or statistics on the rate of prepayment of such Mortgage Loans. Generally, home
equity revolving credit lines are not viewed by borrowers as permanent
financing. Accordingly, the Mortgage Loans may experience a higher rate of
prepayment than traditional first mortgage loans. On the other hand, because the
Mortgage Loans amortize as described under "Description of the Mortgage
Loans--Mortgage Loan Terms" herein, rates of principal payment on the Mortgage
Loans will generally be slower than those of traditional fully-amortizing first
mortgages in the absence of prepayments on such Mortgage Loans. The prepayment
experience of the Trust Fund with respect to the Mortgage Loans may be affected
by a wide variety of factors, including general economic conditions, prevailing
interest rate levels, the availability of alternative financing, homeowner
mobility, the frequency and amount of any future draws on the Credit Line
Agreements and changes affecting the deductibility for Federal income tax
purposes of interest payments on home equity credit lines. Substantially all of
the Mortgage Loans contain "due-on-sale" provisions, and, with respect to the
Mortgage Loans, the Master Servicer intends to enforce such provisions, unless
such enforcement is not permitted by applicable law. The enforcement of a
"due-on-sale"
S-28
<PAGE>
<PAGE>
provision will have the same effect as a prepayment of the related Mortgage
Loan. See "Certain Legal Aspects of the Loans--Due-on-Sale Clauses" in the
Prospectus.
The yield to an investor who purchases the Securities in the secondary
market at a price other than par will vary from the anticipated yield if the
rate of prepayment on the Mortgage Loans is actually different than the rate
anticipated by such investor at the time such Securities were purchased.
Collections on the Mortgage Loans may vary because, among other things,
borrowers may make payments during any month as low as the minimum monthly
payment for such month or as high as the entire outstanding principal balance
plus accrued interest and the fees and charges thereon. It is possible that
borrowers may fail to make scheduled payments. Collections on the Mortgage Loans
may vary due to seasonal purchasing and payment habits of borrowers.
No assurance can be given as to the level of prepayments that will be
experienced by the Trust Fund and it can be expected that a portion of borrowers
will not prepay their Mortgage Loans to any significant degree.
See "Yield and Prepayment Considerations" in the Prospectus.
DESCRIPTION OF THE MASTER SERVICING AGREEMENT
The Master Servicer shall establish and maintain on behalf of the Owner
Trustee an account (the "Collection Account") for the benefit of the Holders.
The Collection Account will be an Eligible Account (as defined herein). Subject
to the investment provision described in the following paragraphs, upon receipt
by the Master Servicer of amounts in respect of the Mortgage Loans (excluding
amounts representing administrative charges, annual fees, taxes, assessments,
credit insurance charges, insurance proceeds to be applied to the restoration or
repair of a Mortgaged Property or similar items), the Master Servicer will
deposit such amounts in the Collection Account. Amounts so deposited may be
invested in Eligible Investments (as described in the Servicing Agreement)
maturing no later than one Business Day prior to the date on which the amount on
deposit therein is required to be deposited in the Distribution Account or on
such Distribution Date if approved by the Rating Agencies. Not later than the
_____ Business Day prior to each Distribution Date (the "Determination Date"),
the Master Servicer will notify the Owner Trustee and the Indenture Trustee of
the amount of such deposit to be included in funds available for the related
Distribution Date.
The Owner Trustee and the Indenture Trustee will establish one or more
accounts (the "Security Account") into which will be deposited amounts withdrawn
from the Collection Account for distribution to Holders on a Distribution Date.
The Security Account will be an Eligible Account. Amounts on deposit therein
will be invested in Eligible Investments maturing on or before the Business Day
prior to the related Distribution Date.
An "Eligible Account" is (i) an account that is maintained with a
depository institution whose debt obligations at the time of any deposit therein
have the highest short-term debt rating by the Rating Agencies, (ii) one or more
accounts with a depository institution having a minimum long-term unsecured debt
rating of "____" by _____ and "____" by _____, which accounts are fully insured
by either the Savings Association Insurance Fund ("SAIF") or the Bank Insurance
Fund ("BIF") of the Federal Deposit Insurance Corporation established by such
fund, (iii) a segregated trust account maintained with the Owner Trustee or an
Affiliate of the Owner Trustee in its fiduciary capacity or (iv) otherwise
acceptable to each Rating Agency as evidenced by a letter from each Rating
Agency to the Owner Trustee, without reduction or withdrawal of their then
current ratings of the Securities.
Eligible Investments are specified in the Servicing Agreement and are
limited to (i) obligations of the United States or any agency thereof, provided
such obligations are backed by the full faith and credit of the United
States; (ii) general obligations of or obligations guaranteed by any state of
the United
S-29
<PAGE>
<PAGE>
States or the District of Columbia receiving the highest long-term debt
rating of each Rating Agency rating the Securities, or such lower rating as
will not result in the downgrading or withdrawal of the ratings then assigned to
the Securities by each such Rating Agency; (iii) commercial or finance company
paper (including, without limitation, commercial paper issued by Countrywide
Home Loans, Inc. or any of its affiliates) which is then receiving the highest
commercial or finance company paper rating of each such Rating Agency, or such
lower rating as will not result in the downgrading or withdrawal of the ratings
then assigned to the Securities by each such Rating Agency; (iv) certificates of
deposit, demand or time deposits, or bankers' acceptances issued by any
depository institution or trust company incorporated under the laws of the
United States or of any state thereof and subject to supervision and examination
by federal and/or state banking authorities, provided that the commercial paper
and/or long term unsecured debt obligations of such depository institution or
trust company (or in the case of the principal depository institution in a
holding company system, the commercial paper or long-term unsecured debt
obligations of such holding company, but only if Moody's Investors Service, Inc.
("Moody's") is not a Rating Agency) are then rated one of the two highest
long-term and the highest short-term ratings of each such Rating Agency for such
securities, or such lower ratings as will not result in the downgrading or
withdrawal of the rating then assigned to the Securities by any such Rating
Agency; (iv) demand or time deposits or certificates of deposit issued by any
bank or trust company or savings institution to the extent that such deposits
are fully insured by the FDIC; (v) guaranteed reinvestment agreements issued by
any bank, insurance company or other corporation containing, at the time of the
issuance of such agreements, such terms and conditions as will not result in the
downgrading or withdrawal of the rating then assigned to the Securities by any
such Rating Agency; (vi) repurchase obligations with respect to any security
described in clauses (i) and (ii) above, in either case entered into with a
depository institution or trust company (acting as principal) described in
clause (iv) above; (vii) securities (other than stripped bonds, stripped coupons
or instruments sold at a purchase price in excess of 115% of the face amount
thereof) bearing interest or sold at a discount issued by any corporation
incorporated under the laws of the United States or any state thereof which, at
the time of such investment, have one of the two highest ratings of each Rating
Agency (except if the Rating Agency is Moody's, such rating shall be the highest
commercial paper rating of Moody's for any such securities), or such lower
rating as will not result in the downgrading or withdrawal of the rating then
assigned to the Securities by any such Rating Agency, as evidenced by a signed
writing delivered by each such Rating Agency; and (viii) such other investments
having a specified stated maturity and bearing interest or sold at a discount
acceptable to each Rating Agency as will not result in the downgrading or
withdrawal of the rating then assigned to the Securities by any such Rating
Agency, as evidenced by a signed writing delivered by each such Rating Agency;
provided that no such instrument shall be a Permitted Investment if such
instrument evidences the right to receive interest only payments with respect to
the obligations underlying such instrument.
Allocations and Collections
All collections on the Mortgage Loans will generally be allocated in
accordance with the Credit Line Agreements between amounts collected in respect
of interest and amounts collected in respect of principal. As to any
Distribution Date, "Interest Collections" will be equal to the aggregate of the
amounts collected during the related Collection Period, including Net
Liquidation Proceeds (as defined below), allocated to interest pursuant to the
terms of the Credit Line Agreements.
As to any Distribution Date, "Principal Collections" will be equal to the
sum of (i) the amounts collected during the related Collection Period, including
Net Liquidation Proceeds, and allocated to principal pursuant to the terms of
the Credit Line Agreements and (ii) any Substitution Adjustment Amounts. "Net
Liquidation Proceeds" with respect to a Mortgage Loan are equal to the aggregate
of all amounts received upon liquidation of such Mortgage Loan, including,
without limitation, insurance proceeds, reduced by related expenses, but not
including the portion, if any, of such amount that exceeds the Principal Balance
of the Mortgage Loan at
S-30
<PAGE>
<PAGE>
the end of the Collection Period immediately preceding the Collection Period in
which such Mortgage Loan became a Liquidated Mortgage Loan plus accrued and
unpaid interest thereon through the date of liquidation.
With respect to any date, the "Pool Balance" will be equal to the aggregate
of the Principal Balances of all Mortgage Loans as of such date. The Principal
Balance of a Mortgage Loan (other than a Liquidated Mortgage Loan) on any day is
equal to the Cut-off Date Principal Balance thereof, plus (i) any Additional
Balances in respect of such Mortgage Loan minus (ii) all collections credited
against the Principal Balance of such Mortgage Loan in accordance with the
related Credit Line Agreement prior to such day. The Principal Balance of a
Liquidated Mortgage Loan after final recovery of related Liquidation Proceeds
shall be zero.
Hazard Insurance
The Master Servicing Agreement provides that the Master Servicer maintain
certain hazard insurance on the Mortgaged Properties relating to the Mortgage
Loans. While the terms of the related Credit Line Agreements generally require
borrowers to maintain certain hazard insurance, the Master Servicer will not
monitor the maintenance of such insurance.
The Master Servicing Agreement requires the Master Servicer to maintain for
any Mortgaged Property relating to a Mortgage Loan acquired upon foreclosure of
a Mortgage Loan, or by deed in lieu of such foreclosure, hazard insurance with
extended coverage in an amount equal to the lesser of (a) the maximum insurable
value of such Mortgaged Property or (b) the outstanding balance of such Mortgage
Loan plus the outstanding balance on any mortgage loan senior to such Mortgage
Loan at the time of foreclosure or deed in lieu of foreclosure, plus accrued
interest and the Master Servicer's good faith estimate of the related
liquidation expenses to be incurred in connection therewith. The Master
Servicing 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 such Mortgaged Properties. If such blanket policy
contains a deductible clause, the Master Servicer will be obligated to deposit
in the Collection Account the sums which would have been deposited therein but
for such clause. The Master Servicer will satisfy these requirements by
maintaining a blanket policy. As set forth above, all amounts collected by the
Master Servicer (net of any reimbursements to the Master Servicer) under any
hazard policy (except for amounts to be applied to the restoration or repair of
the Mortgaged Property) will ultimately be deposited in the Collection Account.
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 and hail, and the like, 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 and therefore will not contain identical terms and
conditions, the basic terms thereof are dictated by state laws and most of 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 or an
exact description of the insurance policies relating to the Mortgaged
Properties.
Realization Upon Defaulted Mortgage Loans
The Master Servicer will foreclose upon or otherwise comparably convert to
ownership Mortgaged Properties securing such of the Mortgage Loans as come into
default when in accordance with applicable servicing procedures under the Master
Servicing Agreement, no satisfactory arrangements can be made for the collection
of delinquent payments. In connection with such foreclosure or other conversion,
the Master Servicer will follow such practices as it deems necessary or
advisable and as are in keeping with its general subordinate mortgage servicing
activities, provided the Master Servicer will not be required to expend its own
S-31
<PAGE>
<PAGE>
funds in connection with foreclosure or other conversion, correction of default
on a related senior mortgage loan or restoration of any property unless, in its
sole judgment, such foreclosure, correction or restoration will increase net
Liquidation Proceeds. The Master Servicer will be reimbursed out of Liquidation
Proceeds for advances of its own funds as liquidation expenses before any Net
Liquidation Proceeds are distributed to Holders or the [Transferor][Seller].
"Net Liquidation Proceeds" with respect to a Mortgage Loan is the amount
received upon liquidation of such Mortgage Loan reduced by related expenses,
which may include the amount advanced in respect of a senior mortgage, up to the
unpaid Principal Balance of the Mortgage Loan plus accrued and unpaid interest
thereon.
Servicing Compensation and Payment of Expenses
With respect to each Collection Period, other than the first Collection
Period, the Master Servicer will retain from interest collections in respect of
the Mortgage Loan a portion of such interest collections as a monthly Servicing
Fee in the amount equal to ___% per annum ("Servicing Fee Rate") on the
aggregate Principal Balances of the Mortgage Loans as of the first day of each
such Collection Period. All assumption fees, late payment charges and other fees
and charges, to the extent collected from borrowers, will be retained by the
Master Servicer as additional servicing compensation.
The Master Servicer will pay certain ongoing expenses associated with the
Trust Fund and incurred by it in connection with its responsibilities under the
Servicing Agreement, including, without limitation, payment of the fees and
disbursements of the Trustee, any custodian appointed by the Trustee, the entity
maintaining the Security Register relating to the Securities and any paying
agent. In addition, the Master Servicer will be entitled to reimbursement for
certain expenses incurred by it in connection with defaulted Mortgage Loans and
in connection with the restoration of Mortgaged Properties, such right of
reimbursement being prior to the rights of Holders to receive any related Net
Liquidation Proceeds.
DESCRIPTION OF THE SECURITIES
General
The Notes will be issued pursuant to the Indenture dated as of ___________,
199_, between the Trust Fund and _______________, as Indenture Trustee. The
Certificates will be issued pursuant to the Trust Agreement dated as of
______________, 199_, among the Depositor, __________, and ______________, as
Owner Trustee. The following is a description of the material provisions of the
Securities, Indenture and Trust Agreement. As used herein, "Agreement" shall
mean either the Trust Agreement or the Indenture, as the context requires.
The Securities will be issued in fully registered, certificated form only.
The Securities will be freely transferrable and exchangeable at the corporate
trust office of the Owner Trustee, with respect to the Certificates or the
Indenture Trustee with respect to the Notes.
Book-Entry Securities
The Senior Certificates will be book-entry Certificates (the "Book-Entry
Certificates"). Persons acquiring beneficial ownership interests in the Senior
Certificates ("Certificate Owners") will hold their Certificates through the
Depository Trust Company ("DTC") in the United States[, or CEDEL or Euroclear
(in Europe)] if they are participants of such systems, or indirectly through
organizations which are participants in such systems. The Book-Entry
Certificates will be issued in one or more certificates which equal the
aggregate principal balance of the Certificates and will initially be registered
in the name of Cede & Co., the nominee of DTC. [CEDEL and Euroclear will hold
omnibus positions on behalf of their participants through customers' securities
accounts in CEDEL's and Euroclear's names on the books of their respective
depositaries
S-32
<PAGE>
<PAGE>
which in turn will hold such positions in customers' securities accounts in the
depositaries' names on the books of DTC. Citibank N.A. will act as depositary
for CEDEL and Chase will act as depositary for Euroclear (in such capacities,
individually the "Relevant Depositary" and collectively the "European
Depositaries").] Investors may hold such beneficial interests in the Book-Entry
Certificates in minimum denominations representing Certificate Principal
Balances of $1,000 and in integral multiples in excess thereof. Except as
described below, no person acquiring a Book-Entry Certificate (each, a
"beneficial owner") will be entitled to receive a physical certificate
representing such Certificate (a "Definitive Certificate"). Unless and until
Definitive Certificates are issued, it is anticipated that the only
"Certificateholder" of the Certificates will be Cede & Co., as nominee of DTC.
Certificate Owners will not be Certificateholders as that term is used in the
Pooling and Servicing Agreement. Certificate Owners are only permitted to
exercise their rights indirectly through Participants and DTC.
Distributions
On each Distribution Date, collections on the Mortgage Loans will be
applied in the following order of priority:
(i) to the Master Servicer, the Servicing Fee;
(ii) as payment for the accrued interest due and any overdue accrued
interest on the respective Security Principal Balance of the Notes and the
Certificates;
(iii) as principal on the Securities, the excess of Principal
Collections over Additional Balances created during the preceding
Collection Period, such amount to be allocated between the Notes and
Certificates pro rata, based on their respective Security Principal
Balances;
(iv) as principal on the Securities, as payment for any Liquidation
Loss Amounts on the Mortgage Loans;
(v) as payment for the premium for the [Letter of Credit][Surety
Bond];
(vi) to reimburse prior draws made on the [Letter of Credit][Surety
Bond]; and
(vii) any remaining amounts to the Seller.
As to any Distribution Date, the "Collection Period" is the calendar month
preceding the month of such Distribution Date.
"Liquidation Loss Amount" means with respect to any Liquidated Mortgage
Loan, the unrecovered Principal Balance thereof at the end of the Collection
Period in which such Mortgage Loan became a Liquidated Mortgage Loan after
giving effect to the Net Liquidation Proceeds in connection therewith.
Interest
Note Rate. Interest will accrue on the unpaid Security Principal Balance of
the Notes at the per annum rate (the "Note Rate") equal to __% per annum from
the Closing Date to the first Distribution Date and thereafter interest will
accrue on the Notes from and including the preceding Distribution Date to but
excluding such current Distribution Date (each, an "Interest Accrual Period") at
[a floating rate equal to LIBOR (as defined herein) plus __%] [__%]. [Interest
will be calculated on the basis of the actual number of days in each Interest
Accrual Period by 360.] A failure to pay interest on any Notes on any
Distribution Date that continues for five days constitutes an Event of Default
under the Indenture.
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<PAGE>
Pass-Through Rate. Interest will accrue on the unpaid Security Principal
Balance of the Certificates at the per annum rate (the "Pass-Through Rate")
equal to __% per annum from the Closing Date to the first Distribution Date and
thereafter interest will accrue on the Certificates for each Interest Accrual
Period at [a floating rate equal to LIBOR (as defined herein) plus __%] [__%].
[Interest will be calculated on the basis of the actual number of days in each
Interest Accrual Period divided by 360.] A failure to pay interest on any
Certificates on any Distribution Date that continues for five days constitutes
an Event of Default under the Trust Agreement.
Optional Termination
The Trust Fund will terminate on the Distribution Date following the
earlier of (i) _________________________ and (ii) the final payment or other
liquidation of the last Mortgage Loan in the Trust Fund. The Mortgage Loans will
be subject to optional repurchase by the Master Servicer on any Distribution
Date after the Principal Balance is reduced to an amount less than or equal to
$________ (__% of the initial Principal Balance). The repurchase price will be
equal to the sum of the outstanding Principal Balance and accrued and unpaid
interest thereon at the weighted average of the Loan Rates through the day
preceding the final Distribution Date.
THE DEPOSITOR
CWABS, Inc. the Depositor, is a Delaware corporation organized on August
__, 1996 for the limited purpose of acquiring, owning and transferring Trust
Assets and selling interests therein or bonds secured thereby. It is a limited
purpose finance subsidiary of Countrywide Credit Industries, Inc., a Delaware
corporation. The Depositor maintains its principal office at 155 North Lake
Avenue, Pasadena, California 91101-7139. Its telephone number is (818) 584-2212.
THE INDENTURE
The following is a description of the material terms of the Indenture.
Whenever particular sections or defined terms of the Indenture are referred to,
such sections or defined terms are thereby incorporated herein by reference. See
"Description of the Securities" herein for a description of certain additional
terms of the Indenture.
Reports to Noteholders
The Indenture Trustee will mail to each Noteholder, at such Noteholder's
request, at its address listed on the Note Register maintained with the
Indenture Trustee a report setting forth certain amounts relating to the Notes.
Events of Default; Rights Upon Event of Default
With respect to the Notes, "Events of Default" under the Indenture will
consist of: (i) a default for five days or more in the payment of any interest
on any Note; (ii) a default in the payment of the principal of or any
installment of the principal of any Note when the same becomes due and payable;
(iii) a default in the observance or performance of any covenant or agreement of
the Trust Fund made in the Indenture and the continuation of any such default
for a period of 30 days after notice thereof is given to the Trust Fund by the
Indenture Trustee or to the Trust Fund and the Indenture Trustee by the holders
of at least 25% in principal amount of the Notes then outstanding; (iv) any
representation or warranty made by the Trust Fund in the Indenture or in any
certificate delivered pursuant thereto or in connection therewith having been
incorrect in a material respect as of the time made, and such breach not having
been cured within 30 days after notice
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thereof is given to the Trust Fund by the Indenture Trustee or to the Trust Fund
and the Indenture Trustee by the holders of at least 25% in principal amount of
Notes then outstanding; or (v) certain events of bankruptcy, insolvency,
receivership or liquidation of the Trust Fund. [The amount of principal required
to be paid to Noteholders under the Indenture will generally be limited to
amounts available to be deposited in the Collection Account. Therefore, the
failure to pay principal on the Notes generally will not result in the
occurrence of an Event of Default until the final scheduled Distribution Date
for such Notes.] If there is an Event of Default with respect to a Note due to
late payment or nonpayment of interest due on a Note, additional interest will
accrue on such unpaid interest at the interest rate on the Note (to the extent
lawful) until such interest is paid. Such additional interest on unpaid interest
shall be due at the time such interest is paid. If there is an Event of Default
due to late payment or nonpayment of principal on a Note, interest will continue
to accrue on such principal at the interest rate on the Note until such
principal is paid. If an Event of Default should occur and be continuing with
respect to the Notes, the Indenture Trustee or holders of a majority in
principal amount of Notes then outstanding may declare the principal of such
Notes to be immediately due and payable. Such declaration may, under certain
circumstances, be rescinded by the holders of a majority in principal amount of
the Notes then outstanding. If the Notes are due and payable following an Event
of Default with respect thereto, the Indenture Trustee may institute proceedings
to collect amounts due or foreclose on Trust Fund property or exercise remedies
as a secured party. If an Event of Default occurs and is continuing with respect
to the Notes, the Indenture Trustee will be under no obligation to exercise any
of the rights or powers under the Indenture at the request or direction of any
of the holders of the Notes, if the Indenture Trustee reasonably believes it
will not be adequately indemnified against the costs, expenses and liabilities
which might be incurred by it in complying with such request. Subject to the
provisions for indemnification and certain limitations contained in the
Indenture, the holders of a majority in principal amount of the outstanding
Notes will have the right to direct the time, method and place of conducting any
proceeding or any remedy available to the Indenture Trustee, and the holders of
a majority in principal amount of the Notes then outstanding may, in certain
cases, waive any default with respect thereto, except a default in the payment
of principal or interest or a default in respect of a covenant or provision of
the Indenture that cannot be modified without the waiver or consent of all the
holders of the outstanding Notes. No holder of a Note will have the right to
institute any proceeding with respect to the Indenture, unless (i) such holder
previously has given the Indenture Trustee written notice of a continuing Event
of Default, (ii) the holders of not less than 25% in principal amount of the
outstanding Notes have made written request to the Indenture Trustee to
institute such proceeding in its own name as Indenture Trustee, (iii) such
holder or holders have offered the Indenture Trustee reasonable indemnity, (iv)
the Indenture Trustee has for 60 days failed to institute such proceeding and
(v) no direction inconsistent with such written request has been given to the
Indenture Trustee during the 60-day period by the holders of a majority in
principal amount of the Notes. In addition, the Indenture Trustee and the
Noteholders, by accepting the Notes, will covenant that they will not at any
time institute against the Trust Fund any bankruptcy, reorganization or other
proceeding under any federal or state bankruptcy or similar law. With respect to
the Trust Fund, neither the Indenture Trustee nor the Owner Trustee in its
individual capacity, nor any holder of a Certificate representing an ownership
interest in the Trust Fund nor any of their respective owners, beneficiaries,
agents, officers, directors, employees, affiliates, successors or assigns will,
in the absence of an express agreement to the contrary, be personally liable for
the payment of the principal of or interest on the Notes or for the agreements
of the Trust Fund contained in the Indenture.
Certain Covenants
The Indenture will provide that the Trust Fund may not consolidate with or
merge into any other entity, unless (i) the entity formed by or surviving such
consolidation or merger is organized under the laws of the United States, any
state or the District of Columbia, (ii) such entity expressly assumes the Trust
Fund's obligation to make due and punctual payments upon the Notes and the
performance or observance of any agreement and covenant of the Trust Fund under
the Indenture, (iii) no Event of Default shall have occurred and be continuing
immediately after such merger or consolidation, (iv) the Trust Fund has been
advised that the ratings of the Securities then in effect would not be reduced
or withdrawn by any Rating Agency as a
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result of such merger or consolidation and (v) the Trust Fund has received an
opinion of counsel to the effect that such consolidation or merger would have no
material adverse tax consequence to the Trust Fund or to any Noteholder or
Certificateholder. The Trust Fund will not, among other things, (i) except as
expressly permitted by the Indenture, sell, transfer, exchange or otherwise
dispose of any of the assets of the Trust Fund, (ii) claim any credit on or make
any deduction from the principal and interest payable in respect of the Notes
(other than amounts withheld under the Code or applicable state law) or assert
any claim against any present or former holder of Notes because of the payment
of taxes levied or assessed upon the Trust Fund, (iii) dissolve or liquidate in
whole or in part, (iv) permit the validity or effectiveness of the Indenture to
be impaired or permit any person to be released from any covenants or
obligations with respect to the Notes under the Indenture except as may be
expressly permitted thereby or (v) permit any lien, charge excise, claim,
security interest, mortgage or other encumbrance to be created on or extend to
or otherwise arise upon or burden the assets of the Trust Fund or any part
thereof, or any interest therein or the proceeds thereof. The Trust Fund may not
engage in any activity other than as specified under "The Trust Fund" herein.
The Trust Fund will not incur, assume or guarantee any indebtedness other than
indebtedness incurred pursuant to the Notes and the Indenture.
Annual Compliance Statement
The Trust Fund will be required to file annually with the Indenture Trustee
a written statement as to the fulfillment of its obligations under the
Indenture.
Indenture Trustee's Annual Report
The Indenture Trustee will be required to mail each year to all Noteholders
a report relating to any change in its eligibility and qualification to continue
as Indenture Trustee under the Indenture, any amounts advanced by it under the
Indenture, the amount, interest rate and maturity date of any indebtedness owing
by the Trust Fund to the Indenture Trustee in its individual capacity, any
change in the property and funds physically held by the Indenture Trustee as
such and any action taken by it that materially affects the Notes and that has
not been previously reported, but if no such changes have occurred, then no
report shall be required.
Satisfaction and Discharge of Indenture
The Indenture will be discharged with respect to the collateral securing
the Notes upon the delivery to the Indenture Trustee for cancellation of all the
Notes or, with certain limitations, upon deposit with the Indenture Trustee of
funds sufficient for the payment in full of all the Notes.
Modification of Indenture
With the consent of the holders of a majority in principal amount of the
Notes then outstanding, the Trust Fund and the Indenture Trustee may execute a
supplemental indenture to add provisions to, change in any manner or eliminate
any provisions of, the Indenture, or modify (except as provided below) in any
manner the rights of the Noteholders. Without the consent of the holder of each
outstanding Note affected thereby, however, no supplemental indenture will: (i)
change the due date of any installment of principal of or interest on any Note
or reduce the principal amount thereof, the interest rate specified thereon or
the redemption price with respect thereto or change any place of payment where
or the coin or currency in which any Note or any interest thereon is payable;
(ii) impair the right to institute suit for the enforcement of certain
provisions of the Indenture regarding payment; (iii) reduce the percentage of
the aggregate amount of the outstanding Notes, the consent of the holders of
which is required for any supplemental indenture or the consent of the holders
of which is required for any waiver of compliance with certain provisions of the
Indenture or of certain defaults thereunder and their consequences as provided
for in the Indenture; (iv) modify or alter the provisions of the Indenture
regarding the voting of Notes held by the Trust Fund, the Depositor or an
affiliate of any of them; (v) decrease the percentage of the aggregate principal
amount of Notes required to amend the sections
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of the Indenture which specify the applicable percentage of aggregate principal
amount of the Notes necessary to amend the Indenture or certain other related
agreements; or (vi) permit the creation of any lien ranking prior to or on a
parity with the lien of the Indenture with respect to any of the collateral for
the Notes or, except as otherwise permitted or contemplated in the Indenture,
terminate the lien of the Indenture on any such collateral or deprive the holder
of any Note of the security afforded by the lien of the Indenture. The Trust
Fund and the Indenture Trustee may also enter into supplemental indentures,
without obtaining the consent of the Noteholders, for the purpose of, among
other things, adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of modifying in any manner the rights
of the Noteholders; provided that such action will not materially and adversely
affect the interest of any Noteholder.
Voting Rights
At all times, the voting rights of Noteholders under the Indenture will be
allocated among the Notes pro rata in accordance with their outstanding
principal balances.
Certain Matters Regarding the Indenture Trustee and the Depositor
Neither the Depositor, the Indenture Trustee nor any director, officer or
employee of the Depositor or the Indenture Trustee will be under any liability
to the Trust Fund or the related Noteholders for any action taken or for
refraining from the taking of any action in good faith pursuant to the Indenture
or for errors in judgment; provided, however, that none of the Indenture
Trustee, the Depositor and any director, officer or employee thereof will be
protected against any liability which would otherwise be imposed by reason of
willful malfeasance, bad faith or gross negligence in the performance of duties
or by reason of reckless disregard of obligations and duties under the
Indenture. Subject to certain limitations set forth in the Indenture, the
Indenture Trustee and any director, officer, employee or agent of the Indenture
Trustee shall be indemnified by the Trust Fund and held harmless against any
loss, liability or expense incurred in connection with investigating, preparing
to defend or defending any legal action, commenced or threatened, relating to
the Indenture other than any loss, liability or expense incurred by reason of
willful malfeasance, bad faith or gross negligence in the performance of its
duties under such Indenture or by reason of reckless disregard of its
obligations and duties under the Indenture. Any such indemnification by the
Trust Fund will reduce the amount distributable to the Noteholders. All persons
into which the Indenture Trustee may be merged or with which it may be
consolidated or any person resulting from such merger or consolidation shall be
the successor of the Indenture Trustee under each Indenture.
THE TRUST AGREEMENT
The following is a description of the material terms of the Trust
Agreement. Whenever particular sections or defined terms of the Trust Agreement
are referred to, such sections or defined terms are thereby incorporated herein
by reference. See "Description of the Securities" herein for a description of
certain additional terms of the Trust Agreement.
Amendment
The Trust Agreement may be amended by the Depositor and the Owner Trustee,
without consent of the Holders, to cure any ambiguity, to correct or supplement
any provision or for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions thereof or of modifying in any
manner the rights of such Holders; provided, however, that such action will not,
as evidenced by an opinion of counsel satisfactory to the Owner Trustee,
adversely affect in any material respect the interests of any Holders. The Trust
Agreement may also be amended by the Depositor and the Owner Trustee with the
consent of the holders of Certificates evidencing at least a majority in
principal amount of then outstanding Certificates and Holders owning Voting
Interests (as herein defined) aggregating not less than a majority of
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the aggregate Voting Interests for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Trust
Agreement or modifying in any manner the rights of the Holders.
Insolvency Event
"Insolvency Event" means, with respect to any Person, any of the following
events or actions; certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings with respect to
such Person and certain actions by such Person indicating its insolvency,
reorganization pursuant to bankruptcy proceedings or inability to pay its
obligations. Upon termination of the Trust Fund, the Owner Trustee shall direct
the Indenture Trustee promptly to sell the assets of the Trust Fund (other than
the Collection Account) in a commercially reasonable manner and on commercially
reasonable terms. The proceeds from any such sale, disposition or liquidation of
the Mortgage Loans will be treated as collections on the Mortgage Loans and
deposited in the Collection Account. The Trust Agreement will provide that the
Owner Trustee does not have the power to commence a voluntary proceeding in
bankruptcy with respect to the Trust Fund without the unanimous prior approval
of all Holders (including the Depositor) of the Trust Fund and the delivery to
the Owner Trustee by each Holder (including the Depositor) of a certificate
certifying that the Holder reasonably believes that the Trust Fund is insolvent.
Liability of the Depositor
Under the Trust Agreement, the Depositor will agree to be liable directly
to an injured party for the entire amount of any losses, claims, damages or
liabilities (other than those incurred by a Noteholder or a Holder in the
capacity of an investor with respect to the Trust Fund) arising out of or based
on the arrangement created by the Trust Agreement.
Voting Interests
As of any date, the aggregate principal balance of all Certificates
outstanding will constitute the voting interest of the Issuer (the "Voting
Interests"), except that, for purposes of determining Voting Interests,
Certificates owned by the Issuer or its affiliates (other than the Depositor)
will be disregarded and deemed not to be outstanding, and except that, in
determining whether the Owner Trustee is protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Certificates that the Owner Trustee knows to be so owned will be so disregarded.
Certificates so owned that have been pledged in good faith may be regarded as
outstanding if the pledgee establishes to the satisfaction of the Owner Trustee
the pledgor's right so to act with respect to such Certificates and that the
pledgee is not the Issuer or its affiliates.
Certain Matters Regarding the Owner Trustee and the Depositor
Neither the Depositor, the Owner Trustee nor any director, officer or
employee of the Depositor or the Owner Trustee will be under any liability to
the Trust Fund or the related Holders for any action taken or for refraining
from the taking of any action in good faith pursuant to the Trust Agreement or
for errors in judgment; provided, however, that none of the Owner Trustee, the
Depositor and any director, officer or employee thereof will be protected
against any liability which would otherwise be imposed by reason of willful
malfeasance, bad faith or gross negligence in the performance of duties or by
reason of reckless disregard of obligations and duties under the Trust
Agreement. Subject to certain limitations set forth in the Trust Agreement, the
Owner Trustee and any director, officer, employee or agent of the Owner Trustee
shall be indemnified by the Trust Fund and held harmless against any loss,
liability or expense incurred in connection with investigating, preparing to
defend or defending any legal action, commenced or threatened, relating to the
Trust Agreement other than any loss, liability or expense incurred by reason of
willful malfeasance, bad faith or gross negligence in the performance of its
duties under such Trust Agreement or by reason of reckless disregard of its
obligations and duties under the Trust Agreement. Any such indemnification by
the Trust
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Fund will reduce the amount distributable to the Holders. All persons into which
the Owner Trustee may be merged or with which it may be consolidated or any
person resulting from such merger or consolidation shall be the successor of the
Owner Trustee under each Trust Agreement.
ADMINISTRATION AGREEMENT
The _________________, in its capacity as Administrator, will enter into
the Administration Agreement with the Trust Fund and the Owner Trustee pursuant
to which the Administrator will agree, to the extent provided in such
Administration Agreement, to provide notices and perform other administrative
obligations required by the Indenture and the Trust Agreement.
THE INDENTURE TRUSTEE
[ ] is the Indenture Trustee under the Indenture. The mailing address of
the Indenture Trustee is [ ], Attention: Corporate Trust Department.
THE OWNER TRUSTEE
[ ] is the Owner Trustee under the Trust Agreement. The mailing address of
the Owner Trustee is [ ], Attention: Corporate Trust Administration.
USE OF PROCEEDS
The net proceeds from the sale of the Securities will be applied by the
Depositor towards the purchase price of the Mortgage Loans.
FEDERAL INCOME TAX CONSEQUENCES
On January 27, 1994, the Internal Revenue Service issued final regulations
("final OID regulations") relating to original issue discount ("OID"). The
discussion under "Federal Income Tax Consequences ___ Taxation of Debt
Securities" in the Prospectus applies with respect to the final OID regulations.
Prospective purchasers should see "Federal Income Tax Consequences" in the
Prospectus for a discussion of the application of material federal income and
state tax laws to the Trust Fund and the Securities.
STATE TAX CONSEQUENCES
In addition to the federal income tax consequences described in "Federal
Income Tax Consequences" herein, potential investors should consider the state
income tax consequences of the acquisition, ownership, and disposition of the
Securities offered hereunder. State income tax law may differ substantially from
the corresponding federal tax law, and this discussion does not purport to
describe any aspect of the income tax laws of any state. Therefore, potential
investors should consult their own tax advisors with respect to the various tax
consequences of investments in the Securities offered hereunder.
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ERISA CONSIDERATIONS
General
The Employee Retirement Income Security Act of 1974, as amended ("ERISA")
and Section 4975 of the Code impose certain restrictions on employee benefit
plans subject to ERISA or plans or arrangements subject to Section 4975 of the
Code ("Plans") and on persons who are parties in interest or disqualified
persons ("parties in interest") with respect to such Plans. Certain employee
benefit plans, such as governmental plans and church plans (if no election has
been made under section 410(d) of the Code), are not subject to the restrictions
of ERISA, and assets of such plans may be invested in the Securities without
regard to the ERISA considerations described below, subject to other applicable
federal and state law. However, any such governmental or church plan which is
qualified under section 401(a) of the Code and exempt from taxation under
section 501(a) of the Code is subject to the prohibited transaction rules set
forth in section 503 of the Code. Any Plan fiduciary which proposes to cause a
Plan to acquire any of the Securities should consult with its counsel with
respect to the potential consequences under ERISA, and the Code, of the Plan's
acquisition and ownership of the Securities. See "ERISA Considerations" in the
Prospectus. Investments by Plans are also subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that a Plan's investments be made in
accordance with the documents governing the Plan.
Prohibited Transactions
General
Section 406 of ERISA prohibits parties in interest with respect to a Plan
from engaging in certain transactions (including loans) involving a Plan and its
assets unless a statutory or administrative exemption applies to the
transaction. Section 4975 of the Code imposes certain excise taxes (or, in some
cases, a civil penalty may be assessed pursuant to section 502(i) of ERISA) on
parties in interest which engage in non-exempt prohibited transactions.
Plan Asset Regulation
The United States Department of Labor ("Labor") has issued final
regulations concerning the definition of what constitutes the assets of a Plan
for purposes of ERISA and the prohibited transaction provisions of the Code (the
"Plan Asset Regulation"). The Plan Asset Regulation describes the circumstances
under which the assets of an entity in which a Plan invests will be considered
to be "plan assets" such that any person who exercises control over such assets
would be subject to ERISA's fiduciary standards. Under the Plan Asset
Regulation, generally when a Plan invests in another entity, the Plan's assets
do not include, solely by reason of such investment, any of the underlying
assets of the entity. However, the Plan Asset Regulation provides that, if a
Plan acquires an "equity interest" in an entity that is neither a
"publicly-offered security" (as defined therein) nor a security issued by an
investment company registered under the Investment Company Act of 1940, the
assets of the entity will be treated as assets of the Plan investor unless
certain exceptions apply. If the [Notes/Certificates] were deemed to be equity
interests and no statutory, regulatory or administrative exemption applies, the
Trust Fund could be considered to hold plan assets by reason of a Plan's
investment in the Notes. Such plan assets would include an undivided interest in
any assets held by the Trust Fund. In such an event, the Trustee and other
persons, in providing services with respect to the Trust Fund's assets, may be
parties in interest with respect to such Plans, subject to the fiduciary
responsibility provisions of Title I of ERISA, including the prohibited
transaction provisions of Section 406 of ERISA, and Section 4975 of the Code
with respect to transactions involving the Trust Fund's assets. Under the Plan
Asset Regulation, the term "equity interest" is defined as any interest in an
entity other than an instrument that is treated as indebtedness under
"applicable local law" and which has no "substantial equity features." Although
the Plan Assets Regulation is silent with respect to the question of which law
constitutes "applicable local law" for this
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purpose, Labor has stated that these determinations should be made under the
state law governing interpretation of the instrument in question. In the
preamble to the Plan Assets Regulation, Labor declined to provide a precise
definition of what features are equity features or the circumstances under which
such features would be considered "substantial," noting that the question of
whether a plan's interest has substantial equity features is an inherently
factual one, but that in making a determination it would be appropriate to take
into account whether the equity features are such that a Plan's investment would
be a practical vehicle for the indirect provision of investment management
services. Brown & Wood llp ("ERISA Counsel") has rendered its opinion that the
Notes will be classified as indebtedness without substantial equity features for
ERISA purposes. ERISA Counsel's opinion is based upon the terms of the Notes,
the opinion of Tax Counsel that the Notes will be classified as debt instruments
for federal income tax purposes and the ratings which have been assigned to the
Notes. However, if contrary to ERISA Counsel's opinion the Notes are deemed to
be equity interests in the Trust Fund and no statutory, regulatory or
administrative exemption applies, the Trust Fund could be considered to hold
plan assets by reason of a Plan's investment in the Notes.
The Underwriter's Exemption
Labor has granted to [ ] (the "Underwriter") an administrative exemption
(Prohibited Transaction Exemption _____ (the "Exemption")) which exempts from
the application of the prohibited transaction rules of ERISA and the related
excise tax provisions of Section 4975 of the Code transactions relating to: (i)
the acquisition, sale and holding by Plans of certificates representing an
undivided interest in certain asset backed pass-through trusts with respect to
which the Underwriter or any of its affiliates is the sole underwriter or the
manager or co-manager of the underwriting syndicate; and (ii) the servicing,
operation and management of such asset backed pass-through trusts, provided that
the general conditions and certain other conditions set forth in the Exemption
are satisfied. The Exemption will apply to the acquisition, holding and resale
of the Certificates by a Plan provided that certain conditions (some of which
are described below) are met.
Among the conditions that must be satisfied for the Exemption to apply are
the following:
(1) the acquisition of the Certificates by a Plan is on terms
(including the price for the Certificates) that are at least as favorable
to the Plan as they would be in an arm's length transaction with an
unrelated party;
(2) the rights and interest evidenced by the Certificates acquired by
the Plan are not subordinated to the rights and interests evidenced by
other Certificates of the trust;
(3) the Certificates acquired by the Plan have received a rating at
the time of such acquisition that is one of the three highest generic
rating categories from either Standard & Poor's Corporation, Moody's
Investors Service, Inc, Duff & Phelps Inc. or Fitch Investors Service,
Inc.;
(4) the trustee must not be an affiliate of the Underwriter, the
Trustee, any Master Servicer, any obligor with respect to assets held in
the Trust Fund constituting more than five percent of the aggregate
unamortized principal balance of the assets in the Trust Fund;
(5) the sum of all payments made to and retained by the Underwriters
in connection with the distribution of the Certificates represents not more
than reasonable compensation for underwriting the Certificates; the sum of
all payments made to and retain by the Issuer pursuant to the assignment of
the Mortgage Loans to the Trust Fund represents not more than the fair
market value of such Mortgage Loans; the sum of all payments made to and
retained by the servicer represents not more than reasonable compensation
for such person's services under a pooling and servicing agreement and
reimbursements of such person's reasonable expenses in connection
therewith; and
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(6) the Plan investing in the Certificates is an "accredited investor"
as defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
Commission under the Securities Act of 1933.
The Underwriter believes that the Exemption will apply to the acquisition
and holding of the Certificates by Plans and that all conditions of the
Exemption other than those within the control of the investors will be met.
Review by Plan Fiduciaries
Any Plan fiduciary considering whether to purchase any [Notes/Certificates]
on behalf of a Plan should consult with its counsel regarding the applicability
of the fiduciary responsibility and prohibited transaction provisions of ERISA
and the Code to such investment. Among other things, before purchasing any
[Notes/Certificates], a fiduciary of a Plan should make its own determination as
to whether the Trust Fund, as obligor on the [Notes/Certificates], is a party in
interest with respect to the Plan, the availability of the exemptive relief
provided in the Plan Asset Regulations and the availability of any other
prohibited transaction exemptions. Purchasers should analyze whether the
decision may have an impact with respect to purchases of the
[Notes/Certificates].
LEGAL INVESTMENT CONSIDERATIONS
The appropriate characterization of the Securities under various legal
investment restrictions, and thus the ability of investors subject to these
restrictions to purchase Securities, may be subject to significant interpretive
uncertainties. All investors whose investment authority is subject to legal
restrictions should consult their own legal advisors to determine whether, and
to what extent, the Securities will constitute legal investments for them. The
Depositor makes no representation as to the proper characterization of the
Securities for legal investment or financial institution regulatory purposes, or
as to the ability of particular investors to purchase Securities under
applicable legal investment restrictions. The uncertainties described above (and
any unfavorable future determinations concerning legal investment or financial
institution regulatory characteristics of the Securities) may adversely affect
the liquidity of the Securities.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
between the Depositor and [ ] (the "Underwriting Agreement"), the Depositor has
agreed to sell to [ ] (the "Underwriter"), and the Underwriter has agreed to
purchase from the Depositor, the Securities. The Underwriter is obligated to
purchase all the Securities offered hereby if any are purchased. Distribution of
the Securities will be made by the Underwriter from time to time in negotiated
transactions or otherwise at varying prices to be determined at the time of
sale. Proceeds to the Depositor are expected to be $________________ from the
sale of the Notes and $___________ from the sale of the Certificates, before
deducting expenses payable by the Depositor of $_________. In connection with
the purchase and sale of the Securities, the Underwriter may be deemed to have
received compensation from the Depositor in the form of underwriting discounts,
concessions or commissions.
The Underwriting Agreement provides that the Depositor will indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, or contribute payments the Underwriter may be required
to make in respect thereof. The Depositor is an affiliate of the Underwriter.
The Underwriter is an affiliate of the Depositor.
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LEGAL MATTERS
Certain legal matters with respect to the Securities will be passed upon
for the Depositor by Brown & Wood llp, New York, New York and for the
Underwriter by _____________________________.
RATINGS
It is a condition to issuance that each Class of the Notes be rated be
rated not lower than "_________" by [ ] and _______ by [ ]. It is a condition to
issuance that the Certificates be rated at least "___" by [ ] and "___" by [ ].
A securities rating addresses the likelihood of the receipt by
Certificateholders and Noteholders of distributions on the Mortgage Loans. The
rating takes into consideration the structural, legal and tax aspects associated
with the Certificates and Notes. The ratings on the Securities do not, however,
constitute statements regarding the possibility that Certificateholders or
Noteholders might realize a lower than anticipated yield. A securities rating is
not a recommendation to buy, sell or hold securities and may be subject to
revision or withdrawal at any time by the assigning rating organization. Each
securities rating should be evaluated independently of similar ratings on
different securities.
[The ratings assigned by Duff & Phelps Credit Rating Co. ("DCR") to
securities address the likelihood of the receipt by the holders of such
securities of all distributions to which they are entitled under the transaction
structure. DCR's ratings reflect its analysis of the riskiness of the mortgages
and its analysis of the structure of the transaction as set forth in the
operative documents. DCR's ratings do not address the effect on yield on the
securities attributable to prepayments or recoveries on the underlying assets.]
[The ratings assigned by Fitch Investors Service, L.P. ("Fitch") to
securities address the likelihood of the receipt of all distributions on the
assets by the related holders of securities under the agreements pursuant to
which such securities are issued. Fitch's ratings take into consideration the
credit quality of the related pool, including any credit support providers,
structural and legal aspects associated with such securities, and the extent to
which the payment stream on the pool is adequate to make the payments required
by such securities. Fitch ratings on such securities do not, however, constitute
a statement regarding frequency of prepayments of the assets.]
[The ratings assigned by Moody's Investors Service, Inc. ("Moody's") to
securities address the likelihood of the receipt by holders of securities of all
distributions to which such holders of securities are entitled. Moody's ratings
on securities do not represent any assessment of the likelihood or rate of
principal prepayments. The ratings do not address the possibility that holders
of securities might suffer a lower than anticipated yield as a result of
prepayments.]
[The ratings assigned by Standard & Poor's Ratings Group, a Division of The
McGraw-Hill Companies ("Standard & Poor's"), to securities address the
likelihood of the receipt of all distributions on the assets by the related
holders of securities under the agreements pursuant to which such securities are
issued. Standard & Poor's ratings take into consideration the credit quality of
the related pool, including any credit support providers, structural and legal
aspects associated with such securities, and the extent to which the payment
stream on such pool is adequate to make payments required by such securities.
Standard & Poor's ratings on such certificates do not, however, constitute a
statement regarding frequency of prepayments on the related assets. The letter
"r" attached to a Standard & Poor's rating highlights derivative, hybrid and
certain other types of securities that Standard & Poor's believes may experience
high volatility or high variability in expected returns due to non-credit risks.
The absence of an "r" symbol in the rating of a class of securities should not
be taken as an indication that such securities will exhibit no volatility or
variability in total return.]
The Depositor has not requested a rating of the Offered Certificates by any
rating agency other than the Rating Agencies; there can be no assurance,
however, as to whether any other rating agency will rate the
S-43
<PAGE>
<PAGE>
Offered Certificates or, if it does, what rating would be assigned by such other
rating agency. The rating assigned by such other rating agency to the Offered
Certificates could be lower than the respective ratings assigned by the Rating
Agencies.
S-44
<PAGE>
<PAGE>
INDEX OF DEFINED TERMS
Page
----
Additional Balances..........................................................S-3
ALTA........................................................................S-17
Alternative Documentation Program...........................................S-16
Assignment Event............................................................S-27
beneficial owners...........................................................S-32
BIF.........................................................................S-29
Book-Entry Certificates.....................................................S-32
Book-Entry Securities........................................................S-8
Business Day.................................................................S-6
Cede.........................................................................S-8
Cedel........................................................................S-8
Certificate Insurer..........................................................S-1
Certificate Owners..........................................................S-32
Certificates............................................................S-1, S-3
Chase........................................................................S-8
Citibank.....................................................................S-8
Collection Account.....................................................S-6, S-29
Collection Period......................................................S-7, S-33
Collections..................................................................S-6
Combined Loan-to-Value Ratio.................................................S-5
Countrywide............................................................S-4. S-15
Credit Limit.................................................................S-5
Credit Limited Utilization Rate.............................................S-19
Credit Line Agreement..................................................S-3, S-18
Cut-Off Date.................................................................S-3
Cut-Off Date Principal Balance..........................................S-3, S-5
DCR.........................................................................S-43
debt-to-income ratio........................................................S-17
Defective Mortgage Loans....................................................S-28
Definitive Certificate......................................................S-33
Definitive Securities........................................................S-8
Depositor....................................................................S-1
Determination Date.....................................................S-4, S-29
Distribution Date............................................................S-1
Draw Period.................................................................S-20
DTC....................................................................S-8, S-32
Due Date.....................................................................S-5
Eligible Account............................................................S-29
Eligible Substitution Mortgage Loan.........................................S-27
ERISA.................................................................S-10, S-39
ERISA Counsel...............................................................S-41
Euroclear....................................................................S-8
European Depositories..................................................S-8, S-32
Events of Default...........................................................S-34
Exemption...................................................................S-41
FHLMC.......................................................................S-16
final OID regulations.......................................................S-39
Fitch.......................................................................S-43
S-45
<PAGE>
<PAGE>
Page
----
FNMA........................................................................S-16
Indenture...............................................................S-1, S-4
Indenture Trustee.......................................................S-1, S-4
Index Rate..................................................................S-19
Insolvency Event............................................................S-38
Interest Accrual Period................................................S-7, S-33
Interest Collections...................................................S-6, S-30
Issuer.......................................................................S-3
Labor.......................................................................S-40
Letter of Credit.............................................................S-9
Letter of Credit Amount......................................................S-9
Liquidation Loss Amount................................................S-7, S-33
Loan Rate..............................................................S-5, S-19
Margin......................................................................S-19
Master Servicer..............................................................S-4
Maximum Rate................................................................S-19
Money Rates..................................................................S-5
Moody's...............................................................S-30, S-43
Mortgage Files..............................................................S-27
Mortgage Loans..........................................................S-1, S-3
Mortgaged Properties.........................................................S-3
Net Liquidation Proceeds..............................................S-30, S-31
Note Rate.........................................................S-1, S-7, S-33
Noteholders..................................................................S-4
Notes...................................................................S-1, S-3
OID.........................................................................S-39
Owner Trustee...........................................................S-1, S-4
parties in interest.........................................................S-40
Pass-Through Rate.................................................S-1, S-7, S-33
Plan..................................................................S-10, S-40
plan assets.................................................................S-10
Plan Asset Regulation.......................................................S-40
Policy..................................................................S-1, S-3
Pool Balance...........................................................S-3, S-30
Principal Balance............................................................S-4
Principal Collections..................................................S-6, S-30
Purchase Agreement...........................................................S-5
Rating Agency...............................................................S-11
Reduced Documentation Program...............................................S-16
Related Documents...........................................................S-26
Relevant Depositary.........................................................S-32
Repayment Period............................................................S-20
Repurchase Price............................................................S-27
SAIF........................................................................S-29
Securities...................................................................S-3
Security Account............................................................S-29
Security Principal Balance...................................................S-6
Seller.......................................................................S-4
Servicing Fee Rate..........................................................S-32
SMMEA.......................................................................S-11
S-46
<PAGE>
<PAGE>
Page
----
Standard & Poor's...........................................................S-43
Surety Bond..................................................................S-9
Surety Bond Amount...........................................................S-9
Trust Agreement.........................................................S-1, S-4
Trust Fund..............................................................S-1, S-3
Underwriter......................................................S-2, S-41, S-42
Underwriting Agreement......................................................S-42
Voting Interests............................................................S-38
S-47
<PAGE>
<PAGE>
================================================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE DEPOSITOR OR THE UNDERWRITER. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OF ANY
SECURITIES OTHER THAN THOSE TO WHICH THEY RELATE OR AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN
OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
$______________PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR
RESPECTIVE DATES.
----------
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
Summary of Terms ........................................................... S-3
Risk Factors ...............................................................S-12
The Trust Fund .............................................................S-15
The [Letter of Credit][Surety Bond] Issuer .................................S-15
The Master Servicer ........................................................S-15
The Home Equity Loan Program ...............................................S-16
Description of the Mortgage Loans ..........................................S-18
Maturity and Prepayment Considerations .....................................S-28
Description of the Master Servicing Agreement ..............................S-29
Description of the Securities ..............................................S-32
The Depositor ..............................................................S-34
The Indenture ..............................................................S-34
The Trust Agreement ........................................................S-37
Administration Agreement ...................................................S-39
The Indenture Trustee ......................................................S-39
The Owner Trustee ..........................................................S-39
Use of Proceeds ............................................................S-39
Federal Income Tax Consequences ............................................S-39
State Tax Consequences .....................................................S-39
ERISA Considerations .......................................................S-39
Legal Investment Considerations ............................................S-42
Underwriting ...............................................................S-42
Legal Matters ..............................................................S-42
Ratings ....................................................................S-43
Defined Terms ..............................................................S-44
PROSPECTUS
Prospectus Supplement or Current Report on Form 8-K ....................... 2
Available Information ..................................................... 2
Incorporation of Certain Documents by Reference ........................... 2
Reports to Securityholders ................................................ 3
Summary of Terms .......................................................... 4
Risk Factors .............................................................. 11
The Trust Fund ............................................................ 17
Use of Proceeds ........................................................... 21
The Depositor ............................................................. 22
Loan Program .............................................................. 22
Description of the Securities ............................................. 24
Credit Enhancement ........................................................ 38
Yield and Prepayment Considerations ....................................... 43
The Agreements ............................................................ 45
Certain Legal Aspects of the Loans ........................................ 57
Federal Income Tax Consequences ........................................... 71
State Tax Considerations .................................................. 90
ERISA Considerations ...................................................... 90
Legal Investment .......................................................... 93
Method of Distribution .................................................... 94
Legal Matters ............................................................. 95
Financial Information ..................................................... 95
Rating .................................................................... 95
Index of Defined Terms .................................................... 97
================================================================================
================================================================================
$________________
[COUNTRYWIDE] HOME EQUITY LOAN
TRUST 199___
$______ [FIXED] [FLOATING] RATE
ASSET BACKED NOTES
$______ [FIXED] [FLOATING] RATE
ASSET BACKED CERTIFICATES,
CWABS, Inc.
(Depositor)
----------------
PROSPECTUS SUPPLEMENT
[_______, 199 ]
----------------
[UNDERWRITER]
================================================================================
<PAGE>
<PAGE>
Information contained herein is subject to completion or amendment. 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 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.
SUBJECT TO COMPLETION, DATED OCTOBER 15, 1996
PROSPECTUS
CWABS, Inc.
Depositor
$200,000,000
(Aggregate Amount)
Asset Backed Securities
(Issuable in Series)
------------
This Prospectus relates to the issuance of Asset Backed Certificates (the
"Certificates") and Asset Backed Notes (the "Notes" and, together with the
Certificates, the "Securities"), which may be sold from time to time in one or
more series (each, a "Series") by CWABS, Inc. (the "Depositor") or by a Trust
Fund (as defined below) on terms determined at the time of sale and described in
this Prospectus and the related Prospectus Supplement. The Securities of a
Series will consist of Certificates which evidence beneficial ownership of a
trust established by the Depositor (each, a "Trust Fund"), and/or Notes secured
by the assets of a Trust Fund. As specified in the related Prospectus
Supplement, the Trust Fund for a Series of Securities will include certain
assets (the "Trust Fund Assets") which will consist of the following types of
single family mortgage loans (the "Loans"): (i) mortgage loans secured by first
and/or subordinate liens on one- to four-family residential properties, (ii)
closed-end and/or revolving home equity loans (the "Home Equity Loans") secured
by subordinate liens on one- to four-family residential properties and (iii)
home improvement installment sale contracts and installment loan agreements (the
"Home Improvement Contracts") that are either unsecured or secured by
subordinate liens on one- to four-family residential properties, or by purchase
money security interests in the home improvements financed thereby (the "Home
Improvements"). The Trust Fund Assets will be acquired by the Depositor, either
directly or indirectly, from one or more institutions (each, a "Seller"), which
may be affiliates of the Depositor, and conveyed by the Depositor to the related
Trust Fund. A Trust Fund also may include insurance policies, surety bonds, cash
accounts, reinvestment income, guaranties or letters of credit to the extent
described in the related Prospectus Supplement. See "Index of Defined Terms" on
Page 98 of this Prospectus for the location of the definitions of certain
capitalized terms.
Each Series of Securities will be issued in one or more classes. Each class
of Certificates of a Series will evidence beneficial ownership of a specified
percentage (which may be 0%) or portion of future interest payments and a
specified percentage (which may be 0%) or portion of future principal payments
on the related Trust Fund Assets. Each class of Notes of a Series will be
secured by the related Trust Fund Assets or, if so specified in the related
Prospectus Supplement, a portion thereof. A Series of Securities may include one
or more classes that are senior in right of payment to one or more other classes
of Securities of such Series. One or more classes of Securities of a Series may
be entitled to receive distributions of principal, interest or any combination
thereof prior to one or more other classes of Securities of such Series or after
the occurrence of specified events, in each case as specified in the related
Prospectus Supplement.
Distributions to Securityholders will be made monthly, quarterly,
semi-annually or at such other intervals and on the dates specified in the
related Prospectus Supplement. Distributions on the Securities of a Series will
be made from the related Trust Fund Assets or proceeds thereof pledged for the
benefit of the Securityholders as specified in the related Prospectus
Supplement.
The related Prospectus Supplement will describe any insurance or guarantee
provided with respect to the related Series of Securities including, without
limitation, any insurance or guarantee provided by the Department of Housing and
Urban Development, the United States Department of Veterans' Affairs or any
private insurer or guarantor. The only obligations of the Depositor with respect
to a Series of Securities will be to obtain certain representations and
warranties from each Seller and to assign to the Trustee for the related Series
of Securities the Depositor's rights with respect to such representations and
warranties. The principal obligations of the Master Servicer named in the
related Prospectus Supplement with respect to the related Series of Securities
will be limited to obligations pursuant to certain representations and
warranties and to its contractual servicing obligations, including any
obligation it may have to advance delinquent payments on the related Trust Fund
Assets.
The yield on each class of Securities of a Series will be affected by,
among other things, the rate of payments of principal (including prepayments) on
the related Trust Fund Assets and the timing of receipt of such payments as
described under "Risk Factors--Prepayment and Yield Considerations" and "Yield
and Prepayment Considerations" herein and in the related Prospectus Supplement.
A Trust Fund may be subject to early termination under the circumstances
described under "The Agreements--Termination; Optional Termination herein and in
the related Prospectus Supplement.
If specified in the related Prospectus Supplement, one or more elections
may be made to treat a Trust Fund or specified portions thereof as a "real
estate mortgage investment conduit" ("REMIC") for federal income tax purposes.
See "Federal Income Tax Consequences."
------------
FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH AN INVESTMENT IN THE
SECURITIES, SEE THE INFORMATION UNDER "RISK FACTORS" ON PAGE 12.
THE CERTIFICATES OF A GIVEN SERIES WILL REPRESENT BENEFICIAL INTERESTS IN, AND
THE NOTES OF A GIVEN SERIES WILL REPRESENT OBLIGATIONS OF, THE RELATED TRUST
FUND ONLY AND WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE DEPOSITOR,
THE MASTER SERVICER, ANY SELLER OR ANY AFFILIATES THEREOF, EXCEPT TO THE EXTENT
DESCRIBED IN THE RELATED PROSPECTUS SUPPLEMENT. THE SECURITIES AND THE LOANS
WILL NOT BE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY
OR BY THE DEPOSITOR OR ANY OTHER PERSON OR ENTITY, EXCEPT IN EACH CASE
TO THE EXTENT DESCRIBED IN THE RELATED PROSPECTUS SUPPLEMENT.
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 OR THE RELATED PROSPECTUS SUPPLEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------
Prior to issuance there will have been no market for the Securities of any
Series and there can be no assurance that a secondary market for any Securities
will develop, or if it does develop, that it will continue or provide
Securityholders with a sufficient level of liquidity of investment. This
Prospectus may not be used to consummate sales of Securities of any Series
unless accompanied by a Prospectus Supplement. Offers of the Securities may be
made through one or more different methods, including offerings through
underwriters, as more fully described under "Method of Distribution" herein and
in the related Prospectus Supplement.
________________, 1996
<PAGE>
<PAGE>
Until 90 days after the date of each Prospectus Supplement, all dealers
effecting transactions in the securities covered by such Prospectus Supplement,
whether or not participating in the distribution thereof, may be required to
deliver such Prospectus Supplement and this Prospectus. This is in addition to
the obligation of dealers to deliver a Prospectus and Prospectus Supplement when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
PROSPECTUS SUPPLEMENT OR CURRENT REPORT ON FORM 8-K
The Prospectus Supplement or Current Report on Form 8-K relating to the
Securities of each Series to be offered hereunder will, among other things, set
forth with respect to such Securities, as appropriate: (i) the aggregate
principal amount, interest rate and authorized denominations of each class of
such Series of Securities; (ii) information as to the assets comprising the
Trust Fund, including the general characteristics of the related Trust Fund
Assets included therein and, if applicable, the insurance policies, surety
bonds, guaranties, letters of credit or other instruments or agreements included
in the Trust Fund or otherwise, and the amount and source of any reserve account
or other cash account; (iii) the circumstances, if any, under which the Trust
Fund may be subject to early termination; (iv) the circumstances, if any, under
which the Notes of such Series are subject to redemption; (v) the method used to
calculate the amount of principal to be distributed or paid with respect to each
class of Securities; (vi) the order of application of distributions or payments
to each of the classes within such Series, whether sequential, pro rata, or
otherwise; (vii) the Distribution Dates with respect to such Series; (viii)
additional information with respect to the method of distribution of such
Securities; (ix) whether one or more REMIC elections will be made with respect
to the Trust Fund and, if so, the designation of the regular interests and the
residual interests; (x) the aggregate original percentage ownership interest in
the Trust Fund to be evidenced by each class of Certificates; (xi) the stated
maturity of each class of Notes of such Series; (xii) information as to the
nature and extent of subordination with respect to any class of Securities that
is subordinate in right of payment to any other class; and (xiii) information as
to the Seller, the Master Servicer and the Trustee.
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 Securities. This Prospectus, which forms a part of
the Registration Statement, and the Prospectus Supplement relating to each
Series of Securities contain descriptions 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 pursuant to the Rules and Regulations of the
Commission. For further information, reference is made to such Registration
Statement and the exhibits thereto. Such Registration Statement and exhibits 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, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; and Northeast Regional Office, Seven World Trade Center, Suite 1300, New
York, New York 10048. The Commission also maintains a Web site at
http://www.sec.gov from which such Registration Statement and exhibits may be
obtained.
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus and any Prospectus
Supplement with respect hereto and, if given or made, such information or
representations must not be relied upon. This Prospectus and any Prospectus
Supplement with respect hereto do not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the Securities offered
hereby and thereby nor an offer of the Securities 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.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents subsequently filed by or on behalf of the Trust Fund referred
to in the accompanying Prospectus Supplement with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), after the date of this Prospectus and prior to the
2
<PAGE>
<PAGE>
termination of any offering of the Securities issued by such Trust Fund shall be
deemed to be incorporated by reference in this Prospectus and to be a part of
this Prospectus from the date of the filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for all purposes of this
Prospectus to the extent that a statement contained herein (or in the
accompanying Prospectus Supplement) or in any other subsequently filed document
which also is or is deemed to be incorporated by reference modifies or replaces
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus. Neither the Depositor nor the Master Servicer for any Series intends
to file with the Commission periodic reports with respect to the related Trust
Fund following completion of the reporting period required by Rule 15d-1 or
Regulation D under the Exchange Act.
The Trustee on behalf of any Trust Fund will provide without charge to each
person to whom this Prospectus is delivered, on the written or oral request of
such person, a copy of any or all of the documents referred to above that have
been or may be incorporated by reference in this Prospectus (not including
exhibits to the information that is incorporated by reference unless such
exhibits are specifically incorporated by reference into the information that
this Prospectus incorporates). Such requests should be directed to the Corporate
Trust Office of the Trustee specified in the accompanying Prospectus Supplement.
Included in the accompanying Prospectus Supplement is the name, address,
telephone number, and, if available, facsimile number of the office or contact
person at the Corporate Trust Office of the Trustee.
REPORTS TO SECURITYHOLDERS
Periodic and annual reports concerning the related Trust Fund for a Series
of Securities will be forwarded to Securityholders. However, such reports will
neither be examined nor reported on by an independent public accountant. See
"Description of the Securities--Reports to Securityholders".
3
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF TERMS
This summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and in the related Prospectus
Supplement with respect to the Series of Securities offered thereby and to the
related Agreement (as such term is defined below) which will be prepared in
connection with each Series of Securities. Unless otherwise specified,
capitalized terms used and not defined in this Summary of Terms have the
meanings given to them in this Prospectus and in the related Prospectus
Supplement. See "Index of Defined Terms" on Page 98 of this Prospectus for the
location of the definitions of certain capitalized terms.
Title of Securities ....................Asset Backed Certificates (the
"Certificates") and Asset Backed Notes
(the "Notes" and, together with the
Certificates, the "Securities"), which
are issuable in Series.
Depositor...............................CWABS, Inc., a Delaware corporation.
Trustee.................................The trustee(s) (the "Trustee") for each
Series of Securities will be specified
in the related Prospectus Supplement.
See "The Agreements" herein for a
description of the Trustee's rights and
obligations.
Master Servicer ........................The entity or entities named as Master
Servicer (the "Master Servicer") in the
related Prospectus Supplement, which may
be an affiliate of the Depositor. See
"The Agreements--Certain Matters
Regarding the Master Servicer and the
Depositor".
Trust Fund Assets ......................Assets of the Trust Fund for a Series of
Securities will include certain assets
(the "Trust Fund Assets") which will
consist of the Loans, together with
payments in respect of such Trust Fund
Assets, as specified in the related
Prospectus Supplement. At the time of
issuance of the Securities of the
Series, the Depositor will cause the
Loans comprising the related Trust Fund
to be assigned to the Trustee, without
recourse. The Loans will be collected in
a pool (each, a "Pool") as of the first
day of the month of the issuance of the
related Series of Securities or such
other date specified in the related
Prospectus Supplement (the "Cut-off
Date"). Trust Fund Assets also may
include insurance policies, surety
bonds, cash accounts, reinvestment
income, guaranties or letters of credit
to the extent described in the related
Prospectus Supplement. See "Credit
Enhancement". In addition, if the
related Prospectus Supplement so
provides, the related Trust Fund Assets
will include the funds on deposit in an
account (a "Pre-Funding Account") which
will be used to purchase additional
Loans during the period specified in
such Prospectus Supplement. See "The
Agreements--Pre-Funding Account".
Loans...................................The Loans will consist of (i) mortgage
loans secured by first and/or
subordinate liens on one- to four-family
residential properties or security
interests in shares issued by
cooperative housing corporations (each,
a "Mortgage Loan"), (ii) closed-end
loans (the "Closed-End Loans") and/or
revolving home equity loans or certain
balances thereof (the "Revolving Credit
Line Loans", together with the
Closed-End
- --------------------------------------------------------------------------------
4
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
Loans, the "Home Equity Loans"), and
(iii) home improvement installment sales
contracts and installment loan
agreements (the "Home Improvement
Contracts"). All Loans will have been
purchased by the Depositor, either
directly or through an affiliate, from
one or more Sellers.
As specified in the related Prospectus
Supplement, the Home Equity Loans will,
and the Home Improvement Contracts may,
be secured by mortgages or deeds of
trust or other similar security
instruments creating a lien on a
Mortgaged Property, which may be
subordinated to one or more senior liens
on the Mortgaged Property, as described
in the related Prospectus Supplement. As
specified in the related Prospectus
Supplement, Home Improvement Contracts
may be unsecured or secured by purchase
money security interests in the Home
Improvements financed thereby. The
Mortgaged Properties and the Home
Improvements are collectively referred
to herein as the "Properties".
Description of
the Securities .......................Each Security will represent a
beneficial ownership interest in, or be
secured by the assets of, a Trust Fund
created by the Depositor pursuant to an
Agreement among the Depositor, the
Master Servicer and the Trustee for the
related Series. The Securities of any
Series may be issued in one or more
classes as specified in the related
Prospectus Supplement. A Series of
Securities may include one or more
classes of senior Securities
(collectively, the "Senior Securities")
and one or more classes of subordinate
Securities (collectively, the
"Subordinated Securities"). Certain
Series or classes of Securities may be
covered by insurance policies or other
forms of credit enhancement, in each
case as described under "Credit
Enhancement" herein and in the related
Prospectus Supplement.
One or more classes of Securities of
each Series (i) may be entitled to
receive distributions allocable only to
principal, only to interest or to any
combination thereof; (ii) may be
entitled to receive distributions only
of prepayments of principal throughout
the lives of the Securities or during
specified periods; (iii) may be
subordinated in the right to receive
distributions of scheduled payments of
principal, prepayments of principal,
interest or any combination thereof to
one or more other classes of Securities
of such Series throughout the lives of
the Securities or during specified
periods; (iv) may be entitled to receive
such distributions only after the
occurrence of events specified in the
related Prospectus Supplement; (v) may
be entitled to receive distributions in
accordance with a schedule or formula or
on the basis of collections from
designated portions of the related Trust
Fund Assets; (vi) as to Securities
entitled to distributions allocable to
interest, may be entitled to receive
interest at a fixed rate or a rate that
is subject to change from time to time;
and (vii) as to Securities entitled to
distributions allocable to interest, may
be entitled to distributions allocable
to interest only after the occurrence of
events specified in the related
Prospectus Supplement and may accrue
interest until such events occur, in
each
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case as specified in the related
Prospectus Supplement. The timing and
amounts of such distributions may vary
among classes or over time, as specified
in the related Prospectus Supplement.
Distributions on
the Securities .......................Distributions on the Securities entitled
thereto will be made monthly, quarterly,
semi-annually or at such other intervals
and on the dates specified in the
related Prospectus Supplement (each, a
"Distribution Date") out of the payments
received in respect of the assets of the
related Trust Fund or Funds or other
assets pledged for the benefit of the
Securities as described under "Credit
Enhancement" herein to the extent
specified in the related Prospectus
Supplement. The amount allocable to
payments of principal and interest on
any Distribution Date will be determined
as specified in the related Prospectus
Supplement. The Prospectus Supplement
for a Series of Securities will describe
the method for allocating distributions
among Securities of different classes as
well as the method for allocating
distributions among Securities for any
particular class.
Unless otherwise specified in the
related Prospectus Supplement, the
aggregate original principal balance of
the Securities will not exceed the
aggregate distributions allocable to
principal that such Securities will be
entitled to receive. If specified in the
related Prospectus Supplement, the
Securities will have an aggregate
original principal balance equal to the
aggregate unpaid principal balance of
the Trust Fund Assets as of the related
Cut-off Date and will bear interest in
the aggregate at a rate equal to the
interest rate borne by the underlying
Loans (the "Loan Rate") net of the
aggregate servicing fees and any other
amounts specified in the related
Prospectus Supplement (the "Pass-Through
Rate") or at such other interest rate as
may be specified in such Prospectus
Supplement. If specified in the related
Prospectus Supplement, the aggregate
original principal balance of the
Securities and interest rates on the
classes of Securities will be determined
based on the cash flow on the Trust Fund
Assets.
The rate at which interest will be
passed through or paid to holders of
each class of Securities entitled
thereto may be a fixed rate or a rate
that is subject to change from time to
time from the time and for the periods,
in each case, as specified in the
related Prospectus Supplement. Any such
rate may be calculated on a
loan-by-loan, weighted average or
notional amount in each case as
described in the related Prospectus
Supplement.
Credit Enhancement .....................The assets in a Trust Fund or the
Securities of one or more classes in the
related Series may have the benefit of
one or more types of credit enhancement
as described in the related Prospectus
Supplement. The protection against
losses afforded by any such credit
support may be limited. The type,
characteristics and amount of credit
enhancement will be determined based on
the characteristics of the Loans
comprising the Trust Fund Assets and
other factors and will be established on
the
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basis of requirements of each Rating
Agency rating the Securities of such
Series. See "Credit Enhancement."
A. Subordination .......................A Series of Securities may consist of
one or more classes of Senior Securities
and one or more classes of Subordinated
Securities. The rights of the holders of
the Subordinated Securities of a Series
to receive distributions with respect to
the assets in the related Trust Fund
will be subordinated to such rights of
the holders of the Senior Securities of
the same Series to the extent described
in the related Prospectus Supplement.
This subordination is intended to
enhance the likelihood of regular
receipt by holders of Senior Securities
of the full amount of monthly payments
of principal and interest due them. The
protection afforded to the holders of
Senior Securities of a Series by means
of the subordination feature will be
accomplished by (i) the preferential
right of such holders to receive, prior
to any distribution being made in
respect of the related Subordinated
Securities, the amounts of interest
and/or principal due them on each
Distribution Date out of the funds
available for distribution on such date
in the related Security Account and, to
the extent described in the related
Prospectus Supplement, by the right of
such holders to receive future
distributions on the assets in the
related Trust Fund that would otherwise
have been payable to the holders of
Subordinated Securities; (ii) reducing
the ownership interest (if applicable)
of the related Subordinated Securities;
or (iii) a combination of clauses (i)
and (ii) above. If so specified in the
related Prospectus Supplement,
subordination may apply only in the
event of certain types of losses not
covered by other forms of credit
support, such as hazard losses not
covered by standard hazard insurance
policies or losses due to the bankruptcy
or fraud of the borrower. The related
Prospectus Supplement will set forth
information concerning, among other
things, the amount of subordination of a
class or classes of Subordinated
Securities in a Series, the
circumstances in which such
subordination will be applicable, and
the manner, if any, in which the amount
of subordination will decrease over
time.
B. Reserve Account .....................One or more reserve accounts or other
cash accounts (each, a "Reserve
Account") may be established and
maintained for each Series of
Securities. The related Prospectus
Supplement will specify whether or not
such Reserve Accounts will be included
in the corpus of the Trust Fund for such
Series and will also specify the manner
of funding such Reserve Accounts and the
conditions under which the amounts in
any such Reserve Accounts will be used
to make distributions to holders of
Securities of a particular class or
released from such Reserve Accounts.
C. Letter of Credit ....................If so specified in the related
Prospectus Supplement, credit support
may be provided by one or more letters
of credit. A letter of credit may
provide limited protection against
certain losses in addition to or in lieu
of other credit support, such as losses
resulting from delinquent payments on
the Loans in the related Trust Fund,
losses from risks not covered by
standard hazard insurance policies,
losses due to bankruptcy of a borrower
and application of certain provisions of
the federal
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Bankruptcy Code, and losses due to
denial of insurance coverage due to
misrepresentations made in connection
with the origination or sale of a Loan.
The issuer of the letter of credit (the
"L/C Bank") will be obligated to honor
demands with respect to such letter of
credit, to the extent of the amount
available thereunder to provide funds
under the circumstances and subject to
such conditions as are specified in the
related Prospectus Supplement. The
liability of the L/C Bank under its
letter of credit will be reduced by the
amount of unreimbursed payments
thereunder.
The maximum liability of a L/C Bank
under its letter of credit will be an
amount equal to a percentage specified
in the related Prospectus Supplement of
the initial aggregate outstanding
principal balance of the Loans in the
related Trust Fund or one or more
Classes of Securities of the related
Series (the "L/C Percentage"). The
maximum amount available at any time to
be paid under a letter of credit will be
determined in the manner specified
therein and in the related Prospectus
Supplement.
D. Insurance Policies;
Surety Bonds and
Guarantees If so specified in the related
Prospectus Supplement, credit support
for a Series may be provided by an
insurance policy and/or a surety bond
issued by one or more insurance
companies or sureties. Such certificate
guarantee insurance or surety bond will
guarantee timely distributions of
interest and/or 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. If
specified in the related Prospectus
Supplement, one or more bankruptcy
bonds, special hazard insurance
policies, other insurance or third-party
guarantees may be used to provide
coverage for the risks of default or
types of losses set forth in such
Prospectus Supplement.
E. Over-Collateralization ..............If so provided in the Prospectus
Supplement for a Series of Securities, a
portion of the interest payment on each
Loan may be applied as an additional
distribution in respect of principal to
reduce the principal balance of a
certain class or classes of Securities
and, thus, accelerate the rate of
payment of principal on such class or
classes of Securities.
F. Loan Pool
Insurance ...........................Policy A mortgage pool insurance policy
or policies may be obtained and
maintained for Loans relating to any
Series of Securities, which shall be
limited in scope, covering defaults on
the related Loans in an initial amount
equal to a specified percentage of the
aggregate principal balance of all Loans
included in the Pool as of the related
Cut-off Date.
G. FHA Insurance .......................If specified in the related Prospectus
Supplement, all or a portion of the
Loans in a Pool may be (i) insured by
the Federal Housing Administration (the
"FHA") and/or (ii) partially guaranteed
by the Department of
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Veterans' Affairs (the "VA"). See
"Certain Legal Aspects of the Loans--The
Title I Program".
H. Cross-Support .......................If specified in the related Prospectus
Supplement, separate classes of a Series
of Securities may evidence the
beneficial ownership of, or be secured
by, separate groups of assets included
in a Trust Fund. In such case, credit
support may be provided by a
cross-support feature which requires
that distributions be made with respect
to Securities evidencing a beneficial
ownership interest in, or secured by,
one or more asset groups prior to
distributions to Subordinated Securities
evidencing a beneficial ownership
interest in, or secured by, other asset
groups within the same Trust Fund.
If specified in the related Prospectus
Supplement, the coverage provided by one
or more forms of credit support may
apply concurrently to two or more
separate Trust Funds. If applicable, the
related Prospectus Supplement will
identify the Trust Funds to which such
credit support relates and the manner of
determining the amount of the coverage
provided thereby and of the application
of such coverage to the identified Trust
Funds.
Advances................................The Master Servicer and, if applicable,
each mortgage servicing institution that
services a Loan in a Pool on behalf of
the Master Servicer (each, a
"Sub-Servicer") may be obligated to
advance amounts (each, an "Advance")
corresponding to delinquent interest
and/or principal payments on such Loan
(including, in the case of Cooperative
Loans, unpaid maintenance fees or other
charges under the related proprietary
lease) until the date, as specified in
the related Prospectus Supplement,
following the date on which the related
Property is sold at a foreclosure sale
or the related Loan is otherwise
liquidated. Any obligation to make
Advances may be subject to limitations
as specified in the related Prospectus
Supplement. If so specified in the
related Prospectus Supplement, Advances
may be drawn from a cash account
available for such purpose as described
in such Prospectus Supplement. Advances
will be reimbursable to the extent
described under "Description of the
Securities--Advances" herein and in the
related Prospectus Supplement.
In the event the Master Servicer or
Sub-Servicer fails to make a required
Advance, the Trustee may be obligated to
advance such amounts otherwise required
to be advanced by the Master Servicer or
Sub-Servicer. See "Description of the
Securities--Advances."
Optional Termination ...................The Master Servicer or the party
specified in the related Prospectus
Supplement, including the holder of the
residual interest in a REMIC, may have
the option to effect early retirement of
a Series of Securities through the
purchase of the Trust Fund Assets. The
Master Servicer will deposit the
proceeds of any such purchase in the
Security
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Account for each Trust Fund as described
under "The Agreements--Payments on
Loans; Deposit to Security Account." Any
such purchase of Trust Fund Assets and
property acquired in respect of Trust
Fund Assets evidenced by a Series of
Securities will be made at the option of
the Master Servicer, such other person
or, if applicable, such holder of the
REMIC residual interest, at a price
specified in the related Prospectus
Supplement. The exercise of such right
will effect early retirement of the
Securities of that Series, but the right
of the Master Servicer, such other
person or, if applicable, such holder of
the REMIC residual interest, to so
purchase is subject to the principal
balance of the related Trust Fund Assets
being less than the percentage specified
in the related Prospectus Supplement of
the aggregate principal balance of the
Trust Fund Assets at the Cut-off Date
for the Series. The foregoing is subject
to the provision that if a REMIC
election is made with respect to a Trust
Fund, any repurchase pursuant to clause
(ii) above will be made only in
connection with a "qualified
liquidation" of the REMIC within the
meaning of Section 860F(g)(4) of the
Code.
Legal Investment .......................The Prospectus Supplement for each
series of Securities will specify which,
if any, of the classes of Securities
offered thereby constitute "mortgage
related securities" for purposes of the
Secondary Mortgage Market Enhancement
Act of 1984 ("SMMEA"). Classes of
Securities that qualify as "mortgage
related securities" will be legal
investments for certain types of
institutional investors to the extent
provided in SMMEA, subject, in any case,
to any other regulations which may
govern investments by such institutional
investors. Institutions whose investment
activities are subject to review by
federal or state authorities should
consult with their counsel or the
applicable authorities to determine
whether an investment in a particular
class of Securities (whether or not such
class constitutes a "mortgage related
security") complies with applicable
guidelines, policy statements or
restrictions. See "Legal Investment."
Federal Income Tax
Consequences .........................The federal income tax consequences to
Securityholders will vary depending on
whether one or more elections are made
to treat the Trust Fund or specified
portions thereof as a REMIC under the
provisions of the Internal Revenue Code
of 1986, as amended (the "Code"). The
Prospectus Supplement for each Series of
Securities will specify whether such an
election will be made. See "Federal
Income Tax Consequences".
ERISA Considerations ...................A fiduciary of any employee benefit plan
or other retirement plan or arrangement
subject to the Employee Retirement
Income Security Act of 1974, as amended
("ERISA"), or the Code should carefully
review with its legal advisors whether
the purchase or holding of Securities
could give rise to a transaction
prohibited or not otherwise permissible
under ERISA or the Code. See "ERISA
Considerations". Certain classes of
Securities may not be transferred unless
the Trustee and the
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Depositor are furnished with a letter of
representation or an opinion of counsel
to the effect that such transfer will
not result in a violation of the
prohibited transaction provisions of
ERISA and the Code and will not subject
the Trustee, the Depositor or the Master
Servicer to additional obligations. See
"Description of the Securities-General"
and "ERISA Considerations".
Risk ...................................Factors For a discussion of certain
risks associated with an investment in
the Securities, see "Risk Factors" on
Page 12 herein and in the related
Prospectus Supplement.
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RISK FACTORS
Investors should consider the following factors in connection with the
purchase of the Securities.
Limited Liquidity
There will be no market for the Securities of any Series prior to the
issuance thereof, and there can be no assurance that a secondary market will
develop or, if it does develop, that it will provide Securityholders with
liquidity of investment or will continue for the life of the Securities of such
Series.
Limited Source of Payments--No Recourse to Sellers, Depositor or Master Servicer
The Depositor does not have, nor is it expected to have, any significant
assets. Unless otherwise specified in the related Prospectus Supplement, the
Securities of a Series will be payable solely from the Trust Fund for such
Securities and will not have any claim against or security interest in the Trust
Fund for any other Series. There will be no recourse to the Depositor or any
other person for any failure to receive distributions on the Securities.
Further, at the times set forth in the related Prospectus Supplement, certain
Trust Fund Assets and/or any balance remaining in the Security Account
immediately after making all payments due on the Securities of such Series,
after making adequate provision for future payments on certain classes of
Securities and after making any other payments specified in the related
Prospectus Supplement, may be promptly released or remitted to the Depositor,
the Master Servicer, any credit enhancement provider or any other person
entitled thereto and will no longer be available for making payments to
Securityholders. Consequently, holders of Securities of each Series must rely
solely upon payments with respect to the Trust Fund Assets and the other assets
constituting the Trust Fund for a Series of Securities, including, if
applicable, any amounts available pursuant to any credit enhancement for such
Series, for the payment of principal of and interest on the Securities of such
Series.
The Securities will not represent an interest in or obligation of the
Depositor, the Master Servicer, any Seller or any of their respective
affiliates. The only obligations, if any, of the Depositor with respect to the
Trust Fund Assets or the Securities of any Series will be pursuant to certain
representations and warranties. The Depositor does not have, and is not expected
in the future to have, any significant assets with which to meet any obligation
to repurchase Trust Fund Assets with respect to which there has been a breach of
any representation or warranty. If, for example, the Depositor were required to
repurchase a Loan, its only sources of funds to make such repurchase would be
from funds obtained (i) from the enforcement of a corresponding obligation, if
any, on the part of the related Seller or originator of such Loan, or (ii) to
the extent provided in the related Prospectus Supplement, from a Reserve Account
or similar credit enhancement established to provide funds for such repurchases.
The only obligations of the Master Servicer, other than its master
servicing obligations, with respect to the Trust Fund Assets or the Securities
of any Series will be pursuant to certain representations and warranties. The
Master Servicer may be required to repurchase or substitute for any Loan with
respect to which such representations and warranties are breached. There is no
assurance, however, that the Master Servicer will have the financial ability to
effect any such repurchase or substitution.
The only obligations of any Seller with respect to Trust Fund Assets or the
Securities of any Series will be pursuant to certain representations and
warranties and certain document delivery requirements. A Seller may be required
to repurchase or substitute for any Loan with respect to which such
representations and warranties or document delivery requirements are breached.
There is no assurance, however, that such Seller will have the financial ability
to effect such repurchase or substitution.
Credit Enhancement
Although credit enhancement is intended to reduce the risk of delinquent
payments or losses to holders of Securities entitled to the benefit thereof, the
amount of such credit enhancement will be limited, as set forth in the related
Prospectus Supplement, and may be subject to periodic reduction in accordance
with a schedule or formula
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or otherwise decline, and could be depleted under certain circumstances prior to
the payment in full of the related Series of Securities, and as a result
Securityholders of the related Series may suffer losses. Moreover, such credit
enhancement may not cover all potential losses or risks. For example, credit
enhancement may or may not cover fraud or negligence by a loan originator or
other parties. In addition, the Trustee will generally be permitted to reduce,
terminate or substitute all or a portion of the credit enhancement for any
Series of Securities, provided the applicable Rating Agency indicates that the
then-current rating of the Securities of such Series will not be adversely
affected. See "Credit Enhancement".
Prepayment and Yield Considerations
The timing of principal payments of the Securities of a Series will be
affected by a number of factors, including the following: (i) the extent of
prepayments (including for this purpose prepayments resulting from refinancing
or liquidations of the Loans due to defaults, casualties, condemnations and
repurchases by the Depositor or the Master Servicer) of the Loans comprising the
Trust Fund, which prepayments may be influenced by a variety of factors
including general economic conditions, prevailing interest rate levels, the
availability of alternative financing and homeowner mobility, (ii) the manner of
allocating principal and/or payments among the classes of Securities of a Series
as specified in the related Prospectus Supplement, (iii) the exercise by the
party entitled thereto of any right of optional termination and (iv) the rate
and timing of payment defaults and losses incurred with respect to the Trust
Fund Assets. The repurchase of Loans by the Depositor or the Master Servicer may
result from repurchases of Trust Fund Assets due to material breaches of the
Depositor's or the Master Servicer's representations and warranties, as
applicable. The yields to maturity and weighted average lives of the Securities
will be affected primarily by the rate and timing of prepayment of the Loans
comprising the Trust Fund Assets. In addition, the yields to maturity and
weighted average lives of the Securities will be affected by the distribution of
amounts remaining in any Pre-Funding Account following the end of the related
Funding Period. Any reinvestment risks resulting from a faster or slower
incidence of prepayment of Loans held by a Trust Fund will be borne entirely by
the holders of one or more clauses of the related Series of Securities. See
"Yield and Prepayment Considerations" and "The Agreements--Pre-Funding Account."
Interest payable on the Securities of a Series on a Distribution Date will
include all interest accrued during the period specified in the related
Prospectus Supplement. In the event interest accrues over a period ending two or
more days prior to a Distribution Date, the effective yield to Securityholders
will be reduced from the yield that would otherwise be obtainable if interest
payable on the Securities were to accrue through the day immediately preceding
each Distribution Date, and the effective yield (at par) to Securityholders will
be less than the indicated coupon rate. See "Description of the Securities -
Distributions on Securities - Distributions of Interest".
Balloon Payments
Certain of the Loans as of the related Cut-off Date may not be fully
amortizing over their terms to maturity and, thus, will require substantial
principal payments (i.e., balloon payments) at their stated maturity. Loans with
balloon payments involve a greater degree of risk because the ability of a
borrower to make a balloon payment typically will depend upon its ability either
to timely refinance the loan or to timely sell the related Property. The ability
of a borrower to accomplish either of these goals will be affected by a number
of factors, including the level of available mortgage rates at the time of sale
or refinancing, the borrower's equity in the related Property, the financial
condition of the borrower and tax laws. Losses on such Loans that are not
otherwise covered by the credit enhancement described in the applicable
Prospectus Supplement will be borne by the holders of one or more classes of
Securities of the related Series.
Nature of Mortgages
Property Values. There are several factors that could adversely affect the
value of Properties such that the outstanding balance of the related Loans,
together with any senior financing on the Properties, if applicable, would equal
or exceed the value of the Properties. Among the factors that could adversely
affect the value of the Properties are an overall decline in the residential
real estate market in the areas in which the Properties are located or a decline
in the general condition of the Properties as a result of failure of borrowers
to maintain adequately the
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Properties or of natural disasters that are not necessarily covered by
insurance, such as earthquakes and floods. In the case of Home Equity Loans,
such decline could extinguish the value of the interest of a junior mortgagee in
the Property before having any effect on the interest of the related senior
mortgagee. If such a decline occurs, the actual rates of delinquencies,
foreclosures and losses on all Loans could be higher than those currently
experienced in the mortgage lending industry in general. Losses on such Loans
that are not otherwise covered by the credit enhancement described in the
applicable Prospectus Supplement will be borne by the holder of one or more
classes of Securities of the related Series.
Delays Due to Liquidation. Even assuming that the Properties provide
adequate security for the Loans, substantial delays could be encountered in
connection with the liquidation of defaulted Loans and corresponding delays in
the receipt of related proceeds by Securityholders could occur. An action to
foreclose on a Property securing a Loan is regulated by state statutes and rules
and is subject to many of the delays and expenses of other lawsuits if defenses
or counterclaims are interposed, sometimes requiring several years to complete.
Furthermore, in some states an action to obtain a deficiency judgment is not
permitted following a nonjudicial sale of a Property. In the event of a default
by a borrower, these restrictions, among other things, may impede the ability of
the Master Servicer to foreclose on or sell the Property or to obtain
liquidation proceeds sufficient to repay all amounts due on the related Loan. In
addition, the Master Servicer will be entitled to deduct from related
liquidation proceeds all expenses reasonably incurred in attempting to recover
amounts due on defaulted Loans and not yet repaid, including payments to senior
lienholders, legal fees and costs of legal action, real estate taxes and
maintenance and preservation expenses.
Disproportionate Effect of Liquidation Expenses. Liquidation expenses with
respect to defaulted loans do not vary directly with the outstanding principal
balance of the loan at the time of default. Therefore, assuming that a servicer
took the same steps in realizing upon a defaulted loan having a small remaining
principal balance as it would in the case of a defaulted loan having a large
remaining principal balance, the amount realized after expenses of liquidation
would be smaller as a percentage of the outstanding principal balance of the
small loan than would be the case with the defaulted loan having a large
remaining principal balance.
Home Equity Loans; Junior Liens. Since the mortgages and deeds of trust
securing the Home Equity Loans will be primarily junior liens subordinate to the
rights of the mortgagee under the related senior mortgage(s) or deed(s) of
trust, the proceeds from any liquidation, insurance or condemnation proceeds
will be available to satisfy the outstanding balance of such junior lien only to
the extent that the claims of such senior mortgagees have been satisfied in
full, including any related foreclosure costs. In addition, a junior mortgagee
may not foreclose on the property securing a junior mortgage unless it
forecloses subject to any senior mortgage, in which case it must either pay the
entire amount due on any senior mortgage to the related senior mortgagee at or
prior to the foreclosure sale or undertake the obligation to make payments on
any such senior mortgage in the event the mortgagor is in default thereunder.
The Trust Fund will not have any source of funds to satisfy any senior mortgages
or make payments due to any senior mortgagees and may therefore be prevented
from foreclosing on the related property.
Consumer Protection Laws. Applicable state laws generally regulate interest
rates and other charges, require certain disclosures, and require licensing of
certain originators and servicers of Loans. In addition, most states have other
laws, public policy and general principles of equity relating to the protection
of consumers, unfair and deceptive practices and practices which may apply to
the origination, servicing and collection of the Loans. Depending on the
provisions of the applicable law and the specific facts and circumstances
involved, violations of these laws, policies and principles may limit the
ability of the Master Servicer to collect all or part of the principal of or
interest on the Loans, may entitle the borrower to a refund of amounts
previously paid and, in addition, could subject the Master Servicer to damages
and administrative sanctions. See "Certain Legal Aspects of the Loans".
Environmental Risks
Real property pledged as security to a lender may be subject to certain
environmental risks. Under the laws of certain states, contamination of a
property may give rise to a lien on the property to assure the costs of cleanup.
In several states, such a lien has priority over the lien of an existing
mortgage against such property. In addition
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under the laws of some states and under the federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), a lender may be
liable, as an "owner" or "operator", for costs of addressing releases or
threatened releases of hazardous substances that require remedy at a property,
if agents or employees of the lender have become sufficiently involved in the
operations of the borrower, regardless of whether the environmental damage or
threat was caused by a prior owner. Such costs could result in a loss to the
holders of one or more classes of Securities of the related Series. A lender
also risks such liability on foreclosure of the related property. See "Certain
Legal Aspects of the Loans--Environmental Risks".
Certain Other Legal Aspects of the Loans
Consumer Protection Laws. The Loans may also be subject to federal laws,
including:
(i) the Federal Truth in Lending Act and Regulation Z promulgated
thereunder, which require certain disclosures to the borrowers regarding
the terms of the Loans;
(ii) the Equal Credit Opportunity Act and Regulation B promulgated
thereunder, which prohibit discrimination on the basis of age, race, color,
sex, religion, marital status, national origin, receipt of public
assistance or the exercise of any right under the Consumer Credit
Protection Act, in the extension of credit;
(iii) the Fair Credit Reporting Act, which regulates the use and
reporting of information related to the borrower's credit experience; and
(iv) for Loans that were originated or closed after November 7, 1989,
the Home Equity Loan Consumer Protection Act of 1988, which requires
additional application disclosures, limits changes that may be made to the
loan documents without the borrower's consent and restricts a lender's
ability to declare a default or to suspend or reduce a borrower's credit
limit to certain enumerated events.
The Riegle Act. Certain mortgage loans may be subject to the Riegle
Community Development and Regulatory Improvement Act of 1994 (the "Riegle Act")
which incorporates the Home Ownership and Equity Protection Act of 1994. These
provisions impose additional disclosure and other requirements on creditors with
respect to non-purchase money mortgage loans with high interest rates or high
up-front fees and charges. The provisions of the Riegle Act apply on a mandatory
basis to all mortgage loans originated on or after October 1, 1995. These
provisions can impose specific statutory liabilities upon creditors who fail to
comply with their provisions and may affect the enforceability of the related
loans. In addition, any assignee of the creditor would generally be subject to
all claims and defenses that the consumer could assert against the creditor,
including, without limitation, the right to rescind the mortgage loan.
Holder in Due Course Rules. The Home Improvement Contracts are also subject
to the Preservation of Consumers' Claims and Defenses regulations of the Federal
Trade Commission and other similar federal and state statutes and regulations
(collectively, the "Holder in Due Course Rules"), which protect the homeowner
from defective craftsmanship or incomplete work by a contractor. These laws
permit the obligor to withhold payment if the work does not meet the quality and
durability standards agreed to by the homeowner and the contractor. The Holder
in Due Course Rules have the effect of subjecting any assignee of the seller in
a consumer credit transaction to all claims and defenses which the obligor in
the credit sale transaction could assert against the seller of the goods.
Violations of certain provisions of these federal laws may limit the
ability of the Master Servicer to collect all or part of the principal of or
interest on the Loans and in addition could subject the Trust Fund to damages
and administrative enforcement. Losses on such Loans that are not otherwise
covered by the credit enhancement described in the applicable Prospectus
Supplement will be borne by the holders of one or more classes of Securities of
the related Series. See "Certain Legal Aspects of the Loans".
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Rating of the Securities
It will be a condition to the issuance of a class of Securities offered
hereby that they be rated in one of the four highest rating categories by the
Rating Agency identified in the related Prospectus Supplement. Any such rating
would be based on, among other things, the adequacy of the value of the related
Trust Fund Assets and any credit enhancement with respect to such class and will
represent such Rating Agency's assessment solely of the likelihood that holders
of such class of Securities will receive payments to which such Securityholders
are entitled under the related Agreement. Such rating will not constitute an
assessment of the likelihood that principal prepayments on the related Loans
will be made, the degree to which the rate of such prepayments might differ from
that originally anticipated or the likelihood of early optional termination of
the Series of Securities. Such rating shall not be deemed a recommendation to
purchase, hold or sell Securities, inasmuch as it does not address market price
or suitability for a particular investor. Such rating will not address the
possibility that prepayment at higher or lower rates than anticipated by an
investor may cause such investor to experience a lower than anticipated yield or
that an investor purchasing a Security at a significant premium might fail to
recoup its initial investment under certain prepayment scenarios.
There is also no assurance that any such rating will remain in effect for
any given period of time or that it may not be lowered or withdrawn entirely by
the Rating Agency in the future if in its judgment circumstances in the future
so warrant. In addition to being lowered or withdrawn due to any erosion in the
adequacy of the value of the Trust Fund Assets or any credit enhancement with
respect to a Series of Securities, such rating might also be lowered or
withdrawn because of, among other reasons, an adverse change in the financial or
other condition of a credit enhancement provider or a change in the rating of
such credit enhancement provider's long term debt.
The amount, type and nature of credit enhancement, if any, established with
respect to a class of Securities will be determined on the basis of criteria
established by each Rating Agency rating classes of such Series. Such criteria
are sometimes based upon an actuarial analysis of the behavior of similar loans
in a larger group. Such analysis is often the basis upon which each Rating
Agency determines the amount of credit enhancement required with respect to each
such class. There can be no assurance that the historical data supporting any
such actuarial analysis will accurately reflect future experience nor any
assurance that the data derived from a large pool of similar loans accurately
predicts the delinquency, foreclosure or loss experience of any particular pool
of Loans. No assurance can be given that the values of any Properties have
remained or will remain at their levels on the respective dates of origination
of the related Loans. If the residential real estate markets should experience
an overall decline in property values such that the outstanding principal
balances of the Loans in a particular Trust Fund and any secondary financing on
the related Properties become equal to or greater than the value of the
Properties, the rates of delinquencies, foreclosures and losses could be higher
than those now generally experienced in the mortgage lending industry. In
addition, adverse economic conditions (which may or may not affect real property
values) may affect the timely payment by mortgagors of scheduled payments of
principal and interest on the Loans and, accordingly, the rates of
delinquencies, foreclosures and losses with respect to any Trust Fund. To the
extent that such losses are not covered by credit enhancement, such losses will
be borne, at least in part, by the holders of one or more classes of Securities
of the related Series. See "Rating".
Book-Entry Registration
If issued in book-entry form, such registration may reduce the liquidity of
the Securities in the secondary trading market since investors may be unwilling
to purchase Securities for which they cannot obtain physical certificates. Since
transactions in book-entry Securities can be effected only through the
Depository Trust Company ("DTC"), participating organizations, Financial
Intermediaries and certain banks, the ability of a Securityholder to pledge a
book-entry Security to persons or entities that do not participate in the DTC
system may be limited due to lack of a physical certificate representing such
Securities.
In addition, Securityholders may experience some delay in their receipt of
distributions of interest and principal on book-entry Securities since
distributions are required to be forwarded by the Trustee to DTC and DTC will
then be required to credit such distributions to the accounts of Depository
participants which thereafter will be
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required to credit them to the accounts of Securityholders either directly or
indirectly through Financial Intermediaries. See "Description of the
Securities--Book-Entry Registration of Securities".
Pre-Funding Accounts
If so provided in the related Prospectus Supplement, on the related Closing
Date the Depositor will deposit cash in an amount (the "Pre-Funded Amount")
specified in such Prospectus Supplement into an account (the "Pre-Funding
Account"). In no event shall the Pre-Funded Amount exceed 50% of the initial
aggregate principal amount of the Certificates and/or Notes of the related
Series of Securities. The Pre-Funded Amount will be used to purchase Loans
("Subsequent Loans") in a period from the related Closing Date to a date not
more than one year after such Closing Date (such period, the "Funding Period")
from the Depositor (which, in turn, will acquire such Subsequent Loans from the
Seller or Sellers specified in the related Prospectus Supplement). The
Pre-Funding Account will be maintained with the Trustee for the related Series
of Securities and is designed solely to hold funds to be applied by such Trustee
during the Funding Period to pay to the Depositor the purchase price for
Subsequent Loans. Monies on deposit in the Pre-Funding Account will not be
available to cover losses on or in respect of the related Loans. To the extent
that the entire Pre-Funded Amount has not been applied to the purchase of
Subsequent Loans by the end of the related Funding Period, any amounts remaining
in the Pre-Funding Account will be distributed as a prepayment of principal to
Certificateholders and/or Noteholders on the Distribution Date immediately
following the end of the Funding Period, in the amounts and pursuant to the
priorities set forth in the related Prospectus Supplement. Any reinvestment risk
resulting from such prepayment will be borne entirely by the holders of one or
more classes of the related Series of Certificates.
Bankruptcy and Insolvency Risks
The Seller and the Depositor will treat the transfer of the Loans by the
Seller to the Depositor as a sale for accounting purposes. The Depositor and the
Trust Fund will treat the transfer of Loans from the Depositor to the Trust Fund
as a sale for accounting purposes. As a sale of the Loans by the Seller to the
Depositor, the Loans would not be part of the Seller's bankruptcy estate and
would not be available to the Seller's creditors. However, in the event of the
insolvency of the Seller, it is possible that the bankruptcy trustee or a
creditor of the Seller may attempt to recharacterize the sale of the Loans as a
borrowing by the Seller, secured by a pledge of the Loans. Similarly, as a sale
of the Loans by the Depositor to the Trust Fund, the Loans would not be part of
the Depositor's bankruptcy estate and would not be available to the Depositor's
creditors. However, in the event of the insolvency of the Depositor, it is
possible that the bankruptcy trustee or a creditor of the Depositor may attempt
to recharacterize the sale of the Loans as a borrowing by the Depositor, secured
by a pledge of the Loans. In either case, this position, if argued before or
accepted by a court, could prevent timely payments of amounts due on the
Securities and result in a reduction of payments due on the Securities.
In the event of a bankruptcy or insolvency of the Master Servicer, the
bankruptcy trustee or receiver may have the power to prevent the Trustee or the
Securityholders from appointing a successor Servicer.
In addition, 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
security. For example, in a proceeding under the federal Bankruptcy Code, a
lender may not foreclose on a mortgaged property without the permission of the
bankruptcy court. The rehabilitation plan proposed by the debtor may provide, if
the mortgaged property is not the debtor's principal residence and the court
determines that the value of the mortgaged property is less than the principal
balance of the mortgage loan, for the reduction of the secured indebtedness to
the value of the mortgaged property as of the date of the commencement of the
bankruptcy, rendering the lender a general unsecured creditor for the
difference, and also may reduce the monthly payments due under such mortgage
loan, change the rate of interest and alter the mortgage loan repayment
schedule. The effect of any such proceedings under the federal Bankruptcy Code,
including but not limited to any automatic stay, could result in delays in
receiving payments on the Loans underlying a Series of Securities and possible
reductions in the aggregate amount of such payments.
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Consequences of Owning Original Issue Discount Securities.
Debt Securities that are Compound Interest Securities will be, and certain
of the other Debt Securities may be, issued with original discount for federal
income tax purposes. A holder of Debt Securities issued with original issue
discount will be required to include original issue discount in ordinary gross
income for federal income tax purposes as it accrues, in advance of receipt of
the cash attributable to such income. Accrued but unpaid interest on the Debt
Securities that are Compound Interest Securities generally will be treated as
original issue discount for this purpose. See Federal Income Tax
Consequences--Taxation of Debt Securities--Interest and Acquisition Discount"
and "--Market Discount" herein.
Value of Trust Fund Assets
There is no assurance that the market value of the Trust Fund Assets or any
other assets relating to a Series of Securities described under "Credit
Enhancement" herein will at any time be equal to or greater than the principal
amount of the Securities of such Series then outstanding, plus accrued interest
thereon. Moreover, upon an event of default under the Agreement for a Series of
Securities and a sale of the related Trust Fund Assets or upon a sale of the
assets of a Trust Fund for a Series of Securities, the Trustee, the Master
Servicer, the credit enhancer, if any, and any other service provider specified
in the related Prospectus Supplement generally will be entitled to receive the
proceeds of any such sale to the extent of unpaid fees and other amounts owing
to such persons under the related Agreement prior to distributions to
Securityholders. Upon any such sale, the proceeds thereof may be insufficient to
pay in full the principal of and interest on the Securities of such Series.
THE TRUST FUND
General
The Securities of each Series will represent interests in the assets of the
related Trust Fund, and the Notes of each Series will be secured by the pledge
of the assets of the related Trust Fund. The Trust Fund for each Series will be
held by the Trustee for the benefit of the related Securityholders. Each Trust
Fund will consist of certain assets (the "Trust Fund Assets") consisting of a
pool (each, a "Pool") comprised of Loans as specified in the related Prospectus
Supplement, together with payments in respect of such Loans, as specified in the
related Prospectus Supplement.* The Pool will be created on the first day of the
month of the issuance of the related Series of Securities or such other date
specified in the related Prospectus Supplement (the "Cut-off Date"). The
Securities will be entitled to payment from the assets of the related Trust Fund
or Funds or other assets pledged for the benefit of the Securityholders, as
specified in the related Prospectus Supplement and will not be entitled to
payments in respect of the assets of any other trust fund established by the
Depositor.
The Trust Fund Assets will be acquired by the Depositor, either directly or
through affiliates, from originators or sellers which may be affiliates of the
Depositor (the "Sellers"), and conveyed without recourse by the Depositor to the
related Trust Fund. Loans acquired by the Depositor will have been originated in
accordance with the underwriting criteria specified below under "Loan
Program-Underwriting Standards" or as otherwise described in the related
Prospectus Supplement. See "Loan Program--Underwriting Standards".
The Depositor will cause the Trust Fund Assets to be assigned to the
Trustee named in the related Prospectus Supplement for the benefit of the
holders of the Securities of the related Series. The Master Servicer
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* Whenever the terms "Pool", "Certificates", "Notes" and "Securities" are
used in this Prospectus, such terms will be deemed to apply, unless the context
indicates otherwise, to one specific Pool and the Securities of one Series
including the Certificates representing certain undivided interests in, and/or
Notes secured by the assets of, a single Trust Fund consisting primarily of the
Loans in such Pool. Similarly, the term "Pass-Through Rate" will refer to the
Pass-Through Rate borne by the Certificates and the term "interest rate" will
refer to the interest rate borne by the Notes of one specific Series, as
applicable, and the term "Trust Fund" will refer to one specific Trust Fund.
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named in the related Prospectus Supplement will service the Trust Fund Assets,
either directly or through other servicing institutions ("Sub-Servicers"),
pursuant to a Pooling and Servicing Agreement among the Depositor, the Master
Servicer and the Trustee with respect to a Series consisting of Certificates, or
a master servicing agreement (each, a "Master Servicing Agreement") between the
Trustee and the Master Servicer with respect to a Series consisting of
Certificates and Notes, and will receive a fee for such services. See "Loan
Program" and "The Agreements". With respect to Loans serviced by the Master
Servicer through a Sub-Servicer, the Master Servicer will remain liable for its
servicing obligations under the related Agreement as if the Master Servicer
alone were servicing such Loans.
As used herein, "Agreement" means, with respect to a Series consisting of
Certificates, the Pooling and Servicing Agreement, and with respect to a Series
consisting of Certificates and Notes, the Trust Agreement, the Indenture and the
Master Servicing Agreement, as the context requires.
If so specified in the related Prospectus Supplement, a Trust Fund relating
to a Series of Securities may be a business trust formed under the laws of the
state specified in the related Prospectus Supplement pursuant to a trust
agreement (each, a "Trust Agreement") between the Depositor and the trustee of
such Trust Fund.
With respect to each Trust Fund, prior to the initial offering of the
related Series of Securities, the Trust Fund will have no assets or liabilities.
No Trust Fund is expected to engage in any activities other than acquiring,
managing and holding of the related Trust Fund Assets and other assets
contemplated herein specified and in the related Prospectus Supplement and the
proceeds thereof, issuing Securities and making payments and distributions
thereon and certain related activities. No Trust Fund is expected to have any
source of capital other than its assets and any related credit enhancement.
Unless otherwise specified in the related Prospectus Supplement, the only
obligations of the Depositor with respect to a Series of Securities will be to
obtain certain representations and warranties from the Sellers and to assign to
the Trustee for such Series of Securities the Depositor's rights with respect to
such representations and warranties. See "The Agreements--Assignment of the
Trust Fund Assets". The obligations of the Master Servicer with respect to the
Loans will consist principally of its contractual servicing obligations under
the related Agreement (including its obligation to enforce the obligations of
the Sub-Servicers or Sellers, or both, as more fully described herein under
"Loan Program--Representations by Sellers; Repurchases" and "The
Agreements--Sub-Servicing By Sellers" and "--Assignment of the Trust Fund
Assets") and its obligation, if any, to make certain cash advances in the event
of delinquencies in payments on or with respect to the Loans in the amounts
described herein under "Description of the Securities--Advances". The
obligations of the Master Servicer to make advances may be subject to
limitations, to the extent provided herein and in the related Prospectus
Supplement.
The following is a brief description of the assets expected to be included
in the Trust Funds. If specific information respecting the Trust Fund Assets is
not known at the time the related Series of Securities initially is offered,
more general information of the nature described below will be provided in the
related Prospectus Supplement, and specific information will be set forth in a
report on Form 8-K to be filed with the Securities and Exchange Commission
within fifteen days after the initial issuance of such Securities (the "Detailed
Description"). A copy of the Agreement with respect to each Series of Securities
will be attached to the Form 8-K and will be available for inspection at the
corporate trust office of the Trustee specified in the related Prospectus
Supplement. A schedule of the Loans relating to such Series will be attached to
the Agreement delivered to the Trustee upon delivery of the Securities.
The Loans
General. Loans will consist of mortgage loans or deeds of trust secured by
first or subordinated liens on one- to four-family residential properties, Home
Equity Loans or Home Improvement Contracts. For purposes hereof, "Home Equity
Loans" includes "Closed-End Loans" and "Revolving Credit Line Loans". If so
specified, the Loans may include cooperative apartment loans ("Cooperative
Loans") secured by security interests in shares issued by private, non-profit,
cooperative housing corporations ("Cooperatives") and in the related proprietary
leases or occupancy agreements granting exclusive rights to occupy specific
dwelling units in such Cooperatives' buildings.
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As more fully described in the related Prospectus Supplement, the Loans may be
"conventional" loans or loans that are insured or guaranteed by a governmental
agency such as the FHA or VA.
Unless otherwise specified in the related Prospectus Supplement, all of the
Loans in a Pool will have monthly payments due on the first day of each month.
The payment terms of the Loans to be included in a Trust Fund will be described
in the related Prospectus Supplement and may include any of the following
features (or combination thereof), all as described below or in the related
Prospectus Supplement:
(a) Interest may be payable at a fixed rate, a rate adjustable from
time to time in relation to an index (which will be specified in the
related Prospectus Supplement), a rate that is fixed for a period of time
or under certain circumstances and is followed by an adjustable rate, a
rate that otherwise varies from time to time, or a rate that is convertible
from an adjustable rate to a fixed rate. Changes to an adjustable rate may
be subject to periodic limitations, maximum rates, minimum rates or a
combination of such limitations. Accrued interest may be deferred and added
to the principal of a Loan for such periods and under such circumstances as
may be specified in the related Prospectus Supplement. Loans may provide
for the payment of interest at a rate lower than the specified interest
rate borne by such Loan (the "Loan Rate") for a period of time or for the
life of the Loan, and the amount of any difference may be contributed from
funds supplied by the seller of the Property or another source.
(b) Principal may be payable on a level debt service basis to fully
amortize the Loan over its term, may be calculated on the basis of an
assumed amortization schedule that is significantly longer than the
original term to maturity or on an interest rate that is different from the
Loan Rate or may not be amortized during all or a portion of the original
term. Payment of all or a substantial portion of the principal may be due
on maturity ("balloon payment"). Principal may include interest that has
been deferred and added to the principal balance of the Loan.
(c) Monthly payments of principal and interest may be fixed for the
life of the Loan, may increase over a specified period of time or may
change from period to period. Loans may include limits on periodic
increases or decreases in the amount of monthly payments and may include
maximum or minimum amounts of monthly payments.
(d) Prepayments of principal may be subject to a prepayment fee, which
may be fixed for the life of the Loan or may decline over time, and may be
prohibited for the life of the Loan or for certain periods ("lockout
periods"). Certain Loans may permit prepayments after expiration of the
applicable lockout period and may require the payment of a prepayment fee
in connection with any such subsequent prepayment. Other Loans may permit
prepayments without payment of a fee unless the prepayment occurs during
specified time periods. The Loans may include "due on sale" clauses which
permit the mortgagee to demand payment of the entire Loan in connection
with the sale or certain transfers of the related Property. Other Loans may
be assumable by persons meeting the then applicable underwriting standards
of the related Seller.
A Trust Fund may contain certain Loans ("Buydown Loans") that include
provisions whereby a third party partially subsidizes the monthly payments of
the borrowers on such Loans during the early years of such Loans, the difference
to be made up from a fund (a "Buydown Fund") contributed by such third party at
the time of origination of the Loan. A Buydown Fund will be in an amount equal
either to the discounted value or full aggregate amount of future payment
subsidies. The underlying assumption of buydown plans is that the income of the
borrower will increase during the buydown period as a result of normal increases
in compensation and inflation, so that the borrower will be able to meet the
full loan payments at the end of the buydown period. To the extent that this
assumption as to increased income is not fulfilled, the possibility of defaults
on Buydown Loans is increased. The related Prospectus Supplement will contain
information with respect to any Buydown Loan concerning limitations on the
interest rate paid by the borrower initially, on annual increases in the
interest rate and on the length of the buydown period.
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The real property which secures repayment of the Loans is referred to as
the "Mortgaged Properties". Home Improvement Contracts may, and the other Loans
will, be secured by mortgages or deeds of trust or other similar security
instruments creating a lien on a Mortgaged Property. In the case of Home Equity
Loans, such liens generally will be subordinated to one or more senior liens on
the related Mortgaged Properties as described in the related Prospectus
Supplement. As specified in the related Prospectus Supplement, Home Improvement
Contracts may be unsecured or secured by purchase money security interests in
the Home Improvements financed thereby. The Mortgaged Properties and the Home
Improvements are collectively referred to herein as the "Properties". The
Properties relating to Loans will consist of detached or semi-detached one- to
four-family dwelling units, townhouses, rowhouses, individual condominium units,
individual units in planned unit developments, and certain other dwelling units
("Single Family Properties"). Such Properties may include vacation and second
homes, investment properties and leasehold interests. In the case of leasehold
interests, the term of the leasehold will exceed the scheduled maturity of the
Loan by at least five years, unless otherwise specified in the related
Prospectus Supplement. The Properties may be located in any one of the fifty
states, the District of Columbia, Guam, Puerto Rico or any other territory of
the United States.
Loans with certain Loan-to-Value Ratios and/or certain principal balances
may be covered wholly or partially by primary mortgage guaranty insurance
policies (each, a "Primary Mortgage Insurance Policy"). The existence, extent
and duration of any such coverage will be described in the applicable Prospectus
Supplement.
The aggregate principal balance of Loans secured by Properties that are
owner-occupied will be disclosed in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement, the sole basis for a
representation that a given percentage of the Loans is secured by Single Family
Properties that are owner-occupied will be either (i) the making of a
representation by the borrower at origination of the Loan either that the
underlying Property will be used by the borrower for a period of at least six
months every year or that the borrower intends to use the Property as a primary
residence or (ii) a finding that the address of the underlying Property is the
borrower's mailing address.
Home Equity Loans. As more fully described in the related Prospectus
Supplement, interest on each Revolving Credit Line Loan, excluding introduction
rates offered from time to time during promotional periods, is computed and
payable monthly on the average daily outstanding principal balance of such Loan.
Principal amounts on a Revolving Credit Line Loan may be drawn down (up to a
maximum amount as set forth in the related Prospectus Supplement) or repaid
under each Revolving Credit Line Loan from time to time, but may be subject to a
minimum periodic payment. Except to the extent provided in the related
Prospectus Supplement, the Trust Fund will not include any amounts borrowed
under a Revolving Credit Line Loan after the Cut-off Date. The full amount of a
Closed-End Loan is advanced at the inception of the Loan and generally is
repayable in equal (or substantially equal) installments of an amount to fully
amortize such Loan at its stated maturity. Except to the extent provided in the
related Prospectus Supplement, the original terms to stated maturity of
Closed-End Loans will not exceed 360 months. Under certain circumstances, under
either a Revolving Credit Line Loan or a Closed-End Loan, a borrower may choose
an interest only payment option and is obligated to pay only the amount of
interest which accrues on the Loan during the billing cycle. An interest only
payment option may be available for a specified period before the borrower must
begin paying at least the minimum monthly payment of a specified percentage of
the average outstanding balance of the Loan.
Home Improvement Contracts. The Trust Fund Assets for a Series of
Securities may consist, in whole or in part, of Home Improvement Contracts
originated by a home improvement contractor, a thrift or a commercial mortgage
banker in the ordinary course of business. The Home Improvements securing the
Home Improvement Contracts may include, but are not limited to, replacement
windows, house siding, new roofs, swimming pools, satellite dishes, kitchen and
bathroom remodeling goods and solar heating panels. As specified in the related
Prospectus Supplement, the Home Improvement Contracts will either be unsecured
or secured by mortgages on Single Family Properties which are generally
subordinate to other mortgages on the same Property, or secured by purchase
money security interests in the Home Improvements financed thereby. Except as
otherwise specified in the related Prospectus Supplement, the Home Improvement
Contracts will be fully amortizing and may have fixed interest rates or
adjustable interest rates and may provide for other payment characteristics as
described below and
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in the related Prospectus Supplement. The initial Loan-to-Value Ratio of a Home
Improvement Contract is computed in the manner described in the related
Prospectus Supplement.
Additional Information. Each Prospectus Supplement will contain
information, as of the date of such Prospectus Supplement and to the extent then
specifically known to the Depositor, with respect to the Loans contained in the
related Pool, including (i) the aggregate outstanding principal balance and the
average outstanding principal balance of the Loans as of the applicable Cut-off
Date, (ii) the type of property securing the Loan (e.g., single family
residences, individual units in condominium apartment buildings, two- to
four-family dwelling units, other real property or Home Improvements), (iii) the
original terms to maturity of the Loans, (iv) the largest principal balance and
the smallest principal balance of any of the Loans, (v) the earliest origination
date and latest maturity date of any of the Loans, (vi) the Loan-to-Value Ratios
or Combined Loan-to-Value Ratios, as applicable, of the Loans, (vii) the Loan
Rates or annual percentage rates ("APR") or range of Loan Rates or APR's borne
by the Loans, (viii) the maximum and minimum per annum Loan Rates, and (ix) the
geographical location of the Loans. If specific information respecting the Loans
is not known to the Depositor at the time the related Securities are initially
offered, more general information of the nature described above will be provided
in the related Prospectus Supplement, and specific information will be set forth
in the Detailed Description.
The "Loan-to-Value Ratio" of a Loan at any given time is the fraction,
expressed as a percentage, the numerator of which is the original principal
balance of the related Loan and the denominator of which is the Collateral Value
of the related Property. The "Combined Loan-to-Value Ratio" of a Loan at any
given time is the ratio, expressed as a percentage, of (i) the sum of (a) the
original principal balance of the Loan (or, in the case of a Revolving Credit
Line Loan, the maximum amount thereof available) and (b) the outstanding
principal balance at the date of origination of the Loan of any senior mortgage
loan(s) or, in the case of any open-ended senior mortgage loan, the maximum
available line of credit with respect to such mortgage loan, regardless of any
lesser amount actually outstanding at the date of origination of the Loan, to
(ii) the Collateral Value of the related Property. The "Collateral Value" of the
Property, other than with respect to certain Loans the proceeds of which were
used to refinance an existing mortgage loan (each, a "Refinance Loan"), is the
lesser of (a) the appraised value determined in an appraisal obtained by the
originator at origination of such Loan and (b) the sales price for such
Property. In the case of Refinance Loans, the "Collateral Value" of the related
Property is the appraised value thereof determined in an appraisal obtained at
the time of refinancing.
No assurance can be given that values of the Properties have remained or
will remain at their levels on the dates of origination of the related Loans. If
the residential real estate market should experience an overall decline in
property values such that the sum of the outstanding principal balances of the
Loans and any primary or secondary financing on the Properties, as applicable,
in a particular Pool become equal to or greater than the value of the
Properties, the actual rates of delinquencies, foreclosures and losses could be
higher than those now generally experienced in the mortgage lending industry. In
addition, adverse economic conditions and other factors (which may or may not
affect real property values) may affect the timely payment by borrowers of
scheduled payments of principal and interest on the Loans and, accordingly, the
actual rates of delinquencies, foreclosures and losses with respect to any Pool.
To the extent that such losses are not covered by subordination provisions or
alternative arrangements, such losses will be borne, at least in part, by the
holders of the Securities of the related Series.
Substitution of Trust Fund Assets
Substitution of Trust Fund Assets will be permitted in the event of
breaches of representations and warranties with respect to any original Trust
Fund Asset or in the event the documentation with respect to any Trust Fund
Asset is determined by the Trustee to be incomplete. The period during which
such substitution will be permitted generally will be indicated in the related
Prospectus Supplement.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Securities will be
applied by the Depositor to the purchase of Trust Fund Assets or will be used by
the Depositor for general corporate purposes. The Depositor expects to sell
Securities in Series from time to time, but the timing and amount of offerings
of Securities will
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depend on a number of factors, including the volume of Trust Fund Assets
acquired by the Depositor, prevailing interest rates, availability of funds and
general market conditions.
THE DEPOSITOR
CWABS, Inc., a Delaware corporation (the "Depositor"), was incorporated in
August 1996 for the limited purpose of acquiring, owning and transferring Trust
Fund Assets and selling interests therein or bonds secured thereby. The
Depositor is a limited purpose finance subsidiary of Countrywide Credit
Industries, Inc., a Delaware corporation. The Depositor maintains its principal
office at 155 North Lake Avenue, Pasadena, California 91101-7139. Its telephone
number is (818) 584-2212.
Neither the Depositor nor any of the Depositor's affiliates will insure or
guarantee distributions on the Securities of any Series.
LOAN PROGRAM
The Loans will have been purchased by the Depositor, either directly or
through affiliates, from Sellers. Unless otherwise specified in the related
Prospectus Supplement, the Loans so acquired by the Depositor will have been
originated in accordance with the underwriting criteria specified below under
"Underwriting Standards".
Underwriting Standards
Unless otherwise specified in the related Prospectus Supplement, each
Seller will represent and warrant that all Loans originated and/or sold by it to
the Depositor or one of its affiliates will have been underwritten in accordance
with standards consistent with those utilized by mortgage lenders generally
during the period of origination for similar types of loans. As to any Loan
insured by the FHA or partially guaranteed by the VA, the Seller will represent
that it has complied with underwriting policies of the FHA or the VA, as the
case may be.
Underwriting standards are applied by or on behalf of a lender to evaluate
the borrower's credit standing and repayment ability, and the value and adequacy
of the related Property as collateral. In general, a prospective borrower
applying for a Loan is required to fill out a detailed application designed to
provide to the underwriting officer pertinent credit information, including the
principal balance and payment history with respect to any senior mortgage, if
any, which, unless otherwise specified in the related Prospectus Supplement,
will be verified by the related Seller. As part of the description of the
borrower's financial condition, the borrower generally is required to provide a
current list of assets and liabilities and a statement of income and expenses,
as well as an authorization to apply for a credit report which summarizes the
borrower's credit history with local merchants and lenders and any record of
bankruptcy. In most cases, an employment verification is obtained from an
independent source (typically the borrower's employer) which verification
reports, among other things, the length of employment with that organization and
the borrower's current salary. If a prospective borrower is self-employed, the
borrower may be required to submit copies of signed tax returns. The borrower
may also be required to authorize verification of deposits at financial
institutions where the borrower has demand or savings accounts.
In determining the adequacy of the property to be used as collateral, an
appraisal will generally be made of each property considered for financing. The
appraiser is generally required to inspect the property, issue a report on its
condition and, if applicable, verify construction, if new, has been completed.
The appraisal is based on the market value of comparable homes, the estimated
rental income (if considered applicable by the appraiser) and the cost of
replacing the home. The value of the property being financed, as indicated by
the appraisal, must be such that it currently supports, and is anticipated to
support in the future, the outstanding loan balance.
Once all applicable employment, credit and property information is
received, a determination generally is made as to whether the prospective
borrower has sufficient monthly income available (i) to meet the borrower's
monthly obligations on the proposed mortgage loan (generally determined on the
basis of the monthly payments due in the year of origination) and other expenses
related to the property (such as property taxes and hazard insurance) and (ii)
to meet other financial obligations and monthly living expenses. The
underwriting standards applied by
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Sellers, particularly with respect to the level of loan documentation and the
borrower's income and credit history, may be varied in appropriate cases where
factors such as low Combined Loan-to-Value Ratios or other favorable credit
exist.
In the case of a Loan secured by a leasehold interest in real property, the
title to which is held by a third party lessor, the related Seller will, unless
otherwise specified in the related Prospectus Supplement, represent and warrant,
among other things, that the remaining term of the lease and any sublease is at
least five years longer than the remaining term on the Loan.
Certain of the types of Loans that may be included in a Trust Fund are
recently developed and may involve additional uncertainties not present in
traditional types of loans. For example, certain of such Loans may provide for
escalating or variable payments by the borrower. These types of Loans are
underwritten on the basis of a judgment that the borrowers have the ability to
make the monthly payments required initially. In some instances, a borrower's
income may not be sufficient to permit continued loan payments as such payments
increase. These types of Loans may also be underwritten primarily upon the basis
of Loan-to-Value Ratios or other favorable credit factors.
Qualifications of Sellers
Each Seller will be required to satisfy the following qualifications. Each
Seller must be an institution experienced in originating and servicing loans of
the type contained in the related Pool in accordance with accepted practices and
prudent guidelines, and must maintain satisfactory facilities to originate and
service those loans. Each Seller must be a seller/servicer approved by either
the Federal National Mortgage Association ("FNMA") or the Federal Home Loan
Mortgage Corporation ("FHLMC"). Each Seller must be a mortgagee approved by the
FHA or an institution the deposit accounts in which are insured by the Federal
Deposit Insurance Corporation (the "FDIC").
Representations by Sellers; Repurchases
Each Seller will have made representations and warranties in respect of the
Loans sold by such Seller and evidenced by all, or a part, of a Series of
Securities. Such representations and warranties may include, among other things:
(i) that title insurance (or in the case of Properties located in areas where
such policies are generally not available, an attorney's certificate of title)
and any required hazard insurance policy were effective at origination of each
Loan, other than a Cooperative Loan, and that each policy (or certificate of
title as applicable) remained in effect on the date of purchase of the Loan from
the Seller by or on behalf of the Depositor; (ii) that the Seller had good title
to each such Loan and such Loan was subject to no offsets, defenses,
counterclaims or rights of rescission except to the extent that any buydown
agreement may forgive certain indebtedness of a borrower; (iii) that each Loan
constituted a valid lien on, or a perfected security interest with respect to,
the Property (subject only to permissible liens disclosed, if applicable, title
insurance exceptions, if applicable, and certain other exceptions described in
the Agreement) and that the Property was free from damage and was in acceptable
condition; (iv) that there were no delinquent tax or assessment liens against
the Property; (v) that no required payment on a Loan was delinquent more than
the number of days specified in the related Prospectus Supplement; and (vi) that
each Loan was made in compliance with, and is enforceable under, all applicable
local, state and federal laws and regulations in all material respects.
If so specified in the related Prospectus Supplement, the representations
and warranties of a Seller in respect of a Loan will be made not as of the
Cut-off Date but as of the date on which such Seller sold the Loan to the
Depositor or one of its affiliates. Under such circumstances, a substantial
period of time may have elapsed between the sale date and the date of initial
issuance of the Series of Securities evidencing an interest in such Loan. Since
the representations and warranties of a Seller do not address events that may
occur following the sale of a Loan by such Seller, its repurchase obligation
described below will not arise if the relevant event that would otherwise have
given rise to such an obligation with respect to a Loan occurs after the date of
sale of such Loan by such Seller to the Depositor or its affiliates. However,
the Depositor will not include any Loan in the Trust Fund for any Series of
Securities if anything has come to the Depositor's attention that would cause it
to believe that the
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representations and warranties of a Seller will not be accurate and complete in
all material respects in respect of such Loan as of the date of initial issuance
of the related Series of Securities. If the Master Servicer is also a Seller of
Loans with respect to a particular Series of Securities, such representations
will be in addition to the representations and warranties made by the Master
Servicer in its capacity as a Master Servicer.
The Master Servicer or the Trustee, if the Master Servicer is the Seller,
will promptly notify the relevant Seller of any breach of any representation or
warranty made by it in respect of a Loan which materially and adversely affects
the interests of the Securityholders in such Loan. Unless otherwise specified in
the related Prospectus Supplement, if such Seller cannot cure such breach within
90 days following notice from the Master Servicer or the Trustee, as the case
may be, then such Seller will be obligated either (i) to repurchase such Loan
from the Trust Fund at a price (the "Purchase Price") equal to 100% of the
unpaid principal balance thereof as of the date of the repurchase plus accrued
interest thereon to the first day of the month following the month of repurchase
at the Loan Rate (less any Advances or amount payable as related servicing
compensation if the Seller is the Master Servicer) or (ii) substitute for such
Loan a replacement loan that satisfies the criteria specified in the related
Prospectus Supplement. If a REMIC election is to be made with respect to a Trust
Fund, unless otherwise specified in the related Prospectus Supplement, the
Master Servicer or a holder of the related residual certificate generally will
be obligated to pay any prohibited transaction tax which may arise in connection
with any such repurchase or substitution and the Trustee must have received a
satisfactory opinion of counsel that such repurchase or substitution will not
cause the Trust Fund to lose its status as a REMIC or otherwise subject the
Trust Fund to a prohibited transaction tax. The Master Servicer may be entitled
to reimbursement for any such payment from the assets of the related Trust Fund
or from any holder of the related residual certificate. See "Description of the
Securities--General". Except in those cases in which the Master Servicer is the
Seller, the Master Servicer will be required under the applicable Agreement to
enforce this obligation for the benefit of the Trustee and the holders of the
Securities, following the practices it would employ in its good faith business
judgment were it the owner of such Loan. This repurchase or substitution
obligation will constitute the sole remedy available to holders of Securities or
the Trustee for a breach of representation by a Seller.
Neither the Depositor nor the Master Servicer (unless the Master Servicer
is the Seller) will be obligated to purchase or substitute a Loan if a Seller
defaults on its obligation to do so, and no assurance can be given that Sellers
will carry out their respective repurchase or substitution obligations with
respect to Loans. However, to the extent that a breach of a representation and
warranty of a Seller may also constitute a breach of a representation made by
the Master Servicer, the Master Servicer may have a repurchase or substitution
obligation as described below under "The Agreements--Assignment of Trust Fund
Assets".
DESCRIPTION OF THE SECURITIES
Each Series of Certificates will be issued pursuant to separate agreements
(each, a "Pooling and Servicing Agreement" or a "Trust Agreement") among the
Depositor, the Master Servicer and the Trustee. A form of Pooling and Servicing
Agreement and Trust Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. Each Series of Notes will be
issued pursuant to an indenture (the "Indenture") between the related Trust Fund
and the entity named in the related Prospectus Supplement as trustee (the
"Trustee") with respect to such Series, and the related Loans will be serviced
by the Master Servicer pursuant to a Master Servicing Agreement. A form of
Indenture and Master Servicing Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. A Series of
Securities may consist of both Notes and Certificates. Each Agreement, dated as
of the related Cut-off Date, will be among the Depositor, the Master Servicer
and the Trustee for the benefit of the holders of the Securities of such Series.
The provisions of each Agreement will vary depending upon the nature of the
Securities to be issued thereunder and the nature of the related Trust Fund. The
following are descriptions of the material provisions which may appear in each
Agreement. The descriptions are subject to, and are qualified in their entirety
by reference to, all of the provisions of the Agreement for each Series of
Securities and the applicable Prospectus Supplement. The Depositor will provide
a copy of the Agreement (without exhibits) relating to any Series without charge
upon written request of a holder of record of a Security of such Series
addressed to CWABS, Inc., 155 North Lake Avenue, Pasadena, California
91101-7139, Attention: Secretary.
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General
Unless otherwise specified in the related Prospectus Supplement, the
Securities of each Series will be issued in book-entry or fully registered form,
in the authorized denominations specified in the related Prospectus Supplement,
will, in the case of Certificates, evidence specified beneficial ownership
interests in, and in the case of Notes, be secured by, the assets of the related
Trust Fund created pursuant to each Agreement and will not be entitled to
payments in respect of the assets included in any other Trust Fund established
by the Depositor. Unless otherwise specified in the related Prospectus
Supplement, the Securities will not represent obligations of the Depositor or
any affiliate of the Depositor. Certain of the Loans may be guaranteed or
insured as set forth in the related Prospectus Supplement. Each Trust Fund will
consist of, to the extent provided in the related Agreement, (i) the Trust Fund
Assets, as from time to time are subject to the related Agreement (exclusive of
any amounts specified in the related Prospectus Supplement ("Retained
Interest")), including all payments of interest and principal received with
respect to the Loans after the Cut-off Date (to the extent not applied in
computing the principal balance of such Loans as of the Cut-off Date (the
"Cut-off Date Principal Balance")); (ii) such assets as from time to time are
required to be deposited in the related Security Account, as described below
under "The Agreements--Payments on Loans; Deposits to Security Account"; (iii)
property which secured a Loan and which is acquired on behalf of the
Securityholders by foreclosure or deed in lieu of foreclosure and (iv) any
insurance policies or other forms of credit enhancement required to be
maintained pursuant to the related Agreement. If so specified in the related
Prospectus Supplement, a Trust Fund may also include one or more of the
following: reinvestment income on payments received on the Trust Fund Assets, a
Reserve Account, a mortgage pool insurance policy, a special hazard insurance
policy, a bankruptcy bond, one or more letters of credit, a surety bond,
guaranties or similar instruments.
Each Series of Securities will be issued in one or more classes. Each class
of Certificates of a Series will evidence beneficial ownership of a specified
percentage (which may be 0%) or portion of future interest payments and a
specified percentage (which may be 0%) or portion of future principal payments
on, and each class of Notes of a Series will be secured by, the related Trust
Fund Assets. A Series of Securities may include one or more classes that are
senior in right to payment to one or more other classes of Securities of such
Series. Certain Series or classes of Securities may be covered by insurance
policies, surety bonds or other forms of credit enhancement, in each case as
described under "Credit Enhancement" herein and in the related Prospectus
Supplement. One or more classes of Securities of a Series may be entitled to
receive distributions of principal, interest or any combination thereof.
Distributions on one or more classes of a Series of Securities may be made prior
to one or more other classes, after the occurrence of specified events, in
accordance with a schedule or formula or on the basis of collections from
designated portions of the related Trust Fund Assets, in each case as specified
in the related Prospectus Supplement. The timing and amounts of such
distributions may vary among classes or over time as specified in the related
Prospectus Supplement.
Distributions of principal and interest (or, where applicable, of principal
only or interest only) on the related Securities will be made by the Trustee on
each Distribution Date (i.e., monthly, quarterly, semi-annually or at such other
intervals and on the dates as are specified in the related Prospectus
Supplement) in proportion to the percentages specified in the related Prospectus
Supplement. Distributions will be made to the persons in whose names the
Securities are registered at the close of business on the dates specified in the
related Prospectus Supplement (each, a "Record Date"). Distributions will be
made in the manner specified in the related Prospectus Supplement to the persons
entitled thereto at the address appearing in the register maintained for holders
of Securities (the "Security Register"); provided, however, that the final
distribution in retirement of the Securities will be made only upon presentation
and surrender of the Securities at the office or agency of the Trustee or other
person specified in the notice to Securityholders of such final distribution.
The Securities will be freely transferable and exchangeable at the
Corporate Trust Office of the Trustee as set forth in the related Prospectus
Supplement. No service charge will be made for any registration of exchange or
transfer of Securities of any Series, but the Trustee may require payment of a
sum sufficient to cover any related tax or other governmental charge.
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Under current law the purchase and holding of a class of Securities
entitled only to a specified percentage of payments of either interest or
principal or a notional amount of either interest or principal on the related
Loans or a class of Securities entitled to receive payments of interest and
principal on the Loans only after payments to other classes or after the
occurrence of certain specified events by or on behalf of any employee benefit
plan or other retirement arrangement (including individual retirement accounts
and annuities, Keogh plans and collective investment funds in which such plans,
accounts or arrangements are invested) subject to provisions of ERISA or the
Code, may result in prohibited transactions, within the meaning of ERISA and the
Code. See "ERISA Considerations". Unless otherwise specified in the related
Prospectus Supplement, the transfer of Securities of such a class will not be
registered unless the transferee (i) represents that it is not, and is not
purchasing on behalf of, any such plan, account or arrangement or (ii) provides
an opinion of counsel satisfactory to the Trustee and the Depositor that the
purchase of Securities of such a class by or on behalf of such plan, account or
arrangement is permissible under applicable law and will not subject the
Trustee, the Master Servicer or the Depositor to any obligation or liability in
addition to those undertaken in the Agreements.
As to each Series, an election may be made to treat the related Trust Fund
or designated portions thereof as a "real estate mortgage investment conduit" or
"REMIC" as defined in the Code. The related Prospectus Supplement will specify
whether a REMIC election is to be made. Alternatively, the Agreement for a
Series may provide that a REMIC election may be made at the discretion of the
Depositor or the Master Servicer and may only be made if certain conditions are
satisfied. As to any such Series, the terms and provisions applicable to the
making of a REMIC election will be set forth in the related Prospectus
Supplement. If such an election is made with respect to a Series, one of the
classes will be designated as evidencing the sole class of "residual interests"
in the related REMIC, as defined in the Code. All other classes of Securities in
such a Series will constitute "regular interests" in the related REMIC, as
defined in the Code. As to each Series with respect to which a REMIC election is
to be made, the Master Servicer or a holder of the related residual certificate
will be obligated to take all actions required in order to comply with
applicable laws and regulations and will be obligated to pay any prohibited
transaction taxes. The Master Servicer, unless otherwise provided in the related
Prospectus Supplement, will be entitled to reimbursement for any such payment
from the assets of the Trust Fund or from any holder of the related residual
certificate.
Distributions on Securities
General. In general, the method of determining the amount of distributions
on a particular Series of Securities will depend on the type of credit support,
if any, that is used with respect to such Series. See "Credit Enhancement". Set
forth below are descriptions of various methods that may be used to determine
the amount of distributions on the Securities of a particular Series. The
Prospectus Supplement for each Series of Securities will describe the method to
be used in determining the amount of distributions on the Securities of such
Series.
Distributions allocable to principal and interest on the Securities will be
made by the Trustee out of, and only to the extent of, funds in the related
Security Account, including any funds transferred from any Reserve Account (a
"Reserve Account"). As between Securities of different classes and as between
distributions of principal (and, if applicable, between distributions of
Principal Prepayments, as defined below, and scheduled payments of principal)
and interest, distributions made on any Distribution Date will be applied as
specified in the related Prospectus Supplement. The Prospectus Supplement will
also describe the method for allocating distributions among Securities of a
particular class.
Available Funds. All distributions on the Securities of each Series on each
Distribution Date will be made from the Available Funds described below, in
accordance with the terms described in the related Prospectus Supplement and
specified in the Agreement. "Available Funds" for each Distribution Date will
generally equal the amount on deposit in the related Security Account on such
Distribution Date (net of related fees and expenses payable by the related Trust
Fund) other than amounts to be held therein for distribution on future
Distribution Dates.
Distributions of Interest. Interest will accrue on the aggregate principal
balance of the Securities (or, in the case of Securities entitled only to
distributions allocable to interest, the aggregate notional amount) of each
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class of Securities (the "Class Security Balance") entitled to interest from the
date, at the Pass-Through Rate or interest rate, as applicable (which in either
case may be a fixed rate or rate adjustable as specified in such Prospectus
Supplement), and for the periods specified in such Prospectus Supplement. To the
extent funds are available therefor, interest accrued during each such specified
period on each class of Securities entitled to interest (other than a class of
Securities that provides for interest that accrues, but is not currently
payable, referred to hereafter as "Accrual Securities") will be distributable on
the Distribution Dates specified in the related Prospectus Supplement until the
aggregate Class Security Balance of the Securities of such class has been
distributed in full or, in the case of Securities entitled only to distributions
allocable to interest, until the aggregate notional amount of such Securities is
reduced to zero or for the period of time designated in the related Prospectus
Supplement. The original Class Security Balance of each Security will equal the
aggregate distributions allocable to principal to which such Security is
entitled. Distributions allocable to interest on each Security that is not
entitled to distributions allocable to principal will be calculated based on the
notional amount of such Security. The notional amount of a Security will not
evidence an interest in or entitlement to distributions allocable to principal
but will be used solely for convenience in expressing the calculation of
interest and for certain other purposes.
Interest payable on the Securities of a Series on a Distribution Date will
include all interest accrued during the period specified in the related
Prospectus Supplement. In the event interest accrues over a period ending two or
more days prior to a Distribution Date, the effective yield to Securityholders
will be reduced from the yield that would otherwise be obtainable if interest
payable on the Security were to accrue through the day immediately preceding
such Distribution Date, and the effective yield (at par) to Securityholders will
be less than the indicated coupon rate.
With respect to any class of Accrual Securities, if specified in the
related Prospectus Supplement, any interest that has accrued but is not paid on
a given Distribution Date will be added to the aggregate Class Security Balance
of such class of Securities on that Distribution Date. Distributions of interest
on any class of Accrual Securities will commence only after the occurrence of
the events specified in such Prospectus Supplement. Prior to such time, the
beneficial ownership interest in the Trust Fund or the principal balance, as
applicable, of such class of Accrued Securities, as reflected in the aggregate
Class Security Balance of such class of Accrual Securities, will increase on
each Distribution Date by the amount of interest that accrued on such class of
Accrual Securities during the preceding interest accrual period but that was not
required to be distributed to such class on such Distribution Date. Any such
class of Accrual Securities will thereafter accrue interest on its outstanding
Class Security Balance as so adjusted.
Distributions of Principal. The related Prospectus Supplement will specify
the method by which the amount of principal to be distributed on the Securities
on each Distribution Date will be calculated and the manner in which such amount
will be allocated among the classes of Securities entitled to distributions of
principal. The aggregate Class Security Balance of any class of Securities
entitled to distributions of principal generally will be the aggregate original
Class Security Balance of such class of Securities specified in such Prospectus
Supplement, reduced by all distributions reported to the holders of such
Securities as allocable to principal and, (i) in the case of Accrual Securities,
unless otherwise specified in the related Prospectus Supplement, increased by
all interest accrued but not then distributable on such Accrual Securities and
(ii) in the case of adjustable rate Securities, subject to the effect of
negative amortization, if applicable.
If so provided in the related Prospectus Supplement, one or more classes of
Securities will be entitled to receive all or a disproportionate percentage of
the payments of principal which are received from borrowers in advance of their
scheduled due dates and are not accompanied by amounts representing scheduled
interest due after the month of such payments ("Principal Prepayments") in the
percentages and under the circumstances or for the periods specified in such
Prospectus Supplement. Any such allocation of Principal Prepayments to such
class or classes of Securities will have the effect of accelerating the
amortization of such Securities while increasing the interests evidenced by one
or more other classes of Securities in the Trust Fund. Increasing the interests
of the other classes of Securities relative to that of certain Securities is
intended to preserve the availability of the subordination provided by such
other Securities. See "Credit Enhancement-Subordination".
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Unscheduled Distributions. If specified in the related Prospectus
Supplement, the Securities will be subject to receipt of distributions before
the next scheduled Distribution Date under the circumstances and in the manner
described below and in such Prospectus Supplement. If applicable, the Trustee
will be required to make such unscheduled distributions on the day and in the
amount specified in the related Prospectus Supplement if, due to substantial
payments of principal (including Principal Prepayments) on the Trust Fund
Assets, the Trustee or the Master Servicer determines that the funds available
or anticipated to be available from the Security Account and, if applicable, any
Reserve Account, may be insufficient to make required distributions on the
Securities on such Distribution Date. Unless otherwise specified in the related
Prospectus Supplement, the amount of any such unscheduled distribution that is
allocable to principal will not exceed the amount that would otherwise have been
required to be distributed as principal on the Securities on the next
Distribution Date. Unless otherwise specified in the related Prospectus
Supplement, the unscheduled distributions will include interest at the
applicable Pass-Through Rate (if any) or interest rate (if any) on the amount of
the unscheduled distribution allocable to principal for the period and to the
date specified in such Prospectus Supplement.
Advances
To the extent provided in the related Prospectus Supplement, the Master
Servicer will be required to advance on or before each Distribution Date (from
its own funds, funds advanced by Sub-Servicers or funds held in the Security
Account for future distributions to the holders of Securities of the related
Series), an amount equal to the aggregate of payments of interest and/or
principal that were delinquent on the related Determination Date (as such term
is defined in the related Prospectus Supplement) and were not advanced by any
Sub-Servicer, subject to the Master Servicer's determination that such advances
may be recoverable out of late payments by borrowers, Liquidation Proceeds,
Insurance Proceeds or otherwise. In the case of Cooperative Loans, the Master
Servicer also may be required to advance any unpaid maintenance fees and other
charges under the related proprietary leases as specified in the related
Prospectus Supplement.
In making Advances, the Master Servicer will endeavor to maintain a regular
flow of scheduled interest and principal payments to holders of the Securities,
rather than to guarantee or insure against losses. If Advances are made by the
Master Servicer from cash being held for future distribution to Securityholders,
the Master Servicer will replace such funds on or before any future Distribution
Date to the extent that funds in the applicable Security Account on such
Distribution Date would be less than the amount required to be available for
distributions to Securityholders on such date. Any Master Servicer funds
advanced will be reimbursable to the Master Servicer out of recoveries on the
specific Loans with respect to which such Advances were made (e.g., late
payments made by the related borrower, any related Insurance Proceeds,
Liquidation Proceeds or proceeds of any Loan purchased by the Depositor, a
Sub-Servicer or a Seller pursuant to the related Agreement). Advances by the
Master Servicer (and any advances by a Sub-Servicer) also will be reimbursable
to the Master Servicer (or Sub-Servicer) from cash otherwise distributable to
Securityholders (including the holders of Senior Securities) to the extent that
the Master Servicer determines that any such Advances previously made are not
ultimately recoverable as described above. To the extent provided in the related
Prospectus Supplement, the Master Servicer also will be obligated to make
Advances, to the extent recoverable out of Insurance Proceeds, Liquidation
Proceeds or otherwise, in respect of certain taxes and insurance premiums not
paid by borrowers on a timely basis. Funds so advanced are reimbursable to the
Master Servicer to the extent permitted by the related Agreement. The
obligations of the Master Servicer to make advances may be supported by a cash
advance reserve fund, a surety bond or other arrangement of the type described
herein under "Credit Enhancement", in each case as described in the related
Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, in the
event the Master Servicer or a Sub-Servicer fails to make a required Advance,
the Trustee will be obligated to make such Advance in its capacity as successor
servicer. If the Trustee makes such an Advance, it will be entitled to be
reimbursed for such Advance to the same extent and degree as the Master Servicer
or a Sub-Servicer is entitled to be reimbursed for Advances. See "Description of
the Securities--Distributions on Securities".
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Reports to Securityholders
Prior to or concurrently with each distribution on a Distribution Date the
Master Servicer or the Trustee will furnish to each Securityholder of record of
the related Series a statement setting forth, to the extent applicable to such
Series of Securities, among other things:
(i) the amount of such distribution allocable to principal, separately
identifying the aggregate amount of any Principal Prepayments and if so
specified in the related Prospectus Supplement, any applicable prepayment
penalties included therein;
(ii) the amount of such distribution allocable to interest;
(iii) the amount of any Advance;
(iv) the aggregate amount (a) otherwise allocable to the Subordinated
Securityholders on such Distribution Date, and (b) withdrawn from the
Reserve Account, if any, that is included in the amounts distributed to the
Senior Securityholders;
(v) the outstanding principal balance or notional amount of each class
of the related Series after giving effect to the distribution of principal
on such Distribution Date;
(vi) the percentage of principal payments on the Loans (excluding
prepayments), if any, which each such class will be entitled to receive on
the following Distribution Date;
(vii) the percentage of Principal Prepayments on the Loans, if any,
which each such class will be entitled to receive on the following
Distribution Date;
(viii) the related amount of the servicing compensation retained or
withdrawn from the Security Account by the Master Servicer, and the amount
of additional servicing compensation received by the Master Servicer
attributable to penalties, fees, excess Liquidation Proceeds and other
similar charges and items;
(ix) the number and aggregate principal balances of Loans (A)
delinquent (exclusive of Loans in foreclosure) (1) 1 to 30 days, (2) 31 to
60 days, (3) 61 to 90 days and (4) 91 or more days and (B) in foreclosure
and delinquent (1) 1 to 30 days, (2) 31 to 60 days, (3) 61 to 90 days and
(4) 91 or more days, as of the close of business on the last day of the
calendar month preceding such Distribution Date;
(x) the book value of any real estate acquired through foreclosure or
grant of a deed in lieu of foreclosure;
(xi) the Pass-Through Rate or interest rate, as applicable, if
adjusted from the date of the last statement, of any such class expected to
be applicable to the next distribution to such class;
(xii) if applicable, the amount remaining in any Reserve Account at
the close of business on the Distribution Date;
(xiii) the Pass-Through Rate or interest rate, as applicable, as of
the day prior to the immediately preceding Distribution Date; and
(xiv) any amounts remaining under letters of credit, pool policies or
other forms of credit enhancement.
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Where applicable, any amount set forth above may be expressed as a dollar
amount per single Security of the relevant class having the Percentage Interest
specified in the related Prospectus Supplement. The report to Securityholders
for any Series of Securities may include additional or other information of a
similar nature to that specified above.
In addition, within a reasonable period of time after the end of each
calendar year, the Master Servicer or the Trustee will mail to each
Securityholder of record at any time during such calendar year a report (a) as
to the aggregate of amounts reported pursuant to (i) and (ii) above for such
calendar year or, in the event such person was a Securityholder of record during
a portion of such calendar year, for the applicable portion of such year and (b)
such other customary information as may be deemed necessary or desirable for
Securityholders to prepare their tax returns.
Categories of Classes of Securities
The Securities of any Series may be comprised of one or more classes. Such
classes, in general, fall into different categories. The following chart
identifies and generally defines certain of the more typical categories. The
Prospectus Supplement for a series of Securities may identify the classes which
comprise such Series by reference to the following categories.
Categories of Classes Definition
PRINCIPAL TYPES
Accretion Directed .....................A class that receives principal payments
from the accreted interest from
specified Accrual classes. An Accretion
Directed class also may receive
principal payments from principal paid
on the underlying Trust Fund Assets for
the related Series.
Component Securities ...................A class consisting of "Components." The
Components of a class of Component
Securities may have different principal
and/or interest payment characteristics
but together constitute a single class.
Each Component of a class of Component
Securities may be identified as falling
into one or more of the categories in
this chart.
Notional Amount
Securities............................A class having no principal balance and
bearing interest on the related notional
amount. The notional amount is used for
purposes of the determination of
interest distributions.
Planned Principal Class
(also sometimes
referred to as "PACs") .............. A class that is designed to receive
principal payments using a predetermined
principal balance schedule derived by
assuming two constant prepayment rates
for the underlying Trust Fund Assets.
These two rates are the endpoints for
the "structuring range" for the Planned
Principal Class. The Planned Principal
Classes in any Series of Securities may
be subdivided into different categories
(e.g., Primary Planned Principal
Classes, Secondary Planned Principal
Classes and so forth) having different
effective structuring ranges and
different principal payment priorities.
The structuring range for the Secondary
Planned Principal
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Categories of Classes Definition
Class of a Series of Securities will be
narrower than that for the Primary
Planned Principal Class of such Series.
Scheduled Principal Class ..............A class that is designed to receive
principal payments using a predetermined
principal balance schedule but is not
designated as a Planned Principal Class
or Targeted Principal class. In may
cases, the schedule is derived by
assuming two constant prepayment rates
for the underlying Trust Fund Assets.
These two rates are the endpoints for
the "structuring range" for the
Scheduled Principal Class.
Sequential Pay .........................Classes that receive principal payments
in a prescribed sequence, that do not
have predetermined principal balance
schedules and that under all
circumstances receive payments of
principal continuously from the first
Distribution Date on which they receive
principal until they are retired. A
single class that receives principal
payments before or after all other
classes in the same Series of Securities
may be identified as a Sequential Pay
class.
Strip...................................A class that receives a constant
proportion, or "strip," of the principal
payments on the underlying Trust Fund
Assets.
Support Class (also
sometimes referred to
as "companion classes") ..............A class that receives principal payments
on any Distribution Date only if
scheduled payments have been made on
specified Planned Principal Classes,
Targeted Principal Classes and/or
Scheduled Principal Classes.
Targeted Principal Class
(also sometimes
referred to as "TACs") ..............A class that is designed to receive
principal payments using a predetermined
principal balance schedule derived by
assuming a single constant prepayment
rate for the underlying Trust Fund
Assets.
INTEREST TYPES
Fixed Rate..............................A class with an interest rate that is
fixed throughout the life of the class.
Floating Rate...........................A class with an interest rate that
resets periodically based upon a
designated index and that varies
directly with changes in such index.
Inverse Floating Rate...................A class with an interest rate that
resets periodically based upon a
designated index and that varies
inversely with changes in such index.
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Variable Rate...........................A class with an interest rate that
resets periodically and is calculated by
reference to the rate or rates of
interest applicable to specified assets
or instruments (e.g., the Loan Rates
borne by the underlying Loans).
Interest Only...........................A class that receives some or all of the
interest payments made on the underlying
Trust Fund Assets and little or no
principal. Interest Only classes have
either a nominal principal balance or a
notional amount. A nominal principal
balance represents actual principal that
will be paid on the class. It is
referred to as nominal since it is
extremely small compared to other
classes. A notional amount is the amount
used as a reference to calculate the
amount of interest due on an Interest
Only class that is not entitled to any
distributions in respect of principal.
Principal ..............................Only A class that does not bear interest
and is entitled to receive only
distributions in respect of principal.
Partial Accrual ........................A class that accretes a portion of the
amount of accrued interest thereon,
which amount will be added to the
principal balance of such class on each
applicable Distribution Date, with the
remainder of such accrued interest to be
distributed currently as interest on
such class. Such accretion may continue
until a specified event has occurred or
until such Partial Accrual class is
retired.
Accrual.................................A class that accretes the amount of
accrued interest otherwise distributable
on such class, which amount will be
added as principal to the principal
balance of such class on each applicable
Distribution Date. Such accretion may
continue until some specified event has
occurred or until such Accrual class is
retired.
Indices Applicable to Floating Rate and Inverse Floating Rate Classes
LIBOR
Unless otherwise specified in the related Prospectus Supplement, on the
LIBOR Determination Date (as such term is defined in the related Prospectus
Supplement) for each class of Securities of a Series as to which the applicable
interest rate is determined by reference to an index denominated as LIBOR, the
Person designated in the related Agreement (the "Calculation Agent") will
determine LIBOR by reference to the quotations, as set forth on the Reuters
Screen LIBO Page (as defined in the International Swap Dealers Association, Inc.
Code of Standard Wording, Assumptions and Provisions for Swaps, 1986 Edition),
offered by the principal London office of each of the designated reference banks
meeting the criteria set forth below (the "Reference Banks") for making
one-month United States dollar deposits in leading banks in the London Interbank
market, as of 11:00 a.m. (London time) on such LIBOR Determination Date. In lieu
of relying on the quotations for those Reference Banks that appear at such time
on the Reuters Screen LIBO Page, the Calculation Agent will request each of the
Reference Banks to provide such offered quotations at such time.
LIBOR will be established by the Calculation Agent on each LIBOR
Determination Date as follows:
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(a) If on any LIBOR Determination Date two or more Reference Banks
provide such offered quotations, LIBOR for the next Interest Accrual Period
shall be the arithmetic mean of such offered quotations (rounded upwards if
necessary to the nearest whole multiple of 1/32%).
(b) If on any LIBOR Determination Date only one or none of the
Reference Banks provides such offered quotations, LIBOR for the next
Interest Accrual Period (as such term is defined in the related Prospectus
Supplement) shall be whichever is the higher of (i) LIBOR as determined on
the previous LIBOR Determination Date or (ii) the Reserve Interest Rate.
The "Reserve Interest Rate" shall be the rate per annum which the
Calculation Agent determines to be either (i) the arithmetic mean (rounded
upwards if necessary to the nearest whole multiple of 1/32%) of the
one-month United States dollar lending rates that New York City banks
selected by the Calculation Agent are quoting, on the relevant LIBOR
Determination Date, to the principal London offices of at least two of the
Reference Banks to which such quotations are, in the opinion of the
Calculation Agent being so made, or (ii) in the event that the Calculation
Agent can determine no such arithmetic mean, the lowest one-month United
States dollar lending rate which New York City banks selected by the
Calculation Agent are quoting on such LIBOR Determination Date to leading
European banks.
(c) If on any LIBOR Determination Date for a class specified in the
related Prospectus Supplement, the Calculation Agent is required but is
unable to determine the Reserve Interest Rate in the manner provided in
paragraph (b) above, LIBOR for the next Interest Accrual Period shall be
LIBOR as determined on the preceding LIBOR Determination Date, or, in the
case of the first LIBOR Determination Date, LIBOR shall be deemed to be the
per annum rate specified as such in the related Prospectus Supplement.
Each Reference Bank (i) shall be a leading bank engaged in transactions in
Eurodollar deposits in the international Eurocurrency market; (ii) shall not
control, be controlled by, or be under common control with the Calculation
Agent; and (iii) shall have an established place of business in London. If any
such Reference Bank should be unwilling or unable to act as such or if
appointment of any such Reference Bank is terminated, another leading bank
meeting the criteria specified above will be appointed.
The establishment of LIBOR on each LIBOR Determination Date by the
Calculation Agent and its calculation of the rate of interest for the applicable
classes for the related Interest Accrual Period shall (in the absence of
manifest error) be final and binding.
COFI
The Eleventh District Cost of Funds Index is designed to represent the
monthly weighted average cost of funds for savings institutions in Arizona,
California and Nevada that are member institutions of the Eleventh Federal Home
Loan Bank District (the "Eleventh District"). The Eleventh District Cost of
Funds Index for a particular month reflects the interest costs paid on all types
of funds held by Eleventh District member institutions and is calculated by
dividing the cost of funds by the average of the total amount of those funds
outstanding at the end of that month and of the prior month and annualizing and
adjusting the result to reflect the actual number of days in the particular
month. If necessary, before these calculations are made, the component figures
are adjusted by the Federal Home Loan Bank of San Francisco ("FHLBSF") to
neutralize the effect of events such as member institutions leaving the Eleventh
District or acquiring institutions outside the Eleventh District. The Eleventh
District Cost of Funds Index is weighted to reflect the relative amount of each
type of funds held at the end of the relevant month. The major components of
funds of Eleventh District member institutions are: (i) savings deposits, (ii)
time deposits, (iii) FHLBSF advances, (iv) repurchase agreements and (v) all
other borrowings. Because the component funds represent a variety of maturities
whose costs may react in different ways to changing conditions, the Eleventh
District Cost of Funds Index does not necessarily reflect current market rates.
A number of factors affect the performance of the Eleventh District Cost of
Funds Index, which may cause it to move in a manner different from indices tied
to specific interest rates, such as United States Treasury bills or LIBOR.
Because the liabilities upon which the Eleventh District Cost of Funds Index is
based were issued at
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various times under various market conditions and with various maturities, the
Eleventh District Cost of Funds Index may not necessarily reflect the prevailing
market interest rates on new liabilities of similar maturities. Moreover, as
stated above, the Eleventh District Cost of Funds Index is designed to represent
the average cost of funds for Eleventh District savings institutions for the
month prior to the month in which it its due to be published. Additionally, the
Eleventh District Cost of Funds Index may not necessarily move in the same
direction as market interest rates at all times, since as longer term deposits
or borrowings mature and are renewed at prevailing market interest rates, the
Eleventh District Cost of Funds Index is influenced by the differential between
the prior and the new rates on those deposits or borrowings. In addition,
movements of the Eleventh District Cost of Funds Index, as compared to other
indices tied to specific interest rates, may be affected by changes instituted
by the FHLBSF in the method used to calculate the Eleventh District Cost of
Funds Index.
The FHLBSF publishes the Eleventh District Cost of Funds Index in its
monthly Information Bulletin. Any individual may request regular receipt by mail
of Information Bulletins by writing the Federal Home Loan Bank of San Francisco,
P.O. Box 7948, 600 California Street, San Francisco, California 94120, or by
calling (415) 616-1000. The Eleventh District Cost of Funds Index may also be
obtained by calling the FHLBSF at (415) 616-2600.
The FHLBSF has stated in its Information Bulletin that the Eleventh
District Cost of Funds Index for a month "will be announced on or near the last
working day" of the following month and also has stated that it "cannot
guarantee the announcement" of such index on an exact date. So long as such
index for a month is announced on or before the tenth day of the second
following month, the interest rate for each class of Securities of a Series as
to which the applicable interest rate is determined by reference to an index
denominated as COFI (each, a class of "COFI Securities") for the Interest
Accrual Period commencing in such second following month will be based on the
Eleventh District Cost of Funds Index for the second preceding month. If
publication is delayed beyond such tenth day, such interest rate will be based
on the Eleventh District Cost of Funds Index for the third preceding month.
Unless otherwise specified in the related Prospectus Supplement, if on the
tenth day of the month in which any Interest Accrual Period commences for a
class of COFI Securities the most recently published Eleventh District Cost of
Funds Index relates to a month prior to the third preceding month, the index for
such current Interest Accrual Period and for each succeeding Interest Accrual
Period will, except as described in the next to last sentence of this paragraph,
be based on the National Monthly Median Cost of Funds Ratio to SAIF-Insured
Institutions (the "National Cost of Funds Index") published by the Office of
Thrift Supervision (the "OTS") for the third preceding month (or the fourth
preceding month if the National Cost of Funds Index for the third preceding
month has not been published on such tenth day of an Interest Accrual Period).
Information on the National Cost of Funds Index may be obtained by writing the
OTS at 1700 G Street, N.W., Washington, D.C. 20552 or calling (202) 906-6677,
and the current National Cost of Funds Index may be obtained by calling (202)
906-6988. If on any such tenth day of the month in which an Interest Accrual
Period commences the most recently published National Cost of Funds Index
relates to a month prior to the fourth preceding month, the applicable index for
such Interest Accrual Period and each succeeding Interest Accrual Period will be
based on LIBOR, as determined by the Calculation Agent in accordance with the
Agreement relating to such Series of Securities. A change of index from the
Eleventh District Cost of Funds Index to an alternative index will result in a
change in the index level, and, particularly if LIBOR is the alternative index,
could increase its volatility.
The establishment of COFI by the Calculation Agent and its calculation of
the rates of interest for the applicable classes for the related Interest
Accrual Period shall (in the absence of manifest error) be final and binding.
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Treasury Index
Unless otherwise specified in the related Prospectus Supplement, on the
Treasury Index Determination Date (as such term is defined in the related
Prospectus Supplement) for each class of Securities of a Series as to which the
applicable interest rate is determined by reference to an index denominated as a
Treasury Index, the Calculation Agent will ascertain the Treasury Index for
Treasury securities of the maturity and for the period (or, if applicable, date)
specified in the related Prospectus Supplement. Unless otherwise specified in
the related Prospectus Supplement, the Treasury Index for any period means the
average of the yield for each business day during the period specified therein
(and for any date means the yield for such date), expressed as a per annum
percentage rate, on (i) U.S Treasury securities adjusted to the "constant
maturity" (as further described below) specified in such Prospectus Supplement
or (ii) if no "constant maturity" is so specified, U.S. Treasury securities
trading on the secondary market having the maturity specified in such Prospectus
Supplement, in each case as published by the Federal Reserve Board in its
Statistical Release No. H.15(519). Statistical Release No. H.15(519) is
published on Monday or Tuesday of each week and may be obtained by writing or
calling the Publications Department at the Board of Governors of the Federal
Reserve System, 21st and C Streets, Washington, D.C. 20551 (202) 452-3244. If
the Calculation Agent has not yet received Statistical Release No. H.15(519) for
such week, then it will use such Statistical Release from the immediately
preceding week.
Yields on U.S. Treasury securities at "constant maturity" are derived from
the U.S. Treasury's daily yield curve. This curve, which relates the yield on a
security to its time to maturity, is based on the closing market bid yields on
actively traded Treasury securities in the over-the-counter market. These market
yields are calculated from composites of quotations reported by five leading
U.S. Government securities dealers to the Federal Reserve Bank of New York. This
method provides a yield for a given maturity even if no security with that exact
maturity is outstanding. In the event that the Treasury Index is no longer
published, a new index based upon comparable data and methodology will be
designated in accordance with the Agreement relating to the particular Series of
Securities. The Calculation Agent's determination of the Treasury Index, and its
calculation of the rates of interest for the applicable classes for the related
Interest Accrual Period shall (in the absence of manifest error) be final and
binding.
Prime Rate
Unless otherwise specified in the related Prospectus Supplement, on the
Prime Rate Determination Date (as such term is defined in the related Prospectus
Supplement) for each class of Securities of a Series as to which the applicable
interest rate is determined by reference to an index denominated as the Prime
Rate, the Calculation Agent will ascertain the Prime Rate for the related
Interest Accrual Period. Unless otherwise specified in the related Prospectus
Supplement, the Prime Rate for an Interest Accrual Period will be the "Prime
Rate" as published in the "Money Rates" section of The Wall Street Journal (or
if not so published, the "Prime Rate" as published in a newspaper of general
circulation selected by the Calculation Agent in its sole discretion) on the
related Prime Rate Determination Date. If a prime rate range is given, then the
average of such range will be used. In the event that the Prime Rate is no
longer published, a new index based upon comparable data and methodology will be
designated in accordance with the Agreement relating to the particular Series of
Securities. The Calculation Agent's determination of the Prime Rate and its
calculation of the rates of interest for the related Interest Accrual Period
shall (in the absence of manifest error) be final and binding.
Book-Entry Registration of Securities
As described in the related Prospectus Supplement, if not issued in fully
registered form, each class of Securities will be registered as book-entry
certificates (the "Book-Entry Securities"). Persons acquiring beneficial
ownership interests in the Securities ("Security Owners") will hold their
Securities through the Depository Trust Company ("DTC") in the United States, or
CEDEL or Euroclear (in Europe) if they are participants of such systems, or
indirectly through organizations which are participants in such systems. The
Book-Entry Securities will be issued in one or more certificates which equal the
aggregate principal balance of the Securities and will initially be registered
in the name of Cede & Co., the nominee of DTC. CEDEL and Euroclear will hold
omnibus positions on behalf of their participants through customers' securities
accounts in CEDEL's and Euroclear's names on the
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books of their respective depositaries which in turn will hold such positions in
customers' securities accounts in the depositaries' names on the books of DTC.
Citibank, N.A., will act as depositary for CEDEL and The Chase Manhattan Bank
will act as depositary for Euroclear (in such capacities, individually the
"Relevant Depositary" and collectively the "European Depositaries"). Except as
described below, no person acquiring a Book-Entry Security (each, a "beneficial
owner") will be entitled to receive a physical certificate representing such
Security (a "Definitive Security"). Unless and until Definitive Securities are
issued, it is anticipated that the only "Securityholders" of the Securities will
be Cede & Co., as nominee of DTC. Security Owners are only permitted to exercise
their rights indirectly through Participants and DTC.
The beneficial owner's ownership of a Book-Entry Security will be recorded
on the records of the brokerage firm, bank, thrift institution or other
financial intermediary (each, a "Financial Intermediary") that maintains the
beneficial owner's account for such purpose. In turn, the Financial
Intermediary's ownership of such Book-Entry Security will be recorded on the
records of DTC (or of a participating firm that acts as agent for the Financial
Intermediary, whose interest will in turn be recorded on the records of DTC, if
the beneficial owner's Financial Intermediary is not a DTC participant, and on
the records of CEDEL or Euroclear, as appropriate).
Security Owners will receive all distributions of principal of, and
interest on, the Securities from the Trustee through DTC and DTC participants.
While the Securities 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 Securities and is
required to receive and transmit distributions of principal of, and interest on,
the Securities. Participants and indirect participants with whom Security Owners
have accounts with respect to Securities are similarly required to make
book-entry transfers and receive and transmit such distributions on behalf of
their respective Security Owners. Accordingly, although Security Owners will not
possess certificates, the Rules provide a mechanism by which Security Owners
will receive distributions and will be able to transfer their interest.
Security Owners will not receive or be entitled to receive certificates
representing their respective interests in the Securities, except under the
limited circumstances described below. Unless and until Definitive Securities
are issued, Security Owners who are not Participants may transfer ownership of
Securities only through Participants and indirect participants by instructing
such Participants and indirect participants to transfer Securities, by
book-entry transfer, through DTC for the account of the purchasers of such
Securities, which account is maintained with their respective Participants.
Under the Rules and in accordance with DTC's normal procedures, transfers of
ownership of Securities will be executed through DTC and the accounts of the
respective Participants at DTC will be debited and credited. Similarly, the
Participants and indirect participants will make debits or credits, as the case
may be, on their records on behalf of the selling and purchasing Security
Owners.
Because of time zone differences, credits of securities received in CEDEL
or Euroclear as a result of a transaction with a Participant will be made during
subsequent securities settlement processing and dated the business day following
the DTC settlement date. Such credits or any transactions in such securities
settled during such processing will be reported to the relevant Euroclear or
CEDEL Participants on such business day. Cash received in CEDEL or Euroclear as
a result of sales of securities by or through a CEDEL Participant (as defined
herein) or Euroclear Participant (as defined herein) 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.
Transfers between Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants and Euroclear Participants will occur in
accordance with their respective 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
Participants 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 the Relevant 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 and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
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transaction meets its settlement requirements, deliver instructions to the
Relevant Depositary to take action to effect final settlement on its behalf by
delivering or receiving securities 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 European Depositaries.
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 certificates. Transactions may be settled in CEDEL in any of 28
currencies, including United States dollars. CEDEL provides to its CEDEL
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. 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.
Euroclear was created in 1968 to hold securities for its participants
("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 be settled in any of 32 currencies, including United
States dollars. Euroclear 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. Euroclear is operated by the Brussels, Belgium office of Morgan
Guarantee Trust Company of New York ("Morgan" and in such capacity, the
"Euroclear Operator"), under contract with Euroclear Clearance Systems S.C., a
Belgian cooperative corporation (the "Belgian Cooperative"). All operations are
conducted by Morgan, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Belgian Cooperative. The Belgian Cooperative establishes policy for Euroclear on
behalf of Euroclear Participants. Euroclear Participants include banks
(including central banks), securities brokers and dealers and other professional
financial intermediaries. 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.
Morgan is the Belgian branch of a New York banking corporation which 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.
Securities clearance accounts and cash accounts with Morgan are governed by
the Terms and Conditions Governing Use of Euroclear and the related Operating
Procedures of the Euroclear System and applicable Belgian law (collectively, the
"Terms and Conditions"). The Terms and Conditions govern transfers of securities
and cash within Euroclear, withdrawals of securities and cash from Euroclear,
and receipts of payments with respect to securities in 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.
Under a book-entry format, beneficial owners of the Book-Entry Securities
may experience some delay in their receipt of payments, since such payments will
be forwarded by the Trustee to Cede & Co., as nominee of DTC. Distributions with
respect to Securities held through CEDEL or Euroclear will be credited to the
cash accounts of CEDEL Participants or Euroclear Participants in accordance with
the relevant system's rules and procedures, to the extent received by the
Relevant Depositary. Such distributions will be subject to tax reporting in
accordance with relevant United States tax laws and regulations. See "Federal
Income Tax Consequences -Tax Treatment of Foreign Investors" and "--Tax
Consequences to Holders of the Notes--Backup Withholding" herein. Because DTC
can only act on behalf of Financial Intermediaries, the ability of a beneficial
owner to pledge
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Book-Entry Securities to persons or entities that do not participate in the
Depository system may be limited due to the lack of physical certificates for
such Book-Entry Securities. In addition, issuance of the Book-Entry Securities
in book-entry form may reduce the liquidity of such Securities in the secondary
market since certain potential investors may be unwilling to purchase Securities
for which they cannot obtain physical certificates.
Monthly and annual reports on the Trust will be provided to Cede & Co., as
nominee of DTC, and may be made available by Cede & Co. to beneficial owners
upon request, in accordance with the rules, regulations and procedures creating
and affecting the Depository, and to the Financial Intermediaries to whose DTC
accounts the Book-Entry Securities of such beneficial owners are credited.
DTC has advised the Trustee that, unless and until Definitive Securities
are issued, DTC will take any action permitted to be taken by the holders of the
Book-Entry Securities under the applicable Agreement only at the direction of
one or more Financial Intermediaries to whose DTC accounts the Book-Entry
Securities are credited, to the extent that such actions are taken on behalf of
Financial Intermediaries whose holdings include such Book-Entry Securities.
CEDEL or the Euroclear Operator, as the case may be, will take any other action
permitted to be taken by a Securityholder under the Agreement on behalf of a
CEDEL Participant or Euroclear Participant only in accordance with its relevant
rules and procedures and subject to the ability of the Relevant Depositary to
effect such actions on its behalf through DTC. DTC may take actions, at the
direction of the related Participants, with respect to some Securities which
conflict with actions taken with respect to other Securities.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee will be required to notify all beneficial
owners of the occurrence of such event and the availability through DTC of
Definitive Securities. Upon surrender by DTC of the global certificate or
certificates representing the Book-Entry Securities and instructions for
re-registration, the Trustee will issue Definitive Securities, and thereafter
the Trustee will recognize the holders of such Definitive Securities as
Securityholders under the applicable Agreement.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Securities among participants of DTC, CEDEL
and Euroclear, they are under no obligation to perform or continue to perform
such procedures and such procedures may be discontinued at any time.
None of the Master Servicer, the Depositor or the Trustee will have any
responsibility for any aspect of the records relating to or payments made on
account of beneficial ownership interests of the Book-Entry Securities held by
Cede & Co., as nominee of DTC, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
CREDIT ENHANCEMENT
General
Credit enhancement may be provided with respect to one or more classes of a
Series of Securities or with respect to the related Trust Fund Assets. Credit
enhancement may be in the form of a limited financial guaranty policy issued by
an entity named in the related Prospectus Supplement, the subordination of one
or more classes of the Securities of such Series, the establishment of one or
more Reserve Accounts, the use of a cross-support feature, use of a mortgage
pool insurance policy, FHA Insurance, VA Guarantee, bankruptcy bond, special
hazard insurance policy, surety bond, letter of credit, guaranteed investment
contract, overcollateralization, or another method of credit enhancement
contemplated herein and described in the related Prospectus Supplement, or any
combination of the foregoing. Unless otherwise specified in the related
Prospectus Supplement, credit enhancement will not provide protection against
all risks of loss and will not guarantee repayment of the entire principal
balance of the Securities and interest thereon. If losses occur which exceed the
amount covered by credit enhancement or which are not covered by the credit
enhancement, Securityholders will bear their allocable share of any
deficiencies.
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Subordination
If so specified in the related Prospectus Supplement, protection afforded
to holders of one or more classes of Securities of a Series by means of the
subordination feature may be accomplished by the preferential right of holders
of one or more other classes of such Series (the "Senior Securities") to
distributions in respect of scheduled principal, Principal Prepayments, interest
or any combination thereof that otherwise would have been payable to holders of
Subordinated Securities under the circumstances and to the extent specified in
the related Prospectus Supplement. Protection may also be afforded to the
holders of Senior Securities of a Series by: (i) reducing the ownership interest
(if applicable) of the related Subordinated Securities; (ii) a combination of
the immediately preceding sentence and clause (i) above; or (iii) as otherwise
described in the related Prospectus Supplement. If so specified in the related
Prospectus Supplement, delays in receipt of scheduled payments on the Loans and
losses on defaulted Loans may be borne first by the various classes of
Subordinated Securities and thereafter by the various classes of Senior
Securities, in each case under the circumstances and subject to the limitations
specified in such Prospectus Supplement. The aggregate distributions in respect
of delinquent payments on the Loans over the lives of the Securities or at any
time, the aggregate losses in respect of defaulted Loans which must be borne by
the Subordinated Securities by virtue of subordination and the amount of the
distributions otherwise distributable to the Subordinated Securityholders that
will be distributable to Senior Securityholders on any Distribution Date may be
limited as specified in the related Prospectus Supplement. If aggregate
distributions in respect of delinquent payments on the Loans or aggregate losses
in respect of such Loans were to exceed an amount specified in the related
Prospectus Supplement, holders of Senior Securities would experience losses on
the Securities.
In addition to or in lieu of the foregoing, if so specified in the related
Prospectus Supplement, all or any portion of distributions otherwise payable to
holders of Subordinated Securities on any Distribution Date may instead be
deposited into one or more Reserve Accounts established with the Trustee or
distributed to holders of Senior Securities. Such deposits may be made on each
Distribution Date, for specified periods or until the balance in the Reserve
Account has reached a specified amount and, following payments from the Reserve
Account to holders of Senior Securities or otherwise, thereafter to the extent
necessary to restore the balance in the Reserve Account to required levels, in
each case as specified in the related Prospectus Supplement. Amounts on deposit
in the Reserve Account may be released to the holders of certain classes of
Securities at the times and under the circumstances specified in such Prospectus
Supplement.
If specified in the related Prospectus Supplement, various classes of
Senior Securities and Subordinated Securities may themselves be subordinate in
their right to receive certain distributions to other classes of Senior and
Subordinated Securities, respectively, through a cross-support mechanism or
otherwise.
As between classes of Senior Securities and as between classes of
Subordinated Securities, distributions may be allocated among such classes (i)
in the order of their scheduled final distribution dates, (ii) in accordance
with a schedule or formula, (iii) in relation to the occurrence of events, or
(iv) otherwise, in each case as specified in the related Prospectus Supplement.
As between classes of Subordinated Securities, payments to holders of Senior
Securities on account of delinquencies or losses and payments to any Reserve
Account will be allocated as specified in the related Prospectus Supplement.
Letter of Credit
The letter of credit, if any, with respect to a Series of Securities will
be issued by the bank or financial institution specified in the related
Prospectus Supplement (the "L/C Bank"). Under the letter of credit, the L/C Bank
will be obligated to honor drawings thereunder in an aggregate fixed dollar
amount, net of unreimbursed payments thereunder, equal to the percentage
specified in the related Prospectus Supplement of the aggregate principal
balance of the Loans on the related Cut-off Date or of one or more Classes of
Securities (the "L/C Percentage"). If so specified in the related Prospectus
Supplement, the letter of credit may permit drawings in the event of losses not
covered by insurance policies or other credit support, such as losses arising
from damage not covered by standard hazard insurance policies, losses resulting
from the bankruptcy of a borrower and the application of certain provisions of
the federal Bankruptcy Code, or losses resulting from denial of insurance
coverage due to misrepresentations in connection with the origination of a Loan.
The amount available under the
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letter of credit will, in all cases, be reduced to the extent of the
unreimbursed payments thereunder. The obligations of the L/C Bank under the
letter of credit for each Series of Securities will expire at the earlier of the
date specified in the related Prospectus Supplement or the termination of the
Trust Fund. See "The Agreements--Termination: Optional Termination." A copy of
the letter of credit for a Series, if any, will be filed with the Commission as
an exhibit to a Current Report on Form 8-K to be filed within 15 days of
issuance of the Securities of the related Series.
Insurance Policies, Surety Bonds and Guaranties
If so provided in the Prospectus Supplement for a Series of Securities,
deficiencies in amounts otherwise payable on such Securities or certain classes
thereof will be covered by insurance policies and/or surety bonds provided by
one or more insurance companies or sureties. Such instruments may cover, with
respect to one or more classes of Securities of the related series, timely
distributions of interest and/or 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. In addition, if specified in the
relate Prospectus Supplement, a Trust Fund may also include bankruptcy bonds,
special hazard insurance policies, other insurance or guaranties for the purpose
of (i) maintaining timely payments or providing additional protection against
losses on the assets included in such Trust Fund, (ii) paying administrative
expenses or (iii) establishing a minimum reinvestment rate on the payments made
in respect of such assets or principal payment rate on such assets. Such
arrangements may include agreements under which Securityholders are entitled to
receive amounts deposited in various accounts held by the Trustee upon the terms
specified in such Prospectus Supplement. A copy of any such instrument for a
series will be filed with the Commission as an exhibit to a Current Report on
Form 8-K to be filed with the Commission within 15 days of issuance of the
Securities of the related series.
Over-Collateralization
If so provided in the Prospectus Supplement for a Series of Securities, a
portion of the interest payment on each Loan may be applied as an additional
distribution in respect of principal to reduce the principal balance of a
certain class or classes of Securities and, thus, accelerate the rate of payment
of principal on such class or classes of Securities.
Reserve Accounts
If specified in the related Prospectus Supplement, credit support with
respect to a Series of Securities will be provided by the establishment and
maintenance with the Trustee for such Series of Securities, in trust, of one or
more Reserve Accounts for such Series. The related Prospectus Supplement will
specify whether or not any such Reserve Accounts will be included in the Trust
Fund for such Series.
The Reserve Account for a Series will be funded (i) by the deposit therein
of cash, United States Treasury securities, instruments evidencing ownership of
principal or interest payments thereon, letters of credit, demand notes,
certificates of deposit or a combination thereof in the aggregate amount
specified in the related Prospectus Supplement, (ii) by the deposit therein from
time to time of certain amounts, as specified in the related Prospectus
Supplement to which the Subordinate Securityholders, if any, would otherwise be
entitled or (iii) in such other manner as may be specified in the related
Prospectus Supplement.
Any amounts on deposit in the Reserve Account and the proceeds of any other
instrument upon maturity will be held in cash or will be invested in "Permitted
Investments" which may include (i) obligations of the United States or any
agency thereof, provided such obligations are backed by the full faith and
credit of the United States; (ii) general obligations of or obligations
guaranteed by any state of the United States or the District of Columbia
receiving the highest long-term debt rating of each Rating Agency rating the
related Series of Securities, or such lower rating as will not result in the
downgrading or withdrawal of the ratings then assigned to such Securities by
each such Rating Agency; (iii) commercial or finance company paper (including,
without limitation, commercial paper issued by Countrywide Home Loans, Inc. or
any of its affiliates) which is then receiving the highest commercial or finance
company paper rating of each such Rating
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Agency, or such lower rating as will not result in the downgrading or withdrawal
of the ratings then assigned to such Securities by each such Rating Agency; (iv)
certificates of deposit, demand or time deposits, or bankers' acceptances issued
by any depository institution or trust company incorporated under the laws of
the United States or of any state thereof and subject to supervision and
examination by federal and/or state banking authorities, provided that the
commercial paper and/or long term unsecured debt obligations of such depository
institution or trust company (or in the case of the principal depository
institution in a holding company system, the commercial paper or long-term
unsecured debt obligations of such holding company, but only if Moody's
Investors Service, Inc. ("Moody's") is not a Rating Agency) are then rated one
of the two highest long-term and the highest short-term ratings of each such
Rating Agency for such securities, or such lower ratings as will not result in
the downgrading or withdrawal of the rating then assigned to such Securities by
any such Rating Agency; (iv) demand or time deposits or certificates of deposit
issued by any bank or trust company or savings institution to the extent that
such deposits are fully insured by the FDIC; (v) guaranteed reinvestment
agreements issued by any bank, insurance company or other corporation
containing, at the time of the issuance of such agreements, such terms and
conditions as will not result in the downgrading or withdrawal of the rating
then assigned to such Securities by any such Rating Agency; (vi) repurchase
obligations with respect to any security described in clauses (i) and (ii)
above, in either case entered into with a depository institution or trust
company (acting as principal) described in clause (iv) above; (vii) securities
(other than stripped bonds, stripped coupons or instruments sold at a purchase
price in excess of 115% of the face amount thereof) bearing interest or sold at
a discount issued by any corporation incorporated under the laws of the United
States or any state thereof which, at the time of such investment, have one of
the two highest ratings of each Rating Agency (except if the Rating Agency is
Moody's, such rating shall be the highest commercial paper rating of Moody's for
any such securities), or such lower rating as will not result in the downgrading
or withdrawal of the rating then assigned to such Securities by any such Rating
Agency, as evidenced by a signed writing delivered by each such Rating Agency;
and (viii) such other investments having a specified stated maturity and bearing
interest or sold at a discount acceptable to each Rating Agency as will not
result in the downgrading or withdrawal of the rating then assigned to such
Securities by any such Rating Agency, as evidenced by a signed writing delivered
by each such Rating Agency; provided that no such instrument shall be a
Permitted Investment if such instrument evidences the right to receive interest
only payments with respect to the obligations underlying such instrument. If a
letter of credit is deposited with the Trustee, such letter of credit will be
irrevocable. Unless otherwise specified in the related Prospectus Supplement,
any instrument deposited therein will name the Trustee, in its capacity as
trustee for the holders of the Securities, as beneficiary and will be issued by
an entity acceptable to each Rating Agency that rates the Securities of the
related Series. Additional information with respect to such instruments
deposited in the Reserve Accounts will be set forth in the related Prospectus
Supplement.
Any amounts so deposited and payments on instruments so deposited will be
available for withdrawal from the Reserve Account for distribution to the
holders of Securities of the related Series for the purposes, in the manner and
at the times specified in the related Prospectus Supplement.
Pool Insurance Policies
If specified in the related Prospectus Supplement, a separate pool
insurance policy ("Pool Insurance Policy") will be obtained for the Pool and
issued by the insurer (the "Pool Insurer") named in such Prospectus Supplement.
Each Pool Insurance Policy will, subject to the limitations described below,
cover loss by reason of default in payment on Loans in the Pool in an amount
equal to a percentage specified in such Prospectus Supplement of the aggregate
principal balance of such Loans on the Cut-off Date which are not covered as to
their entire outstanding principal balances by Primary Mortgage Insurance
Policies. As more fully described below, the Master Servicer will present claims
thereunder to the Pool Insurer on behalf of itself, the Trustee and the holders
of the Securities of the related Series. The Pool Insurance Policies, however,
are not blanket policies against loss, since claims thereunder may only be made
respecting particular defaulted Loans and only upon satisfaction of certain
conditions precedent described below. Unless otherwise specified in the related
Prospectus Supplement, the Pool Insurance Policies will not cover losses due to
a failure to pay or denial of a claim under a Primary Mortgage Insurance Policy.
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Unless otherwise specified in the related Prospectus Supplement, the Pool
Insurance Policy will provide that no claims may be validly presented unless (i)
any required Primary Mortgage Insurance Policy is in effect for the defaulted
Loan and a claim thereunder has been submitted and settled; (ii) hazard
insurance on the related Property has been kept in force and real estate taxes
and other protection and preservation expenses have been paid; (iii) if there
has been physical loss or damage to the Property, it has been restored to its
physical condition (reasonable wear and tear excepted) at the time of issuance
of the policy; and (iv) the insured has acquired good and merchantable title to
the Property free and clear of liens except certain permitted encumbrances. Upon
satisfaction of these conditions, the Pool Insurer will have the option either
(a) to purchase the property securing the defaulted Loan at a price equal to the
principal balance thereof plus accrued and unpaid interest at the Loan Rate to
the date of such purchase and certain expenses incurred by the Master Servicer
on behalf of the Trustee and Securityholders, or (b) to pay the amount by which
the sum of the principal balance of the defaulted Loan plus accrued and unpaid
interest at the Loan Rate to the date of payment of the claim and the
aforementioned expenses exceeds the proceeds received from an approved sale of
the Property, in either case net of certain amounts paid or assumed to have been
paid under the related Primary Mortgage Insurance Policy. If any Property
securing a defaulted Loan is damaged and proceeds, if any, from the related
hazard insurance policy or the applicable special hazard insurance policy are
insufficient to restore the damaged Property to a condition sufficient to permit
recovery under the Pool Insurance Policy, the Master Servicer will not be
required to expend its own funds to restore the damaged Property unless it
determines that (i) such restoration will increase the proceeds to
Securityholders on liquidation of the Loan after reimbursement of the Master
Servicer for its expenses and (ii) such expenses will be recoverable by it
through proceeds of the sale of the Property or proceeds of the related Pool
Insurance Policy or any related Primary Mortgage Insurance Policy.
Unless otherwise specified in the related Prospectus Supplement, the Pool
Insurance Policy will not insure (and many Primary Mortgage Insurance Policies
do not insure) against loss sustained by reason of a default arising from, among
other things, (i) fraud or negligence in the origination or servicing of a Loan,
including misrepresentation by the borrower, the originator or persons involved
in the origination thereof, or (ii) failure to construct a Property in
accordance with plans and specifications. A failure of coverage attributable to
one of the foregoing events might result in a breach of the related Seller's
representations described above, and, in such events might give rise to an
obligation on the part of such Seller to repurchase the defaulted Loan if the
breach cannot be cured by such Seller. No Pool Insurance Policy will cover (and
many Primary Mortgage Insurance Policies do not cover) a claim in respect of a
defaulted Loan occurring when the servicer of such Loan, at the time of default
or thereafter, was not approved by the applicable insurer.
Unless otherwise specified in the related Prospectus Supplement, the
original amount of coverage under each Pool Insurance Policy will be reduced
over the life of the related Securities by the aggregate dollar amount of claims
paid less the aggregate of the net amounts realized by the Pool Insurer upon
disposition of all foreclosed properties. The amount of claims paid will include
certain expenses incurred by the Master Servicer as well as accrued interest on
delinquent Loans to the date of payment of the claim, unless otherwise specified
in the related Prospectus Supplement. Accordingly, if aggregate net claims paid
under any Pool Insurance Policy reach the original policy limit, coverage under
that Pool Insurance Policy will be exhausted and any further losses will be
borne by the related Securityholders.
Cross-Support
If specified in the related Prospectus Supplement, the beneficial ownership
of separate groups of assets included in a Trust Fund may be evidenced by
separate classes of the related Series of Securities. In such case, credit
support may be provided by a cross-support feature which requires that
distributions be made with respect to Securities evidencing a beneficial
ownership interest in other asset groups within the same Trust Fund. The
Prospectus Supplement for a Series which includes a cross-support feature will
describe the manner and conditions for applying such cross-support feature.
If specified in the related Prospectus Supplement, the coverage provided by
one or more forms of credit support may apply concurrently to two or more
related Trust Funds. If applicable, the related Prospectus
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Supplement will identify the Trust Funds to which such credit support relates
and the manner of determining the amount of the coverage provided thereby and of
the application of such coverage to the identified Trust Funds.
YIELD AND PREPAYMENT CONSIDERATIONS
The yields to maturity and weighted average lives of the Securities will be
affected primarily by the amount and timing of principal payments received on or
in respect of the Trust Fund Assets included in the related Trust Fund. The
original terms to maturity of the Loans in a given Pool will vary depending upon
the type of Loans included therein. Each Prospectus Supplement will contain
information with respect to the type and maturities of the Loans in the related
Pool. The related Prospectus Supplement will specify the circumstances, if any,
under which the related Loans will be subject to prepayment penalties. The
prepayment experience on the Loans in a Pool will affect the weighted average
life of the related Series of Securities.
The rate of prepayment on the Loans cannot be predicted. Home equity loans
and home improvement contracts have been originated in significant volume only
during the past few years and the Depositor is not aware of any publicly
available studies or statistics on the rate of prepayment of such loans.
Generally, home equity loans and home improvement contracts are not viewed by
borrowers as permanent financing. Accordingly, the Loans may experience a higher
rate of prepayment than traditional first mortgage loans. On the other hand,
because home equity loans such as the Revolving Credit Line Loans generally are
not fully amortizing, the absence of voluntary borrower prepayments could cause
rates of principal payments lower than, or similar to, those of traditional
fully-amortizing first mortgage loans. The prepayment experience of the related
Trust Fund may be affected by a wide variety of factors, including general
economic conditions, prevailing interest rate levels, the availability of
alternative financing, homeowner mobility and the frequency and amount of any
future draws on any Revolving Credit Line Loans. Other factors that might be
expected to affect the prepayment rate of a pool of home equity mortgage loans
or home improvement contracts include the amounts of, and interest rates on, the
underlying senior mortgage loans, and the use of first mortgage loans as
long-term financing for home purchase and subordinate mortgage loans as
shorter-term financing for a variety of purposes, including home improvement,
education expenses and purchases of consumer durables such as automobiles.
Accordingly, the Loans may experience a higher rate of prepayment than
traditional fixed-rate mortgage loans. In addition, any future limitations on
the right of borrowers to deduct interest payments on home equity loans for
federal income tax purposes may further increase the rate of prepayments of the
Loans. The enforcement of a "due-on-sale" provision (as described below) will
have the same effect as a prepayment of the related Loan. See "Certain Legal
Aspects of the Loans--Due-on-Sale Clauses". The yield to an investor who
purchases Securities in the secondary market at a price other than par will vary
from the anticipated yield if the rate of prepayment on the Loans is actually
different than the rate anticipated by such investor at the time such Securities
were purchased.
Collections on Revolving Credit Line Loans may vary because, among other
things, borrowers may (i) make payments during any month as low as the minimum
monthly payment for such month or, during the interest-only period for certain
Revolving Credit Line Loans and, in more limited circumstances, Closed-End
Loans, with respect to which an interest-only payment option has been selected,
the interest and the fees and charges for such month or (ii) make payments as
high as the entire outstanding principal balance plus accrued interest and the
fees and charges thereon. It is possible that borrowers may fail to make the
required periodic payments. In addition, collections on the Loans may vary due
to seasonal purchasing and the payment habits of borrowers.
Unless otherwise specified in the related Prospectus Supplement, all
conventional Loans will contain due-on-sale provisions permitting the mortgagee
to accelerate the maturity of the loan upon sale or certain transfers by the
borrower of the related Property. Loans insured by the FHA, and Single Family
Loans partially guaranteed by the VA, are assumable with the consent of the FHA
and the VA, respectively. Thus, the rate of prepayments on such Loans may be
lower than that of conventional Loans bearing comparable interest rates. The
Master Servicer generally will enforce any due-on-sale or due-on-encumbrance
clause, to the extent it has knowledge of the conveyance or further encumbrance
or the proposed conveyance or proposed further encumbrance of the
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Property and reasonably believes that it is entitled to do so under applicable
law; provided, however, that the Master Servicer will not take any enforcement
action that would impair or threaten to impair any recovery under any related
insurance policy. See "The Agreements-Collection Procedures" and "Certain Legal
Aspects of the Loans" for a description of certain provisions of each Agreement
and certain legal developments that may affect the prepayment experience on the
Loans.
The rate of prepayments with respect to conventional mortgage loans has
fluctuated significantly in recent years. In general, if prevailing rates fall
significantly below the Loan Rates borne by the Loans, such Loans are more
likely to be subject to higher prepayment rates than if prevailing interest
rates remain at or above such Loan Rates. Conversely, if prevailing interest
rates rise appreciably above the Loan Rates borne by the Loans, such Loans are
more likely to experience a lower prepayment rate than if prevailing rates
remain at or below such Loan Rates. However, there can be no assurance that such
will be the case.
When a full prepayment is made on a Loan, the borrower is charged interest
on the principal amount of the Loan so prepaid only for the number of days in
the month actually elapsed up to the date of the prepayment, rather than for a
full month. The effect of prepayments in full will be to reduce the amount of
interest passed through or paid in the following month to holders of Securities
because interest on the principal amount of any Loan so prepaid will generally
be paid only to the date of prepayment. Partial prepayments in a given month may
be applied to the outstanding principal balances of the Loans so prepaid on the
first day of the month of receipt or the month following receipt. In the latter
case, partial prepayments will not reduce the amount of interest passed through
or paid in such month. Unless otherwise specified in the related Prospectus
Supplement, neither full nor partial prepayments will be passed through or paid
until the month following receipt.
Even assuming that the Properties provide adequate security for the Loans,
substantial delays could be encountered in connection with the liquidation of
defaulted Loans and corresponding delays in the receipt of related proceeds by
Securityholders could occur. An action to foreclose on a Property securing a
Loan is regulated by state statutes and rules and is subject to many of the
delays and expenses of other lawsuits if defenses or counterclaims are
interposed, sometimes requiring several years to complete. Furthermore, in some
states an action to obtain a deficiency judgment is not permitted following a
nonjudicial sale of a property. In the event of a default by a borrower, these
restrictions among other things, may impede the ability of the Master Servicer
to foreclose on or sell the Property or to obtain liquidation proceeds
sufficient to repay all amounts due on the related Loan. In addition, the Master
Servicer will be entitled to deduct from related liquidation proceeds all
expenses reasonably incurred in attempting to recover amounts due on defaulted
Loans and not yet repaid, including payments to senior lienholders, legal fees
and costs of legal action, real estate taxes and maintenance and preservation
expenses.
Liquidation expenses with respect to defaulted mortgage loans do not vary
directly with the outstanding principal balance of the loan at the time of
default. Therefore, assuming that a servicer took the same steps in realizing
upon a defaulted mortgage loan having a small remaining principal balance as it
would in the case of a defaulted mortgage loan having a large remaining
principal balance, the amount realized after expenses of liquidation would be
smaller as a percentage of the remaining principal balance of the small mortgage
loan than would be the case with the other defaulted mortgage loan having a
large remaining principal balance.
Applicable state laws generally regulate interest rates and other charges,
require certain disclosures, and require licensing of certain originators and
servicers of Loans. In addition, most have other laws, public policy and general
principles of equity relating to the protection of consumers, unfair and
deceptive practices and practices which may apply to the origination, servicing
and collection of the Loans. Depending on the provisions of the applicable law
and the specific facts and circumstances involved, violations of these laws,
policies and principles may limit the ability of the Master Servicer to collect
all or part of the principal of or interest on the Loans, may entitle the
borrower to a refund of amounts previously paid and, in addition, could subject
the Master Servicer to damages and administrative sanctions.
If the rate at which interest is passed through or paid to the holders of
Securities of a Series is calculated on a Loan-by-Loan basis, disproportionate
principal prepayments among Loans with different Loan Rates will affect the
yield
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on such Securities. In most cases, the effective yield to Securityholders will
be lower than the yield otherwise produced by the applicable Pass-Through Rate
or interest rate and purchase price, because while interest will accrue on each
Loan from the first day of the month (unless otherwise specified in the related
Prospectus Supplement), the distribution of such interest will not be made
earlier than the month following the month of accrual.
Under certain circumstances, the Master Servicer, the holders of the
residual interests in a REMIC or any person specified in the related Prospectus
Supplement may have the option to purchase the assets of a Trust Fund thereby
effecting earlier retirement of the related Series of Securities. See "The
Agreements--Termination; Optional Termination".
The relative contribution of the various factors affecting prepayment may
vary from time to time. There can be no assurance as to the rate of payment of
principal of the Trust Fund Assets at any time or over the lives of the
Securities.
The Prospectus Supplement relating to a Series of Securities will discuss
in greater detail the effect of the rate and timing of principal payments
(including prepayments), delinquencies and losses on the yield, weighted average
lives and maturities of such Securities.
THE AGREEMENTS
Set forth below is a description of the material provisions of each
Agreement which are not described elsewhere in this Prospectus. The description
is subject to, and qualified in its entirety by reference to, the provisions of
each Agreement. Where particular provisions or terms used in the Agreements are
referred to, such provisions or terms are as specified in the Agreements.
Assignment of the Trust Fund Assets
Assignment of the Loans. At the time of issuance of the Securities of a
Series, the Depositor will cause the Loans comprising the related Trust Fund to
be assigned to the Trustee, without recourse, together with all principal and
interest received by or on behalf of the Depositor on or with respect to such
Loans after the Cut-off Date, other than principal and interest due on or before
the Cut-off Date and other than any Retained Interest specified in the related
Prospectus Supplement. The Trustee will, concurrently with such assignment,
deliver such Securities to the Depositor in exchange for the Loans. Each Loan
will be identified in a schedule appearing as an exhibit to the related
Agreement. Such schedule will include information as to the outstanding
principal balance of each Loan after application of payments due on or before
the Cut-off Date, as well as information regarding the Loan Rate or APR, the
maturity of the Loan, the Loan-to-Value Ratios or Combined Loan-to-Value Ratios,
as applicable, at origination and certain other information.
Unless otherwise specified in the related Prospectus Supplement, the
Agreement will require that, within the time period specified therein, the
Depositor will also deliver or cause to be delivered to the Trustee (or to the
custodian hereinafter referred to) as to each Mortgage Loan or Home Equity Loan,
among other things, (i) the mortgage note or contract endorsed without recourse
in blank or to the order of the Trustee, (ii) the mortgage, deed of trust or
similar instrument (a "Mortgage") with evidence of recording indicated thereon
(except for any Mortgage not returned from the public recording office, in which
case the Depositor will deliver or cause to be delivered a copy of such Mortgage
together with a certificate that the original of such Mortgage was delivered to
such recording office), (iii) an assignment of the Mortgage to the Trustee,
which assignment will be in recordable form in the case of a Mortgage
assignment, and (iv) such other security documents, including those relating to
any senior interests in the Property, as may be specified in the related
Prospectus Supplement or the related Agreement. Unless otherwise specified in
the related Prospectus Supplement, the Depositor will promptly cause the
assignments of the related Loans to be recorded in the appropriate public office
for real property records, except in states in which, in the opinion of counsel
acceptable to the Trustee, such recording is not required to protect the
Trustee's interest in such Loans against the claim of any subsequent transferee
or any successor to or creditor of the Depositor or the originator of such
Loans.
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With respect to any Loans that are Cooperative Loans, the Depositor will
cause to be delivered to the Trustee the related original cooperative note
endorsed without recourse in blank or to the order of the Trustee, the original
security agreement, the proprietary lease or occupancy agreement, the
recognition agreement, an executed financing agreement and the relevant stock
certificate, related blank stock powers and any other document specified in the
related Prospectus Supplement. The Depositor will cause to be filed in the
appropriate office an assignment and a financing statement evidencing the
Trustee's security interest in each Cooperative Loan.
Unless otherwise specified in the related Prospectus Supplement, the
Depositor will as to each Home Improvement Contract, deliver or cause to be
delivered to the Trustee the original Home Improvement Contract and copies of
documents and instruments related to each Home Improvement Contract and, other
than in the case of unsecured Home Improvement Contracts, the security interest
in the Property securing such Home Improvement Contract. In order to give notice
of the right, title and interest of Securityholders to the Home Improvement
Contracts, the Depositor will cause a UCC-1 financing statement to be executed
by the Depositor or the Seller identifying the Trustee as the secured party and
identifying all Home Improvement Contracts as collateral. Unless otherwise
specified in the related Prospectus Supplement, the Home Improvement Contracts
will not be stamped or otherwise marked to reflect their assignment to the
Trustee. Therefore, if, through negligence, fraud or otherwise, a subsequent
purchaser were able to take physical possession of the Home Improvement
Contracts without notice of such assignment, the interest of Securityholders in
the Home Improvement Contracts could be defeated. See "Certain Legal Aspects of
the Loans--The Home Improvement Contracts."
The Trustee (or the custodian hereinafter referred to) will review such
Loan documents within the time period specified in the related Prospectus
Supplement after receipt thereof, and the Trustee will hold such documents in
trust for the benefit of the related Securityholders. Unless otherwise specified
in the related Prospectus Supplement, if any such document is found to be
missing or defective in any material respect, the Trustee (or such custodian)
will notify the Master Servicer and the Depositor, and the Master Servicer will
notify the related Seller. If such Seller cannot cure the omission or defect
within the time period specified in the related Prospectus Supplement after
receipt of such notice, such Seller will be obligated to either (i) purchase the
related Loan from the Trust Fund at the Purchase Price or (ii) if so specified
in the related Prospectus Supplement, remove such Loan from the Trust Fund and
substitute in its place one or more other Loans that meets certain requirements
set forth therein. There can be no assurance that a Seller will fulfill this
purchase or substitution obligation. Although the Master Servicer may be
obligated to enforce such obligation to the extent described above under "Loan
Program-Representations by Sellers; Repurchases", neither the Master Servicer
nor the Depositor will be obligated to purchase or replace such Loan if the
Seller defaults on its obligation, unless such breach also constitutes a breach
of the representations or warranties of the Master Servicer or the Depositor, as
the case may be. Unless otherwise specified in the related Prospectus
Supplement, this obligation to cure, purchase or substitute constitutes the sole
remedy available to the Securityholders or the Trustee for omission of, or a
material defect in, a constituent document.
The Trustee will be authorized to appoint a custodian pursuant to a
custodial agreement to maintain possession of and, if applicable, to review the
documents relating to the Loans as agent of the Trustee.
The Master Servicer will make certain representations and warranties
regarding its authority to enter into, and its ability to perform its
obligations under, the Agreement. Upon a breach of any such representation of
the Master Servicer which materially and adversely affects the interests of the
Securityholders in a Loan, the Master Servicer will be obligated either to cure
the breach in all material respects or to purchase (at the Purchase Price) or if
so specified in the related Prospectus Supplement, replace the Loan. Unless
otherwise specified in the related Prospectus Supplement, this obligation to
cure, purchase or substitute constitutes the sole remedy available to the
Securityholders or the Trustee for such a breach of representation by the Master
Servicer.
Notwithstanding the foregoing provisions, with respect to a Trust Fund for
which a REMIC election is to be made, no purchase or substitution of a Loan will
be made if such purchase or substitution would result in a prohibited
transaction tax under the Code.
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No Recourse to Sellers; Depositor or Master Servicer. As described above
under "--Assignment of the Loans," the Depositor will cause the Loans comprising
the related Trust Fund to be assigned to the Trustee, without recourse. However,
each Seller will be obligated to repurchase or substitute for any Loan as to
which certain representations and warranties are breached or for failure to
deliver certain documents relating to the Loans as described herein under
"Assignment of the Loans" and "Loan Program -- Representations by Sellers;
Repurchases." In addition, the Master Servicer and the Depositor will be
obligated to purchase or substitute for any Loan as to which certain
representations and warranties are breached as described herein under
"--Assignment of the Loans." These obligations to purchase or substitute
constitute the sole remedy available to the Securityholders or the Trustee for a
breach of any such representation or failure to deliver a constituent document.
Payments on Loans; Deposits to Security Account
The Master Servicer will establish and maintain or cause to be established
and maintained with respect to the related Trust Fund a separate account or
accounts for the collection of payments on the related Trust Fund Assets in the
Trust Fund (the "Security Account") which, unless otherwise specified in the
related Prospectus Supplement, must be either (i) maintained with a depository
institution the debt obligations of which (or in the case of a depository
institution that is the principal subsidiary of a holding company, the
obligations of which) are rated in one of the two highest rating categories by
the Rating Agency or Rating Agencies that rated one or more classes of the
related Series of Securities, (ii) an account or accounts the deposits in which
are fully insured by either the Bank Insurance Fund (the "BIF") of the FDIC or
the Savings Association Insurance Fund (as successor to the Federal Savings and
Loan Insurance Corporation ("SAIF")), (iii) an account or accounts the deposits
in which are insured by the BIF or SAIF (to the limits established by the FDIC),
and the uninsured deposits in which are otherwise secured such that, as
evidenced by an opinion of counsel, the Securityholders have a claim with
respect to the funds in the Security Account or a perfected first priority
security interest against any collateral securing such funds that is superior to
the claims of any other depositors or general creditors of the depository
institution with which the Security Account is maintained, or (iv) an account or
accounts otherwise acceptable to each Rating Agency. The collateral eligible to
secure amounts in the Security Account is limited to Permitted Investments. A
Security Account may be maintained as an interest bearing account or the funds
held therein may be invested pending each succeeding Distribution Date in
Permitted Investments. Unless otherwise specified in the related Prospectus
Supplement, the Master Servicer or its designee will be entitled to receive any
such interest or other income earned on funds in the Security Account as
additional compensation and will be obligated to deposit in the Security Account
the amount of any loss immediately as realized. The Security Account may be
maintained with the Master Servicer or with a depository institution that is an
affiliate of the Master Servicer, provided it meets the standards set forth
above.
The Master Servicer will deposit or cause to be deposited in the Security
Account for each Trust Fund, to the extent applicable and unless otherwise
specified in the related Prospectus Supplement and provided in the Agreement,
the following payments and collections received or advances made by or on behalf
of it subsequent to the Cut-off Date (other than payments due on or before the
Cut-off Date and exclusive of any amounts representing Retained Interest):
(i) all payments on account of principal, including Principal
Prepayments and, if specified in the related Prospectus Supplement, any
applicable prepayment penalties, on the Loans;
(ii) all payments on account of interest on the Loans, net of
applicable servicing compensation;
(iii) all proceeds (net of unreimbursed payments of property taxes,
insurance premiums and similar items ("Insured Expenses") incurred, and
unreimbursed Advances made, by the Master Servicer, if any) of the hazard
insurance policies and any Primary Mortgage Insurance Policies, to the
extent such proceeds are not applied to the restoration of the property or
released to the Mortgagor in accordance with the Master Servicer's normal
servicing procedures (collectively, "Insurance Proceeds") and all other
cash amounts (net of unreimbursed expenses incurred in connection with
liquidation or foreclosure ("Liquidation Expenses") and unreimbursed
Advances made, by the Master Servicer, if any) received and retained in
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connection with the liquidation of defaulted Loans, by foreclosure or
otherwise ("Liquidation Proceeds"), together with any net proceeds received
on a monthly basis with respect to any properties acquired on behalf of the
Securityholders by foreclosure or deed in lieu of foreclosure;
(iv) all proceeds of any Loan or property in respect thereof purchased
by the Master Servicer, the Depositor or any Seller as described under
"Loan Program-Representations by Sellers; Repurchases" or "-Assignment of
Trust Fund Assets" above and all proceeds of any Loan repurchased as
described under "-Termination; Optional Termination" below;
(v) all payments required to be deposited in the Security Account with
respect to any deductible clause in any blanket insurance policy described
under "-Hazard Insurance" below;
(vi) any amount required to be deposited by the Master Servicer in
connection with losses realized on investments for the benefit of the
Master Servicer of funds held in the Security Account and, to the extent
specified in the related Prospectus Supplement, any payments required to be
made by the Master Servicer in connection with prepayment interest
shortfalls; and
(vii) all other amounts required to be deposited in the Security
Account pursuant to the Agreement.
The Master Servicer (or the Depositor, as applicable) may from time to time
direct the institution that maintains the Security Account to withdraw funds
from the Security Account for the following purposes:
(i) to pay to the Master Servicer the servicing fees described in the
related Prospectus Supplement, the master servicing fees (subject to
reduction) and, as additional servicing compensation, earnings on or
investment income with respect to funds in the amounts in the Security
Account credited thereto;
(ii) to reimburse the Master Servicer for Advances, such right of
reimbursement with respect to any Loan being limited to amounts received
that represent late recoveries of payments of principal and/or interest on
such Loan (or Insurance Proceeds or Liquidation Proceeds with respect
thereto) with respect to which such Advance was made;
(iii) to reimburse the Master Servicer for any Advances previously
made which the Master Servicer has determined to be nonrecoverable;
(iv) to reimburse the Master Servicer from Insurance Proceeds for
expenses incurred by the Master Servicer and covered by the related
insurance policies;
(v) to reimburse the Master Servicer for unpaid master servicing fees
and unreimbursed out-of-pocket costs and expenses incurred by the Master
Servicer in the performance of its servicing obligations, such right of
reimbursement being limited to amounts received representing late
recoveries of the payments for which such advances were made;
(vi) to pay to the Master Servicer, with respect to each Loan or
property acquired in respect thereof that has been purchased by the Master
Servicer pursuant to the Agreement, all amounts received thereon and not
taken into account in determining the principal balance of such repurchased
Loan;
(vii) to reimburse the Master Servicer or the Depositor for expenses
incurred and reimbursable pursuant to the Agreement;
(viii) to withdraw any amount deposited in the Security Account and
not required to be deposited therein; and
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(ix) to clear and terminate the Security Account upon termination of
the Agreement.
In addition, unless otherwise specified in the related Prospectus
Supplement, on or prior to the business day immediately preceding each
Distribution Date, the Master Servicer shall withdraw from the Security Account
the amount of Available Funds, to the extent on deposit, for deposit in an
account maintained by the Trustee for the related Series of Securities.
Pre-Funding Account
If so provided in the related Prospectus Supplement, the Master Servicer
will establish and maintain a Pre-Funding Account, in the name of the related
Trustee on behalf of the related Securityholders, into which the Depositor will
deposit cash in an amount equal to the Pre-Funded Amount on the related Closing
Date. The Pre-Funding Account will be maintained with the Trustee for the
related Series of Securities and is designed solely to hold funds to be applied
by such Trustee during the Funding Period to pay to the Depositor the purchase
price for Subsequent Loans. Monies on deposit in the Pre-Funding Account will
not be available to cover losses on or in respect of the related Loans. The
Pre-Funded Amount will not exceed 50% of the initial aggregate principal amount
of the Certificates and Notes of the related Series. The Pre-Funded Amount will
be used by the related Trustee to purchase Subsequent Loans from the Depositor
from time to time during the Funding Period. The Funding Period, if any, for a
Trust Fund will begin on the related Closing Date and will end on the date
specified in the related Prospectus Supplement, which in no event will be later
than the date that is one year after the related Closing Date. Monies on deposit
in the Pre-Funding Account may be invested in Permitted Investments under the
circumstances and in the manner described in the related Agreement. Earnings on
investment of funds in the Pre-Funding Account will be deposited into the
related Security Account or such other trust account as is specified in the
related Prospectus Supplement and losses will be charged against the funds on
deposit in the Pre-Funding Account. Any amounts remaining in the Pre-Funding
Account at the end of the Funding Period will be distributed to the related
Securityholders in the manner and priority specified in the related Prospectus
Supplement, as a prepayment of principal of the related Securities.
Sub-Servicing by Sellers
Each Seller of a Loan or any other servicing entity may act as the
Sub-Servicer for such Loan pursuant to an agreement (each, a "Sub-Servicing
Agreement"), which will not contain any terms inconsistent with the related
Agreement. While each Sub-Servicing Agreement will be a contract solely between
the Master Servicer and the Sub-Servicer, the Agreement pursuant to which a
Series of Securities is issued will provide that, if for any reason the Master
Servicer for such Series of Securities is no longer the Master Servicer of the
related Loans, the Trustee or any successor Master Servicer must recognize the
Sub-Servicer's rights and obligations under such Sub-Servicing Agreement.
Notwithstanding any such subservicing arrangement, unless otherwise provided in
the related Prospectus Supplement, the Master Servicer will remain liable for
its servicing duties and obligations under the Master Servicing Agreement as if
the Master Servicer alone were servicing the Loans.
Collection Procedures
The Master Servicer, directly or through one or more Sub-Servicers, will
make reasonable efforts to collect all payments called for under the Loans and
will, consistent with each Agreement and any Pool Insurance Policy, Primary
Mortgage Insurance Policy, FHA Insurance, VA Guaranty, bankruptcy bond or
alternative arrangements, follow such collection procedures as are customary
with respect to loans that are comparable to the Loans. Consistent with the
above, the Master Servicer may, in its discretion, (i) waive any assumption fee,
late payment or other charge in connection with a Loan and (ii) to the extent
not inconsistent with the coverage of such Loan by a Pool Insurance Policy,
Primary Mortgage Insurance Policy, FHA Insurance, VA Guaranty, bankruptcy bond
or alternative arrangements, if applicable, arrange with a borrower a schedule
for the liquidation of delinquencies running for no more than 125 days after the
applicable due date for each payment. To the extent the Master Servicer is
obligated to make or cause to be made Advances, such obligation will remain
during any period of such an arrangement.
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In any case in which property securing a Loan has been, or is about to be,
conveyed by the mortgagor or obligor, the Master Servicer will, to the extent it
has knowledge of such conveyance or proposed conveyance, exercise or cause to be
exercised its rights to accelerate the maturity of such Loan under any
due-on-sale clause applicable thereto, but only if the exercise of such rights
is permitted by applicable law and will not impair or threaten to impair any
recovery under any Primary Mortgage Insurance Policy. If these conditions are
not met or if the Master Servicer reasonably believes it is unable under
applicable law to enforce such due-on-sale clause or if such Loan is a mortgage
loan insured by the FHA or partially guaranteed by the VA, the Master Servicer
will enter into or cause to be entered into an assumption and modification
agreement with the person to whom such property has been or is about to be
conveyed, pursuant to which such person becomes liable for repayment of the Loan
and, to the extent permitted by applicable law, the mortgagor remains liable
thereon. Any fee collected by or on behalf of the Master Servicer for entering
into an assumption agreement will be retained by or on behalf of the Master
Servicer as additional servicing compensation. See "Certain Legal Aspects of the
Loans-Due-on-Sale Clauses". In connection with any such assumption, the terms of
the related Loan may not be changed.
With respect to Cooperative Loans, any prospective purchaser will generally
have to obtain the approval of the board of directors of the relevant
Cooperative before purchasing the shares and acquiring rights under the related
proprietary lease or occupancy agreement. See "Certain Legal Aspects of the
Loans". This approval is usually based on the purchaser's income and net worth
and numerous other factors. Although the Cooperative's approval is unlikely to
be unreasonably withheld or delayed, the necessity of acquiring such approval
could limit the number of potential purchasers for those shares and otherwise
limit the Trust Fund's ability to sell and realize the value of those shares.
In general a "tenant-stockholder" (as defined in Code Section 216(b)(2) of
a corporation that qualifies as a "cooperative housing corporation" within the
meaning of Code Section 216(b)(1) is allowed a deduction for amounts paid or
accrued within his taxable year to the corporation representing his
proportionate share of certain interest expenses and certain real estate taxes
allowable as a deduction under Code Section 216(a) to the corporation under Code
Sections 163 and 164. In order for a corporation to qualify under Code Section
216(b)(1) for its taxable year in which such items are allowable as a deduction
to the corporation, such Section requires, among other things, that at least 80%
of the gross income of the corporation be derived from its tenant-stockholders
(as defined in Code Section 216(b)(2)). By virtue of this requirement, the
status of a corporation for purposes of Code Section 216(b)(1) must be
determined on a year-to-year basis. Consequently, there can be no assurance that
Cooperatives relating to the Cooperative Loans will qualify under such Section
for any particular year. In the event that such a Cooperative fails to qualify
for one or more years, the value of the collateral securing any related
Cooperative Loans could be significantly impaired because no deduction would be
allowable to tenant-stockholders under Code Section 216(a) with respect to those
years. In view of the significance of the tax benefits accorded
tenant-stockholders of a corporation that qualifies under Code Section
216(b)(1), the likelihood that such a failure would be permitted to continue
over a period of years appears remote.
Hazard Insurance
Except as otherwise specified in the related Prospectus Supplement, the
Master Servicer will require the mortgagor or obligor on each Loan to maintain a
hazard insurance policy providing for no less than the coverage of the standard
form of fire insurance policy with extended coverage customary for the type of
Property in the state in which such Property is located. Such coverage will be
in an amount that is at least equal to the lesser of (i) the maximum insurable
value of the improvements securing such Loan or (ii) the greater of (y) the
outstanding principal balance of the Loan and (z) an amount such that the
proceeds of such policy shall be sufficient to prevent the mortgagor and/or the
mortgagee from becoming a co-insurer. All amounts collected by the Master
Servicer under any hazard policy (except for amounts to be applied to the
restoration or repair of the Property or released to the mortgagor or obligor in
accordance with the Master Servicer's normal servicing procedures) will be
deposited in the related Security Account. In the event that the Master Servicer
maintains a blanket policy insuring against hazard losses on all the Loans
comprising part of a Trust Fund, it will conclusively be deemed to have
satisfied its obligation relating to the maintenance of hazard insurance. Such
blanket policy may contain a deductible clause, in which case the Master
Servicer will be required to deposit from its own funds into the related
Security Account the amounts which would have been deposited therein but for
such clause.
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In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements securing a Loan by fire,
lightning, explosion, smoke, windstorm and hail, riot, strike and civil
commotion, subject to the conditions and exclusions particularized in each
policy. Although the policies relating to the Loans may have been underwritten
by different insurers under different state laws in accordance with different
applicable forms and therefore may 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 mud flows),
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. If
the Property securing a Loan is located in a federally designated special flood
area at the time of origination, the Master Servicer will require the mortgagor
or obligor to obtain and maintain flood insurance.
The hazard insurance policies covering properties securing the Loans
typically contain a clause which in effect requires the insured at all time to
carry insurance of a specified percentage of a specified percentage (generally
80% to 90%) of the full replacement value of the insured property in order to
recover the full amount of any partial loss. If the insured's coverage falls
below this specified percentage, then the insurer's liability in the event of
partial loss will not exceed the larger of (i) the actual cash value (generally
defined as replacement cost at the time and place of loss, less physical
depreciation) of the improvements damaged or destroyed 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 the Master Servicer may cause to be maintained on the improvements
securing the Loans declines as the principal balances owing thereon decrease,
and since improved real estate generally has appreciated in value over time in
the past, the effect of this requirement in the event of partial loss may be
that hazard insurance proceeds will be insufficient to restore fully the damaged
property. If specified in the related Prospectus Supplement, a special hazard
insurance policy will be obtained to insure against certain of the uninsured
risks described above. See "Credit Enhancement.
The Master Servicer will not require that a standard hazard or flood
insurance policy be maintained on the cooperative dwelling relating to any
Cooperative Loan. Generally, the Cooperative itself is responsible for
maintenance of hazard insurance for the property owned by the Cooperative and
the tenant-stockholders of that Cooperative do not maintain individual hazard
insurance policies. To the extent, however, that a Cooperative and the related
borrower on a Cooperative Loan do not maintain such insurance or do not maintain
adequate coverage or any insurance proceeds are not applied to the restoration
of damaged property, any damage to such borrower's cooperative dwelling or such
Cooperative's building could significantly reduce the value of the collateral
securing such Cooperative Loan to the extent not covered by other credit
support.
If the Property securing a defaulted Loan is damaged and proceeds, if any,
from the related hazard insurance policy are insufficient to restore the damaged
Property, 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 Securityholders on liquidation of the Loan after
reimbursement of the Master Servicer for its expenses and (ii) that such
expenses will be recoverable by it from related Insurance Proceeds or
Liquidation Proceeds.
If recovery on a defaulted Loan under any related Insurance Policy is not
available for the reasons set forth in the preceding paragraph, or if the
defaulted Loan is not covered by an Insurance Policy, the Master Servicer will
be obligated to follow or cause to be followed such normal practices and
procedures as it deems necessary or advisable to realize upon the defaulted
Loan. If the proceeds of any liquidation of the Property securing the defaulted
Loan are less than the principal balance of such Loan plus interest accrued
thereon that is payable to Securityholders, the Trust Fund will realize a loss
in the amount of such difference plus the aggregate of expenses incurred by the
Master Servicer in connection with such proceedings and which are reimbursable
under the Agreement. In the unlikely event that any such proceedings result in a
total recovery which is, after reimbursement to the Master Servicer of its
expenses, in excess of the principal balance of such Loan plus interest accrued
thereon that is payable to Securityholders, the Master Servicer will be entitled
to withdraw or retain from the Security Account amounts representing its normal
servicing compensation with respect to such Loan and, unless otherwise
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specified in the related Prospectus Supplement, amounts representing the balance
of such excess, exclusive of any amount required by law to be forwarded to the
related borrower, as additional servicing compensation.
If the Master Servicer or its designee recovers Insurance Proceeds which,
when added to any related Liquidation Proceeds and after deduction of certain
expenses reimbursable to the Master Servicer, exceed the principal balance of
such Loan plus interest accrued thereon that is payable to Securityholders, the
Master Servicer will be entitled to withdraw or retain from the Security Account
amounts representing its normal servicing compensation with respect to such
Loan. In the event that the Master Servicer has expended its own funds to
restore the damaged Property and such funds have not been reimbursed under the
related hazard insurance policy, it will be entitled to withdraw from the
Security Account out of related Liquidation Proceeds or Insurance Proceeds an
amount equal to such expenses incurred by it, in which event the Trust Fund may
realize a loss up to the amount so charged. Since Insurance Proceeds cannot
exceed deficiency claims and certain expenses incurred by the Master Servicer,
no such payment or recovery will result in a recovery to the Trust Fund which
exceeds the principal balance of the defaulted Loan together with accrued
interest thereon. See "Credit Enhancement".
The proceeds from any liquidation of a Loan will be applied in the
following order of priority: first, to reimburse the Master Servicer for any
unreimbursed expenses incurred by it to restore the related Property and any
unreimbursed servicing compensation payable to the Master Servicer with respect
to such Loan; second, to reimburse the Master Servicer for any unreimbursed
Advances with respect to such Loan; third, to accrued and unpaid interest (to
the extent no Advance has been made for such amount) on such Loan; and fourth,
as a recovery of principal of such Loan.
Realization Upon Defaulted Loans
Primary Mortgage Insurance Policies. If so specified in the related
Prospectus Supplement, the Master Servicer will maintain or cause to be
maintained, as the case may be, in full force and effect, a Primary Mortgage
Insurance Policy with regard to each Loan for which such coverage is required.
Primary Mortgage Insurance Policies reimburse certain losses sustained by reason
of defaults in payments by borrowers. 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 Securities that is required to be kept in
force under the applicable Agreement unless the replacement Primary Mortgage
Insurance Policy for such cancelled or nonrenewed policy is maintained with an
insurer whose claims-paying ability is sufficient to maintain the current rating
of the classes of Securities of such Series that have been rated.
FHA Insurance; VA Guaranties. Loans designated in the related Prospectus
Supplement as insured by the FHA will be insured by the FHA as authorized under
the United States Housing Act of 1937, as amended. In addition to the Title I
Program of the FHA, see "Certain Legal Aspects of the Loans -- Title I Program",
certain Loans will be insured under various FHA programs including the standard
FHA 203(b) program to finance the acquisition of one- to four-family housing
units and the FHA 245 graduated payment mortgage program. These programs
generally limit the principal amount and interest rates of the mortgage loans
insured. Loans insured by FHA generally require a minimum down payment of
approximately 5% of the original principal amount of the loan. No FHA-insured
Loans relating to a Series may have an interest rate or original principal
amount exceeding the applicable FHA limits at the time of origination of such
loan.
Loans designated in the related Prospectus Supplement as guaranteed by the
VA will be partially guaranteed by the VA under the Serviceman's Readjustment
Act of 1944, as amended (a "VA Guaranty"). The Serviceman's Readjustment Act of
1944, as amended, permits a veteran (or in certain instances the spouse of a
veteran) to obtain a mortgage loan guaranty by the VA covering mortgage
financing of the purchase of a one- to four-family dwelling unit at interest
rates permitted by the VA. The program has no mortgage loan limits, requires no
down payment from the purchaser and permits the guaranty of mortgage loans of up
to 30 years' duration. However, no Loan guaranteed by the VA will have an
original principal amount greater than five times the partial VA guaranty for
such Loan. The maximum guaranty that may be issued by the VA under a VA
guaranteed mortgage loan depends upon the original principal amount of the
mortgage loan, as further described in 38 United States Code Section 1803(a), as
amended.
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Servicing and Other Compensation and Payment of Expenses
The principal servicing compensation to be paid to the Master Servicer in
respect of its master servicing activities for each Series of Securities 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 Loan, and such compensation will be retained by it from
collections of interest on such Loan in the related Trust Fund (the "Master
Servicing Fee"). As compensation for its servicing duties, a Sub-Servicer or, if
there is no Sub-Servicer, the Master Servicer will be entitled to a monthly
servicing fee as described in the related Prospectus Supplement. In addition,
the Master Servicer or Sub-Servicer will retain all prepayment charges,
assumption fees and late payment charges, to the extent collected from
borrowers, and any benefit that may accrue as a result of the investment of
funds in the applicable Security Account (unless otherwise specified in the
related Prospectus Supplement).
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 related Agreement, including, without limitation,
payment of any fee or other amount payable in respect of any 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
Sub-Servicers and Sellers. The Master Servicer will be entitled to reimbursement
of expenses incurred in enforcing the obligations of Sub-Servicers and Sellers
under certain limited circumstances.
Evidence as to Compliance
Each Agreement will provide that on or before a specified date in each
year, a firm of independent public accountants will furnish a statement to the
Trustee to the effect that, on the basis of the examination by such firm
conducted substantially in compliance with the Uniform Single Attestation
Program for Mortgage Bankers or the Audit Program for Mortgages serviced for
FHLMC, the servicing by or on behalf of the Master Servicer of mortgage loans or
private asset backed securities, or under pooling and servicing agreements
substantially similar to each other (including the related Agreement) was
conducted in compliance with such agreements except for any significant
exceptions or errors in records that, in the opinion of the firm, the Audit
Program for Mortgages serviced for FHLMC, or the Uniform Single Attestation
Program for Mortgage Bankers, it is required to report. In rendering its
statement such firm may rely, as to matters relating to the direct servicing of
Loans by Sub-Servicers, upon comparable statements for examinations conducted
substantially in compliance with the Uniform Single Attestation Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC (rendered
within one year of such statement) of firms of independent public accountants
with respect to the related Sub-Servicer.
Each Agreement will also provide for delivery to the Trustee, on or before
a specified date in each year, of an annual statement signed by two officers of
the Master Servicer to the effect that the Master Servicer has fulfilled its
obligations under the Agreement throughout the preceding year.
Copies of the annual accountants' statement and the statement of officers
of the Master Servicer may be obtained by Securityholders of the related Series
without charge upon written request to the Master Servicer at the address set
forth in the related Prospectus Supplement.
Certain Matters Regarding the Master Servicer and the Depositor
The Master Servicer under each Pooling and Servicing Agreement or Master
Servicing Agreement, as applicable, will be named in the related Prospectus
Supplement. The entity serving as Master Servicer may have normal business
relationships with the Depositor or the Depositor's affiliates.
Each Agreement will provide that the Master Servicer may not resign from
its obligations and duties under the Agreement except upon a determination that
its duties thereunder are no longer permissible under applicable law. The Master
Servicer may, however, be removed from its obligations and duties as set forth
in the Agreement. No
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such resignation will become effective until the Trustee or a successor servicer
has assumed the Master Servicer's obligations and duties under the Agreement.
Each Agreement will further provide that 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 related Trust Fund or
Securityholders for any action taken or for refraining from the taking of any
action in good faith pursuant to the 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 wilful misfeasance, bad faith or gross negligence in the
performance of duties thereunder or by reason of reckless disregard of
obligations and duties thereunder. Each Agreement will further provide that the
Master Servicer, the Depositor and any director, officer, employee or agent of
the Master Servicer or the Depositor will be entitled to indemnification by the
related Trust Fund and will be held harmless against any loss, liability or
expense incurred in connection with any legal action relating to the Agreement
or the Securities, other than any loss, liability or expense related to any
specific Loan or Loans (except any such loss, liability or expense otherwise
reimbursable pursuant to the 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 Agreement will provide that
neither the Master Servicer nor the Depositor will be under any obligation to
appear in, prosecute or defend any legal action which is not incidental to its
respective responsibilities under the 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 Agreement and the rights and duties
of the parties thereto and the interests of the Securityholders 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
Securityholders.
Except as otherwise specified in the related Prospectus Supplement, any
person into which the Master Servicer may be merged or consolidated, or 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 each Agreement, provided that
such person is qualified to sell mortgage loans to, and service mortgage loans
on behalf of, FNMA or FHLMC and further provided that such merger, consolidation
or succession does not adversely affect the then current rating or ratings of
the class or classes of Securities of such Series that have been rated.
Events of Default; Rights Upon Event of Default
Pooling and Servicing Agreement; Master Servicing Agreement. Except as
otherwise specified in the related Prospectus Supplement, Events of Default
under each Agreement will consist of (i) any failure by the Master Servicer to
distribute or cause to be distributed to Securityholders of any class any
required payment (other than an Advance) which continues unremedied for five
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 Securities of such class evidencing not less than
25% of the total distributions allocated to such class ("Percentage Interests");
(ii) any failure by the Master Servicer to make an Advance as required under the
Agreement, unless cured as specified therein; (iii) any failure by the Master
Servicer duly to observe or perform in any material respect any of its other
covenants or agreements in the Agreement which continues unremedied for thirty
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 Securities of any class evidencing not less than
25% of the aggregate Percentage Interests constituting such class; and (iv)
certain events of insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceeding and certain actions by or on behalf of the
Master Servicer indicating its insolvency, reorganization or inability to pay
its obligations.
If specified in the related Prospectus Supplement, the Agreement will
permit the Trustee to sell the Trust Fund Assets and the other assets of the
Trust Fund described under "Credit Enhancement" herein in the event that
payments in respect thereto are insufficient to make payments required in the
Agreement. The assets of the
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Trust Fund will be sold only under the circumstances and in the manner specified
in the related Prospectus Supplement.
Unless otherwise provided in the related Prospectus Supplement, so long as
an Event of Default under an Agreement remains unremedied, the Depositor or the
Trustee may, and at the direction of holders of Securities of any class
evidencing not less than 25% of the aggregate Percentage Interests constituting
such class and under such other circumstances as may be specified in such
Agreement, the Trustee shall terminate all of the rights and obligations of the
Master Servicer under the Agreement relating to such Trust Fund and in and to
the related Trust
Fund Assets, whereupon the Trustee will succeed to all of the responsibilities,
duties and liabilities of the Master Servicer under the Agreement, including, if
specified in the related Prospectus Supplement, the obligation to make Advances,
and will be entitled to similar compensation arrangements. In the event that the
Trustee is unwilling or unable so to act, it may appoint, or petition a court of
competent jurisdiction for the appointment of, a mortgage loan servicing
institution with a net worth of a least $10,000,000 to act as successor to the
Master Servicer under the Agreement. Pending such appointment, the Trustee is
obligated to act in such capacity. The Trustee and any such successor may agree
upon the servicing compensation to be paid, which in no event may be greater
than the compensation payable to the Master Servicer under the Agreement.
Unless otherwise provided in the related Prospectus Supplement, no
Securityholder, solely by virtue of such holder's status as a Securityholder,
will have any right under any Agreement to institute any proceeding with respect
to such Agreement, unless such holder previously has given to the Trustee
written notice of default and unless the holders of Securities of any class of
such Series 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 has neglected or
refused to institute any such proceeding.
Indenture. Except as otherwise specified in the related Prospectus
Supplement, Events of Default under the Indenture for each Series of Notes
include: (i) a default in the payment of any principal of or interest on any
Note of such Series which continues unremedied for five days after the giving of
written notice of such default is given as specified in the related Prospectus
Supplement; (ii) failure to perform in any material respect any other covenant
of the Depositor or the Trust Fund in the Indenture which continues for a period
of thirty (30) days after notice thereof is given in accordance with the
procedures described in the related Prospectus Supplement; (iii) certain events
of bankruptcy, insolvency, receivership or liquidation of the Depositor or the
Trust Fund; or (iv) any other Event of Default provided with respect to Notes of
that Series including but not limited to certain defaults on the part of the
issuer, if any, of a credit enhancement instrument supporting such Notes.
If an Event of Default with respect to the Notes of any Series at the time
outstanding occurs and is continuing, either the Trustee or the holders of a
majority of the then aggregate outstanding amount of the Notes of such Series
may declare the principal amount (or, if the Notes of that Series have an
interest rate of 0%, such portion of the principal amount as may be specified in
the terms of that Series, as provided in the related Prospectus Supplement) of
all the Notes of such Series to be due and payable immediately. Such declaration
may, under certain circumstances, be rescinded and annulled by the holders of
more than 50% of the Percentage Interests of the Notes of such Series.
If, following an Event of Default with respect to any Series of Notes, the
Notes of such Series have been declared to be due and payable, the Trustee may,
in its discretion, notwithstanding such acceleration, elect to maintain
possession of the collateral securing the Notes of such Series and to continue
to apply distributions on such collateral as if there had been no declaration of
acceleration if such collateral continues to provide sufficient funds for the
payment of principal of and interest on the Notes of such Series as they would
have become due if there had not been such a declaration. In addition, the
Trustee may not sell or otherwise liquidate the collateral securing the Notes of
a Series following an Event of Default, other than a default in the payment of
any principal or interest on any Note of such Series for five days or more,
unless (a) the holders of 100% of the Percentage Interests of the Notes of such
Series consent to such sale, (b) the proceeds of such sale or liquidation are
sufficient to pay in full the principal of and accrued interest, due and unpaid,
on the outstanding Notes of such Series at the date of such sale or (c) the
Trustee determines that such collateral would not be sufficient on an ongoing
basis to make all
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payments on such Notes as such payments would have become due if such Notes had
not been declared due and payable, and the Trustee obtains the consent of the
holders of 66 2/3% of the Percentage Interests of the Notes of such Series.
In the event that the Trustee liquidates the collateral in connection with
an Event of Default involving a default for five days or more in the payment of
principal of or interest on the Notes of a Series, the Indenture provides that
the Trustee will have a prior lien on the proceeds of any such liquidation for
unpaid fees and expenses. As a result, upon the occurrence of such an Event of
Default, the amount available for distribution to the Noteholders would be less
than would otherwise be the case. However, the Trustee may not institute a
proceeding for the enforcement of its lien except in connection with a
proceeding for the enforcement of the lien of the Indenture for the benefit of
the Noteholders after the occurrence of such an Event of Default.
Except as otherwise specified in the related Prospectus Supplement, in the
event the principal of the Notes of a Series is declared due and payable, as
described above, the holders of any such Notes issued at a discount from par may
be entitled to receive no more than an amount equal to the unpaid principal
amount thereof less the amount of such discount which is unamortized.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing with respect
to a Series of Notes, the Trustee shall be under no obligation to exercise any
of the rights or powers under the Indenture at the request or direction of any
of the holders of Notes of such Series, unless such holders offered to the
Trustee security or indemnity satisfactory to it against the costs, expenses and
liabilities which might be incurred by it in complying with such request or
direction. Subject to such provisions for indemnification and certain
limitations contained in the Indenture, the holders of a majority of the then
aggregate outstanding amount of the Notes of such Series shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee with respect to the Notes of such Series, and the holders of a majority
of the then aggregate outstanding amount of the Notes of such Series may, in
certain cases, waive any default with respect thereto, except a default in the
payment of principal or interest or a default in respect of a covenant or
provision of the Indenture that cannot be modified without the waiver or consent
of all the holders of the outstanding Notes of such Series affected thereby.
Amendment
Except as otherwise specified in the related Prospectus Supplement, each
Agreement may be amended by the Depositor, the Master Servicer and the Trustee,
without the consent of any of the Securityholders, (i) to cure any ambiguity;
(ii) to correct or supplement any provision therein which may be defective or
inconsistent with any other provision therein; or (iii) to make any other
revisions with respect to matters or questions arising under the Agreement which
are not inconsistent with the provisions thereof, provided that such action will
not adversely affect in any material respect the interests of any
Securityholder. An amendment will be deemed not to adversely affect in any
material respect the interests of the Securityholders if the person requesting
such amendment obtains a letter from each Rating Agency requested to rate the
class or classes of Securities of such Series stating that such amendment will
not result in the downgrading or withdrawal of the respective ratings then
assigned to such Securities. In addition, to the extent provided in the related
Agreement, an Agreement may be amended without the consent of any of the
Securityholders, to change the manner in which the Security Account is
maintained, provided that any such change does not adversely affect the then
current rating on the class or classes of Securities of such Series that have
been rated. In addition, if a REMIC election is made with respect to a Trust
Fund, the related Agreement may be amended to modify, eliminate or add to any of
its provisions to such extent as may be necessary to maintain the qualification
of the related Trust Fund as a REMIC, provided that the Trustee has received an
opinion of counsel to the effect that such action is necessary or helpful to
maintain such qualification. Except as otherwise specified in the related
Prospectus Supplement, each Agreement may also be amended by the Depositor, the
Master Servicer and the Trustee with consent of holders of Securities of such
Series evidencing not less than 66% of the aggregate Percentage Interests of
each class affected thereby for the purpose of adding any provisions to or
changing in an manner or eliminating any of the provisions of the Agreement or
of modifying in any manner the rights of the holders of the related Securities;
provided, however, that no such amendment may (i)
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reduce in any manner the amount of or delay the timing of, payments received on
Loans which are required to be distributed on any Security without the consent
of the holder of such Security, or (ii) reduce the aforesaid percentage of
Securities of any class the holders of which are required to consent to any such
amendment without the consent of the holders of all Securities of such class
covered by such Agreement then outstanding. If a REMIC election is made with
respect to a Trust Fund, the Trustee will not be entitled to consent to an
amendment to the related Agreement without having first received an opinion of
counsel to the effect that such amendment will not cause such Trust Fund to fail
to qualify as a REMIC.
Termination; Optional Termination
Pooling and Servicing Agreement; Trust Agreement. Unless otherwise
specified in the related Agreement, the obligations created by each Pooling and
Servicing Agreement and Trust Agreement for each Series of Securities will
terminate upon the payment to the related Securityholders of all amounts held in
the Security Account or by the Master Servicer and required to be paid to them
pursuant to such Agreement following the later of (i) the final payment of or
other liquidation of the last of the Trust Fund Assets subject thereto or the
disposition of all property acquired upon foreclosure of any such Trust Fund
Assets remaining in the Trust Fund and (ii) the purchase by the Master Servicer
or, if REMIC treatment has been elected and if specified in the related
Prospectus Supplement, by the holder of the residual interest in the REMIC (see
"Federal Income Tax Consequences" below), from the related Trust Fund of all of
the remaining Trust Fund Assets and all property acquired in respect of such
Trust Fund Assets.
Unless otherwise specified by the related Prospectus Supplement, any such
purchase of Trust Fund Assets and property acquired in respect of Trust Fund
Assets evidenced by a Series of Securities will be made at the option of the
Master Servicer, such other person or, if applicable, such holder of the REMIC
residual interest, at a price specified in the related Prospectus Supplement.
The exercise of such right will effect early retirement of the Securities of
that Series, but the right of the Master Servicer, such other person or, if
applicable, such holder of the REMIC residual interest, to so purchase is
subject to the principal balance of the related Trust Fund Assets being less
than the percentage specified in the related Prospectus Supplement of the
aggregate principal balance of the Trust Fund Assets at the Cut-off Date for the
Series. The foregoing is subject to the provision that if a REMIC election is
made with respect to a Trust Fund, any repurchase pursuant to clause (ii) above
will be made only in connection with a "qualified liquidation" of the REMIC
within the meaning of Section 860F(g)(4) of the Code.
Indenture. The Indenture will be discharged with respect to a Series of
Notes (except with respect to certain continuing rights specified in the
Indenture) upon the delivery to the Trustee for cancellation of all the Notes of
such Series or, with certain limitations, upon deposit with the Trustee of funds
sufficient for the payment in full of all of the Notes of such Series.
In addition to such discharge with certain limitations, the Indenture will
provide that, if so specified with respect to the Notes of any Series, the
related Trust Fund will be discharged from any and all obligations in respect of
the Notes of such Series (except for certain obligations relating to temporary
Notes and exchange of Notes, to register the transfer of or exchange Notes of
such Series, to replace stolen, lost or mutilated Notes of such Series, to
maintain paying agencies and to hold monies for payment in trust) upon the
deposit with the Trustee, in trust, of money and/or direct obligations of or
obligations guaranteed by the United States of America which through the payment
of interest and principal in respect thereof in accordance with their terms will
provide money in an amount sufficient to pay the principal of and each
installment of interest on the Notes of such Series on the last scheduled
Distribution Date for such Notes and any installment of interest on such Notes
in accordance with the terms of the Indenture and the Notes of such Series. In
the event of any such defeasance and discharge of Notes of such Series, holders
of Notes of such Series would be able to look only to such money and/or direct
obligations for payment of principal and interest, if any, on their Notes until
maturity.
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The Trustee
The Trustee under each Agreement will be named in the applicable Prospectus
Supplement. The commercial bank or trust company serving as Trustee may have
normal banking relationships with the Depositor, the Master Servicer and any of
their respective affiliates.
CERTAIN LEGAL ASPECTS OF THE LOANS
The following discussion contains summaries, which are general in nature,
of certain legal matters relating to the Loans. Because such legal aspects are
governed primarily by applicable state law (which laws may differ
substantially), the descriptions do not, except as expressly provided below,
reflect the laws of any particular state, nor to encompass the laws of all
states in which the security for the Loans is situated. The descriptions are
qualified in their entirety by reference to the applicable federal laws and the
appropriate laws of the states in which Loans may be originated.
General
The Loans for a Series may be secured by deeds of trust, mortgages,
security deeds or deeds to secure debt, depending upon the prevailing practice
in the state in which the property subject to the loan is located. Deeds of
trust are used almost exclusively in California instead of mortgages. A mortgage
creates a lien upon the real property encumbered by the mortgage, which lien is
generally not prior to the lien for real estate taxes and assessments. Priority
between mortgages depends on their terms and generally on the order of recording
with a state or county office. There are two parties to a mortgage, the
mortgagor, who is the borrower and owner of the mortgaged property, and the
mortgagee, who is the lender. Under the mortgage instrument, the mortgagor
delivers to the mortgagee a note or bond and the mortgage. Although a deed of
trust is similar to a mortgage, a deed of trust formally has three parties, the
borrower-property owner called the trustor (similar to a mortgagor), a lender
(similar to a mortgagee) called the beneficiary, 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. A security deed and a deed to
secure debt are special types of deeds which indicate on their face that they
are granted to secure an underlying debt. By executing a security deed or deed
to secure debt, the grantor conveys title to, as opposed to merely creating a
lien upon, the subject property to the grantee until such time as the underlying
debt is repaid. The trustee's authority under a deed of trust, the mortgagee's
authority under a mortgage and the grantee's authority under a security deed or
deed to secure debt are governed by law and, with respect to some deeds of
trust, the directions of the beneficiary.
Cooperatives. Certain of Loans may be Cooperative Loans. The Cooperative
owns all the real property that comprises the project, including the land,
separate dwelling units and all common areas. The Cooperative is directly
responsible for project management and, in most cases, payment of real estate
taxes and hazard and liability insurance. If there is a blanket mortgage on the
Cooperative and/or underlying land, as is generally the case, the Cooperative,
as project mortgagor, is also responsible for meeting these mortgage
obligations. A blanket mortgage is ordinarily incurred by the Cooperative in
connection with the construction or purchase of the Cooperative's apartment
building. The interest of the occupant under proprietary leases or occupancy
agreements to which that Cooperative is a party are generally subordinate to the
interest of the holder of the blanket mortgage in that building. If the
Cooperative is unable to meet the payment obligations arising under its blanket
mortgage, the mortgagee holding the blanket mortgage could foreclose on that
mortgage and terminate all subordinate proprietary leases and occupancy
agreements. In addition, the blanket mortgage on a Cooperative may provide
financing in the form of a mortgage that does not fully amortize with a
significant portion of principal being due in one lump sum at final maturity.
The inability of the Cooperative to refinance this mortgage and its consequent
inability to make such final payment could lead to foreclosure by the mortgagee
providing the financing. A foreclosure in either event by the holder of the
blanket mortgage could eliminate or significantly diminish the value of any
collateral held by the lender who financed the purchase by an individual
tenant-stockholder of Cooperative shares or, in the case of a Trust Fund
including Cooperative Loans, the collateral securing the Cooperative Loans.
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The Cooperative is owned by tenant-stockholders who, through ownership of stock,
shares or membership certificates in the corporation, receive proprietary leases
or occupancy agreements which confer exclusive rights to occupy specific units.
Generally, a tenant-stockholder of a Cooperative must make a monthly payment to
the Cooperative representing such tenant-stockholder's pro rata share of the
Cooperative's payments for its blanket mortgage, real property taxes,
maintenance expenses and other capital or ordinary expenses. An ownership
interest in a Cooperative and accompanying rights is financed through a
Cooperative share loan evidenced by a promissory note and secured by a security
interest in the occupancy agreement or proprietary lease and in the related
Cooperative shares. The lender takes possession of the share certificate and a
counterpart of the proprietary lease or occupancy agreement, and a financing
statement covering the proprietary lease or occupancy agreement and the
Cooperative shares is filed in the appropriate state and local offices to
perfect the lender's interest in its collateral. Subject to the limitations
discussed below, upon default of the tenant-stockholder, the lender may sue for
judgment on the promissory note, dispose of the collateral at a public or
private sale or otherwise proceed against the collateral or tenant-stockholder
as an individual as provided in the security agreement covering the assignment
of the proprietary lease or occupancy agreement and the pledge of Cooperative
shares.
Foreclosure/Repossession
Deed of Trust. Foreclosure of a deed of trust is generally accomplished by
a non-judicial sale under a specific provision in the deed of trust which
authorizes the trustee to sell the property at public auction upon any default
by the borrower under the terms of the note or deed of trust. In certain states,
such foreclosure also may be accomplished by judicial action in the manner
provided for foreclosure of mortgages. In addition to any notice requirements
contained in a deed of trust, in some states (such as California), the trustee
must record a notice of default and send a copy to the borrower-trustor, to any
person who has recorded a request for a copy of any notice of default and notice
of sale, to any successor in interest to the borrower-trustor, to the
beneficiary of any junior deed of trust and to certain other persons. In some
states (including California), the borrower-trustor has the right to reinstate
the loan at any time following default until shortly before the trustee's sale.
In general, the borrower, or any other person having a junior encumbrance on the
real estate, may, during a statutorily prescribed reinstatement period, cure a
monetary default by paying the entire amount in arrears plus other designated
costs and expenses incurred in enforcing the obligation. Generally, state law
controls the amount of foreclosure expenses and costs, including attorney's
fees, which may be recovered by a lender. After the reinstatement period has
expired without the default having been cured, the borrower or junior lienholder
no longer has the right to reinstate the loan and must pay the loan in full to
prevent the scheduled foreclosure sale. If the deed of trust is not reinstated
within any applicable cure period, a notice of sale must be posted in a public
place and, in most states (including California), published for a specific
period of time in one or more newspapers. In addition, some state laws require
that a copy of the notice of sale be posted on the property and sent to all
parties having an interest of record in the real property. In California, the
entire process from recording a notice of default to a non-judicial sale usually
takes four to five months.
Mortgages. Foreclosure of a mortgage is generally accomplished by judicial
action. The action is initiated by the service of legal pleadings upon all
parties having an interest in the real property. Delays in completion of the
foreclosure may occasionally result from difficulties in locating necessary
parties. Judicial foreclosure proceedings are often not contested by any of the
parties. When the mortgagee's right to foreclosure is contested, the legal
proceedings necessary to resolve the issue can be time consuming. After the
completion of a judicial foreclosure proceeding, the court generally issues a
judgment of foreclosure and appoints a referee or other court officer to conduct
the sale of the property. In some states, mortgages may also be foreclosed by
advertisement, pursuant to a power of sale provided in the mortgage.
Although foreclosure sales are typically public sales, frequently no third
party purchaser bids in excess of the lender's lien because of the difficulty of
determining the exact status of title to the property, the possible
deterioration of the property during the foreclosure proceedings and a
requirement that the purchaser pay for the property in cash or by cashier's
check. Thus the foreclosing lender often purchases the property from the trustee
or referee for an amount equal to the principal amount outstanding under the
loan, accrued and unpaid interest and the expenses of foreclosure in which event
the mortgagor's debt will be extinguished or the lender may purchase for a
lesser amount in order to preserve its right against a borrower to seek a
deficiency judgment in states where
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such judgment is available. Thereafter, subject to the right of the borrower in
some states to remain in possession during the redemption period, the lender
will assume the burden of ownership, including obtaining hazard insurance and
making such repairs at its own expense as are necessary to render the property
suitable for sale. The lender will commonly 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. Any loss may
be reduced by the receipt of any mortgage guaranty insurance proceeds.
Courts have imposed general equitable principles upon foreclosure, which
are generally designed to mitigate the legal consequences to the borrower of the
borrower's defaults under the loan documents. Some courts have been faced with
the issue of whether federal or state constitutional provisions reflecting due
process concerns for fair notice require that borrowers under deeds of trust
receive notice longer than that prescribed by statute. For the mostpart, these
cases have upheld the notice provisions as being reasonable or have found that
the sale by a trustee under a deed of trust does not involve sufficient state
action to afford constitutional protection to the borrower.
When the beneficiary under a junior mortgage or deed of trust cures the
default and reinstates or redeems by paying the full amount of the senior
mortgage or deed of trust, the amount paid by the beneficiary so to cure or
redeem becomes a part of the indebtedness secured by the junior mortgage or deed
of trust. See "Junior Mortgages; Rights of Senior Mortgagees" below.
Cooperative Loans. The Cooperative shares owned by the tenant-stockholder
and pledged to the lender are, in almost all cases, subject to restrictions on
transfer as set forth in the Cooperative's certificate of incorporation and
bylaws, as well as the proprietary lease or occupancy agreement, and may be
cancelled by the Cooperative for failure by the tenant-stockholder to pay rent
or other obligations or charges owed by such tenant-stockholder, including
mechanics' liens against the cooperative apartment building incurred by such
tenant-stockholder. The proprietary lease or occupancy agreement generally
permits the Cooperative to terminate such lease or agreement in the event an
obligor fails to make payments or defaults in the performance of covenants
required thereunder. Typically, the lender and the Cooperative enter into a
recognition agreement which establishes the rights and obligations of both
parties in the event of a default by the tenant-stockholder on its obligations
under the proprietary lease or occupancy agreement. A default by the
tenant-stockholder under the proprietary lease or occupancy agreement will
usually constitute a default under the security agreement between the lender and
the tenant-stockholder.
The recognition agreement generally provides that, in the event that the
tenant-stockholder has defaulted under the proprietary lease or occupancy
agreement, the Cooperative will take no action to terminate such lease or
agreement until the lender has been provided with an opportunity to cure the
default. The recognition agreement typically provides that if the proprietary
lease or occupancy agreement is terminated, the Cooperative will recognize the
lender's lien against proceeds form the sale of the Cooperative apartment,
subject, however, to the Cooperative's right to sums due under such proprietary
lease or occupancy agreement. The total amount owed to the Cooperative by the
tenant-stockholder, which the lender generally cannot restrict and does not
monitor, could reduce the value of the collateral below the outstanding
principal balance of the Cooperative Loan and accrued and unpaid interest
thereon.
Recognition agreements also provide that in the event of a foreclosure on a
Cooperative Loan, the lender must obtain the approval or consent of the
Cooperative as required by the proprietary lease before transferring the
Cooperative shares or assigning the proprietary lease. Generally, the lender is
not limited in any rights it may have to dispossess the tenant-stockholders.
In some states, foreclosure on the Cooperative shares is accomplished by a
sale in accordance with the provisions of Article 9 of the Uniform Commercial
Code (the "UCC") and the security agreement relating to those shares. Article 9
of the UCC requires that a sale be conducted in a "commercially reasonable"
manner. Whether a foreclosure sale has been conducted in a "commercially
reasonable" manner will depend on the facts in each case. In determining
commercial reasonableness, a court will look to the notice given the debtor and
the method, manner,
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time, place and terms of the foreclosure. Generally, a sale conducted according
to the usual practice of banks selling similar collateral will be considered
reasonably conducted.
Article 9 of the UCC provides that the proceeds of the sale will be applied
first to pay the costs and expenses of the sale and then to satisfy the
indebtedness secured by the lender's security interest. The recognition
agreement, however, generally provides that the lender's right to reimbursement
is subject to the right of the Cooperative to receive sums due under the
proprietary lease or occupancy agreement. If there are proceeds remaining, the
lender must account to the tenant-stockholder for the surplus. Conversely, if a
portion of the indebtedness remains unpaid, the tenant-stockholder is generally
responsible for the deficiency. See "Anti-Deficiency Legislation and Other
Limitations on Lenders" below.
In the case of foreclosure on a building which was converted from a rental
building to a building owned by a Cooperative under a non-eviction plan, some
states require that a purchaser at a foreclosure sale take the property subject
to rent control and rent stabilization laws which apply to certain tenants who
elected to remain in the building but who did not purchase shares in the
Cooperative when the building was so converted.
Environmental Risks
Real property pledged as security to a lender may be subject to unforeseen
environmental risks. Under the laws of certain states, contamination of a
property may give risks to a lien on the property to assure the payment of the
costs of clean-up. In several states such a lien has priority over the lien of
an existing mortgage against such property. In addition, under the federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the United States Environmental Protection Agency ("EPA") may impose
a lien on property where EPA has incurred clean-up costs. However, a CERCLA lien
is subordinate to pre-existing, perfected security interests.
Under the laws of some states, and under CERCLA, it is conceivable that a
secured lender may be held liable as an "owner" or "operator" for the costs of
addressing releases or threatened releases of hazardous substances at a
Property, even though the environmental damage or threat was caused by a prior
or current owner or operator. CERCLA imposes liability for such costs on any and
all "responsible parties," including owners or operators. However, CERCLA
excludes from the definition of "owner or operator" a secured creditor who holds
indicia of ownership primarily to protect its security interest (the "secured
creditor exclusion") but without "participating in the management" of the
Property. Thus, if a lender's activities begin to encroach on the actual
management of a contaminated facility or property, the lender may incur
liability as an "owner or operator" under CERCLA. Similarly, if a lender
forecloses and takes title to a contaminated facility or property, the lender
may incur CERCLA liability in various circumstances, including, but not limited
to, when it holds the facility or property as an investment (including leasing
the facility or property to third party), or fails to market the property in a
timely fashion.
A decision in May 1990 of the United States Court of Appeals for the
Eleventh Circuit in United States v. Fleet Factors Corp. very narrowly construed
CERCLA's secured creditor exclusion. The Court's opinion suggested that a lender
need not have involved itself in the day-to-day operations of the facility, or
participated in decisions related to hazardous waste to be held liable under
CERCLA; rather, liability could attach to a lender if its involvement with the
management of the facility is broad enough to support the inference that the
lender had the capacity to influence the borrower's hazardous waste management
practices. The court added that a lender's capacity to influence such decisions
could be inferred from the extent of its involvement in the facility's financial
management. In January 1991, the Supreme Court denied certiorari in the Fleet
Factors case, thereby letting the Court of Appeals decision stand. In response
to the Fleet Factors decision, on April 29, 1992, EPA issued regulations
interpreting and delineating CERCLA's secured creditor exclusion and the range
of permissible actions that may be undertaken by a holder of a security interest
in a contaminated property without exceeding the bounds of the secured creditor
exclusion. However, on February 4, 1994, the United States Court of Appeals for
the District of Columbia Circuit issued a decision in Kelley v. EPA invalidating
the EPA regulations. Further, in January 1995, the Supreme Court denied
certiorari in the Kelley case, thereby letting the Court of Appeals decision
stand. In September 1995, EPA and the U.S. Department of Justice issued a
guidance document stating that the
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two agencies, respectively, would apply the 1992 regulations in prosecuting
enforcement and cost recovery actions, and in otherwise addressing lender
liability under CERCLA. However, this guidance document is not binding on any
parties other than the federal government, and need not be applied by the courts
in adjudicating CERCLA cost recovery or contribution actions brought by states,
municipalities or private parties.
As a result of the Kelley decision, the state of the law with respect to
the secured creditor exclusion remains unclear. Proposed amendments to CERCLA
that would clarify the range of actions a secured creditor may take without
losing the benefit of the exclusion have been introduced in Congress, but have
not been enacted. However, even if CERCLA were to be amended, such amendments
would not affect the potential for liability under other federal or state laws
which impose liability on "owners or operators" but do not provide any
protection for secured creditors.
If a lender is or becomes liable, it can bring an action for contribution
against any other "responsible parties," including a previous owner or operator,
who created the environmental hazard, but those persons or entities may be
bankrupt or otherwise judgment proof. The costs associated with environmental
cleanup may be substantial. It is conceivable that such costs arising from the
circumstances set forth above would result in a loss to Certificateholders.
CERCLA does not apply to petroleum products, and the secured creditor
exclusion does not govern liability for cleanup costs under federal laws other
than CERCLA, in particular Subtitle I of the federal Resource Conservation and
Recovery Act ("RCRA"), which regulates underground petroleum storage tanks
(except heating oil tanks). The EPA has adopted a lender liability rule for
underground storage tanks under Subtitle I of RCRA. Under such rule, a holder of
a security interest in an underground storage tank or real property containing
an underground storage tank is not considered an operator of the underground
storage tank as long as petroleum is not added to, stored in or dispensed from
the tank. It should be noted, however, that liability for cleanup of petroleum
contamination may be governed by state law, which may not provide for any
specific protection for secured creditors.
Except as otherwise specified in the related Prospectus Supplement, at the
time the Loans were originated, no environmental assessment or a very limited
environmental assessment of the Properties was conducted.
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 are given a statutory
period in which to redeem the property from the foreclosure sale. In certain
other states (including California), this right of redemption applies only to
sales following judicial foreclosure, and not to sales pursuant to a
non-judicial power of sale. In most states where the right of redemption is
available, statutory redemption may occur upon payment of the foreclosure
purchase price, accrued interest and taxes. In 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 exercise of a right of redemption
would defeat the title of any purchaser from the lender subsequent to
foreclosure or sale under a deed of trust. Consequently, the practical effect of
the redemption right is to force the lender to retain the property and pay the
expenses of ownership until the redemption period has run. In some states, there
is no right to redeem property after a trustee's sale under a deed of trust.
Anti-Deficiency Legislation; Bankruptcy Laws; Tax Liens
Certain states have imposed statutory restrictions that 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 borrowers financing the
purchase of their residence or following sale under a deed of trust or certain
other foreclosure proceedings. A deficiency judgment is a personal judgment
against the borrower equal in most cases to the difference between the amount
due to the lender and the fair market value of the real property at the time of
the foreclosure sale. As a result of these prohibitions, it is
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anticipated that in most instances the Master Servicer will utilize the
non-judicial foreclosure remedy and will not seek deficiency judgments against
defaulting borrowers.
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, when applicable, is that lenders
will usually proceed first against the security rather than bringing a personal
action against the borrower. In some states, exceptions to the anti-deficiency
statutes are provided for in certain instances where the value of the lender's
security has been impaired by acts or omissions of the borrower, for example, in
the event of waste of the property. Finally, other statutory provisions limit
any deficiency judgment against the former borrower following a foreclosure sale
to the excess of the outstanding debt over the fair market value of the property
at the time of the public sale. The purpose of these statutes is generally to
prevent a beneficiary or a mortgagee from obtaining a large deficiency judgment
against the former borrower as a result of low or no bids at the foreclosure
sale.
Generally, Article 9 of the UCC governs foreclosure on Cooperative shares
and the related proprietary lease or occupancy agreement. Some courts have
interpreted section 9-504 of the UCC to prohibit a deficiency award unless the
creditor establishes that the sale of the collateral (which, in the case of a
Cooperative Loan, would be the shares of the Cooperative and the related
proprietary lease or occupancy agreement) was conducted in a commercially
reasonable manner.
In addition to anti-deficiency and related legislation, 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 security. For
example, in a proceeding under the federal Bankruptcy Code, a lender may not
foreclose on a mortgaged property without the permission of the bankruptcy
court. The rehabilitation plan proposed by the debtor may provide, if the
mortgaged property is not the debtor's principal residence and the court
determines that the value of the mortgaged property is less than the principal
balance of the mortgage loan, for the reduction of the secured indebtedness to
the value of the mortgaged property as of the date of the commencement of the
bankruptcy, rendering the lender a general unsecured creditor for the
difference, and also may reduce the monthly payments due under such mortgage
loan, change the rate of interest and alter the mortgage loan repayment
schedule. The effect of any such proceedings under the federal Bankruptcy Code,
including but not limited to any automatic stay, could result in delays in
receiving payments on the Loans underlying a Series of Securities and possible
reductions in the aggregate amount of such payments.
The federal tax laws provide priority to certain tax liens over the lien of
a mortgage or secured party.
Due-on-Sale Clauses
Unless otherwise specified in the related Prospectus Supplement, each
conventional Loan will contain a due-on-sale clause which will generally provide
that if the mortgagor or obligor sells, transfers or conveys the Property, the
loan or contract may be accelerated by the mortgagee or secured party. Court
decisions and legislative actions have placed substantial restriction on the
right of lenders to enforce such clauses in many states. For instance, the
California Supreme Court in August 1978 held that due-on-sale clauses were
generally unenforceable. However, the Garn-St Germain Depository Institutions
Act of 1982 (the "Garn-St Germain Act"), subject to certain exceptions, preempts
state constitutional, statutory and case law prohibiting the enforcement of
due-on-sale clauses. As a result, due-on-sale clauses have become generally
enforceable except in those states whose legislatures exercised their authority
to regulate the enforceability of such clauses with respect to mortgage loans
that were (i) originated or assumed during the "window period" under the Garn-St
Germain Act which ended in all cases not later than October 15, 1982, and (ii)
originated by lenders other than national banks, federal savings institutions
and federal credit unions. FHLMC has taken the position in its published
mortgage servicing standards that, out of a total of eleven "window period
states," five states (Arizona, Michigan, Minnesota, New Mexico and Utah) have
enacted statutes
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extending, on various terms and for varying periods, the prohibition on
enforcement of due-on-sale clauses with respect to certain categories of window
period loans. Also, 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.
As to loans secured by an owner-occupied residence, the Garn-St Germain Act
sets forth nine specific instances in which a mortgagee covered by the Act may
not exercise its rights under a due-on-sale clause, notwithstanding the fact
that a transfer of the property may have occurred. The inability to enforce a
due-on-sale clause may result in transfer of the related Property to an
uncreditworthy person, which could increase the likelihood of default or may
result in a mortgage bearing an interest rate below the current market rate
being assumed by a new home buyer, which may affect the average life of the
Loans and the number of Loans which may extend to maturity.
In addition, under federal bankruptcy law, due-on-sale clauses may not be
enforceable in bankruptcy proceedings and may, under certain circumstances, be
eliminated in any modified mortgage resulting from such bankruptcy proceeding.
Enforceability of Prepayment and Late Payment Fees
Forms of notes, mortgages and deeds of trust used by lenders may contain
provisions obligating the borrower to pay a late charge if payments are not
timely made, and in some circumstances may provide for prepayment fees or
penalties if the obligation is paid prior to maturity. In certain states, there
are or may be specific limitations upon the late charges which a lender may
collect from a borrower for delinquent payments. Certain states also limit the
amounts that a lender may collect from a borrower as an additional charge if the
loan is prepaid. Under certain state laws, prepayment charges may not be imposed
after a certain period of time following the origination of mortgage loans with
respect to prepayments on loans secured by liens encumbering owner-occupied
residential properties. Since many of the Properties will be owner-occupied, it
is anticipated that prepayment charges may not be imposed with respect to many
of the Loans. The absence of such a restraint on prepayment, particularly with
respect to fixed rate Loans having higher Loan Rates, may increase the
likelihood of refinancing or other early retirement of such loans or contracts.
Late charges and prepayment fees are typically retained by servicers as
additional servicing compensation.
Applicability of Usury Laws
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, enacted in March 1980 ("Title V") provides that state usury
limitations shall not apply to certain types of residential first mortgage loans
originated by certain lenders after March 31, 1980. The Office of Thrift
Supervision, as successor to the Federal Home Loan Bank Board, is authorized to
issue rules and regulations and to publish interpretations governing
implementation of Title V. The statute authorized the states to reimpose
interest rate limits by adopting, before April 1, 1983, a law or constitutional
provision which expressly rejects an application of the federal law. Fifteen
states adopted such a law prior to the April 1, 1983 deadline. 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 mortgage loans covered by
Title V. Certain states have taken action to reimpose interest rate limits
and/or to limit discount points or other charges.
The Home Improvement Contracts
General. The Home Improvement Contracts, other than those Home Improvement
Contracts that are unsecured or secured by mortgages on real estate (such Home
Improvement Contracts are hereinafter referred to in this section as
"contracts") generally are "chattel paper" or constitute "purchase money
security interests" each as defined in the UCC. Pursuant to the UCC, the sale of
chattel paper is treated in a manner similar to perfection of a security
interest in chattel paper. Under the related Agreement, the Depositor will
transfer physical possession of the contracts to the Trustee or a designated
custodian or may retain possession of the contracts as custodian for the
Trustee. In addition, the Depositor will make an appropriate filing of a UCC-1
financing statement in the
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appropriate states to, among other things, give notice of the Trust Fund's
ownership of the contracts. Unless otherwise specified in the related Prospectus
Supplement, the contracts will not be stamped or otherwise marked to reflect
their assignment from the Depositor to the Trustee. Therefore, if through
negligence, fraud or otherwise, a subsequent purchaser were able to take
physical possession of the contracts without notice of such assignment, the
Trust Fund's interest in the contracts could be defeated.
Security Interests in Home Improvements. The contracts that are secured by
the Home Improvements financed thereby grant to the originator of such contracts
a purchase money security interest in such Home Improvements to secure all or
part of the purchase price of such Home Improvements and related services. A
financing statement generally is not required to be filed to perfect a purchase
money security interest in consumer goods. Such purchase money security
interests are assignable. In general, a purchase money security interest grants
to the holder a security interest that has priority over a conflicting security
interest in the same collateral and the proceeds of such collateral. However, to
the extent that the collateral subject to a purchase money security interest
becomes a fixture, in order for the related purchase money security interest to
take priority over a conflicting interest in the fixture, the holder's interest
in such Home Improvement must generally be perfected by a timely fixture filing.
In general, a security interest does not exist under the UCC in ordinary
building material incorporated into an improvement on land. Home Improvement
Contracts that finance lumber, bricks, other types of ordinary building material
or other goods that are deemed to lose such characterization upon incorporation
of such materials into the related property, will not be secured by a purchase
money security interest in the Home Improvement being financed.
Enforcement of Security Interest in Home Improvements. So long as the Home
Improvement has not become subject to the real estate law, a creditor can
repossess a Home Improvement securing a contract by voluntary surrender, by
"self-help" repossession that is "peaceful" (i.e., without breach of the peace)
or, in the absence of voluntary surrender and the ability to repossess without
breach of the peace, by judicial process. The holder of a contract must give the
debtor a number of days' notice, which varies from 10 to 30 days depending on
the state, prior to commencement of any repossession. The UCC and consumer
protection laws in most states place restrictions on repossession sales,
including requiring prior notice to the debtor and commercial reasonableness in
effecting such a sale. The law in most states also requires that the debtor be
given notice of any sale prior to resale of the unit that the debtor may redeem
at or before such resale.
Under the laws applicable in most states, a creditor is entitled to obtain
a deficiency judgment from a debtor for any deficiency on repossession and
resale of the property securing the debtor's loan. However, some states impose
prohibitions or limitations on deficiency judgments, and in many cases the
defaulting borrower would have no assets with which to pay a judgment.
Certain other statutory provisions, including federal and state bankruptcy
and insolvency laws and general equitable principles, may limit or delay the
ability of a lender to repossess and resell collateral or enforce a deficiency
judgment.
Consumer Protection Laws. The so-called "Holder-in-Due Course" rule of the
Federal Trade Commission is intended to defeat the ability of the transferor of
a consumer credit contract which is the seller of goods which gave rise to the
transaction (and certain related lenders and assignees) to transfer such
contract free of notice of claims by the debtor thereunder. The effect of this
rule is to subject the assignee of such a contract to all claims and defenses
which the debtor could assert against the seller of goods. Liability under this
rule is limited to amounts paid under a contract; however, the obligor also may
be able to assert the rule to set off remaining amounts due as a defense against
a claim brought by the Trustee against such obligor. Numerous other federal and
state consumer protection laws impose requirements applicable to the origination
and lending pursuant to the contracts, including the Truth in Lending Act, the
Federal Trade Commission Act, the Fair Credit Billing Act, the Fair Credit
Reporting Act, the Equal Credit Opportunity Act, the Fair Debt Collection
Practices Act and the Uniform Consumer Credit Code. In the case of some of these
laws, the failure to comply with their provisions may affect the enforceability
of the related contract.
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Applicability of Usury Laws. Title V of the Depository Institutions
Deregulation and Monetary Control Act of 1980, as amended ("Title V"), provides
that, subject to the following conditions, state usury limitations shall not
apply to any contract which is secured by a first lien on certain kinds of
consumer goods. The contracts would be covered if they satisfy certain
conditions governing, among other things, the terms of any prepayments, late
charges and deferral fees and requiring a 30-day notice period prior to
instituting any action leading to repossession of the related unit.
Title V authorized any state to reimpose limitations on interest rates and
finance charges by adopting before April 1, 1983 a law or constitutional
provision which expressly rejects application of the federal law. Fifteen states
adopted such a law prior to the April 1, 1983 deadline. In addition, even where
Title V was not so rejected, any state is authorized by the law to adopt a
provision limiting discount points or other charges on loans covered by Title V.
Installment Contracts
The Loans may also consist of installment contracts. Under an installment
contract ("Installment Contract") the seller (hereinafter referred to in this
section as the "lender") retains legal title to the property and enters into an
agreement with the purchaser hereinafter referred to in this section as the
"borrower") for the payment of the purchase price, plus interest, over the term
of such contract. Only after full performance by the borrower of the contract is
the lender obligated to convey title to the property to the purchaser. As with
mortgage or deed of trust financing, during the effective period of the
Installment Contract, the borrower is generally responsible for maintaining the
property in good condition and for paying real estate taxes, assessments and
hazard insurance premiums associated with the property.
The method of enforcing the rights of the lender under an Installment
Contract varies on a state-by-state basis depending upon the extent to which
state courts are willing, or able pursuant to state statute, to enforce the
contract strictly according to its terms. The terms of Installment Contracts
generally provide that upon a default by the borrower, the borrower loses his or
her right to occupy the property, the entire indebtedness is accelerated, and
the buyer's equitable interest in the property is forfeited. The lender in such
a situation does not have to foreclose in order to obtain title to the property,
although in some cases a quiet title action is in order if the borrower has
filed the Installment Contract in local land records and an ejectment action may
be necessary to recover possession. In a few states, particularly in cases of
borrower default during the early years of an Installment Contract, the courts
will permit ejectment of the buyer and a forfeiture of his or her interest in
the property. However, most state legislatures have enacted provisions by
analogy to mortgage law protecting borrowers under Installment Contracts from
the harsh consequences of forfeiture. Under such statutes, a judicial or
nonjudicial foreclosure may be required, the lender may be required to give
notice of default and the borrower may be granted some grace period during which
the Installment Contract may be reinstated upon full payment of the default
amount and the borrower may have a post-foreclosure statutory redemption right.
In other states, courts in equity may permit a borrower with significant
investment in the property under an Installment Contract for the sale of real
estate to share in the proceeds of sale of the property after the indebtedness
is repaid or may otherwise refuse to enforce the forfeiture clause.
Nevertheless, generally speaking, the lender's procedures for obtaining
possession and clear title under an Installment Contract in a given state are
simpler and less time-consuming and costly than are the procedures for
foreclosing and obtaining clear title to a property subject to one or more
liens.
Soldiers' and Sailors' Civil Relief Act
Generally, under the terms of the Soldiers' and Sailors' Civil Relief Act
of 1940, as amended (the "Relief Act"), a borrower who enters military service
after the origination of such borrower's Loan (including a borrower who is a
member of the National Guard or is in reserve status at the time of the
origination of the Loan and is later called to active duty) may not be charged
interest above an annual rate of 6% during the period of such borrower's active
duty status, unless a court orders otherwise upon application of the lender. It
is possible that such interest rate limitation could have an effect, for an
indeterminate period of time, on the ability of the Master Servicer to collect
full amounts of interest on certain of the Loans. Unless otherwise provided in
the related Prospectus Supplement, any shortfall in interest collections
resulting from the application of the Relief Act could result in losses
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to Securityholders. The Relief Act also imposes limitations which would impair
the ability of the Master Servicer to foreclose on an affected Loan during the
borrower's period of active duty status. Moreover, the Relief Act permits the
extension of a Loan's maturity and the re-adjustment of its payment schedule
beyond the completion of military service. Thus, in the event that such a Loan
goes into default, there may be delays and losses occasioned by the inability to
realize upon the Property in a timely fashion.
Junior Mortgages; Rights of Senior Mortgagees
To the extent that the Loans comprising the Trust Fund for a Series are
secured by mortgages which are junior to other mortgages held by other lenders
or institutional investors, the rights of the Trust Fund (and therefore the
Securityholders), as mortgagee under any such junior mortgage, are subordinate
to those of any mortgagee under any senior mortgage. The senior mortgagee has
the right to receive hazard insurance and condemnation proceeds and to cause the
property securing the Loan to be sold upon default of the mortgagor, thereby
extinguishing thejunior mortgagee's lien unless the junior mortgagee asserts its
subordinate interest in the property in foreclosure litigation and, possibly,
satisfies the defaulted senior mortgage. A junior mortgagee may satisfy a
defaulted senior loan in full and, in some states, may cure a default and bring
the senior loan current, in either event adding the amounts expended to the
balance due on the junior loan. In most states, absent a provision in the
mortgage or deed of trust, no notice of default is required to be given to a
junior mortgagee.
The standard form of the mortgage used by most institutional lenders
confers on the mortgagee the right both to receive all proceeds collected under
any hazard insurance policy and all awards made in connection with condemnation
proceedings, and to apply such proceeds and awards to any indebtedness secured
by the mortgage, in such order as the mortgagee may determine. Thus, in the
event improvements on the property are damaged or destroyed by fire or other
casualty, or in the event the property is taken by condemnation, the mortgagee
or beneficiary under senior mortgages will have the prior right to collect any
insurance proceeds payable under a hazard insurance policy and any award of
damages in connection with the condemnation and to apply the same to the
indebtedness secured by the senior mortgages. Proceeds in excess of the amount
of senior mortgage indebtedness, in most cases, may be applied to the
indebtedness of a junior mortgage.
Another provision sometimes found in the form of the mortgage or deed of
trust used by institutional lenders obligates the mortgagor to pay before
delinquency all taxes and assessments on the property and, when due, all
encumbrances, charges and liens on the property which appear prior to the
mortgage or deed of trust, to provide and maintain fire insurance on the
property, to maintain and repair the property and not to commit or permit any
waste thereof, and to appear in and defend any action or proceeding purporting
to affect the property or the rights of the mortgagee under the mortgage. Upon a
failure of the mortgagor to perform any of these obligations, the mortgagee is
given the right under certain mortgages to perform the obligation itself, at its
election, with the mortgagor agreeing to reimburse the mortgagee for any sums
expended by the mortgagee on behalf of the mortgagor. All sums so expended by
the mortgagee become part of the indebtedness secured by the mortgage.
The form of credit line trust deed or mortgage generally used by most
institutional lenders which make Revolving Credit Line Loans typically contains
a "future advance" clause, which provides, in essence, that additional amounts
advanced to or on behalf of the borrower by the beneficiary or lender are to be
secured by the deed of trust or mortgage. Any amounts so advanced after the
Cut-off Date with respect to any Mortgage will not be included in the Trust
Fund. The priority of the lien securing any advance made under the clause may
depend in most states on whether the deed of trust or mortgage is called and
recorded as a credit line deed of trust or mortgage. If the beneficiary or
lender advances additional amounts, the advance is entitled to receive the same
priority as amounts initially advanced under the trust deed or mortgage,
notwithstanding the fact that there may be junior trust deeds or mortgages and
other liens which intervene between the date of recording of the trust deed or
mortgage and the date of the future advance, and notwithstanding that the
beneficiary or lender had actual knowledge of such intervening junior trust
deeds or mortgages and other liens at the time of the advance. In most states,
the trust deed or mortgage lien securing mortgage loans of the type which
includes home equity credit lines applies retroactively to the date of the
original recording of the trust deed or mortgage, provided that the total amount
of advances under the home equity credit line does not exceed the maximum
specified principal amount of the recorded
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trust deed or mortgage, except as to advances made after receipt by the lender
of a written notice of lien from a judgment lien creditor of the trustor.
The Title I Program
General. Certain of the Loans contained in a Trust Fund may be loans
insured under the FHA Title I Credit Insurance program created pursuant to
Sections 1 and 2(a) of the National Housing Act of 1934 (the "Title I Program").
Under the Title I Program, the FHA is authorized and empowered to insure
qualified lending institutions against losses on eligible loans. The Title I
Program operates as a coinsurance program in which the FHA insures up to 90% of
certain losses incurred on an individual insured loan, including the unpaid
principal balance of the loan, but only to the extent of the insurance coverage
available in the lender's FHA insurance coverage reserve account. The owner of
the loan bears the uninsured loss on each loan.
The types of loans which are eligible for insurance by the FHA under the
Title I Program include property improvement loans ("Property Improvement Loans"
or "Title I Loans"). A Property Improvement Loan or Title I Loan means a loan
made to finance actions or items that substantially protect or improve the basic
livability or utility of a property and includes single family improvement
loans.
There are two basic methods of lending or originating such loans which
include a "direct loan" or a "dealer loan". With respect to a direct loan, the
borrower makes application directly to a lender without any assistance from a
dealer, which application may be filled out by the borrower or by a person
acting at the direction of the borrower who does not have a financial interest
in the loan transaction, and the lender may disburse the loan proceeds solely to
the borrower or jointly to the borrower and other parties to the transaction.
With respect to a dealer loan, the dealer, who has a direct or indirect
financial interest in the loan transaction, assists the borrower in preparing
the loan application or otherwise assists the borrower in obtaining the loan
from lender and the lender may distribute proceeds solely to the dealer or the
borrower or jointly to the borrower and the dealer or other parties. With
respect to a dealer Title I Loan, a dealer may include a seller, a contractor or
supplier of goods or services.
Loans insured under the Title I Program are required to have fixed interest
rates and, generally, provide for equal installment payments due weekly,
biweekly, semi-monthly or monthly, except that a loan may be payable quarterly
or semi-annually in order to correspond with the borrower's irregular flow of
income. The first or last payments (or both) may vary in amount but may not
exceed 150% of the regular installment payment, and the first payment may be due
no later than two months from the date of the loan. The note must contain a
provision permitting full or partial prepayment of the loan. The interest rate
may be established by the lender and must be fixed for the term of the loan and
recited in the note. Interest on an insured loan must accrue from the date of
the loan and be calculated according to the actuarial method. The lender must
assure that the note and all other documents evidencing the loan are in
compliance with applicable federal, state and local laws.
Each insured lender is required to use prudent lending standards in
underwriting individual loans and to satisfy the applicable loan underwriting
requirements under the Title I Program prior to its approval of the loan and
disbursement of loan proceeds. Generally, the lender must exercise prudence and
diligence to determine whether the borrower and any co-maker is solvent and an
acceptable credit risk, with a reasonable ability to make payments on the loan
obligation. The lender's credit application and review must determine whether
the borrower's income will be adequate to meet the periodic payments required by
the loan, as well as the borrower's other housing and recurring expenses, which
determination must be made in accordance with the expense-to-income ratios
published by the Secretary of HUD.
Under the Title I Program, the FHA does not review or approve for
qualification for insurance the individual loans insured thereunder at the time
of approval by the lending institution (as is typically the case with other
federal loan programs). If, after a loan has been made and reported for
insurance under the Title I Program, the lender discovers any material
misstatement of fact or that the loan proceeds have been misused by the
borrower, dealer or any other party, it shall promptly report this to the FHA.
In such case, provided that the validity of any lien on the property has not
been impaired, the insurance of the loan under the Title I Program will not be
affected
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unless such material misstatements of fact or misuse of loan proceeds
was caused by (or was knowingly sanctioned by) the lender or its employees.
Requirements for Title I Loans. The maximum principal amount for Title I
Loans must not exceed the actual cost of the project plus any applicable fees
and charges allowed under the Title I Program; provided that such maximum amount
does not exceed $25,000 (or the current applicable amount) for a single family
property improvement loan. Generally, the term of a Title I Loan may not be less
than six months nor greater than 20 years and 32 days. A borrower may obtain
multiple Title I Loans with respect to multiple properties, and a borrower may
obtain more than one Title I Loan with respect to a single property, in each
case as long as the total outstanding balance of all Title I Loans in the same
property does not exceed the maximum loan amount for the type of Title I Loan
thereon having the highest permissible loan amount.
Borrower eligibility for a Title I Loan requires that the borrower have at
least a one-half interest in either fee simple title to the real property, a
lease thereof for a term expiring at least six months after the final maturityof
the Title I Loan or a recorded land installment contract for the purchase of the
real property, and that the borrower have equity in the property being improved
at least equal to the amount of the Title I Loan if such loan amount exceeds
$15,000. Any Title I Loan in excess of $7,500 must be secured by a recorded lien
on the improved property which is evidenced by a mortgage or deed of trust
executed by the borrower and all other owners in fee simple.
The proceeds from a Title I Loan may be used only to finance property
improvements which substantially protect or improve the basic livability or
utility of the property as disclosed in the loan application. The Secretary of
HUD has published a list of items and activities which cannot be financed with
proceeds from any Title I Loan and from time to time the Secretary of HUD may
amend such list of items and activities. With respect to any dealer Title I
Loan, before the lender may disburse funds, the lender must have in its
possession a completion certificate on a HUD approved form, signed by the
borrower and the dealer. With respect to any direct Title I Loan, the lender is
required to obtain, promptly upon completion of the improvements but not later
than six months after disbursement of the loan proceeds with one six month
extension if necessary, a completion certificate, signed by the borrower. The
lender is required to conduct an on-site inspection on any Title I Loan where
the principal obligation is $7,500 or more, and on any direct Title I Loan where
the borrower fails to submit a completion certificate.
FHA Insurance Coverage. Under the Title I Program the FHA establishes an
insurance coverage reserve account for each lender which has been granted a
Title I insurance contract. The amount of insurance coverage in this account is
10% of the amount disbursed, advanced or expended by the lender in originating
or purchasing eligible loans registered with FHA for Title I insurance, with
certain adjustments. The balance in the insurance coverage reserve account is
the maximum amount of insurance claims the FHA is required to pay. Loans to be
insured under the Title I Program will be registered for insurance by the FHA
and the insurance coverage attributable to such loans will be included in the
insurance coverage reserve account for the originating or purchasing lender
following the receipt and acknowledgment by the FHA of a loan report on the
prescribed form pursuant to the Title I regulations. The FHA charges a fee of
0.50% per annum of the net proceeds (the original balance) of any eligible loan
so reported and acknowledged for insurance by the originating lender. The FHA
bills the lender for the insurance premium on each insured loan annually, on
approximately the anniversary date of the loan's origination. If an insured loan
is prepaid during the year, FHA will not refund or abate the insurance premium.
Under the Title I Program the FHA will reduce the insurance coverage
available in the lender's FHA insurance coverage reserve account with respect to
loans insured under the lender's contract of insurance by (i) the amount of the
FHA insurance claims approved for payment relating to such insured loans and
(ii) the amount of insurance coverage attributable to insured loans sold by the
lender, and such insurance coverage may be reduced for any FHA insurance claims
rejected by the FHA. The balance of the lender's FHA insurance coverage reserve
account will be further adjusted as required under Title I or by the FHA, and
the insurance coverage therein may be earmarked with respect to each or any
eligible loans insured thereunder, if a determination is made by the Secretary
of HUD that it is in its interest to do so. Originations and acquisitions of new
eligible loans will continue to increase a lender's insurance coverage reserve
account balance by 10% of the amount disbursed, advanced or
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expended in originating or acquiring such eligible loans registered with the FHA
for insurance under the Title I Program. The Secretary of HUD may transfer
insurance coverage between insurance coverage reserve accounts with earmarking
with respect to a particular insured loan or group of insured loans when a
determination is made that it is in the Secretary's interest to do so.
The lender may transfer (except as collateral in a bona fide transaction)
insured loans and loans reported for insurance only to another qualified lender
under a valid Title I contract of insurance. Unless an insured loan is
transferred with recourse or with a guaranty or repurchase agreement, the FHA,
upon receipt of written notification of the transfer of such loan in accordance
with the Title I regulations, will transfer from the transferor's insurance
coverage reserve account to the transferee's insurance coverage reserve account
an amount, if available, equal to 10% of the actual purchase price or the net
unpaid principal balance of such loan (whichever is less). However, under the
Title I Program not more than $5,000 in insurance coverage shall be transferred
to or from a lender's insurance coverage reserve account during any October 1 to
September 30 period without the prior approval of the Secretary of HUD.
Claims Procedures Under Title I. Under the Title I Program the lender may
accelerate an insured loan following a default on such loan only after the
lender or its agent has contacted the borrower in a face-to-face meeting or by
telephone to discuss the reasons for the default and to seek its cure. If the
borrower does not cure the default or agree to a modification agreement or
repayment plan, the lender will notify the borrower in writing that, unless
within 30 days the default is cured or the borrower enters into a modification
agreement or repayment plan, the loan will be accelerated and that, if the
default persists, the lender will report the default to an appropriate credit
agency. The lender may rescind the acceleration of maturity after full payment
is due and reinstate the loan only if the borrower brings the loan current,
executes a modification agreement or agrees to an acceptable repayment plan.
Following acceleration of maturity upon a secured Title I Loan, the lender
may either (a) proceed against the property under any security instrument, or
(b) make a claim under the lender's contract of insurance. If the lender chooses
to proceed against the property under a security instrument (or if it accepts a
voluntary conveyance or surrender of the property), the lender may file an
insurance claim only with the prior approval of the Secretary of HUD.
When a lender files an insurance claim with the FHA under the Title I
Program, the FHA reviews the claim, the complete loan file and documentation of
the lender's efforts to obtain recourse against any dealer who has agreed
thereto, certification of compliance with applicable state and local laws in
carrying out any foreclosure or repossession, and evidence that the lender has
properly filed proofs of claims, where the borrower is bankrupt or deceased.
Generally, a claim for reimbursement for loss on any Title I Loan must be filed
with the FHA no later than nine months after the date of default of such loan.
Concurrently with filing the insurance claim, the lender shall assign to the
United States of America the lender's entire interest in the loan note (or a
judgment in lieu of the note), in any security held and in any claim filed in
any legal proceedings. If, at the time the note is assigned to the United
States, the Secretary has reason to believe that the note is not valid or
enforceable against the borrower, the FHA may deny the claim and reassign the
note to the lender. If either such defect is discovered after the FHA has paid a
claim, the FHA may require the lender to repurchase the paid claim and to accept
a reassignment of the loan note. If the lender subsequently obtains a valid and
enforceable judgment against the borrower, the lender may resubmit a new
insurance claim with an assignment of the judgment. The FHA may contest any
insurance claim and make a demand for repurchase of the loan at any time up to
two years from the date the claim was certified for payment and may do so
thereafter in the event of fraud or misrepresentation on the part of the lender.
Under the Title I Program the amount of an FHA insurance claim payment,
when made, is equal to the Claimable Amount, up to the amount of insurance
coverage in the lender's insurance coverage reserve account. For the purposes
hereof, the "Claimable Amount" means an amount equal to 90% of the sum of: (a)
the unpaid loan obligation (net unpaid principal and the uncollected interest
earned to the date of default) with adjustments thereto if the lender has
proceeded against property securing such loan; (b) the interest on the unpaid
amount of the loan obligation from the date of default to the date of the
claim's initial submission for payment plus 15 calendar days
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(but not to exceed 9 months from the date of default), calculated at the rate of
7% per annum; (c) the uncollected court costs; (d) the attorney's fees not to
exceed $500; and (e) the expenses for recording the assignment of the security
to the United States.
Consumer Protection Laws
Numerous federal and state consumer protection laws impose substantive
requirements upon mortgage lenders in connection with the origination, servicing
and enforcement of loans secured by Single Family Properties. These laws include
the federal Truth-in-Lending Act and Regulation Z promulgated thereunder, Real
Estate Settlement Procedures Act and Regulation B promulgated thereunder, Equal
Credit Opportunity Act, Fair Credit Billing Act, Fair Credit Reporting Act and
related statutes and regulations. In particular, Regulation Z, requires certain
disclosures to the borrowers regarding the terms of the Loans; the Equal Credit
Opportunity Act and Regulation B promulgated thereunder prohibit discrimination
on the basis of age, race, color, sex, religion, marital status, national
origin, receipt of public assistance or the exercise of any right under the
Consumer Credit Protection Act, in the extension of credit; the Fair Credit
Reporting Act regulates the use and reporting of information relatedto the
borrower's credit experience. Certain provisions of these laws impose specific
statutory liabilities upon lenders who fail to comply therewith. In addition,
violations of such laws may limit the ability of the Sellers to collect all or
part of the principal of or interest on the Loans and could subject the Sellers
and in some cases their assignees to damages and administrative enforcement.
FEDERAL INCOME TAX CONSEQUENCES
General
The following is a summary of the anticipated material federal income tax
consequences of the purchase, ownership, and disposition of the Securities and
is based on advice of Brown & Wood LLP, special counsel to the Depositor. The
summary is based upon the provisions of the Code, the regulations promulgated
thereunder, including, where applicable, proposed regulations, and the judicial
and administrative rulings and decisions now in effect, all of which are subject
to change or possible differing interpretations. The statutory provisions,
regulations, and interpretations on which this interpretation is based are
subject to change, and such a change could apply retroactively.
The summary does not purport to deal with all aspects of federal income
taxation that may affect particular investors in light of their individual
circumstances, nor with certain types of investors subject to special treatment
under the federal income tax laws. This summary focuses primarily upon investors
who will hold Securities as "capital assets" (generally, property held for
investment) within the meaning of Section 1221 of the Code, but much of the
discussion is applicable to other investors as well. Prospective Investors are
advised to consult their own tax advisers concerning the federal, state, local
and any other tax consequences to them of the purchase, ownership and
disposition of the Securities.
The federal income tax consequences to Holders will vary depending on
whether (i) the Securities of a Series are classified as indebtedness; (ii) an
election is made to treat the Trust Fund relating to a particular Series of
Securities as a real estate mortgage investment conduit ("REMIC") under the
Internal Revenue Code of 1986, as amended (the "Code"); (iii) the Securities
represent an ownership interest in some or all of the assets included in the
Trust Fund for a Series; or (iv) an election is made to treat the Trust Fund
relating to a particular Series of Certificates as a partnership. The Prospectus
Supplement for each Series of Securities will specify how the Securities will be
treated for federal income tax purposes and will discuss whether a REMIC
election, if any, will be made with respect to such Series.
Taxation of Debt Securities
Status as Real Property Loans. Except to the extent otherwise provided in
the related Prospectus Supplement, Brown & Wood LLP will have advised the
Depositor that: (i) Securities held by a domestic building
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and loan association will constitute "loans... secured by an interest in real
property" within the meaning of Code section 7701(a)(19)(C)(v); and (ii)
Securities held by a real estate investment trust will constitute "real estate
assets" within the meaning of Code section 856(c)(5)(A) and interest on
Securities will be considered "interest on obligations secured by mortgages on
real property or on interests in real property" within the meaning of Code
section 856(c)(3)(B).
The Small Business Job Protection Act of 1996, as part of the repeal of the
bad debt reserve method for thrift institutions, repealed the application of
Code section 593(d) to any taxable year beginning after December 31, 1995.
Interest and Acquisition Discount. Securities representing regular
interests in a REMIC ("Regular Interest Securities") are generally taxable to
holders in the same manner as evidences of indebtedness issued by the REMIC.
Stated interest on the Regular Interest Securities will be taxable as ordinary
income and taken into account using the accrual method of accounting, regardless
of the Holder's normal accounting method. Interest (other than original issue
discount) on Securities (other than Regular Interest Securities) that are
characterized as indebtedness for federal income tax purposes will be includible
in income by holders thereof in accordance with their usual methods of
accounting. Securities characterized as debt for federal income tax purposes and
Regular Interest Securities will be referred to hereinafter collectively as
"Debt Securities."
Debt Securities that are Compound Interest Securities will, and certain of
the other Debt Securities may, be issued with "original issue discount" ("OID").
The following discussion is based in part on the rules governing OID which are
set forth in Sections 1271-1275 of the Code and the Treasury regulations issued
thereunder on February 2, 1994 (the "OID Regulations"). A Holder should be
aware, however, that the OID Regulations do not adequately address certain
issues relevant to prepayable securities, such as the Debt Securities.
In general, OID, if any, will equal the difference between the stated
redemption price at maturity of a Debt Security and its issue price. A holder of
a Debt Security must include such OID in gross income as ordinary interest
income as it accrues under a method taking into account an economic accrual of
the discount. In general, OID must be included in income in advance of the
receipt of the cash representing that income. The amount of OID on a Debt
Security will be considered to be zero if it is less than a de minimis amount
determined under the Code.
The issue price of a Debt Security is the first price at which a
substantial amount of Debt Securities of that class are sold to the public
(excluding bond houses, brokers, underwriters or wholesalers). If less than a
substantial amount of a particular class of Debt Securities is sold for cash on
or prior to the related Closing Date, the issue price for such class will be
treated as the fair market value of such class on such Closing Date. The issue
price of a Debt Security also includes the amount paid by an initial Debt
Security holder for accrued interest that relates to a period prior to the issue
date of the Debt Security. The stated redemption price at maturity of a Debt
Security includes the original principal amount of the Debt Security, but
generally will not include distributions of interest if such distributions
constitute "qualified stated interest."
Under the OID Regulations, qualified stated interest generally means
interest payable at a single fixed rate or qualified variable rate (as described
below) provided that such interest payments are unconditionally payable at
intervals of one year or less during the entire term of the Debt Security. The
OID Regulations state that interest payments are unconditionally payable only if
a late payment or nonpayment is expected to be penalized or reasonable remedies
exist to compel payment. Certain Debt Securities may provide for default
remedies in the event of late payment or nonpayment of interest. The interest on
such Debt Securities will be unconditionally payable and constitute qualified
stated interest, not OID. However, absent clarification of the OID Regulations,
where Debt Securities do not provide for default remedies, the interest payments
will be included in the Debt Security's stated redemption price at maturity and
taxed as OID. Interest is payable at a single fixed rate only if the rate
appropriately takes into account the length of the interval between payments.
Distributions of interest on Debt Securities with respect to which deferred
interest will accrue, will not constitute qualified stated interest payments, in
which case the stated redemption price at maturity of such Debt Securities
includes all distributions of interest as well as principal thereon. Where the
interval between the issue date and the first Distribution Date on a Debt
Security is either longer or shorter than the interval between subsequent
Distribution Dates, all or part of the interest
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foregone, in the case of the longer interval, and all of the additional
interest, in the case of the shorter interval, will be included in the stated
redemption price at maturity and tested under the de minimis rule described
below. In the case of a Debt Security with a long first period which has non-de
minimis OID, all stated interest in excess of interest payable at the effective
interest rate for the long first period will be included in the stated
redemption price at maturity and the Debt Security will generally have OID.
Holders of Debt Securities should consult their own tax advisors to determine
the issue price and stated redemption price at maturity of a Debt Security.
Under the de minimis rule, OID on a Debt Security will be considered to be
zero if such OID is less than 0.25% of the stated redemption price at maturity
of the Debt Security multiplied by the weighted average maturity of the Debt
Security. For this purpose, the weighted average maturity of the Debt Security
is computed as the sum of the amounts determined by multiplying the number of
full years (i.e., rounding down partial years) from the issue date until each
distribution in reduction of stated redemption price at maturity is scheduled to
be made by a fraction, the numerator of which is the amount of each distribution
included in the stated redemption price at maturity of the Debt Security and the
denominator of which is the stated redemption price at maturity of the Debt
Security. Holders generally must report de minimis OID pro rata as principal
payments are received, and such income will be capital gain if the Debt Security
is held as a capital asset. However, accrual method holders may elect to accrue
all de minimis OID as well as market discount under a constant interest method.
Debt Securities may provide for interest based on a qualified variable
rate. Under the OID Regulations, interest is treated as payable at a qualified
variable rate and not as contingent interest if, generally, (i) such interest is
unconditionally payable at least annually, (ii) the issue price of the debt
instrument does not exceed the total noncontingent principal payments and (iii)
interest is based on a "qualified floating rate," an "objective rate," or a
combination of "qualified floating rates" that do not operate in a manner that
significantly accelerates or defers interest payments on such Debt Security. In
the case of Compound Interest Securities, certain Interest Weighted Securities
(as defined herein), and certain of the other Debt Securities, none of the
payments under the instrument will be considered qualified stated interest, and
thus the aggregate amount of all payments will be included in the stated
redemption price.
The Internal Revenue Services (the "IRS") recently issued final regulations
(the "Contingent Regulations") governing the calculation of OID on instruments
having contingent interest payments. The Contingent Regulations specifically do
not apply for purposes of calculating OID on debt instruments subject to Code
Section 1272(a)(6), such as the Debt Security. Additionally, the OID Regulations
do not contain provisions specifically interpreting Code Section 1272(a)(6).
Until the Treasury issues guidance to the contrary, the Trustee intends to base
its computation on Code Section 1272(a)(6) and the OID Regulations as described
in this Prospectus. However, because no regulatory guidance currently exists
under Code Section 1272(a)(6), there can be no assurance that such methodology
represents the correct manner of calculating OID.
The holder of a Debt Security issued with OID must include in gross income,
for all days during its taxable year on which it holds such Debt Security, the
sum of the "daily portions" of such original issue discount. The amount of OID
includible in income by a holder will be computed by allocating to each day
during a taxable year a pro rata portion of the original issue discount that
accrued during the relevant accrual period. In the case of a Debt Security that
is not a Regular Interest Security and the principal payments on which are not
subject to acceleration resulting from prepayments on the Loans, the amount of
OID includible in income of a Holder for an accrual period (generally the period
over which interest accrues on the debt instrument) will equal the product of
the yield to maturity of the Debt Security and the adjusted issue price of the
Debt Security, reduced by any payments of qualified stated interest. The
adjusted issue price is the sum of its issue price plus prior accruals or OID,
reduced by the total payments made with respect to such Debt Security in all
prior periods, other than qualified stated interest payments.
The amount of OID to be included in income by a holder of a debt
instrument, such as certain Classes of the Debt Securities, that is subject to
acceleration due to prepayments on other debt obligations securing such
instruments (a "Pay-Through Security"), is computed by taking into account the
anticipated rate of prepayments assumed in pricing the debt instrument (the
"Prepayment Assumption"). The amount of OID that will accrue during an accrual
period on a Pay-Through Security is the excess (if any) of the sum of (a) the
present value of all
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payments remaining to be made on the Pay-Through Security as of the close of the
accrual period and (b) the payments during the accrual period of amounts
included in the stated redemption price of the Pay-Through Security, over the
adjusted issue price of the Pay-Through Security at the beginning of the accrual
period. The present value of the remaining payments is to be determined on the
basis of three factors: (i) the original yield to maturity of the Pay-Through
Security (determined on the basis of compounding at the end of each accrual
period and properly adjusted for the length of the accrual period), (ii) events
which have occurred before the end of the accrual period and (iii) the
assumption that the remaining payments will be made in accordance with the
original Prepayment Assumption. The effect of this method is to increase the
portions of OID required to be included in income by a Holder to take into
account prepayments with respect to the Loans at a rate that exceeds the
Prepayment Assumption, and to decrease (but not below zero for any period) the
portions of original issue discount required to be included in income by a
Holder of a Pay-Through Security to take into account prepayments with respect
to the Loans at a rate that is slower than the Prepayment Assumption. Although
original issue discount will be reported to Holders of Pay-Through Securities
based on the Prepayment Assumption, no representation is made to Holders that
Loans will be prepaid at that rate or at any other rate.
The Depositor may adjust the accrual of OID on a Class of Regular Interest
Securities (or other regular interests in a REMIC) in a manner that it believes
to be appropriate, to take account of realized losses on the Loans, although the
OID Regulations do not provide for such adjustments. If the IRS were to require
that OID be accrued without such adjustments, the rate of accrual of OID for a
Class of Regular Interest Securities could increase.
Certain classes of Regular Interest Securities may represent more than one
class of REMIC regular interests. Unless otherwise provided in the related
Prospectus Supplement, the Trustee intends, based on the OID Regulations, to
calculate OID on such Securities as if, solely for the purposes of computing
OID, the separate regular interests were a single debt instrument.
A subsequent holder of a Debt Security will also be required to include OID
in gross income, but such a holder who purchases such Debt Security for an
amount that exceeds its adjusted issue price will be entitled (as will an
initial holder who pays more than a Debt Security's issue price) to offset such
OID by comparable economic accruals of portions of such excess.
Effects of Defaults and Delinquencies. Holders will be required to report
income with respect to the related Securities under an accrual method without
giving effect to delays and reductions in distributions attributable to a
default or delinquency on the Loans, except possibly to the extent that it can
be established that such amounts are uncollectible. As a result, the amount of
income (including OID) reported by a holder of such a Security in any period
could significantly exceed the amount of cash distributed to such holder in that
period. The holder will eventually be allowed a loss (or will be allowed to
report a lesser amount of income) to the extent that the aggregate amount of
distributions on the Securities is deduced as a result of a Loan default.
However, the timing and character of such losses or reductions in income are
uncertain and, accordingly, holders of Securities should consult their own tax
advisors on this point.
Interest Weighted Securities. It is not clear how income should be accrued
with respect to Regular Interest Securities or Stripped Securities (as defined
under "--Tax Status as a Grantor Trust; General" herein) the payments on which
consist solely or primarily of a specified portion of the interest payments on
qualified mortgages held by the REMIC or on Loans underlying Pass-Through
Securities ("Interest Weighted Securities"). The Issuer intends to take the
position that all of the income derived from an Interest Weighted Security
should be treated as OID and that the amount and rate of accrual of such OID
should be calculated by treating the Interest Weighted Security as a Compound
Interest Security. However, in the case of Interest Weighted Securities that are
entitled to some payments of principal and that are Regular Interest Securities
the Internal Revenue Service could assert that income derived from an Interest
Weighted Security should be calculated as if the Security were a security
purchased at a premium equal to the excess of the price paid by such holder for
such Security over its stated principal amount, if any. Under this approach, a
holder would be entitled to amortize such premium only if it has in effect an
election under Section 171 of the Code with respect to all taxable debt
instruments held by such holder, as described below. Alternatively, the Internal
Revenue Service could assert that an Interest Weighted Security should be
taxable under the rules governing bonds issued with contingent payments. Such
treatment may be more likely in the case of
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Interest Weighted Securities that are Stripped Securities as described below.
See "--Tax Status as a Grantor Trust--Discount or Premium on Pass-Through
Securities."
Variable Rate Debt Securities. In the case of Debt Securities bearing
interest at a rate that varies directly, according to a fixed formula, with an
objective index, it appears that (i) the yield to maturity of such Debt
Securities and (ii) in the case of Pay-Through Securities, the present value of
all payments remaining to be made on such Debt Securities, should be calculated
as if the interest index remained at its value as of the issue date of such
Securities. Because the proper method of adjusting accruals of OID on a variable
rate Debt Security is uncertain, holders of variable rate Debt Securities should
consult their own tax advisers regarding the appropriate treatment of such
Securities for federal income tax purposes.
Market Discount. A purchaser of a Security may be subject to the market
discount rules of Sections 1276-1278 of the Code. A Holder that acquires a Debt
Security with more than a prescribed de minimis amount of "market discount"
(generally, the excess of the principal amount of the Debt Security over the
purchaser's purchase price) will be required to include accrued market discount
in income as ordinary income in each month, but limited to an amount not
exceeding the principal payments on the Debt Security received in that month
and, if the Securities are sold, the gain realized. Such market discount would
accrue in a manner to be provided in Treasury regulations but, until such
regulations are issued, such market discount would in general accrue either (i)
on the basis of a constant yield (in the case of a Pay-Through Security, taking
into account a prepayment assumption) or (ii) in the ratio of (a) in the case of
Securities (or in the case of a Pass-Through Security (as defined herein), as
set forth below, the Loans underlying such Security) not originally issued with
original issue discount, stated interest payable in the relevant period to total
stated interest remaining to be paid at the beginning of the period or (b) in
the case of Securities (or, in the case of a Pass-Through Security, as described
below, the Loans underlying such Security) originally issued at a discount, OID
in the relevant period to total OID remaining to be paid.
Section 1277 of the Code provides that, regardless of the origination date
of the Debt Security (or, in the case of a Pass-Through Security, the Loans),
the excess of interest paid or accrued to purchase or carry a Security (or, in
the case of a Pass-Through Security, as described below, the underlying Loans)
with market discount over interest received on such Security is allowed as a
current deduction only to the extent such excess is greater than the market
discount that accrued during the taxable year in which such interest expense was
incurred. In general, the deferred portion of any interest expense will be
deductible when such market discount is included in income, including upon the
sale, disposition, or repayment of the Security (or in the case of a
Pass-Through Security, an underlying Loan). A holder may elect to include market
discount in income currently as it accrues, on all market discount obligations
acquired by such holder during the taxable year such election is made and
thereafter, in which case the interest deferral rule will not apply.
Premium. A holder who purchases a Debt Security (other than an Interest
Weighted Security to the extent described above) at a cost greater than its
stated redemption price at maturity, generally will be considered to have
purchased the Security at a premium, which it may elect to amortize as an offset
to interest income on such Security (and not as a separate deduction item) on a
constant yield method. Although no regulations addressing the computation of
premium accrual on securities similar to the Securities have been issued, the
legislative history of the 1986 Act indicates that premium is to be accrued in
the same manner as market discount. Accordingly, it appears that the accrual of
premium on a Class of Pay-Through Securities will be calculated using the
prepayment assumption used in pricing such Class. If a holder makes an election
to amortize premium on a Debt Security, such election will apply to all taxable
debt instruments (including all REMIC regular interests and all pass-through
certificates representing ownership interests in a trust holding debt
obligations) held by the holder at the beginning of the taxable year in which
the election is made, and to all taxable debt instruments acquired thereafter by
such holder, and will be irrevocable without the consent of the IRS. Purchasers
who pay a premium for the Securities should consult their tax advisers regarding
the election to amortize premium and the method to be employed.
On June 27, 1996 the IRS issued proposed regulations (the "Amortizable Bond
Premium Regulations") dealing with amortizable bond premium. These regulations
specifically do not apply to prepayable debt instruments subject to Code Section
1272(a)(6) such as the Securities. Absent further guidance from the IRS, the
Trustee
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intends to account for amortizable bond premium in the manner described above.
Prospective purchasers of the Securities should consult their tax advisors
regarding the possible application of the Amortizable Bond Premium Regulations.
Election to Treat All Interest as Original Issue Discount. The OID
Regulations permit a holder of a Debt Security 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 for Debt Securities
acquired on or after April 4, 1994. If such an election were to be made with
respect to a Debt Security with market discount, the holder of the Debt Security
would be deemed to have made an election to include in income currently market
discount with respect to all other debt instruments having market discount that
such holder of the Debt Security acquires during the year of the election or
thereafter. Similarly, a holder of a Debt Security that makes this election for
a Debt Security that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such holder owns or acquires. The election to
accrue interest, discount and premium on a constant yield method with respect to
a Debt Security is irrevocable.
Taxation of the REMIC and its Holders
General. In the opinion of Brown & Wood LLP, special counsel to the
Depositor, if a REMIC election is made with respect to a Series of Securities,
then the arrangement by which the Securities of that Series are issued will be
treated as a REMIC as long as all of the provisions of the applicable Agreement
are complied with and the statutory and regulatory requirements are satisfied.
Securities will be designated as "Regular Interests" or "Residual Interests" in
a REMIC, as specified in the related Prospectus Supplement.
Except to the extent specified otherwise in a Prospectus Supplement, if a
REMIC election is made with respect to a Series of Securities, (i) Securities
held by a domestic building and loan association will constitute "a regular or a
residual interest in a REMIC" within the meaning of Code Section
7701(a)(19)(C)(xi) (assuming that at least 95% of the REMIC's assets consist of
cash, government securities, "loans secured by an interest in real property,"
and other types of assets described in Code Section 7701(a)(19)(C)); and (ii)
Securities held by a real estate investment trust will constitute "real estate
assets" within the meaning of Code Section 856(c)(6)(B), and income with respect
to the Securities will be considered "interest on obligations secured by
mortgages on real property or on interests in real property" within the meaning
of Code Section 856(c)(3)(B) (assuming, for both purposes, that at least 95% of
the REMIC's assets are qualifying assets). If less than 95% of the REMIC's
assets consist of assets described in (i) or (ii) above, then a Security will
qualify for the tax treatment described in (i), (ii) or (iii) in the proportion
that such REMIC assets are qualifying assets.
The Small Business Job Protection Act of 1996, as part of the repeal of
the bad debt reserve method for thrift institutions, repealed the application of
Code section 593(d) to any taxable year beginning after December 31, 1995.
REMIC Expenses; Single Class REMICs
As a general rule, all of the expenses of a REMIC will be taken into
account by holders of the Residual Interest Securities. In the case of a "single
class REMIC," however, the expenses will be allocated, under Treasury
regulations, among the holders of the Regular Interest Securities and the
holders of the Residual Interest Securities (as defined herein) on a daily basis
in proportion to the relative amounts of income accruing to each Holder on that
day. In the case of a holder of a Regular Interest Security who is an individual
or a "pass-through interest holder" (including certain pass-through entities but
not including real estate investment trusts), such expenses will be deductible
only to the extent that such expenses, plus other "miscellaneous itemized
deductions" of the Holder, exceed 2% of such Holder's adjusted gross income. In
addition, for taxable years beginning after December 31, 1990, the amount of
itemized deductions otherwise allowable for the taxable year for an individual
whose adjusted gross income exceeds the applicable amount (which amount will be
adjusted for inflation for taxable years beginning after 1990) will be reduced
by the lesser of (i) 3% of the excess of adjusted gross income over the
applicable amount, or (ii) 80% of the amount of itemized deductions otherwise
allowable for such taxable year. The reduction or disallowance of this deduction
may have a significant impact on the yield of the Regular Interest Security to
such
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a Holder. In general terms, a single class REMIC is one that either (i) would
qualify, under existing Treasury regulations, as a grantor trust if it were not
a REMIC (treating all interests as ownership interests, even if they would be
classified as debt for federal income tax purposes) or (ii) is similar to such a
trust and which is structured with the principal purpose of avoiding the single
class REMIC rules. Unless otherwise specified in the related Prospectus
Supplement, the expenses of the REMIC will be allocated to holders of the
related residual interest securities.
Taxation of the REMIC
General. Although a REMIC is a separate entity for federal income tax
purposes, a REMIC is not generally subject to entity-level tax. Rather, the
taxable income or net loss of a REMIC is taken into account by the holders of
residual interests. As described above, the regular interests are generally
taxable as debt of the REMIC.
Calculation of REMIC Income. The taxable income or net loss of a REMIC is
determined under an accrual method of accounting and in the same manner as in
the case of an individual, with certain adjustments. In general, the taxable
income or net loss will be the difference between (i) the gross income produced
by the REMIC's assets, including stated interest and any original issue discount
or market discount on loans and other assets, and (ii) deductions, including
stated interest and original issue discount accrued on Regular Interest
Securities, amortization of any premium with respect to Loans, and servicing
fees and other expenses of the REMIC. A holder of a Residual Interest Security
that is an individual or a "pass-through interest holder" (including certain
pass-through entities, but not including real estate investment trusts) will be
unable to deduct servicing fees payable on the loans or other administrative
expenses of the REMIC for a given taxable year, to the extent that such
expenses, when aggregated with such holder's other miscellaneous itemized
deductions for that year, do not exceed two percent of such holder's adjusted
gross income.
For purposes of computing its taxable income or net loss, the REMIC should
have an initial aggregate tax basis in its assets equal to the aggregate fair
market value of the regular interests and the residual interests on the Startup
Day (generally, the day that the interests are issued). That aggregate basis
will be allocated among the assets of the REMIC in proportion to their
respective fair market values.
The OID provisions of the Code apply to loans of individuals originated on
or after March 2, 1984, and the market discount provisions apply to loans
originated after July 18, 1984. Subject to possible application of the de
minimis rules, the method of accrual by the REMIC of OID income on such loans
will be equivalent to the method under which holders of Pay-Through Securities
accrue original issue discount (i.e., under the constant yield method taking
into account the Prepayment Assumption). The REMIC will deduct OID on the
Regular Interest Securities in the same manner that the holders of the Regular
Interest Securities include such discount in income, but without regard to the
de minimis rules. See "Taxation of Debt Securities" above. However, a REMIC that
acquires loans at a market discount must include such market discount in income
currently, as it accrues, on a constant interest basis.
To the extent that the REMIC's basis allocable to loans that it holds
exceeds their principal amounts, the resulting premium, if attributable to
mortgages originated after September 27, 1985, will be amortized over the life
of the loans (taking into account the Prepayment Assumption) on a constant yield
method. Although the law is somewhat unclear regarding recovery of premium
attributable to loans originated on or before such date, it is possible that
such premium may be recovered in proportion to payments of loan principal.
Prohibited Transactions and Contributions Tax. The REMIC will be subject to
a 100% tax on any net income derived from a "prohibited transaction." For this
purpose, net income will be calculated without taking into account any losses
from prohibited transactions or any deductions attributable to any prohibited
transaction that resulted in a loss. In general, prohibited transactions
include: (i) subject to limited exceptions, the sale or other disposition of any
qualified mortgage transferred to the REMIC; (ii) subject to a limited
exception, the sale or other disposition of a cash flow investment; (iii) the
receipt of any income from assets not permitted to be held by the REMIC pursuant
to the Code; or (iv) the receipt of any fees or other compensation for services
rendered by the
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REMIC. It is anticipated that a REMIC will not engage in any prohibited
transactions in which it would recognize a material amount of net income. In
addition, subject to a number of exceptions, a tax is imposed at the rate of
100% on amounts contributed to a REMIC after the close of the three-month period
beginning on the Startup Day. The holders of Residual Interest Securities will
generally be responsible for the payment of any such taxes imposed on the REMIC.
To the extent not paid by such holders or otherwise, however, such taxes will be
paid out of the Trust Fund and will be allocated pro rata to all outstanding
classes of Securities of such REMIC.
Taxation of Holders of Residual Interest Securities
The holder of a Security representing a residual interest (a "Residual
Interest Security") will take into account the "daily portion" of the taxable
income or net loss of the REMIC for each day during the taxable year on which
such holder held the Residual Interest Security. The daily portion is determined
by allocating to each day in any calendar quarter its ratable portion of the
taxable income or net loss of the REMIC for such quarter, and by allocating that
amount among the holders (on such day) of the Residual Interest Securities in
proportion to their respective holdings on such day.
The holder of a Residual Interest Security must report its proportionate
share of the taxable income of the REMIC whether or not it receives cash
distributions from the REMIC attributable to such income or loss. The reporting
of taxable income without corresponding distributions could occur, for example,
in certain REMIC issues in which the loans held by the REMIC were issued or
acquired at a discount, since mortgage prepayments cause recognition of discount
income, while the corresponding portion of the prepayment could be used in whole
or in part to make principal payments on REMIC Regular Interests issued without
any discount or at an insubstantial discount (if this occurs, it is likely that
cash distributions will exceed taxable income in later years). Taxable income
may also be greater in earlier years of certain REMIC issues as a result of the
fact that interest expense deductions, as a percentage of outstanding principal
on REMIC Regular Interest Securities, will typically increase over time as lower
yielding Securities are paid, whereas interest income with respect to loans will
generally remain constant over time as a percentage of loan principal.
In any event, because the holder of a residual interest is taxed on the net
income of the REMIC, the taxable income derived from a Residual Interest
Security in a given taxable year will not be equal to the taxable income
associated with investment in a corporate bond or stripped instrument having
similar cash flow characteristics and pretax yield. Therefore, the after-tax
yield on the Residual Interest Security may be less than that of such a bond or
instrument.
Limitation on Losses. The amount of the REMIC's net loss that a holder may
take into account currently is limited to the holder's adjusted basis at the end
of the calendar quarter in which such loss arises. A holder's basis in a
Residual Interest Security will initially equal such holder's purchase price,
and will subsequently be increased by the amount of the REMIC's taxable income
allocated to the holder, and decreased (but not below zero) by the amount of
distributions made and the amount of the REMIC's net loss allocated to the
holder. Any disallowed loss may be carried forward indefinitely, but may be used
only to offset income of the REMIC generated by the same REMIC. The ability of
holders of Residual Interest Securities to deduct net losses may be subject to
additional limitations under the Code, as to which such holders should consult
their tax advisers.
Distributions. Distributions on a Residual Interest Security (whether at
their scheduled times or as a result of prepayments) will generally not result
in any additional taxable income or loss to a holder of a Residual Interest
Security. If the amount of such payment exceeds a holder's adjusted basis in the
Residual Interest Security, however, the holder will recognize gain (treated as
gain from the sale of the Residual Interest Security) to the extent of such
excess.
Sale or Exchange. A holder of a Residual Interest Security will recognize
gain or loss on the sale or exchange of a Residual Interest Security equal to
the difference, if any, between the amount realized and such holder's adjusted
basis in the Residual Interest Security at the time of such sale or exchange.
Except to the extent provided in regulations, which have not yet been issued,
any loss upon disposition of a Residual Interest Security
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will be disallowed if the selling holder acquires any residual interest in a
REMIC or similar mortgage pool within six months before or after such
disposition.
Excess Inclusions. The portion of the REMIC taxable income of a holder of a
Residual Interest Security consisting of "excess inclusion" income may not be
offset by other deductions or losses, including net operating losses, on such
holder's federal income tax return. An exception applies to organizations to
which Code Section 593 applies (generally, certain thrift institutions);
however, such exception will not apply if the aggregate value of the Residual
Interest Securities is not considered to be "significant," as described below.
Further, if the holder of a Residual Interest Security is an organization
subject to the tax on unrelated business income imposed by Code Section 511,
such holder's excess inclusion income will be treated as unrelated business
taxable income of such holder. In addition, under Treasury regulations yet to be
issued, if a real estate investment trust, a regulated investment company, a
common trust fund, or certain cooperatives were to own a Residual Interest
Security, a portion of dividends (or other distributions) paid by the real
estate investment trust (or other entity) would be treated as excess inclusion
income. If a Residual Security is owned by a foreign person excess inclusion
income is subject to tax at a rate of 30% which may not be reduced by treaty, is
not eligible for treatment as "portfolio interest" and is subject to certain
additional limitations. See "Tax Treatment of Foreign Investors." The Small
Business Job Protection Act of 1996 has eliminated the special rule permitting
Section 593 institutions ("thrift institutions") to use net operating losses and
other allowable deductions to offset their excess inclusion income from REMIC
residual certificates that have "significant value" within the meaning of the
REMIC Regulations, effective for taxable years beginning after December 31,
1995, except with respect to residual certificates continuously held by a
thrift institution since November 1, 1995.
In addition, the Small Business Job Protection Act of 1996 provides three
rules for determining the effect on excess inclusions on the alternative minimum
taxable income of a residual holder. First, alternative minimum taxable income
for such residual holder is determined without regard to the special rule that
taxable income cannot be less than excess inclusions. Second, a residual
holder's alternative minimum taxable income for a tax year cannot be less than
excess inclusions for the year. Third, the amount of any alternative minimum tax
net operating loss deductions must be computed without regard to any excess
inclusions. These rules are effective for tax years beginning after December 31,
1986, unless a residual holder elects to have such rules apply only to tax years
beginning after August 20, 1996.
The excess inclusion portion of a REMIC's income is generally equal to the
excess, if any, of REMIC taxable income for the quarterly period allocable to a
Residual Interest Security, over the daily accruals for such quarterly period of
(i) 120% of the long term applicable federal rate on the Startup Day multiplied
by (ii) the adjusted issue price of such Residual Interest Security at the
beginning of such quarterly period. The adjusted issue price of a Residual
Interest at the beginning of each calendar quarter will equal its issue price
(calculated in a manner analogous to the determination of the issue price of a
Regular Interest), increased by the aggregate of the daily accruals for prior
calendar quarters, and decreased (but not below zero) by the amount of loss
allocated to a holder and the amount of distributions made on the Residual
Interest Security before the beginning of the quarter. The long-term federal
rate, which is announced monthly by the Treasury Department, is an interest rate
that is based on the average market yield of outstanding marketable obligations
of the United States government having remaining maturities in excess of nine
years.
Under the REMIC Regulations, in certain circumstances, transfers of
Residual Securities may be disregarded. See "--Restrictions on Ownership and
Transfer of Residual Interest Securities" and "--Tax Treatment of Foreign
Investors" below.
Restrictions on Ownership and Transfer of Residual Interest Securities. As
a condition to qualification as a REMIC, reasonable arrangements must be made to
prevent the ownership of a REMIC residual interest by any "Disqualified
Organization." Disqualified Organizations include 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, a rural
electric or telephone cooperative described in Section 1381(a)(2)(C) of the
Code, or any entity exempt from the tax imposed by Sections 1-1399 of the Code,
if such entity is not subject to tax on its unrelated business income.
Accordingly, the applicable Pooling and Servicing Agreement will prohibit
Disqualified
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Organizations from owning a Residual Interest Security. In addition, no transfer
of a Residual Interest Security will be permitted unless the proposed transferee
shall have furnished to the Trustee an affidavit representing and warranting
that it is neither a Disqualified Organization nor an agent or nominee acting on
behalf of a Disqualified Organization.
If a Residual Interest Security is transferred to a Disqualified
Organization after March 31, 1988 (in violation of the restrictions set forth
above), a substantial tax will be imposed on the transferor of such Residual
Interest Security at the time of the transfer. In addition, if a Disqualified
Organization holds an interest in a pass-through entity after March 31, 1988
(including, among others, a partnership, trust, real estate investment trust,
regulated investment company, or any person holding as nominee), that owns a
Residual Interest Security, the pass-through entity will be required to pay an
annual tax on its allocable share of the excess inclusion income of the REMIC.
Under the REMIC Regulations, if a Residual Interest Security is a
"noneconomic residual interest," as described below, a transfer of a Residual
Interest Security to a United States person will be disregarded for all Federal
tax purposes unless no significant purpose of the transfer was to impede the
assessment or collection of tax. A Residual Interest Security is a "noneconomic
residual interest" unless, at the time of the transfer (i) the present value of
the expected future distributions on the Residual Interest Security at least
equals the product of the present value of the anticipated excess inclusions and
the highest rate of tax for the year in which the transfer occurs, and (ii) the
transferor reasonably expects that the transferee will receive distributions
from the REMIC at or after the time at which the taxes accrue on the anticipated
excess inclusions in an amount sufficient to satisfy the accrued taxes. If a
transfer of a Residual Interest is disregarded, the transferor would be liable
for any Federal income tax imposed upon taxable income derived by the transferee
from the REMIC. The REMIC Regulations provide no guidance as to how to determine
if a significant purpose of a transfer is to impede the assessment or collection
of tax. A similar type of limitation exists with respect to certain transfers of
residual interests by foreign persons to United States persons. See "--Tax
Treatment of Foreign Investors."
Mark to Market Rules. Prospective purchasers of a REMIC Residual Interest
Security should be aware that the IRS recently released proposed regulations
(the "Proposed Mark-to-Market Regulations") which provide that a REMIC Residual
Interest Security acquired after January 3, 1995 cannot be marked-to-market. The
Proposed Mark-to-Market Regulations replace the temporary regulations which
allowed a REMIC Residual Interest Security to be marked-to-market provided that
it was not a negative value residual interest and did not have the same economic
effect as a negative value residual interest. The IRS could issue subsequent
regulations, which could apply retroactively, providing additional or different
requirements with respect to such deemed negative value residual interests.
Prospective purchasers of a REMIC Residual Interest Security should consult
their tax advisors regarding the possible application of the Proposed
Mark-to-Market Regulations.
Administrative Matters
The REMIC's books must be maintained on a calendar year basis and the REMIC
must file an annual federal income tax return. The REMIC will also be subject to
the procedural and administrative rules of the Code applicable to partnerships,
including the determination of any adjustments to, among other things, items of
REMIC income, gain, loss, deduction, or credit, by the IRS in a unified
administrative proceeding.
Tax Status as a Grantor Trust
General. As specified in the related Prospectus Supplement if a REMIC or
partnership election is not made, in the opinion of Brown & Wood LLP, special
counsel to the Depositor, the Trust Fund relating to a Series of Securities will
be classified for federal income tax purposes as a grantor trust under Subpart
E, Part I of Subchapter J of the Code and not as an association taxable as a
corporation (the Securities of such Series, "Pass-Through Securities"). In some
Series there will be no separation of the principal and interest payments on the
Loans. In such circumstances, a Holder will be considered to have purchased a
pro rata undivided interest in each of the Loans. In other cases ("Stripped
Securities"), sale of the Securities will produce a separation in the ownership
of all or a portion of the principal payments from all or a portion of the
interest payments on the Loans.
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Each Holder must report on its federal income tax return its share of the
gross income derived from the Loans (not reduced by the amount payable as fees
to the Trustee and the Servicer and similar fees (collectively, the "Servicing
Fee")), at the same time and in the same manner as such items would have been
reported under the Holder's tax accounting method had it held its interest in
the Loans directly, received directly its share of the amounts received with
respect to the Loans, and paid directly its share of the Servicing Fees. In the
case of Pass-Through Securities other than Stripped Securities, such income will
consist of a pro rata share of all of the income derived from all of the Loans
and, in the case of Stripped Securities, such income will consist of a pro rata
share of the income derived from each stripped bond or stripped coupon in which
the Holder owns an interest. The holder of a Security will generally be entitled
to deduct such Servicing Fees under Section 162 or Section 212 of the Code to
the extent that such Servicing Fees represent "reasonable" compensation for the
services rendered by the Trustee and the Servicer (or third parties that are
compensated for the performance of services). In the case of a noncorporate
holder, however, Servicing Fees (to the extent not otherwise disallowed, e.g.,
because they exceed reasonable compensation) will be deductible in computing
such holder's regular tax liability only to the extent that such fees, when
added to other miscellaneous itemized deductions, exceed 2% of adjusted gross
income and may not be deductible to any extent in computing such holder's
alternative minimum tax liability. In addition, for taxable years beginning
after December 31, 1990, the amount of itemized deductions otherwise allowable
for the taxable year for an individual whose adjusted gross income exceeds the
applicable amount (which amount will be adjusted for inflation in taxable years
beginning after 1990) will be reduced by the lesser of (i) 3% of the excess of
adjusted gross income over the applicable amount or (ii) 80% of the amount of
itemized deductions otherwise allowable for such taxable year.
Discount or Premium on Pass-Through Securities. The holder's purchase price
of a Pass-Through Security is to be allocated among the Loans in proportion to
their fair market values, determined as of the time of purchase of the
Securities. In the typical case, the Trustee (to the extent necessary to fulfill
its reporting obligations) will treat each Loan as having a fair market value
proportional to the share of the aggregate principal balances of all of the
Loans that it represents, since the Securities, unless otherwise specified in
the related Prospectus Supplement, will have a relatively uniform interest rate
and other common characteristics. To the extent that the portion of the purchase
price of a Pass-Through Security allocated to a Loan (other than to a right to
receive any accrued interest thereon and any undistributed principal payments)
is less than or greater than the portion of the principal balance of the Loan
allocable to the Security, the interest in the Loan allocable to the
Pass-Through Security will be deemed to have been acquired at a discount or
premium, respectively.
The treatment of any discount will depend on whether the discount
represents OID or market discount. In the case of a Loan with OID in excess of a
prescribed de minimis amount or a Stripped Security, a holder of a Security will
be required to report as interest income in each taxable year its share of the
amount of OID that accrues during that year in the manner described above. OID
with respect to a Loan could arise, for example, by virtue of the financing of
points by the originator of the Loan, or by virtue of the charging of points by
the originator of the Loan in an amount greater than a statutory de minimis
exception, in circumstances under which the points are not currently deductible
pursuant to applicable Code provisions. Any market discount or premium on a Loan
will be includible in income, generally in the manner described above, except
that in the case of Pass-Through Securities, market discount is calculated with
respect to the Loans underlying the Certificate, rather than with respect to the
Security. A Holder that acquires an interest in a Loan originated after July 18,
1984 with more than a de minimis amount of market discount (generally, the
excess of the principal amount of the Loan over the purchaser's allocable
purchase price) will be required to include accrued market discount in income in
the manner set forth above. See "--Taxation of Debt Securities; Market Discount"
and "--Premium" above.
In the case of market discount on a Pass-Through Security attributable to
Loans originated on or before July 18, 1984, the holder generally will be
required to allocate the portion of such discount that is allocable to a loan
among the principal payments on the Loan and to include the discount allocable
to each principal payment in ordinary income at the time such principal payment
is made. Such treatment would generally 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 in the preceding paragraph.
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Stripped Securities. A Stripped Security may represent a right to receive
only a portion of the interest payments on the Loans, a right to receive only
principal payments on the Loans, or a right to receive certain payments of both
interest and principal. Certain Stripped Securities ("Ratio Strip Securities")
may represent a right to receive differing percentages of both the interest and
principal on each Loan. Pursuant to Section 1286 of the Code, the separation of
ownership of the right to receive some or all of the interest payments on an
obligation from ownership of the right to receive some or all of the principal
payments results in the creation of "stripped bonds" with respect to principal
payments and "stripped coupons" with respect to interest payments. Section 1286
of the Code applies the OID rules to stripped bonds and stripped coupons. For
purposes of computing original issue discount, a stripped bond or a stripped
coupon is treated as a debt instrument issued on the date that such stripped
interest is purchased with an issue price equal to its purchase price or, if
more than one stripped interest is purchased, the ratable share of the purchase
price allocable to such stripped interest.
Servicing fees in excess of reasonable servicing fees ("excess servicing")
will be treated under the stripped bond rules. If the excess servicing fee is
less than 100 basis points (i.e., 1% interest on the Loan principal balance) or
the Securities are initially sold with a de minimis discount (assuming no
prepayment assumption is required), any non-de minimis discount arising from a
subsequent transfer of the Securities should be treated as market discount. The
IRS appears to require that reasonable servicing fees be calculated on a Loan by
Loan basis, which could result in some Loans being treated as having more than
100 basis points of interest stripped off.
The Code, OID Regulations and judicial decisions provide no direct guidance
as to how the interest and original issue discount rules are to apply to
Stripped Securities and other Pass-Through Securities. Under the method
described above for Pay-Through Securities (the "Cash Flow Bond Method"), a
prepayment assumption is used and periodic recalculations are made which take
into account with respect to each accrual period the effect of prepayments
during such period. However, the 1986 Act does not, absent Treasury regulations,
appear specifically to cover instruments such as the Stripped Securities which
technically represent ownership interests in the underlying Loans, rather than
being debt instruments "secured by" those loans. Nevertheless, it is believed
that the Cash Flow Bond Method is a reasonable method of reporting income for
such Securities, and it is expected that OID will be reported on that basis
unless otherwise specified in the related Prospectus Supplement. In applying the
calculation to Pass-Through Securities, the Trustee will treat all payments to
be received by a holder with respect to the underlying Loans as payments on a
single installment obligation. The IRS could, however, assert that original
issue discount must be calculated separately for each Loan underlying a
Security.
Under certain circumstances, if the Loans prepay at a rate faster than the
Prepayment Assumption, the use of the Cash Flow Bond Method may accelerate a
Holder's recognition of income. If, however, the Loans prepay at a rate slower
than the Prepayment Assumption, in some circumstances the use of this method may
decelerate a Holder's recognition of income.
In the case of a Stripped Security that is an Interest Weighted Security,
the Trustee intends, absent contrary authority, to report income to Security
holders as OID, in the manner described above for Interest Weighted Securities.
Possible Alternative Characterizations. The characterizations of the
Stripped Securities described above are not the only possible interpretations of
the applicable Code provisions. Among other possibilities, the IRS could contend
that (i) in certain Series, each non-Interest Weighted Security is composed of
an unstripped undivided ownership interest in Loans and an installment
obligation consisting of stripped principal payments; (ii) the non-Interest
Weighted Securities are subject to the contingent payment provisions of the
Contingent Regulations; or (iii) each Interest Weighted Stripped Security is
composed of an unstripped undivided ownership interest in Loans and an
installment obligation consisting of stripped interest payments.
Given the variety of alternatives for treatment of the Stripped Securities
and the different federal income tax consequences that result from each
alternative, potential purchasers are urged to consult their own tax advisers
regarding the proper treatment of the Securities for federal income tax
purposes.
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Character as Qualifying Loans. In the case of Stripped Securities, there is
no specific legal authority existing regarding whether the character of the
Securities, for federal income tax purposes, will be the same as the Loans. The
IRS could take the position that the Loans character is not carried over to the
Securities in such circumstances. Pass-Through Securities will be, and, although
the matter is not free from doubt, Stripped Securities should be considered to
represent "real estate assets" within the meaning of Section 856(c)(6)(B) of the
Code and "loans secured by an interest in real property" within the meaning of
Section 7701(a)(19)(C)(v) of the Code; and interest income attributable to the
Securities should be considered to represent "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. Reserves or funds underlying the Securities
may cause a proportionate reduction in the above-described qualifying status
categories of Securities.
Sale or Exchange
Subject to the discussion below with respect to Trust Funds as to which a
partnership election is made, a Holder's tax basis in its Security is the price
such holder pays for a Security, plus amounts of original issue or market
discount included in income and reduced by any payments received (other than
qualified stated interest payments) and any amortized premium. Gain or loss
recognized on a sale, exchange, or redemption of a Security, measured by the
difference between the amount realized and the Security's basis as so adjusted,
will generally be capital gain or loss, assuming that the Security is held as a
capital asset. In the case of a Security held by a bank, thrift, or similar
institution described in Section 582 of the Code, however, gain or loss realized
on the sale or exchange of a Regular Interest Security will be taxable as
ordinary income or loss. In addition, gain from the disposition of a Regular
Interest Security that might otherwise be capital gain will be treated as
ordinary income to the extent of the excess, if any, of (i) the amount that
would have been includible in the holder's income if the yield on such Regular
Interest Security had equaled 110% of the applicable federal rate as of the
beginning of such holder's holding period, over the amount of ordinary income
actually recognized by the holder with respect to such Regular Interest
Security. For taxable years beginning after December 31, 1993, the maximum tax
rate on ordinary income for individual taxpayers is 39.6% and the maximum tax
rate on long-term capital gains reported after December 31, 1990 for such
taxpayers is 28%. The maximum tax rate on both ordinary income and long-term
capital gains of corporate taxpayers is 35%.
Miscellaneous Tax Aspects
Backup Withholding. Subject to the discussion below with respect to Trust
Funds as to which a partnership election is made, a Holder, other than a holder
of a REMIC Residual Security, may, under certain circumstances, be subject to
"backup withholding" at a rate of 31% with respect to distributions or the
proceeds of a sale of certificates to or through brokers that represent interest
or original issue discount on the Securities. This withholding generally applies
if the holder of a Security (i) fails to furnish the Trustee with its taxpayer
identification number ("TIN"); (ii) furnishes the Trustee an incorrect TIN;
(iii) fails to report properly interest, dividends or other "reportable
payments" as defined in the Code; or (iv) under certain circumstances, fails to
provide the Trustee or such holder's securities broker with a certified
statement, signed under penalty of perjury, that the TIN provided is its correct
number and that the holder is not subject to backup withholding. Backup
withholding will not apply, however, with respect to certain payments made to
Holders, including payments to certain exempt recipients (such as exempt
organizations) and to certain Nonresidents (as defined below). Holders should
consult their tax advisers as to their qualification for exemption from backup
withholding and the procedure for obtaining the exemption.
The Trustee will report to the Holders and to the Servicer for each
calendar year the amount of any "reportable payments" during such year and the
amount of tax withheld, if any, with respect to payments on the Securities.
Tax Treatment of Foreign Investors
Subject to the discussion below with respect to Trust Funds as to which a
partnership election is made, under the Code, unless interest (including OID)
paid on a Security (other than a Residual Interest Security) is considered to be
"effectively connected" with a trade or business conducted in the United States
by a nonresident
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alien individual, foreign partnership or foreign corporation ("Nonresidents"),
such interest will normally qualify as portfolio interest (except where (i) the
recipient is a holder, directly or by attribution, of 10% or more of the capital
or profits interest in the issuer, or (ii) the recipient is a controlled foreign
corporation to which the issuer is a related person) and will be exempt from
federal income tax. Upon receipt of appropriate ownership statements, the issuer
normally will be relieved of obligations to withhold tax from such interest
payments. These provisions supersede the generally applicable provisions of
United States law that would otherwise require the issuer to withhold at a 30%
rate (unless such rate were reduced or eliminated by an applicable tax treaty)
on, among other things, interest and other fixed or determinable, annual or
periodic income paid to Nonresidents. Holders of Pass-Through Securities and
Stripped Securities, including Ratio Strip Securities, however, may be subject
to withholding to the extent that the Loans were originated on or before July
18, 1984.
Interest and OID of Holders who are foreign persons are not subject to
withholding if they are effectively connected with a United States business
conducted by the Holder. They will, however, generally be subject to the regular
United States income tax.
Payments to holders of Residual Interest Securities who are foreign persons
will generally be treated as interest for purposes of the 30% (or lower treaty
rate) United States withholding tax. Holders should assume that such income does
not qualify for exemption from United States withholding tax as "portfolio
interest." It is clear that, to the extent that a payment represents a portion
of REMIC taxable income that constitutes excess inclusion income, a holder of a
Residual Interest Security will not be entitled to an exemption from or
reduction of the 30% (or lower treaty rate) withholding tax rule. If the
payments are subject to United States withholding tax, they generally will be
taken into account for withholding tax purposes only when paid or distributed
(or when the Residual Interest Security is disposed of). The Treasury has
statutory authority, however, to promulgate regulations which would require such
amounts to be taken into account at an earlier time in order to prevent the
avoidance of tax. Such regulations could, for example, require withholding prior
to the distribution of cash in the case of Residual Interest Securities that do
not have significant value. Under the REMIC Regulations, if a Residual Interest
Security has tax avoidance potential, a transfer of a Residual Interest Security
to a Nonresident will be disregarded for all federal tax purposes. A Residual
Interest Security has tax avoidance potential unless, at the time of the
transfer the transferor reasonably expects that the REMIC will distribute to the
transferee residual interest holder amounts that will equal at least 30% of each
excess inclusion, and that such amounts will be distributed at or after the time
at which the excess inclusions accrue and not later than the calendar year
following the calendar year of accrual. If a Nonresident transfers a Residual
Interest Security to a United States person, and if the transfer has the effect
of allowing the transferor to avoid tax on accrued excess inclusions, then the
transfer is disregarded and the transferor continues to be treated as the owner
of the Residual Interest Security for purposes of the withholding tax provisions
of the Code. See "--Excess Inclusions."
Tax Characterization of the Trust Fund as a Partnership
Brown & Wood LLP, special counsel to the Depositor, will deliver its
opinion that a Trust Fund for which a partnership election is made will not be
an association (or publicly traded partnership) taxable as a corporation for
federal income tax purposes. This opinion will be based on the assumption that
the terms of the Trust Agreement and related documents will be complied with,
and on counsel's conclusions that (1) the Trust Fund will not have certain
characteristics necessary for a business trust to be classified as an
association taxable as a corporation and (2) the nature of the income of the
Trust Fund will exempt it from the rule that certain publicly traded
partnerships are taxable as corporations or the issuance of the Securities has
been structured as a private placement under an IRS safe harbor, so that the
Trust Fund will not be characterized as a publicly traded partnership taxable as
a corporation.
If the Trust Fund were taxable as a corporation for federal income tax
purposes, the Trust Fund would be subject to corporate income tax on its taxable
income. The Trust Fund's taxable income would include all its income, possibly
reduced by its interest expense on the Notes. Any such corporate income tax
could materially reduce cash available to make payments on the Notes and
distributions on the Certificates, and Certificateholders could be liable for
any such tax that is unpaid by the Trust Fund.
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Tax Consequences to Holders of the Notes
Treatment of the Notes as Indebtedness. The Trust Fund will agree, and the
Noteholders will agree by their purchase of Notes, to treat the Notes as debt
for federal income tax purposes. Special counsel to the Depositor will, except
as otherwise provided in the related Prospectus Supplement, advise the Depositor
that the Notes will be classified as debt for federal income tax purposes. The
discussion below assumes this characterization of the Notes is correct.
OID, Indexed Securities, etc. The discussion below assumes that all
payments on the Notes are denominated in U.S. dollars, and that the Notes are
not Indexed Securities or Strip Notes. Moreover, the discussion assumes that the
interest formula for the Notes meets the requirements for "qualified stated
interest" under the OID regulations, and that any OID on the Notes (i.e., any
excess of the principal amount of the Notes over their issue price) does not
exceed a de minimis amount (i.e., 0.25% of their principal amount multiplied by
the number of full years included in their term), all within the meaning of the
OID regulations. If these conditions are not satisfied with respect to any given
series of Notes, additional tax considerations with respect to such Notes will
be disclosed in the applicable Prospectus Supplement.
Interest Income on the Notes. Based on the above assumptions, except as
discussed in the following paragraph, the Notes will not be considered issued
with OID. The stated interest thereon will be taxable to a Noteholder as
ordinary interest income when received or accrued in accordance with such
Noteholder's method of tax accounting. Under the OID regulations, a holder of a
Note issued with a de minimis amount of OID must include such OID in income, on
a pro rata basis, as principal payments are made on the Note. It is believed
that any prepayment premium paid as a result of a mandatory redemption will be
taxable as contingent interest when it becomes fixed and unconditionally
payable. A purchaser who buys a Note for more or less than its principal amount
will generally be subject, respectively, to the premium amortization or market
discount rules of the Code.
A holder of a Note that has a fixed maturity date of not more than one year
from the issue date of such Note (a "Short-Term Note") may be subject to special
rules. An accrual basis holder of a Short-Term Note (and certain cash method
holders, including regulated investment companies, as set forth in Section 1281
of the Code) generally would be required to report interest income as interest
accrues on a straight-line basis over the term of each interest period. Other
cash basis holders of a Short-Term Note would, in general, be required to report
interest income as interest is paid (or, if earlier, upon the taxable
disposition of the Short-Term Note). However, a cash basis holder of a
Short-Term Note reporting interest income as it is paid may be required to defer
a portion of any interest expense otherwise deductible on indebtedness incurred
to purchase or carry the Short-Term Note until the taxable disposition of the
Short-Term Note. A cash basis taxpayer may elect under Section 1281 of the Code
to accrue interest income on all nongovernment debt obligations with a term of
one year or less, in which case the taxpayer would include interest on the
Short-Term Note in income as it accrues, but would not be subject to the
interest expense deferral rule referred to in the preceding sentence. Certain
special rules apply if a Short-Term Note is purchased for more or less than its
principal amount.
Sale or Other Disposition. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note, increased by any market discount, acquisition discount, OID
and gain previously included by such Noteholder in income with respect to the
Note and decreased by the amount of bond premium (if any) previously amortized
and by the amount of principal payments previously received by such Noteholder
with respect to such Note. Any such gain or loss will be capital gain or loss if
the Note was held as a capital asset, except for gain representing accrued
interest and accrued market discount not previously included in income. Capital
losses generally may be used only to offset capital gains.
Foreign Holders. Interest payments made (or accrued) to a Noteholder who
is a nonresident alien, foreign corporation or other non-United States person (a
"foreign person") generally will be considered "portfolio interest", and
generally will not be subject to United States federal income tax and
withholding tax, if the interest is not effectively connected with the conduct
of a trade or business within the United States by the foreign person and the
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foreign person (i) is not actually or constructively a "10 percent shareholder"
of the Trust Fund or the Seller (including a holder of 10% of the outstanding
Certificates) or a "controlled foreign corporation" with respect to which the
Trust Fund or the Seller is a "related person" within the meaning of the Code
and (ii) provides the Owner Trustee or other person who is otherwise required to
withhold U.S. tax with respect to the Notes with an appropriate statement (on
Form W-8 or a similar form), signed under penalties of perjury, certifying that
the beneficial owner of the Note is a foreign person and providing the foreign
person's name and address. If a Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide the relevant signed statement to the withholding agent;
in that case, however, the signed statement must be accompanied by a Form W-8 or
substitute form provided by the foreign person that owns the Note. If such
interest is not portfolio interest, then it will be subject to United States
federal income and withholding tax at a rate of 30 percent, unless reduced or
eliminated pursuant to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income and withholding tax, provided that (i) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days or
more in the taxable year.
Backup Withholding. Each holder of a Note (other than an exempt holder such
as a corporation, tax-exempt organization, qualified pension and profit-sharing
trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident) will be required to provide, under
penalties of perjury, a certificate containing the holder's name, address,
correct federal taxpayer identification number and a statement that the holder
is not subject to backup withholding. Should a nonexempt Noteholder fail to
provide the required certification, the Trust Fund will be required to withhold
31 percent of the amount otherwise payable to the holder, and remit the withheld
amount to the IRS as a credit against the holder's federal income tax liability.
Possible Alternative Treatments of the Notes. If, contrary to the opinion
of special counsel to the Company, the IRS successfully asserted that one or
more of the Notes did not represent debt for federal income tax purposes, the
Notes might be treated as equity interests in the Trust Fund. If so treated, the
Trust Fund might be taxable as a corporation with the adverse consequences
described above (and the taxable corporation would not be able to reduce its
taxable income by deductions for interest expense on Notes recharacterized as
equity). Alternatively, and most likely in the view of special counsel to the
Depositor, the Trust Fund might be treated as a publicly traded partnership that
would not be taxable as a corporation because it would meet certain qualifying
income tests. Nonetheless, treatment of the Notes as equity interests in such a
publicly traded partnership could have adverse tax consequences to certain
holders. For example, income to certain tax-exempt entities (including pension
funds) would be "unrelated business taxable income", income to foreign holders
generally would be subject to U.S. tax and U.S. tax return filing and
withholding requirements, and individual holders might be subject to certain
limitations on their ability to deduct their share of the Trust Fund's expenses.
Tax Consequences to Holders of the Certificates
Treatment of the Trust Fund as a Partnership. The Trust Fund and the
Servicer will agree, and the Certificateholders will agree by their purchase of
Certificates, to treat the Trust Fund as a partnership for purposes of federal
and state income tax, franchise tax and any other tax measured in whole or in
part by income, with the assets of the partnership being the assets held by the
Trust Fund, the partners of the partnership being the Certificateholders, and
the Notes being debt of the partnership. However, the proper characterization of
the arrangement involving the Trust Fund, the Certificates, the Notes, the Trust
Fund and the Servicer is not clear because there is no authority on transactions
closely comparable to that contemplated herein.
A variety of alternative characterizations are possible. For example,
because the Certificates have certain features characteristic of debt, the
Certificates might be considered debt of the Trust Fund. Any such
characterization would not result in materially adverse tax consequences to
Certificateholders as compared to the consequences from treatment of the
Certificates as equity in a partnership, described below. The following
discussion assumes that the Certificates represent equity interests in a
partnership.
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Indexed Securities, etc. The following discussion assumes that all payments
on the Certificates are denominated in U.S. dollars, none of the Certificates
are Indexed Securities or Strip Certificates, and that a Series of Securities
includes a single class of Certificates. If these conditions are not satisfied
with respect to any given Series of Certificates, additional tax considerations
with respect to such Certificates will be disclosed in the applicable Prospectus
Supplement.
Partnership Taxation. As a partnership, the Trust Fund will not be subject
to federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Trust Fund. The Trust Fund's income will
consist primarily of interest and finance charges earned on the Loans (including
appropriate adjustments for market discount, OID and bond premium) and any gain
upon collection or disposition of Loans. The Trust Fund's deductions will
consist primarily of interest accruing with respect to the Notes, servicing and
other fees, and losses or deductions upon collection or disposition of Loans.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). The Trust Agreement will provide, in
general, that the Certificateholders will be allocated taxable income of the
Trust Fund for each month equal to the sum of (i) the interest that accrues on
the Certificates in accordance with their terms for such month, including
interest accruing at the Pass-Through Rate for such month and interest on
amounts previously due on the Certificates but not yet distributed; (ii) any
Trust Fund income attributable to discount on the Loans that corresponds to any
excess of the principal amount of the Certificates over their initial issue
price (iii) prepayment premium payable to the Certificateholders for such month;
and (iv) any other amounts of income payable to the Certificateholders for such
month. Such allocation will be reduced by any amortization by the Trust Fund of
premium on Loans that corresponds to any excess of the issue price of
Certificates over their principal amount. All remaining taxable income of the
Trust Fund will be allocated to the Company. Based on the economic arrangement
of the parties, this approach for allocating Trust Fund income should be
permissible under applicable Treasury regulations, although no assurance can be
given that the IRS would not require a greater amount of income to be allocated
to Certificateholders. Moreover, even under the foregoing method of allocation,
Certificateholders may be allocated income equal to the entire Pass-Through Rate
plus the other items described above even though the Trust Fund might not have
sufficient cash to make current cash distributions of such amount. Thus, cash
basis holders will in effect be required to report income from the Certificates
on the accrual basis and Certificateholders may become liable for taxes on Trust
Fund income even if they have not received cash from the Trust Fund to pay such
taxes. In addition, because tax allocations and tax reporting will be done on a
uniform basis for all Certificateholders but Certificateholders may be
purchasing Certificates at different times and at different prices,
Certificateholders may be required to report on their tax returns taxable income
that is greater or less than the amount reported to them by the Trust Fund.
All of the taxable income allocated to a Certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will constitute "unrelated business
taxable income" generally taxable to such a holder under the Code.
An individual taxpayer's share of expenses of the Trust Fund (including
fees to the Servicer but not interest expense) would be miscellaneous itemized
deductions. Such deductions might be disallowed to the individual in whole or in
part and might result in such holder being taxed on an amount of income that
exceeds the amount of cash actually distributed to such holder over the life of
the Trust Fund.
The Trust Fund intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Loan, the Trust Fund
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on Certificateholders.
Discount and Premium. It is believed that the Loans were not issued with
OID, and, therefore, the Trust Fund should not have OID income. However, the
purchase price paid by the Trust Fund for the Loans may be greater or less than
the remaining principal balance of the Loans at the time of purchase. If so, the
Loan will have
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been acquired at a premium or discount, as the case may be. (As indicated above,
the Trust Fund will make this calculation on an aggregate basis, but might be
required to recompute it on a Loan by Loan basis.)
If the Trust Fund acquires the Loans at a market discount or premium, the
Trust Fund will elect to include any such discount in income currently as it
accrues over the life of the Loans or to offset any such premium against
interest income on the Loans. As indicated above, a portion of such market
discount income or premium deduction may be allocated to Certificateholders.
Section 708 Termination. Under Section 708 of the Code, the Trust Fund will
be deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the Trust Fund are sold or exchanged within a
12-month period. If such a termination occurs, the Trust Fund will be considered
to distribute its assets to the partners, who would then be treated as
recontributing those assets to the Trust Fund as a new partnership. The Trust
Fund will not comply with certain technical requirements that might apply when
such a constructive termination occurs. As a result, the Trust Fund may be
subject to certain tax penalties and may incur additional expenses if it is
required to comply with those requirements. Furthermore, the Trust Fund might
not be able to comply due to lack of data.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates sold.
A Certificateholder's tax basis in a Certificate will generally equal the
holder's cost increased by the holder's share of Trust Fund income (includible
in income) and decreased by any distributions received with respect to such
Certificate. In addition, both the tax basis in the Certificates and the amount
realized on a sale of a Certificate would include the holder's share of the
Notes and other liabilities of the Trust Fund. A holder acquiring Certificates
at different prices may be required to maintain a single aggregate adjusted tax
basis in such Certificates, and, upon sale or other disposition of some of the
Certificates, allocate a portion of such aggregate tax basis to the Certificates
sold (rather than maintaining a separate tax basis in each Certificate for
purposes of computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's share of
unrecognized accrued market discount on the Loans would generally be treated as
ordinary income to the holder and would give rise to special tax reporting
requirements. The Trust Fund does not expect to have any other assets that would
give rise to such special reporting requirements. Thus, to avoid those special
reporting requirements, the Trust Fund will elect to include market discount in
income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificates.
Allocations Between Transferors and Transferees. In general, the Trust
Fund's taxable income and losses will be determined monthly and the tax items
for a particular calendar month will be apportioned among the Certificateholders
in proportion to the principal amount of Certificates owned by them as of the
close of the last day of such month. As a result, a holder purchasing
Certificates may be allocated tax items (which will affect its tax liability and
tax basis) attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust Fund might be reallocated among the Certificateholders. The Trust
Fund's method of allocation between transferors and transferees may be revised
to conform to a method permitted by future regulations.
Section 754 Election. In the event that a Certificateholder sells its
Certificates at a profit (loss), the purchasing Certificateholder will have a
higher (lower) basis in the Certificates than the selling Certificateholder had.
The tax basis of the Trust Fund's assets will not be adjusted to reflect that
higher (or lower) basis unless the Trust Fund were to file an election under
Section 754 of the Code. In order to avoid the administrative complexities
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that would be involved in keeping accurate accounting records, as well as
potentially onerous information reporting requirements, the Trust Fund will not
make such election. As a result, Certificateholders might be allocated a greater
or lesser amount of Trust Fund income than would be appropriate based on their
own purchase price for Certificates.
Administrative Matters. The Owner Trustee is required to keep or have kept
complete and accurate books of the Trust Fund. Such books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal year of
the Trust Fund will be the calendar year. The Trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of the
Trust Fund and will report each Certificateholder's allocable share of items of
Trust Fund income and expense to holders and the IRS on Schedule K-1. The Trust
Fund will provide the Schedule K-l information to nominees that fail to provide
the Trust Fund with the information statement described below and such nominees
will be required to forward such information to the beneficial owners of the
Certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the Trust Fund or be subject to penalties unless
the holder notifies the IRS of all such inconsistencies .
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust Fund
with a statement containing certain information on the nominee, the beneficial
owners and the Certificates so held. Such information includes (i) the name,
address and taxpayer identification number of the nominee and (ii) as to each
beneficial owner (x) the name, address and identification number of such person,
(y) whether such person is a United States person, a tax-exempt entity or a
foreign government, an international organization, or any wholly owned agency or
instrumentality of either of the foregoing, and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust Fund information
as to themselves and their ownership of Certificates. A clearing agency
registered under Section 17A of the Exchange Act is not required to furnish any
such information statement to the Trust Fund. The information referred to above
for any calendar year must be furnished to the Trust Fund on or before the
following January 31. Nominees, brokers and financial institutions that fail to
provide the Trust Fund with the information described above may be subject to
penalties.
The Depositor will be designated as the tax matters partner in the related
Trust Agreement and, as such, will be responsible for representing the
Certificateholders in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the Trust Fund by the appropriate taxing authorities
could result in an adjustment of the returns of the Certificateholders, and,
under certain circumstances, a Certificateholder may be precluded from
separately litigating a proposed adjustment to the items of the Trust Fund. An
adjustment could also result in an audit of a Certificateholder's returns and
adjustments of items not related to the income and losses of the Trust Fund.
Tax Consequences to Foreign Certificateholders. It is not clear whether the
Trust Fund would be considered to be engaged in a trade or business in the
United States for purposes of federal withholding taxes with respect to non-U.S.
persons because there is no clear authority dealing with that issue under facts
substantially similar to those described herein. Although it is not expected
that the Trust Fund would be engaged in a trade or business in the United States
for such purposes, the Trust Fund will withhold as if it were so engaged in
order to protect the Trust Fund from possible adverse consequences of a failure
to withhold. The Trust Fund expects to withhold on the portion of its taxable
income that is allocable to foreign Certificateholders pursuant to Section 1446
of the Code, as if such income were effectively connected to a U.S. trade or
business, at a rate of 35% for foreign holders that are taxable as corporations
and 39.6% for all other foreign holders. Subsequent adoption of Treasury
regulations or the issuance of other administrative pronouncements may require
the Trust Fund to change its withholding procedures. In determining a holder's
withholding status, the Trust Fund may rely on IRS Form W-8, IRS Form W-9 or the
holder's certification of nonforeign status signed under penalties of perjury.
Each foreign holder might be required to file a U.S. individual or
corporate income tax return (including, in the case of a corporation, the branch
profits tax) on its share of the Trust Fund's income. Each foreign holder
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must obtain a taxpayer identification number from the IRS and submit that number
to the Trust Fund on Form W-8 in order to assure appropriate crediting of the
taxes withheld. A foreign holder generally would be entitled to file with the
IRS a claim for refund with respect to taxes withheld by the Trust Fund taking
the position that no taxes were due because the Trust Fund was not engaged in a
U.S. trade or business. However, interest payments made (or accrued) to a
Certificateholder who is a foreign person generally will be considered
guaranteed payments to the extent such payments are determined without regard to
the income of the Trust Fund. If these interest payments are properly
characterized as guaranteed payments, then the interest will not be considered
"portfolio interest." As a result, Certificateholders will be subject to United
States federal income tax and withholding tax at a rate of 30 percent, unless
reduced or eliminated pursuant to an applicable treaty. In such case, a foreign
holder would only be entitled to claim a refund for that portion of the taxes in
excess of the taxes that should be withheld with respect to the guaranteed
payments.
Backup Withholding. Distributions made on the Certificates and proceeds
from the sale of the Certificates will be subject to a "backup" withholding tax
of 31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Federal
Income Tax Consequences," potential investors should consider the state and
local income tax consequences of the acquisition, ownership, and disposition of
the Securities. State and local income tax law may differ substantially from the
corresponding federal law, and this discussion does not purport to describe any
aspect of the income tax laws of any state or locality. Therefore, potential
investors should consult their own tax advisors with respect to the various
state and local tax consequences of an investment in the Securities.
ERISA CONSIDERATIONS
The following describes certain considerations under ERISA and the Code,
which apply only to Securities of a Series that are not divided into subclasses.
If Securities are divided into subclasses the related Prospectus Supplement will
contain information concerning considerations relating to ERISA and the Code
that are applicable to such Securities.
ERISA imposes requirements on employee benefit plans (and on 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 or arrangements are invested) (collectively "Plans")
subject to ERISA and on persons who are fiduciaries with respect to such Plans.
Generally, ERISA applies to investments made by Plans. Among other things, ERISA
requires that the assets of Plans be held in trust and that the trustee, or
other duly authorized fiduciary, have exclusive authority and discretion to
manage and control the assets of such Plans. ERISA also imposes certain duties
on persons who are fiduciaries of Plans. Under ERISA, any person who exercises
any authority or control respecting the management or disposition of the assets
of a Plan is considered to be a fiduciary of such Plan (subject to certain
exceptions not here relevant). Certain employee benefit plans, such as
governmental plans (as defined in ERISA Section 3(32)) and, if no election has
been made under Section 410(d) of the Code, church plans (as defined in ERISA
Section 3(33)), are not subject to ERISA requirements. Accordingly, assets of
such plans may be invested in Securities without regard to the ERISA
considerations described above and below, subject to the provisions of
applicable state law. Any such plan which is qualified and exempt from taxation
under Code Sections 401(a) and 501(a), however, is subject to the prohibited
transaction rules set forth in Code Section 503.
On November 13, 1986, the United States Department of Labor (the "DOL")
issued final regulations concerning the definition of what constitutes the
assets of a Plan. (Labor Reg. Section 2510.3-101) Under this regulation, the
underlying assets and properties of corporations, partnerships and certain other
entities in which a Plan makes an "equity" investment could be deemed for
purposes of ERISA to be assets of the investing Plan in certain circumstances.
However, the regulation provides that, generally, the assets of a corporation or
partnership in which a Plan invests will not be deemed for purposes of ERISA to
be assets of such Plan if the equity interest
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acquired by the investing Plan is a publicly-offered security. A
publicly-offered security, as defined in the Labor Reg. Section 2510.3-101, is a
security that is widely held, freely transferable and registered under the
Securities Exchange Act of 1934, as amended.
In addition to the imposition of general fiduciary standards of investment
prudence and diversification, ERISA prohibits a broad range of transactions
involving Plan assets and persons ("Parties in Interest") having certain
specified relationships to a Plan and imposes additional prohibitions where
Parties in Interest are fiduciaries with respect to such Plan. Because the Loans
may be deemed Plan assets of each Plan that purchases Securities, an investment
in the Securities by a Plan might be a prohibited transaction under ERISA
Sections 406 and 407 and subject to an excise tax under Code Section 4975 unless
a statutory or administrative exemption applies.
In Prohibited Transaction Exemption 83-1 ("PTE 83-1"), which amended
Prohibited Transaction Exemption 81-7, the DOL exempted from ERISA's prohibited
transaction rules certain transactions relating to the operation of residential
mortgage pool investment trusts and the purchase, sale and holding of "mortgage
pool pass-through certificates" in the initial issuance of such certificates.
PTE 83-1 permits, subject to certain conditions, transactions which might
otherwise be prohibited between Plans and Parties in Interest with respect to
those Plans related to the origination, maintenance and termination of mortgage
pools consisting of mortgage loans secured by first or second mortgages or deeds
of trust on single-family residential property, and the acquisition and holding
of certain mortgage pool pass-through certificates representing an interest in
such mortgage pools by Plans. If the general conditions (discussed below) of PTE
83-1 are satisfied, investments by a Plan in Securities that represent interests
in a Pool consisting of Loans ("Single Family Securities") will be exempt from
the prohibitions of ERISA Sections 406(a) and 407 (relating generally to
transactions with Parties in Interest who are not fiduciaries) if the Plan
purchases the Single Family Securities at no more than fair market value and
will be exempt from the prohibitions of ERISA Sections 406(b)(1) and (2)
(relating generally to transactions with fiduciaries) if, in addition, the
purchase is approved by an independent fiduciary, no sales commission is paid to
the pool sponsor, the Plan does not purchase more than 25% of all Single Family
Securities, and at least 50% of all Single Family Securities are purchased by
persons independent of the pool sponsor or pool trustee. PTE 83-1 does not
provide an exemption for transactions involving Subordinate Securities.
Accordingly, unless otherwise provided in the related Prospectus Supplement, no
transfer of a Subordinate Security or a Security which is not a Single Family
Security may be made to a Plan.
The discussion in this and the next succeeding paragraph applies only to
Single Family Securities. The Depositor believes that, for purposes of PTE 83-1,
the term "mortgage pass-through certificate" would include: (i) Securities
issued in a Series consisting of only a single class of Securities; and (ii)
Securities issued in a Series in which there is only one class of such
Securities; provided that the Securities in the case of clause (i), or the
Securities in the case of clause (ii), evidence the beneficial ownership of both
a specified percentage of future interest payments (greater than 0%) and a
specified percentage (greater than 0%) of future principal payments on the
Loans. It is not clear whether a class of Securities that evidences the
beneficial ownership in a Trust Fund divided into Loan groups, beneficial
ownership of a specified percentage of interest payments only or principal
payments only, or a notional amount of either principal or interest payments, or
a class of Securities entitled to receive payments of interest and principal on
the Loans only after payments to other classes or after the occurrence of
certain specified events would be a "mortgage pass-through certificate" for
purposes of PTE 83-1.
PTE 83-1 sets forth three general conditions which must be satisfied for
any transaction to be eligible for exemption: (i) the maintenance of a system of
insurance or other protection for the pooled mortgage loans and property
securing such loans, and for indemnifying Securityholders against reductions in
pass-through payments due to property damage or defaults in loan payments in an
amount not less than the greater of one percent of the aggregate principal
balance of all covered pooled mortgage loans or the principal balance of the
largest covered pooled mortgage loan; (ii) the existence of a pool trustee who
is not an affiliate of the pool sponsor; and (iii) 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 Pool. The Depositor believes that the first general condition referred to
above will be satisfied with respect to the Securities in a Series issued
without a subordination feature, or the Securities only in a Series issued with
a subordination feature, provided that the subordination and Reserve Account,
subordination by shifting of interests, the pool insurance or other form of
credit enhancement described under
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"Credit Enhancement" herein (such subordination, pool insurance or other form of
credit enhancement being the system of insurance or other protection referred to
above) with respect to a Series of Securities is maintained in an amount not
less than the greater of one percent of the aggregate principal balance of the
Loans or the principal balance of the largest Loan. See "Description of the
Securities" herein. In the absence of a ruling that the system of insurance or
other protection with respect to a Series of Securities satisfies the first
general condition referred to above, there can be no assurance that these
features will be so viewed by the DOL. The Trustee will not be affiliated with
the Depositor.
Each Plan fiduciary who is responsible for making the investment decisions
whether to purchase or commit to purchase and to hold Single Family Securities
must make its own determination as to whether the first and third general
conditions, and the specific conditions described briefly in the preceding
paragraph, of PTE 83-1 have been satisfied, or as to the availability of any
other prohibited transaction exemptions. Each Plan fiduciary should also
determine whether, under the general fiduciary standards of investment prudence
and diversification, an investment in the Securities is appropriate for the
Plan, taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
The DOL has granted to certain underwriters individual administrative
exemptions (the "Underwriter Exemptions") from certain of the prohibited
transaction rules of ERISA and the related excise tax provisions of Section 4975
of the Code with respect to the initial purchase, the holding and the subsequent
resale by Plans of certificates in pass-through trusts that consist of certain
receivables, loans and other obligations that meet the conditions and
requirements of the Underwriter Exemptions.
While each underwriter Exemption is an individual exemption separately
granted to a specific underwriter, the terms and conditions which generally
apply to the Underwriter Exemptions are substantially the following:
(1) the acquisition of the certificates by a Plan is on terms
(including the price for the certificates) that are at least as favorable
to the Plan as they would be in an arm's-length transaction with an
unrelated party;
(2) the rights and interest evidenced by the certificates acquired by
the Plan are not subordinated to the rights and interests evidenced by
other certificates of the trust fund;
(3) the certificates required by the Plan have received a rating at
the time of such acquisition that is one of the three highest generic
rating categories from Standard & Poor's Ratings Group, a Division of The
McGraw-Hill Companies ("S&P"), Moody's Investors Service, Inc. ("Moody's"),
Duff & Phelps Credit Rating Co. ("DCR") or Fitch Investors Service, Inc.
("Fitch");
(4) the trustee must not be an affiliate of any other member of the
Restricted Group as defined below;
(5) the sum of all payments made to and retained by the underwriters
in connection with the distribution of the certificates represents not more
than reasonable compensation for underwriting the certificates; the sum of
all payments made to and retained by the seller pursuant to the assignment
of the loans to the trust fund represents not more than the fair market
value of such loans; the sum of all payments made to and retained by the
servicer and any other servicer represents not more than reasonable
compensation for such person's services under the agreement pursuant to
which the loans are pooled and reimbursements of such person's reasonable
expenses in connection therewith; and
(6) the Plan investing in the certificates is an "accredited investor"
as defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
Commission under the Securities Act of 1933 as amended.
The trust fund must also meet the following requirements:
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(i) the corpus of the trust fund must consist solely of assets of the type
that have been included in other investment pools;
(ii) certificates in such other investment pools must have been rated in
one of the three highest rating categories of S&P, Moody's, Fitch or DCR for at
least one year prior to the Plan's acquisition of certificates; and
(iii) certificates evidencing interests in such other investment pools must
have been purchased by investors other than Plans for at least one year prior to
any Plan's acquisition of certificates.
Moreover, the Underwriter Exemptions generally provide relief from certain
self-dealing/conflict of interest prohibited transactions that may occur when
the Plan fiduciary causes a Plan to acquire certificates in a trust as to which
the fiduciary (or its affiliate) is an obligor on the receivables held in the
trust provided that, among other requirements: (i) in the case of an acquisition
in connection with the initial issuance of certificates, at least fifty percent
(50%) of each class of certificates in which Plans have invested is acquired by
persons independent of the Restricted Group, (ii) such fiduciary (or its
affiliate) is an obligor with respect to five percent (5%) or less of the fair
market value of the obligations contained in the trust; (iii) the Plan's
investment in certificates of any class does not exceed twenty-five percent
(25%) of all of the certificates of that class outstanding at the time of the
acquisition; and (iv) immediately after the acquisition, no more than
twenty-five percent (25%) of the assets of the Plan with respect to which such
person is a fiduciary is invested in certificates representing an interest in
one or more trusts containing assets sold or serviced by the same entity. The
Underwriter Exemptions do not apply to Plans sponsored by the Seller, the
related Underwriter, the Trustee, the Master Servicer, any insurer with respect
to the Loans, any obligor with respect to Loans included in the Trust Fund
constituting more than five percent (5%) of the aggregate unamortized principal
balance of the assets in the Trust Fund, or any affiliate of such parties (the
"Restricted Group").
The Prospectus Supplement for each Series of Securities will indicate the
classes of Securities, if any, offered thereby as to which it is expected that
an Underwriter Exemption will apply.
The Underwriter Exemption contains several requirements, some of which
differ from those in PTE 83-l. The Underwriter Exemption contains an expanded
definition of "certificate" which includes an interest which entitles the holder
to pass-through payments of principal, interest and/or other payments. The
Underwriter Exemption contains an expanded definition of "trust" which permits
the trust corpus to consist of secured consumer receivables. The definition of
"trust", however, does not include any investment pool unless, inter alia, (i)
the investment pool consists only of assets of the type which have been included
in other investment pools, (ii) certificates evidencing interests in such other
investment pools have been purchased by investors other than Plans for at least
one year prior to the Plan's acquisition of certificates pursuant to the
Underwriter Exemption, and (iii) certificates in such other investment pools
have been rated in one of the three highest generic rating categories of the
four credit rating agencies noted below. Generally, the Underwriter Exemption
holds that the acquisition of the certificates by a Plan must be on terms
(including the price for the certificates) that are at least as favorable to the
Plan as they would be in an arm's length transaction with an unrelated party.
The Underwriter Exemption requires that the rights and interests evidenced by
the certificates not be "subordinated" to the rights and interests evidenced by
other certificates of the same trust. The Underwriter Exemption requires that
certificates acquired by a Plan have received a rating at the time of their
acquisition that is in one of the three highest generic rating categories of
S&P, Moody's, Fitch or DCR. The Underwriter Exemption specifies that the pool
trustee must not be an affiliate of the pool sponsor, nor an affiliate of the
Underwriter, the pool servicer, any obligor with respect to mortgage loans
included in the trust constituting more than five percent of the aggregate
unamortized principal balance of the assets in the trust, or any affiliate of
such entities. Finally, the Underwriter Exemption stipulates that any Plan
investing in the certificates must be an "accredited investor" as defined in
Rule 501(a)(1) of Regulation D of the Securities and Exchange Commission under
the Securities Act of 1933.
Any Plan fiduciary which proposes to cause a Plan to purchase Securities
should consult with their counsel concerning the impact of ERISA and the Code,
the applicability of PTE 83-1 and the Underwriter Exemption, and the potential
consequences in their specific circumstances, prior to making such investment.
Moreover, each Plan fiduciary should determine whether under the general
fiduciary standards of investment procedure and diversification
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an investment in the Securities is appropriate for the Plan, taking into account
the overall investment policy of the Plan and the composition of the Plan's
investment portfolio.
LEGAL INVESTMENT
The Prospectus Supplement for each series of Securities will specify which,
if any, of the classes of Securities offered thereby constitute "mortgage
related securities" for purposes of the Secondary Mortgage Market Enhancement
Act of 1984 ("SMMEA"). Classes of Securities that qualify as "mortgage related
securities" 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
(including the District of Columbia and Puerto Rico) whose authorized
investments are subject to state regulations to the same extent as, under
applicable law, obligations issued by or guaranteed as to principal and interest
by the United States or any such entities. Under SMMEA, if a state enacts
legislation prior to October 4, 1991 specifically limiting the legal investment
authority of any such entities with respect to "mortgage related securities",
securities will constitute legal investments for entities subject to such
legislation only to the extent provided therein. Approximately twenty-one states
adopted such legislation prior to the October 4, 1991 deadline. 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
securities, or require the sale or other disposition of securities, so long as
such contractual commitment was made or such securities were 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 in Securities
without limitations as to the percentage of their assets represented thereby,
federal credit unions may invest in mortgage related securities, and national
banks may purchase 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
authority may prescribe. In this connection, federal credit unions should review
the National Credit Union Administration ("NCUA") Letter to Credit Unions No.
96, as modified by Letter to Credit Unions No. 108, which includes guidelines to
assist federal credit unions in making investment decisions for mortgage related
securities and the NCUA's regulation "Investment and Deposit Activities" (12
C.F.R. Part 703), which sets forth certain restrictions on investment by federal
credit unions in mortgage related securities (in each case whether or not the
class of Securities under consideration for purchase constituted a "mortgage
related security").
All depository institutions considering an investment in the Securities
(whether or not the class of Securities under consideration for purchase
constitutes a "mortgage related security") should review the Federal Financial
Institutions Examination Council's Supervisory Policy Statement on the
Securities Activities (to the extent adopted by their respective regulators)
(the "Policy Statement") setting forth, in relevant part, certain securities
trading and sales practices deemed unsuitable for an institution's investment
portfolio, and guidelines for (and restrictions on) investing in mortgage
derivative products, including "mortgage related securities", which are
"high-risk mortgage securities" as defined in the Policy Statement. According to
the Policy Statement, such "high-risk mortgage securities" include securities
such as Securities not entitled to distributions allocated to principal or
interest, or Subordinated Securities. Under the Policy Statement, it is the
responsibility of each depository institution to determine, prior to purchase
(and at stated intervals thereafter), whether a particular mortgage derivative
product is a "high-risk mortgage security", and whether the purchase (or
retention) of such a product would be consistent with the Policy Statement.
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to "prudent investor" provisions which may restrict or prohibit investment in
securities which are not "interest bearing" or "income paying".
There may be other restrictions on the ability of certain investors,
including depository institutions, either to purchase Securities or to purchase
Securities representing more than a specified percentage of the investor's
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assets. Investors should consult their own legal advisors in determining whether
and to what extent the Securities constitute legal investments for such
investors.
METHOD OF DISTRIBUTION
Securities are being offered hereby in Series from time to time (each
Series evidencing or relating to a separate Trust Fund) through any of the
following methods:
1. By negotiated firm commitment underwriting and public reoffering by
underwriters;
2. By agency placements through one or more placement agents primarily
with institutional investors and dealers; and
3. By placement directly by the Depositor with institutional
investors.
A Prospectus Supplement will be prepared for each Series which will
describe the method of offering being used for that Series and will set forth
the identity of any underwriters thereof and either the price at which such
Series is being offered, the nature and amount of any underwriting discounts or
additional compensation to such underwriters and the proceeds of the offering to
the Depositor, or the method by which the price at which the underwriters will
sell the Securities will be determined. Each Prospectus Supplement for an
underwritten offering will also contain information regarding the nature of the
underwriters' obligations, any material relationship between the Depositor and
any underwriter and, where appropriate, information regarding any discounts or
concessions to be allowed or reallowed to dealers or others and any arrangements
to stabilize the market for the Securities so offered. In firm commitment
underwritten offerings, the underwriters will be obligated to purchase all of
the Securities of such Series if any such Securities are purchased. Securities
may be acquired by the underwriters for their own accounts and may be resold
from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale.
Underwriters and agents may be entitled under agreements entered into with
the Depositor to indemnification by the Depositor against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribution with respect to payments which such underwriters or agents
may be required to make in respect thereof.
If a Series is offered other than through underwriters, the Prospectus
Supplement relating thereto will contain information regarding the nature of
such offering and any agreements to be entered into between the Depositor and
purchasers of Securities of such Series.
LEGAL MATTERS
The validity of the Securities of each Series, including certain federal
income tax consequences with respect thereto, will be passed upon for the
Depositor by Brown & Wood LLP, One World Trade Center, New York, New York 10048.
FINANCIAL INFORMATION
A new Trust Fund will be formed with respect to each Series of Securities
and no Trust Fund will engage in any business activities or have any assets or
obligations prior to the issuance of the related Series of Securities.
Accordingly, no financial statements with respect to any Trust Fund will be
included in this Prospectus or in the related Prospectus Supplement.
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RATING
It is a condition to the issuance of the Securities of each Series offered
hereby and by the Prospectus Supplement that they shall have been rated in one
of the four highest rating categories by the nationally recognized statistical
rating agency or agencies (each, a "Rating Agency") specified in the related
Prospectus Supplement.
Any such rating would be based on, among other things, the adequacy of the
value of the Trust Fund Assets and any credit enhancement with respect to such
class and will reflect such Rating Agency's assessment solely of the likelihood
that holders of a class of Securities of such class will receive payments to
which such Securityholders are entitled under the related Agreement. Such rating
will not constitute an assessment of the likelihood that principal prepayments
on the related Loans will be made, the degree to which the rate of such
prepayments might differ from that originally anticipated or the likelihood of
early optional termination of the Series of Securities. Such rating should not
be deemed a recommendation to purchase, hold or sell Securities, inasmuch as it
does not address market price or suitability for a particular investor. Each
security rating should be evaluated independently of any other security rating.
Such rating will not address the possibility that prepayment at higher or lower
rates than anticipated by an investor may cause such investor to experience a
lower than anticipated yield or that an investor purchasing a Security at a
significant premium might fail to recoup its initial investment under certain
prepayment scenarios.
There is also no assurance that any such rating will remain in effect for
any given period of time or that it may not be lowered or withdrawn entirely by
the Rating Agency in the future if in its judgment circumstances in the future
so warrant. In addition to being lowered or withdrawn due to any erosion in the
adequacy of the value of the Trust Fund Assets or any credit enhancement with
respect to a Series, such rating might also be lowered or withdrawn among other
reasons, because of an adverse change in the financial or other condition of a
credit enhancement provider or a change in the rating of such credit enhancement
provider's long term debt.
The amount, type and nature of credit enhancement, if any, established with
respect to a Series of Securities will be determined on the basis of criteria
established by each Rating Agency rating classes of such Series. Such criteria
are sometimes based upon an actuarial analysis of the behavior of mortgage loans
in a larger group. Such analysis is often the basis upon which each Rating
Agency determines the amount of credit enhancement required with respect to each
such class. There can be no assurance that the historical data supporting any
such actuarial analysis will accurately reflect future experience nor any
assurance that the data derived from a large pool of mortgage loans accurately
predicts the delinquency, foreclosure or loss experience of any particular pool
of Loans. No assurance can be given that values of any Properties have remained
or will remain at their levels on the respective dates of origination of the
related Loans. If the residential real estate markets should experience an
overall decline in property values such that the outstanding principal balances
of the Loans in a particular Trust Fund and any secondary financing on the
related Properties become equal to or greater than the value of the Properties,
the rates of delinquencies, foreclosures and losses could be higher than those
now generally experienced in the mortgage lending industry. In additional,
adverse economic conditions (which may or may not affect real property values)
may affect the timely payment by mortgagors of scheduled payments of principal
and interest on the Loans and, accordingly, the rates of delinquencies,
foreclosures and losses with respect to any Trust Fund. To the extent that such
losses are not covered by credit enhancement, such losses will be borne, at
least in part, by the holders of one or more classes of the Securities of the
related Series.
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INDEX OF DEFINED TERMS
Term Page
- ---- ----
Accretion Directed ......................................... 30
Accrual .................................................... 32
Accrual Securities ......................................... 27
Advance .................................................... 9
Agreement .................................................. 18
Amortizable Bond Premium Regulations ....................... 75
APR ........................................................ 21
Available Funds ............................................ 26
Balloon payment ............................................ 19
Belgian Cooperative ........................................ 37
Beneficial owner ........................................... 36
BIF ........................................................ 47
Book-Entry Securities ...................................... 35
Borrower ................................................... 66
Buydown Fund ............................................... 19
Buydown Loans .............................................. 19
Calculation Agent .......................................... 32
Cash Flow Bond Method ...................................... 82
CEDEL Participants ......................................... 37
CERCLA ..................................................... 14, 61
Certificates ............................................... 1, 4
Class Security Balance ..................................... 27
Closed-End Loans ........................................... 4
Code ....................................................... 10, 71
COFI Securities ............................................ 34
Collateral Value ........................................... 21
Combined Loan-to-Value Ratio ............................... 21
Commission ................................................. 2
Companion classes .......................................... 31
Component Securities ....................................... 30
Contingent Regulations ..................................... 73
Contracts .................................................. 64
Cooperative Loans .......................................... 18
Cooperatives ............................................... 18
Cut-off Date ............................................... 4, 17
Cut-off Date Principal Balance ............................. 25
DCR ........................................................ 92
Debt Securities ............................................ 72
Definitive Certificate ..................................... 36
Depositor .................................................. 1, 22
Detailed Description ....................................... 18
Distribution Date .......................................... 6
DOL ........................................................ 90
DTC ........................................................ 15, 35
Eleventh District .......................................... 33
EPA ........................................................ 61
ERISA ...................................................... 10
Euroclear Operator ......................................... 37
98
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<PAGE>
Euroclear Participants ..................................... 37
European Depositaries ...................................... 36
Excess servicing ........................................... 82
Exchange Act ............................................... 2
FDIC ....................................................... 23
FHA ........................................................ 8
FHLBSF ..................................................... 33
FHLMC ...................................................... 23
Financial Intermediary ..................................... 36
Fitch ...................................................... 92
Fixed Rate ................................................. 31
Floating Rate .............................................. 31
FNMA ....................................................... 23
Foreign person ............................................. 85
Funding Period ............................................. 16
Garn-St Germain Act ........................................ 63
Holder in Due Course Rules ................................. 14
Home Equity Loans .......................................... 1, 5
Home Improvement Contracts ................................. 1, 5, 20
Home Improvements .......................................... 1
Indenture .................................................. 24
Installment Contract ....................................... 66
Insurance Proceeds ......................................... 47
Insured Expenses ........................................... 47
Interest Only .............................................. 32
Interest Weighted Securities ............................... 74
Inverse Floating Rate ...................................... 31
IRS ........................................................ 73
L/C Bank ................................................... 7, 39
L/C Percentage ............................................. 8, 39
Lender ..................................................... 66
Liquidation Expenses ....................................... 47
Liquidation Proceeds ....................................... 47
Loan Rate .................................................. 6, 19
Loans ...................................................... 1
Lockout periods ............................................ 19
Master Servicer ............................................ 4
Master Servicing Agreement ................................. 18
Master Servicing Fee ....................................... 53
Moody's .................................................... 92
Morgan ..................................................... 37
Mortgage ................................................... 45
Mortgage Loan .............................................. 4
Mortgaged Properties ....................................... 20
National Cost of Funds Index ............................... 34
NCUA ....................................................... 94
Nonresidents ............................................... 83
Notes ...................................................... 1, 4
Notional Amount Securities ................................. 30
OID ........................................................ 72
OID Regulations ............................................ 72
OTS ........................................................ 34
PACs ....................................................... 30
Partial Accrual ............................................ 32
99
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<PAGE>
Parties in Interest ........................................ 90
Pass-Through Rate .......................................... 6
Pass-Through Securities .................................... 80
Pay-Through Security ....................................... 73
Percentage Interests ....................................... 54
Permitted Investments ...................................... 40
Planned Principal Class .................................... 30
Plans ...................................................... 90
Policy Statement ........................................... 94
Pool ....................................................... 4, 17
Pool Insurance Policy ...................................... 41
Pool Insurer ............................................... 41
Pooling and Servicing Agreement ............................ 24
Pre-Funded Amount .......................................... 16
Pre-Funding Account ........................................ 4, 16
Prepayment Assumption ...................................... 73
Primary Mortgage Insurance Policy .......................... 20
Principal Only ............................................. 32
Principal Prepayments ...................................... 27
Properties ................................................. 5, 20
Property Improvement Loans ................................. 68
Proposed Mark-to-Market Regulations ........................ 80
PTE 83-1 ................................................... 91
Purchase Price ............................................. 24
Rating Agency .............................................. 95
Ratio Strip Securities ..................................... 81
RCRA ....................................................... 62
Record Date ................................................ 25
Reference Banks ............................................ 32
Refinance Loan ............................................. 21
Regular Interest Securities ................................ 71
Relevant Depositary ........................................ 36
Relief Act ................................................. 66
REMIC ...................................................... 1, 26, 71
Reserve Account ............................................ 7, 26
Residual Interest Security ................................. 77
Restricted Group ........................................... 93
Retained Interest .......................................... 25
Revolving Credit Line Loans ................................ 4
Riegle Act ................................................. 14
Rules ...................................................... 36
S&P ........................................................ 92
SAIF ....................................................... 47
Scheduled Principal Class .................................. 31
Securities ................................................. 1, 4
Security Account ........................................... 47
Security Owners ............................................ 35
Security Register .......................................... 25
Securityholders ............................................ 36
Seller ..................................................... 1
Sellers .................................................... 17
Senior Securities .......................................... 5, 39
100
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Sequential Pay ............................................. 31
Series ..................................................... 1
Servicing Fee .............................................. 80
Short-Term Note ............................................ 85
Single Family Properties ................................... 20
Single Family Securities ................................... 91
SMMEA ...................................................... 10, 93
Strip ...................................................... 31
Stripped Securities ........................................ 80
Sub-Servicer ............................................... 9, 18
Sub-Servicing Agreement .................................... 49
Subordinated Securities .................................... 5
Subsequent Loans ........................................... 16
Support Class .............................................. 31
TACs ....................................................... 31
Targeted Principal Class ................................... 31
Terms and Conditions ....................................... 37
TIN ........................................................ 83
Title I Loans .............................................. 68
Title I Program ............................................ 67
Title V .................................................... 64, 65
Trust Agreement ............................................ 18, 24
Trust Fund ................................................. 1
Trust Fund Assets .......................................... 1, 4, 17
Trustee .................................................... 4, 24
UCC ........................................................ 60
Underwriter Exemptions ..................................... 92
VA ......................................................... 8
VA Guaranty ................................................ 52
Variable Rate .............................................. 32
101
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution*
The following table sets forth the estimated expenses in connection with
the issuance and distribution of the Securities being registered under this
Registration Statement, other than underwriting discounts and commissions:
SEC Registration Fee ..................................... $ 606,060.61
Printing and Engraving Expenses .......................... $ 35,000.00
Legal Fees and Expenses .................................. $ 65,000.00
Trustee Fees and Expenses ................................ $ 15,000.00
Accounting Fees and Expenses ............................. $ 25,000.00
Blue Sky Fees and Expenses ............................... $ 5,000.00
Rating Agency Fees ....................................... $ 125,000.00
Miscellaneous ............................................ $ 5,000.00
==============
Total .................................................... $ 881,060.61
==============
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* All amounts except the SEC Registration Fee are estimates of expenses
incurred in connection with the issuance and distribution of a Series of
Securities in an aggregate principal amount assumed for these purposes to be
equal to $250,000,000 of Securities registered hereby.
Item 15. Indemnification of Directors and Officers.
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 or she is
or was a director, officer, 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. Depending on the character of the proceeding, a corporation may
indemnify against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with
such action, suit or proceeding if the person indemnified acted in good faith
and in a manner he or she 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 or her conduct was unlawful. In the case
of an action by or in the right of the corporation, 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 but in view of all
the circumstances of the case, 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 or officer of a corporation has
been successful in the defense of any action, suit or proceeding referred to
above or in the defense of any claim, issue or matter therein, he or she shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
The Certificate of Incorporation and Bylaws of the Registrant provide, in
effect, that, to the extent and under the circumstances permitted by Section 145
of the General Corporation Law of Delaware, the Registrant
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<PAGE>
shall indemnify any person who was or is a party or is threatened to be made a
party to any action, suit or proceeding of the type described above by reason of
the fact that he or she is or was a director, officer, employee or agent of the
Registrant.
Item 16. Exhibits.
1.1(a) Form of Underwriting Agreement.
1.1(b) Form of Indemnification and Contribution Agreement.
3.1 Certificate of Incorporation of the Registrant.**
3.2 By-laws of the Registrant.**
4.1 Form of Pooling and Servicing Agreement relating to Home Equity Loan
Asset Backed Certificates.
4.2 Form of Pooling and Servicing Agreement relating to Mortgage
Pass-Through Certificates.
4.3 Form of Trust Agreement.
4.4 Form of Indenture.
4.5 Form of Master Servicing Agreement.
5.1 Opinion of Brown & Wood LLP as to legality of the Securities.
8.1 Opinion of Brown & Wood LLP as to tax matters
(included in Exhibit 5.1).
10.1 Form of Loan Purchase Agreement.
23.1 Consent of Brown & Wood LLP (included in Exhibits 5.1 and 8.1
hereof).
24.1 Power of Attorney.**
- ------------
** Previously filed.
Item 17. Undertakings.
(a) 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, as amended (the "Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this Registration
Statement.
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<PAGE>
(2) That, for the purpose of determining any liability under the Act,
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.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of a Trust Fund'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 this Registration Statement 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.
(c) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 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.
(d) The undersigned Registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act of 1939 in accordance
with the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Trust Indenture Act of 1939.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that (i) it reasonably believes that the security rating
requirement of Transaction Requirement B.5 of Form S-3 will be met by the time
of sale of each Series of Securities to which this Registration Statement
relates and (ii) it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Pasadena, California on the 15th day of October,
1996.
CWABS, Inc.
By /s/ STANFORD L. KURLAND
--------------------------------------
Name: Stanford L. Kurland
Title: Chairman of the Board,
President and Director
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 2 to Registration Statement has been signed by the following
persons in the capacities indicated on the dates indicated.
Signatures Title Date
---------- ----- ----
/s/ STANFORD L. KURLAND Chairman of the Board, President October 15, 1996
- ------------------------ (Principal Executive Officer)
Stanford L. Kurland and Director
* Executive Vice President and Chief October 15, 1996
- ------------------------ Financial Officer (Principal
Carlos M. Garcia Accounting Officer) and Director
* Director October 15, 1996
- ------------------------
Kevin W. Bartlett
* Director October 15, 1996
- ------------------------
Thomas H. Boone
* Director October 15, 1996
- ------------------------
Jeffrey P. Grogin
*By /s/ STANFORD L. KURLAND
------------------------
Stanford L. Kurland
Attorney-in-Fact
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<PAGE>
EXHIBIT INDEX
Sequential
Exhibit Page
No. Description of Exhibit Number
1.1(a) Form of Underwriting Agreement.
1.1(b) Form of Indemnification and Contribution Agreement.
3.1 Certificate of Incorporation of the Registrant.**
3.2 By-laws of the Registrant.**
4.1 Form of Pooling and Servicing Agreement relating to Home Equity Loan
Asset Backed Certificates.
4.2 Form of Pooling and Servicing Agreement relating to Mortgage
Pass-Through Certificates.
4.3 Form of Trust Agreement.
4.4 Form of Indenture.
4.5 Form of Master Servicing Agreement.
5.1 Opinion of Brown & Wood LLP as to legality of the Securities.
8.1 Opinion of Brown & Wood LLP as to tax matters
(included in Exhibit 5.1).
10.1 Form of Loan Purchase Agreement.
23.1 Consent of Brown & Wood LLP (included in Exhibits 5.1 and 8.1
hereof).
24.1 Power of Attorney.**
- ------------
** Previously filed.
<PAGE>
<PAGE>
CWABS, INC.
Asset Backed Certificates
UNDERWRITING AGREEMENT
Dated the date
specified on the
signature page
hereof
The Firm or Firms
of Underwriters named
on the signature page hereof
Ladies and Gentlemen:
CWABS, Inc., a Delaware corporation ("CWABS"), proposes to cause
to be issued and to sell, severally and not jointly, to you, as underwriter
(each, an "Underwriter"), the principal amount of each Class of Asset Backed
Certificates of the series specified on the signature page hereof and described
in Section 2 hereof (the "Underwritten Public Certificates" and, together with
any certificates of such series retained by CWABS or the Seller, if any, set
forth on the cover page of the Prospectus Supplement (as defined below),
collectively, the "Public Certificates") having the characteristics set forth in
the Prospectus Supplement, evidencing ownership interests in a trust consisting
[mortgage loans secured by first and/or subordinate interest liens on one- to
four-family mortgage loans][closed-end and/or revolving home equity loans
secured by subordinate liens on one- to four-family residential properties]
acquired by CWABS (the "Mortgage Loans")
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<PAGE>
and related property, but excluding the Retained Interest (as defined in the
Prospectus Supplement), if any (collectively, the "Trust Fund"). The Mortgage
Loans will be of the type and will have the characteristics described in the
Prospectus Supplement, subject to the variances, ranges, minimums and maximums
set forth in the Prospectus Supplement, and will have the aggregate principal
balance set forth in the Prospectus Supplement, subject to an upward or downward
variance in principal balance, not to exceed the percentage set forth in the
Prospectus Supplement, the precise aggregate principal balance within such range
to be determined by CWABS in its sole discretion.
The Public Certificates, together with the other classes of
certificates of the series specified on Exhibit A hereto (the "Private
Certificates," and collectively with the Public Certificates, the
"Certificates") are to be issued under a pooling and servicing agreement (the
"Pooling and Servicing Agreement"), dated as of the Cut-off Date (as defined in
the Prospectus Supplement), among CWABS, as Depositor, the master servicer and
seller specified in the Prospectus Supplement (the "Seller"), and
[_________________], as trustee (the "Trustee"). The Public Certificates of each
class will be issued in the minimum denominations and will have the terms set
forth in the Prospectus Supplement. Capitalized terms used but not otherwise
defined herein shall have the respective meanings ascribed thereto in the
Pooling and Servicing Agreement.
1. Representations and Warranties. CWABS represents
and warrants to, and agrees with, each Underwriter that:
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(i) A registration statement on Form S-3 (File No. 333-08389),
including a prospectus, has been filed with the Securities and Exchange
Commission (the "Commission") and has become effective under the
Securities Act of 1933, as amended (the "Act"). As of the Closing Date
(as hereinafter defined), no stop order suspending the effectiveness of
such registration statement has been issued and no proceedings for that
purpose have been initiated or to CWABS's knowledge threatened by the
Commission. The prospectus in the form in which it will be used in
connection with the offering of the Public Certificates is proposed to
be supplemented by a prospectus supplement dated the date hereof
relating to the Certificates and, as so supplemented, to be filed with
the Commission pursuant to Rule 424 under the Act. (Such registration
statement is hereinafter referred to as the "Registration Statement";
such prospectus supplement, as first filed with the Commission, is
hereinafter referred to as the "Prospectus Supplement"; and such
prospectus, in the form in which it will first be filed with the
Commission in connection with the offering of the Public Certificates,
including documents incorporated therein as of the time of such filing
and as supplemented by the Prospectus Supplement, is hereinafter
referred to as the "Prospectus"). Any reference herein to the
Registration Statement, a preliminary prospectus or the Prospectus shall
be deemed to refer to and include the documents
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<PAGE>
incorporated by reference therein pursuant to Item 12 of Form S-3 which
were filed under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") on or before the date on which the Registration
Statement, as amended, became effective or the issue date of such
preliminary prospectus or the date on which the Prospectus is filed
pursuant to Rule 424(b) under the Act, as the case may be; and any
reference herein to the terms "amend", "amendment" or supplement with
respect to the Registration Statement, any preliminary prospectus or the
Prospectus shall be deemed to refer to and include the filing of any
document under the Exchange Act after the date on which the Registration
Statement became effective or the issue date of any preliminary
prospectus or the date on which the Prospectus is filed pursuant to Rule
424(b) under the Act, as the case may be, deemed to be incorporated
therein by reference.
(ii) The Registration Statement and the Prospectus, as of the date
of the Prospectus Supplement will conform, and the Registration
Statement and the Prospectus as revised, amended or supplemented and
filed with the Commission prior to the termination of the offering of
the Public Certificates, as of their respective effective or issue
dates, will conform in all material respects to the requirements of the
Act and the rules and regulations of the Commission thereunder
applicable to such documents as of such respective dates, and the
Registration Statement
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<PAGE>
and the Prospectus as revised, amended or supplemented and filed with
the Commission as of the Closing Date will conform in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder applicable to such documents as of the Closing
Date. The Registration Statement, at the time it became effective, did
not include 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 not misleading; and the Prospectus as of the date of
the Prospectus Supplement, and the Prospectus as revised, amended or
supplemented and filed prior to the Closing Date, as of the Closing
Date, will not include any untrue statement of a material fact and will
not omit 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; provided, however, that
CWABS makes no representations, warranties or agreements as to the
information contained in or omitted from the Prospectus or any revision
or amendment thereof or supplement thereto in reliance upon and in
conformity with information furnished in writing to CWABS by or on
behalf of any Underwriter specifically for use in connection with the
preparation of the Prospectus or any revision or amendment thereof or
supplement thereto, such information being defined in the
Indemnification and Contribution Agreement, dated the date hereof (the
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<PAGE>
"Indemnification Agreement"), among CWABS, the Master Servicer and the
other parties named therein.
(iii) The Public Certificates will conform in all material respects
to the description thereof contained in the Prospectus, and each of the
Certificates, when validly authenticated, issued and delivered in
accordance with the Pooling and Servicing Agreement, will be duly and
validly issued and outstanding and entitled to the benefits of the
Pooling and Servicing Agreement. [Each Certificate of the classes
indicated to be "mortgage related securities" under the heading "Summary
of Terms--Legal Investment" in the Prospectus Supplement will, when
issued, be a "mortgage related security" as such term is defined in
Section 3(a)(41) of the Exchange Act.]
(iv) This Agreement has been duly authorized, executed and delivered
by CWABS. As of the Closing Date, the Pooling and Servicing Agreement
will have been duly authorized, executed and delivered by CWABS and will
conform in all material respects to the descriptions thereof contained
in the Prospectus and, assuming the valid execution and delivery thereof
by the other parties thereto, this Agreement and the Pooling and
Servicing Agreement each will constitute a legal, valid and binding
agreement of CWABS enforceable in accordance with its terms, except as
the same may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting
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creditors' rights generally and by general principles of equity.
(v) CWABS has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware
with corporate power and authority to own its properties and conduct its
business as described in the Prospectus and to enter into and perform
its obligations under the Pooling and Servicing Agreement and this
Agreement.
(vi) Neither the issuance or delivery of the Certificates, nor the
consummation of any other of the transactions contemplated herein, nor
compliance with the provisions of the Pooling and Servicing Agreement,
the Indemnification Agreement or this Agreement, will conflict with or
result in the breach of any material term or provision of the
certificate of incorporation or by-laws of CWABS, and CWABS is not in
breach or violation of or in default (nor has an event occurred which
with notice or lapse of time or both would constitute a default) under
the terms of (i) any indenture, contract, lease, mortgage, deed of
trust, note, agreement or other evidence of indebtedness or other
agreement, obligation or instrument to which CWABS is a party or by
which it or its properties are bound, or (ii) any law, decree, order,
rule or regulation applicable to CWABS of any court or supervisory,
regulatory, administrative or governmental agency, body or authority, or
arbitrator having jurisdiction over CWABS, or its
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<PAGE>
properties, the default in or the breach or violation of which would
have a material adverse effect on CWABS or the Certificates or the
ability of CWABS to perform its obligations under the Pooling and
Servicing Agreement, the Indemnification Agreement or this Agreement;
and neither the delivery of the Certificates, nor the consummation of
any other of the transactions contemplated herein, nor the compliance
with the provisions of the Pooling and Servicing Agreement, the
Indemnification Agreement or this Agreement will result in such a
breach, violation or default which would have such a material adverse
effect.
(vii) No filing or registration with, notice to, or consent,
approval, authorization or order or other action of any court or
governmental authority or agency is required for the consummation by
CWABS of the transactions contemplated by this Agreement, the
Indemnification Agreement or the Pooling and Servicing Agreement (other
than as required under "blue sky" or state securities laws, as to which
no representations and warranties are made by CWABS), except such as
have been, or will have been prior to the Closing Date, obtained under
the Act, and such recordations of the assignment of the Mortgage Loans
to the Trustee (to the extent such recordations are required pursuant to
the Pooling and Servicing Agreement) that have not yet been completed.
(viii) There is no action, suit or proceeding before or
by any court, administrative or governmental agency now
-8-
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<PAGE>
pending to which CWABS is a party, or to the best of CWABS's knowledge
threatened against CWABS, which could reasonably result individually or
in the aggregate in any material adverse change in the condition
(financial or otherwise), earnings, affairs, regulatory situation or
business prospects of CWABS or could reasonably interfere with or
materially and adversely affect the consummation of the transactions
contemplated in the Pooling and Servicing Agreement, the Indemnification
Agreement or this Agreement.
(ix) At the time of execution and delivery of the Pooling and
Servicing Agreement, (1) CWABS will own the Mortgage Loans being
transferred to the Trust Fund pursuant thereto, free and clear of any
lien, mortgage, pledge, charge, encumbrance, adverse claim or other
security interest (collectively, "Liens"), except to the extent
permitted in the Pooling and Servicing Agreement, and will not have
assigned to any person other than the Trust Fund any of its right, title
or interest, exclusive of the Retained Interest, if any, in the Mortgage
Loans, (2) CWABS will have the power and authority to transfer the
Mortgage Loans to the Trust Fund and to transfer the Certificates to
you, and (3) upon execution and delivery to the Trustee of the Pooling
and Servicing Agreement, and delivery of the Certificates to CWABS, the
Trust Fund will own the Mortgage Loans (exclusive of the Retained
Interest, if any) free of Liens other than Liens permitted by the
Pooling and Servicing Agreement or created or granted by you and (4)
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upon payment and delivery of the Underwritten Public Certificates to
you, you will acquire ownership of the Underwritten Public Certificates,
free of Liens other than Liens permitted by the Pooling and Servicing
Agreement or created or granted by you.
(x) Any taxes, fees and other governmental charges in connection
with the execution, delivery and issuance of this Agreement, the
Indemnification Agreement, the Pooling and Servicing Agreement and the
Certificates have been or will be paid by CWABS at or prior to the
Closing Date, except for fees for recording assignments of the Mortgage
Loans to the Trustee pursuant to the Pooling and Servicing Agreement
that have not yet been completed, which fees will be paid by or on
behalf of CWABS in accordance with the Pooling and Servicing Agreement.
(xi) The Master Servicer is qualified to do business in all
jurisdictions in which its activities as servicer of the Mortgage Loans
require such qualification except where failure to be so qualified will
not have a material adverse effect on such servicing activities.
(xii) The transfer of the Mortgage Loans to the Trust Fund at the
Closing Date will be treated by CWABS for financial accounting and
reporting purposes as a sale of assets and not as a pledge of assets to
secure debt.
(xiii) CWABS is not doing business with Cuba.
2. Purchase and Sale. Subject to the terms and
conditions and in reliance upon the representations and
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warranties herein set forth, CWABS agrees to sell, and each Underwriter agrees,
severally and not jointly, to purchase from CWABS, the respective initial Class
Certificate Balance of each Class of Underwritten Public Certificates to be
purchased by such Underwriter as specified in the Prospectus Supplement. The
purchase price at which each Underwriter will purchase its Underwritten Public
Certificates shall be as set forth in a separate pricing letter dated the date
hereof between such Underwriter and CWABS (each, a "Pricing Letter"), and the
terms of each such Pricing Letter are hereby incorporated herein by reference as
if such terms were stated herein in their entirety. References herein to this
"Agreement" shall include the terms of each Pricing Letter.
3. Delivery and Payment. The Public Certificates shall be
delivered at the office, on the date and at the time specified in the Prospectus
Supplement, which place, date and time may be changed by agreement between the
Underwriters and CWABS (such date and time of delivery of and payment for such
Public Certificates being hereinafter referred to as the "Closing Date").
Delivery of the Underwritten Public Certificates shall be made to each of the
Underwriters as against their respective payment of the purchase price therefor
to or upon the order of CWABS in immediately available federal funds. The
Underwritten Public Certificates shall be registered in such names and in such
denominations as the respective Underwriters may have requested or as required
by book-entry registration not less than two full business days prior to the
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Closing Date. CWABS agrees to make the Underwritten Public Certificates
available for inspection, checking and packaging in New York, New York, on the
business day prior to the Closing Date.
4. Offering by Underwriters. It is understood that the
Underwriters propose to offer the Underwritten Public Certificates for sale as
set forth in the Prospectus and that you will not offer, sell or otherwise
distribute the Underwritten Public Certificates (except for the sale thereof in
exempt transactions) in any state in which the Underwritten Public Certificates
are not exempt from registration under "blue sky" or state securities laws
(except where the Underwritten Public Certificates will have been qualified for
offering and sale at your direction under such "blue sky" or state securities
laws).
5. Agreements. CWABS agrees with each Underwriter
that:
(a) CWABS will cause the Prospectus to be filed with the
Commission pursuant to Rule 424 under the Act and, if necessary, within 15 days
of the Closing Date, will file a report on Form 8-K setting forth specific
information concerning the Mortgage Loans, and will promptly advise each
Underwriter when the Prospectus has been so filed, and, prior to the termination
of the offering of the Public Certificates, will also promptly advise each
Underwriter (i) when any amendment to the Registration Statement has become
effective or any revision of or supplement to the Prospectus has been so filed
(unless
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such amendment, revision or supplement does not relate to the Certificates),
(ii) of any request by the Commission for any amendment of the Registration
Statement or the Prospectus or for any additional information (unless such
request for additional information does not relate to the Certificates), (iii)
of any written notification received by CWABS of the suspension of qualification
of the Public Certificates for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the institution or to the knowledge of CWABS, the threatening of
any proceeding for that purpose. CWABS will use its best efforts to prevent the
issuance of any such stop order and, if issued, to obtain as soon as possible
the withdrawal thereof. Except as otherwise provided in Section 5(b) hereof,
CWABS will not file prior to the termination of such offering any amendment to
the Registration Statement or any revision of or supplement to the Prospectus
(other than any such amendment, revision or supplement which does not relate to
the Certificates) which shall be disapproved by the Underwriters after
reasonable notice and review of such filing.
(b) If, at any time when a prospectus relating to the Public
Certificates is required to be delivered under the Act (i) any event occurs as a
result of which the Prospectus as then amended or supplemented would include any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein in the light of the circumstances under
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which they were made not misleading, or (ii) it shall be necessary to revise,
amend or supplement the Prospectus to comply with the Act or the rules and
regulations of the Commission thereunder, CWABS promptly will notify each
Underwriter and will, upon the request of any Underwriter, or may, after
consultation with each Underwriter, prepare and file with the Commission a
revision, amendment or supplement which will correct such statement or omission
or effect such compliance, and furnish without charge to each Underwriter as
many copies as such Underwriter may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus which will correct such
statement or omission or effect such compliance.
(c) CWABS will furnish to each Underwriter and counsel to the
Underwriters, without charge, conformed copies of the Registration Statement
(including exhibits thereto) and, so long as delivery of a prospectus relating
to the Public Certificates is required under the Act, as many copies of the
Prospectus and any revisions or amendments thereof or supplements thereto as may
be reasonably requested.
(d) CWABS will, as between itself and the Underwriters, pay all
expenses incidental to the performance of its obligations under this Agreement,
including without limitation (i) expenses of preparing, printing and reproducing
the Registration Statement, the Prospectus, the Pooling and Servicing Agreement
and the Certificates, (ii) the cost of delivering the Underwritten Public
Certificates to the
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Underwriters, insured to your reasonable satisfaction, (iii) the fees charged by
securities rating services for rating the Certificates, (iv) the fees and
expenses of the Trustee except for fees and expenses of Trustee's counsel which
will be borne by the Trustee and (v) all other costs and expenses incidental to
the performance by CWABS of CWABS's obligations hereunder which are not
otherwise specifically provided for in this subsection. It is understood that,
except as provided in this paragraph (d) and in Section 9 hereof, each
Underwriter will pay all of its own expenses, including (i) the fees of any
counsel to such Underwriter, (ii) any transfer taxes on resale of any of the
Certificates by it, (iii) any advertising expenses connected with any offers
that such Underwriter may make and (iv) any expenses for the qualification of
the Certificates under "blue sky" or state securities laws, including filing
fees and the fee and disbursements of counsel for such Underwriter in connection
therewith and in connection with the preparation of any Blue Sky Survey.
(e) So long as any Certificates are outstanding, upon request of
any Underwriter, CWABS will, or will cause the Master Servicer to, furnish to
such Underwriter, as soon as available, a copy of (i) the annual statement of
compliance delivered by the Master Servicer to the Trustee under the Pooling and
Servicing Agreement, (ii) the annual independent public accountants' servicing
report furnished to the Trustee pursuant to the Pooling and Servicing Agreement,
(iii) each report of CWABS regarding the Certificates filed with the Commission
under
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the Exchange Act or mailed to the holders of the Certificates and (iv) from time
to time, such other information concerning the Certificates which may be
furnished by CWABS or the Master Servicer without undue expense and without
violation of applicable law.
(f) CWABS will file a current report on Form 8-K for purposes of
filing any Computational Materials (as defined in the Indemnification Agreement)
furnished to CWABS by an Underwriter prior to the time of filing of the
Prospectus as provided in Section 5(a) hereof and will include therein all
Computational Materials so furnished.
6. Conditions to the Obligations of Underwriters. The obligation
of each Underwriter to purchase the Underwritten Public Certificates to be
purchased by it as indicated in the related Pricing Letter shall be subject to
the accuracy in all material respects of the representations and warranties on
the part of CWABS contained herein as of the date hereof and as of the Closing
Date, to the accuracy of the statements of CWABS made in any officer's
certificate pursuant to the provisions hereof, to the performance in all
material respects by CWABS of its obligations hereunder and to the following
additional conditions:
(a) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted and be pending or shall have been threatened,
and the Prospectus shall have been filed or mailed for filing with the
Commission not later than
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required pursuant to the rules and regulations of the Commission.
(b) CWABS shall have furnished to the Underwriters a certificate,
dated the Closing Date, of CWABS, signed by a vice president of CWABS, to the
effect that the signer of such certificate has carefully examined the
Registration Statement, the Prospectus and this Agreement and that:
(i) The representations and warranties of CWABS herein are true
and correct in all material respects on and as of the Closing Date with
the same effect as if made on the Closing Date, and CWABS has complied
with all agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date;
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for that purpose have been
instituted and are pending or, to his knowledge, have been threatened as
of the Closing Date; and
(iii) Nothing has come to the attention of such person that would
lead him to believe that the Prospectus (other than any Computational
Materials (as defined in the Indemnification Agreement) incorporated
therein by reference) contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
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(c) The Seller shall have furnished to the Underwriters a
certificate, dated the Closing Date, of the Seller, signed by a vice president
or an assistant vice president of the Seller, to the effect that (i) the signer
of such certificate has carefully examined the Prospectus and nothing has come
to the attention of such person that would lead him to believe that the
Prospectus contains any untrue statement of a material fact with respect to the
Seller or omits to state any material fact with respect to the Seller or the
Mortgage Loans necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading and (ii) the Seller
has complied with all agreements and satisfied all the conditions on its part to
be performed or satisfied at or prior to the Closing Date under this Agreement
and the Pooling and Servicing Agreement.
(d) CWABS shall have furnished to you an opinion, dated the
Closing Date, of Brown & Wood LLP, special counsel to CWABS, to the effect that:
(i) The Registration Statement and any amendments thereto have
become effective under the Act; to the best knowledge of such counsel,
no stop order suspending the effectiveness of the Registration Statement
has been issued and not withdrawn, no proceedings for that purpose have
been instituted or threatened and not terminated; and the Registration
Statement, the Prospectus and each amendment or supplement thereto, as
of their respective effective or issue dates (other than the financial
and statistical
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information contained therein as to which such counsel need express no
opinion), complied as to form in all material respects with the
applicable requirements of the Act and the rules and regulations
thereunder;
(ii) To the best knowledge of such counsel, there are no material
contracts, indentures or other documents of a character required to be
described or referred to in the Registration Statement or the Prospectus
or to be filed as exhibits to the Registration Statement other than
those described or referred to therein or filed or incorporated by
reference as exhibits thereto;
(iii) Assuming that this Agreement and the Pooling and Servicing
Agreement have each been duly authorized, executed and delivered by the
parties thereto, each constitutes a valid, legal and binding agreement
of CWABS, and of the Seller in the case of the Pooling and Servicing
Agreement enforceable against CWABS or the Seller in accordance with its
terms, subject, as to enforceability to bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and to general principles of equity regardless of
whether enforcement is sought in a proceeding in equity or at law;
(iv) Assuming that the Certificates have been duly and validly
authorized, executed and authenticated in the manner contemplated in the
Pooling and Servicing Agreement, when delivered and paid for by you as
provided in this Agreement, the Certificates will be validly issued and
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outstanding and entitled to the benefits of the Pooling and Servicing
Agreement;
(v) The Certificates and the Pooling and Servicing
Agreement conform to the descriptions thereof contained in
the Prospectus;
(vi) The statements in the Prospectus and the Prospectus Supplement,
as the case may be, under the headings "Federal Income Tax
Consequences," "ERISA Considerations" and "Legal Investment," to the
extent that they constitute matters of New York or federal law or legal
conclusions with respect thereto, have been reviewed by such counsel and
are correct in all material respects;
(vii) [The Certificates indicated under the heading "Summary of
Terms--Legal Investment" in the Prospectus Supplement to be "mortgage
related securities" will be mortgage related securities, as defined in
Section 3(a)(41) of the Exchange Act, so long as such Certificates are
rated in one of the two highest rating categories by at least one
nationally recognized statistical rating organization;] [and]
(viii) The Pooling and Servicing Agreement is not required to be
qualified under the Trust Indenture Act of 1939, as amended, and the
Trust Fund created by the Pooling and Servicing Agreement is not
required to be registered under the Investment Company Act of 1940, as
amended[.] [; and]
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[(ix) The Trust Fund as described in the Prospectus Supplement and
the Pooling and Servicing Agreement will qualify as a "real estate
mortgage investment conduit" ("REMIC") within the meaning of Section
860D of the Internal Revenue Code of 1986, as amended (the "Code"),
assuming: (i) an election is made to treat the Trust Fund as a REMIC,
(ii) compliance with the Pooling and Servicing Agreement and (iii)
compliance with changes in the law, including any amendments to the Code
or applicable Treasury regulations thereunder.]
Such counsel shall also state that nothing has come to its
attention that would lead such counsel to believe that the Registration
Statement, at the time 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 on the Closing
Date, contained or contains an untrue statement of a material fact or omitted or
omits 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; it being understood that such counsel need express no view as to (i)
financial and statistical information contained therein or (ii) any description
in the Prospectus of any third party providing credit enhancement to the
Certificates.
Such opinion may express its reliance as to factual matters
on the representations and warranties made by, and on
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certificates or other documents furnished by officers of, the parties to this
Agreement and the Pooling and Servicing Agreement. Such opinion may be qualified
as an opinion only on the laws of the State of New York and the federal law of
the United States. To the extent that such firm relies upon the opinion of other
counsel in rendering any portion of its opinion, the opinion of such other
counsel shall be attached to and delivered with the opinion of such firm that is
delivered to you.
(e) CWABS shall have furnished to the Underwriters an opinion,
dated the Closing Date, of counsel to CWABS (who may be an employee of CWABS or
of an affiliate of CWABS), to the effect that:
(i) CWABS has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of Delaware and
is duly qualified to do business in, and is in good standing as a
foreign corporation under the laws of, the State of California.
(ii) The Certificates have been duly authorized and executed and,
assuming authentication and delivery in the manner contemplated in the
Pooling and Servicing Agreement, are validly issued and outstanding, and
upon delivery by CWABS of the Certificates to be purchased by the
Underwriters and payment by the Underwriters of the purchase price
therefor in the manner contemplated by this Agreement, the Underwriters
will acquire such Certificates free and clear of any lien, pledge,
encumbrance or other
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security interest other than one created or granted by any Underwriter;
(iii) The Pooling and Servicing Agreement has been duly authorized,
executed and delivered by CWABS;
(iv) This Agreement and the Indemnification Agreement have each
been duly authorized, executed and delivered by CWABS;
(v) No consent, approval, authorization or order of any
California, Delaware or federal governmental agency or body or any
California, Delaware or federal court is required for the consummation
by CWABS of the transactions contemplated by the terms of this
Agreement, the Indemnification Agreement or the Pooling and Servicing
Agreement except such as may be required under the "blue sky" or state
securities laws of any jurisdiction in connection with the offering,
sale or acquisition of the Certificates, any recordations of the
assignment of the Mortgage Loans to the Trustee (to the extent such
recordations are required pursuant to the Pooling and Servicing
Agreement) that have not yet been completed and such other approvals as
have been obtained;
(vi) The sale of the Certificates to be purchased by the
Underwriters pursuant to this Agreement and the consummation of any of
the transactions contemplated by the terms of the Pooling and Servicing
Agreement, the Indemnification Agreement or this Agreement do not
conflict with or result in a breach or violation of any material
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term or provision of, or constitute a default under, the certificate of
incorporation of CWABS, or any indenture or other agreement or
instrument to which CWABS is a party or by which it is bound, or any
California, Delaware or federal statute or regulation applicable to
CWABS or an order of any California, Delaware or federal court,
regulatory body, administrative agency or governmental body having
jurisdiction over CWABS; and
(vii) There are no legal or governmental actions, investigations or
proceedings pending to which CWABS is a party, or, to the best knowledge
of such counsel, threatened against CWABS, (A) asserting the invalidity
of this Agreement, the Pooling and Servicing Agreement, the
Indemnification Agreement or the Certificates, (B) seeking to prevent
the issuance of the Certificates or the consummation of any of the
transactions contemplated by this Agreement, the Pooling and Servicing
Agreement or the Indemnification Agreement, (C) which might materially
and adversely affect the performance by CWABS of its obligations under,
or the validity or enforceability of, this Agreement, the Pooling and
Servicing Agreement, the Indemnification Agreement or the Certificates
or (D) seeking to affect adversely the Federal income tax attributes of
the Certificates as described in the Prospectus under the heading
"Federal Income Tax Consequences." For purposes of the
foregoing, such counsel may state that it has not regarded any legal or
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governmental actions, investigations or proceedings to be "threatened"
unless the potential litigant or governmental authority has manifested
to the legal department of CWABS a present intention to initiate such
proceedings.
Such opinion may express its reliance as to factual matters on
the representations and warranties made by, and on certificates or other
documents furnished by officers of, the parties to this Agreement and the
Pooling and Servicing Agreement. Such opinion may assume the due authorization,
execution and delivery of the instruments and documents referred to therein by
the parties thereto other than CWABS or its affiliates. Such opinion may be
qualified as an opinion only on the laws of the States of Delaware and
California and the federal law of the United States. To the extent that such
counsel relies upon the opinion of other counsel in rendering any portion of its
opinion, the opinion of such other counsel shall be attached to and delivered
with the opinion of such counsel that is delivered to the Underwriters.
(f) The Seller shall have furnished to the Underwriters an
opinion, dated the Closing Date, of counsel to the Seller (who may be an
employee of the Seller), to the effect that:
(i) The Seller has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the state of its
incorporation (the "Incorporation State");
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(ii) The Pooling and Servicing Agreement and the Indemnification
Agreement have each been duly authorized, executed and delivered by the
Seller;
(iii) No consent, approval, authorization or order of any
Incorporation State or federal court or governmental agency or body is
required for the consummation by the Seller of the transactions
contemplated by the terms of the Pooling and Servicing Agreement or the
Indemnification Agreement except any such as may be required under the
"blue sky" or state securities laws of any jurisdiction in connection
with the offering, sale or acquisition of the Certificates, any
recordations of the assignment of the Mortgage Loans evidenced by the
Certificates to the Trustee (to the extent such recordations are
required pursuant to the Pooling and Servicing Agreement) that have not
yet been completed and any approvals as have been obtained;
(iv) The consummation of any of the transactions contemplated by the
terms of the Pooling and Servicing Agreement or the Indemnification
Agreement do not conflict with or result in a breach or violation of any
material term or provision of, or constitute a default under, the
charter or by-laws of the Seller, or, to the best knowledge of such
counsel, any indenture or other agreement or instrument to which the
Seller is a party or by which it is bound, any Incorporation State or
federal statute or regulation applicable to the Seller or any order of
any Incorporation State or federal court, regulatory body,
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administrative agency or governmental body having jurisdiction over the
Seller; and
(v) There are no legal or governmental actions, investigations or
proceedings pending to which the Seller is a party, or, to the best
knowledge of such counsel, threatened against the Seller, (A) asserting
the invalidity of the Pooling and Servicing Agreement or the
Indemnification Agreement or (B) which might materially and adversely
affect the performance by the Seller of its obligations under, or the
validity or enforceability of, the Pooling and Servicing Agreement or
the Indemnification Agreement. For purposes of the foregoing, such
counsel may state that it has not regarded any legal or governmental
actions, investigations or proceedings to be "threatened" unless the
potential litigant or governmental authority has manifested to the legal
department of the Seller a present intention to initiate such
proceedings.
Such opinion may express its reliance as to factual matters on
the representations and warranties made by, and on certificates or other
documents furnished by officers of, the parties to the Pooling and Servicing
Agreement. Such opinion may assume the due authorization, execution and delivery
of the instruments and documents referred to therein by the parties thereto
other than the Seller. Such opinion may be qualified as an opinion only on the
laws of the Incorporation State and the federal law of the United States and,
with respect to the opinions set forth in paragraph (f)(ii) above, the laws of
the
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State of New York. To the extent that such counsel relies upon the opinion of
other counsel in rendering any portion of its opinion, the opinion of such other
counsel shall be attached to and delivered with the opinion of such counsel that
is delivered to the Underwriters.
(g) Each party providing credit enhancement to the Certificates
shall have furnished to the Underwriters an opinion, dated the Closing Date, of
its counsel, with respect to the Registration Statement and the Prospectus, and
such other related matters, in the form previously agreed to by such provider
and the Underwriters.
(h) The Underwriters shall have received from their counsel such
opinion or opinions, dated the Closing Date, with respect to the issuance and
sale of the Public Certificates, the Registration Statement and the Prospectus,
and such other related matters as you may reasonably require.
(i) CWABS' independent accountants, _________________
______________ and __________________ shall each have furnished to the
Underwriters a letter or letters addressed to the Underwriters and dated as of
or prior to the date of first use of the Prospectus Supplement in the form and
reflecting the performance of the procedures previously agreed to by CWABS and
the Underwriters.
(j) Subsequent to the date hereof, there shall not have occurred
any change, or any development involving a prospective change, in or affecting
the business or properties of CWABS which in your reasonable judgment materially
impairs
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the investment quality of the Certificates so as to make it impractical or
inadvisable to proceed with the public offering or the delivery of the
Certificates as contemplated by the Prospectus.
(k) The Public Certificates shall be rated not lower than the
required ratings set forth under the heading "Ratings" in the Prospectus
Supplement, such ratings shall not have been rescinded and no public
announcement shall have been made that any such required rating of the
Certificates has been placed under review (otherwise than for possible
upgrading).
(l) The Underwriters shall have received copies of any opinions
of counsel to CWABS supplied to the rating organizations relating to certain
matters with respect to the Certificates. Any such opinions shall be dated the
Closing Date and addressed to the Underwriters or accompanied by reliance
letters addressed to the Underwriters.
(m) All Classes of Certificates being publicly offered by the
Underwriters or privately placed by the Purchaser shall have been issued and
paid for pursuant to the terms of this Agreement and the Purchase Agreement,
respectively.
(n) The Trustee shall have furnished to the Underwriters an
opinion dated the Closing Date, of counsel to the Trustee (who may be an
employee of the Trustee), to the effect that:
(i) The Trustee has full corporate power and
authority to execute and deliver the Pooling and Servicing
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Agreement and to perform its obligations thereunder and to execute,
countersign and deliver the Certificates.
(ii) The Pooling and Servicing Agreement has been duly authorized,
executed and delivered by the Trustee.
(iii) The Pooling and Servicing Agreement is a legal, valid and
binding obligation of the Trustee, enforceable against the Trustee in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, receivership, conservatorship and similar
laws affecting the rights of creditors generally, and subject, as to
enforceability, to general principles of equity, regardless of whether
such enforcement is considered in a proceeding at law or equity.
(iv) In the event that the Master Servicer defaults in its
obligation to make Advances pursuant to the Pooling and Servicing
Agreement, the Trustee is not, as of the date hereof, prohibited by any
provision of its articles of incorporation or by-laws from assuming,
pursuant to the Pooling and Servicing Agreement, the obligation to make
such Advances.
Such opinion may express its reliance as to factual matters on
the representations and warranties made by, and on certificates or other
documents furnished by officers of, the parties to the Pooling and Servicing
Agreement. Such opinion may assume the due authorization, execution and delivery
of the instruments and documents referred to therein by the parties thereto
other than the Trustee or its affiliates. Such opinion
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may be qualified as an opinion only on the laws of the State of New York and the
federal law of the United States. To the extent that such counsel relies upon
the opinion of other counsel in rendering any portion of its opinion, the
opinion of such other counsel shall be attached to and delivered with the
opinion of such counsel that is delivered to the Underwriters.
(o) CWABS shall have furnished to the Underwriters such further
information, certificates and documents as the Underwriters may reasonably have
requested, and all proceedings in connection with the transactions contemplated
by this Agreement and all documents incident hereto shall be in all material
respects reasonably satisfactory in form and substance to the Underwriters and
their counsel.
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, this Agreement and all obligations of an Underwriter hereunder may be
canceled at, or at any time prior to, the Closing Date by such Underwriter.
Notice of such cancellation shall be given to CWABS in writing, or by telephone
or telegraph confirmed in writing.
7. Termination. This Agreement shall be subject to termination in
your absolute discretion, by notice given to CWABS prior to delivery of and
payment for the Underwritten Public Certificates, if prior to such time (i)
trading in securities generally on the New York Stock Exchange shall have been
suspended or materially limited, (ii) a general moratorium on commercial banking
activities in New York shall have been
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declared by either Federal or New York State authorities, or (iii) there shall
have occurred any material outbreak or escalation of hostilities or other
calamity or crisis the effect of which on the financial markets is such as to
make it, in your judgment after consultation with CWABS, impracticable to market
the Public Certificates on the terms specified in this Agreement.
8. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of
CWABS and its officers and of each Underwriter set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or CWABS, and will survive
delivery of and payment for the Underwritten Public Certificates. The provisions
of Section 5(d) and Section 9 hereof shall survive the termination or
cancellation of this Agreement.
9. Reimbursement of Underwriter Expenses. If for any reason,
other than default by any Underwriter in its obligation to purchase the
Underwritten Public Certificates or termination by any Underwriter pursuant to
Section 7 hereof, the Underwritten Public Certificates are not delivered by or
on behalf of CWABS as provided herein, CWABS will reimburse each Underwriter for
all out-of-pocket expenses of such Underwriter, including reasonable fees and
disbursements of its counsel, reasonably incurred by such Underwriter in making
preparations for the purchase, sale and delivery of the Underwritten Public
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Certificates, but CWABS shall then be under no further liability to any
Underwriter with respect to the Underwritten Public Certificates, except as
provided in Section 5(d) hereof.
10. Default by an Underwriter. If any one or more of the
Underwriters shall fail to purchase and pay for any of the Underwritten Public
Certificates agreed to be purchased by such Underwriter or Underwriters
hereunder and such failure to purchase shall constitute a default in the
performance of its or their obligations under this Agreement, the remaining
Underwriters shall be obligated severally to take up and pay for (in the
respective proportions which the aggregate principal amount of all the
Underwritten Public Certificates of the various Classes set forth opposite their
names in the Prospectus Supplement bears to the aggregate principal amount of
all of the Underwritten Public Certificates of the various Classes set forth
opposite the name of all the remaining Underwriters) the Underwritten Public
Certificates that the defaulting Underwriter or Underwriters agreed but failed
to purchase; provided, however, that in the event that the aggregate principal
amount of Underwritten Public Certificates which the defaulting Underwriter or
Underwriters agreed but failed to purchase shall exceed 10% of the aggregate
principal amount of all of the Underwritten Public Certificates set forth in the
Prospectus Supplement, the remaining Underwriters shall have the right to
purchase all, but shall not be under any obligation to purchase any, of the
Underwritten Public Certificates, and if such nondefaulting Underwriters do not
purchase all the Underwritten
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<PAGE>
Public Certificates, this Agreement will terminate without liability to any
nondefaulting Underwriter or CWABS. In the event of a default by any Underwriter
as set forth in this Section 10, the Closing Date shall be postponed for such
period, not exceeding seven days, as the nondefaulting Underwriters shall
determine in order that required changes in the Registration Statement and the
Prospectus or in any other documents or arrangements may be effected. Nothing
contained in this Agreement shall relieve any defaulting Underwriter of its
liability, if any, to CWABS and to any nondefaulting Underwriter for damages
occasioned by its defaulting hereunder.
11. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto and their respective successors and their
respective 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 New York.
13. Miscellaneous. Time shall be of the essence of this
Agreement. This Agreement supersedes all prior or contemporaneous agreements and
understandings relating to the subject matter hereof, other than the
Indemnification Agreement. Neither this Agreement nor any term hereof may be
changed, waived, discharged or terminated except by a writing signed by the
party against whom enforcement of such change, waiver, discharge or termination
is sought. This Agreement may be
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<PAGE>
signed in any number of counterparts, each of which shall be deemed an original,
which taken together shall constitute one and the same instrument.
14. Notices. All communications hereunder shall be in writing and
effective only on receipt and, if sent to an Underwriter, shall be delivered to
the address specified on the signature page hereof; or if sent to CWABS, shall
be delivered to 155 North Lake Avenue, Pasadena, California 91101-7137,
attention of General Counsel.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the undersigned a counterpart hereof,
whereupon this Agreement and your acceptance shall represent a binding agreement
by and among CWABS and each Underwriter on [______________, 199__] relating to
CWABS, Inc. Asset Backed Certificates Series 1996-__ issued by the _________
______________________.
Very truly yours,
CWABS, INC.
By:___________________________
Name:
Title:
The foregoing Agreement is hereby confirmed and accepted.
[UNDERWRITER]
By:_______________________________
Name:
Title:
Address:
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<PAGE>
<PAGE>
CWABS 1996-__
INDEMNIFICATION
AND
CONTRIBUTION AGREEMENT
AGREEMENT, dated [________], 199__ (this "Agreement"), among CWABS,
Inc., a Delaware corporation ("CWABS"), the Seller (as defined below) and the
Broker Dealers (as defined below).
WITNESSETH:
WHEREAS, CWABS and one or more of the Broker Dealers are parties to the
Underwriting Agreement (defined below), providing for the sale by CWABS and the
purchase, severally and not jointly, by such Broker Dealers of the Public
Certificates (defined below); and
[WHEREAS, CWABS and one or more of the Broker Dealers are parties to the
Purchase Agreement (defined below), providing for the sale by CWABS and the
purchase, severally and not jointly, of the Private Certificates (defined
below); and]
WHEREAS, as an inducement to the Broker Dealers to enter into the
Underwriting Agreement [and the Purchase Agreement], CWABS and the Broker
Dealers wish to provide for indemnification and contribution on the terms and
conditions hereinafter set forth; and
WHEREAS, the purchase price to be paid by CWABS to the Seller for the
Mortgage Loans will be the proceeds of the sale by CWABS to the Broker Dealers
of the Public Certificates [and the Private Certificates] and as an inducement
to the Broker Dealers to enter into the Underwriting Agreement [and the Purchase
Agreement], the Seller agrees to perform certain obligations set forth herein;
NOW, THEREFORE, in consideration of the foregoing and of other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
<PAGE>
ARTICLE I
Definitions
1.1 Certain Defined Terms.
The following terms shall have the meanings set forth below,
unless the context clearly indicates otherwise:
Act: The Securities Act of 1933, as amended.
Agreement: This Indemnification and Contribution
Agreement, as the same may be amended in accordance with the
terms hereof.
Base Prospectus: The prospectus dated [______________], 199__, as
the same may be amended or supplemented, of CWABS relating to the offering from
time to time of one or more series of asset backed certificates.
Broker Dealer: Each of the signatories to this
Agreement other than CWABS or the Seller.
Certificates: Asset Backed Certificates, Series 1996-
___ of CWABS.
Closing Date: On or about [_______________], 199__.
Computational Materials: Computer generated tables and/or charts
displaying, with respect to any Class or Classes of Certificates, any of the
following: yield; average life; duration; expected maturity; interest rate
sensitivity; loss sensitivity; cash flow characteristics; background information
regarding the Mortgage Loans; the proposed structure; decrement tables; or
similar information (tabular or otherwise) of a statistical, mathematical,
tabular or computational nature.
CWABS: CWABS, Inc., a Delaware corporation and its successors in
interest.
[CWABS Memorandum Information: All information contained or
incorporated in the Memorandum other than the Purchaser Information.]
CWABS Prospectus Information: All information contained or
incorporated in the Prospectus other than the Underwriter Information.
CWABS Registration Information: All information contained or
incorporated in the Registration Statement.
Exchange Act: The Securities Exchange Act of 1934, as amended.
<PAGE>
<PAGE>
Form 8-K: The Current Report on Form 8-K, if any, filed by or on
behalf of CWABS with respect to the Mortgage Loans and including any
Computational Materials furnished by one or more of the Broker Dealers.
[Memorandum: The Confidential Private Placement Memorandum, if
any, dated the Closing Date, as the same may be amended or supplemented, of
CWABS relating to the Private Certificates.]
Offered Certificates: The Public Certificates.
[Private Certificates: Class ____ Certificates.]
Prospectus: The Base Prospectus together with the Prospectus
Supplement.
Prospectus Supplement: The Prospectus Supplement dated the date
hereof, as the same may be amended or supplemented, of CWABS relating to the
offering of the Public Certificates.
Public Certificates: The Class ___ Certificates.
[Purchase Agreement: The Purchase Agreement, if any, dated the
date hereof, between CWABS and the Purchaser providing for the purchase and sale
of the Private Certificates.
Purchase Spread: The excess, if any, of (i) the purchase prices
paid by investors to the Purchaser for the Private Certificates over (ii) the
purchase price paid by the Purchaser to CWABS for the Private Certificates
pursuant to the Purchase Agreement.
Purchaser: The Broker Dealer which is purchasing the Private
Certificates pursuant to the Purchase Agreement.
Purchaser Information: The only written information furnished by
or on behalf of the Purchaser to CWABS specifically for use in connection with
the preparation of the Memorandum, such information being the information
relating to the Purchaser set forth in the Memorandum under the caption "Method
of Placement."]
Registration Statement: As defined in the Underwriting Agreement.
[Retained Certificates: The Class Certificates.]
Seller: [Countrywide Home Loans, Inc., a New York] corporation
and its successors in interest.
Seller Mortgage Loan Information: Information relating to the
Mortgage Loans furnished by the Seller to any
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<PAGE>
Underwriter upon which the mathematical calculations reflected in the
Computational Materials of such Underwriter are based.
[Senior Certificates: The Class ___ Certificates.]
Spread: As to any Underwriter, the excess, if any, of (i) the
purchase prices paid by investors to such Underwriter for the Certificates sold
by it over (ii) the purchase price paid by such Underwriter to CWABS for the
Certificates purchased by it, pursuant to the Underwriting Agreement.
Underwriter: Each Broker Dealer which is purchasing
the Certificates pursuant to the Underwriting Agreement.
Underwriter Information: As to any Underwriter, the only written
information furnished by or on behalf of such Underwriter to CWABS specifically
for use in connection with the preparation of the Registration Statement or the
Prospectus, such information being (i) the information relating to such
Underwriter set forth in the Prospectus Supplement in the last two paragraphs of
the cover page thereof and under the caption "Method of Distribution" therein
and (ii) any Computational Materials prepared by such Underwriter, furnished to
CWABS and included in the Form 8-K; provided, however, that such Computational
Materials shall not include any Seller Mortgage Loan Information or any errors
in the mathematical calculations reflected in such Computational Materials to
the extent such errors result from such Seller Mortgage Loan Information.
Underwriting Agreement: The Underwriting Agreement, dated the
date hereof, among CWABS and each Underwriter providing for the purchase and
sale of the Public Certificates [other than any Retained Certificates].
1.2 Other Terms.
Capitalized terms used but not defined herein shall have the
meanings assigned to such terms in the Underwriting Agreement [or the Purchase
Agreement, as applicable].
ARTICLE II
Representations and Warranties
2.1 Mutual Representation.
Each party hereto represents to the other parties hereto that:
(a) the execution, performance and delivery of this
Agreement has been duly authorized by such party;
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<PAGE>
(b) this Agreement has been duly executed and delivered by
such party; and
(c) this Agreement constitutes the legal and valid
obligations of such party.
2.2 Other Representations.
(a) CWABS has all requisite corporate power and authority
to execute, deliver and perform its obligations under this
Agreement; and
(b) The Seller has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement.
2.3 Computational Materials.
Each Broker Dealer which desires to furnish Computational
Materials to CWABS shall furnish fifteen (15) copies thereof to Brown & Wood LLP
no later than 3:00 p.m. New York City time on the business day prior to the day
on which the Prospectus Supplement is being cleared for printing. In addition,
each Broker Dealer which has so furnished Computational Materials to CWABS
hereby represents as to the materials it has furnished as follows:
(a) The Computational Materials so furnished by such Broker Dealer
include all Computational Materials prepared by such Broker Dealer that:
(i) are generated based on assumptions regarding the
payment priorities and characteristics of a Class of Certificates
that is actually issued and purchased by a Broker Dealer; and
(ii) are provided to prospective investors under the
following conditions prior to the time of filing of the
Prospectus pursuant to Rule 424(b):
(A) in the case of each prospective investor that has
orally indicated to such Broker Dealer that it will
purchase all or a portion of the Class of Certificates to
which such Computational Materials relate, the
Computational Materials relating to such Class that are
sent to such prospective investor; and
(B) for any other prospective investor, all Computational
Materials that are sent to such prospective investor after
the structure for the Certificates is finalized;
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<PAGE>
<PAGE>
provided, however, that the Computational Materials so furnished
need not include any Computational Materials that relate to
abandoned structures or that are furnished to prospective
investors prior to the time that the structure of the
Certificates is finalized where such investors have not indicated
to such Broker Dealer their intention to purchase the Class or
Classes of Certificates described in such Computational
Materials.
(b) The Computational Materials included in the Underwriter
Information of such Broker Dealer pursuant to the definitions thereof do not
contain an untrue statement of a material fact or, when read in conjunction with
the Prospectus as an integral document, omit to state a material fact necessary
to make such statements, in light of the circumstances under which they were
made, not misleading; provided, however, that no representation is made that the
Prospectus (exclusive of such Computational Materials and the Underwriter
Information provided by such Underwriter) does not include any untrue statements
of a material fact and does not omit to state any material facts necessary to
make the statements contained therein, in light of the circumstances under which
they were made, not misleading.
(c) The Computational Materials contain customary legends
regarding the assumptions on which they are based and the absence of assurances
or representations as to the actual rate or timing of principal payments or
prepayments on any of the Mortgage Loans or the performance characteristics of
the Certificates, and a statement to the effect that the Computational Materials
were prepared by the applicable Broker Dealer in reliance on information
regarding the Mortgage Loans furnished by the Seller.
(d) Neither CWABS nor any of its affiliates participated in the
preparation of the Computational Materials other than by supplying the Seller
Mortgage Loan Information to the Broker Dealer.
(e) At or prior to the time any Computational Materials are
furnished to CWABS for filing on the Form 8-K, the Broker Dealer furnishing such
Computational Materials will provide to CWABS and such Broker Dealer a letter,
in form and substance reasonably satisfactory to CWABS and such Broker Dealer,
of a firm of independent public accountants of national reputation to the effect
that such accountants have performed certain specified procedures with respect
to such Computational Materials and have found no exceptions, other than such
exceptions as are acceptable to CWABS and the Broker Dealer. [Fifty percent
(50%) of the costs and expenses of such letter will be paid by each of the
Broker Dealer obtaining the same and CWABS.]
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<PAGE>
ARTICLE III
Indemnification
3.1 Indemnification.
(a) CWABS agrees to indemnify and hold harmless each Broker
Dealer and each person who controls a Broker Dealer within the meaning of either
the Act or the Exchange Act against any and all losses, claims, damages or
liabilities, joint or several, to which they may become subject under the Act,
the Exchange 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 upon any untrue
statement or alleged untrue statement of a material fact contained in the [CWABS
Memorandum Information,] the CWABS Prospectus Information or the CWABS
Registration Information or in any revision or amendment thereof or supplement
thereto or arise out of or are based upon the omission or alleged omission to
state in the CWABS Registration Information, the CWABS Prospectus Information[,
the CWABS Memorandum Information] or in any revision or amendment thereof or
supplement thereto a material fact required to be stated therein or the omission
or alleged omission to state a material fact in [the CWABS Memorandum
Information,] the CWABS Prospectus Information or the CWABS Registration
Information or in any revision or amendment thereof or supplement thereto
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and agrees to reimburse each such
indemnified party for any legal or other expenses reasonably incurred by it or
him in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that CWABS shall not be liable to a
particular Broker Dealer or any person who controls such Broker Dealer to the
extent that any misstatement or alleged misstatement or omission or alleged
omission was (i) made in reliance upon and in conformity with the Underwriter
Information [or the Purchaser Information, as applicable,] furnished by such
Broker Dealer, and (ii) in the case of the CWABS Prospectus Information, to the
extent that such misstatement or omission was corrected and such Broker Dealer
did not deliver, at or prior to the written confirmation of such sale, a copy of
the Prospectus as then revised, amended or supplemented in any case where such
delivery is required by the Act or the Exchange Act, if CWABS has previously
furnished copies thereof to the Broker Dealers in accordance with the terms of
the Underwriting Agreement [or the Purchase Agreement, as applicable]. This
indemnity agreement will be in addition to any liability which CWABS may
otherwise have.
(b) Each Broker Dealer severally agrees to indemnify and hold
harmless CWABS, its officers who signed the Registration Statement or any
amendment thereof, its directors, and each person who controls CWABS within the
meaning of either
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<PAGE>
<PAGE>
the Act or the Exchange Act, to the same extent as the foregoing indemnities
from CWABS to each Broker Dealer; provided, however, that a Broker Dealer will
be liable in any such case only to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with (i) the Underwriter Information furnished by such
Broker Dealer, in the case of an Underwriter [and (ii) the Purchaser
Information, in the case of the Purchaser]; and provided, further, that any such
omission or alleged omission relating to the Computational Materials included in
any Underwriter Information pursuant to the definitions thereof shall be
determined by reading such Computational Materials in conjunction with the
Prospectus as an integral document and in light of the circumstances under which
such statements in the Computational Materials and Prospectus were made. This
indemnity agreement will be in addition to any liability which any Broker Dealer
may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 3.1 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 3.1, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve the indemnifying party from any liability which it may have to any
indemnified party otherwise than under this Section 3.1. In case any such action
is brought against any indemnified party and it notifies the indemnifying party
of the commencement thereof, the indemnifying party shall be entitled to
participate therein, and to the extent that it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, to assume the defense thereof, with counsel
satisfactory to such indemnified party; provided, however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party or parties shall have reasonably
concluded that there may be legal defenses available to it or them and/or other
indemnified parties that are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
elect separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and approval by
the indemnified party of counsel, the indemnifying party will not be liable for
any legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof, unless (i) the indemnified party shall have
employed separate counsel in connection with the assertion of legal defenses in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel for
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<PAGE>
each of, and approved by, the applicable Underwriter [or the Purchaser, as
applicable,] in the case of paragraph (a) of this Section 3.1, representing the
related indemnified parties under such paragraph (a) who are parties to such
action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party; and except that, if clause (i)
or (iii) is applicable, such liability shall only be in respect of the counsel
referred to in such clause (i) or (iii). No indemnifying party shall, without
the consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceeding.
3.2 Contribution.
If the indemnification provided for in Section 3.1 is unavailable or
insufficient to hold harmless an indemnified party under Section 3.1(a)-(b),
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of the losses, claims, damages or liabilities
referred to in Section 3.1 above in such proportion as is appropriate to reflect
the following: (A) in the case of any Broker Dealer which did not furnish
Computational Materials as provided in Section 2.3 hereof (i) in such proportion
as is appropriate to reflect the relative benefits received by CWABS on the one
hand and the Broker Dealers on the other from the offering of the Offered
Certificates or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of CWABS on the one hand and the Broker Dealers on the other in connection
with the statements or omissions or alleged statements or alleged omissions
which resulted in such losses, claims, damages or liabilities as well as any
other relevant equitable considerations; or (B) in the case of any Broker Dealer
which did so furnish Computational Materials, (i) the relative benefits received
by CWABS on the one hand and the Broker Dealers on the other from the offering
of the Offered Certificates and (ii) the relative fault of CWABS on the one hand
and the Broker Dealers on the other in connection with the statements or
omissions or alleged statements or alleged omissions which resulted in such
losses, claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by CWABS on the one hand and the
Broker Dealers on the other shall be in such proportion so that the Broker
Dealers are responsible for an
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<PAGE>
amount equal to the sum of [each of] the Spread [and the Purchase Spread] and
CWABS is responsible for the balance. The relative benefits received by a
Underwriter [and the Purchaser] shall be the Spread of such Underwriter, in the
case of each Underwriter [and the Purchase Spread, in the case of the
Purchaser]. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omissions or alleged omission to state a material fact relates to information
supplied by CWABS or by the Broker Dealers and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this Section 3.2 shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of this
Section 3.2. A Broker Dealer shall not be required to contribute any amount in
excess of (x) the applicable Spread, in the case of each Underwriter, [or the
Purchase Spread, in the case of the Purchaser] over (y) the amount of any
damages which the applicable Broker Dealer has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission; provided, however, that if the statements or omissions or alleged
statements or alleged omissions which resulted in contribution were contained in
or omitted from Computational Materials filed on the Form 8-K, the preceding
limitation on contribution shall be inapplicable to the Broker Dealer which
furnished such Computational Materials. The obligation of any Broker Dealer to
contribute under this Section 3.2 is several in proportion to each Spread [and
the Purchase Spread, respectively]. 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.
3.3 Benefits.
The obligations of CWABS under this Article III shall be in
addition to any liability which CWABS may otherwise have and shall extend, upon
the same terms and conditions, to each person, if any, who controls a Broker
Dealer within the meaning of the Act; and the obligations of each Broker Dealer
under this Article III shall be in addition to any liability which such Broker
Dealer may otherwise have and shall have extended upon the same terms and
conditions, to the officers of CWABS who signed the Registration Statement or
any amendment thereof, to its directors, and to each person who controls CWABS
within the meaning of either the Act or the Exchange Act.
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<PAGE>
3.4 Seller Obligation.
The Seller agrees with each Broker Dealer, for the sole and
exclusive benefit of such Broker Dealer and each person who controls a Broker
Dealer within the meaning of either the Act or the Exchange Act and not for the
benefit of any assignee thereof or any other person or persons dealing with such
Broker Dealer, to indemnify and hold harmless each Broker Dealer and each person
who controls a Broker Dealer within the meaning of either the Act or the
Exchange Act against any failure by CWABS to perform any of its obligations
under this Agreement. The Seller agrees that there are no conditions precedent
to the obligations of the Seller hereunder other than written demand to CWABS to
perform its obligations under this Agreement.
ARTICLE IV
Expenses
4.1 Other Expenses.
Any costs and expenses incurred in connection with the
qualification of any of the Offered Certificates under the "blue sky" or
securities laws of any state shall be paid by the Broker Dealer requesting such
action. Unless otherwise agreed to among the Broker Dealers, any advertising or
"tombstone" expenses shall be paid by the Broker Dealer incurring the same. Each
Broker Dealer shall be responsible for all other costs and expenses incurred by
it in connection with the purchase and sale of the Offered Certificates.
4.2 OID Calculations.
If a Broker Dealer fails to provide CWABS with original issue
discount ("OID") calculations within five business days after the Closing Date
for any Certificates purchased by such Broker Dealer, such Broker Dealer agrees
to reimburse the Trust Fund for any penalties actually incurred by the Trust
Fund resulting from the failure of the Trust Fund to legend the Certificates
with OID information or for any delay in legending, as well as for any other
penalties actually imposed on the Trust Fund resulting from not having the OID
information or for having such information late.
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ARTICLE V
General
5.1 Survival.
This Agreement and the obligations of the parties hereunder shall
survive the purchase and sale of the Offered Certificates and any termination of
the Underwriting Agreement [and/or the Purchase Agreement].
5.2 Successors.
This Agreement will inure to the benefit of and be binding upon
the parties hereto and their respective successors and the officers, directors
and controlling persons referred to in Article III hereof and their respective
successors and assigns, and no other person will have any right or obligation
hereunder.
5.3 Applicable Law.
This Agreement will be governed by and construed in accordance
with the laws of the State of New York disregarding principles of conflict of
laws.
5.4 Miscellaneous.
Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated except by a writing signed by the party against
whom enforcement of such change, waiver, discharge or termination is sought.
This Agreement may be signed in any number of counterparts, each of which shall
be deemed an original, which taken together shall constitute one and the same
instrument.
5.5 Notices.
All communications hereunder shall be in writing and effective
only on receipt and, if sent to a Broker Dealer, shall be delivered to the
address specified on the signature page hereof; or if sent to CWABS, shall be
delivered to 155 North Lake Avenue, Pasadena, California 91101-7137, attention
of General Counsel.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement by
their duly authorized officers on the date first above written.
CWABS, INC.
By:_____________________________
Name:
Title:
[BROKER/DEALER]
By:______________________________
Name:
Title:
Address:
<PAGE>
<PAGE>
================================================================================
CWABS, INC.,
as Depositor,
[COUNTRYWIDE HOME LOANS, INC.]
as Seller and Master Servicer,
and
[___________________________________]
as Trustee
-----------------------
POOLING AND SERVICING AGREEMENT
Dated as of _________________, 199__
----------------------
Home Equity Loan Asset Backed Certificates
Series 199__-__
================================================================================
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE I
Definitions
Section 1.01. Definitions......................................................... 1
Section 1.02. Interest Calculations............................................... 20
ARTICLE II
Conveyance of Mortgage Loans;
Original Issuance of Certificates;
Tax Treatment
Section 2.01. Conveyance of Mortgage Loans; Retention
of Obligation to Fund Advances Under
Credit Line Agreements....................................... 21
Section 2.02. Acceptance by Trustee; Retransfer of
Mortgage Loans............................................... 25
Section 2.03. Representations and Warranties Regarding
the Master Servicer.......................................... 27
Section 2.04. Representations and Warranties of the
Seller Regarding the Mortgage Loans;
Retransfer of Certain Mortgage Loans......................... 29
Section 2.05. Covenants of the Depositor.......................................... 35
Section 2.06. Retransfers of Mortgage Loans at
Election of Transferor....................................... 36
Section 2.07. Execution and Authentication of
Certificates................................................. 38
Section 2.08. Tax Treatment....................................................... 38
Section 2.09. Representations and Warranties of the
Depositor.................................................... 38
ARTICLE III
Administration and Servicing of Mortgage Loans
Section 3.01. The Master Servicer................................................. 40
Section 3.02. Collection of Certain Mortgage Loan
Payments..................................................... 42
Section 3.03. Withdrawals from the Collection Account............................ 44
Section 3.04. Maintenance of Hazard Insurance;
Property Protection Expenses................................. 44
Section 3.05. Assumption and Modification Agreements............................. 45
Section 3.06. Realization Upon Defaulted Mortgage
Loans; Repurchase of Certain Mortgage Loans.................. 46
Section 3.07. Trustee to Cooperate............................................... 47
Section 3.08. Servicing Compensation; Payment of
Certain Expenses by Master Servicer.......................... 48
Section 3.09. Annual Statement as to Compliance................................... 48
Section 3.10. Annual Servicing Report............................................. 49
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Section 3.11. Annual Opinion of Counsel........................................... 49
Section 3.12. Access to Certain Documentation and
Information Regarding the Mortgage Loans..................... 49
Section 3.13. Maintenance of Certain Servicing
Insurance Policies........................................... 50
Section 3.14. Reports to the Securities and Exchange
Commission................................................... 50
Section 3.15. Tax Returns........................................................ 50
Section 3.16. Information Required by the Internal
Revenue Service Generally and Reports of
Foreclosures and Abandonments of
Mortgaged Property........................................... 51
ARTICLE IV
Servicing Certificate
Section 4.01. Servicing Certificate............................................... 52
Section 4.02. Claims upon the Policy; Policy Payments
Account...................................................... 55
Section 4.03. Spread Account..................................................... 56
Section 4.04. Effect of Payments by the Credit
Enhancer; Subrogation........................................ 57
Section 4.05. Optional Advances of the Master
Servicer..................................................... 58
ARTICLE V
Payments and Statements to
Certificateholders; Rights of Certificateholders
Section 5.01. Distributions....................................................... 59
Section 5.02. Calculation of the Investor Certificate
Rate......................................................... 61
Section 5.03. Statements to Certificateholders.................................... 62
Section 5.04. Rights of Certificateholders........................................ 63
ARTICLE VI
The Certificates
Section 6.01. The Certificates................................................... 64
Section 6.02. Registration of Transfer and Exchange of
Investor Certificates; Appointment of
Registrar.................................................... 64
Section 6.03. Mutilated, Destroyed, Lost or Stolen
Certificates................................................. 67
Section 6.04. Persons Deemed Owners.............................................. 67
Section 6.05. Restrictions on Transfer of Transferor
Certificates................................................. 67
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Section 6.06. Appointment of Paying Agent......................................... 69
Section 6.07. Acceptance of Obligations........................................... 70
ARTICLE VII
The Master Servicer, the Seller and the Depositor
Section 7.01. Liability of the Seller, the Master
Servicer and the Depositor................................... 71
Section 7.02. Merger or Consolidation of, or
Assumption of the Obligations of, the
Master Servicer or the Depositor............................. 71
Section 7.03. Limitation on Liability of the Master
Servicer and Others.......................................... 71
Section 7.05. Delegation of Duties................................................ 73
Section 7.06. Indemnification of the Trust by the
Master Servicer.............................................. 73
Section 7.07. Indemnification of the Trust by the
Transferor................................................... 73
Section 7.08. Limitation on Liability of the
Transferor................................................... 74
ARTICLE VIII
Servicing Termination
Section 8.01. Events of Servicing Termination.................................... 75
Section 8.02. Trustee to Act; Appointment of
Successor.................................................... 77
Section 8.03. Notification to Certificateholders................................. 78
ARTICLE IX
The Trustee
Section 9.01. Duties of Trustee.................................................. 79
Section 9.02. Certain Matters Affecting the Trustee.............................. 80
Section 9.03. Trustee Not Liable for Certificates or
Mortgage Loans............................................... 82
Section 9.04. Trustee May Own Certificates....................................... 83
Section 9.05. Master Servicer to Pay Trustee's Fees
and Expenses................................................. 83
Section 9.06. Eligibility Requirements for Trustee............................... 83
Section 9.07. Resignation or Removal of Trustee.................................. 84
Section 9.08. Successor Trustee.................................................. 85
Section 9.09. Merger or Consolidation of Trustee................................. 85
Section 9.10. Appointment of Co-Trustee or Separate
Trustee...................................................... 86
Section 9.11. Limitation of Liability............................................. 87
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Section 9.12. Trustee May Enforce Claims Without
Possession of Certificates................................... 87
Section 9.13. Suits for Enforcement............................................... 88
ARTICLE X
Termination
Section 10.01. Termination......................................................... 89
ARTICLE XI
Rapid Amortization Events
Section 11.01. Rapid Amortization Events........................................... 92
Section 11.02. Additional Rights Upon the Occurrence
of Certain Events........................................... 93
ARTICLE XII
Miscellaneous Provisions
Section 12.01. Amendment........................................................... 96
Section 12.02. Recordation of Agreement............................................ 98
Section 12.03. Limitation on Rights of Certificate-
holders..................................................... 98
Section 12.04. Governing Law....................................................... 99
Section 12.05. Notices............................................................. 99
Section 12.06. Severability of Provisions..........................................100
Section 12.07. Assignment..........................................................100
Section 12.08. Certificates Nonassessable and Fully
Paid........................................................100
Section 12.09. Third-Party Beneficiaries...........................................100
Section 12.10. Counterparts........................................................100
Section 12.11. Effect of Headings and Table of
Contents....................................................101
Section 12.12. Insurance Agreement................................................ 101
EXHIBIT A - FORM OF INVESTOR CERTIFICATE...................................................A-1
EXHIBIT B - FORM OF TRANSFEROR CERTIFICATE.................................................B-1
EXHIBIT C - MORTGAGE LOAN SCHEDULE.........................................................C-1
EXHIBIT D - RESERVED.......................................................................D-1
EXHIBIT E - ANNUAL OPINION OF COUNSEL......................................................E-1
EXHIBIT F - FORM OF CREDIT LINE AGREEMENT..................................................F-1
EXHIBIT G - RESERVED.......................................................................G-1
EXHIBIT H - RESERVED.......................................................................H-1
EXHIBIT I - LETTER OF REPRESENTATIONS......................................................I-1
EXHIBIT J - RESERVED.......................................................................J-1
EXHIBIT K - FORM OF INVESTMENT LETTER......................................................K-1
EXHIBIT L - FORM OF REQUEST FOR RELEASE....................................................L-1
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This Pooling and Servicing Agreement, dated as of ____________, 199__, among
CWABS, Inc., as Depositor (the "Depositor"), [Countrywide Home Loans, Inc.], as
Seller and Master Servicer (in such capacities, the "Seller" and the "Master
Servicer", respectively), and [______________________], as Trustee (the
"Trustee"),
W I T N E S S E T H T H A T:
In consideration of the mutual agreements herein contained, the parties
hereto 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.
Accelerated Principal Distribution Amount: With respect to any
Distribution Date, the amount, if any, required to reduce the Investor
Certificate Principal Balance (after giving effect to the distribution of all
other amounts actually distributed on the Investor Certificates on such
Distribution Date) so that the Invested Amount (immediately following such
Distribution Date) exceeds the Investor Certificate Principal Balance (as so
reduced) by the Required Overcollateralization Amount.
Additional Balance: As to any Mortgage Loan and day, the aggregate
amount of all Draws conveyed to the Trust pursuant to Section 2.01.
[Adjustment Date: With respect to any Interest Period, the second LIBOR
Business Day preceding the first day of such Interest Period.]
Affiliate: With respect to any Person, any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" means the power to direct the management and policies of a
Person, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise and "controlling" and "controlled" shall have meanings
correlative to the foregoing.
Agreement: This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
Alternative Principal Payment: As to any Distribution Date, the greater
of (x) _____% of the Investor Certificate Principal
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Balance immediately prior to the Distribution Date or (y) the amount (but not
less than zero) equal to Principal Collections for such Distribution Date less
the aggregate of Draws under the Credit Line Agreements during the related
Collection Period.
Appraised Value: As to any Mortgaged Property, the value established by
any of the following: (i) with respect to Credit Line Agreements with Credit
Limits greater than $________, by a full appraisal, (ii) with respect to Credit
Line Agreements with Credit Limits equal to or less than $_________, by a drive
by inspection of such Mortgaged Property made to establish compliance with the
underwriting criteria then in effect in connection with the application for the
Mortgage Loan secured by such Mortgaged Property.
Asset Balance: As to any Mortgage Loan, other than a Liquidated Mortgage
Loan, and day, the related Cut-off Date Asset Balance, plus (i) any Additional
Balance in respect of such Mortgage Loan, minus (ii) all collections credited as
principal against the Asset Balance of any such Mortgage Loan in accordance with
the related Credit Line Agreement. For purposes of this definition, a Liquidated
Mortgage Loan shall be deemed to have an Asset Balance equal to the Asset
Balance of the related Mortgage Loan immediately prior to the final recovery of
related Liquidation Proceeds and an Asset Balance of zero thereafter.
Assignment of Mortgage: With respect to any Mortgage, an assignment,
notice of transfer or equivalent instrument, in recordable form, sufficient
under the laws of the jurisdiction in which the related Mortgaged Property is
located to reflect the sale of the Mortgage to the Trustee, which assignment,
notice of transfer or equivalent instrument may be in the form of one or more
blanket assignments covering the Mortgage Loans secured by Mortgaged Properties
located in the same jurisdiction.
Authorized Newspaper: A newspaper of general circulation in the Borough
of Manhattan, The City of New York, printed in the English language and
customarily published on each Business Day, whether or not published on
Saturdays, Sundays and holidays.
BIF: The Bank Insurance Fund, as from time to time constituted, created
under the Financial Institutions Reform, Recovery and Enhancement Act of 1989,
or if at any time after the execution of this instrument the Bank Insurance Fund
is not existing and performing duties now assigned to it, the body performing
such duties on such date.
Billing Cycle: With respect to any Mortgage Loan and Collection Period,
the billing period specified in the related Credit Line Agreement and with
respect to which amounts billed are received during such Collection Period.
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Book-Entry Certificate: Any Investor Certificate registered in the name
of the Depository or its nominee, ownership of which is reflected on the books
of the Depository or on the books of a Person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the rules
of such Depository).
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, California or
___________ are required or authorized by law to be closed.
Certificate: An Investor Certificate or a Transferor Certificate.
Certificate Owner: The Person who is the beneficial owner of a
Book-Entry Certificate.
Certificate Register and Certificate Registrar: The register maintained
and the registrar appointed pursuant to Section 6.02.
Certificateholder or Holder: The Person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purpose of
giving any consent, direction, waiver or request pursuant to this Agreement, (x)
any Investor Certificate registered in the name of the Transferor, or any Person
known to a Responsible Officer to be an Affiliate of either the Depositor or the
Transferor and (y) any Investor Certificate for which the Transferor, or any
Person known to a Responsible Officer to be an Affiliate of either such entity
is the Certificate Owner shall be deemed not to be outstanding (unless to the
knowledge of a Responsible Officer (i) the Transferor, or such Affiliate is
acting as trustee or nominee for a Person who is not an Affiliate of the
Transferor and who makes the voting decision with respect to such Investor
Certificate or (ii) the Transferor, or such Affiliate is the Certificate Owner
of all the Investor Certificates) and the Percentage Interest evidenced thereby
shall not be taken into account in determining whether the requisite amount of
Percentage Interests necessary to effect any such consent, direction, waiver or
request has been obtained.
Closing Date: _______________, 199___.
Code: The Internal Revenue Code of 1986, as the same may be
amended from time to time (or any successor statute thereto).
Collection Account: The custodial account or accounts created and
maintained for the benefit of the Investor Certificateholders and the Credit
Enhancer pursuant to Section 3.02(b). The Collection Account shall be an
Eligible Account.
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Collection Period: With respect to any Distribution Date (other than the
first Collection Period) and any Mortgage Loan, the calendar month preceding
such Distribution Date. With respect to the first Distribution Date, the period
from _______________, 199___ through _______________, 199___.
Combined Loan-to-Value Ratio: With respect to any Mortgage Loan as of
any date, the percentage equivalent of the fraction, the numerator of which is
the sum of (i) the Credit Limit and (ii) the outstanding principal balance as of
the date of execution of the related original Credit Line Agreement (or any
subsequent date as of which such outstanding principal balance may be determined
in connection with an increase in the Credit Limit for such Mortgage Loan) of
any mortgage loan or mortgage loans that are senior or equal in priority to the
Mortgage Loan and which is secured by the same Mortgaged Property and the
denominator of which is the Valuation of the related Mortgaged Property.
Corporate Trust Office: The principal office of the Trustee at which at
any particular time its corporate business shall be administered, which office
on the Closing Date is located at __________________________________, Attention:
_________________.
Credit Enhancement Draw Amount: As to any Distribution Date, an amount
equal to the sum of (x) the amount by which the amount to be distributed to
Investor Certificateholders pursuant to Section 5.01(a)(iii) exceeds the amount
of Investor Interest Collections on deposit in the Collection Account on the
Business Day preceding such Distribution Date that is available to be applied
therefor and the sum of the amount if any deposited in the Collection Account in
respect of such Distribution Date pursuant to Section 4.05 and any amount
transferred from the Spread Account to the Collection Account pursuant to
Section 4.03, (y) the Guaranteed Principal Distribution Amount and (z) any
Preference Claim for such Distribution Date.
Credit Enhancer: _______________________________, a
________________________ company, any successor thereto or any replacement
credit enhancer substituted pursuant to Section 4.03.
Credit Enhancer Default: The failure by the Credit Enhancer to make a
payment required under the Policy in accordance with the terms thereof.
Credit Limit: As to any Mortgage Loan, the maximum Asset Balance
permitted under the terms of the related Credit Line Agreement.
Credit Limit Utilization Rate: As to any Mortgage Loan, the percentage
equivalent of a fraction the numerator of which is the Cut-off Date Asset
Balance for such Mortgage Loan and the denominator of which is the related
Credit Limit.
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Credit Line Agreement: With respect to any Mortgage Loan, the related
credit line account agreement executed by the related Mortgagor and any
amendment or modification thereof.
Custodial Agreement: Any Custodial Agreement between any Custodian and
the Trustee, which is reasonably acceptable in form and substance to the Credit
Enhancer, relating to the custody of the Mortgage Loans and the Related
Documents.
Custodian: Any custodian appointed by the Trustee under a Custodial
Agreement to maintain all or a portion of the Mortgage Files pursuant to Section
2.01(b).
Cut-off Date: ______________, 199___.
Cut-off Date Asset Balance: With respect to any Mortgage Loan, the
unpaid principal balance thereof as of the Cut-off Date.
Cut-off Date Pool Balance: The Pool Balance calculated as of the Cut-off
Date.
Defective Mortgage Loan: A Mortgage Loan subject to retransfer pursuant
to Section 2.02, 2.04 or 2.09.
Definitive Certificates: As defined in Section 6.02(c).
Delivery Event: As defined in Section 2.01.
Depositor: CWABS, Inc., or its successor in interest.
Depository: The initial Depository shall be The Depository Trust
Company, the nominee of which is Cede & Co., as the registered Holder of
Investor Certificates evidencing $______________ in initial aggregate principal
amount of the Investor Certificates. The Depository shall at all times be a
"clearing corporation" as defined in Section 8-102(3) of the UCC of the State of
New York.
Depository Participant: A broker, dealer, bank or other financial
institution or other Person for whom from time to time the Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
Determination Date: With respect to any Distribution Date, the third
Business Day prior to such Distribution Date.
Distribution Date: The ________th day of each month, or if such day is
not a Business Day, then the next Business Day, beginning in the month
immediately following the month of the initial issuance of the Certificates.
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Draw: With respect to any Mortgage Loan, an additional borrowing by the
Mortgagor subsequent to the Cut-off Date in accordance with the related Mortgage
Note.
Due Date: As to any Mortgage Loan, the fifteenth day of the month.
Electronic Ledger: The electronic master record of home equity credit
line mortgage loans maintained by the Master Servicer or by the Seller, as
appropriate.
Eligible Account: (i) An account that is maintained with a depository
institution whose debt obligations [throughout] the time of any deposit therein
are rated in the highest short-term debt rating category by the Rating Agencies,
(ii) one or more accounts with a depository institution having a minimum
long-term unsecured debt rating of "_______" by ________________ and "_____" by
__________________, which accounts are fully insured by either SAIF or BIF,
(iii) a segregated trust account maintained with the Trustee or an Affiliate of
the Trustee in its fiduciary capacity, or (iv) an account otherwise acceptable
to each Rating Agency and the Credit Enhancer, as evidenced at closing by
delivery of a rating letter by each Rating Agency and thereafter by delivery of
a letter from each Rating Agency and the Credit Enhancer to the Trustee, within
30 days of receipt of notice of such deposit, to reduce or withdraw its
then-current rating of the Certificates without regard to the Policy.
Eligible Investments: (i) obligations of the United States or any agency
thereof, provided such obligations are backed by the full faith and credit of
the United States; (ii) general obligations of or obligations guaranteed by any
state of the United States or the District of Columbia receiving the highest
long-term debt rating of each Rating Agency rating the related Series of
Securities, or such lower rating as will not result in the downgrading or
withdrawal of the ratings then assigned to the Certificates by each such Rating
Agency; (iii) commercial or finance company paper (including, without
limitation, commercial paper issued by Countrywide Home Loans, Inc. or any of
its Affiliates) which is then receiving the highest commercial or finance
company paper rating of each such Rating Agency, or such lower rating as will
not result in the downgrading or withdrawal of the ratings then assigned to the
Certificates by each such Rating Agency; (iv) certificates of deposit, demand or
time deposits, or bankers' acceptances issued by any depository institution or
trust company incorporated under the laws of the United States or of any state
thereof and subject to supervision and examination by federal and/or state
banking authorities, provided that the commercial paper and/or long term
unsecured debt obligations of such depository institution or trust company (or
in the case of the principal depository institution in a holding company system,
the commercial paper or long-term unsecured debt obligations of such holding
company, but only if
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Moody's Investors Service, Inc. ("Moody's") is not a Rating Agency) are then
rated one of the two highest long-term and the highest short-term ratings of
each such Rating Agency for such securities, or such lower ratings as will not
result in the downgrading or withdrawal of the rating then assigned to the
Certificates by any such Rating Agency; (iv) demand or time deposits or
certificates of deposit issued by any bank or trust company or savings
institution to the extent that such deposits are fully insured by the FDIC; (v)
guaranteed reinvestment agreements issued by any bank, insurance company or
other corporation containing, at the time of the issuance of such agreements,
such terms and conditions as will not result in the downgrading or withdrawal of
the rating then assigned to the Certificates by any such Rating Agency; (vi)
repurchase obligations with respect to any security described in clauses (i) and
(ii) above, in either case entered into with a depository institution or trust
company (acting as principal) described in clause (iv) above; (vii) securities
(other than stripped bonds, stripped coupons or instruments sold at a purchase
price in excess of 115% of the face amount thereof) bearing interest or sold at
a discount issued by any corporation incorporated under the laws of the United
States or any state thereof which, at the time of such investment, have one of
the two highest ratings of each Rating Agency (except if the Rating Agency is
Moody's, such rating shall be the highest commercial paper rating of Moody's for
any such securities), or such lower rating as will not result in the downgrading
or withdrawal of the rating then assigned to the Certificates by any such Rating
Agency, as evidenced by a signed writing delivered by each such Rating Agency;
and (viii) such other investments having a specified stated maturity and bearing
interest or sold at a discount acceptable to each Rating Agency as will not
result in the downgrading or withdrawal of the rating then assigned to the
Securities of such Series by any such Rating Agency, as evidenced by a signed
writing delivered by each such Rating Agency; provided that no such instrument
shall be a Permitted Investment if such instrument evidences the right to
receive interest only payments with respect to the obligations underlying such
instrument.
Eligible Substitute Mortgage Loan: A Mortgage Loan substituted by the
Seller for a Defective Mortgage Loan which must, on the date of such
substitution, (i) have an outstanding Asset Balance (or in the case of a
substitution of more than one Mortgage Loan for a Defective Mortgage Loan, an
aggregate Asset Balance), not ____ percent more or ____ percent less than the
Transfer Deficiency, if any, relating to such Defective Mortgage Loan; (ii) have
a Loan Rate not less than the Loan Rate of the Defective Mortgage Loan and not
more than ___% in excess of the Loan Rate of such Defective Mortgage Loan; (iii)
have a Loan Rate based on the same Index with adjustments to such Loan Rate made
on the same Interest Rate Adjustment Date as that of the Defective Mortgage
Loan; (iv) have a Gross Margin that is not less than the Gross Margin of the
Defective Mortgage Loan and not more
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than _____ basis points higher than the Gross Margin for the Defective Mortgage
Loan; (v) have a Mortgage of the same or higher level of priority as the
Mortgage relating to the Defective Mortgage Loan at the time such Mortgage was
transferred to the Trust; (vi) have a remaining term to maturity not more than
____ months earlier and not more than _____ months later than the remaining term
to maturity of the Defective Mortgage Loan; (vii) comply with each
representation and warranty set forth in Section 2.04 (deemed to be made as of
the date of substitution); and (viii) have an original Combined Loan-to-Value
Ratio not greater than that of the Defective Mortgage Loan. More than one
Eligible Substitute Mortgage Loan may be substituted for a Defective Mortgage
Loan if such Eligible Substitute Mortgage Loans meet the foregoing attributes in
the aggregate and such substitution is approved in writing in advance by the
Credit Enhancer.
Endorsement: As defined in the Policy.
ERISA: Employee Retirement Income Security Act of 1974, as amended.
Event of Servicing Termination: As defined in Section 8.01.
FDIC: The Federal Deposit Insurance Corporation or any successor
thereto.
Fiscal Agent: As defined in the Policy.
Foreclosure Profit: With respect to a Liquidated Mortgage Loan, the
amount, if any, by which (i) the aggregate of its Net Liquidation Proceeds
exceeds (ii) the related Asset Balance (plus accrued and unpaid interest thereon
at the applicable Loan Rate from the date interest was last paid through the
date of receipt of the final Liquidation Proceeds) of such Liquidated Mortgage
Loan immediately prior to the final recovery of its Liquidation Proceeds.
Gross Margin: As to any Mortgage Loan, the percentage set forth as the
"Gross Margin" for such Mortgage Loan on Exhibit C hereto.
Guaranteed Distribution: With respect to any Distribution Date, the sum
of the (i) the Guaranteed Principal Distribution Amount and (ii) the amount to
be distributed to Certificateholders pursuant to Section 5.01(a)(iii) for such
Distribution Date.
Guaranteed Principal Distribution Amount: With respect to any
Distribution Date, (i) on any such Distribution Date, other than the
Distribution Date in ___________ 20___, the amount, if any, required to reduce
the Investor Certificate Principal Balance (after giving effect to the
distributions of Interest Collections and Principal Collections that are
allocable to
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principal on the Investor Certificates on such Distribution Date) to the
Invested Amount immediately following such Distribution Date or (ii) on the
Distribution Date in _____________ 20___, the amount by which the outstanding
Investor Certificate Principal Balance (after giving effect to Interest
Collections allocable and distributable to principal on the Investor
Certificates on such Distribution Date) exceeds the sum of the amounts on
deposit in the Collection Account available to be distributed to the Investor
Certificateholders pursuant to Section 5.01(b) hereof.
Increased Senior Lien Limitation: As defined in Section 3.01(a).
Index: With respect to each Interest Rate Adjustment Date for a Mortgage
Loan, the highest Prime Rate as published in the "Money Rates" table of The Wall
Street Journal as of the first business day of the calendar month.
Insolvency Event: As defined in Section 11.02.
Insurance Agreement: The insurance and indemnity agreement dated as of
____________, 19___ among the Depositor, the Seller, the Master Servicer, the
Trustee and the Credit Enhancer, including any amendments and supplements
thereto.
Insurance Proceeds: Proceeds paid by any insurer (other than the Credit
Enhancer) pursuant to any insurance policy covering a Mortgage Loan, or amounts
required to be paid by the Master Servicer pursuant to the last sentence of
Section 3.04, net of any component thereof (i) covering any expenses incurred by
or on behalf of the Master Servicer in connection with obtaining such proceeds,
(ii) that is applied to the restoration or repair of the related Mortgaged
Property, (iii) released to the Mortgagor in accordance with the Master
Servicer's normal servicing procedures or (iv) required to be paid to any holder
of a mortgage senior to such Mortgage Loan.
Interest Collections: As to any Distribution Date, the sum of all
payments by or on behalf of Mortgagors and any other amounts constituting
interest (including without limitation such portion of Insurance Proceeds and
Net Liquidation Proceeds as is allocable to interest on the applicable Mortgage
Loan) collected by the Master Servicer under the Mortgage Loans (excluding any
fees (including annual fees) or late charges or similar administrative fees paid
by Mortgagors) during the related Collection Period minus the Servicing Fee
payable to the Master Servicer with respect to the related Collection Period.
The terms of the related Credit Line Agreement shall determine the portion of
each payment in respect of such Mortgage Loan that constitutes principal or
interest.
Interest Period: With respect to any Distribution Date other than the
first Distribution Date, the period beginning on
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the preceding Distribution Date and ending on the day preceding such
Distribution Date, and in the case of the first Distribution Date, the period
beginning on the Closing Date and ending on the day preceding the first
Distribution Date.
Interest Rate Adjustment Date: With respect to each Mortgage Loan, any
date on which the Loan Rate is adjusted in accordance with the related Credit
Line Agreement.
Invested Amount: With respect to any Distribution Date, an amount equal
to the Original Invested Amount minus (i) the amount of Principal Collections
previously distributed to Investor Certificateholders and minus (ii) the
Investor Loss Amounts for prior Distribution Dates.
Investor Certificate: Any certificate executed and authenticated by the
Trustee substantially in the form set forth in Exhibit A hereto.
Investor Certificate Distribution Amount: As to any Distribution Date,
the sum of all amounts to be distributed to the Holders of Investor Certificates
pursuant to Article V and Article XI hereof.
Investor Certificate Interest: With respect to any Distribution Date,
interest for the related Interest Period at the applicable Investor Certificate
Rate on the Investor Certificate Principal Balance as of the first day of such
Interest Period (after giving effect to the distributions made on the first day
of such Interest Period).
Investor Certificate Principal Balance: With respect to any Distribution
Date, (a) the Original Investor Certificate Principal Balance less (b) the
aggregate of amounts actually distributed as principal on the Investor
Certificates.
Investor Certificate Rate: The sum of [(a) LIBOR as of the second LIBOR
Business Day prior to the immediately preceding Distribution Date (or as of two
LIBOR Business Days prior to the Closing Date, in the case of the first
Distribution Date) and (b) _____% per annum]; provided, however, that in no
event shall the Investor Certificate Rate with respect to any Interest Period
exceed the Maximum Rate for such Interest Period.
Investor Certificateholder: The Holder of an Investor Certificate.
Investor Floating Allocation Percentage: With respect to any
Distribution Date, the percentage equivalent of a fraction, the numerator of
which is the Invested Amount at the close of business on the preceding
Distribution Date (or at the Closing Date in the case of the first Distribution
Date) and the denomi-
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nator of which is the Pool Balance, calculated as of the beginning of the
related Collection Period.
Investor Fixed Allocation Percentage: ____%.
Investor Interest Collections: As to any Distribution Date, the product
of (i) the Interest Collections during the related Collection Period and (ii)
the Investor Floating Allocation Percentage for such Distribution Date.
Investor Loss Amount: With respect to any Distribution Date, the amount
equal to the product of (i) the Investor Floating Allocation Percentage for such
Distribution Date and (ii) the aggregate of the Liquidation Loss Amounts for
such Distribution Date.
Investor Loss Reduction Amount: With respect to any Distribution Date,
the portion, if any, of the Investor Loss Amount for such Distribution Date and
all prior Distribution Dates that has not been distributed to Investor
Certificateholders on such Distribution Date pursuant to Section 5.01(a)(iv) or
5.01(a)(v) or by way of the Credit Enhancement Draw Amount.
Investor Principal Collections: As to any Distribution Date, the
Investor Fixed Allocation Percentage of Principal Collections in respect of such
Distribution Date.
Investor Servicing Fee: With respect to any Distribution Date, the
product of (i) the Investor Floating Allocation Percentage for such Distribution
Date and (ii) the Servicing Fee for such Distribution Date.
[LIBOR: As to any date, the rate for United States dollar deposits for
one month which appear on the Telerate Screen LIBOR Page 3750 as of 11:00 A.M.,
London time. If such rate does not appear on such page (or such other page as
may replace that page on that service, or if such service is no longer offered,
such other service for displaying LIBOR or comparable rates as may be reasonably
selected by the Depositor after consultation with the Trustee), the rate will be
the Reference Bank Rate. If no such quotations can be obtained and no Reference
Bank Rate is available, LIBOR will be LIBOR applicable to the preceding
Distribution Date.]
[LIBOR 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 in the city
of London, England are required or authorized by law to be closed.]
Lien: Any mortgage, deed of trust, pledge, conveyance, hypothecation,
assignment, participation, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority right or interest or other security agreement or
preferential
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arrangement of any kind or nature whatsoever, including, without limitation, any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing and the filing of
any financing statement under the UCC (other than any such financing statement
filed for informational purposes only) or comparable law of any jurisdiction to
evidence any of the foregoing; provided, however, that any assignment pursuant
to Section 7.02 hereof shall not be deemed to constitute a Lien.
Lifetime Rate Cap: With respect to each Mortgage Loan with respect to
which the related Mortgage Note provides for a lifetime rate cap, the maximum
Loan Rate permitted over the life of such Mortgage Loan under the terms of the
related Credit Line Agreement, as set forth on Exhibit C hereto.
Liquidated Mortgage Loan: As to any Distribution Date, any Mortgage Loan
in respect of which the Master Servicer has determined, in accordance with the
servicing procedures specified herein, as of the end of the related Collection
Period, that all Liquidation Proceeds which it expects to recover with respect
to the disposition of such Mortgage Loan or the related REO have been recovered.
Liquidation Expenses: Out-of-pocket expenses (exclusive of overhead)
which are incurred by the Master Servicer in connection with the liquidation of
any Mortgage Loan and not recovered under any insurance policy, including,
without limitation, legal fees and expenses, any unreimbursed amount expended
pursuant to Section 3.06 (including, without limitation, amounts advanced to
correct defaults on any mortgage loan which is senior to such Mortgage Loan and
amounts advanced to keep current or pay off a mortgage loan that is senior to
such Mortgage Loan) respecting the related Mortgage Loan and any related and
unreimbursed expenditures with respect to real estate property taxes, water or
sewer taxes, condominium association dues, property restoration or preservation
or insurance against casualty, loss or damage.
Liquidation Loss Amount: With respect to any Distribution Date and any
Mortgage Loan that becomes a Liquidated Mortgage Loan during the related
Collection Period, the unrecovered Asset Balance thereof at the end of such
Collection Period, after giving effect to the Net Liquidation Proceeds applied
in reduction of such Asset Balance.
Liquidation Proceeds: Proceeds (including Insurance Proceeds but not
including amounts drawn under the Policy) received in connection with the
liquidation of any Mortgage Loan or related REO, whether through trustee's sale,
foreclosure sale or otherwise.
Loan Rate: With respect to any Mortgage Loan and as of any day, the per
annum rate of interest applicable under the related
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Credit Line Agreement to the calculation of interest for such day on the Asset
Balance of such Mortgage Loan.
Loan Rate Cap: With respect to each Mortgage Loan, the lesser of (i) the
Lifetime Rate Cap, if any, or (ii) the applicable state usury ceiling, if any.
Managed Amortization Period: The period from the Closing Date to and
including the Rapid Amortization Commencement Date.
Master Servicer: [Countrywide Home Loans, Inc., a New York] corporation
and any successor thereto and any successor hereunder.
Maximum Principal Payment: With respect to any Distribution Date, the
Investor Fixed Allocation Percentage of the Principal Collections for such
Distribution Date.
Maximum Rate: As to any Interest Period, the Weighted Average Net Loan
Rate for the Collection Period during which such Interest Period begins
(adjusted to an effective rate reflecting accrued interest calculated on the
basis of the actual number of days in the Collection Period commencing in the
month in which such Interest Period commences and a year assumed to consist of
360 days).
Minimum Monthly Payment: With respect to any Mortgage Loan and any
month, the minimum amount required to be paid by the related Mortgagor in that
month.
Minimum Transferor Interest: With respect to any date, an amount equal
to the lesser of (a) ___% of the Pool Balance on such date and (b) the
Transferor Principal Balance as of the Closing Date.
Moody's: Moody's Investors Service, Inc. or its successor in interest.
Mortgage: The mortgage, deed of trust or other instrument creating a
first or second lien on an estate in fee simple interest in real property
securing a Mortgage Loan.
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 Schedule: With respect to any date, the schedule of
Mortgage Loans included in the Trust on such date. The initial schedule of
Mortgage Loans as of the Cut-off Date is the schedule set forth herein as
Exhibit C, which schedule sets forth as to each Mortgage Loan (i) the Cut-off
Date Asset Balance, (ii) the Credit Limit, (iii) the Gross Margin, (iv) the
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Lifetime Rate Cap, (v) the account number, (vi) the current Loan Rate, (vii) the
Combined Loan-to-Value Ratio, (viii) a code specifying the property type, (ix) a
code specifying documentation type and (x) a code specifying lien position. The
Mortgage Loan Schedule will be deemed to be amended from time to time to reflect
Additional Balances.
Mortgage Loans: The mortgage loans, including Additional Balances with
respect thereto, that are transferred and assigned to the Trustee pursuant to
Section 2.01, together with the Related Documents, exclusive of Mortgage Loans
that are retransferred to the Depositor, the Master Servicer or the Seller from
time to time pursuant to Section 2.02, 2.04, 2.05, 2.06, 2.09 or 3.01 as from
time to time are held as a part of the Trust. The mortgage loans originally so
held are identified in the Mortgage Loan Schedule delivered on the Closing Date.
The Mortgage Loans shall also include any Eligible Substitute Mortgage Loan
Substituted by the Seller for a Defective Mortgage Loan pursuant to Sections
2.02 and 2.04.
Mortgage Note: With respect to a Mortgage Loan, the Credit Line
Agreement pursuant to which the related mortgagor agrees to pay the indebtedness
evidenced thereby and secured by the related Mortgage.
Mortgaged Property: The underlying property, including any
real property and improvements thereon, securing a Mortgage Loan.
Mortgagor: The obligor or obligors under a Credit Line
Agreement.
Net Liquidation Proceeds: With respect to any Liquidated
Mortgage Loan, Liquidation Proceeds net of Liquidation Expenses.
Net Loan Rate: With respect to any Mortgage Loan and as to any day, the
Loan Rate less the Servicing Fee Rate, the Premium Fee Rate and the Trustee Fee
Rate.
Officer's Certificate: A certificate (i) signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, a Managing Director, a
Vice President (however denominated), an Assistant Vice President, the
Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant
Secretaries of the Depositor, the Transferor or the Master Servicer, or (ii), if
provided for in this Agreement, signed by a Servicing Officer, as the case may
be, and delivered to the Depositor and the Trustee, as the case may be, as
required by this Agreement.
Opinion of Counsel: A written opinion of counsel acceptable to the
Trustee, who may be in-house counsel for the Depositor, the Seller, the Master
Servicer or the Transferor (except that any opinion pursuant to Section 7.04 or
relating to taxation must
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be an opinion of independent outside counsel) and who, in the case of opinions
delivered to the Credit Enhancer and the Rating Agency, is reasonably acceptable
to it.
Original Invested Amount: $_____________.
Original Investor Certificate Principal Balance: $________________.
Overcollateralization Amount: At the time of reference thereto, the
amount, if any, by which the Invested Amount exceeds the Investor Certificate
Principal Balance.
Paying Agent: Any paying agent appointed pursuant to Section 6.06.
Percentage Interest: As to any Investor Certificate, the percentage
obtained by dividing the principal denomination of such Investor Certificate by
the aggregate of the principal denominations of all Investor Certificates.
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Policy: The financial guaranty insurance policy number ___________, and
all endorsements thereto, dated as of the Closing Date, issued by the Credit
Enhancer to the Trustee for the benefit of the Investor Certificateholders.
Policy Payments Account: As defined in Section 4.02.
Pool Balance: With respect to any date, the aggregate of the Asset
Balances of all Mortgage Loans as of such date.
Pool Factor: With respect to any Distribution Date, the percentage,
carried to seven places, obtained by dividing the Investor Certificate Principal
Balance for such Distribution Date by the Original Investor Certificate
Principal Balance.
Preference Claim: As defined in Section 4.02.
Premium Fee Rate: As described in the Insurance Agreement.
Principal Collections: As to any Distribution Date, the sum of all
payments by or on behalf of Mortgagors and any other amounts constituting
principal (including but not limited to any portion of Insurance Proceeds or Net
Liquidation Proceeds allocable to principal of the applicable Mortgage Loan, and
Transfer Deposit Amounts, but excluding Foreclosure Profits) collected by the
Master Servicer under the Mortgage Loans during the related Collection Period.
The terms of the related Credit Line
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Agreement shall determine the portion of each payment in respect of a Mortgage
Loan that constitutes principal or interest.
Purchase Agreement: The Mortgage Loan Purchase Agreement, dated as of
the Cut-off Date, between [Countrywide Home Loans, Inc.], as seller, and the
Depositor, as purchaser, with respect to the Mortgage Loans.
Rapid Amortization Commencement Date: The earlier of (i) the
Distribution Date in ____________ 200__ and (ii) the Distribution Date next
succeeding the Collection Period in which a Rapid Amortization Event is deemed
to occur pursuant to Section 11.01.
Rapid Amortization Event: As defined in Section 11.01.
Rapid Amortization Period: The period following the Managed
Amortization Period until the termination of the Trust pursuant
to Section 10.01.
Rating Agency: Any statistical credit rating agency, or its successor,
that rated the Investor Certificates at the request of the Depositor at the time
of the initial issuance of the Certificates. If such agency or a successor is no
longer in existence, "Rating Agency" shall be such statistical credit rating
agency, or other comparable Person, designated by the Depositor and the Credit
Enhancer, notice of which designation shall be given to the Trustee. References
herein to the highest short term unsecured rating category of a Rating Agency
shall mean A-1+ or better in the case of ____________________ and P-1 or better
in the case of _______________ and in the case of any other Rating Agency shall
mean the ratings such other Rating Agency deems equivalent to the foregoing
ratings. References herein to the highest long-term rating category of a Rating
Agency shall mean "AAA" in the case of ____________________ and "Aaa" in the
case of _______________ and in the case of any other Rating Agency, the rating
such other Rating Agency deems equivalent to the foregoing ratings.
Record Date: The last day preceding the related Distribution Date;
provided, however, that following the date on which Definitive Certificates are
available pursuant to Section 6.02(c) the Record Date shall be the last day of
the calendar month preceding the month in which the related Distribution Date
occurs.
Reference Bank Rate: As to any Interest Period as follows: the
arithmetic mean (rounded upwards, if necessary, to the nearest one sixteenth of
a percent) of the offered rates for United States dollar deposits for one month
which are offered by the Reference Banks as of A.M., London time, on the
second LIBOR Business Day prior to the first day of such Interest Period to
prime banks in the London interbank market for a period of one month in amounts
approximately equal to the Outstanding Investor
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Certificate Principal Balance; provided that at least two such Reference Banks
provide such rate. If fewer than two offered rates appear, the Reference Bank
Rate will be the arithmetic mean of the rates quoted by one or more major banks
in New York City, selected by the Depositor after consultation with the Trustee,
as of A.M., New York City time, on such date for loans in U.S. Dollars to
leading European Banks for a period of one month in amounts approximately equal
to the outstanding Investor Certificate Principal Balance. If no such quotations
can be obtained, the Reference Bank Rate shall be the Reference Bank Rate
applicable to the preceding Interest Period.
Reference Banks: Three major banks that are engaged in the London
interbank market, selected by the Depositor after consultation with the Trustee.
Related Documents: As defined in Section 2.01.
REO: A Mortgaged Property that is acquired by the Trust in
foreclosure or by deed in lieu of foreclosure.
Required Overcollateralization Amount: As defined in the
Insurance Agreement.
Responsible Officer: When used with respect to the Trustee, any officer
of the Trustee with direct responsibility for the administration of this
Agreement and also, with respect to a particular matter, any other officer to
whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject.
Revolving Period: With respect to each Mortgage Loan, the period
specified for such Mortgage Loan in the related Credit Line Agreement, during
which the Mortgagor is permitted to make Draws.
SAIF: The Savings Association Insurance Fund, as from time to time
constituted, created under the Financial Institutions Reform, Recovery and
Enhancement Act of 1989, or if at any time after the execution of this
instrument the Savings Association Insurance Fund is not existing and performing
duties now assigned to it, the body performing such duties on such date.
Scheduled Principal Collections Distribution Amount: With respect to any
Distribution Date during the Managed Amortization Period and the Investor
Certificates, an amount equal to the lesser of (i) the Maximum Principal Payment
and (ii) the Alternative Principal Payment. With respect to any Distribution
Date in respect of the Rapid Amortization Period, the Maximum Principal Payment.
Seller: [Countrywide Home Loans, Inc., a New York] corporation and any
successor thereto.
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Servicing Certificate: A certificate completed and executed
by a Servicing Officer in accordance with Section 4.01.
Servicing Fee: With respect to any Distribution Date, the product of (i)
the Servicing Fee Rate divided by 12 and (ii) the aggregate Asset Balance of the
Mortgage Loans on the first day of the Collection Period preceding such
Distribution Date (or at the Cut-off Date with respect to the first Distribution
Date).
Servicing Fee Rate: _____% per annum.
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 (with a copy to the Credit Enhancer) by the Master Servicer on the
Closing Date, as such list may be amended from time to time.
Spread Account: The account created pursuant to Section
4.03 and maintained pursuant to the Insurance Agreement.
Spread Account Maximum: As defined in the Insurance Agreement.
Telerate Screen LIBO Page 3750: The display designated as page 3750 on
the Telerate Service (or such other page as may replace page 3750 on that
service for the purpose of displaying London inter-bank offered rates of major
banks).
Transfer Date: As defined in Section 2.06.
Transfer Deficiency: As defined in Section 2.02.
Transfer Deposit Amount: As defined in Section 2.02.
Transfer Notice Date: As defined in Section 2.06.
Transferor or Transferor Certificateholders: The Holders of
the Transferor Certificates.
Transferor Certificates: The certificates executed and
authenticated by the Trustee substantially in the form set forth
in Exhibit B hereto.
Transferor Collections: As to any period, the sum of Transferor Interest
Collections and Transferor Principal Collections for such period.
Transferor Interest Collections: Interest Collections that
are not Investor Interest Collections, reduced by the Transferor
Servicing Fee.
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Transferor Principal Balance: As of any date of determination, the
amount equal to (i) the Pool Balance at the end of the day next preceding such
date of determination less (ii) the Invested Amount as of the close of business
on the preceding Distribution Date.
Transferor Principal Collections: On any Distribution Date, Principal
Collections received during the related Collection Period minus the amount of
such Principal Collections required to be distributed to Investor
Certificateholders pursuant to Section 5.01(b).
Transferor Servicing Fee: With respect to any Distribution
Date, the Servicing Fee for such Distribution Date less the
Investor Servicing Fee for such Distribution Date.
Trust: The trust created by this Agreement, the corpus of which consists
of the Mortgage Loans, such other assets as shall from time to time be
identified as deposited in the Collection Account in accordance with this
Agreement, property that secured a Mortgage Loan and that has become REO, the
interest of the Depositor in certain hazard insurance policies maintained by the
Mortgagors or the Master Servicer in respect of the Mortgage Loans, the Policy,
an assignment of the Depositor's rights under the Purchase Agreement and all
proceeds of each of the foregoing (exclusive of payments of accrued interest on
the Mortgage Loans which are due on or prior to the Cut-off Date or due in the
month of ____________).
Trustee: ____________________________ or any successor
Trustee appointed in accordance with this Agreement that has
accepted such appointment in accordance with this Agreement.
Trustee Fee: A fee which is separately agreed to between
the Master Servicer and the Trustee.
Trustee Fee Rate: The per annum rate at which the Trustee
Fee is calculated.
UCC: The Uniform Commercial Code, as amended from time to
time, as in effect in any specified jurisdiction.
Unpaid Investor Certificate Interest Shortfall: With respect to any
Distribution Date, the aggregate amount, if any, of Investor Certificate
Interest that was accrued in respect of a prior Distribution Date and has not
been distributed to Investor Certificateholders.
Valuation: With respect to any Mortgaged Property and time referred to
herein, the lesser of (i) the Appraised Value of the Mortgaged Property and (ii)
in the case of a Mortgaged Property purchased within one year of the origination
of the related Mortgage loan, the purchase price of the Mortgaged Property.
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Weighted Average Net Loan Rate: As to any Collection Period, the average
of the daily Net Loan Rate for each Mortgage Loan for each day during the
related Billing Cycle, weighted on the basis of the daily average of the related
Asset Balances outstanding for each day in such Billing Cycle for each Mortgage
Loan as determined by the Master Servicer in accordance with the Master
Servicer's normal servicing procedures.
Section 1.02. Interest Calculations. All calculations of interest
hereunder that are made in respect of the Asset Balance of a Mortgage Loan shall
be made on a daily basis using a 365-day year. All calculations of interest on
the Investor Certificates shall be made on the basis of the actual number of
days in an Interest Period and a year assumed to consist of 360 days. The
calculation of the Servicing Fee shall be made on the basis of a 360-day year
consisting of twelve 30-day months. All dollar amounts calculated hereunder
shall be rounded to the nearest penny with one-half of one penny being rounded
down.
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ARTICLE II
Conveyance of Mortgage Loans;
Original Issuance of Certificates;
Tax Treatment
Section 2.01. Conveyance of Mortgage Loans; Retention of Obligation to
Fund Advances Under Credit Line Agreements. The Depositor, concurrently with the
execution and delivery of this Agreement, does hereby transfer, assign, set over
and otherwise convey to the Trust without recourse (subject to Sections 2.02 and
2.04) all of its right, title and interest in and to (i) each Mortgage Loan,
including its Asset Balance (including all Additional Balances) and all
collections in respect thereof received on or after the Cut-off Date (excluding
payments in respect of accrued interest due prior to the Cut-off Date or due in
the month of ____________); (ii) property that secured a Mortgage Loan that is
acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
rights under the Purchase Agreement; (iv) [the Depositor's rights under the
hazard insurance policies,] (v) the Collection Account and the [Security Account
for the Certificates] (excluding net earnings thereon); (vi) the Policy, (vii)
the Spread Account and (viii) all other assets included or to be included in the
Trust for the benefit of Certificateholders; provided, however, neither the
Trustee nor the Trust assumes the obligation under any Credit Line Agreement
that provides for the funding of future advances to the Mortgagor thereunder,
and neither the Trust nor the Trustee shall be obligated or permitted to fund
any such future advances. Additional Balances shall be part of the related Asset
Balance and are hereby transferred to the Trust on the Closing Date pursuant to
this Section 2.01, and therefore part of the Trust property. In addition, on or
prior to the Closing Date, the Depositor shall cause the Credit Enhancer to
deliver the Policy to the Trustee for the benefit of the Investor
Certificateholders. The foregoing transfer, assignment, set-over and conveyance
to the Trust shall be made to the Trustee, on behalf of the Trust, and each
reference in this Agreement to such transfer, assignment, set-over and
conveyance shall be construed accordingly.
The Depositor agrees to take or cause to be taken such actions and
execute such documents (including without limitation the filing of all necessary
continuation statements for the UCC-1 financing statements filed in the State of
__________ (which shall have been filed within 90 days of the Closing Date)
describing the Cut-off Date Asset Balances and Additional Balances and naming
the Depositor as debtor and the Trustee as secured party and any amendments to
UCC-1 financing statements required to reflect a change in the name or corporate
structure of the Depositor or the filing of any additional UCC-1 financing
statements due to the change in the principal office of the Depositor (within 90
days of any event necessitating such filing)
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as are necessary to perfect and protect the Certificateholders' and Credit
Enhancer's interests in each Cut-off Date Asset Balance and Additional Balances
and the proceeds thereof (other than maintaining possession by the Trustee of
the Mortgage Loans and the Mortgage Files, which possession will, subject to the
terms hereof, be maintained by the Master Servicer as custodian and bailee of
the Trustee).
In connection with such transfer and assignment by the Depositor, the
Master Servicer acknowledges that it is holding as custodian and bailee for the
Trustee the following documents or instruments (the "Related Documents") with
respect to each Mortgage Loan:
(i) the original Mortgage Note endorsed in blank;
(ii) an original Assignment of Mortgage in blank in
recordable form;
(iii) the original recorded Mortgage or, if, in connection
with any Mortgage Loan, the original recorded Mortgage with evidence of
recording thereon cannot be delivered on or prior to the Closing Date
because of a delay caused by the public recording office where such
original Mortgage has been delivered for recordation or because such
original Mortgage has been lost, the Seller, at the direction of the
Depositor, shall deliver or cause to be delivered to the Custodian, as
agent for the Trustee, a true and correct copy of such Mortgage,
together with (i) in the case of a delay caused by the public recording
office, an Officer's Certificate of the Depositor stating that such
original Mortgage has been dispatched to the appropriate public
recording official or (ii) in the case of an original Mortgage that has
been lost, a certificate by the appropriate county recording office
where such Mortgage is recorded;
(iv) if applicable, the original intervening assignments, if
any ("Intervening Assignments"), with evidence of recording thereon,
showing a complete chain of title to the Mortgage from the originator to
the Depositor or, if any such original Intervening Assignment has not
been returned from the applicable recording office or has been lost, a
true and correct copy thereof, together with (i) in the case of a delay
caused by the public recording office, an Officer's Certificate of the
Seller stating that such original Intervening Assignment has been
dispatched to the appropriate public recording official for recordation
or (ii) in the case of an original Intervening Assignment that has been
lost, a certificate by the appropriate county recording office where
such Mortgage is recorded;
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(v) either (1) for each Mortgage Loan with a Credit Limit in
excess of $_________, a title policy or (2) for all other Mortgage
Loans, either a title policy, a title search or guaranty of title with
respect to the related Mortgaged Property;
(vi) the original of any guaranty executed in
connection with the Mortgage Note;
(vii) the original of each assumption, modification,
consolidation or substitution agreement, if any, relating to
the Mortgage Loan; and
(viii) any security agreement, chattel mortgage or
equivalent instrument executed in connection with the Mortgage;
provided, however, that as to any Mortgage Loan, if (a) as evidenced by an
Opinion of Counsel delivered to and in form and substance satisfactory to the
Trustee and the Credit Enhancer, (x) an optical image or other representation of
the related documents specified in clauses (i) through (viii) above are
enforceable in the relevant jurisdictions to the same extent as the original of
such document and (y) such optical image or other representation does not impair
the ability of an owner of such Mortgage Loan to transfer its interest in such
Mortgage Loan, and (b) the retention of such documents in such format will not
result in a reduction in the then current rating of the Investor Certificates,
without regard to the Policy, such optical image or other representation may be
held by the Master Servicer, as custodian for the Trustee or assignee in lieu of
the physical documents specified above.
The Seller hereby confirms to the Trustee that it has caused the
portions of the Electronic Ledgers relating to the Mortgage Loans to be clearly
and unambiguously marked, and has made the appropriate entries in its general
accounting records, to indicate that such Mortgage Loans have been transferred
to the Trust at the direction of the Depositor. The Master Servicer hereby
confirms to the Trustee that it has clearly and unambiguously made appropriate
entries in its general accounting records indicating that such Mortgage Loans
constitute part of the Trust and are serviced by it on behalf of the Trust in
accordance with the terms hereof.
The parties hereto intend that the transaction set forth herein be a
sale by the Depositor to the Trust of all the Depositor's right, title and
interest in and to the Mortgage Loans and other property described above. In the
event the transaction set forth herein is deemed not to be a sale, the Depositor
hereby grants to the Trust a security interest in all of the Depositor's right,
title and interest in, to and under the Mortgage Loans whether now existing or
hereafter created, all
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monies due or to become due on the Mortgage Loans and all proceeds of any
thereof; and this Agreement shall constitute a security agreement under
applicable law.
Except as hereinafter provided, the Master Servicer shall be entitled to
maintain possession of all of the foregoing documents and instruments and shall
not be required to deliver any of them to the Trustee. In the event, however,
that possession of any of such documents or instruments is required by any
Person (including the Trustee) acting as successor servicer pursuant to Section
7.04 or 8.02 in order to carry out the duties of Master Servicer hereunder, then
such successor shall be entitled to request delivery, at the expense of the
Master Servicer, of such documents or instruments by the Master Servicer and to
retain such documents or instruments for servicing purposes; provided that the
Trustee or such servicers shall maintain such documents at such offices as may
be required by any regulatory body having jurisdiction over such Mortgage Loans.
The Master Servicer's right to maintain possession of the documents
enumerated above shall continue so long as the long term unsecured debt of
[Countrywide Home Loans, Inc.] is assigned ratings of at least "BBB-" by
__________________ and "Baa2" by _______________. At such time as the condition
specified in the preceding sentence is not satisfied, as promptly as practicable
but in no event more than 90 days in the case of clause (i) below and 60 days in
the case of clause (ii) below following the occurrence of such event (a
"Delivery Event"), the Master Servicer shall, at its expense, (i) either (x)
record an assignment of Mortgage in favor of the Trustee (which may be a blanket
assignment if permitted by applicable law) in the appropriate real property or
other records or (y) deliver to the Trustee the assignment of such Mortgage in
favor of the Trustee in form for recordation, together with an Opinion of
Counsel addressed to the Trustee and the Credit Enhancer to the effect that
recording is not required to protect the Trustee's right, title and interest in
and to the related Mortgage Loan or, in case a court should recharacterize the
sale of the Mortgage Loans as a financing, to perfect a first priority security
interest in favor of the Trustee in the related Mortgage Loan, which Opinion of
Counsel also shall be reasonably acceptable to each of the Rating Agencies (as
evidenced in writing) and the Credit Enhancer, and (ii) unless an Opinion of
Counsel, reasonably acceptable to the Trustee, the Rating Agencies (as evidenced
in writing) and the Credit Enhancer, is delivered to the Trustee and the Credit
Enhancer to the effect that delivery of the Mortgage Files is not necessary to
protect the Trustee's right, title and interest in the related Mortgage Loans;
provided that the lack of delivery will not result in a reduction in the then
current rating of the Investor Certificates, without regard to the Policy,
deliver the related Mortgage Files to the Trustee or to a custodian located in
the State of California appointed by the Trustee and acceptable to the Rating
Agencies and the Credit
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Enhancer to be held by the Custodian on behalf of the Trustee in trust, upon the
terms herein set forth, for the use and benefit of all present and future
Certificateholders and the Custodian on behalf of the Trustee shall retain
possession thereof except to the extent the Master Servicer requires any
Mortgage Files for normal servicing as contemplated by Section 3.07. The Trustee
is hereby appointed as the attorney-in-fact of the Master Servicer with the
power to prepare, execute and record Assignments of Mortgages in the event that
the Master Servicer fails to do so on a timely basis as provided in this
paragraph.
Within 90 days following delivery, if any, of the Mortgage Files to the
Trustee pursuant to the preceding paragraph, the Trustee shall review each such
Mortgage File to ascertain that all required documents set forth in this Section
2.01 have been executed and received, and that such documents relate to the
Mortgage Loans identified on the Mortgage Loan Schedule and in so doing the
Trustee may rely on the purported due execution and genuineness of any signature
thereon. If within such 90-day period the Trustee finds any document
constituting a part of a Mortgage File not to have been executed or received or
to be unrelated to the Mortgage Loans identified in said Mortgage Loan Schedule
or, if in the course of its review, the Trustee determines that such Mortgage
File is otherwise defective in any material respect, the Trustee shall promptly
upon the conclusion of its review notify the Seller and the Credit Enhancer, and
the Seller shall have a period of 90 days after such notice within which to
correct or cure any such defect.
The Trustee shall have no responsibility for reviewing any Mortgage File
except as expressly provided in this Section 2.01. In reviewing any Mortgage
File pursuant to this Section, the Trustee shall have no responsibility for
determining whether any document is valid and binding, whether the text of any
assignment or endorsement is in proper or recordable form (except, if
applicable, to determine if the Trustee is the assignee or endorsee), whether
any document has been recorded in accordance with the requirements of any
applicable jurisdiction, or whether a blanket assignment is permitted in any
applicable jurisdiction, whether any Person executing any document is authorized
to do so or whether any signature thereon is genuine, but shall only be required
to determine whether a document has been executed, that it appears to be what it
purports to be, and, where applicable, that it purports to be recorded.
Section 2.02. Acceptance by Trustee; Retransfer of Mortgage Loans. (a)
The Trustee hereby acknowledges its receipt of the Policy and the Mortgage
Loans, and declares that the Trustee holds and will hold such instrument, and to
the extent that any documents are delivered to it pursuant to Section 2.01, will
hold such documents, and all amounts received by it thereunder and hereunder, in
trust, upon the terms herein set forth, for the use
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and benefit of all present and future Certificateholders and the Credit
Enhancer. If the time to cure any defect in respect of any Mortgage Loan of
which the Trustee has notified the Seller and the Depositor following the review
pursuant to Section 2.01 has expired or if at any time any loss is suffered by
the Trustee on behalf of the Certificateholders or the Credit Enhancer, in
respect of any Mortgage Loan as a result of (i) a defect in any document
constituting a part of its Mortgage File or (ii) an Assignment of Mortgage to
the Trustee not having been recorded as required by Section 2.01, then on the
next succeeding Business Day upon the deposit to the Collection Account of the
Transfer Deposit Amount, if any, and upon satisfaction of the applicable
conditions described herein, all right, title and interest of the Trust in and
to such Mortgage Loan shall be deemed to be retransferred, reassigned and
otherwise reconveyed, without recourse, representation or warranty, to the
Seller on such Business Day and the Asset Balance of such Mortgage Loan shall be
deducted from the Pool Balance; provided, however, that interest accrued on the
Asset Balance of such Mortgage Loan to the end of the related Collection Period
shall be the property of the Trust. The Trustee shall determine if the reduction
of such Asset Balance from the Pool Balance in accordance with the preceding
sentence would cause the Transferor Principal Balance to be less than the
Minimum Transferor Interest ("Transfer Deficiency"), in which event the Trustee
shall deliver written notice of such deficiency to the Seller, and within five
Business Days after the Business Day of such retransfer the Seller shall either
(i) substitute an Eligible Substitute Mortgage Loan or (ii) deposit into the
Collection Account an amount (the "Transfer Deposit Amount") in immediately
available funds equal to the Transfer Deficiency or a combination of both (i)
and (ii) above. Such reduction or substitution and the actual payment of any
Transfer Deposit Amount, if any, shall be deemed to be payment in full for such
Mortgage Loan. Upon receipt of any Eligible Substitute Mortgage Loan or of
written notification signed by a Servicing Officer to the effect that the
Transfer Deposit Amount in respect of a Defective Mortgage Loan has been
deposited into the Collection Account or, if the Transferor Principal Balance is
not reduced below the Minimum Transferor Interest as a result of the deemed
retransfer of a Defective Mortgage Loan, then as promptly as practicable
following such deemed transfer, the Trustee shall execute such documents and
instruments of transfer presented by the Seller, in each case without recourse,
representation or warranty, and take such other actions as shall reasonably be
requested by the Seller to effect such transfer by the Trust of such Defective
Mortgage Loan pursuant to this Section. It is understood and agreed that the
obligation of the Seller to accept a transfer of a Defective Mortgage Loan and
to either convey an Eligible Substitute Mortgage Loan or to make a deposit of
any related Transfer Deposit Amount into the Collection Account shall constitute
the sole remedy respecting such defect available to Certificateholders, the
Trustee and the Credit Enhancer against the Seller.
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The Master Servicer, promptly following the transfer of a Defective
Mortgage Loan from or to the Trust pursuant to this Section, shall amend the
Mortgage Loan Schedule and make appropriate entries in its general account
records to reflect such transfer. The Master Servicer shall, following such
retransfer, appropriately mark its records to indicate that it is no longer
servicing such Mortgage Loan on behalf of the Trust. The Seller, promptly
following such transfer, shall appropriately mark its Electronic Ledger and make
appropriate entries in its general account records to reflect such transfer.
Notwithstanding any other provision of this Section, a retransfer of a
Defective Mortgage Loan to the Seller pursuant to this Section that would cause
the Transferor Principal Balance to be less than the Minimum Transferor Interest
shall not occur if either the Seller fails to convey an Eligible Substitute
Mortgage Loan or to deposit into the Collection Account any related Transfer
Deposit Amount required by this Section with respect to the transfer of such
Defective Mortgage Loan.
(b) As to any Eligible Substitute Mortgage Loan or Loans, the Seller
shall, if a Delivery Event has occurred, deliver to the Trustee with respect to
such Eligible Substitute Mortgage Loan or Loans such documents and agreements as
are required to be held by the Trustee in accordance with Section 2.01. For any
Collection Period during which the Seller substitutes one or more Eligible
Substitute Mortgage Loans, the Master Servicer shall determine the Transfer
Deposit Amount which amount shall be deposited by the Seller in the Collection
Account at the time of substitution. All amounts received in respect of the
Eligible Substitute Mortgage Loan or Loans during the Collection Period in which
the circumstances giving rise to such substitution occur shall not be a part of
the Trust Fund and shall not be deposited by the Master Servicer in the
Collection Account. All amounts received by the Master Servicer during the
Collection Period in which the circumstances giving rise to such substitution
occur in respect of any Defective Mortgage Loan so removed by the Trust Fund
shall be deposited by the Master Servicer in the Collection Account. Upon such
substitution, the Eligible Substitute Mortgage Loan or Loans shall be subject to
the terms of this Agreement in all respects, and the Seller shall be deemed to
have made with respect to such Eligible Substitute Mortgage Loan or Loans, as of
the date of substitution, the covenants, representations and warranties set
forth in Section 2.04. The procedures applied by the Seller in selecting each
Eligible Substitute Mortgage Loan shall not be materially adverse to the
interests of the Trustee, the Certificateholders and the Credit Enhancer.
Section 2.03. Representations and Warranties Regarding the
Master Servicer. The Master Servicer represents and warrants to
the Trustee and the Credit Enhancer that as of the Closing Date:
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(i) The Master Servicer is a [New York] corporation, validly
existing and in good standing under the laws of the State of [New York],
and has the corporate power to own its assets and to transact the
business in which it is currently engaged. The Master Servicer is duly
qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the character of the business
transacted by it or any properties owned or leased by it requires such
qualification and in which the failure so to qualify would have a
material adverse effect on the business, properties, assets, or
condition (financial or other) of the Master Servicer;
(ii) The Master Servicer has the power and authority to make,
execute, deliver and perform this Agreement and all of the transactions
contemplated under the Agreement, and has taken all necessary corporate
action to authorize the execution, delivery and performance of this
Agreement. When executed and delivered, this Agreement will constitute
the legal, valid and binding obligation of the Master Servicer
enforceable in accordance with its terms, except as enforcement of such
terms may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors'
rights generally and by the availability of equitable remedies;
(iii) The Master Servicer is not required to obtain the
consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement, except for such consent, license, approval or authorization,
or registration or declaration, as shall have been obtained or filed, as
the case may be, prior to the Closing Date;
(iv) The execution, delivery and performance of this
Agreement by the Master Servicer will not violate any provision of any
existing law or regulation or any order or decree of any court
applicable to the Master Servicer or any provision of the Certificate of
Incorporation or Bylaws of the Master Servicer, or constitute a material
breach of any mortgage, indenture, contract or other agreement to which
the Master Servicer is a party or by which the Master Servicer may be
bound; and
(v) No litigation or administrative proceeding of or before
any court, tribunal or governmental body is currently pending, or to the
knowledge of the Master Servicer threatened, against the Master Servicer
or any of its properties or with respect to this Agreement or the
Certificates which in the opinion of the Master Servicer has a
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reasonable likelihood of resulting in a material adverse effect on the
transactions contemplated by this Agreement.
The representations and warranties set forth in this Section shall survive the
sale and assignment of the Mortgage Loans to the Trust. Upon discovery of a
breach of any representations and warranties which materially and adversely
affects the interests of the Certificateholders or the Credit Enhancer, the
person discovering such breach shall give prompt written notice to the other
parties and to the Credit Enhancer. Within 90 days of its discovery or its
receipt of notice of breach, or, with the prior written consent of a Responsible
Officer of the Trustee, such longer period specified in such consent, the Master
Servicer shall cure such breach in all material respects.
Section 2.04. Representations and Warranties of the Seller Regarding the
Mortgage Loans; Retransfer of Certain Mortgage Loans. (a) The Seller hereby
represents and warrants to the Trustee and the Credit Enhancer that as of the
Cut-off Date, unless otherwise specifically set forth herein:
(i) As of the Closing Date, this Agreement constitutes a legal,
valid and binding obligation of the Seller, enforceable against the
Seller in accordance with its terms, except as enforcement of such terms
may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect affecting the enforcement
of creditors' rights generally and by the availability of equitable
remedies;
(ii) As of the Closing Date with respect to the Mortgage Loans
and as of the applicable Transfer Date with respect to any Eligible
Substitute Mortgage Loan, either (A) the Purchase Agreement constitutes
a valid transfer and assignment to the Depositor of all right, title and
interest of the Seller in and to the Cut-off Date Asset Balances with
respect to the applicable Mortgage Loans, all monies due or to become
due with respect thereto (excluding payments in respect of accrued
interest due prior to the Cut-off Date or due in the month of
_________), and all proceeds of such Cut-off Date Asset Balances with
respect to the Mortgage Loans and such funds as are from time to time
deposited in the Collection Account (excluding any investment earnings
thereon) and all other property specified in the definition of "Asset"
as being part of the corpus of the Trust conveyed to the Trust by the
Seller, and upon payment for the Additional Balances, will constitute a
valid transfer and assignment to the Trustee of all right, title and
interest of the Seller in and to the Additional Balances, all monies due
or to become due with respect thereto, and all proceeds of such
Additional Balances and all other property specified in the definition
of "Asset" relating to the Additional Balances or (B) the Purchase
Agreement or this Agreement, as
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appropriate, constitutes a grant of a security interest (as defined in
the UCC as in effect in California) in such property to the Trustee on
behalf of the Trust. If this Agreement constitutes the grant of a
security interest to the Trust in such property, and if the Trustee
obtains and maintains possession of the Mortgage File for each Mortgage
Loan, the Trust shall have a first priority perfected security interest
in such property, subject to the effect of Section 9-306 of the UCC with
respect to collections on the Mortgage Loans that are deposited in the
Collection Account in accordance with the next to last paragraph of
Section 3.02(b); provided, however, that nothing in this clause (ii)
shall be construed to obligate the Master Servicer to deliver any
Mortgage Files other than as set forth in Section 2.01 hereof;
(iii) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan and as of the date any Additional Balance is created, the
information set forth in the Mortgage Loan Schedule for such Mortgage
Loans is true and correct in all material respects;
(iv) The applicable Cut-off Date Asset Balance has not been
assigned or pledged, and the Seller is the sole owner and holder of such
Cut-off Date Asset Balance free and clear of any and all liens, claims,
encumbrances, participation interests, equities, pledges, charges or
security interests of any nature, and has full right and authority,
under all governmental and regulatory bodies having jurisdiction over
the ownership of the applicable Mortgage Loan, to sell, assign or
transfer the same pursuant to the Purchase Agreement;
(v) As of the Closing Date with respect to the Mortgage Loans and
the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, the related Mortgage Note and the Mortgage with respect
to each Mortgage Loan have not been assigned or pledged, and the Seller
is the sole owner and holder of the Mortgage Loan free and clear of any
and all liens, claims, encumbrances, participation interests, equities,
pledges, charges or security interests of any nature, and has full right
and authority, under all governmental and regulatory bodies having
jurisdiction over the ownership of the applicable Mortgage Loans, to
sell and assign the same pursuant to the Purchase Agreement;
(vi) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, the related Mortgage is a valid and subsisting first or
second lien, as set forth on the Mortgage Loan Schedule with respect to
each related Mortgage Loan, on the property therein described, and as of
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the applicable Cut-off Date the related Mortgaged Property is free and
clear of all encumbrances and liens having priority over the first or
second lien, as applicable, of such Mortgage except for liens for (i)
real estate taxes and special assessments not yet delinquent; (ii) any
first mortgage loan secured by such Mortgaged Property and specified on
the Mortgage Loan Schedule; (iii) covenants, conditions and
restrictions, rights of way, easements and other matters of public
record as of the date of recording that are acceptable to mortgage
lending institutions generally; and (iv) 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 such Mortgage;
(vii) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, there is no valid offset, defense or counterclaim of any
obligor under any Credit Line Agreement or Mortgage;
(viii) To the best knowledge of the Seller, as of the Closing
Date with respect to the Mortgage Loans and the applicable Transfer Date
with respect to any Eligible Substitute Mortgage Loan, there is no
delinquent recording or other tax or fee or assessment lien against any
related Mortgaged Property;
(ix) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, there is no proceeding pending or, to the best knowledge
of the Seller, threatened for the total or partial condemnation of the
related Mortgaged Property, and such property is free of material
damage;
(x) To the best knowledge of the Seller, as of the Closing Date
with respect to the Mortgage Loans and the applicable Transfer Date with
respect to any Eligible Substitute Mortgage Loan, there are no
mechanics' or similar liens or claims which have been filed for work,
labor or material affecting the related Mortgaged Property which are, or
may be, liens prior or equal to the lien of the related Mortgage, except
liens which are fully insured against by the title insurance policy
referred to in clause (xiv);
(xi) No Minimum Monthly Payment is more than 89 days delinquent
(measured on a contractual basis); and with respect to the Mortgage
Loans no more than _____% (by Cut-off Date Pool Balance) were 30-59 days
delinquent (measured on a contractual basis) and no more than _____% (by
Cut-off Date Pool Balance) were 60-89 days delinquent (measured on a
contractual basis);
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(xii) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, for each Mortgage Loan, the related Mortgage File
contains each of the documents and instruments specified to be included
therein;
(xiii) The related Mortgage Note and the related Mortgage at
origination complied in all material respects with applicable state and
federal laws, including, without limitation, usury, truth-in-lending,
real estate settlement procedures, consumer credit protection, equal
credit opportunity or disclosure laws applicable to the Mortgage Loan;
(xiv) Either a lender's title insurance policy or binder was
issued on the date of origination of the Mortgage Loan and each such
policy is valid and remains in full force and effect, or a title search
or guaranty of title customary in the relevant jurisdiction was obtained
with respect to a Mortgage Loan as to which no title insurance policy or
binder was issued;
(xv) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, none of the Mortgaged Properties is a mobile home or a
manufactured housing unit that is not considered or classified as part
of the real estate under the laws of the jurisdiction in which it is
located;
(xvi) As of the Cut-off Date for the Mortgage Loans no more than
_____% of such Mortgage Loans, by aggregate principal balance, are
secured by Mortgaged Properties located in one United States postal zip
code;
(xvii) The Combined Loan-to-Value Ratio for each Mortgage Loan
was not in excess of 100%;
(xviii) No selection procedure reasonably believed by the Seller
to be adverse to the interests of the Certificateholders or the Credit
Enhancer was utilized in selecting the Mortgage Loans;
(xix) The Seller has not transferred the Mortgage
Loans to the Trust with any intent to hinder, delay or
defraud any of its creditors;
(xx) The Minimum Monthly Payment with respect to any Mortgage
Loan is not less than the interest accrued at the applicable Loan Rate
on the average daily Asset Balance during the interest period relating
to the date on which such Minimum Monthly Payment is due;
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(xxi) Within 90 days of the Closing Date with respect to the
Mortgage Loans and, to the extent not already included in such filing
with respect to the Mortgage Loans, the applicable Transfer Date with
respect to any Eligible Substitute Mortgage Loan, the Seller will file
UCC-1 financing statements with respect to the Mortgage Loans;
(xxii) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, each Credit Line Agreement and each Mortgage Loan is an
enforceable obligation of the related Mortgagor, except as the
enforceability thereof may be limited by the bankruptcy, insolvency or
similar laws affecting creditors' rights generally;
(xxiii) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, the Seller has not received a notice of default of any
senior mortgage loan related to a Mortgaged Property that has not been
cured by a party other than the Master Servicer;
(xxiv) The definition of Prime Rate in each Credit Line Agreement
relating to a Mortgage Loan does not differ materially from the
definition in the form of Credit Line Agreement in Exhibit F;
(xxv) The weighted average remaining term to maturity of the
Mortgage Loans on a contractual basis as of the Cut-off Date for the
Mortgage Loans is approximately ___ months. On each date that the Loan
Rates have been adjusted, interest rate adjustments on the Mortgage
Loans were made in compliance with the related Mortgage and Mortgage
Note and applicable law. Over the term of each Mortgage Loan, the Loan
Rate may not exceed the related Loan Rate Cap, if any. The Loan Rate
Caps range between ____% and ____%. The Margins range between ____% and
____% and the weighted average Margin is approximately ____% as of the
Cut-off Date for the Mortgage Loans. The Loan Rates on such Mortgage
Loans range between ____% and _____% and the weighted average Loan Rate
is approximately _____%.
(xxvi) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, each Mortgaged Property consists of a single parcel of
real property with a one-to-four unit single family residence erected
thereon, or an individual condominium unit, planned unit development
unit or townhouse;
(xxvii) No more than _____% (by Cut-off Date Pool Balance) of the
Mortgage Loans are secured by real property improved by individual
condominium units, planned develop-
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ment units, townhouses or two-to-four family residences erected thereon,
and at least _____% (by Cut-off Date Pool Balance) of the Mortgage Loans
are secured by real property with a detached one-family residence
erected thereon;
(xxviii) The Credit Limits on the Mortgage Loans range between
$________ and $__________ with an average of $_________. As of the
Cut-off Date for the Mortgage Loans, no Mortgage Loan had a principal
balance in excess of approximately $__________ and the average principal
balance of the Mortgage Loans is equal to approximately $_________; and
(xxix) Approximately ____% and _____% of the Mortgage Loans, by
aggregate principal balance as of the Cut-off Date for the Mortgage
Loans, are first and second liens, respectively.
With respect to the representations and warranties set forth in this
Section 2.04 that are made to the best of the Seller's knowledge or as to which
the Seller has no knowledge, if it is discovered by the Seller, the Depositor,
the Master Servicer or a Responsible Officer of the Trustee that the substance
of such representation and warranty is inaccurate and such inaccuracy materially
and adversely affects the value of the related Mortgage Loan then,
notwithstanding the Seller's lack of knowledge with respect to the substance of
such representation and warranty being inaccurate at the time the representation
or warranty was made, such inaccuracy shall be deemed a breach of the applicable
representation or warranty.
(b) It is understood and agreed that the representations and warranties
set forth in this Section 2.04 shall survive delivery of the respective Mortgage
Files to the Trustee pursuant to Section 2.01 and the termination of the rights
and obligations of the Master Servicer pursuant to Section 7.04 or 8.02. Upon
discovery by the Seller, the Depositor, the Master Servicer, the Credit Enhancer
or a Responsible Officer of the Trustee of a breach of any of the foregoing
representations and warranties (other than the representation and warranty set
forth in Section 2.04(a)(iv) above), without regard to any limitation set forth
therein concerning the knowledge of the Seller as to the facts stated therein,
which materially and adversely affects the interests of the Trust or the
Investor Certificateholders or the Credit Enhancer in the related Mortgage Loan,
the party discovering such breach shall give prompt written notice to the other
parties and the Credit Enhancer. Within 90 days of its discovery or its receipt
of notice of such breach, the Seller shall use all reasonable efforts to cure
such breach in all material respects or shall, not later than the Business Day
next preceding the Distribution Date in the month following the Collection
Period in which any such cure period expired (or such later date that is
acceptable to the Trustee and the Credit Enhancer as evidenced by
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their written consents), either (a) accept a transfer of such Mortgage Loan from
the Trust or (b) substitute an Eligible Substitute Mortgage Loan in the same
manner and subject to the same conditions as set forth in Section 2.02;
provided, however, that the cure for any breach of a representation and warranty
relating to the characteristics of the Mortgage Loans in the aggregate shall be
a repurchase of or substitution for only the Mortgage Loans necessary to cause
such characteristics to be in compliance with the related representation and
warranty. Upon accepting such transfer and making any required deposit into the
Collection Account or substitution of an Eligible Substitute Mortgage Loan, as
the case may be, the Seller shall be entitled to receive an instrument of
assignment or transfer from the Trustee to the same extent as set forth in
Section 2.02 with respect to the transfer of Mortgage Loans under that Section.
It is understood and agreed that the obligation of the Seller to accept
a transfer of a Mortgage Loan as to which a breach has occurred and is
continuing and to make any required deposit in the Collection Account or to
substitute an Eligible Substitute Mortgage Loan, as the case may be, shall
constitute the sole remedy against the Seller respecting such breach available
to Investor Certificateholders, the Trustee on behalf of Investor
Certificateholders and the Credit Enhancer; provided, however, that the Seller
shall defend and indemnify the Trustee, the Credit Enhancer and the Investor
Certificateholders against all reasonable costs and expenses, and all losses,
damages, claims and liabilities, including reasonable fees and expenses of
counsel and the amount of any settlement entered into with the consent of the
Seller (such consent not to be unreasonably withheld), which may be asserted
against or incurred by any of them as a result of any third-party action arising
out of any breach of any such representation and warranty. Notwithstanding the
foregoing, with regard to any breach of the representation and warranty set
forth in Section 2.04(a)(iv), the sale and assignment of the affected Mortgage
Loans to the Trust shall be deemed void and the Seller shall pay to the Trust
the sum of (i) the amount of the related Asset Balances, plus unpaid accrued
interest on each such Asset Balance at the applicable Loan Rate to the date of
payment and (ii) the amount of any loss suffered by Certificateholders or the
Credit Enhancer with respect to the affected Mortgage Loans.
Section 2.05. Covenants of the Depositor. The Depositor
hereby covenants that:
(a) Security Interests. Except for the transfer hereunder, the Depositor
will not sell, pledge, assign or transfer to any other Person, or grant, create,
incur, assume or suffer to exist any Lien on any Mortgage Loan, whether now
existing or hereafter created, or any interest therein; the Depositor will
notify the Trustee of the existence of any Lien on any Mortgage Loan immediately
upon discovery thereof; and the Depositor will defend the
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right, title and interest of the Trust in, to and under the Mortgage Loans,
whether now existing or hereafter created, against all claims of third parties
claiming through or under the Depositor; provided, however, that nothing in this
Section 2.05(a) shall prevent or be deemed to prohibit the Depositor from
suffering to exist upon any of the Mortgage Loans any Liens for municipal or
other local taxes and other governmental charges if such taxes or governmental
charges shall not at the time be due and payable or if the Depositor shall
currently be contesting the validity thereof in good faith by appropriate
proceedings and shall have set aside on its books adequate reserves with respect
thereto.
(b) Negative Pledge. The Depositor hereby agrees not to transfer,
assign, exchange, pledge, finance, hypothecate, grant a security interest in or
otherwise convey the Transferor Certificates except in accordance with Sections
6.05 and 7.02.
(c) Additional Indebtedness. So long as the Investor Certificates are
outstanding the Depositor will not incur any debt other than debt that (i) is
non-recourse to the assets of the Depositor other than the Mortgage Loans
specifically pledged as security for such debt, or (ii) is subordinated in right
of payment to the rights of the Investor Certificateholders or (iii) is assigned
a rating by each of the Rating Agencies that is the same as the then current
rating of the Investor Certificates.
(d) Downgrading. The Depositor will not engage in any
activity which would result in a downgrading of the Investor
Certificates.
(e) Amendment to Certificate of Incorporation. The Depositor will not
amend its Certificate of Incorporation without prior written notice to the
Rating Agencies and the Credit Enhancer.
(f) Principal Place of Business. The Depositor's principal place of
business is in California and it will not change its principal place of business
without prior written notice to the Rating Agencies.
Section 2.06. Retransfers of Mortgage Loans at Election of Transferor.
Subject to the conditions set forth below, the Transferor may, but shall not be
obligated to, require the retransfer of Mortgage Loans from the Trust to the
Seller as of the close of business on a Distribution Date (the "Transfer Date").
On the fifth Business Day (the "Transfer Notice Date") prior to the Transfer
Date designated in such notice, the Transferor shall give the Trustee and the
Master Servicer a notice of the proposed retransfer that contains a list of the
Mortgage Loans to be retransferred. Such retransfers of Mortgage Loans shall be
permitted upon satisfaction of the following conditions:
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(i) No Rapid Amortization Event has occurred;
(ii) On the Transfer Notice Date the Transferor Principal
Balance (after giving effect to the removal from the Trust of the
Mortgage Loans proposed to be retransferred) is at least equal to the
Minimum Transferor Interest;
(iii) The transfer of any Mortgage Loans on any Transfer Date
during the Managed Amortization Period shall not, in the reasonable
belief of the Transferor, cause a Rapid Amortization Event to occur or
an event which with notice or lapse of time or both would constitute a
Rapid Amortization Event;
(iv) On or before the Transfer Date, the Transferor shall
have delivered to the Trustee a revised Mortgage Loan Schedule,
reflecting the proposed transfer and the Transfer Date, and the Master
Servicer shall have marked the Electronic Ledger to show that the
Mortgages Loans transferred to the Transferor are no longer owned by the
Trust;
(v) The Transferor shall represent and warrant that no
selection procedures reasonably believed by the Transferor to be adverse
to the interests of the Investor Certificateholders or the Credit
Enhancer were utilized in selecting the Mortgage Loans to be removed
from the Trust;
(vi) In connection with first retransfer of Mortgage Loans
pursuant to this Section, each Rating Agency shall have received on or
prior to the related Transfer Notice Date notice of such proposed
retransfer of Mortgage Loans and, prior to the Transfer Date, shall have
notified the Trustee in writing that such retransfer of Mortgage Loans
would not result in a reduction or withdrawal of its then current rating
of the Investor Certificates without regard to the Policy;
(vii) The Transferor shall have delivered to the Trustee and
the Credit Enhancer an Officer's Certificate certifying that the items
set forth in subparagraphs (i) through (vi), inclusive, have been
performed or are true and correct, as the case may be. The Trustee may
conclusively rely on such Officer's Certificate, shall have no duty to
make inquiries with regard to the matters set forth therein and shall
incur no liability in so relying.
Upon receiving the requisite information from the Transferor, the Master
Servicer shall perform in a timely manner those acts required of it, as
specified above. Upon satisfaction of the above conditions, on the Transfer Date
the Trustee shall deliver, or cause to be delivered, to the Transferor the
Mortgage File for each Mortgage Loan being so transferred, and the Trustee shall
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execute and deliver to the Transferor such other documents prepared by the
Transferor as shall be reasonably necessary to transfer such Mortgage Loans to
the Transferor. Any such transfer of the Trust's right, title and interest in
and to Mortgage Loans shall be without recourse, representation or warranty by
or of the Trustee or the Trust to the Transferor.
Section 2.07. Execution and Authentication of Certificates. The Trustee,
on behalf of the Trust, has caused to be executed, authenticated and delivered
to or upon the order of the Depositor, in exchange for the Trust, concurrently
with the sale, assignment and conveyance to the Trustee of the Trust, Investor
Certificates in authorized denominations and the Transferor Certificates,
together evidencing the ownership of the entire Trust.
Section 2.08. Tax Treatment. It is the intention of the Depositor, the
Transferor and the Investor Certificateholders that the Investor Certificates
will be indebtedness of the Transferor for federal, state and local income and
franchise tax purposes and for purposes of any other tax imposed on or measured
by income. The Transferor, the Depositor, the Trustee and each Investor
Certificateholder (or Certificate Owner) by acceptance of its Investor
Certificate (or, in the case of a Certificate Owner, by virtue of such
Certificate Owner's acquisition of a beneficial interest therein) agrees to
treat the Investor Certificates (or beneficial interest therein), for purposes
of federal, state and local income or franchise taxes and any other tax imposed
on or measured by income, as indebtedness of the Transferor secured by the
assets of the Trust and to report the transactions contemplated by this
Agreement on all applicable tax returns in a manner consistent with such
treatment. Each Investor Certificateholder agrees that it will cause any
Certificate Owner acquiring an interest in an Investor Certificate through it to
comply with this Agreement as to treatment of the Investor Certificates as
indebtedness for federal, state and local income and franchise tax purposes and
for purposes of any other tax imposed on or measured by income. The Trustee will
prepare and file all tax reports required hereunder.
Section 2.09. Representations and Warranties of the Depositor. The
Depositor represents and warrants to the Trustee on behalf of the
Certificateholders and the Credit Enhancer as follows:
(i) This Agreement constitutes a legal, valid and binding
obligation of the Depositor, enforceable against the Depositor in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect affecting the enforcement of
creditors' rights in general and except as such enforceability may be
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limited by general principles of equity (whether considered
in a proceeding at law or in equity);
(ii) Immediately prior to the sale and assignment by the
Depositor to the Trustee of each Mortgage Loan, the Depositor was the
sole beneficial owner of each Mortgage Loan (insofar as such title was
conveyed to it by the Seller) subject to no prior lien, claim,
participation interest, mortgage, security interest, pledge, charge or
other encumbrance or other interest of any nature;
(iii) As of the Closing Date, the Depositor has transferred
all right, title and interest in the Mortgage Loans to
the Trustee; and
(iv) The Depositor has not transferred the Mortgage Loans
to the Trustee with any intent to hinder, delay or defraud any of
its creditors.
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ARTICLE III
Administration and Servicing
of Mortgage Loans
Section 3.01. The Master Servicer. (a) The Master Servicer shall service
and administer the Mortgage Loans in a manner consistent with the terms of this
Agreement and with general industry practice and shall have full power and
authority, acting alone or through a subservicer, to do any and all things in
connection with such servicing and administration which it may deem necessary or
desirable, it being understood, however, that the Master Servicer shall at all
times remain responsible to the Trustee, the Certificateholders and the Credit
Enhancer for the performance of its duties and obligations hereunder in
accordance with the terms hereof. Any amounts received by any subservicer in
respect of a Mortgage Loan shall be deemed to have been received by the Master
Servicer whether or not actually received by it. Without limiting the generality
of the foregoing, the Master Servicer shall continue, and is hereby authorized
and empowered by the Trustee, to execute and deliver, on behalf of itself, 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 and all
other comparable instruments, with respect to the Mortgage Loans and with
respect to the Mortgaged Properties. The Trustee shall, upon the written request
of a Servicing Officer, furnish the Master Servicer with any powers of attorney
and other documents necessary or appropriate to enable the Master Servicer to
carry out its servicing and administrative duties hereunder. The Master Servicer
in such capacity may also consent to the placing of a lien senior to that of any
Mortgage on the related Mortgaged Property, provided that
(x) such Mortgage succeeded to a first lien position after
the related Mortgage Loan was conveyed to the Trust and,
immediately following the placement of such senior lien, such
Mortgage is in a second lien position and the outstanding
principal amount of the mortgage loan secured by such subsequent
senior lien is no greater than the outstanding principal amount
of the senior mortgage loan secured by the Mortgaged Property as
of the date the related Mortgage Loan was originated; or
(y) the Mortgage relating to such Mortgage Loan was in a
second lien position as of the Cut-off Date and the new senior
lien secures a mortgage loan that refinances an existing first
mortgage loan and the outstanding principal amount of the
replacement first mortgage loan immediately following such
refinancing is not greater than the outstanding principal amount
of
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such existing first mortgage loan at the date of
origination of such Mortgage Loan;
provided, further, that such senior lien does not secure a note that provides
for negative amortization. Notwithstanding the foregoing, the Master Servicer
can consent to the placing of liens senior to that of a Mortgage on the related
Mortgaged Property which have a principal balance in excess of the principal
balance of the senior lien it replaces on Mortgage Loans having in the aggregate
Asset Balances not in excess of ___% of the Cut-off Date Pool Balance; provided,
however, that, with respect to Mortgage Loans which as of the Cut-off Date had
combined Loan-to-Value Ratios in excess of ___%, the aggregate Asset Balance of
such Mortgage Loans with respect to which the senior lien may be so modified
shall not exceed _____% of the Cut-off Date Pool Balance (such ___% and _____%
herein referred to as the "Increased Senior Lien Limitation"). Any such increase
to the principal balance of the senior lien shall not exceed the greater of
$_______ and _____% of the principal balance of the senior lien prior to such
increase.
The Master Servicer may also, without prior approval from the Rating
Agencies or the Credit Enhancer, increase the Credit Limits on Mortgage Loans
provided that (i) new appraisals are obtained and the Combined Loan-to-Value
Ratios of the Mortgage Loans after giving effect to such increase are less than
or equal to the Combined Loan-to-Value Ratios or the Mortgage Loans as of the
Cut-off Date and (ii) such increases are consistent with the Master Servicer's
underwriting policies. In addition, the Master Servicer may increase the Credit
Limits on Mortgage Loans having aggregate balances of up to ____% of the
aggregate Cut-off Date Pool Balance, without obtaining new appraisals provided
that (i) the increase in the Credit Limit does not cause the Combined
Loan-to-Value Ratios of the Mortgage Loans to exceed _____% and (ii) the
increase is consistent with the Master Servicer's underwriting policies.
Furthermore, the Master Servicer may, without prior approval from the
Rating Agencies and the Credit Enhancer solicit Mortgagors for a reduction in
Loan Rates; provided that the Master Servicer can only reduce such Loan Rates on
up to ____% of the Mortgage Loans by Cut-off Date Pool Balance. Any such
solicitations shall not result in a reduction in the weighted average Gross
Margin of the Mortgage Loans in the pool by more than ____ basis points taking
into account any such prior reductions.
In addition, the Master Servicer may agree to changes in the terms of a
Mortgage Loan at the request of the Mortgagor provided that such changes (i) do
not materially and adversely affect the interests of Certificateholders or the
Credit Enhancer and (ii) are consistent with prudent and customary business
practice as
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evidenced by a certificate signed by a Servicing Officer delivered to the
Trustee and the Credit Enhancer.
In addition to the foregoing, the Master Servicer may solicit Mortgagors
to change any other terms of the related Mortgage Loans, provided that such
changes (i) do not materially and adversely affect the interest of
Certificateholders or the Credit Enhancer and (ii) are consistent with prudent
and customary business practice as evidenced by a certificate signed by a
Servicing Officer delivered to the Trustee and the Credit Enhancer. Nothing
herein shall limit the right of the Master Servicer to solicit Mortgagors with
respect to new loans (including mortgage loans) that are not Mortgage Loans.
The relationship of the Master Servicer (and of any successor to the
Master Servicer as servicer under this Agreement) to the Trustee under this
Agreement is intended by the parties to be that of an independent contractor and
not that of a joint venturer, partner or agent.
(b) In the event that the rights, duties and obligations of the Master
Servicer are terminated hereunder, any successor to the Master Servicer in its
sole discretion may, to the extent permitted by applicable law, terminate the
existing subservicer arrangements with any subservicer or assume the terminated
Master Servicer's rights under such subservicing arrangements which termination
or assumption will not violate the terms of such arrangements.
Section 3.02. Collection of Certain Mortgage Loan Payments. (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, follow such collection
procedures as it follows with respect to mortgage loans in its servicing
portfolio comparable to the Mortgage Loans. Consistent with the foregoing, and
without limiting the generality of the foregoing, the Master Servicer may in its
discretion (i) waive any late payment charge or any assumption fees or other
fees which may be collected in the ordinary course of servicing such Mortgage
Loan and (ii) arrange with a Mortgagor a schedule for the payment of interest
due and unpaid; provided that such arrangement is consistent with the Master
Servicer's policies with respect to the mortgage loans it owns or services;
provided, further, that notwithstanding such arrangement such Mortgage Loans
will be included in the information regarding delinquent Mortgage Loans set
forth in the Servicing Certificate and monthly statement to Certificateholders
pursuant to Section 5.03.
(b) The Master Servicer shall establish and maintain a trust account
(the "Collection Account") titled "___________________________, as Trustee, in
trust for the registered holders of Home Equity Loan Asset Backed
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Certificates, Series 199__-__ and _____________________." The Collection Account
shall be an Eligible Account. The Master Servicer shall on the Closing Date
deposit any amounts representing payments on, and any collections in respect of,
the Mortgage Loans received after the Cut-off Date and prior to the Closing Date
(exclusive of payments in respect of accrued interest due on or prior to the
Cut-off Date or due in the month of _________), and thereafter the Master
Servicer, or the Seller, as the case may be, shall deposit within two Business
Days following receipt thereof the following payments and collections received
or made by it (without duplication):
(i) all collections on and in respect of the Mortgage
Loans;
(ii) the amounts, if any, deposited to the Collection
Account pursuant to Section 4.05;
(iii) Net Liquidation Proceeds net of any related
Foreclosure Profit;
(iv) Insurance Proceeds (including, for this purpose, any
amount required to be credited by the Master Servicer pursuant to the
last sentence of Section 3.04 and excluding the portion thereof, if any,
that has been applied to the restoration or repair of the related
Mortgaged Property or released to the related Mortgagor in accordance
with the normal servicing procedures of the Master Servicer); and
(v) any amounts required to be deposited therein
pursuant to Section 10.01;
provided, however, that with respect to each Collection Period, the Master
Servicer shall be permitted to retain from payments in respect of interest on
the Mortgage Loans, the Servicing Fee for such Collection Period. The foregoing
requirements respecting deposits to the Collection Account are exclusive, it
being understood that, without limiting the generality of the foregoing, the
Master Servicer need not deposit in the Collection Account amounts representing
Foreclosure Profits, fees (including annual fees) or late charge penalties
payable by Mortgagors, or amounts received by the Master Servicer for the
accounts of Mortgagors for application towards the payment of taxes, insurance
premiums, assessments, excess pay off amounts and similar items. The Master
Servicer shall remit all Foreclosure Profits to the Seller.
The Trustee shall hold amounts deposited in the Collection Account as
trustee for the Certificateholders and for the Credit Enhancer. In addition, the
Master Servicer shall notify the Trustee and the Credit Enhancer in writing on
each Determination Date of the amount of payments and collections in the
Collection Account allocable to Interest Collections and Principal
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Collections for the related Distribution Date. Following such notification, the
Master Servicer shall be entitled to withdraw from the Collection Account and
retain any amounts that constitute income and gain realized from the investment
of such payments and collections.
All income and gain realized from any investment in Eligible Investments
of funds in the Collection Account shall be for the benefit of the Master
Servicer and shall be subject to its withdrawal from time to time. The amount of
any losses incurred in respect of the principal amount of any such investments
shall be deposited in the Collection Account by the Master Servicer out of its
own funds immediately as realized.
Section 3.03. Withdrawals from the Collection Account. From time to
time, withdrawals may be made from the Collection Account by the Master Servicer
for the following purposes:
(i) To the Master Servicer as payment for its
Servicing Fee pursuant to Section 3.08;
(ii) To pay to the Master Servicer amounts on deposit in the
Collection Account that are not to be included in the distributions and
payments pursuant to Section 5.01 to the extent provided by the second
to the last and the last paragraph of Section 3.02(b);
(iii) To make or to permit the Paying Agent to make
distributions and payments pursuant to Section 5.01; and
(iv) Prior to the Collection Period preceding the Rapid Amortization
Commencement Date, to pay to the Seller, the amount of any Additional
Balances as and when created during the related Collection Period,
provided, that the aggregate amount so paid to the Seller in respect of
Additional Balances at any time during any Collection Period shall not
exceed the amount of Principal Collections theretofore received for such
Collection Period minus the amount determined pursuant to clause (x) of
the definition of "Alternative Principal Payment".
If the Master Servicer deposits in the Collection Account any amount not
required to be deposited therein or any amount in respect of payments by
Mortgagors made by checks subsequently returned for insufficient funds or other
reason for non-payment it may at any time withdraw such amount from the
Collection Account, and any such amounts shall not be included in the amounts to
be deposited in the Collection Account pursuant to Section 3.02(b), any
provision herein to the contrary notwithstanding.
Section 3.04. Maintenance of Hazard Insurance; Property
Protection Expenses. The Master Servicer shall cause to be main-
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tained for each Mortgage Loan hazard insurance naming the Master Servicer or the
related subservicer as loss payee thereunder providing extended coverage in an
amount which is at least equal to the lesser of (i) the maximum insurable value
of the improvements securing such Mortgage Loan from time to time or (ii) the
combined principal balance owing on such Mortgage Loan and any mortgage loan
senior to such Mortgage Loan from time to time. The Master Servicer shall also
maintain on property acquired upon foreclosure, or by deed in lieu of
foreclosure, hazard insurance with extended coverage in an amount which is at
least equal to the lesser of (i) the maximum insurable value from time to time
of the improvements which are a part of such property or (ii) the combined
principal balance owing on such Mortgage Loan and any mortgage loan senior to
such Mortgage Loan at the time of such foreclosure or deed in lieu of
foreclosure plus accrued interest and the good-faith estimate of the Master
Servicer of related Liquidation Expenses to be incurred in connection therewith.
Amounts collected by the Master Servicer under any such policies shall be
deposited in the Collection Account to the extent called for by Section 3.02. In
cases in which any Mortgaged Property is located in a federally designated flood
area, the hazard insurance to be maintained for the related Mortgage Loan shall
include flood insurance. All such flood insurance shall be in such amounts as
are required under applicable guidelines of the Federal Flood Emergency Act. The
Master Servicer shall be under no obligation to require that any Mortgagor
maintain earthquake or other additional insurance and shall be under no
obligation itself to maintain any such additional insurance 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. If the Master Servicer shall obtain and maintain a blanket
policy consistent with prudent industry standards insuring against hazard losses
on all of the Mortgage Loans in an aggregate amount prudent under industry
standards, it shall conclusively be deemed to have satisfied its obligations as
set forth in the first sentence of this Section 3.04 and there shall have been a
loss which would have been covered by such policy, deposit in the Collection
Account, as the case may be, the amount not otherwise payable under the blanket
policy because of such deductible clause.
Section 3.05. Assumption and Modification Agreements. In any case in
which a Mortgaged Property has been or is about to be conveyed by the Mortgagor,
the Master Servicer shall exercise its right to accelerate the maturity of such
Mortgage Loan consistent with the then current practice of the Master Servicer
and without regard to the inclusion of such Mortgage Loan in the Trust. If it
elects not to enforce its right to accelerate or if it is prevented from doing
so by applicable law, the Master Servicer (so long as such action conforms with
the underwriting standards generally acceptable in the industry at the time for
new origination) is authorized to take or enter into an assumption
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and modification agreement from or with the Person to whom such Mortgaged
Property has been or is about to be conveyed, pursuant to which such Person
becomes liable under the Credit Line Agreement and, to the extent permitted by
applicable law, the Mortgagor remains liable thereon. The Master Servicer shall
notify the Trustee that any assumption and modification agreement has been
completed by delivering to the Trustee an Officer's Certificate certifying that
such agreement is in compliance with this Section 3.05 and by forwarding to the
applicable Custodian, as agent for the Trustee, the original copy of such
assumption and modification agreement. Any such assumption and modification
agreement shall, for all purposes, be considered a part of the related Mortgage
File to the same extent as all other documents and instruments constituting a
part thereof. No change in the terms of the related Credit Line Agreement may be
made by the Master Servicer in connection with any such assumption to the extent
that such change would not be permitted to be made in respect of the original
Credit Line Agreement pursuant to the fourth paragraph of Section 3.01(a). Any
fee collected by the Master Servicer for entering into any such agreement will
be retained by the Master Servicer as additional servicing compensation.
Section 3.06. Realization Upon Defaulted Mortgage Loans; Repurchase of
Certain Mortgage Loans. The Master Servicer shall foreclose upon or otherwise
comparably convert to ownership Mortgaged Properties securing such of the
Mortgage Loans as come into and continue in default when, in the opinion of the
Master Servicer based upon the practices and procedures referred to in the
following sentence, no satisfactory arrangements can be made for collection of
delinquent payments pursuant to Section 3.02; provided that if the Master
Servicer has actual knowledge or reasonably believes that any Mortgaged Property
is affected by hazardous or toxic wastes or substances and that the acquisition
of such Mortgaged Property would not be commercially reasonable, then the Master
Servicer will not cause the Trust to acquire title to such Mortgaged Property in
a foreclosure or similar proceeding. In connection with such foreclosure or
other conversion, the Master Servicer shall follow such practices (including, in
the case of any default on a related senior mortgage loan, the advancing of
funds to correct such default) and procedures as it shall deem necessary or
advisable and as shall be normal and usual in its general mortgage servicing
activities. The foregoing is subject to the proviso that the Master Servicer
shall not be required to expend its own funds in connection with any foreclosure
or towards the correction of any default on a related senior mortgage loan or
restoration of any property unless it shall determine that such expenditure will
increase Net Liquidation Proceeds.
In the event that title to any Mortgaged Property is
acquired in foreclosure or by deed in lieu of foreclosure, the
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deed or certificate of sale shall be issued to the Trustee, or to
its nominee on behalf of Certificateholders.
The Master Servicer, in its sole discretion, shall have the right to
purchase for its own account from the Trust any Mortgage Loan which is 91 days
or more delinquent at a price equal to the purchase price described below. The
price for any Mortgage Loan purchased hereunder (which shall be calculated in
the same manner set forth in Section 2.02) shall be deposited in the Collection
Account and the Trustee, upon receipt of a certificate from the Master Servicer
in the form of Exhibit L hereto, shall release or cause to be released to the
Master Servicer the related Mortgage File and 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 purchaser of such
Mortgage Loan any Mortgage Loan released pursuant hereto and the Master Servicer
shall succeed to all the Trustee's right, title and interest in and to such
Mortgage Loan and all security and documents related thereto. Such assignment
shall be an assignment outright and not for security. The Master Servicer shall
thereupon own such Mortgage Loan, and all security and documents, free of any
further obligation to the Trustee, the Credit Enhancer or the Certificateholders
with respect thereto.
Section 3.07. Trustee to Cooperate. On or before each Distribution Date,
the Master Servicer will notify the Trustee of the payment in full of the Asset
Balance of any Mortgage Loan during the preceding Collection Period, which
notification shall be by a certification (which certification shall include a
statement to the effect that all amounts received in connection with such
payment which are required to be deposited in the Collection Account pursuant to
Section 3.02 have been so deposited or credited) of a Servicing Officer. Upon
any such payment in full, the Master Servicer is authorized to execute, pursuant
to the authorization contained in Section 3.01, if the assignments of Mortgage
have been recorded as required hereunder, an instrument of satisfaction
regarding the related Mortgage, which instrument of satisfaction shall be
recorded by the Master Servicer if required by applicable law and be delivered
to the Person entitled thereto. It is understood and agreed that no expenses
incurred in connection with such instrument of satisfaction or transfer shall be
reimbursed from amounts deposited in the Collection Account. If the Trustee is
holding the Mortgage Files, from time to time and as appropriate for the
servicing or foreclosure of any Mortgage Loan, or in connection with the payment
in full of the Asset Balance of any Mortgage Loan, the Trustee shall, upon
request of the Master Servicer and delivery to the Trustee of a Request for
Release substantially in the form attached hereto as Exhibit J signed by a
Servicing Officer, release the related Mortgage File to the Master Servicer and
the Trustee shall execute such documents, in the forms provided by the Master
Servicer, as shall be necessary to the prosecution of any such proceedings or
the taking of other
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servicing actions. Such trust receipt shall obligate the Master Servicer to
return the Mortgage File to the Trustee when the need therefor by the Master
Servicer no longer unless the Mortgage Loan shall be liquidated, in which case,
upon receipt of a certificate of a Servicing Officer similar to that hereinabove
specified, the trust receipt shall be released by the Trustee or such Custodian
to the Master Servicer.
In order to facilitate the foreclosure of the Mortgage securing any
Mortgage Loan that is in default following recordation of the assignments of
Mortgage in accordance with the provisions hereof, the Trustee shall, if so
requested in writing by the Master Servicer, execute an appropriate assignment
in the form provided to the Trustee by the Master Servicer to assign such
Mortgage Loan for the purpose of collection to the Master Servicer or to the
related subservicer (any such assignment shall unambiguously indicate that the
assignment is for the purpose of collection only), and, upon such assignment,
the Master Servicer will thereupon bring all required actions in its own name
and otherwise enforce the terms of the Mortgage Loan and deposit the Net
Liquidation Proceeds, exclusive of Foreclosure Profits, received with respect
thereto in the Collection Account. In the event that all delinquent payments due
under any such Mortgage Loan are paid by the Mortgagor and any other defaults
are cured, then the Master Servicer shall promptly reassign such Mortgage Loan
to the Trustee and return the related Mortgage File to the place where it was
being maintained.
Section 3.08. Servicing Compensation; Payment of Certain Expenses by
Master Servicer. The Master Servicer shall be entitled to receive the Servicing
Fee pursuant to Section 3.03 as compensation for its services in connection with
servicing the Mortgage Loans. Moreover, additional servicing compensation in the
form of late payment charges or other receipts not required to be deposited in
the Collection Account (other than Foreclosure Profits) shall be retained by the
Master Servicer. The Master Servicer shall be required to pay all expenses
incurred by it in connection with its activities hereunder (including payment of
all other fees and expenses not expressly stated hereunder to be for the account
of the Certificateholders) and shall not be entitled to reimbursement therefor
except as specifically provided herein. Liquidation Expenses are reimbursable to
the Master Servicer solely from related Liquidation Proceeds.
Section 3.09. Annual Statement as to Compliance. (a) The Master Servicer
will deliver to the Trustee, the Credit Enhancer and the Rating Agencies, on or
before _______ of each year, beginning _____________, 19___, an Officer's
Certificate stating that (i) a review of the activities of the Master Servicer
during the preceding fiscal year (or such shorter period as is applicable in the
case of the first report) and of its performance under this Agreement has been
made under such officer's supervision and (ii) to the best of such officer's
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knowledge, based on such review, the Master Servicer has fulfilled all of its
material obligations under this Agreement throughout such fiscal year, or, if
there has been a default in the fulfillment of any such obligation, specifying
each such default known to such officer and the nature and status thereof.
(b) The Master Servicer shall deliver to the Trustee, the Credit
Enhancer and each of the Rating Agencies, promptly after having obtained
knowledge thereof, but in no event later than five Business Days thereafter,
written notice by means of an Officer's Certificate of any event which with the
giving of notice or the lapse of time or both, would become an Event of
Servicing Termination.
Section 3.10. Annual Servicing Report. On or before _________ of each
year, beginning ____________, 19___, the Master Servicer, at its expense, shall
cause a firm of nationally recognized independent public accountants (who may
also render other services to the Master Servicer) to furnish a report to the
Trustee, the Credit Enhancer and each Rating Agency to the effect that such firm
has examined certain documents and records relating to the servicing of mortgage
loans during the most recent fiscal year then ended under pooling and servicing
agreements (substantially similar to this Agreement, including this Agreement)
that such examination, was conducted substantially in compliance with the audit
guide for audits of non-supervised mortgagees approved by the Department of
Housing and Urban Development for use by independent public accountants (to the
extent that the procedures in such audit guide are applicable to the servicing
obligations set forth in such agreements) and that such examination has
disclosed no items of noncompliance with the provisions of this Agreement which,
in the opinion of such firm, are material, except for such items of
noncompliance as shall be set forth in such report.
Section 3.11. Annual Opinion of Counsel. On or before _________ of each
year, beginning _____________, 19___, each of the Transferor and the Depositor,
at its expense, shall deliver to the Trustee and the Credit Enhancer the
applicable Opinion of Counsel specified in Exhibit E hereto.
Section 3.12. Access to Certain Documentation and Information Regarding
the Mortgage Loans. (a) The Master Servicer shall provide to the Trustee, the
Credit Enhancer, any Investor Certificateholders that are federally insured
savings and loan associations, the Office of Thrift Supervision, successor to
the Federal Home Loan Bank Board, the FDIC and the supervisory agents and
examiners of the Office of Thrift Supervision access to the documentation
regarding the Mortgage Loans required by applicable regulations of the Office of
Thrift Supervision and the FDIC (acting as operator of the SAIF or the BIF),
such access being afforded without charge but only upon reasonable request and
during normal business hours at the offices of the Master
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Servicer. Nothing in this Section 3.12 shall derogate from the obligation of the
Master Servicer to observe any applicable law prohibiting disclosure of
information regarding the Mortgagors and the failure of the Master Servicer to
provide access as provided in this Section 3.12 as a result of such obligation
shall not constitute a breach of this Section 3.12.
(b) The Master Servicer shall supply information in such form as the
Trustee shall reasonably request to the Trustee and the Paying Agent, on or
before the start of the Determination Date preceding the related Distribution
Date, as is required in the Trustee's reasonable judgment to enable the Paying
Agent or the Trustee, as the case may be, to make required distributions and to
furnish the required reports to Certificateholders and to make any claim under
the Policy.
Section 3.13. Maintenance of Certain Servicing Insurance Policies. The
Master Servicer shall during the term of its service as servicer maintain in
force (i) a policy or policies of insurance covering errors and omissions in the
performance of its obligations as master servicer hereunder and (ii) a fidelity
bond in respect of its officers, employees or agents. Each such policy or
policies and bond together shall comply with the requirements from time to time
of the Federal National Mortgage Association for persons performing servicing
for mortgage loans purchased by such Association.
Section 3.14. Reports to the Securities and Exchange Commission. The
Trustee shall, on behalf of the Trust, cause to be filed with the Securities and
Exchange Commission any periodic reports required to be filed under the
provisions of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Securities and Exchange Commission thereunder. Upon the
request of the Trustee, each of the Seller, the Master Servicer, the Depositor
and the Transferor shall cooperate with the Trustee in the preparation of any
such report and shall provide to the Trustee in a timely manner all such
information or documentation as the Trustee may reasonably request in connection
with the performance of its duties and obligations under this Section.
Section 3.15. Tax Returns. In accordance with Section 2.08 hereof, the
Trustee shall prepare and file any Federal, State or local income and franchise
tax return for the Trust as well as any other applicable return and apply for a
taxpayer identification number on behalf of the Trust. The Transferor shall
treat the Mortgage Loans as its property for all Federal, State or local tax
purposes and shall report all income earned thereon (including amounts payable
as fees to the Master Servicer) as its income for income tax purposes. In the
event the Trust shall be required pursuant to an audit or administrative
proceeding or change in applicable regulations to file Federal, State or local
tax returns, the Trustee shall prepare and file or shall cause to
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be prepared and filed any tax returns required to be filed by the Trust; the
Trustee shall promptly sign such returns and deliver such returns after
signature to the Master Servicer and such returns shall be filed by the Master
Servicer. The Trustee shall also prepare or shall cause to be prepared all tax
information required by law to be distributed to Investor Certificateholders. In
no event shall the Trustee or the Master Servicer be liable for any liabilities,
costs or expenses of the Trust, the Investor Certificateholders, the Transferor
Certificateholders or the Certificate Owners arising under any tax law,
including without limitation Federal, state or local income and franchise or
excise taxes or any other tax imposed on or measured by income (or any interest
or penalty with respect thereto or arising from a failure to comply therewith).
Section 3.16. Information Required by the Internal Revenue Service
Generally and Reports of Foreclosures and Abandonments of Mortgaged Property.
The Master Servicer shall prepare and deliver all federal and state information
reports when and as required by all applicable state and federal income tax
laws. In particular, with respect to the requirement under Section 6050J of the
Code to the effect that the Master Servicer shall make reports of foreclosures
and abandonments of any mortgaged property for each year beginning in 1997, the
Master Servicer shall file reports relating to each instance occurring during
the previous calendar year in which the Master Servicer (i) on behalf of the
Trustee acquires an interest in any Mortgaged Property through foreclosure or
other comparable conversion in full or partial satisfaction of a Mortgage Loan,
or (ii) knows or has reason to know that any Mortgaged Property has been
abandoned. The reports from the Master Servicer shall be in form and substance
sufficient to meet the reporting requirements imposed by Section 6050J.
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ARTICLE IV
Servicing Certificate
Section 4.01. Servicing Certificate. Not later than each Determination
Date, the Master Servicer shall deliver (a) to the Trustee, the Statement to
Certificateholders required to be prepared pursuant to Section 5.03 and (b) to
the Trustee, the Seller, the Depositor, the Paying Agent, the Credit Enhancer
and each Rating Agency a Servicing Certificate (in written form or the form of
computer readable media or such other form as may be agreed to by the Trustee
and the Master Servicer), together with an Officer's Certificate to the effect
that such Servicing Certificate is true and correct in all material respects,
stating the related Collection Period, Distribution Date, the series number of
the Certificates, the date of this Agreement, and:
(i) the aggregate amount of collections received on
the Mortgage Loans on or prior to the Determination Date in
respect of such Collection Period;
(ii) the aggregate amount of (a) Interest Collections
and (b) Principal Collections for such Collection Period;
(iii) the Investor Floating Allocation Percentage and
the Investor Fixed Allocation Percentage for such Collection Period;
(iv) the Investor Interest Collections and Investor
Principal Collections for such Collection Period;
(v) the Transferor Interest Collections and
Transferor Principal Collections for such Collection Period;
(vi) Investor Certificate Interest and the Investor
Certificate Rate for the related Interest Period;
(vii) the amount, if any, of such Investor Certificate
Interest that is not payable on account of insufficient
Investor Interest Collections;
(viii) the portion of the Unpaid Investor Certificate Interest
Shortfall, if any, the amount of interest on such shortfall at the
Certificate Rate applicable from time to time (separately stated) to be
distributed on such Distribution Date;
(ix) the Unpaid Investor Certificate Interest Short-
fall, if any, to remain after the distribution on such
Distribution Date;
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(x) the Accelerated Principal Distribution Amount
and the portion thereof that will be distributed pursuant to
Section 5.01(a)(vii);
(xi) the Scheduled Principal Collections Distribution
Amount, separately stating the components thereof;
(xii) the amount of any Transfer Deposit Amount paid
by the Seller or the Depositor pursuant to Section 2.02 or
2.04;
(xiii) any accrued and unpaid Servicing Fees for
previous Collection Periods and the Servicing Fee for such
Collection Period;
(xiv) the Investor Loss Amount for such Collection
Period;
(xv) the aggregate amount, if any, of Investor Loss Reduction
Amounts for previous Distribution Dates that have not been previously
reimbursed to Investor Certificateholders pursuant to 5.01(a)(v);
(xvi) the aggregate Asset Balance of the Mortgage
Loans as of the end of the preceding Collection Period and
as of the end of the second preceding Collection Period;
(xvii) the Pool Balance as of the end of the preceding
Collection Period and as of the end of the second preceding
Collection Period;
(xviii) the Invested Amount as of the end of the
preceding Collection Period;
(xix) the Investor Certificate Principal Balance and Pool
Factor after giving effect to the distribution on such Distribution Date
and to any reduction on account of the Investor Loss Amount;
(xx) the Transferor Principal Balance after giving
effect to the distribution on such Distribution Date;
(xxi) the aggregate amount of Additional Balances
created during the previous Collection Period;
(xxii) the number and aggregate Asset Balances of Mortgage
Loans (x) as to which the Minimum Monthly Payment is delinquent for
30-59 days, 60-89 days and 90 or more days, respectively and (y) that
have become REO, in each case as of the end of the preceding Collection
Period;
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(xxiii) whether a Rapid Amortization Event has occurred since
the prior Determination Date, specifying each such Rapid Amortization
Event if one has occurred; and
(xxiv) whether an Event of Servicing Termination has occurred
since the prior Determination Date, specifying each such Event of
Servicing Termination if one has occurred;
(xxv) the amount to be distributed to the Credit
Enhancer pursuant to Section 5.01(a)(vi) and Section
5.01(a)(viii)(ii), stated separately;
(xxvi) the amount to be distributed to the Spread
Account pursuant to Section 5.01(a)(viii)(i);
(xxvii) the Guaranteed Principal Distribution Amount for
such Distribution Date;
(xxviii) the Credit Enhancement Draw Amount, if any, for
such Distribution Date;
(xxix) the amount to be distributed to the Transferor
pursuant to Section 5.01(a)(x);
(xxx) the amount to be paid to the Master Servicer
pursuant to Section 5.01(a)(ix);
(xxxi) the Maximum Rate for the related Collection
Period and the Weighted Average Net Loan Rate;
(xxxii) the total amount of funds on deposit in the
Spread Account and the applicable Spread Account Maximum;
(xxxiii) the expected amount of any optional advances pursuant to
Section 4.05 hereof by the Master Servicer included in the distribution
on such Distribution Date and the aggregate expected amount of optional
advances pursuant to Section 4.05 hereof by the Master Servicer
outstanding as of the close of business on such Distribution Date;
(xxxiv) the Overcollateralization Amount after giving
effect to the distribution to be made on such Distribution;
and
(xxxv) the number and principal balances of any Mortgage
Loans retransferred to the Transferor pursuant to Section 2.06.
The Trustee shall conclusively rely upon the information contained in a
Servicing Certificate for purposes of making distributions pursuant to Section
5.01, shall have no duty to inquire into such information and shall have no
liability in so relying. The format and content of the Servicing Certificate may
be modi-
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fied by the mutual agreement of the Master Servicer, the Trustee and the Credit
Enhancer. The Master Servicer shall give notice of any such change to the Rating
Agencies.
Section 4.02. Claims upon the Policy; Policy Payments
Account.
(a) If, by the close of business on the third Business Day prior to a
Distribution Date, the sum of the funds then on deposit in the Collection
Account for the related Collection Period which are payable to the Investor
Certificateholders pursuant to Sections 5.01(a), (b) and (g) (after giving
effect to the distribution of the Trustee Fee and the Premium), the amounts on
deposit in the Spread Account and the amount, if any, deposited into the
Collection Account pursuant to Section 4.05 are insufficient to pay the
Guaranteed Distribution on such Distribution Date, then the Trustee shall give
notice to the Credit Enhancer by telephone or telecopy of the amount equal to
the Credit Enhancement Draw Amount. Such notice of such sum shall be confirmed
in writing in the form set forth as Exhibit A to the Endorsement of the Policy,
to the Credit Enhancer and the Fiscal Agent, if any, at or before 10:00 a.m.,
New York City time, on the second Business Day prior to such Distribution Date.
Following receipt by the Credit Enhancer of such notice in such form, the Credit
Enhancer or the Fiscal Agent will pay any amount payable under the Policy on the
later to occur of (i) 12:00 noon, New York City time, on the Business Day
following such receipt and (ii) 12:00 noon, New York City time, on the
Distribution Date to which such deficiency relates, as provided in the
Endorsement to the Policy.
(b) The Trustee shall establish a separate special purpose trust
account, which account shall be an Eligible Account, for the benefit of Holders
of the Investor Certificates and the Credit Enhancer referred to herein as the
"Policy Payments Account" over which the Trustee shall have exclusive control
and sole right of withdrawal. The Trustee shall deposit any amount paid under
the Policy in the Policy Payments Account and distribute such amount only for
purposes of payment to Holders of the Investor Certificates of the Guaranteed
Distribution for which a claim was made and such amount may not be applied to
satisfy any costs, expenses or liabilities of the Master Servicer, the Trustee
or the Trust Fund. Amounts paid under the Policy shall be transferred to the
Collection Account in accordance with the next succeeding paragraph and
disbursed by the Trustee to Holders of Investor Certificates in accordance with
Section 5.01. It shall not be necessary for such payments to be made by checks
or wire transfers separate from the checks or wire transfers used to pay the
Guaranteed Distribution with other funds available to make such payment.
However, the amount of any payment of principal of or interest on the Investor
Certificates to be paid from funds transferred from the Policy Payments Account
shall be noted as provided in paragraph (c) below in the
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Certificate Register and in the statement to be furnished to Holders of the
Investor Certificates pursuant to Section 5.03. Funds held in the Policy
Payments Account shall not be invested.
On any Distribution Date with respect to which a claim has been made
under the Policy, the amount of any funds received by the Trustee as a result of
any claim under the Policy, to the extent required to make the Guaranteed
Distribution on such Distribution Date, shall be withdrawn from the Policy
Payments Account and deposited in the Collection Account and applied by the
Trustee, together with the other funds to be withdrawn from the Collection
Account pursuant to Section 5.01 directly to the payment in full of the
Guaranteed Distribution due on the Investor Certificates. Any funds received by
the Trustee shall be used solely for payment to the Holders of Investor
Certificates and may not be applied to satisfy any costs, expenses or
liabilities of the Master Servicer, the Trustee or the Trust. Any funds
remaining in the Policy Payments Account on the first Business Day following a
Distribution Date shall be remitted to the Credit Enhancer, pursuant to the
instructions of the Credit Enhancer, by the end of such Business Day.
(c) The Trustee shall keep a complete and accurate record of the amount
of interest and principal paid in respect of any Investor Certificate from
moneys received under the Policy. The Credit Enhancer shall have the right to
inspect such records at reasonable times during normal business hours upon one
Business Day's prior notice to the Trustee.
(d) The Trustee shall promptly notify the Credit Enhancer and Fiscal
Agent of any proceeding or the institution of any action, of which a Responsible
Officer of the Trustee has actual knowledge, seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency, receivership or
similar law (a "Preference Claim") of any distribution made with respect to the
Investor Certificates. Each Investor Certificateholder, by its purchase of
Investor Certificates, the Master Servicer and the Trustee hereby agree that,
the Credit Enhancer (so long as no Credit Enhancer Default exists) may at any
time during the continuation of any proceeding relating to a Preference Claim
direct all matters relating to such Preference Claim, including, without
limitation, (i) the direction of any appeal of any order relating to such
Preference Claim and (ii) the posting of any surety, supersedeas or performance
bond pending any such appeal. In addition and without limitation of the
foregoing, the Credit Enhancer shall be subrogated to the rights of the Master
Servicer, the Trustee and each Investor Certificateholder in the conduct of any
such Preference Claim, including, without limitation, all rights of any party to
an adversary proceeding action with respect to any court order issued in
connection with any such Preference Claim.
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Section 4.03. Spread Account. (a) The Trustee shall establish and
maintain a separate trust account (the "Spread Account") titled
"________________________, as Trustee, in trust for the registered holders of
Revolving Home Equity Loan Asset Backed Certificates, Series 199__-__ and
_____________________." The Spread Account shall be an Eligible Account. Amounts
on deposit in the Spread Account will, at the direction of the Transferor, be
invested in either Eligible Investments maturing no later than the day before
the next Distribution Date or in the commercial paper (maturing no later than
the day before the next Distribution Date) of [Countrywide Home Loans, Inc.], or
any of its Affiliates, provided that such commercial paper's short-term rating
is no lower than ___ and ____ and the long-term unsecured debt of [Countrywide
Home Loans, Inc.] is rated at least ____ by _______________, or such lower
rating as is agreed to by the Rating Agencies as evidenced by a letter from each
such Rating Agency.
All income and gain realized from any investment of funds in the Spread
Account shall be for the benefit of the Transferor and shall be subject to its
withdrawal from time to time. The amount of any losses incurred in respect of
the principal amount of any such investments shall be deposited in the Spread
Account by the Transferor out of its own funds immediately as realized.
(b) On each Determination Date the Trustee shall determine (i) the
extent to which Investor Interest Collections and the amounts, if any, deposited
into the Collection Account pursuant to Section 4.05 applied in the order
specified in Section 5.01(a) are insufficient to make distributions as provided
in clauses (iii) and (iv) of Section 5.01(a) and (ii) the Guaranteed Principal
Distribution Amount for the related Distribution Date. On each Distribution Date
the Trustee shall withdraw from the Spread Account and deposit into the
Collection Account the lesser of the amount on deposit in the Spread Account and
an amount equal to the sum of the amounts, if any, determined in clauses (i) and
(ii) of the preceding sentence.
(c) Following the termination of the Trust pursuant to Section 10.01 or
11.02 hereof, the Trustee shall withdraw all amounts then on deposit in the
Spread Account and distribute such amounts first to any amounts due and owing to
the Credit Enhancer and then to the Transferor. If on any Distribution Date the
amount on deposit in the Spread Account exceeds the Spread Account Maximum, the
Trustee shall withdraw such excess and distribute it to the Transferor.
Section 4.04. Effect of Payments by the Credit Enhancer; Subrogation.
Anything herein to the contrary notwithstanding, any payment with respect to
principal of or interest on any of the Investor Certificates which is made with
moneys received pursuant to the terms of the Policy shall not be considered
payment of such Investor Certificates from the Trust and shall not result
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in the payment of or the provision for the payment of the principal of or
interest on such Investor Certificates within the meaning of Section 5.01. The
Depositor, the Master Servicer and the Trustee acknowledge, and each Holder by
its acceptance of an Investor Certificate agrees, that without the need for any
further action on the part of the Credit Enhancer, the Depositor, the Master
Servicer, the Trustee or the Certificate Registrar (a) to the extent the Credit
Enhancer makes payments, directly or indirectly, on account of principal of or
interest on any Investor Certificates to the Holders of such Certificates, the
Credit Enhancer will be fully subrogated to the rights of such Holders to
receive such principal and interest from the Trust and (b) the Credit Enhancer
shall be paid such principal and interest but only from the sources and in the
manner provided herein for the payment of such principal and interest.
The Trustee and the Master Servicer shall cooperate in all respects with
any reasonable request by the Credit Enhancer for action to preserve or enforce
the Credit Enhancer's rights or interests under this Agreement without limiting
the rights or affecting the interests of the Holders as otherwise set forth
herein.
Section 4.05. Optional Advances of the Master Servicer. The Master
Servicer, in its sole discretion, may advance the interest component of any
delinquent Minimum Monthly Payment (or any portion thereof) by depositing such
amount into the Collection Account on or prior to the Determination Date.
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ARTICLE V
Payments and Statements to
Certificateholders; Rights of Certificateholders
Section 5.01. Distributions.
(a) Distributions of Investor Interest Collections and Investment
Proceeds. Subject to Section 11.02(b), on each Distribution Date, the Trustee or
the Paying Agent, as the case may be, shall distribute out of the Collection
Account to the extent of Investor Interest Collections collected during the
related Collection Period and the amounts transferred from the Spread Account as
determined pursuant to Section 4.03(b) and the amount, if any, deposited into
the Collection Account pursuant to Section 4.05, the following amounts and in
the following order of priority to the following Persons (based on the
information set forth in the Servicing Certificate):
(i) the Trustee Fee for such Distribution Date to
the Trustee;
(ii) the premium pursuant to the Insurance Agreement
to the Credit Enhancer;
(iii) the Investor Certificate Interest for such Distribution
Date to the Investor Certificateholders and the Unpaid Investor
Certificate Interest Shortfall, if any, for such Distribution Date to
the Investor Certificateholders plus, to the extent legally permissible,
interest thereon at the Investor Certificate Rate;
(iv) the Investor Loss Amount for such Collection
Period to the Investor Certificateholders as principal in
reduction of the Investor Certificate Principal Balance;
(v) to Investor Certificateholders as principal in reduction
of the Investor Certificate Principal Balance the aggregate amount of
the Investor Loss Reduction Amounts, if any, for previous Distribution
Dates that have not been previously reimbursed to Investor
Certificateholders pursuant to this clause (v);
(vi) to reimburse the Credit Enhancer for previously
unreimbursed Credit Enhancement Draw Amounts together with interest
thereon at the applicable rate set forth in the Insurance Agreement;
(vii) the Accelerated Principal Distribution Amount,
if any, to the Investor Certificateholders;
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(viii) (i) to the Trustee to deposit to the Spread Account up
to the Spread Account Maximum and (ii) to the Credit Enhancer for any
amounts owed to the Credit Enhancer pursuant to the Insurance Agreement;
(ix) any amount required to be paid to the Master
Servicer pursuant to Section 7.03 which has not been previously paid to
the Master Servicer; and
(x) any remaining amount to the Transferor.
(b) Distribution of Principal Collections. Subject to Section 11.02(b)
and except on the Distribution Date in __________ 20___, on each Distribution
Date, the Trustee shall distribute out of the Collection Account to the Investor
Certificateholders the Principal Collections (including amounts transferred
thereto from the Spread Account pursuant to Section 4.03(b) in respect of the
amount determined pursuant to Section 4.03(b)(ii) up to the Scheduled Principal
Collections Distribution Amount but not in excess of the Investor Certificate
Principal Balance. On the Distribution Date in ____________ 20___, the Trustee
shall distribute to Investor Certificateholders Principal Collections up to the
Investor Certificate Principal Balance.
(c) Reserved.
(d) Distribution of the Credit Enhancement Draw Amount: With respect to
any Distribution Date, to the extent that Investor Interest Collections and
amounts transferred from the Spread Account on the related Distribution Date in
respect of the amount determined pursuant to Section 4.03(b)(i) and any amounts,
if any, deposited to the Collection Account pursuant to Section 4.05 applied in
the order specified in Section 5.01(a) are insufficient to make distributions as
provided in clause (iii) of Section 5.01(a) above, the Trustee will make such
payments (the "Deficiency Amount") from the amount drawn under the Policy for
such Distribution Date pursuant to Section 4.02. For any Distribution Date as to
which there is a Guaranteed Principal Distribution Amount, the Trustee shall
distribute the Guaranteed Principal Distribution Amount to Certificateholders
from the amount drawn under the Policy for such Distribution Date pursuant to
Section 4.02.
The aggregate amount of principal distributed to the Investor
Certificateholders under this Agreement shall not exceed the Original Investor
Certificate Principal Balance.
(e) Method of Distribution. The Trustee shall make distributions in
respect of a Distribution Date to each Investor Certificateholder of record on
the related Record Date (other than as provided in Section 10.01 respecting the
final distribution) by check or money order mailed to such Investor Certifi-
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cateholder at the address appearing in the Certificate Register, or upon written
request by an Investor Certificateholder delivered to the Trustee at least five
Business Days prior to such Record Date, by wire transfer (but only if such
Certificateholder is the Depository or such Certificateholder owns of record one
or more Investor Certificates having principal denominations aggregating at
least $______________), or by such other means of payment as such Investor
Certificateholder and the Trustee shall agree. Distributions among Investor
Certificateholders shall be made in proportion to the Percentage Interests
evidenced by the Investor Certificates held by such Investor Certificateholders.
(f) Distributions on Book-Entry Certificates. Each distribution with
respect to a Book-Entry Certificate shall be paid to the Depository, which shall
credit 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
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. All such credits and disbursements
with respect to a Book-Entry Certificate are to be made by the Depository and
the Depository Participants in accordance with the provisions of the Investor
Certificates. None of the Trustee, the Paying Agent, the Certificate Registrar,
the Depositor, the Credit Enhancer or the Master Servicer shall have any
responsibility therefor except as otherwise provided by applicable law.
(g) Distributions to Holders of Transferor Certificates. On each
Distribution Date, the Trustee shall, based upon the information set forth in
the Servicing Certificate for such Distribution Date, distribute to the
Transferor (i) the Transferor Interest Collections for the related Collection
Period and (ii) the portion, if any, of Transferor Principal Collections for the
related Collection Period in excess of Additional Balances created during such
Collection Period; provided that collections allocable to the Transferor
Certificates will be distributed to the Transferor only to the extent that such
distribution will not reduce the amount of the Transferor Principal Balance as
of the related Distribution Date below the Minimum Transferor Interest. Amounts
not distributed to the Transferor because of such limitations will be retained
in the Collection Account until the Transferor Principal Balance exceeds the
Minimum Transferor Interest, at which time such excess shall be released to the
Transferor. If any such amounts are still retained in the Collection Account
upon the commencement of the Rapid Amortization Period, such amounts will be
paid to the Investor Certificateholders as a reduction of the Investor
Certificate Principal Balance.
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Section 5.02. Calculation of the Investor Certificate Rate. On the
[second LIBOR Business Day immediately preceding each Distribution Date, the
Trustee shall determine LIBOR] for the Interest Period commencing on such
Distribution Date and inform the Master Servicer (at the facsimile number given
to the Trustee in writing) of such rates. On each Determination Date, the
Trustee shall determine the applicable Investor Certificate Rate for the related
Distribution Date.
Section 5.03. Statements to Certificateholders. Concurrently with each
distribution to Investor Certificateholders, the Trustee shall forward to each
Investor Certificateholder, the Master Servicer and each Rating Agency a
statement prepared by the Master Servicer pursuant to Section 4.01 with respect
to such distribution setting forth:
(i) the Investor Floating Allocation Percentage for
the preceding Collection Period;
(ii) the Investor Certificate Distribution Amount;
(iii) the amount of Investor Certificate Interest in
such distribution and the related Investor Certificate Rate;
(iv) the amount, if any, of any Unpaid Investor
Certificate Interest Shortfall in such distribution;
(v) the amount, if any, of the remaining Unpaid
Investor Certificate Interest Shortfall after giving effect
to such distribution;
(vi) the amount, if any, of principal in such
distribution, separately stating the components thereof;
(vii) the amount, if any, of the reimbursement of
previous Investor Loss Reduction Amounts in such distribution;
(viii) the amount, if any, of the aggregate of
unreimbursed Investor Loss Reduction Amounts after giving effect to such
distribution;
(ix) the Servicing Fee for such Distribution Date;
(x) the Invested Amount, the Investor Certificate
Principal Balance and the Pool Factor, each after giving effect to such
distribution;
(xi) the Pool Balance as of the end of the preceding
Collection Period and the aggregate of the Asset Balances of the
Mortgage Loans at the close of business on the last day of the related
Collection Period;
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(xii) the Credit Enhancement Draw Amount, if any;
(xiii) the number and aggregate Asset Balances of Mortgage
Loans as to which the Minimum Monthly Payment is delinquent for 30-59
days, 60-89 days and 90 or more days, respectively, as of the end of the
preceding Collection Period;
(xiv) the book value (within the meaning of 12 C.F.R.
ss. 571.13 or comparable provision) of any real estate
acquired through foreclosure or grant of a deed in lieu of
foreclosure;
(xv) the amount of any optional advances pursuant to Section
4.05 hereof by the Master Services included in the distribution on such
Distribution Date and the aggregate amount of optional advances pursuant
to Section 4.05 hereof by the Master Services outstanding as of the
close of business on such Distribution Date;
(xvi) the Investor Certificate Rate applicable to the
distribution on the following Distribution Date;
(xvii) the number and principal balances of any Mortgage
Loans retransferred to the Transferor pursuant to (a) Section 2.04 and
(b) Section 2.06.
In the case of information furnished pursuant to clauses (ii), (iii) in
respect of Investor Certificate Interest, (iv) and (viii) above, the amounts
shall be expressed as a dollar amount per Investor Certificate with a $1,000
denomination.
Within 60 days after the end of each calendar year, the Master Servicer
shall prepare or cause to be prepared and shall forward to the Trustee the
information set forth in clauses (iii) and (vi) above aggregated for such
calendar year. 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 or a Paying Agent pursuant to any requirements
of the Code.
The Trustee shall prepare or cause to be prepared (in a manner
consistent with the treatment of the Investor Certificates as indebtedness of
the Transferor, or as may be otherwise required by Section 3.15) Internal
Revenue Service Form 1099 (or any successor form) and any other tax forms
required to be filed or furnished to Certificateholders in respect of
distributions by the Trustee (or the Paying Agent) on the Investor Certificates
and shall file and distribute such forms as required by law.
Section 5.04. Rights of Certificateholders. The Investor
Certificates shall represent fractional undivided interests in
the Trust, including the benefits of the Collection Account and
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the right to receive Investor Interest Collections, Principal Collections and
other amounts at the times and in the amounts specified in this Agreement; the
Transferor Certificates shall represent the remaining interest in the Trust.
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ARTICLE VI
The Certificates
Section 6.01. The Certificates. The Investor Certificates and Transferor
Certificates shall be substantially in the forms set forth in Exhibits A and B,
respectively, and shall, on original issue, be executed, authenticated and
delivered by the Trustee to or upon the order of the Depositor concurrently with
the sale and assignment to the Trustee of the Trust. The Investor Certificates
shall be initially evidenced by one or more certificates representing the entire
Original Investor Certificate Principal Balance and shall be held in minimum
dollar denominations of $1,000 and integral dollar multiples in excess thereof,
except that one Investor Certificate may be in a different denomination of less
than $1,000 so that the sum of the denominations of all outstanding Investor
Certificates shall equal the Original Investor Certificate Principal Balance.
The sum of the denominations of all outstanding Investor Certificates shall
equal the Original Investor Certificate Principal Balance. The Transferor
Certificates shall be issuable as one or more certificates representing the
entire interest in the assets of the Trust other than that represented by the
Investor Certificates and shall initially be issued to the Seller.
The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by an authorized officer under its seal imprinted thereon.
Certificates bearing the manual or facsimile signatures of individuals who were,
at the time when such signatures were affixed, authorized to sign on behalf of
the Trustee shall bind the Trust, notwithstanding that such individuals or any
of them have ceased to be so authorized prior to the authentication and delivery
of such Transferor Certificates or did not hold such offices at the date of such
Transferor Certificate. No Certificate shall be entitled to any benefit under
this Agreement, or be valid for any purpose, unless such Certificate shall have
been manually authenticated by the Trustee substantially in the form provided
for herein, and such authentication 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. Subject to Section 6.02(c), the Investor Certificates
shall be Book-Entry Certificates. The Transferor Certificates shall not be
Book-Entry Certificates.
Section 6.02. Registration of Transfer and Exchange of Investor
Certificates; Appointment of Registrar. (a) The Certificate Registrar shall
cause to be kept at the Corporate Trust Office a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Certificate
Registrar shall provide for the registration of Investor Certificates and of
transfers and exchanges of Investor Certificates as
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herein provided. The Trustee shall initially serve as Certificate Registrar for
the purpose of registering Investor Certificates and transfers and exchanges of
Investor Certificates as herein provided.
Upon surrender for registration of transfer of any Investor Certificate
at any office or agency of the Certificate Registrar maintained for such purpose
pursuant to the foregoing paragraph, the Trustee on behalf of the Trust shall
execute, authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Investor Certificates of the same aggregate
Percentage Interest.
At the option of the Investor Certificateholders, Investor Certificates
may be exchanged for other Investor Certificates in authorized denominations and
the same aggregate Percentage Interests, upon surrender of the Investor
Certificates to be exchanged at any such office or agency. Whenever any Investor
Certificates are so surrendered for exchange, the Trustee shall execute and
authenticate and deliver the Investor Certificates which the Investor
Certificateholder making the exchange is entitled to receive. Every Investor
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.
(b) Except as provided in paragraph (c) below, the BookEntry
Certificates shall at all times remain registered in the name of the Depository
or its nominee and at all times: (i) registration of the Investor Certificates
may not be transferred by the Trustee except to another Depository; (ii) the
Depository shall maintain book-entry records with respect to the Certificate
Owners and with respect to ownership and transfers of such Investor
Certificates; (iii) ownership and transfers of registration of the Investor
Certificates on the books of the Depository shall be governed by applicable
rules established by the Depository; (iv) the Depository may collect its usual
and customary fees, charges and expenses from its Depository Participants; (v)
the Trustee shall deal with the Depository as representative of the Certificate
Owners of the Investor Certificates for purposes of exercising the rights of
Holders under this Agreement, and requests and directions for and votes of such
representative shall not be deemed to be inconsistent if they are made with
respect to different Certificate Owners; and (vi) the Trustee may rely and shall
be fully protected in relying upon information furnished by the Depository with
respect to its Depository Participants and furnished by the Depository
Participants with respect to indirect participating firms and Persons shown on
the books of such indirect participating firms as direct or indirect Certificate
Owners.
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All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owners. Each Depository
Participant shall only transfer Book-Entry Certificates of Certificate Owners
that it represents or of brokerage firms for which it acts as agent in
accordance with the Depository's normal procedures. The parties hereto are
hereby authorized to execute a Letter of Representations with the Depository or
take such other action as may be necessary or desirable to register a Book-Entry
Certificate to the Depository. In the event of any conflict between the terms of
any such Letter of Representation and this Agreement the terms of this Agreement
shall control.
(c) If (i)(x) the Depository or the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to discharge properly
its responsibilities as Depository, and (y) the Trustee or the Depositor is
unable to locate a qualified successor, (ii) the Depositor, at its sole option,
with the consent of the Trustee, elects to terminate the book-entry system
through the Depository or (iii) after the occurrence of an Event of Servicing
Termination, the Depository, at the direction of Certificate Owners representing
Percentage Interests aggregating not less than 51% advises the Trustee in
writing that the continuation of a book-entry system through the Depository to
the exclusion of definitive, fully registered Investor Certificates (the
"Definitive Certificates") to Certificate Owners is no longer in the best
interests of the Certificate Owners. Upon surrender to the Certificate Registrar
of the Investor Certificates by the Depository, accompanied by registration
instructions from the Depository for registration, the Trustee shall execute and
authenticate the Definitive Certificates. Neither the Depositor nor the Trustee
shall be liable for 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 Depository shall be deemed to
be imposed upon and performed by the Trustee, to the extent applicable with
respect to such Definitive Certificates, and the Trustee, the Certificate
Registrar, the Master Servicer and the Depositor shall recognize the Holders of
the Definitive Certificates as Certificateholders hereunder.
No service charge shall be made for any registration of transfer or
exchange of Investor Certificates, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer or exchange of Certificates.
All Investor Certificates surrendered for registration of transfer or
exchange shall be cancelled by the Certificate Registrar and disposed of
pursuant to its standard procedures.
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Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates. If (i)
any mutilated Certificate is surrendered to the Certificate Registrar or the
Certificate Registrar receives evidence to its satisfaction of the destruction,
loss or theft of any Certificate, and (ii) there is delivered to the Trustee,
the Depositor 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, authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like tenor and Percentage Interest.
Upon the issuance of any new Certificate under this Section 6.03, the Trustee or
the Certificate Registrar may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Trustee and the
Certificate Registrar) connected therewith. Any duplicate Certificate issued
pursuant to this Section 6.03, shall constitute complete and indefeasible
evidence of ownership in the Trust, as if originally issued, whether or not the
lost, stolen or destroyed Certificate shall be found at any time.
Section 6.04. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Master Servicer, the Depositor,
the Trustee, the Certificate Registrar, any Paying Agent and any agent of the
Master Servicer, the Depositor, the Trustee, any Paying Agent or the Certificate
Registrar may treat the Person, including a Depository, in whose name any
Certificate is registered as the owner of such Certificate for the purpose of
receiving distributions pursuant to Section 5.01 and for all other purposes
whatsoever, and none of the Master Servicer, the Depositor, the Trustee, the
Certificate Registrar, any Paying Agent or any agent of any of them shall be
affected by notice to the contrary.
Section 6.05. Restrictions on Transfer of Transferor Certificates. (a)
The Transferor Certificates shall be assigned, transferred, exchanged, pledged,
financed, hypothecated or otherwise conveyed (collectively, for purposes of this
Section 6.05 and any other Section referring to the Transferor Certificates,
"transferred" or a "transfer") only in accordance with this Section 6.05.
(b) No transfer of a Transferor Certificate shall 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. Except for the initial issuance of the
Transferor Certificate to the Transferor, the Trustee shall require (i) the
transferee to execute an investment letter acceptable to and in form and
substance satisfactory to the Trustee certifying to the Trustee the facts
surrounding such transfer, which investment
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letter shall not be an expense of the Trustee or (ii) if the investment letter
is not delivered, 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 or is being made pursuant to said Act, which
Opinion of Counsel shall not be an expense of the Trustee or the Depositor. The
Holder of a Transferor Certificate desiring to effect such transfer shall, and
does hereby agree to, indemnify the Transferor against any liability that may
result if the transfer is not so exempt or is not made in accordance with such
federal and state laws.
(c) The Transferor Certificates and any interest therein shall not be
transferred except upon satisfaction of the following conditions precedent: (i)
the Person that acquires a Transferor Certificate shall (A) be organized and
existing under the laws of the United States of America or any state or the
District of Columbia thereof, (B) expressly assume, by an agreement supplemental
hereto, executed and delivered to the Trustee, the performance of every covenant
and obligation of the Transferor hereunder and (C) as part of its acquisition of
a Transferor Certificate, acquire all rights of the Transferor or any transferee
under this Section 6.05(c) to amounts payable to such Transferor or such
transferee under Sections 5.01(a)(x) and 5.01(g); (ii) the Holder of the
Transferor Certificates shall deliver to the Trustee an Officer's Certificate
stating that such transfer and such supplemental agreement comply with this
Section 6.05(c) and that all conditions precedent provided by this subsection
6.05(c) have been complied with and an Opinion of Counsel stating that all
conditions precedent provided by this subsection 6.05(c) have been complied
with, and the Trustee may conclusively rely on such Officer's Certificate, shall
have no duty to make inquiries with regard to the matters set forth therein and
shall incur no liability in so relying; (iii) the Holder of the Transferor
Certificates shall deliver to the Trustee a letter from each Rating Agency
confirming that its rating of the Investor Certificates, after giving effect to
such transfer, will not be reduced or withdrawn without regard to the Policy;
(iv) the transferee of the Transferor Certificates shall deliver to the Trustee
an Opinion of Counsel to the effect that (a) such transfer will not adversely
affect the treatment of the Investor Certificates after such transfer as debt
for federal and applicable state income tax purposes, (b) such transfer will not
result in the Trust being subject to tax at the entity level for federal or
applicable state tax purposes, (c) such transfer will not have any material
adverse impact on the federal or applicable state income taxation of an Investor
Certificateholder or any Certificate Owner and (d) such transfer will not result
in the arrangement created by this Agreement or any "portion" of the Trust,
being treated as a taxable mortgage pool as defined in Section 7701(i) of the
Code; (v) all filings and other actions necessary to continue the perfection of
the interest of the Trust
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in the Mortgage Loans and the other property conveyed hereunder shall have been
taken or made and (vi) the transferee shall have assumed the obligations of the
Transferor pursuant to Section 7.07 hereof. Notwithstanding the foregoing, the
requirement set forth in subclause (i)(A) of this Section 6.05(c) shall not
apply in the event the Trustee shall have received a letter from each Rating
Agency confirming that its rating of the Investor Certificates, after giving
effect to a proposed transfer to a Person that does not meet the requirement set
forth in subclause (i)(A), shall not be reduced or withdrawn. Notwithstanding
the foregoing, the requirements set forth in this paragraph (c) shall not apply
to the initial issuance of the Transferor Certificates to the Transferor.
(d) Except for the initial issuance of the Transferor Certificate to the
Transferor, no transfer of a Transferor Certificate shall be made unless the
Trustee shall have received either (i) a representation letter from the
transferee of such Certificate, acceptable to and in form and substance
satisfactory to the Trustee, to the effect that such transferee is not an
employee benefit plan subject to Section 406 of ERISA, nor a Person acting on
behalf of any such plan, which representation letter shall not be an expense of
the Trustee, (ii) if the purchaser is an insurance company, a representation
that the purchaser is an insurance company which is purchasing such Certificates
with funds contained in an "insurance company general account" (as such term is
defined in Section V(e) of Prohibited Transaction Class Exemption 95-60 ("PTCE
95-60")) and that the purchase and holding of such Certificates are covered
under PTCE 95-60, or (iii) in the case of any Transferor Certificate presented
for registration in the name of an employee benefit plan subject to ERISA, and
Section 4975 of the Code (or comparable provisions of any subsequent
enactments), or a trustee of any such plan, an Opinion of Counsel to the effect
that the purchase or holding of such Certificate will not result in the assets
of the Trust being deemed to be "plan assets" and subject to the prohibited
transaction provisions of ERISA and the Code and will not subject the Trustee to
any obligation in addition to those undertaken in this Agreement, which Opinion
of Counsel shall not be an expense of the Trustee or the Depositor.
Section 6.06. Appointment of Paying Agent. (a) The Paying Agent shall
make distributions to Investor Certificateholders from the Collection Account
pursuant to Section 5.01 and shall report the amounts of such distributions to
the Trustee. The duties of the Paying Agent may include the obligation (i) to
withdraw funds from the Collection Account pursuant to Section 3.03 and for the
purpose of making the distributions referred to above and (ii) to distribute
statements and provide information to Certificateholders as required hereunder.
The Paying Agent hereunder shall at all times be a corporation duly incorporated
and validly existing under the laws of the United States of America or any state
thereof, authorized under such laws to
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exercise corporate trust powers and subject to supervision or examination by
federal or state authorities. The Paying Agent shall initially be the Trustee.
The Trustee may appoint a successor to act as Paying Agent, which appointment
shall be reasonably satisfactory to the Depositor.
(b) The Trustee shall cause the Paying Agent (if other than the Trustee)
to execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee that such Paying Agent shall hold all sums, if any,
held by it for payment to the Investor Certificateholders in trust for the
benefit of the Investor Certificateholders entitled thereto until such sums
shall be paid to such Certificateholders and shall agree that it shall comply
with all requirements of the Code regarding the withholding of payments in
respect of Federal income taxes due from Certificate Owners and otherwise comply
with the provisions of this Agreement applicable to it.
Section 6.07. Acceptance of Obligations. The Transferor, by its
acceptance of the Transferor Certificates, agrees to be bound by and to perform
all the duties of the Transferor set forth in this Agreement.
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ARTICLE VII
The Master Servicer, the Seller and the Depositor
Section 7.01. Liability of the Seller, the Master Servicer and the
Depositor. The Seller and the Master Servicer shall be liable in accordance
herewith only to the extent of the obligations specifically imposed upon and
undertaken by the Seller or Master Servicer, as the case may be, herein. The
Depositor shall be liable in accordance herewith only to the extent of the
obligations specifically imposed upon and undertaken by the Depositor.
Section 7.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Master Servicer or the Depositor. Any corporation into which
the Master Servicer or the Depositor may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Master Servicer or the Depositor shall be a party, or any corporation succeeding
to the business of the Master Servicer or the Depositor, shall be the successor
of the Master Servicer or the Depositor, 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.
Section 7.03. Limitation on Liability of the Master Servicer and Others.
Neither the Master Servicer nor any of the directors or officers or employees or
agents of the Master Servicer shall be under any liability to the Trust or the
Certificateholders for any action taken or for refraining from the taking of any
action by the Master Servicer in good faith pursuant to this Agreement, or for
errors in judgment; provided, however, that this provision shall not protect the
Master Servicer or any such Person against any liability which would otherwise
be imposed by reason of willful misfeasance, bad faith or gross negligence in
the performance of duties of the Master Servicer or by reason of reckless
disregard of obligations and duties of the Master Servicer hereunder. The Master
Servicer and any director or officer or employee or agent of 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 Master
Servicer and any director or officer or employee or agent of the Master Servicer
shall be indemnified by the Trust 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 its willful
misfeasance, bad faith or gross negligence in the performance of duties
hereunder or by reason of its reckless
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disregard of obligations and duties hereunder. The Master Servicer shall not be
under any obligation to appear in, prosecute or defend any legal action which is
not incidental to duties to service the Mortgage Loans in accordance with this
Agreement, and which in its opinion may involve it in any expense or liability;
provided, however, that the Master Servicer may in its sole discretion undertake
any such action which it may deem necessary or desirable in respect of this
Agreement, and the rights and duties of the parties hereto and the interests of
the Certificateholders hereunder. In such event, the reasonable legal expenses
and costs of such action and any liability resulting therefrom shall be
expenses, costs and liabilities of the Trust and the Master Servicer shall only
be entitled to be reimbursed therefor pursuant to Section 5.01(a)(ix). The
Master Servicer's right to indemnity or reimbursement pursuant to this Section
7.03 shall survive any resignation or termination of the Master Servicer
pursuant to Section 7.04 or 8.01 with respect to any losses, expenses, costs or
liabilities arising prior to such resignation or termination (or arising from
events that occurred prior to such resignation or termination).
Section 7.04. Master Servicer Not to Resign. Subject to the provisions
of Section 7.02, the Master Servicer shall not resign from the obligations and
duties hereby imposed on it except (i) upon determination that the performance
of its obligations or duties hereunder are no longer permissible under
applicable law or are in material conflict by reason of applicable law with any
other activities carried on by it or its subsidiaries or Affiliates, the other
activities of the Master Servicer so causing such a conflict being of a type and
nature carried on by the Master Servicer or its subsidiaries or Affiliates at
the date of this Agreement or (ii) upon satisfaction of the following
conditions: (a) the Master Servicer has proposed a successor servicer to the
Trustee in writing and such proposed successor servicer is reasonably acceptable
to the Trustee; (b) each Rating Agency shall have delivered a letter to the
Trustee prior to the appointment of the successor servicer stating that the
proposed appointment of such successor servicer as Master Servicer hereunder
will not result in the reduction or withdrawal of the then current rating of the
Investor Certificates without regard to the Policy; and (c) such proposed
successor servicer is reasonably acceptable to the Credit Enhancer, as evidenced
by a letter to the Trustee; provided, however, that no such resignation by the
Master Servicer shall become effective until the Trustee or successor servicer
designated by the Master Servicer as provided above shall have assumed the
Master Servicer's responsibilities and obligations hereunder or the Trustee
shall have designated a successor servicer in accordance with Section 8.02. Any
such resignation shall not relieve the Master Servicer of responsibility for any
of the obligations specified in Sections 8.01 and 8.02 as obligations that
survive the resignation or termination of the Master Servicer. Any such
determination permitting the
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resignation of the Master Servicer pursuant to clause (i) above shall be
evidenced by an Opinion of Counsel to such effect delivered to the Trustee and
the Credit Enhancer. The Master Servicer shall have no claim (whether by
subrogation or otherwise) or other action against any Certificateholder or the
Credit Enhancer for any amounts paid by the Master Servicer pursuant to any
provision of this Agreement.
Section 7.05. Delegation of Duties. In the ordinary course of business,
the Master Servicer at any time may delegate any of its duties hereunder to any
Person, including any of its Affiliates, or any subservicer referred to in
Section 3.01, who agrees to conduct such duties in accordance with standards
comparable to those with which the Master Servicer complies pursuant to Section
3.01. Such delegation shall not relieve the Master Servicer of its liabilities
and responsibilities with respect to such duties and shall not constitute a
resignation within the meaning of Section 7.04.
Section 7.06. Indemnification of the Trust by the Master Servicer. The
Master Servicer shall indemnify and hold harmless the Trust and the Trustee from
and against any loss, liability, expense, damage or injury suffered or sustained
by reason of the Master Servicer's activities or omissions in servicing or
administering the Mortgage Loans that are not in accordance with this Agreement,
including, but not limited to, any judgment, award, settlement, reasonable
attorneys' fees and other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim. Any such
indemnification shall not be payable from the assets of the Trust. The
provisions of this indemnity shall run directly to and be enforceable by an
injured party subject to the limitations hereof. The provisions of this Section
7.06 shall survive termination of this Agreement.
Section 7.07. Indemnification of the Trust by the Transferor.
Notwithstanding anything to the contrary contained herein, the Transferor (i)
agrees to be liable directly to the injured party for the entire amount of any
losses, claims, damages, liabilities and expenses of the Trust (other than those
attributable to an Investor Certificateholder in the capacity as an investor in
the Investor Certificates as a result of defaults on the Mortgage Loans) to the
extent that the Transferor would be liable if the Trust were a partnership under
the Delaware Revised Uniform Limited Partnership Act in which the Transferor was
a general partner and (ii) shall indemnify and hold harmless the Trust and the
Trustee from and against any loss, liability, expense, damage, claim or injury
(other than those attributable to an Investor Certificateholder in the capacity
as an investor in the Investor Certificates as a result of defaults on the
Mortgage Loans) arising out of or based on this Agreement by reason of any acts,
omissions, or alleged acts or omissions arising out of activities of the Trust
or the Trustee, or the
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actions of the Master Servicer including, but not limited to, amounts payable to
the Master Servicer pursuant to Section 7.03, any judgment, award, settlement,
reasonable attorneys' fees and other costs or expenses incurred in connection
with the defense of any actual or threatened action, proceeding or claim;
provided that the Transferor shall not indemnify the Trustee (but shall
indemnify any other injured party) if such loss, liability, expense, damage or
injury is due to the Trustee's willful malfeasance, bad faith or gross
negligence or by reason of the Trustee's reckless disregard of its obligations
hereunder. The provisions of this indemnity shall run directly to and be
enforceable by an injured party subject to the limitations hereof.
Section 7.08. Limitation on Liability of the Transferor. None of the
directors or officers or employees or agents of the Transferor shall be under
any liability to the Trust, the Trustee or the Certificateholders, it being
expressly understood that all such liability is expressly waived and released as
a condition of, and as consideration for, the execution of this Agreement and
the issuance of the Certificates; provided, however, that this provision shall
not protect any such Person against any liability which would otherwise be
imposed by reason of willful misfeasance, bad faith or gross negligence in the
performance of the duties hereunder. Except as provided in Section 7.07, the
Transferor shall not be under any liability to the Trust, the Trustee or the
Certificateholders for any action taken or for refraining from the taking of any
action in its capacity as Transferor pursuant to this Agreement whether arising
from express or implied duties under this Agreement; provided, however, that
this provision shall not protect the Transferor against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of reckless disregard
of its obligations and duties hereunder. The Transferor and any director or
officer or employee or agent of the Transferor 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.
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ARTICLE VIII
Servicing Termination
Section 8.01. Events of Servicing Termination. If any one
of the following events ("Events of Servicing Termination") shall
occur and be continuing:
(i) Any failure by the Master Servicer to deposit in the
Collection Account any deposit required to be made under the terms of
this Agreement which continues unremedied for a period of five Business
Days after the date upon which written notice of such failure shall have
been given to the Master Servicer by the Trustee or to the Master
Servicer and the Trustee by the Credit Enhancer or Holders of Investor
Certificates evidencing Percentage Interests aggregating not less than
25%; or
(ii) Failure on the part of the Master Servicer duly to
observe or perform in any material respect any other covenants or
agreements of the Master Servicer set forth in the Certificates or in
this Agreement, which failure continues unremedied for a period of 60
days after the date on which written notice of such failure, requiring
the same to be remedied, and stating that such notice is a "Notice of
Default" hereunder, shall have been given to the Master Servicer by the
Trustee or to the Master Servicer and the Trustee by the Credit Enhancer
or the Holders of Investor Certificates evidencing Percentage Interests
aggregating not less than 25%; or
(iii) The entry against the Master Servicer of a decree or
order by a court or agency or supervisory authority having jurisdiction
in the premises for the appointment of a trustee, conservator, receiver
or liquidator in any insolvency, conservatorship, receivership,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding up or liquidation of its affairs, and
the continuance of any such decree or order unstayed and in effect for a
period of 60 consecutive days; or
(iv) The consent by the Master Servicer to the appointment of
a trustee, conservator, receiver or liquidator in any insolvency,
conservatorship, receivership, readjustment of debt, marshalling of
assets and liabilities or similar proceedings of or relating to the
Master Servicer or of or relating to substantially all of its property;
or the Master Servicer shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take advantage of
any applicable insolvency or reorganization statute, make an assignment
for the benefit
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of its creditors, or voluntarily suspend payment of its
obligations;
then, and in each and every such case, so long as an Event of Servicing
Termination shall not have been remedied by the Master Servicer, with respect to
an Event of Servicing Termination specified in (i) - (iv), above, either the
Trustee, the Credit Enhancer or the Holders of Investor Certificates evidencing
Percentage Interests aggregating not less than 51%, by notice then given in
writing to the Master Servicer (and to the Trustee if given by the Credit
Enhancer or the Holders of Investor Certificates) may terminate all of the
rights and obligations of the Master Servicer as servicer under this Agreement.
Any such notice to the Master Servicer shall also be given to each Rating Agency
and the Credit Enhancer. 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 or the Mortgage Loans or
otherwise, shall pass to and be vested in the Trustee pursuant to and under this
Section 8.01; 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 of each Mortgage Loan and related documents, or otherwise. The
Master Servicer agrees to cooperate with the Trustee in effecting the
termination of the responsibilities and rights of the Master Servicer hereunder,
including, without limitation, the transfer to the Trustee for the
administration by it of all cash amounts that shall at the time be held by the
Master Servicer and to be deposited by it in the Collection Account, or that
have been deposited by the Master Servicer in the Collection Account or
thereafter received by the Master Servicer with respect to the Mortgage Loans.
All reasonable costs and expenses (including attorneys' fees) incurred in
connection with transferring the Mortgage Files to the successor Master Servicer
and amending this Agreement to reflect such succession as Master Servicer
pursuant to this Section 8.01 shall be paid by the predecessor Master Servicer
(or if the predecessor Master Servicer is the Trustee, the initial Master
Servicer) upon presentation of reasonable documentation of such costs and
expenses.
Notwithstanding the foregoing, a delay in or failure of performance
under Section 8.01(i) for a period of ten Business Days or under Section
8.01(ii) for a period of 60 Business Days, shall not constitute an Event of
Servicing Termination if such delay or failure could not be prevented by the
exercise of reasonable diligence by the Master Servicer and such delay or
failure was caused by an act of God or the public enemy, acts of declared or
undeclared war, public disorder, rebellion or sabotage, epidemics, landslides,
lightning, fire, hurricanes,
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earthquakes, floods or similar causes. The preceding sentence shall not relieve
the Master Servicer from using its best efforts to perform its respective
obligations in a timely manner in accordance with the terms of this Agreement
and the Master Servicer shall provide the Trustee, the Transferor, the Credit
Enhancer and the Investor Certificateholders with an Officers' Certificate
giving prompt notice of such failure or delay by it, together with a description
of its efforts to so perform its obligations. The Master Servicer shall
immediately notify the Trustee in writing of any Events of Servicing
Termination.
Section 8.02. Trustee to Act; Appointment of Successor. (a) On and after
the time the Master Servicer receives a notice of termination pursuant to
Section 8.01 or 7.04, the Trustee shall be the successor in all respects to the
Master Servicer in its capacity as servicer under this Agreement and the
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 by the terms and provisions hereof. Notwithstanding the above, if the
Trustee becomes the Master Servicer hereunder, it shall have no responsibility
or obligation (i) of repurchase or substitution with respect to any Mortgage
Loan, (ii) with respect to any representation or warranty of the Master
Servicer, and (iii) for any act or omission of either a predecessor or successor
Master Servicer other than the Trustee. As compensation therefor, the Trustee
shall be entitled to such compensation as the Master Servicer would have been
entitled to hereunder if no such notice of termination had been given. In
addition, the Trustee will be entitled to compensation with respect to its
expenses in connection with conversion of certain information, documents and
record keeping, as provided in Section 7.04(b). Notwithstanding the above, (i)
if the Trustee is unwilling to act as successor Master Servicer, or (ii) if the
Trustee is legally unable so to act, the Trustee may (in the situation described
in clause (i)) or shall (in the situation described in clause (ii)) appoint or
petition a court of competent jurisdiction to appoint, any established housing
and home finance institution, bank or other mortgage loan or home equity loan
servicer having a net worth of not less than $______________ as the successor to
the Master Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Master Servicer hereunder;
provided that any such successor Master Servicer shall be acceptable to the
Credit Enhancer, as evidenced by the Credit Enhancer's prior written consent,
which consent shall not be unreasonably withheld; and provided further that the
appointment of any such successor Master Servicer will not result in the
qualification, reduction or withdrawal of the ratings assigned to the
Certificates by the Rating Agencies without regard to the Policy. Pending
appointment of a successor to the Master Servicer hereunder, unless the Trustee
is prohibited by law from so acting, the Trustee shall act in such capacity as
hereinabove provided. In connection with such appointment and assumption,
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the successor shall be entitled to receive compensation out of payments on
Mortgage Loans in an amount equal to the compensation which the Master Servicer
would otherwise have received pursuant to Section 3.08 (or such lesser
compensation as the Trustee and such successor shall agree). The Trustee and
such successor shall take such action, consistent with this Agreement, as shall
be necessary to effectuate any such succession.
(b) Any successor, including the Trustee, to the Master Servicer as
servicer shall during the term of its service as servicer (i) continue to
service and administer the Mortgage Loans for the benefit of Certificateholders
and the Credit Enhancer and (ii) maintain in force a policy or policies of
insurance covering errors and omissions in the performance of its obligations as
Master Servicer hereunder and a fidelity bond in respect of its officers,
employees and agents to the same extent as the Master Servicer is so required
pursuant to Section 3.12. The appointment of a successor Master Servicer shall
not affect any liability of the predecessor Master Servicer which may have
arisen under this Agreement prior to its termination as Master Servicer
(including, without limitation, any deductible under an insurance policy
pursuant to Section 3.04), nor shall any successor Master Servicer be liable for
any acts or omissions of the predecessor Master Servicer or for any breach by
such Master Servicer of any of their representations or warranties contained
herein.
Section 8.03. Notification to Certificateholders. Upon any termination
or appointment of a successor to the Master Servicer pursuant to this Article
VIII or Section 7.04, the Trustee shall give prompt written notice thereof to
the Certificateholders at their respective addresses appearing in the
Certificate Register, the Credit Enhancer and each Rating Agency.
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ARTICLE IX
The Trustee
Section 9.01. Duties of Trustee. The Trustee, prior to the occurrence of
an Event of Servicing Termination and after the curing or waiver of all Events
of Servicing Termination which may have occurred, undertakes to perform such
duties and only such duties as are specifically set forth in this Agreement. If
an Event of Servicing Termination has occurred (which has not been cured or
waived) of which a Responsible Officer has knowledge, 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 man would exercise or
use under the circumstances in the conduct of his own affairs; provided,
however, that if the Trustee is acting as Master Servicer it shall use the same
degree of care and skill as is required of the Master Servicer under this
Agreement.
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.
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 Servicing
Termination of which a Responsible Officer of the Trustee has knowledge,
and after the curing or waiver of all such Events of Servicing
Termination which may have occurred, the duties and obligations of the
Trustee shall be determined solely by the express provisions of this
Agreement, the Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this
Agreement, no implied covenants or obligations shall be read into this
Agreement against the Trustee and, in the absence of bad faith on the
part of the Trustee, the Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the Trustee and
conforming to the requirements of this Agreement;
(ii) the Trustee shall not be personally liable for an error
of judgment made in good faith by a Responsible Officer of the Trustee,
unless it shall be proved that the Trustee was negligent in ascertaining
or investigating the facts related thereto;
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(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 consent or direction of the Credit Enhancer or in
accordance with the direction of the Holders of Investor Certificates
evidencing Percentage Interests aggregating not less than 51% relating
to the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Agreement; and
(iv) the Trustee shall not be charged with knowledge of any
failure by the Master Servicer to comply with the obligations of the
Master Servicer referred to in clauses (i) and (ii) of Section 8.01 or
of the occurrence of a Rapid Amortization Event unless a Responsible
Officer of the Trustee at the Corporate Trust Office obtains actual
knowledge of such failure or the Trustee receives written notice of such
failure from the Master Servicer, the Credit Enhancer or the Holders of
Investor Certificates evidencing Percentage Interests aggregating not
less than 51%.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it. None
of the provisions contained in this Agreement shall in any event require the
Trustee to perform, or be responsible for the manner of performance of, any of
the obligations of the Master Servicer under this Agreement, except during such
time, if any, as the Trustee shall be the successor to, and be vested with the
rights, duties, powers and privileges of, the Master Servicer in accordance with
the terms of this Agreement and in no event shall it be required to perform or
accept responsibility for the obligations of the Depositor, the Seller or the
Transferor.
Section 9.02. Certain Matters Affecting the Trustee. Except as otherwise
provided in Section 9.01:
(i) the Trustee may request and rely upon, and shall be
protected in acting or refraining from acting upon, any resolution,
Officer's Certificate, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent, order,
appraisal, bond or other paper or document reasonably believed by it to
be genuine and to have been signed or presented by the proper party or
parties;
(ii) the Trustee may consult with counsel and any written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in
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respect of any action taken or suffered or omitted by it hereunder in
good faith and in accordance with such advice or Opinion of Counsel;
(iii) the Trustee shall be under no obligation to exercise any
of the rights 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 or the
Credit Enhancer, pursuant to the provisions of this Agreement, unless
such Certificateholders or the Credit Enhancer shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby; the right of the
Trustee to perform any discretionary act enumerated in this Agreement
shall not be construed as a duty, and the Trustee shall not be
answerable for other than its negligence or wilful misconduct in the
performance of any such act; nothing contained herein shall, however,
relieve the Trustee of the obligations, upon the occurrence of an Event
of Servicing Termination (which has not been cured or waived) of which a
Responsible Officer has knowledge, 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 man would exercise or use
under the circumstances in the conduct of his own affairs, unless it is
acting as Master Servicer;
(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 Servicing
Termination and after the curing or waiver of all Events of Servicing
Termination 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 documents,
unless requested in writing to do so by Holders of Investor Certificates
evidencing Percentage Interests aggregating not less than 51%; 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 cost, expense or liability as a condition to such
proceeding. The reasonable expense of every such examination shall be
paid by the Master Servicer or, if paid by the Trustee, shall be
reimbursed by the Master Servicer upon demand. Nothing in this
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clause (v) shall derogate from the obligation of the Master Servicer to
observe any applicable law prohibiting disclosure of information
regarding the Mortgagors;
(vi) the Trustee shall not be accountable, shall have no
liability and makes no representation as to any acts or omissions
hereunder of the Master Servicer until such time as the Trustee may be
required to act as Master Servicer pursuant to Section 8.02; and
(vii) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through an Affiliate, agents or attorneys or a custodian.
Section 9.03. Trustee Not Liable for Certificates or Mortgage Loans. The
recitals contained herein and in the Certificates (other than the authentication
of the Trustee on the Certificates) shall be taken as the statements of the
Depositor, and the Trustee assumes no responsibility for the correctness of the
same. The Trustee makes no representations as to the validity or sufficiency of
this Agreement or of the Certificates (other than the signature and
authentication of the Trustee on the Certificates) or of any Mortgage Loan or
Related Document. The Trustee shall not be accountable for the use or
application by the Depositor of any of the Certificates or of the proceeds of
such Certificates, or for the use or application of any funds paid to the
Depositor or the Master Servicer in respect of the Mortgage Loans or deposited
in or withdrawn from the Collection Account by the Master Servicer. The Trustee
shall at no time have any responsibility or liability for or with respect to the
legality, validity and enforceability of any Mortgage or any Mortgage Loan, or
the perfection and priority of any Mortgage or the maintenance of any such
perfection and priority, or for or with respect to the sufficiency of the Trust
or its ability to generate the payments to be distributed to Certificateholders
under this Agreement, including, without limitation: the existence, condition
and ownership of any Mortgaged Property; the existence and enforceability of any
hazard insurance thereon (other than if the Trustee shall assume the duties of
the Master Servicer pursuant to Section 8.02); the validity of the assignment of
any Mortgage Loan to the Trustee or of any intervening assignment; the
completeness of any Mortgage Loan; the performance or enforcement of any
Mortgage Loan (other than if the Trustee shall assume the duties of the Master
Servicer pursuant to Section 8.02); the compliance by the Depositor, the Seller
or the Master Servicer with any warranty or representation made under this
Agreement or in any related document or the accuracy of any such warranty or
representation prior to the Trustee's receipt of notice or other discovery of
any non-compliance therewith or any breach thereof; any investment of monies by
or at the direction of the Master Servicer or any loss resulting therefrom, it
being understood that the Trustee shall remain responsible for any
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Trust property that it may hold in its individual capacity; the acts or
omissions of any of the Depositor, the Master Servicer (other than if the
Trustee shall assume the duties of the Master Servicer pursuant to Section
8.02), any subservicer or any Mortgagor; any action of the Master Servicer
(other than if the Trustee shall assume the duties of the Master Servicer
pursuant to Section 8.02), or any subservicer taken in the name of the Trustee;
the failure of the Master Servicer or any subservicer to act or perform any
duties required of it as agent of the Trustee hereunder; or any action by the
Trustee taken at the instruction of the Master Servicer (other than if the
Trustee shall assume the duties of the Master Servicer pursuant to Section
8.02); provided, however, that the foregoing shall not relieve the Trustee of
its obligation to perform its duties under this Agreement. The Trustee shall
have no responsibility for filing any financing or continuation statement in any
public office at any time or to otherwise perfect or maintain the perfection of
any security interest or lien granted to it hereunder (unless the Trustee shall
have become the successor Master Servicer) or to prepare or file any Securities
and Exchange Commission filing for the Trust or to record this Agreement.
Section 9.04. 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 as it would have if it were not Trustee and may transact
any banking and trust business with the Seller, the Master Servicer, the Credit
Enhancer or the Depositor.
Section 9.05. Master Servicer to Pay Trustee's Fees and Expenses; Master
Servicer to Indemnify. The Master Servicer covenants and agrees to pay to the
Trustee from time to time, and the 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
it in the execution of the trusts hereby created and in the exercise and
performance of any of the powers and duties hereunder of the Trustee, and the
Master Servicer will pay or reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Trustee
in accordance with any of the provisions of this Agreement (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all Persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence or bad faith or which is the
responsibility of Certificateholders hereunder. The Master Servicer covenants
and agrees to indemnify the Trustee from, and hold it harmless against, any and
all losses, liabilities, damages, claims or expenses other than those resulting
from the negligence or bad faith of the Trustee. This section shall survive
termination of this Agreement or the resignation or removal of any Trustee
hereunder.
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Section 9.06. Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be a corporation duly incor- porated and validly
existing under the laws of the United States of America or any state thereof,
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $____________, subject to supervision or
examination by federal or state authority. If such corporation 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 9.06, 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. The principal office of the Trustee (other
than the initial Trustee) shall be in a state with respect to which an Opinion
of Counsel has been delivered to such Trustee at the time such Trustee is
appointed Trustee to the effect that the Trust will not be a taxable entity
under the laws of such state. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 9.06, the Trustee
shall resign immediately in the manner and with the effect specified in Section
9.07.
Section 9.07. Resignation or Removal of Trustee. The Trustee may at any
time resign and be discharged from the trusts hereby created by giving written
notice thereof to the Transferor, the Depositor, the Master Servicer, the Credit
Enhancer and each Rating Agency. Upon receiving such notice of resignation, the
Transferor shall promptly appoint a successor Trustee (approved in writing by
the Credit Enhancer, so long as such approval is not unreasonably withheld) by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the resigning Trustee (who shall deliver a copy to the Master
Servicer) and one copy to the successor Trustee; provided, however, that any
such successor Trustee shall be subject to the prior written approval of the
Transferor. If no successor Trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 9.06 and shall fail to resign after written request
therefor by the Transferor or the Credit Enhancer, or if at any time the Trustee
shall be legally unable to act, or shall be adjudged a 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, or if a
tax is imposed or threatened with respect to the Trust Fund by any state in
which the Trustee or the Trust Fund is located (which tax cannot be vacated by
the appointment of a co-Trustee or separate trustee pursuant to
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Section 9.10), then the Transferor or the Credit Enhancer may remove the
Trustee. If the Transferor or the Credit Enhancer removes the Trustee under the
authority of the immediately preceding sentence, the Transferor shall promptly
appoint a successor Trustee (approved in writing by the Credit Enhancer, which
approval shall not be unreasonably withheld) by written instrument, in
duplicate, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee.
The Holders of Investor Certificates evidencing Percentage Interests
aggregating over ____% of all Investor Certificates may at any time remove the
Trustee by written instrument or instruments delivered to the Master Servicer,
the Transferor and the Trustee; the Transferor shall thereupon use its best
efforts to appoint a successor trustee in accordance with this Section.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this Section 9.07 shall not become
effective until acceptance of appointment by the successor Trustee as provided
in Section 9.08.
Section 9.08. Successor Trustee. Any successor Trustee appointed as
provided in Section 9.07 shall execute, acknowledge and deliver to the
Transferor, the Depositor, the Master Servicer, the Credit Enhancer and to its
predecessor Trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee. The Transferor, 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 fully and certainly vesting and
confirming in the successor Trustee all such rights, powers, duties and
obligations.
No successor Trustee shall accept appointment as provided in this
Section 9.08 unless at the time of such acceptance such successor Trustee shall
be eligible under the provisions of Section 9.06.
Upon acceptance of appointment by a successor Trustee as provided in
this Section 9.08, the successor Trustee shall mail notice of the succession of
such Trustee hereunder to all Holders of Certificates at their addresses as
shown in the Certificate Register and to each Rating Agency. If the Master
Servicer fails to mail such notice within 30 days after acceptance of
appointment by the successor Trustee, the successor Trustee shall cause such
notice to be mailed at the expense of the Master Servicer.
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Section 9.09. Merger or Consolidation of Trustee. Any Person into which
the Trustee 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
Trustee shall be a party, or any Person succeeding to all or substantially all
of the business of the Trustee, shall be the successor of the Trustee hereunder,
provided such Person shall be eligible under the provisions of Section 9.06,
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.
Section 9.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust or any Mortgaged Property may at the time be located, the
Transferor and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments necessary to appoint one or more Persons approved by
the Credit Enhancer 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, and to vest in such Person or Persons, in such capacity and for the
benefit of the Certificateholders, such title to the Trust, or any part thereof,
and, subject to the other provisions of this Section 9.10, such powers, duties,
obligations, rights and trusts as the Transferor and the Trustee may consider
necessary or desirable. Any such co-trustee or separate trustee shall be subject
to the written approval of the Master Servicer. If the Transferor shall not have
joined in such appointment within 15 days after the receipt by it of a request
so to do, or in the case an Event of Servicing Termination 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 9.06 and no
notice to Certificateholders of the appointment of any co-trustee or separate
trustee shall be required under Section 9.08. The Master Servicer shall be
responsible for the fees of any co-trustee or separate trustee appointed
hereunder.
Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as successor to the
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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 or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee,
but solely at the direction of the Trustee;
(ii) no trustee hereunder shall be held personally
liable by reason of any act or omission of any other trustee
hereunder; and
(iii) the Master Servicer and the Trustee acting jointly may
at any time accept the resignation of or remove any separate trustee or
co-trustee except that following the occurrence of an Event of Servicing
Termination, the Trustee acting alone may accept the resignation or
remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article IX. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Transferor and the Master Servicer.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor Trustee.
Section 9.11. Limitation of Liability. The Certificates are executed by
the Trustee, not in its individual capacity but solely as Trustee of the Trust,
in the exercise of the powers and authority conferred and vested in it by the
Trust Agreement. Each of the undertakings and agreements made on the part of the
Trustee in the Certificates is made and intended not as a personal undertaking
or agreement by the Trustee but is made and intended for the purpose of binding
only the Trust.
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Section 9.12. Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and such proceeding instituted by the Trustee shall
be brought in its own name or in its capacity as Trustee. Any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursement and advances of the Trustee, its agents and counsel, be
for the ratable benefit or the Certificateholders in respect of which such
judgment has been recovered.
Section 9.13. Suits for Enforcement. In case an Event of Servicing
Termination or other default by the Master Servicer, the Transferor, the
Depositor or the Seller hereunder shall occur and be continuing, the Trustee, in
its discretion, may proceed to protect and enforce its rights and the rights of
the Investor Certificateholders under this Agreement by a suit, action or
proceeding in equity or at law or otherwise, whether for the specific
performance of any covenant or agreement contained in this Agreement or in aid
of the execution of any power granted in this Agreement or for the enforcement
of any other legal, equitable or other remedy, as the Trustee, being advised by
counsel, shall deem most effectual to protect and enforce any of the rights of
the Trustee and the Certificateholders.
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ARTICLE X
Termination
Section 10.01. Termination. (a) The respective obligations and
responsibilities of the Seller, the Master Servicer, the Depositor, the
Transferor and the Trustee created hereby (other than the obligation of the
Trustee to make certain payments to Certificateholders after the final
Distribution Date and the obligation of the Master Servicer 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 X following the later of (A) payment in full of all amounts owing to the
Credit Enhancer and (B) the earliest of (i) the transfer, under the conditions
specified in Section 10.01(b), to the Transferor of the Investor
Certificateholders' interest in each Mortgage Loan and all property acquired in
respect of any Mortgage Loan remaining in the Trust for an amount equal to the
sum of (w) the Investor Certificate Principal Balance, (x) accrued and unpaid
Investor Certificate Interest through the day preceding the final Distribution
Date, and (y) interest accrued on any Unpaid Investor Certificate Interest
Shortfall, to the extent legally permissible, (ii) the day following the
Distribution Date on which the distribution made to Investor Certificateholders
has reduced the Investor Certificate Principal Balance to zero, (iii) the final
payment or other liquidation of the last Mortgage Loan remaining in the Trust
(including without limitation the disposition of the Mortgage Loans pursuant to
Section 10.02) or the disposition of all property acquired upon foreclosure or
deed in lieu of foreclosure of any Mortgage Loan (iv) the Distribution Date in
____________ 20___; provided, however, that in no event shall the trust created
hereby continue beyond the expiration of 21 years from the date of the last
survivor descendants of Joseph P. Kennedy, the late ambassador of the United
States to the Court of St. James, living on the date hereof. Upon termination in
accordance with clause (i) or (ii) of this Section 10.01, the Trustee shall
execute such documents and instruments of transfer presented by the Transferor,
in each case without recourse, representation or warranty, and take such other
actions as the Transferor may reasonably request to effect the transfer of the
Mortgage Loans to the Transferor.
(b) The Transferor shall have the right to exercise the option to effect
the transfer to the Transferor of each Mortgage Loan pursuant to Section
10.01(a) above on any Distribution Date on or after the Distribution Date
immediately prior to which the Investor Certificate Principal Balance is less
than _____ percent (____%) of the Original Investor Certificate Principal
Balance and all amounts due and owing to the Credit Enhancer for unpaid premiums
and unreimbursed draws on the Policy, together with
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interest thereon as provided under the Insurance Agreement, have been paid.
(c) Notice of any termination, specifying the Distribution Date (which
shall be a date that would otherwise be a Distribution Date) upon which the
Investor Certificateholders may surrender their Investor Certificates to the
Trustee for payment of the final distribution and cancellation, shall be given
promptly by the Trustee (upon receipt of written directions from the Transferor,
if the Transferor is exercising its right to transfer of the Mortgage Loans,
given not later than the first day of the month preceding the month of such
final distribution) to the Credit Enhancer and to the Master Servicer by letter
to Investor Certificateholders mailed not earlier than the 15th day and not
later than the 25th day of the month next preceding the month of such final
distribution specifying (i) the Distribution Date upon which final distribution
of the Investor Certificates will be made upon presentation and surrender of
Investor Certificates at the office or agency of the Trustee therein designated,
(ii) the amount of any such final distribution and (iii) that the Record Date
otherwise applicable to such Distribution Date is not applicable, distributions
being made only upon presentation and surrender of the Investor Certificates at
the office or agency of the Trustee therein specified. In the event written
directions are delivered by the Transferor to the Trustee as described in the
preceding sentence, the Transferor shall deposit in the Collection Account on or
before the Distribution Date for such final distribution in immediately
available funds an amount which, when added to the funds on deposit in the
Collection Account that are payable to the Investor Certificateholders, will be
equal to the retransfer amount for the Mortgage Loans computed as above
provided.
(d) Upon presentation and surrender of the Investor Certificates, the
Trustee shall cause to be distributed to the Holders of Investor Certificates on
the Distribution Date for such final distribution, in proportion to the
Percentage Interests of their respective Investor Certificates and to the extent
that funds are available for such purpose, an amount equal to (i) if such final
distribution is not being made pursuant to the transfer to the Transferor
pursuant to Section 10.01(a)(i), the amount required to be distributed to
Investor Certificateholders pursuant to Section 5.01 for such Distribution Date
and (ii) if such final distribution is being made pursuant to such retransfer,
the amount specified in Section 10.01(a)(i). The distribution on such final
Distribution Date pursuant to a retransfer pursuant to Section 10.01(a)(i) shall
be in lieu of the distribution otherwise required to be made on such
Distribution Date in respect of the Certificates. On the final Distribution Date
prior to having made the distributions called for above, the Trustee shall,
based upon the information set forth in the Servicing Certificate for such
Distribution Date, withdraw from the Collection Account and remit to the Credit
Enhancer the lesser of (x) the amount avail-
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able for distribution on such final Distribution Date, net of any portion
thereof necessary to pay the amounts described in clauses (d)(i) and (ii) above
and (y) the unpaid amounts due and owing to the Credit Enhancer for unpaid
premiums and unreimbursed draws on the Policy, together with interest thereon as
provided under the Insurance Agreement.
(e) In the event that all of the Investor Certificateholders shall not
surrender their Investor Certificates for final payment and cancellation on or
before such final Distribution Date, the Trustee shall on such date cause all
funds in the Collection Account not distributed in final distribution to
Investor Certificateholders to be withdrawn therefrom and credited to the
remaining Investor Certificateholders by depositing such funds in a separate
escrow account for the benefit of such Investor Certificateholders and the
Transferor (if the Transferor has exercised its right to transfer the Mortgage
Loans) or the Trustee (in any other case) shall give a second written notice to
the remaining Investor Certificateholders to surrender their Investor
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Investor
Certificates shall not have been surrendered for cancellation, the Trustee may
take appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining Investor Certificateholders concerning surrender of their
Investor Certificates, and the cost thereof shall be paid out of the funds on
deposit in such escrow account.
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ARTICLE XI
Rapid Amortization Events
Section 11.01. Rapid Amortization Events. If any one of
the following events shall occur during the Managed Amortization
Period:
(a) failure on the part of the Seller (i) to make any payment or
deposit required by the terms of this Agreement, on or before the date
occurring three Business Days after the date such payment or deposit is
required to be made herein, or (ii) duly to observe or perform in any
material respect the covenants of the Seller set forth in Section
2.04(a) or (iii) duly to observe or perform in any material respect any
other covenants or agreements of the Seller set forth in this Agreement,
which failure, in each case, materially and adversely affects the
interests of the Certificateholders or the Credit Enhancer and which, in
the case of clause (iii), continues unremedied and continues to affect
materially and adversely the interests of the Certificateholders for a
period of 60 days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to the
Seller by the Trustee, or to the Seller and the Trustee by the Holders
of Investor Certificates evidencing Percentage Interests aggregating not
less than 51%;
(b) any representation or warranty made by the Seller or the
Depositor in this Agreement shall prove to have been incorrect in any
material respect when made, as a result of which the interests of the
Investor Certificateholders or the Credit Enhancer are materially and
adversely affected and which continues to be incorrect in any material
respect and continues to affect materially and adversely the interests
of the Certificateholders or the Credit Enhancer for a period of 60 days
after the date on which written notice of such failure, requiring the
same to be remedied, shall have been given to the Seller or the
Depositor, as the case may be, by the Trustee, or to the Seller, the
Depositor and the Trustee by either the Credit Enhancer or the Holders
of Investor Certificates evidencing Percentage Interests aggregating not
less than 51%; provided, however, that a Rapid Amortization Event
pursuant to this subparagraph (b) shall not be deemed to have occurred
hereunder if the Transferor has accepted retransfer of the related
Mortgage Loan or Mortgage Loans during such period (or such longer
period (not to exceed an additional 60 days) as the Trustee may specify)
in accordance with the provisions hereof;
(c) the Transferor or the Depositor shall voluntarily
go into liquidation, consent to the appointment of a con-
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servator or receiver or liquidator or similar person in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings of or relating to the Transferor or the Depositor, or of or
relating to all or substantially all of such Person's property, or a
decree or order of a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator,
receiver, liquidator or similar person 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 Transferor or the Depositor and such decree or order
shall have remained in force undischarged or unstayed for a period of 30
days; or the Transferor or the Depositor shall admit in writing its
inability to pay its debts generally as they become due, file a petition
to take advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors or
voluntarily suspend payment of its obligations; or
(d) the Trust shall become subject to registration as
an "investment company" under the Investment Company Act of
1940, as amended;
then, in the case of any event described in subparagraph (a) or (b) after the
applicable grace period, if any, set forth in such subparagraphs, either the
Trustee, the Credit Enhancer or the Holders of Investor Certificates evidencing
Percentage Interests aggregating more than 51%, by notice given in writing to
the Transferor, the Depositor and the Master Servicer (and to the Trustee if
given by either the Credit Enhancer or the Investor Certificateholders) may
declare that an early amortization event (a "Rapid Amortization Event") has
occurred as of the date of such notice, and in the case of any event described
in subparagraph (c) or (d), a Rapid Amortization Event shall occur without any
notice or other action on the part of the Trustee, the Credit Enhancer or the
Investor Certificateholders, immediately upon the occurrence of such event.
Section 11.02. Additional Rights Upon the Occurrence of Certain Events.
(a) If the Transferor voluntarily goes into liquidation or consents to
the appointment of a conservator or receiver or liquidator or similar person in
any insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Transferor or of or relating to all or
substantially all its property, or a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises for the appointment of
a conservator or receiver or liquidator or similar person 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
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have been entered against the Transferor and such decree shall have remained in
force undischarged or unstayed for a period of 30 days; or the Transferor shall
admit in writing its inability to pay its debts generally as they become due,
file a petition to take advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors or voluntarily
suspend payment of its obligations (such voluntary liquidation, appointment,
entering of such decree, admission, filing, making, suspension or violation or
other event described above, an "Insolvency Event"), the Transferor shall on the
day of such appointment, voluntary liquidation, entering of such decree,
admission, filing, making, suspension or inability, as the case may be (the
"Appointment Day"), promptly give notice to the Trustee, the Master Servicer and
the Credit Enhancer of such Insolvency Event. Within 15 days of the receipt by
the Trustee of the Transferor's notice of an Insolvency Event, the Trustee shall
(i) publish a notice in Authorized Newspapers that an Insolvency Event has
occurred and that the Trustee intends to direct the Master Servicer to sell,
dispose of or otherwise liquidate the Mortgage Loans in a commercially
reasonable manner and (ii) send written notice to the Investor
Certificateholders describing the provisions of this Section 11.02, which notice
shall inform Investor Certificateholders that unless more than _____% of all
Investor Certificateholders advise the Trustee in writing that they wish the
Trustee to instruct the Master Servicer not to sell, dispose of or otherwise
liquidate the Mortgage Loans within 90 days from the day notice pursuant to
clause (i) above is first published (the "Publication Date"), the Trustee shall
instruct the Master Servicer to proceed to sell, dispose of, or otherwise
liquidate the Mortgage Loans in a commercially reasonable manner and on
commercially reasonable terms, which shall include the solicitation of
competitive bids, and shall proceed to consummate the sale, liquidation or
disposition of the Mortgage Loans as provided above with the highest bidder for
the Mortgage Loans. The Transferor shall be permitted to bid for the Mortgage
Loans. The Trustee may obtain a prior determination from such conservator or
receiver that the terms and manner of any proposed sale, disposition or
liquidation are commercially reasonable. The provisions of Sections 11.01 and
11.02 shall not be deemed to be mutually exclusive.
(b) The proceeds from the sale, disposition or liquidation of the
Mortgage Loans pursuant to Section 11.02(a) above shall be treated as
collections on the Mortgage Loans received during the Rapid Amortization Period;
provided, however, that such proceeds will, based on amounts specified in
writing by the Master Servicer to the Trustee, first be paid to the Credit
Enhancer to reimburse the Credit Enhancer for previously unreimbursed Credit
Enhancement Draw Amounts and other amounts owing under the Insurance Agreement;
and provided, further, that the Certificateholders' Fixed Allocation Percentage
of such remaining proceeds shall be paid to Investor Certificateholders in the
following amounts and order of priority:
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(i) all accrued and unpaid interest on the Investor
Certificate Principal Balance through the Interest Period immediately
preceding the Distribution Date on which such proceeds are distributed
to the Investor Certificateholders; and
(ii) an amount of principal up to the Investor
Certificate Principal Balance.
The Policy shall cover any shortfall in the event such proceeds are insufficient
to make the distributions to Investor Certificateholders pursuant to Section
11.02(b). On the day following the Distribution Date on which such proceeds are
distributed to the Investor Certificateholders, the Trust shall terminate.
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ARTICLE XII
Miscellaneous Provisions
Section 12.01. Amendment. This Agreement may be amended from time to
time by the Seller, the Master Servicer, the Depositor and the Trustee, in each
case without the consent of any of the Certificateholders, but only with the
consent of the Credit Enhancer (which consent shall not be unreasonably
withheld), (i) to cure any ambiguity, (ii) to correct any defective provisions
or to correct or supplement any provisions herein that may be inconsistent with
any other provisions herein, (iii) to add to the duties of the Transferor or the
Master Servicer, (iv) to add any other provisions with respect to matters or
questions arising under this Agreement or the Policy, as the case may be, which
shall not be inconsistent with the provisions of this Agreement, (v) to add or
amend any provisions of this Agreement as required by any Rating Agency or any
other nationally recognized statistical rating organization in order to maintain
or improve any rating of the Investor Certificates (it being understood that,
after obtaining the ratings in effect on the Closing Date, neither the Trustee,
the Seller, the Depositor nor the Master Servicer is obligated to obtain,
maintain or improve any such rating), (vi) to add or amend any provisions of
this Agreement to correct or cure any defective provision or ambiguity as a
result of a transfer of the Transferor Certificates pursuant to Section 6.05,
(vii) to comply with any requirement imposed by the Code or (viii) to increase
the Increased Senior Lien Limitation; provided, however, that such action shall
not, as evidenced by an Opinion of Counsel, materially and adversely affect the
interests of any Certificateholder or the Credit Enhancer; and provided,
further, that the amendment shall not be deemed to adversely affect in any
material respect the interests of the Certificateholders and no opinion referred
to in the preceding proviso shall be required to be delivered if the Person
requesting the amendment obtains a letter from each Rating Agency stating that
the amendment would not result in the downgrading or withdrawal of the
respective ratings then assigned to the Investor Certificates without regard to
the Policy. Notwithstanding the foregoing, any amendment pursuant to clause
(viii) above shall be permissible only upon receipt of a letter from each Rating
Agency stating that the amendment would not result in the downgrading or
withdrawal of the respective ratings then assigned to the Investor
Certificateholders without regard to the Policy.
This Agreement also may be amended from time to time by the Master
Servicer, the Seller, the Depositor and the Trustee, and the Master Servicer and
the Credit Enhancer, may from time to time consent to the amendment of the
Policy with the consent of the Holders of the Investor Certificates evidencing
Percentage Interests aggregating not less than 51%, and in the case of an
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amendment to this Agreement, with the consent of the Credit Enhancer for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Certificateholders; provided, however, that no such amendment shall (i)
reduce in any manner the amount of, or delay the timing of, payments on the
Certificates or distributions or payments under the Policy which are required to
be made on any Certificate without the consent of the Holder of such Certificate
or (ii) reduce the aforesaid percentage required to consent to any such
amendment, without the consent of the Holders of all Certificates then
outstanding or (iii) adversely effect in any material respect the interests of
the Credit Enhancer.
Notwithstanding the foregoing, the Agreement may not be amended unless,
in connection with such amendment, an Opinion of Counsel is furnished to the
Trustee that such amendment will not (i) adversely affect the status of the
Investor Certificates as debt; (ii) result in the Trust being taxable at the
entity level; or (iii) result in the Trust being classified as a taxable
mortgage pool (as defined in Section 7701(i) of the Code).
Following the execution and delivery of any such amendment hereto or to
the Policy to which the Credit Enhancer was required to consent, either the
Transferor, if the Transferor requested the amendment, or the Master Servicer,
if the Master Servicer requested the amendment, shall reimburse the Credit
Enhancer for the reasonable out-of-pocket costs and expenses incurred by the
Credit Enhancer in connection with such amendment.
Prior to the execution of any such amendment, the party hereto
requesting any such amendment shall furnish written notification of the
substance of such amendment to each Rating Agency. In addition, promptly after
the execution of any such amendment made with the consent of the Investor
Certificateholders, the Trustee shall furnish written notification of the
substance of such amendment to each Investor Certificateholder and fully
executed original counterparts of the instruments effecting such amendment to
the Credit Enhancer.
It shall not be necessary for the consent of Investor Certificateholders
under this Section 12.01 to approve the particular form of any proposed
amendment or consent, 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 requirements as the Trustee may prescribe.
In executing any amendment permitted by this Section 12.01, the Trustee
shall be entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel stating that such amendment is authorized or permitted hereby
and that all
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conditions precedent to the execution and delivery of such amendment have been
satisfied. The Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's own rights, duties or immunities under
this Agreement or otherwise.
Section 12.02. Recordation of Agreement. 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
Trustee, but only upon direction of Investor Certificateholders accompanied by
an Opinion of Counsel to the effect that such recordation materially and
beneficially affects the interests of Investor Certificateholders. The Investor
Certificateholders requesting such recordation shall bear all costs and expenses
of such recordation. The Trustee shall have no obligation to ascertain whether
such recordation so affects the interests of the Certificateholders.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
Section 12.03. Limitation on Rights of Certificateholders. The death or
incapacity of any Investor Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Investor Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.
No Certificateholder shall have any right to vote (except as provided in
Sections 8.01, 9.01, 9.02, 11.01 and 12.01) or in any manner otherwise control
the operation and management of the Trust, or the obligations of the parties
hereto, nor shall anything herein set forth, or contained in the terms of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any Investor
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue or by availing
itself of any provisions 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
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of the continuance thereof, as hereinbefore provided, and unless also the
Holders of Investor Certificates evidencing Percentage Interests aggregating not
less than 51% 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 shall have any right in any manner
whatever by virtue or by availing itself or themselves of any provisions of this
Agreement to affect, disturb or prejudice the rights of the Holders of any other
of the Certificates, 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 equal, ratable and common benefit of
all Certificateholders. For the protection and enforcement of the provisions of
this Section 12.03, each and every Certificateholder and the Trustee shall be
entitled to such relief as can be given either at law or in equity.
By accepting its Investor Certificate, each Investor Certificateholder
agrees that unless a Credit Enhancer Default exists, the Credit Enhancer shall
have the right to exercise all rights of the Investor Certificateholders under
this Agreement without any further consent of the Investor Certificateholders.
Section 12.04. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
Section 12.05. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at or mailed by certified mail, return receipt requested,
to (a) in the case of the Depositor, 155 North Lake Avenue, Pasadena, California
91101, Attention: ____________________, (b) in the case of the Master Servicer,
[Countrywide Home Loans, Inc., 155 North Lake Avenue, Pasadena, California
91101, Attention: ____________________], (c) in the case of the Trustee, at the
Corporate Trust Office, (d) in the case of the Credit Enhancer,
_________________________________, Attention: ____________________ (telecopy
number ____________________), (e) in the case of [each Rating Agency],
___________________________________________________, and (f) in the case of
____________________, __________________________, or, as to each party, at such
other address as shall be designated by such party in a written notice to each
other party. [In each
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case in which a notice or other communication to the Credit Enhancer refers to
an Event of Servicing Termination or a claim under the Policy or with respect to
which failure on the part of the Credit Enhancer to respond shall be deemed to
constitute consent or acceptance, then a copy of such notice or other
communication should also be sent to the attention of the ______________ and the
_____________________ and shall be marked to indicate "URGENT MATERIAL
ENCLOSED."] 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. Any
notice or other document required to be delivered or mailed by the Trustee to
any Rating Agency shall be given on a best efforts basis and only as a matter of
courtesy and accommodation and the Trustee shall have no liability for failure
to deliver such notice or document to any Rating Agency.
Section 12.06. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the Holders thereof.
Section 12.07. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 6.05, 7.02 and 7.04, this
Agreement may not be assigned by the Depositor or the Master Servicer without
the prior written consent of the Credit Enhancer and Holders of the Investor
Certificates evidencing Percentage Interests aggregating not less than
- -----%.
Section 12.08. Certificates Nonassessable and Fully Paid. The parties
agree that the Investor Certificateholders shall not be personally liable for
obligations of the Trust, that the beneficial ownership interests represented by
the Certificates shall be nonassessable for any losses or expenses of the Trust
or for any reason whatsoever, and that the Certificates upon execution,
authentication and delivery thereof by the Trustee pursuant to Section 2.08 or
6.02 are and shall be deemed fully paid.
Section 12.09. Third-Party Beneficiaries. This Agreement will inure to
the benefit of and be binding upon the parties hereto, the Certificateholders,
the Certificate Owners, the Credit Enhancer and their respective successors and
permitted assigns. Except as otherwise provided in this Agreement, no other
Person will have any right or obligation hereunder.
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Section 12.10. Counterparts. This instrument may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 12.11. Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
Section 12.12. Insurance Agreement. The Trustee is authorized and
directed to execute and deliver the Insurance Agreement and to perform the
obligations of the Trustee thereunder.
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IN WITNESS WHEREOF, the Depositor, the Seller, the Master
Servicer and the Trustee have caused this Agreement to be duly executed by their
respective officers all as of the day and year first above written.
CWABS, INC.,
as Depositor
By:
_____________________________________
Name:
Title:
[COUNTRYWIDE HOME LOANS, INC.],
as Seller and Master Servicer
By:
_____________________________________
Name:
Title:
[_______________________________],
as Trustee
By:
_____________________________________
Name:
Title:
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State of )
) ss.:
County of )
On the __th day of __________, 199_ before me, a notary public in
and for the State of ________, personally appeared _____________________, known
to me who, being by me duly sworn, did depose and say that he resides at
_________________, ____________, ________ _____; that he is the ______________
of _____________________________, a [New York] corporation, one of the parties
that executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said corporation;
and that he signed his name thereto by like order.
_______________________________
Notary Public
[Notarial Seal]
<PAGE>
<PAGE>
State of )
) ss.:
County of )
On the __th day of __________, 199_ before me, a notary public in
and for the State of ________, personally appeared _____________________, known
to me who, being by me duly sworn, did depose and say that he resides at
_________________, ____________, ________ _____; that he is the ______________
of _____________________________, a national banking association, one of the
parties that executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said corporation;
and that he signed his name thereto by like order.
_______________________________
Notary Public
[Notarial Seal]
<PAGE>
<PAGE>
State of )
) ss.:
County of )
On the __th day of ______________, 199_ before me, a notary
public in and for the State of ________, personally appeared _________________,
known to me who, being by me duly sworn, did depose and say that he resides at
_______________, _______________ _____; that he is the _____________ of ________
____, a _____________ banking corporation, one of the parties that executed the
foregoing instrument; and that he signed his name thereto by order of the Board
of Directors of said corporation.
_______________________________
Notary Public
[Notarial Seal]
<PAGE>
<PAGE>
CWABS, Inc.
Depositor
-------------------------------
Seller and Master Servicer
and
----------------------------
Trustee
-----------------------------------
POOLING AND SERVICING AGREEMENT
Dated as of _________, 199_
----------------------------------
ASSET BACKED CERTIFICATES, Series 199_-_
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I
DEFINITIONS
<S> <C>
[Accretion Directed Certificates]..........................................................I-1
[Accrual Amount]...........................................................................I-1
[Accrual Certificates].....................................................................I-1
[Accrual Termination Date].................................................................I-1
Adjusted Mortgage Rate.....................................................................I-1
Adjusted Net Mortgage Rate.................................................................I-1
Advance ...................................................................................I-1
Agreement..................................................................................I-2
Allocable Share............................................................................I-2
Amount Available for Senior Principal......................................................I-2
Amount Held for Future Distribution........................................................I-2
Applicable Credit Support Percentage.......................................................I-2
Appraised Value............................................................................I-2
Available Funds............................................................................I-3
Bankruptcy Code............................................................................I-3
Bankruptcy Coverage Termination Date.......................................................I-3
Bankruptcy Loss............................................................................I-3
Bankruptcy Loss Coverage Amount............................................................I-3
Book-Entry Certificates....................................................................I-4
Business Day...............................................................................I-4
Certificate................................................................................I-4
Certificate Account........................................................................I-4
Certificate Balance........................................................................I-4
Certificate Owner..........................................................................I-4
Certificate Register.......................................................................I-4
Certificateholder or Holder................................................................I-4
Class ...................................................................................I-5
[Class A-_ Optimal Amount].................................................................I-5
[Class A-_ Percentage].....................................................................I-5
[Class Certificate Balance]................................................................I-5
[Class Interest Shortfall].................................................................I-5
[Class Optimal Interest Distribution Amount]...............................................I-5
[Class PO Deferred Amount].................................................................I-6
Class Subordination Percentage.............................................................I-6
Class Unpaid Interest Amounts..............................................................I-6
Closing Date...............................................................................I-6
Code ...................................................................................I-6
COFI ...................................................................................I-6
COFI Certificates..........................................................................I-6
Component..................................................................................I-6
Component Balance..........................................................................I-6
Component Certificates.....................................................................I-6
Corporate Trust Office.....................................................................I-6
</TABLE>
i
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Cut-off Date...............................................................................I-7
Cut-off Date Pool Principal Balance........................................................I-7
Cut-off Date Principal Balance.............................................................I-7
DCR ...................................................................................I-7
Debt Service Reduction.....................................................................I-7
Defective Mortgage Loan....................................................................I-7
Deficient Valuation........................................................................I-7
Definitive Certificates....................................................................I-7
Deleted Mortgage Loan......................................................................I-8
Denomination...............................................................................I-8
Depositor..................................................................................I-8
Depository.................................................................................I-8
Depository Participant.....................................................................I-8
Determination Date.........................................................................I-8
Discount Mortgage Loan.....................................................................I-8
Distribution Account.......................................................................I-8
Distribution Account Deposit Date..........................................................I-8
Distribution Date..........................................................................I-8
Due Date...................................................................................I-9
Eligible Account...........................................................................I-9
ERISA ...................................................................................I-9
ERISA-Restricted Certificate...............................................................I-9
Escrow Account.............................................................................I-9
Event of Default...........................................................................I-9
Excess Loss................................................................................I-9
Excess Proceeds............................................................................I-9
Expense Rate..............................................................................I-10
FDIC ..................................................................................I-10
FHLMC ..................................................................................I-10
FIRREA ..................................................................................I-10
Fitch ..................................................................................I-10
FNMA ..................................................................................I-10
Fraud Loan................................................................................I-10
Fraud Losses..............................................................................I-10
Fraud Loss Coverage Amount................................................................I-10
Fraud Loss Coverage Termination Date......................................................I-11
Index ..................................................................................I-11
Indirect Participant......................................................................I-11
Initial Bankruptcy Coverage Amount........................................................I-11
Initial Component Balance.................................................................I-11
Initial LIBOR Rate........................................................................I-11
Insurance Policy..........................................................................I-11
Insurance Proceeds........................................................................I-11
Insured Expenses..........................................................................I-11
Interest Accrual Period...................................................................I-11
Interest Determination Date...............................................................I-12
Interest Rate.............................................................................I-12
Latest Possible Maturity Date.............................................................I-12
LIBOR ..................................................................................I-12
LIBOR Certificates........................................................................I-12
Liquidated Mortgage Loan..................................................................I-12
Liquidation Proceeds......................................................................I-12
</TABLE>
ii
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Loan-to-Value Ratio.......................................................................I-12
Majority in Interest......................................................................I-12
Master Servicer...........................................................................I-13
Master Servicer Advance Date..............................................................I-13
Master Servicing Fee......................................................................I-13
Master Servicing Fee Rate.................................................................I-13
Monthly Statement.........................................................................I-13
Moody's ..................................................................................I-13
Mortgage..................................................................................I-13
Mortgage File.............................................................................I-13
Mortgage Loans............................................................................I-13
Mortgage Loan Schedule....................................................................I-14
Mortgage Note.............................................................................I-15
Mortgage Rate.............................................................................I-15
Mortgaged Property........................................................................I-15
Mortgagor.................................................................................I-15
National Cost of Funds Index..............................................................I-15
Net Prepayment Interest Shortfalls........................................................I-15
Non-Delay Certificates....................................................................I-15
Non-Discount Mortgage Loan................................................................I-15
Non-PO Formula Principal Amount...........................................................I-15
Non-PO Percentage.........................................................................I-16
Nonrecoverable Advance....................................................................I-16
Notice of Final Distribution..............................................................I-16
Notional Amount...........................................................................I-16
Notional Amount Certificates..............................................................I-16
Offered Certificates......................................................................I-16
Officer's Certificate.....................................................................I-16
Opinion of Counsel........................................................................I-17
Optional Termination......................................................................I-17
Original Applicable Credit Support Percentage.............................................I-17
Original Mortgage Loan....................................................................I-17
Original Subordinated Principal Balance...................................................I-17
OTS ..................................................................................I-17
Outside Reference Date....................................................................I-17
Outstanding...............................................................................I-17
Outstanding Mortgage Loan.................................................................I-18
Ownership Interest........................................................................I-18
Pass-Through Rate.........................................................................I-18
Percentage Interest.......................................................................I-18
Permitted Investments.....................................................................I-18
Permitted Transferee......................................................................I-20
Person ..................................................................................I-21
Physical Certificate......................................................................I-21
Planned Balance...........................................................................I-21
Planned Principal Classes.................................................................I-21
PO Formula Principal Amount...............................................................I-21
PO Percentage.............................................................................I-21
Pool Stated Principal Balance.............................................................I-21
Prepayment Interest Excess................................................................I-22
Prepayment Interest Shortfall.............................................................I-22
Prepayment Period.........................................................................I-22
iii
<PAGE>
<PAGE>
</TABLE>
<TABLE>
<S> <C>
Prepayment Shifting Percentage............................................................I-22
Primary Insurance Policy..................................................................I-22
Primary Planned Principal Classes.........................................................I-22
Principal Prepayment......................................................................I-22
Principal Prepayment in Full..............................................................I-23
Private Certificate.......................................................................I-23
Pro Rata Share............................................................................I-23
Prospectus Supplement.....................................................................I-23
PUD ..................................................................................I-23
Purchase Price............................................................................I-23
Qualified Insurer.........................................................................I-23
Rating Agency.............................................................................I-24
Realized Loss.............................................................................I-24
Record Date...............................................................................I-24
Reference Bank............................................................................I-24
Refinancing Mortgage Loan.................................................................I-24
Regular Certificates......................................................................I-24
Relief Act................................................................................I-24
Relief Act Reductions.....................................................................I-25
REMIC ..................................................................................I-25
REMIC Change of Law.......................................................................I-25
REMIC Provisions..........................................................................I-25
REO Property..............................................................................I-25
Request for Release.......................................................................I-25
Required Coupon...........................................................................I-25
Required Insurance Policy.................................................................I-25
Residual Certificates.....................................................................I-25
Responsible Officer.......................................................................I-25
Restricted Classes........................................................................I-25
Scheduled Balances........................................................................I-26
Scheduled Classes.........................................................................I-26
Scheduled Payment.........................................................................I-26
Scheduled Principal Distribution Amount...................................................I-26
Secondary Planned Principal Clauses.......................................................I-26
Securities Act............................................................................I-26
Seller ..................................................................................I-26
Senior Certificates.......................................................................I-26
Senior Credit Support Depletion Date......................................................I-26
Senior Percentage.........................................................................I-26
Senior Prepayment Percentage..............................................................I-26
Senior Principal Distribution Amount......................................................I-27
Servicing Advances........................................................................I-28
Servicing Officer.........................................................................I-28
Special Hazard Coverage Termination Date..................................................I-28
Special Hazard Loss.......................................................................I-28
Special Hazard Loss Coverage Amount.......................................................I-29
Special Hazard Mortgage Loan..............................................................I-29
S&P ..................................................................................I-29
Startup Day...............................................................................I-30
Stated Principal Balance..................................................................I-30
Streamlined Documentation Mortgage Loan...................................................I-30
Subordinated Certificates.................................................................I-30
iv
<PAGE>
<PAGE>
</TABLE>
<TABLE>
<S> <C>
Subordinated Percentage...................................................................I-30
Subordinated Prepayment Percentage........................................................I-30
Subordinated Principal Distribution Amount................................................I-30
Subservicer...............................................................................I-31
Substitute Mortgage Loan..................................................................I-31
Substitution Adjustment Amount............................................................I-31
Support Classes...........................................................................I-31
Targeted Balance..........................................................................I-31
Targeted Principal Classes................................................................I-31
Tax Matters Person........................................................................I-31
Tax Matters Person Certificate............................................................I-32
Transfer..................................................................................I-32
Trustee ..................................................................................I-32
Trustee Fee...............................................................................I-32
Trustee Fee Rate..........................................................................I-32
Trust Fund................................................................................I-32
Unscheduled Principal Distribution Amount.................................................I-32
Voting Rights.............................................................................I-32
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND WARRANTIES
SECTION 2.01. Conveyance of Mortgage Loans...............................................II-1
SECTION 2.02. Acceptance by Trustee of the Mortgage Loans................................II-4
SECTION 2.03. Representations, Warranties and Covenants of
the Seller and Master Servicer.............................................II-6
SECTION 2.04. Representations and Warranties of the
Depositor as to the Mortgage Loans........................................II-8
SECTION 2.05. Delivery of Opinion of Counsel in Connection
with Substitutions.........................................................II-9
SECTION 2.06. Execution and Delivery of Certificates....................................II-10
SECTION 2.07. REMIC Matters.............................................................II-10
SECTION 2.08. Covenants of the Master Servicer..........................................II-10
ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
SECTION 3.01. Master Servicer to Service Mortgage Loans.................................III-1
SECTION 3.02. Subservicing; Enforcement of the Obligations
of Servicers..............................................................III-2
</TABLE>
v
<PAGE>
<PAGE>
<TABLE>
<S> <C>
SECTION 3.03. Rights of the Depositor and the Trustee
in Respect of the Master Servicer........................................III-3
SECTION 3.04. Trustee to Act as Master Servicer.........................................III-3
SECTION 3.05. Collection of Mortgage Loan Payments;
Certificate Account; Distribution Account................................III-4
SECTION 3.06. Collection of Taxes, Assessments and
Similar Items; Escrow Accounts............................................III-7
SECTION 3.07. Access to Certain Documentation and
Information Regarding the Mortgage Loans..................................III-8
SECTION 3.08. Permitted Withdrawals from the Certificate
Account and Distribution Account..........................................III-8
SECTION 3.09. Maintenance of Hazard Insurance; Maintenance
of Primary Insurance Policies............................................III-10
SECTION 3.10. Enforcement of Due-on-Sale Clauses;
Assumption Agreements....................................................III-12
SECTION 3.11. Realization Upon Defaulted Mortgage Loans;
Repurchase of Certain Mortgage Loans.....................................III-13
SECTION 3.12. Trustee to Cooperate; Release of Mortgage
Files....................................................................III-17
SECTION 3.13. Documents Records and Funds in Possession
of Master Servicer to be Held for the
Trustee..................................................................III-18
SECTION 3.14. Servicing Compensation...................................................III-18
SECTION 3.15. Access to Certain Documentation..........................................III-19
SECTION 3.16. Annual Statement as to Compliance........................................III-19
SECTION 3.17. Annual Independent Public Accountants'
Servicing Statement; Financial Statements................................III-19
SECTION 3.18. Errors and Omissions Insurance;
Fidelity Bonds...........................................................III-20
ARTICLE IV
DISTRIBUTIONS AND
ADVANCES BY THE MASTER SERVICER
SECTION 4.01. Advances...................................................................IV-1
SECTION 4.02. Priorities of Distribution.................................................IV-1
SECTION 4.03. Allocation of Realized Losses..............................................IV-7
SECTION 4.04. Monthly Statements to Certificateholders...................................IV-8
SECTION 4.05. Determination of Pass-Through Rates for
COFI Certificates.........................................................IV-10
SECTION 4.06. Determination of Pass-Through Rates for
LIBOR Certificates........................................................IV-13
ARTICLE V
THE CERTIFICATES
SECTION 5.01. The Certificates............................................................V-1
SECTION 5.02. Certificate Register; Registration of
Transfer and Exchange of Certificates.......................................V-2
vi
<PAGE>
<PAGE>
</TABLE>
<TABLE>
<S> <C>
SECTION 5.03. Mutilated, Destroyed, Lost or Stolen
Certificates................................................................V-7
SECTION 5.04. Persons Deemed Owners.......................................................V-8
SECTION 5.05. Access to List of Certificateholders'
Names and Addresses.........................................................V-8
SECTION 5.06. Maintenance of Office or Agency.............................................V-8
ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
SECTION 6.01. Respective Liabilities of the Depositor
and the Master Servicer....................................................VI-1
SECTION 6.02. Merger or Consolidation of the Depositor
or the Master Servicer.....................................................VI-1
SECTION 6.03. Limitation on Liability of the Depositor,
the Seller, the Master Servicer and Others.................................VI-1
SECTION 6.04. Limitation on Resignation of Master Servicer...............................VI-2
ARTICLE VII
DEFAULT
SECTION 7.01. Events of Default.........................................................VII-1
SECTION 7.02. Trustee to Act; Appointment of Successor..................................VII-3
SECTION 7.03. Notification to Certificateholders........................................VII-4
ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.01. Duties of Trustee........................................................VIII-1
SECTION 8.02. Certain Matters Affecting the Trustee....................................VIII-2
SECTION 8.03. Trustee Not Liable for Certificates or
Mortgage Loans...........................................................VIII-3
SECTION 8.04. Trustee May Own Certificates.............................................VIII-3
SECTION 8.05. Trustee's Fees and Expenses..............................................VIII-4
SECTION 8.06. Eligibility Requirements for Trustee.....................................VIII-4
SECTION 8.07. Resignation and Removal of Trustee.......................................VIII-5
SECTION 8.08. Successor Trustee........................................................VIII-6
SECTION 8.09. Merger or Consolidation of Trustee.......................................VIII-6
SECTION 8.10. Appointment of Co-Trustee or Separate
Trustee..................................................................VIII-7
SECTION 8.11. Tax Matters..............................................................VIII-8
SECTION 8.12. Periodic Filings........................................................VIII-11
vii
<PAGE>
<PAGE>
ARTICLE IX
TERMINATION
SECTION 9.01. Termination upon Liquidation or Purchase of
all Mortgage Loans.........................................................IX-1
SECTION 9.02. Final Distribution on the Certificates.....................................IX-1
SECTION 9.03. Additional Termination Requirements........................................IX-3
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01. Amendment...................................................................X-1
SECTION 10.02. Recordation of Agreement; Counterparts......................................X-2
SECTION 10.03. Governing Law...............................................................X-3
SECTION 10.04. Intention of Parties........................................................X-3
SECTION 10.05. Notices.....................................................................X-3
SECTION 10.06. Severability of Provisions..................................................X-4
SECTION 10.07. Assignment..................................................................X-5
SECTION 10.08. Limitation on Rights of Certificateholders..................................X-5
SECTION 10.09. Inspection and Audit Rights.................................................X-6
SECTION 10.10. Certificates Nonassessable and Fully Paid...................................X-6
Exhibit A: Form of Senior Certificate
(excluding Notional Amount Certificates)........................................A-1
Exhibit B: Form of Subordinated Certificate................................................B-1
Exhibit C: Form of Class A-R Certificate...................................................C-1
Exhibit D: Form of Notional Amount Certificate.............................................D-1
Exhibit E: Form of Reverse of Certificates.................................................E-1
Exhibit F: [Reserved]......................................................................F-1
Exhibit G: Form of Initial Certificates....................................................G-1
Exhibit H: Form of Final Certification of Trustee..........................................H-1
Exhibit I: Transfer Affidavit..............................................................I-1
Exhibit J: Form of Transferor Certificate..................................................J-1
Exhibit K: Form of Investment Letter [Non-Rule 144A].......................................K-1
Exhibit L: Form of Rule 144A Letter........................................................L-1
Exhibit M: Request for Release (for Trustee)...............................................M-1
Exhibit N: Request for Release (Mortgage Loan)
Paid in Full, Repurchased and Replaced).........................................N-1
SCHEDULES
Schedule I: Mortgage Loan Schedule....................................................S-I-1
Schedule II: Representations and Warranties of the
Seller/Master Servicer...................................................S-II-1
Schedule III: Representations and Warranties as to
the Mortgage Loans......................................................S-III-1
Schedule IV: Planned Balance Schedules................................................S-IV-1
</TABLE>
viii
<PAGE>
<PAGE>
THIS POOLING AND SERVICING AGREEMENT, dated as of _______ __,
199_, among CWABS, Inc., a Delaware corporation, as depositor (the "Depositor"),
____________________________, a _______________ corporation, as seller (in such
capacity, the "Seller") and as master servicer (in such capacity, the "Master
Servicer"), and ____________________, a banking corporation organized under the
laws of the __________________, as trustee (the "Trustee").
WITNESSETH THAT
In consideration of the mutual agreements herein contained, the
parties hereto agree as follows:
PRELIMINARY STATEMENT
The Depositor is the owner of the Trust Fund that is hereby
conveyed to the Trustee in return for the Certificates. The Trust Fund for
federal income tax purposes will consist of a single REMIC. The Certificates
will represent the entire beneficial ownership interest in the Trust Fund. The
Regular Certificates will represent the "regular interests" in the Trust Fund
and the Residual Certificates will represent as the single "residual interest"
in the Trust Fund. The "latest possible maturity date" for federal income tax
purposes of all interests created hereby will be the Latest Possible Maturity
Date.
The following table sets forth characteristics of the
Certificates, together with the minimum denominations and integral multiples in
excess thereof in which such Classes shall be issuable (except that one
Certificate of each Class of Certificates may be issued in a different amount
and, in addition, one Residual Certificate representing the Tax Matters Person
Certificate may be issued in a different amount):
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================
Integral
Initial Class Multiples
Certificate Pass-Through Minimum in Excess of
Balance Rate Denomination Minimum
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Class A-_ $__________ ____% $_________ $________
- ----------------------------------------------------------------------------------------------------------
Class A-_ $__________ ____% $_________ $________
- ----------------------------------------------------------------------------------------------------------
Class A-_ $__________ ____% $_________ $________
- ----------------------------------------------------------------------------------------------------------
Class A-_ $__________ ____% $_________ $________
- ----------------------------------------------------------------------------------------------------------
Class A-_ $__________ ____% $_________ $________
- ----------------------------------------------------------------------------------------------------------
Class A-_ $__________ ____% $_________ $________
- ----------------------------------------------------------------------------------------------------------
Class A-_ $__________ (4) $_________ $________
- ----------------------------------------------------------------------------------------------------------
Class PO $__________ (1) $_________ $________
- ----------------------------------------------------------------------------------------------------------
Class X (2) (3) $_______ $________(5)
- ----------------------------------------------------------------------------------------------------------
Class A-R $__________ ____% $_________ N/A
- ----------------------------------------------------------------------------------------------------------
Class B-_ $__________ ____% $_________ $________
- ----------------------------------------------------------------------------------------------------------
Class B-_ $__________ ____% $_________ $________
- ----------------------------------------------------------------------------------------------------------
Class B-_ $__________ ____% $_________ $________
- ----------------------------------------------------------------------------------------------------------
Class B-_ $__________ ____% $_________ $________
- ----------------------------------------------------------------------------------------------------------
Class B-_ $__________ ____% $_________ $________
- ----------------------------------------------------------------------------------------------------------
Class B-_ $__________ ____% $_________ $________
==========================================================================================================
</TABLE>
- ---------------------
(1) The Class PO Certificates will be Principal Only Certificates and will
not bear interest.
(2) The Class X Certificates will be Notional Amount Certificates, will have
no principal balance and will bear interest on their Notional Amount
(initially, $________________).
(3) The Pass-Through Rate for the Class X Certificates for any
Distribution Date will be equal to the excess of (a) the
average of the Net Mortgage Rates of the Non-Discount
Mortgage Loans, weighted on the basis of their respective
Stated Principal Balances over (b) ____% per annum. The
Pass-Through Rate of the Class X Certificates for the first
Distribution Date is _______%.
(4) The Class A-_ Certificates will be comprised of multiple payment
components. The Pass-Through Rate for any Distribution Date will equal
the weighted average of the Pass-Through Rates of the various
Components. The Pass-Through Rate for the first Distribution Date is
_____%.
2
<PAGE>
<PAGE>
(5) Minimum Denomination is based on the Notional Amount of such
Class.
Set forth below are designations of Classes of Certificates to
the categories used herein:
Accretion Directed
Certificates. . . . . . Class A-_ Certificates and Class A-
_-_ Certificates.
Accrual Certificates . . . Class A-_-_ Certificates.
Book-Entry Certificates . . All Classes of Certificates other
than the Physical Certificates.
Component Certificates . . Class A-_ Certificates.
Components . . . . . . For purposes of calculating
distributions, the Component
Certificates will be comprised of
multiple payment components having
the designations, Initial Component
Balances and Pass-Through Rates set
forth below:
<TABLE>
<CAPTION>
Initial
Component
Designation Balance Pass-Through Rate
----------- --------- -----------------
<S> <C> <C>
Class A-_-_ Notional ____%
Class A-_-_ Notional ____%
Class A-_-_ Notional ____%
Class A-_-_ $____________ ____%
Class A-_-_ $____________ ____%
Class A-_- $____________ ____%
</TABLE>
The Class A-_-_, Class A-_-_ and
Class A-_-_ Components will have no
Component Balances and will bear
interest on their respective
Notional Amounts. The Notional
Amount for the Class A-_-_ Component
will equal the outstanding Class
Certificate Balance of the Class A-_
Certificate. The Notional Amount for
the Class A-_-_ Component will equal
the outstanding Class Certificate
Balance of the Class A- _
Certificate. The Notional Amount for
the Class A-_-_ Component will
3
<PAGE>
<PAGE>
equal the outstanding Class
Certificate Balance of the Class A-
_ Certificate.
Delay Certificates . . . All interest-bearing Classes of
Certificates other than the
Non-Delay Certificates, if any.
ERISA-Restricted
Certificates . . . . . Class PO and Class X Certificates,
Residual Certificates and
Subordinated Certificates.
Floating Rate Certificates. [Class ____ Certificates.]
Inverse Floating Rate
Certificates . . . . . [Class ____ Certificates.]
COFI Certificates. . . . [Class ____ Certificates.]
LIBOR Certificates . . . [Class ____ Certificates.]
Non-Delay Certificates . . [Class ____ Certificates.]
Notional Amount
Certificates . . . . . Class X Certificates and the Class
A-_-_, Class A-_-_ and Class A-_-_
Components.
Offered Certificates . . All Classes of Certificates other
than the Private Certificates.
Physical Certificates . . Residual Certificates, Class
PO Certificates, Class X
Certificates, Class A-_
Certificates and the Subordinated
Certificates.
Planned Principal Classes . Class A-_ and Class A-_
Certificates and the Class A-_-_
and Class A-_-_ Components.
Primary Planned Principal
Classes . . . . . . . [Class ____ Certificates.]
Principal Only
Certificates . . . . . Class PO Certificates.
Private Certificates . . Class A-_, Class B-_, Class B-_ and
Class B-_ Certificates.
4
<PAGE>
<PAGE>
Rating Agencies . . . . ___________ and __________.
Regular Certificates . . All Classes of Certificates, other
than the Residual Certificates.
Residual Certificates . . Class A-R Certificates.
Scheduled Principal
Classes . . . . . . . [Class ____ Certificates.]
Secondary Planned Principal
Class . . . . . . . [Class ____ Certificates.]
Senior Certificates . . . Class A-_, Class A-_, Class A-_,
Class A-_, Class A-_, Class A-_,
Class A-_, Class PO, Class X and
Class A-R Certificates.
Subordinated Certificates . Class B-_, Class B-_, Class B-_,
Class B-_, Class B-_ and Class B-_
Certificates.
Support Classes . . . . Class A-_ and Class A-_
Certificates and the Class A-_-_
Component.
Targeted Principal
Classes . . . . . . . Class A-_ Certificates and the
Class A-_-_, Class A-_-_ and Class
A-_-_ Components.
With respect to any of the foregoing designations as to which the
corresponding reference is "None," all defined terms and provisions herein
relating solely to such designations shall be of no force or effect, and any
calculations herein incorporating references to such designations shall be
interpreted without reference to such designations and amounts. Defined terms
and provisions herein relating to statistical rating agencies not designated
above as Rating Agencies shall be of no force or effect.
5
<PAGE>
<PAGE>
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
Accretion Directed Certificates: As specified in the
Preliminary Statement.
Accrual Amount: With respect to any Class of Accrual Certificates
and any Distribution Date prior to the Accrual Termination Date, the amount
allocable to interest on each such Class of Accrual Certificates with respect to
such Distribution Date pursuant to Section 4.02(a)(i).
Accrual Certificates: As specified in the Preliminary
Statement.
Accrual Termination Date: The earlier to occur of (i) the first
Distribution Date following the Distribution Date on which the Component Balance
of the Class A-_-_ Component is reduced to zero, and (ii) the Senior Credit
Support Depletion Date.
Adjusted Mortgage Rate: As to each Mortgage Loan, and
at any time, the per annum rate equal to the Mortgage Rate less
the Master Servicing Fee Rate.
Adjusted Net Mortgage Rate: As to each Mortgage Loan, and at any
time, the per annum rate equal to the Mortgage Rate less the related Expense
Rate. For purposes of determining whether any Substitute Mortgage Loan is a
Discount Mortgage Loan or a Non-Discount Mortgage Loan and for purposes of
calculating the applicable PO Percentage and applicable Non-PO Percentage, each
Substitute Mortgage Loan shall be deemed to have an Adjusted Net Mortgage Rate
equal to the Adjusted Net Mortgage Rate of the Deleted Mortgage Loan for which
it is substituted.
Advance: The payment required to be made by the Master Servicer
with respect to any Distribution Date pursuant to Section 4.01, the amount of
any such payment being equal to the aggregate of payments of principal and
interest (net of the Master Servicing Fee and net of any net income in the case
of any REO Property) on the Mortgage Loans that were due on the related Due Date
and not received as of the close of business on the related Determination Date,
less the aggregate amount of any such delinquent payments that the Master
Servicer has determined would constitute a Nonrecoverable Advance if advanced.
I-1
<PAGE>
<PAGE>
Agreement: This Pooling and Servicing Agreement and
all amendments or supplements hereto.
Allocable Share: As to any Distribution Date and any Mortgage
Loan (i) with respect to the Class X Certificates, (a) the ratio that (x) the
excess, if any, of the Adjusted Net Mortgage Rate with respect to such Mortgage
Loan over the Required Coupon bears to (y) such Adjusted Net Mortgage Rate or
(b) if the Adjusted Net Mortgage Rate with respect to such Mortgage Loan does
not exceed the Required Coupon, zero, (ii) with respect to the Class PO
Certificates, zero and (iii) with respect to each other Class of Certificates
the product of (a) the lesser of (I) the ratio that the Required Coupon bears to
such Adjusted Net Mortgage Rate and (II) one, multiplied by (b), the ratio that
the amount calculated with respect to such Distribution Date for such Class
pursuant to clause (i) of the definition of Class Optimal Interest Distribution
Amount (without giving effect to any reduction of such amount pursuant to
Section 4.02(d)) bears to the amount calculated with respect to such
Distribution Date for each Class of Certificates pursuant to clause (i) of the
definition of Class Optimal Interest Distribution Amount (in each case without
giving effect to any reduction of such amounts pursuant to Section 4.02(d)).
Amount Available for Senior Principal: As to any Distribution
Date, Available Funds for such Distribution Date reduced by the aggregate amount
distributable (or allocable to the Accrual Amount, if applicable) on such
Distribution Date in respect of interest on the Senior Certificates pursuant to
Section 4.02(a)(i).
Amount Held for Future Distribution: As to any Distribution Date,
the aggregate amount held in the Certificate Account at the close of business on
the related Determination Date on account of (i) Principal Prepayments received
during the related Prepayment Period and Liquidation Proceeds received in the
month of such Distribution Date and (ii) all Scheduled Payments due after the
related Due Date.
Applicable Credit Support Percentage: As defined in
Section 4.02(e).
Appraised Value: With respect to any Mortgage Loan, the Appraised
Value of the related Mortgaged Property shall be: (i) with respect to a Mortgage
Loan other than a Refinancing Mortgage Loan, the lesser of (a) the value of the
Mortgaged Property based upon the appraisal made at the time of the origination
of such Mortgage Loan and (b) the sales price of the Mortgaged Property at the
time of the origination of such Mortgage Loan; (ii) with respect to a
Refinancing Mortgage Loan other than a Streamlined Documentation Mortgage Loan,
the value of the Mortgaged Property based upon the appraisal made at the
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time of the origination of such Refinancing Mortgage Loan; and (iii) with
respect to a Streamlined Documentation Mortgage Loan, (a) if the loan-to-value
ratio with respect to the Original Mortgage Loan at the time of the origination
thereof was __% or less, the value of the Mortgaged Property based upon the
appraisal made at the time of the origination of the Original Mortgage Loan and
(b) if the loan-to-value ratio with respect to the Original Mortgage Loan at the
time of the origination thereof was greater than __%, the value of the Mortgaged
Property based upon the appraisal (which may be a drive-by appraisal) made at
the time of the origination of such Streamlined Documentation Mortgage Loan.
Available Funds: As to any Distribution Date, the sum of (a) the
aggregate amount held in the Certificate Account at the close of business on the
related Determination Date net of the Amount Held for Future Distribution and
net of amounts permitted to be withdrawn from the Certificate Account pursuant
to clauses (i)-(viii), inclusive, of Section 3.08(a) and amounts permitted to be
withdrawn from the Distribution Account pursuant to clauses (i)-(iii) inclusive
of Section 3.08(b), (b) the amount of the related Advance and (c) in connection
with Defective Mortgage Loans, as applicable, the aggregate of the Purchase
Prices and Substitution Adjustment Amounts deposited on the related Distribution
Account Deposit Date.
Bankruptcy Code: The United States Bankruptcy Reform
Act of 1978, as amended.
Bankruptcy Coverage Termination Date: The point in
time at which the Bankruptcy Loss Coverage Amount is reduced to
zero.
Bankruptcy Loss: With respect to any Mortgage Loan, a Deficient
Valuation or Debt Service Reduction; provided, however, that a Bankruptcy Loss
shall not be deemed a Bankruptcy Loss hereunder so long as the Master Servicer
has notified the Trustee in writing that the Master Servicer is diligently
pursuing any remedies that may exist in connection with 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 related escrow payments in respect of
such Mortgage Loan are being advanced on a current basis by the Master Servicer,
in either case without giving effect to any Debt Service Reduction or Deficient
Valuation.
Bankruptcy Loss Coverage Amount: As of any Determination Date,
the Bankruptcy Loss Coverage Amount shall equal the Initial Bankruptcy Coverage
Amount as reduced by (i) the aggregate amount of Bankruptcy Losses allocated to
the Certificates since the Cut-off Date and (ii) any permissible
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reductions in the Bankruptcy Loss Coverage Amount as evidenced by a letter of
each Rating Agency to the Trustee to the effect that any such reduction will not
result in a downgrading of the then current ratings assigned to the Classes of
Certificates rated by it.
Book-Entry Certificates: As specified in the
Preliminary Statement.
Business Day: Any day other than (i) a Saturday or a Sunday, or
(ii) a day on which banking institutions in the City of New York, New York, or
the State of California or the city in which the Corporate Trust Office of the
Trustee is located are authorized or obligated by law or executive order to be
closed.
Certificate: Any one of the Certificates executed by
the Trustee in substantially the forms attached hereto as
exhibits.
Certificate Account: The separate Eligible Account or Accounts
created and maintained by the Master Servicer pursuant to Section 3.05 with a
depository institution in the name of the Master Servicer for the benefit of the
Trustee on behalf of Certificateholders and designated
"____________________________ in trust for the registered holders of CWABS,
Inc., Asset Backed Certificates Series 199_-_."
Certificate Balance: With respect to any Certificate at any time,
the maximum dollar amount of principal to which the Holder thereof is then
entitled hereunder, such amount being equal to the Denomination thereof (A)
minus the sum of (i) all distributions of principal previously made with respect
thereto and (ii) all Realized Losses allocated thereto and, in the case of any
Subordinated Certificates, all other reductions in Certificate Balance
previously allocated thereto pursuant to Section 4.03 and (B) in the case of any
Class of Accrual Certificates, increased by the Accrual Amount added to the
Class Certificate Balance of such Class prior to such date.
Certificate Owner: With respect to any Book-Entry
Certificate, the Person who is the beneficial owner of such Book-
Entry Certificate.
Certificate Register: The register maintained pursuant
to Section 5.02 hereof.
Certificateholder or Holder: The person in whose name a
Certificate is registered in the Certificate Register, except that, solely for
the purpose of giving any consent pursuant to this Agreement, any Certificate
registered in the name of the Depositor or any affiliate of the Depositor shall
be deemed not to be Outstanding and the Percentage Interest evidenced thereby
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shall not be taken into account in determining whether the requisite amount of
Percentage Interests necessary to effect such consent has been obtained;
provided, however, that if any such Person (including the Depositor) owns 100%
of the Percentage Interests evidenced by a Class of Certificates, such
Certificates shall be deemed to be Outstanding for purposes of any provision
hereof that requires the consent of the Holders of Certificates of a particular
Class as a condition to the taking of any action hereunder. The Trustee is
entitled to rely conclusively on a certification of the Depositor or any
affiliate of the Depositor in determining which Certificates are registered in
the name of an affiliate of the Depositor.
Class: All Certificates bearing the same class
designation as set forth in the Preliminary Statement.
Class A-_ Optimal Amount: As to any Distribution Date, an amount
equal to the sum of (i) the product of the Class A-_ Percentage and the
Scheduled Principal Distribution Amount and (ii) the product of (A) the Class
A-_ Percentage, (B) the Prepayment Shifting Percentage and (C) the Unscheduled
Principal Distribution Amount.
Class A-_ Percentage: As to any Distribution Date, a fraction,
the numerator of which is the Class Certificate Balance of the Class A-_
Certificates on such Distribution Date and the denominator of which is the
aggregate Class Certificate Balances of the Senior Certificates (other than the
Class PO Certificates) on such Distribution Date.
Class Certificate Balance: With respect to any Class
and as to any date of determination, the aggregate of the
Certificate Balances of all Certificates of such Class as of such
date.
Class Interest Shortfall: As to any Distribution Date and Class,
the amount by which the amount described in clause (i) of the definition of
Class Optimal Interest Distribution Amount for such Class exceeds the amount of
interest actually distributed on such Class on such Distribution Date pursuant
to such clause (i).
Class Optimal Interest Distribution Amount: With respect to any
Distribution Date and interest bearing Class or, with respect to any interest
bearing Component, any Component thereof, the sum of (i) one month's interest
accrued during the related Interest Accrual Period at the Pass-Through Rate for
such Class on the related Class Certificate Balance, Component Balance or
Notional Amount, as applicable, subject to reduction as provided in Section
4.02(d) and (ii) any Class Unpaid Interest Amounts for such Class or Component.
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Class PO Deferred Amount: As to any Distribution Date, the
aggregate of the applicable PO Percentage of each Realized Loss, other than any
Excess Loss, to be allocated to the Class PO Certificates on such Distribution
Date on or prior to the Senior Credit Support Depletion Date or previously
allocated to the Class PO Certificates and not yet paid to the Holders of the
Class PO Certificates.
Class Subordination Percentage: With respect to any Distribution
Date and each Class of Subordinated Certificates, the quotient (expressed as a
percentage) of (a) the Class Certificate Balance of such Class of Certificates
immediately prior to such Distribution Date divided by (b) the aggregate of the
Class Certificate Balances immediately prior to such Distribution Date of all
Classes of Certificates.
Class Unpaid Interest Amounts: As to any Distribution Date and
Class of interest bearing Certificates, the amount by which the aggregate Class
Interest Shortfalls for such Class on prior Distribution Dates exceeds the
amount distributed on such Class on prior Distribution Dates pursuant to clause
(ii) of the definition of Class Optimal Interest Distribution Amount.
Closing Date: ___________, 199_.
Code: The Internal Revenue Code of 1986, including any
successor or amendatory provisions.
COFI: The Monthly Weighted Average Cost of Funds Index
for the Eleventh District Savings Institutions published by the
Federal Home Loan Bank of San Francisco.
COFI Certificates: As specified in the Preliminary
Statement.
Collateral Value: With respect to a Mortgage Loan the proceeds of
which were not used to refinance an existing mortgage loan, the lesser of (x)
the appraised value based on an appraisal made by an independent fee appraiser
at the time of the origination of the related Mortgage Loan, and (y) the sales
price of such Mortgaged Property at such time of origination. With respect to a
Mortgage Loan the proceeds of which were used to refinance an existing mortgage
loan, the appraised value of the Mortgaged Property based upon the appraisal
obtained at the time of refinancing.
Component: As specified in the Preliminary Statement.
Component Balance: With respect to any Component and
any Distribution Date, the Initial Component Balance thereof on
the Closing Date, (A) less all amounts applied in reduction of
the principal balance of such Component and Realized Losses
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allocated thereto on previous Distribution Dates and (B) in the case of the
Accrual Certificates, increased by all interest accrued and added to the
Component Balance thereof prior to such Distribution Date.
Component Certificates: As specified in the
Preliminary Statement.
Corporate Trust Office: The designated office of the Trustee in
the State of New York 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 Agreement is located at
__________________________________ (Attn: ____________________________________,
facsimile no. ________________, and which is the address to which notices to and
correspondence with the Trustee should be directed.
Cut-off Date: _________ __, 199_.
Cut-off Date Pool Principal Balance: $______________.
Cut-off Date Principal Balance: As to any Mortgage
Loan, the Stated Principal Balance thereof as of the close of
business on the Cut-off Date.
DCR: Duff & Phelps Credit Rating Company, or any successor
thereto. If DCR is designated as a Rating Agency in the Preliminary Statement,
for purposes of Section 10.05(b) the address for notices to DCR shall be Duff &
Phelps Credit Rating Company, 17 State Street, 12th Floor, New York, New York
10004, Attention: ______________, or such other address as DCR may hereafter
furnish to the Depositor and the Master Servicer.
Debt Service Reduction: With respect to any Mortgage Loan, a
reduction by a court of competent jurisdiction in a proceeding under the
Bankruptcy Code in the Scheduled Payment for such Mortgage Loan which became
final and non-appealable, except such a reduction resulting from a Deficient
Valuation or any reduction that results in a permanent forgiveness of principal.
Defective Mortgage Loan: Any Mortgage Loan which is
required to be repurchased pursuant to Section 2.02 or 2.03.
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 Payment that results in a permanent forgiveness of principal, which
valuation or reduction results from an order of such court which is final and
non-appealable in a proceeding under the Bankruptcy Code.
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Definitive Certificates: Any Certificate evidenced by
a Physical Certificate and any Certificate issued in lieu of a
Book-Entry Certificate pursuant to Section 5.02(e).
Deleted Mortgage Loan: As defined in Section 2.03(b)
hereof.
Denomination: With respect to each Certificate, the amount set
forth on the face thereof as the "Initial Certificate Balance of this
Certificate" or the "Initial Notional Amount of this Certificate" or, if neither
of the foregoing, the Percentage Interest appearing on the face thereof.
Depositor: CWABS, Inc., a Delaware corporation, or its
successor in interest.
Depository: The initial Depository shall be The Depository Trust
Company, the nominee of which is CEDE & Co., as the registered Holder of the
Book-Entry Certificates. The Depository shall at all times be a "clearing
corporation" as defined in Section 8-102(3) of the Uniform Commercial Code of
the State of New York.
Depository 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: As to any Distribution Date, the ____ day of
each month or if such ____ day is not a Business Day the next preceding Business
Day; provided, however, that if such ____ day or such Business Day, whichever is
applicable, is less than two Business Days prior to the related Distribution
Date, the Determination Date shall be the first Business Day which is two
Business Days preceding such Distribution Date.
Discount Mortgage Loan: Any Mortgage Loan with an
Adjusted Net Mortgage Rate that is less than the Required Coupon.
Distribution Account: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 3.05 in the name of the Trustee
for the benefit of the Certificateholders and designated
"_________________________ in trust for registered holders of CWABS, Inc. Asset
Backed Certificates, Series 199_-_." Funds in the Distribution Account shall be
held in trust for the Certificateholders for the uses and purposes set forth in
this Agreement.
Distribution Account Deposit Date: As to any
Distribution Date, 12:30 p.m. Pacific time on the Business Day
immediately preceding such Distribution Date.
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Distribution Date: The ____ day of each calendar month after the
initial issuance of the Certificates, or if such ____ day is not a Business Day,
the next succeeding Business Day, commencing in ____________, 199_.
Due Date: With respect to any Distribution Date, the
first day of the month in which the related Distribution Date
occurs.
Eligible Account: Any of (i) an account or accounts maintained
with a federal or state chartered depository institution or trust company the
short-term unsecured debt obligations of which (or, in the case of a depository
institution or trust company that is the principal subsidiary of a holding
company, the debt obligations of such holding company) have the highest
short-term ratings of each Rating Agency at the time any amounts are held on
deposit therein, or (ii) an account or accounts in a depository institution or
trust company in which such accounts are insured by the FDIC (to the limits
established by the FDIC) and the uninsured deposits in which accounts are
otherwise secured such that, as evidenced by an Opinion of Counsel delivered to
the Trustee and to each Rating Agency, the Certificateholders have a claim with
respect to the funds in such account or a perfected first priority 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 or trust company in which
such account is maintained, or (iii) a trust account or accounts maintained with
(a) the trust department of a federal or state chartered depository institution
or (b) a trust company, acting in its fiduciary capacity or (iv) any other
account acceptable to each Rating Agency. Eligible Accounts may bear interest,
and may include, if otherwise qualified under this definition, accounts
maintained with the Trustee.
ERISA: The Employee Retirement Income Security Act of
1974, as amended.
ERISA-Restricted Certificate: As specified in the
Preliminary Statement.
Escrow Account: The Eligible Account or Accounts
established and maintained pursuant to Section 3.06(a) hereof.
Event of Default: As defined in Section 7.01 hereof.
Excess Loss: The amount of any (i) Fraud Loss realized
after the Fraud Loss Coverage Termination Date, (ii) Special
Hazard Loss realized after the Special Hazard Coverage
Termination Date or (iii) Bankruptcy Loss realized after the
Bankruptcy Coverage Termination Date.
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Excess Proceeds: With respect to any Liquidated Mortgage Loan,
the amount, if any, by which the sum of any Liquidation Proceeds of such
Mortgage Loan received in the calendar month in which such Mortgage Loan became
a Liquidated Mortgage Loan, net of any amounts previously reimbursed to the
Master Servicer as Nonrecoverable Advance(s) with respect to such Mortgage Loan
pursuant to Section 3.08(a)(iii), exceeds (i) the unpaid principal balance of
such Liquidated Mortgage Loan as of the Due Date in the month in which such
Mortgage Loan became a Liquidated Mortgage Loan plus (ii) accrued interest at
the Mortgage Rate from the Due Date as to which interest was last paid or
advanced (and not reimbursed) to Certificateholders up to the Due Date
applicable to the Distribution Date immediately following the calendar month
during which such liquidation occurred.
Expense Rate: As to each Mortgage Loan, the sum of the
related Master Servicing Fee Rate and the Trustee Fee Rate.
FDIC: The Federal Deposit Insurance Corporation, or
any successor thereto.
FHLMC: The 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.
FIRREA: The Financial Institutions Reform, Recovery,
and Enforcement Act of 1989.
Fitch: Fitch Investors Service, L.P., or any successor thereto.
If Fitch is designated as a Rating Agency in the Preliminary Statement, for
purposes of Section 10.05(b) the address for notices to Fitch shall be Fitch
Investors Service, L.P., One State Street Plaza, New York, New York 10004,
Attention: _______________________________________, or such other address as
Fitch may hereafter furnish to the Depositor and the Master Servicer.
FNMA: The 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.
Fraud Loan: A Liquidated Mortgage Loan as to which a
Fraud Loss has occurred.
Fraud Loss Coverage Amount: As of the Closing Date,
$_____________ subject to reduction from time to time, by the
amount of Fraud Losses allocated to the Certificates. In
addition, on each anniversary of the Cut-off Date, the Fraud Loss
Coverage Amount will be reduced as follows: (a) on the
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__________, __________, __________ and __________ anniversaries of the Cut-off
Date, to an amount equal to the lesser of (i) ___% of the then current Pool
Stated Principal Balance and (ii) the excess of the Fraud Loss Coverage Amount
as of the preceding anniversary of the Cut-off Date over the cumulative amount
of Fraud Losses allocated to the Certificates since such preceding anniversary;
and (b) on the __________ anniversary of the Cut-off Date, to zero.
Fraud Loss Coverage Termination Date: The point in
time at which the Fraud Loss Coverage Amount is reduced to zero.
Fraud Losses: Realized Losses on Mortgage Loans as to which a
loss is sustained by reason of a default arising from fraud, dishonesty or
misrepresentation in connection with the related Mortgage Loan, including a loss
by reason of the denial of coverage under any related Primary Insurance Policy
because of such fraud, dishonesty or misrepresentation.
Index: With respect to any Interest Accrual Period for the COFI
Certificates, the then-applicable index used by the Trustee pursuant to Section
4.05 to determine the applicable Pass-Through Rate for such Interest Accrual
Period for the COFI Certificates.
Indirect Participant: A broker, dealer, bank or other financial
institution or other Person that clears through or maintains a custodial
relationship with a Depository Participant.
Initial Bankruptcy Coverage Amount: $_________.
Initial Component Balance: As specified in the
Preliminary Statement.
Initial LIBOR Rate: Not applicable.
Insurance Policy: With respect to any Mortgage Loan included in
the Trust Fund, any insurance policy, including all riders and endorsements
thereto in effect, including any replacement policy or policies for any
Insurance Policies.
Insurance Proceeds: Proceeds paid by an insurer pursuant to any
Insurance Policy, in each case other than any amount included in such Insurance
Proceeds in respect of Insured Expenses.
Insured Expenses: Expenses covered by an Insurance
Policy or any other insurance policy with respect to the Mortgage
Loans.
Interest Accrual Period: With respect to each Class of
Delay Certificates and any Distribution Date, the calendar month
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prior to the month of such Distribution Date. With respect to any Non-Delay
Certificates and any Distribution Date, the one month period commencing on the
____ day of the month preceding the month in which such Distribution Date occurs
and ending on the ____ day of the month in which such Distribution Date occurs.
Interest Determination Date: With respect to (a) any Interest
Accrual Period for any LIBOR Certificates and (b) any Interest Accrual Period
for the COFI Certificates for which the applicable Index is LIBOR, the second
Business Day prior to the first day of such Interest Accrual Period.
Latest Possible Maturity Date: The Distribution Date following
the third anniversary of the scheduled maturity date of the Mortgage Loan having
the latest scheduled maturity date as of the Cut-off Date.
LIBOR: The London interbank offered rate for one-month
United States dollar deposits calculated in the manner described
in Section 4.06.
LIBOR Certificates: As specified in the Preliminary
Statement.
Liquidated Mortgage Loan: With respect to any Distribution Date,
a defaulted Mortgage Loan (including any REO Property) which was liquidated in
the calendar month preceding the month of such Distribution Date and as to which
the Master Servicer has determined (in accordance with this Agreement) that it
has received all amounts it expects to receive in connection with the
liquidation of such Mortgage Loan, including the final disposition of an REO
Property.
Liquidation Proceeds: Amounts, including Insurance Proceeds,
received in connection with the partial or complete liquidation of defaulted
Mortgage Loans, whether through trustee's sale, foreclosure sale or otherwise or
amounts received in connection with any condemnation or partial release of a
Mortgaged Property and any other proceeds received in connection with an REO
Property, less the sum of related unreimbursed Master Servicing Fees, Servicing
Advances and Advances.
Loan-to-Value Ratio: With respect to any Mortgage Loan and as to
any date of determination, (i) the principal balance of such Mortgage Loan [at
the date of origination] divided by (ii) the Collateral Value of the related
Mortgaged Property.
Majority in Interest: As to any Class of Regular Certificates,
the Holders of Certificates of such Class evidencing, in the aggregate, at least
51% of the Percentage Interests evidenced by all Certificates of such Class.
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Master Servicer: ____________________________, a
___________ corporation, and its successors and assigns, in its
capacity as master servicer hereunder.
Master Servicer Advance Date: As to any Distribution
Date, 12:30 p.m. Pacific time on the Business Day immediately
preceding such Distribution Date.
Master Servicing Fee: As to each Mortgage Loan and any
Distribution Date, an amount payable out of each full payment of interest
received on such Mortgage Loan and equal to one-twelfth of the Master Servicing
Fee Rate multiplied by the Stated Principal Balance of such Mortgage Loan as of
the Due Date in the month of such Distribution Date (prior to giving effect to
any Scheduled Payments due on such Mortgage Loan on such Due Date), subject to
reduction as provided in Section 3.14.
Master Servicing Fee Rate: With respect to each
Mortgage Loan, ____% per annum.
Monthly Statement: The statement delivered to the
Certificateholders pursuant to Section 4.04.
Moody's: Moody's Investors Service, Inc., or any successor
thereto. If Moody's is designated as a Rating Agency in the Preliminary
Statement, for purposes of Section 10.05(b) the address for notices to Moody's
shall be Moody's Investors Service, Inc., 99 Church Street, New York, New York
10007, Attention: ___________________________________, or such other address as
Moody's may hereafter furnish to the Depositor or the Master Servicer.
Mortgage: The mortgage, deed of trust or other 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
hereof pertaining to a particular Mortgage Loan and any additional documents
delivered to the Trustee to be added to the Mortgage File pursuant to this
Agreement.
Mortgage Loans: Such of the mortgage loans transferred and
assigned to the Trustee pursuant to the provisions hereof as from time to time
are held as a part of the Trust Fund (including any REO Property), the mortgage
loans so held being identified in the Mortgage Loan Schedule, notwithstanding
foreclosure or other acquisition of title of the related Mortgaged Property.
Mortgage Loan Schedule: The list of Mortgage Loans (as from time
to time amended by the Master Servicer to reflect the addition of Substitute
Mortgage Loans and the deletion of Deleted Mortgage Loans pursuant to the
provisions of this Agreement)
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transferred to the Trustee as part of the Trust Fund and from time to time
subject to this Agreement, attached hereto as Schedule I, setting forth the
following information with respect to each Mortgage Loan:
(i) the loan number;
(ii) the Mortgagor's name and the street address of
the Mortgaged Property, including the zip code;
(iii) the maturity date;
(iv) the original principal balance;
(v) the Cut-off Date Principal Balance;
(vi) the first payment date of the Mortgage Loan;
(vii) the Scheduled Payment in effect as of the Cut-
off Date;
(viii) the Loan-to-Value Ratio at origination;
(ix) a code indicating whether the residential
dwelling at the time of origination was represented to
be owner-occupied;
(x) a code indicating whether the residential dwelling is either
(a) a detached single family dwelling (b) a dwelling in a de
minimis PUD, (c) a condominium unit or PUD (other than a de
minimis PUD), or (d) a two- to four-unit residential property;
(xi) the Mortgage Rate;
(xii) the purpose for the Mortgage Loan;
(xiii) the type of documentation program pursuant to
which the Mortgage Loan was originated, and
(xiv) the Master Servicing Fee for the Mortgage Loan.
Such schedule shall also set forth the total of the amounts
described under (iv) and (v) above for all of the Mortgage Loans.
Mortgage Note: The original executed note or other
evidence of indebtedness evidencing the indebtedness of a
Mortgagor under a Mortgage Loan.
Mortgage Rate: The annual rate of interest borne by a
Mortgage Note from time to time, net of any interest premium
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charged by the mortgagee to obtain or maintain any Primary
Insurance Policy.
Mortgaged Property: The underlying property securing a
Mortgage Loan.
Mortgagor: The obligor(s) on a Mortgage Note.
National Cost of Funds Index: The National Monthly
Median Cost of Funds Ratio to SAIF-Insured Institutions published
by the Office of Thrift Supervision.
Net Prepayment Interest Shortfalls: As to any Distribution Date,
the amount by which the aggregate of Prepayment Interest Shortfalls during the
related Prepayment Period exceeds an amount equal to one-half of the aggregate
Master Servicing Fee for such Distribution Date before reduction of the Master
Servicing Fee in respect of such Prepayment Interest Shortfalls.
Non-Delay Certificates: As specified in the
Preliminary Statement.
Non-Discount Mortgage Loan: Any Mortgage Loan with an
Adjusted Net Mortgage Rate that is greater than or equal to the
Required Coupon.
Non-PO Formula Principal Amount: As to any Distribution Date, the
sum of the applicable Non-PO Percentage of (a) the principal portion of each
Scheduled Payment (without giving effect, prior to the Bankruptcy Coverage
Termination Date, to any reductions thereof caused by any Debt Service
Reductions or Deficient Valuations) due on each Mortgage Loan on the related Due
Date, (b) the Stated Principal Balance of each Mortgage Loan that was
repurchased by the Seller or the Master Servicer pursuant to this Agreement as
of such Distribution Date, (c) the Substitution Adjustment Amount in connection
with any Deleted Mortgage Loan received with respect to such Distribution Date,
(d) any Insurance Proceeds or Liquidation Proceeds allocable to recoveries of
principal of Mortgage Loans that are not yet Liquidated Mortgage Loans received
during the calendar month preceding the month of such Distribution Date, (e)
with respect to each Mortgage Loan that became a Liquidated Mortgage Loan during
the calendar month preceding the month of such Distribution Date, the amount of
the Liquidation Proceeds allocable to principal received during the calendar
month preceding the month of such Distribution Date with respect to such
Mortgage Loan and (f) all Principal Prepayments received during the related
Prepayment Period.
Non-PO Percentage: As to any Discount Mortgage Loan, a
fraction (expressed as a percentage) the numerator of which is
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the Adjusted Net Mortgage Rate of such Discount Mortgage Loan and
the denominator of which is the Required Coupon. As to any Non-
Discount Mortgage Loan, 100%.
Nonrecoverable Advance: Any portion of an Advance previously made
or proposed to be made by the Master Servicer that, in the good faith judgment
of the Master Servicer, will not be ultimately recoverable by the Master
Servicer from the related Mortgagor, related Liquidation Proceeds or otherwise.
Notice of Final Distribution: The notice to be provided pursuant
to Section 9.02 to the effect that final distribution on any of the Certificates
shall be made only upon presentation and surrender thereof.
Notional Amount: With respect to any Distribution Date and the
Class X Certificates, the aggregate of the Stated Principal Balances of the
Non-Discount Mortgage Loans as of the Due Date in the month of such Distribution
Date (prior to giving effect to any Scheduled Payments due on such Mortgage
Loans on such Due Date). With respect to any Distribution Date and (i) the Class
A-_-_ Component, the Class Certificate Balance of the Class A-_ Certificate on
such Distribution Date; (ii) the Class A-_-_ Component, the Class Certificate
Balance of the Class A-_ Certificate on such Distribution Date; and (iii) the
Class A-_-_ Component, the Class Certificate Balance of the Class A-_
Certificate on such Distribution Date.
Notional Amount Certificates: As specified in the
Preliminary Statement.
Offered Certificates: As specified in the Preliminary
Statement.
Officer's Certificate: A certificate (i) signed by the Chairman
of the Board, the Vice Chairman of the Board, the President, a Managing
Director, a Vice President (however denominated), an Assistant Vice President,
the Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant
Secretaries of the Depositor or the Master Servicer, or (ii), if provided for in
this Agreement, signed by a Servicing Officer, as the case may be, and delivered
to the Depositor and the Trustee, as the case may be, as required by this
Agreement.
Opinion of Counsel: A written opinion of counsel, who may be
counsel for the Depositor or the Master Servicer, including, in-house counsel,
reasonably acceptable to the Trustee; provided, however, that with respect to
the interpretation or application of the REMIC Provisions, such counsel must (i)
in fact be independent of the Depositor and the Master Servicer, (ii) not have
any direct financial interest in the Depositor or the Master Servicer or in any
affiliate of
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either, and (iii) not be connected with the-Depositor or the Master Servicer as
an officer, employee, promoter, underwriter, trustee, partner, director or
person performing similar functions.
Optional Termination: The termination of the trust
created hereunder in connection with the purchase of the Mortgage
Loans pursuant to Section 9.01(a) hereof.
Original Applicable Credit Support Percentage: With respect to
each of the following Classes of Subordinated Certificates, the corresponding
percentage described below, as of the Closing Date:
Class B-_ ____%
Class B-_ ____%
Class B-_ ____%
Class B-_ ____%
Class B-_ ____%
Class B-_ ____%
Original Mortgage Loan: The mortgage loan refinanced
in connection with the origination of a Refinancing Mortgage Loan.
Original Subordinated Principal Balance: The aggregate
of the Class Certificate Balances of the Subordinated
Certificates as of the Closing Date.
OTS: The Office of Thrift Supervision.
Outside Reference Date: As to any Interest Accrual
Period for the COFI Certificates, the close of business on the
tenth day thereof.
Outstanding: With respect to the Certificates as of
any date of determination, all Certificates theretofore executed
and authenticated under this Agreement except:
(i) Certificates theretofore canceled by the Trustee
or delivered to the Trustee for cancellation; and
(ii) Certificates in exchange for which or in lieu of which other
Certificates have been executed and delivered by the Trustee
pursuant to this Agreement.
Outstanding Mortgage Loan: As of any Due Date, a Mortgage Loan
with a Stated Principal Balance greater than zero-which was not the subject of a
Principal Prepayment in Full prior to such Due Date and which did not become a
Liquidated Mortgage Loan prior to such Due Date.
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Ownership Interest: As to any Residual Certificate, any ownership
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.
Pass-Through Rate: For any interest bearing Class of
Certificates or Component, the per annum rate set forth or
calculated in the manner described in the Preliminary Statement.
Percentage Interest: As to any Certificate, the percentage
interest evidenced thereby in distributions required to be made on the related
Class, such percentage interest being set forth on the face thereof or equal to
the percentage obtained by dividing the Denomination of such Certificate by the
aggregate of the Denominations of all Certificates of the same Class.
Permitted Investments: (i) obligations of the United States or
any agency thereof, provided such obligations are backed by the full faith and
credit of the United States; (ii) general obligations of or obligations
guaranteed by any state of the United States or the District of Columbia
receiving the highest long-term debt rating of each Rating Agency rating the
related Series of Securities, or such lower rating as will not result in the
downgrading or withdrawal of the ratings then assigned to the Certificates by
each such Rating Agency; (iii) commercial or finance company paper (including,
without limitation, commercial paper issued by Countrywide Home Loans, Inc. or
any of its affiliates) which is then receiving the highest commercial or finance
company paper rating of each such Rating Agency, or such lower rating as will
not result in the downgrading or withdrawal of the ratings then assigned to the
Certificates by each such Rating Agency; (iv) certificates of deposit, demand or
time deposits, or bankers' acceptances issued by any depository institution or
trust company incorporated under the laws of the United States or of any state
thereof and subject to supervision and examination by federal and/or state
banking authorities, provided that the commercial paper and/or long term
unsecured debt obligations of such depository institution or trust company (or
in the case of the principal depository institution in a holding company system,
the commercial paper or long-term unsecured debt obligations of such holding
company, but only if Moody's Investors Service, Inc. ("Moody's") is not a Rating
Agency) are then rated one of the two highest long-term and the highest
short-term ratings of each such Rating Agency for such securities, or such lower
ratings as will not result in the downgrading or withdrawal of the rating then
assigned to the Certificates by any such Rating Agency; (iv) demand or time
deposits or certificates of deposit issued by any bank or trust company or
savings institution to the extent that such deposits are fully insured by the
FDIC; (v) guaranteed reinvestment agreements issued by any bank, insurance
company or other corporation containing, at the time of the issuance of such
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agreements, such terms and conditions as will not result in the downgrading or
withdrawal of the rating then assigned to the Certificates by any such Rating
Agency; (vi) repurchase obligations with respect to any security described in
clauses (i) and (ii) above, in either case entered into with a depository
institution or trust company (acting as principal) described in clause (iv)
above; (vii) securities (other than stripped bonds, stripped coupons or
instruments sold at a purchase price in excess of 115% of the face amount
thereof) bearing interest or sold at a discount issued by any corporation
incorporated under the laws of the United States or any state thereof which, at
the time of such investment, have one of the two highest ratings of each Rating
Agency (except if the Rating Agency is Moody's, such rating shall be the highest
commercial paper rating of Moody's for any such securities), or such lower
rating as will not result in the downgrading or withdrawal of the rating then
assigned to the Certificates by any such Rating Agency, as evidenced by a signed
writing delivered by each such Rating Agency; and (viii) such other investments
having a specified stated maturity and bearing interest or sold at a discount
acceptable to each Rating Agency as will not result in the downgrading or
withdrawal of the rating then assigned to the Securities of such Series by any
such Rating Agency, as evidenced by a signed writing delivered by each such
Rating Agency; provided that no such instrument shall be a Permitted Investment
if such instrument evidences the right to receive interest only payments with
respect to the obligations underlying such instrument.
Permitted Transferee: Any person other than (i) the United
States, any State or political subdivision thereof, or any agency or
instrumentality of any of the foregoing, (ii) a foreign government,
International Organization or any agency or instrumentality of either of the
foregoing, (iii) an organization (except certain farmers' cooperatives described
in section 521 of the Code) which is exempt from tax imposed by Chapter 1 of the
Code (including the tax imposed by section 511 of the Code on unrelated business
taxable income) on any excess inclusions (as defined in section 860E(c)(l) of
the Code) with respect to any Residual Certificate, (iv) rural electric and
telephone cooperatives described in section 1381(a)(2)(C) of the Code, (v) a
Person that is not 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 unless such Person has
furnished the transferor and the Trustee with a duly completed Internal Revenue
Service Form 4224, and (vi) any other Person so designated by the Depositor
based upon an Opinion of Counsel that the Transfer of an Ownership Interest in a
Residual Certificate to such Person may
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cause the REMIC hereunder to fail to qualify as a REMIC at any time that the
Certificates are outstanding. The terms "United States," "State" and
"International Organization" shall have the meanings set forth in section 7701
of the Code or successor provisions. A corporation will not be treated as an
instrumentality of the United States or of any State or political subdivision
thereof for these purposes if all of its activities are subject to tax and, with
the exception of the Federal Home Loan Mortgage Corporation, a majority of its
board of directors is not selected by such government unit.
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government, or any agency or political subdivision thereof.
Physical Certificate: As specified in the Preliminary
Statement.
Planned Balance: With respect to the Planned Principal Classes
and any Distribution Date appearing in Schedule IV hereto, the applicable amount
appearing opposite such Distribution Date for such respective Class or
Component.
Planned Principal Classes: As specified in the
Preliminary Statement.
PO Formula Principal Amount: As to any Distribution Date, the sum
of the applicable PO Percentage of (a) the principal portion of each Scheduled
Payment (without giving effect, prior to the Bankruptcy Coverage Termination
Date, to any reductions thereof caused by any Debt Service Reductions or
Deficient Valuations) due on each Mortgage Loan on the related Due Date, (b) the
Stated Principal Balance of each Mortgage Loan that was repurchased by the
Seller or the Master Servicer pursuant to this Agreement as of such Distribution
Date, (c) the Substitution Adjustment Amount in connection with any Deleted
Mortgage Loan received with respect to such Distribution Date, (d) any Insurance
Proceeds or Liquidation Proceeds allocable to recoveries of principal of
Mortgage Loans that are not yet Liquidated Mortgage Loans received during the
calendar month preceding the month of such Distribution Date, (e) with respect
to each Mortgage Loan that became a Liquidated Mortgage Loan during the month
preceding the calendar month of such Distribution Date, the amount of
Liquidation Proceeds allocable to principal received during the month preceding
the month of such Distribution Date with respect to such Mortgage Loan and (f)
all Principal Prepayments received during the related Prepayment Period.
PO Percentage: As to any Discount Mortgage Loan, a
fraction (expressed as a percentage) the numerator of which is
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the excess of the Required Coupon over the Adjusted Net Mortgage
Rate of such Discount Mortgage Loan and the denominator of which
is the Required Coupon. As to any Non-Discount Mortgage Loan,
0%.
Pool Stated Principal Balance: As to any Distribution Date, the
aggregate of the Stated Principal Balances of the Mortgage Loans which were
Outstanding Mortgage Loans on the Due Date in the month preceding the month of
such Distribution Date.
Prepayment Interest Excess: As to any Principal Prepayment
received by the Master Servicer from the first day through the fifteenth day of
any calendar month (other than the calendar month in which the Cut-off Date
occurs), all amounts paid by the related Mortgagor in respect of interest on
such Principal Prepayment. All Prepayment Interest Excess shall be paid to the
Master Servicer as additional master servicing compensation.
Prepayment Interest Shortfall: As to any Distribution Date,
Mortgage Loan and Principal Prepayment received on or after the sixteenth day of
the month preceding the month of such Distribution Date (or, in the case of the
first Distribution Date, on or after the Cut-off Date) and on or before the last
day of the month preceding the month of such Distribution Date, the amount, if
any, by which one month's interest at the related Mortgage Rate, net of the
Master Servicing Fee Rate, on such Principal Prepayment exceeds the amount of
interest paid in connection with such Principal Prepayment.
Prepayment Period: As to any Distribution Date, the period from
the __th day of the calendar month preceding the month of such Distribution Date
(or, in the case of the first Distribution Date, from the Cut-off Date) through
the __th of the month of such Distribution Date.
Prepayment Shifting Percentage: As to any Distribution Date
occurring during the ____ years beginning on the _____ Distribution Date will
equal 0%. Thereafter, the Prepayment Shifting Percentage for any Distribution
Date occurring on or after the ____ anniversary of the _____ Distribution Date
will be as follows: for any Distribution Date in the _____ year thereafter, __%;
for any Distribution Date in the ______ year thereafter, __%; for any
Distribution Date in the ______ year thereafter, __%; for any Distribution Date
in the ______ year thereafter, __%; and for any Distribution Date thereafter,
100%.
Primary Insurance Policy: Each policy of primary
mortgage guaranty insurance or any replacement policy therefor
with respect to any Mortgage Loan.
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Primary Planned Principal Classes: As specified in the
Preliminary Statement.
Principal Prepayment: Any payment of principal by a Mortgagor on
a Mortgage Loan that is received in advance of its scheduled Due Date and is not
accompanied by an amount representing scheduled interest due on any date or
dates in any month or months subsequent to the month of prepayment. Partial
Principal Prepayments shall be applied by the Master Servicer in accordance with
the terms of the related Mortgage Note.
Principal Prepayment in Full: Any Principal Prepayment
made by a Mortgagor of the entire principal balance of a Mortgage
Loan.
Private Certificate: As specified in the Preliminary
Statement.
Pro Rata Share: As to any Distribution Date, the Subordinated
Principal Distribution Amount and any Class of Subordinated Certificates, the
portion of the Subordinated Principal Distribution Amount allocable to such
Class, equal to the product of the Subordinated Principal Distribution Amount on
such Distribution Date and a fraction, the numerator of which is the related
Class Certificate Balance thereof and the denominator of which is the aggregate
of the Class Certificate Balances of the Subordinated Certificates.
Prospectus Supplement: The Prospectus Supplement dated
________ __, 199_ relating to the Offered Certificates.
PUD: Planned Unit Development.
Purchase Price: With respect to any Mortgage Loan required to be
purchased by the Seller pursuant to Section 2.02 or 2.03 hereof or purchased at
the option of the Master Servicer pursuant to Section 3.11, an amount equal to
the sum of (i) 100% of the unpaid principal balance of the Mortgage Loan on the
date of such purchase, and (ii) accrued interest thereon at the applicable
Mortgage Rate (or at the applicable Adjusted Mortgage Rate if (x) the purchaser
is the Master Servicer or (y) if the purchaser is the Seller and the Seller is
the Master Servicer) from the date through which interest was last paid by the
Mortgagor to the Due Date in the month in which the Purchase Price is to be
distributed to Certificateholders.
Qualified Insurer: A mortgage guaranty insurance company duly
qualified as such under the laws of the state of its principal place of business
and each state having jurisdiction over such insurer in connection with the
insurance policy issued by such insurer, duly authorized and licensed in such
states to transact a mortgage guaranty insurance business in such states
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and to write the insurance provided by the insurance policy issued by it,
approved as a FNMA-approved mortgage insurer and having a claims paying ability
rating of at least "AA" or equivalent rating by a nationally recognized
statistical rating organization. Any replacement insurer with respect to a
Mortgage Loan must have at least as high a claims paying ability rating as the
insurer it replaces had on the Closing Date.
Rating Agency: Each of the Rating Agencies specified in the
Preliminary Statement. If any such organization or a successor is no longer in
existence, "Rating Agency" shall be such nationally recognized statistical
rating organization, or other comparable Person, as is designated by the
Depositor, notice of which designation shall be given to the Trustee. References
herein to a given rating category of a Rating Agency shall mean such rating
category without giving effect to any modifiers.
Realized Loss: With respect to each Liquidated Mortgage Loan, an
amount (not less than zero or more than the Stated Principal Balance of the
Mortgage Loan) as of the date of such liquidation, equal to (i) the Stated
Principal Balance of the Liquidated Mortgage Loan as of the date of such
liquidation, plus (ii) interest at the Adjusted Net Mortgage Rate from the Due
Date as to which interest was last paid or advanced (and not reimbursed) to
Certificateholders up to the Due Date in the month in which Liquidation Proceeds
are required to be distributed on the Stated Principal Balance of such
Liquidated Mortgage Loan from time to time, minus (iii) the Liquidation
Proceeds, if any, received during the month in which such liquidation occurred,
to the extent applied as recoveries of interest at the Adjusted Net Mortgage
Rate and to principal of the Liquidated Mortgage Loan. With respect to each
Mortgage Loan which has become the subject of a Deficient Valuation, if the
principal amount due under the related Mortgage Note has been reduced, 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 subject of a Debt Service Reduction and any
Distribution Date, the amount, if any, by which the principal portion of the
related Scheduled Payment has been reduced.
Record Date: With respect to any Distribution Date, the close of
business on the last Business Day of the month preceding the month in which such
Distribution Date occurs.
Reference Bank: As defined in Section 4.05.
Refinancing Mortgage Loan: Any Mortgage Loan originated in
connection with the refinancing of an existing mortgage loan.
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Regular Certificates: As specified in the Preliminary
Statement.
Relief Act: The Soldiers' and Sailors' Civil Relief
Act of 1940, as amended.
Relief Act Reductions: With respect to any Distribution Date and
any Mortgage Loan as to which there has been a reduction in the amount of
interest collectible thereon for the most recently ended calendar month as a
result of the application of the Relief Act, the amount, if any, by which (i)
interest collectible on such Mortgage Loan for the most recently ended calendar
month is less than (ii) interest accrued thereon for such month pursuant to the
Mortgage Note.
REMIC: A "real estate mortgage investment conduit"
within the meaning of section 860D of the Code.
REMIC Change of Law: Any proposed, temporary or final regulation,
revenue ruling, revenue procedure or other official announcement or
interpretation relating to REMICs and the REMIC Provisions issued after the
Closing Date.
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 regulations promulgated thereunder, as the foregoing may be in
effect from time to time as well as provisions of applicable state laws.
REO Property: A Mortgaged Property acquired by the Trust Fund
through foreclosure or deed-in-lieu of foreclosure in connection with a
defaulted Mortgage Loan.
Request for Release: The Request for Release submitted by the
Master Servicer to the Trustee, substantially in the form of Exhibits M and N,
as appropriate.
Required Coupon: ____% per annum.
Required Insurance Policy: With respect to any Mortgage Loan, any
insurance policy that is required to be maintained from time to time under this
Agreement.
Residual Certificates: As specified in the Preliminary
Statement.
Responsible Officer: When used with respect to the Trustee, any
Vice President, any Assistant Vice President, the Secretary, any Assistant
Secretary, any Trust Officer or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
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officers and also to whom, with respect to a particular matter, such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
Restricted Classes: As defined in Section 4.02(e).
Scheduled Balances: With respect to any Scheduled Classes and any
Distribution Date appearing in Schedule IV hereto, the applicable amount
appearing in Schedule IV hereto opposite such Distribution Date for such
respective Classes.
Scheduled Classes: As specified in the Preliminary
Statement.
Scheduled Payment: The scheduled monthly payment on a Mortgage
Loan due on any Due Date allocable to principal and/or interest on such Mortgage
Loan which, unless otherwise specified herein, shall give effect to any related
Debt Service Reduction and any Deficient Valuation that affects the amount of
the monthly payment due on such Mortgage Loan.
Scheduled Principal Distribution Amount: With respect to any
Distribution Date, the applicable Non-PO Percentage of the amount described in
clauses (a) through (d) of the definition of Non-PO Formula Principal Amount.
Secondary Planned Principal Clauses: As specified in
the Preliminary Statement.
Securities Act: The Securities Act of 1933, as
amended.
Seller: ________________________, a ________
corporation, and its successors and assigns, in its capacity as
seller of the Mortgage Loans to the Depositor.
Senior Certificates: As specified in the Preliminary
Statement.
Senior Credit Support Depletion Date: The date on
which the Class Certificate Balance of each Class of Subordinated
Certificates has been reduced to zero.
Senior Percentage: As to any Distribution Date, the percentage
equivalent of a fraction the numerator of which is the aggregate of the Class
Certificate Balances of each Class of Senior Certificates (other than the Class
PO Certificates) as of such date and the denominator of which is the aggregate
of the Class Certificate Balances of all Classes of Certificates (other than the
Class PO Certificates) as of such date.
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Senior Prepayment Percentage: For any Distribution Date during
the __________ years beginning on the ____ Distribution Date, 100%. The Senior
Prepayment Percentage for any Distribution Date occurring on or after the
__________ anniversary of the first Distribution Date will, except as provided
herein, be as follows: for any Distribution Date in the __________ year
thereafter, the Senior Percentage plus __% of the Subordinated Percentage for
such Distribution Date; for any Distribution Date in the __________ year
thereafter, the Senior Percentage plus ___% of the Subordinated Percentage for
such Distribution Date; for any Distribution Date in the __________ year
thereafter, the Senior Percentage plus __% of the Subordinated Percentage for
such Distribution Date; for any Distribution Date in the __________ year
thereafter, the Senior Percentage plus ___% of the Subordinated Percentage for
such Distribution Date; and for any Distribution Date thereafter, the Senior
Percentage for such Distribution Date (unless on any of the foregoing
Distribution Dates the Senior Percentage exceeds the initial Senior Percentage,
in which case the Senior Prepayment Percentage for such Distribution Date will
once again equal 100%). Notwithstanding the foregoing, no decrease in the Senior
Prepayment Percentage will occur if, as of the first Distribution Date as to
which any such decrease applies, (i) the outstanding principal balance of all
Mortgage Loans delinquent ___ days or more (averaged over the preceding ______
period), as a percentage of the aggregate principal balance of the Subordinate
Certificates (averaged over the preceding six month period), is equal to or
greater than ___% or (ii) cumulative Realized Losses with respect to the
Mortgage Loans exceed (a) with respect to the Distribution Date on the
__________ anniversary of the first Distribution Date, __% of the Original
Subordinated Principal Balance, (b) with respect to the Distribution Date on the
__________ anniversary of the first Distribution Date, __% of the Original
Subordinated Principal Balance, (c) with respect to the Distribution Date on the
__________ anniversary of the first Distribution Date, __% of the Original
Subordinated Principal Balance, (d) with respect to the Distribution Date on the
__________ anniversary of the first Distribution Date, __% of the Original
Subordinated Principal Balance and (e) with respect to the Distribution Date on
the __________ anniversary of the first Distribution Date, __% of the Original
Subordinated Principal Balance.
Senior Principal Distribution Amount: As to any Distribution
Date, the sum of (i) the Senior Percentage of the applicable Non-PO Percentage
of all amounts described in clauses (a) through (d) of the definition of "Non-PO
Formula Principal Amount" for such Distribution Date, (ii) with respect to each
Mortgage Loan that became a Liquidated Mortgage Loan during the calendar month
preceding the month of such Distribution Date, the lesser of (x) the Senior
Percentage of the applicable Non-PO Percentage of the Stated Principal Balance
of such Mortgage Loan
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and (y) either (A) the Senior Prepayment Percentage or (B) if an Excess Loss was
sustained with respect to such Liquidated Mortgage Loan during such prior
calendar month, the Senior Percentage, of the applicable Non-PO Percentage of
the amount of the Liquidation Proceeds allocable to principal received with
respect to such Mortgage Loan, and (iii) the Senior Prepayment Percentage of the
applicable Non-PO Percentage of the amounts described in clause (f) of the
definition of "Non-PO Formula Principal Amount" for such Distribution Date.
Servicing Advances: All customary, reasonable and necessary "out
of pocket" costs and expenses incurred in the performance by the Master Servicer
of its servicing obligations, including, but not limited to, the cost of (i) the
preservation, restoration and protection of a Mortgaged Property, (ii) any
expenses reimbursable to the Master Servicer pursuant to Section 3.11 and any
enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of any REO Property and (iv) compliance with the
obligations under Section 3.09.
Servicing Officer: Any officer of the Master Servicer involved
in, or responsible for, the administration and servicing of the Mortgage Loans
whose name and facsimile signature appear on a list of servicing officers
furnished to the Trustee by the Master Servicer on the Closing Date pursuant to
this Agreement, as such list may from time to time be amended.
Special Hazard Coverage Termination Date: The point in time
at which the Special Hazard Loss Coverage Amount is reduced to zero.
Special Hazard Loss: Any Realized Loss suffered by a Mortgaged
Property on account of direct physical loss but not including (i) any loss of a
type covered by a hazard insurance policy or a flood insurance policy required
to be maintained with respect to such Mortgaged Property pursuant to Section
3.09 to the extent of the amount of such loss covered thereby, or (ii) any loss
caused by or resulting from:
(a) normal wear and tear;
(b) fraud, conversion or other dishonest act on the part of the
Trustee, the Master Servicer or any of their agents or employees
(without regard to any portion of the loss not covered by any errors and
omissions policy);
(c) errors in design, faulty workmanship or faulty materials,
unless the collapse of the property or a part thereof ensues and then
only for the ensuing loss;
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(d) nuclear or chemical reaction or nuclear radiation or
radioactive or chemical 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";
(e) hostile or warlike action in time of peace and war, including
action in hindering, combating 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;
(f) any weapon of war employing nuclear fission, fusion or
other radioactive force, whether in time of peace or war; or
(g) insurrection, rebellion, revolution, civil war, usurped power
or action taken by governmental authority in hindering, combating 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.
Special Hazard Loss Coverage Amount: With respect to the first
Distribution Date, $____________. With respect to any Distribution Date after
the first Distribution Date, the lesser of (a) the greatest of (i) ___% of the
aggregate of the principal balances of the Mortgage Loans, (ii) __________ the
principal balance of the largest Mortgage Loan and (iii) the aggregate of the
principal balances of all Mortgage Loans secured by Mortgaged Properties located
in the single California postal zip code area having the highest aggregate
principal balance of any such zip code area and (b) the Special Hazard Loss
Coverage Amount as of the Closing Date less the amount, if any, of Special
Hazard Losses allocated to the Certificates since the Closing Date. All
principal balances for the purpose of this definition will be calculated as of
the first day of the calendar month preceding the month of such Distribution
Date after giving effect to Scheduled Payments on the Mortgage Loans then due,
whether or not paid.
Special Hazard Mortgage Loan: A Liquidated Mortgage
Loan as to which a Special Hazard Loss has occurred.
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S&P: Standard & Poor's Ratings Group, a division of McGraw-Hill
Inc. If S&P is designated as a Rating Agency in the Preliminary Statement, for
purposes of Section 10.05(b) the address for notices to S&P shall be Standard &
Poor's Ratings Group, 26 Broadway, 15th Floor, New York, New York 10004,
Attention: ________________________________, or such other address as S&P may
hereafter furnish to the Depositor and the Master Servicer.
Startup Day: The Closing Date.
Stated Principal Balance: As to any Mortgage Loan and Due Date,
the unpaid principal balance of such Mortgage Loan as of such Due Date as
specified in the amortization schedule at the time relating thereto (before any
adjustment to such amortization schedule by reason of any moratorium or similar
waiver or grace period) after giving effect to any previous partial Principal
Prepayments and Liquidation Proceeds allocable to principal (other than with
respect to any Liquidated Mortgage Loan) and to the payment of principal due on
such Due Date and irrespective of any delinquency in payment by the related
Mortgagor.
Streamlined Documentation Mortgage Loan: Any Mortgage
Loan originated pursuant to the Seller's Streamlined Loan
Documentation Program then in effect.
Subordinated Certificates: As specified in the
Preliminary Statement.
Subordinated Percentage: As to any Distribution Date,
100% minus the Senior Percentage for such Distribution Date.
Subordinated Prepayment Percentage: As to any
Distribution Date, 100% minus the Senior Prepayment Percentage
for such Distribution Date.
Subordinated Principal Distribution Amount: With respect to any
Distribution Date, an amount equal to (A) the sum of (i) the Subordinated
Percentage of the applicable Non-PO Percentage of all amounts described in
clauses (a) through (d) of the definition of "Non-PO Formula Principal Amount"
for such Distribution Date, (ii) with respect to each Mortgage Loan that became
a Liquidated Mortgage Loan during the calendar month preceding the month of such
Distribution Date, the applicable Non-PO Percentage of the amount of the
Liquidation Proceeds allocated to principal received with respect thereto
remaining after application thereof pursuant to clause (ii) of the definition of
Senior Principal Distribution Amount, up to the Subordinated Percentage of the
applicable Non-PO Percentage of the Stated Principal Balance of such Mortgage
Loan and (iii) the Subordinated Prepayment Percentage of the applicable Non-PO
Percentage of all amounts described in clause (f) of the
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definition of "Non-PO Formula Principal Amount" for such Distribution Date
reduced by (B) the amount of any payments in respect of Class PO Deferred
Amounts on the related Distribution Date.
Subservicer: Any person to whom the Master Servicer
has contracted for the servicing of all or a portion of the
Mortgage Loans pursuant to Section 3.02 hereof.
Substitute Mortgage Loan: A Mortgage Loan substituted by the
Seller for a Deleted Mortgage Loan which must, on the date of such substitution,
as confirmed in a Request for Release, substantially in the form of Exhibit M,
(i) have a Stated Principal Balance, after deduction of the principal portion of
the Scheduled Payment due in the month of substitution, not in excess of, and
not more than __% less than the Stated Principal Balance of the Deleted Mortgage
Loan; (ii) be accruing interest at a rate no lower than and not more than __%
per annum higher than, that of the Deleted Mortgage Loan; (iii) have a
Loan-to-Value Ratio no higher than that of the Deleted Mortgage Loan; (iv) have
a remaining term to maturity no greater than (and not more than ____________
less than that of) the Deleted Mortgage Loan; and (v) comply with each
representation and warranty set forth in Section 2.03 hereof.
Substitution Adjustment Amount: The meaning ascribed
to such term pursuant to Section 2.03.
Support Classes: As specified in the Preliminary Statement.
Targeted Balance: With respect to the Targeted Principal Classes
and any Distribution Date appearing in Schedule IV hereto, the applicable amount
appearing opposite such Distribution Date for such respective Class or
Component.
Targeted Principal Classes: As specified in the
Preliminary Statement.
Tax Matters Person: The person designated as "tax matters
person" in the manner provided under Treasury regulation ss. 1.860F-4(d) and
temporary Treasury regulation ss. 301.6231(a)(7)1T. Initially, the Tax Matters
Person shall be the Trustee.
Tax Matters Person Certificate: The Class A-R
Certificate with a Denomination of $1.00.
Transfer: Any direct or indirect transfer or sale of
any Ownership Interest in a Residual Certificate.
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Trustee: ____________________ and its successors and,
if a successor trustee is appointed hereunder, such successor.
Trustee Fee: As to any Distribution Date, an amount equal to
one-twelfth of the Trustee Fee Rate multiplied by the Pool Stated Principal
Balance with respect to such Distribution Date.
Trustee Fee Rate: With respect to each Mortgage Loan,
the per annum rate agreed upon in writing on or prior to the
Closing Date by the Trustee and the Depositor.
Trust Fund: The corpus of the trust created hereunder consisting
of (i) the Mortgage Loans and all interest and principal received on or with
respect thereto after the Cut-off Date to the extent not applied in computing
the Cut-off Date Principal Balance thereof; (ii) the Certificate Account, the
Distribution Account, and all amounts deposited therein pursuant to the
applicable provisions of this Agreement; (iv) property that secured a Mortgage
Loan and has been acquired by foreclosure, deed-in-lieu of foreclosure or
otherwise; and (v) all proceeds of the conversion, voluntary or involuntary, of
any of the foregoing.
Unscheduled Principal Distribution Amount: With respect to any
Distribution Date, the sum of (i) with respect to each Mortgage Loan that became
a Liquidated Mortgage Loan during the calendar month preceding the month of such
Distribution Date, the lesser of (x) the applicable Non-PO Percentage of the
Stated Principal Balance of such Mortgage Loan and (y) the applicable Non-PO
Percentage of the amount of the Liquidation Proceeds allocable to principal
received with respect to such Mortgage Loan, and (ii) the applicable Non-PO
Percentage of the amount described in clause (f) of the definition of Non-PO
Formula Principal Amount.
Voting Rights: The portion of the voting rights of all of the
Certificates which is allocated to any Certificate. As of any date of
determination, (a) 1% of all Voting Rights shall be allocated to each Class of
Notional Amount Certificates, if any (such Voting Rights to be allocated among
the holders of Certificates of each such Class in accordance with their
respective Percentage Interests), and (b) the remaining Voting Rights (or 100%
of the Voting Rights if there is no Class of Notional Amount Certificates) shall
be allocated among Holders of the remaining Classes of Certificates in
proportion to the Certificate Balances of their respective Certificates on such
date.
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ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND WARRANTIES
SECTION 2.01. Conveyance of Mortgage Loans.
(a) The Seller, concurrently with the execution and delivery
hereof, hereby sells, transfers, assigns, sets over and otherwise conveys to the
Depositor, without recourse, all the right, title and interest of the Seller in
and to the Mortgage Loans, including all interest and principal received or
receivable by the Seller on or with respect to the Mortgage Loans after the
Cut-off Date and all interest and principal payments on the Mortgage Loans
received prior to the Cut-off Date in respect of installments of interest and
principal due thereafter, but not including payments of principal and interest
due and payable on the Mortgage Loans on or before the Cut-off Date. On or prior
to the Closing Date, the Seller shall deliver to the Depositor or, at the
Depositor's direction, to the Trustee or other designee of the Depositor, the
Mortgage File for each Mortgage Loan listed in the Mortgage Loan Schedule. Such
delivery of the Mortgage Files shall be made against payment by the Depositor of
the purchase price, previously agreed to by the Seller and Depositor, for the
Mortgage Loans. With respect to any Mortgage Loan that does not have a first
payment date on or before the Due Date in the month of the first Distribution
Date, the Seller shall deposit into the Distribution Account on or before the
Distribution Account Deposit Date relating to the first Distribution Date, an
amount equal to one month's interest at the related Adjusted Mortgage Rate on
the Cut-off Date Principal Balance of such Mortgage Loan.
(b) The Depositor, concurrently with the execution and delivery
hereof, hereby sells, transfers, assigns, sets over and otherwise conveys to the
Trustee for the benefit of the Certificateholders, without recourse, all the
right, title and interest of the Depositor in and to the Trust Fund together
with the Depositor's right to require the Seller to cure any breach of a
representation or warranty made herein by the Seller or to repurchase or
substitute for any affected Mortgage Loan in accordance herewith.
(c) In connection with the transfer and assignment set forth in
clause (b) above, the Depositor has delivered or caused to be delivered to the
Trustee for the benefit of the Certificateholders the following documents or
instruments with respect to each Mortgage Loan so assigned:
(i) the original Mortgage Note endorsed by manual
or facsimile signature in blank in the following form:
"Pay to the order of ____________ without recourse,"
with all intervening endorsements showing a complete
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chain of endorsement from the originator to the Person endorsing
it to the Trustee (each such endorsement being sufficient to
transfer all right, title and interest of the party so endorsing,
as noteholder or assignee thereof, in and to that Mortgage Note);
(ii) except as provided below, the original recorded Mortgage
or a copy of such Mortgage certified by the Seller as being a
true and complete copy of the Mortgage;
(iii) a duly executed assignment of the Mortgage (which may be
included in a blanket assignment or assignments), together with,
except as provided below, all interim recorded assignments of
such mortgage (each such assignment, when duly and validly
completed, to be in recordable form and sufficient to effect the
assignment of and transfer to the assignee thereof, under the
Mortgage to which the assignment relates); provided that, if the
related Mortgage has not been returned from the applicable public
recording office, such assignment of the Mortgage may exclude the
information to be provided by the recording office;
(iv) the original or copies of each assumption,
modification, written assurance or substitution
agreement, if any; and
(v) except as provided below, the original or duplicate
original lender's title policy and all riders thereto.
In the event that in connection with any Mortgage Loan the
Depositor cannot deliver (a) the original recorded Mortgage, (b) all interim
recorded assignments or (c) the lender's title policy (together with all riders
thereto) satisfying the requirements of clause (ii), (iii) or (v) above,
respectively, concurrently with the execution and delivery hereof because such
document or documents have not been returned from the applicable public
recording office in the case of clause (ii) or (iii) above, or because the title
policy has not been delivered to either the Master Servicer or the Depositor by
the applicable title insurer in the case of clause (v) above, the Depositor
shall promptly deliver to the Trustee, in the case of clause (ii) or (iii)
above, such original Mortgage or such interim assignment, as the case may be,
with evidence of recording indicated thereon upon receipt thereof from the
public recording office, or a copy thereof, certified, if appropriate, by the
relevant recording office, but in no event shall any such delivery of the
original Mortgage and each such interim assignment or a copy thereof, certified,
if appropriate, by the relevant recording office, be made later than one year
following
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the Closing Date, or, in the case of clause (v) above, no later than 120 days
following the Closing Date; provided, however, in the event the Depositor is
unable to deliver by such date each Mortgage and each such interim assignment by
reason of the fact that any such documents have not been returned by the
appropriate recording office, or, in the case of each such interim assignment,
because the related Mortgage has not been returned by the appropriate recording
office, the Depositor shall deliver such documents to the Trustee as promptly as
possible upon receipt thereof and, in any event, within 720 days following the
Closing Date. The Depositor shall forward or cause to be forwarded to the
Trustee (a) from time to time additional original documents evidencing an
assumption or modification of a Mortgage Loan and (b) any other documents
required to be delivered by the Depositor or the Master Servicer to the Trustee.
In the event that the original Mortgage is not delivered and in connection with
the payment in full of the related Mortgage Loan and the public recording office
requires the presentation of a "lost instruments affidavit and indemnity" or any
equivalent document, because only a copy of the Mortgage can be delivered with
the instrument of satisfaction or reconveyance, the Master Servicer shall
execute and deliver or cause to be executed and delivered such a document to the
public recording office. In the case where a public recording office retains the
original recorded Mortgage or in the case where a Mortgage is lost after
recordation in a public recording office, the Seller shall deliver to the
Trustee a copy of such Mortgage certified by such public recording office to be
a true and complete copy of the original recorded Mortgage.
As promptly as practicable subsequent to such transfer and
assignment, and in any event, within thirty (30) days thereafter, the Trustee
shall (i) affix the Trustee's name to each assignment of Mortgage, as the
assignee thereof, (ii) cause such assignment to be in proper form for recording
in the appropriate public office for real property records and (iii) cause to be
delivered for recording in the appropriate public office for real property
records the assignments of the Mortgages to the Trustee, except that, with
respect to any assignments of Mortgage as to which the Trustee has not received
the information required to prepare such assignment in recordable form, the
Trustee's obligation to do so and to deliver the same for such recording shall
be as soon as practicable after receipt of such information and in any event
within thirty (30) days after receipt thereof and that the Trustee need not
cause to be recorded any assignment which relates to a Mortgage Loan (a) the
Mortgaged Property and Mortgage File relating to which are located in California
or (b) in any other jurisdiction under the laws of which, as evidenced by an
Opinion of Counsel delivered by the Seller (at the Seller's expense) to the
Trustee, the recordation of such assignment is not necessary to protect the
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Trustee's and the Certificateholders' interest in the related Mortgage Loan.
In the case of Mortgage Loans that have been prepaid in full as
of the Closing Date, the Depositor, in lieu of delivering the above documents to
the Trustee, will deposit in the Certificate Account the portion of such payment
that is required to be deposited in the Certificate Account pursuant to Section
3.08 hereof.
SECTION 2.02. Acceptance by Trustee of the Mortgage
Loans.
The Trustee acknowledges receipt of the documents identified in
the Initial Certification in the form annexed hereto as Exhibit G and declares
that it holds and will hold such documents and the other documents delivered to
it constituting the Mortgage Files, and that it holds or will hold such other
assets as are included in the Trust Fund, in trust for the exclusive use and
benefit of all present and future Certificateholders. The Trustee acknowledges
that it will maintain possession of the Mortgage Notes in the State of
California, unless otherwise permitted by the Rating Agencies.
The Trustee agrees to execute and deliver on the Closing Date to
the Depositor, the Master Servicer and the Seller an Initial Certification in
the form annexed hereto as Exhibit G. Based on its review and examination, and
only as to the documents identified in such Initial Certification, the Trustee
acknowledges that such documents appear regular on their face and relate to such
Mortgage Loan. The Trustee 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 in the real estate
records or that they are other than what they purport to be on their face.
Not later than 90 days after the Closing Date, the Trustee shall
deliver to the Depositor, the Master Servicer and the Seller a Final
Certification in the form annexed hereto as Exhibit H, with any applicable
exceptions noted thereon.
If, in the course of such review, the Trustee finds any document
constituting a part of a Mortgage File which does not meet the requirements of
Section 2.01, the Trustee shall list such as an exception in the Final
Certification; provided, however that the Trustee shall not make any
determination as to whether (i) any endorsement is sufficient to transfer all
right, title and interest of the party so endorsing, as noteholder or assignee
thereof, in and to that Mortgage Note or (ii) any assignment is in recordable
form or is sufficient to effect the
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assignment of and transfer to the assignee thereof under the mortgage to which
the assignment relates. The Seller shall promptly correct or cure such defect
within 90 days from the date it was so notified of such defect and, if the
Seller does not correct or cure such defect within such period, the Seller shall
either (a) substitute for the related Mortgage Loan a Substitute Mortgage Loan,
which substitution shall be accomplished in the manner and subject to the
conditions set forth in Section 2.03, or (b) purchase such Mortgage Loan from
the Trustee within 90 days from the date the Seller was notified of such defect
in writing at the Purchase Price of such Mortgage Loan; provided, however, that
in no event shall such substitution or purchase occur more than 540 days from
the Closing Date, except that if the substitution or purchase of a Mortgage Loan
pursuant to this provision is required by reason of a delay in delivery of any
comments by the appropriate recording office, and there is a dispute between
either the Master Servicer or the Seller and the Trustee over the location or
status of the recorded document, then such substitution or purchase shall occur
within 720 days from the Closing Date. The Trustee shall deliver written notice
to each Rating Agency within 270 days from the Closing Date indicating each
Mortgage Loan (a) which has not been returned by the appropriate recording
office or (b) as to which there is a dispute as to location or status of such
Mortgage Loan. Such notice shall be delivered every 90 days thereafter until the
related Mortgage Loan is returned to the Trustee. Any such substitution pursuant
to (a) above or purchase pursuant to (b) above shall not be effected prior to
the delivery to the Trustee of the opinion of Counsel required by Section 2.05
hereof, if any, and any substitution pursuant to (a) above shall not be effected
prior to the additional delivery to the Trustee of a Request for release
substantially in the form of Exhibit N. No substitution is permitted to be made
in any calendar month after the Determination Date for such month. The Purchase
Price for any such Mortgage Loan shall be deposited by the Seller in the
Certificate Account on or prior to the Distribution Account Deposit Date for the
Distribution Date in the month following the month of repurchase and, upon
receipt of such deposit and certification with respect thereto in the form of
Exhibit N hereto, the Trustee shall release the related Mortgage File to the
Seller and shall execute and deliver at the Seller's request such instruments of
transfer or assignment prepared by the Seller, in each case without recourse, as
shall be necessary to vest in the Seller, or a designee, the Trustee's interest
in any Mortgage Loan released pursuant hereto.
The Trustee shall retain possession and custody of each Mortgage
File in accordance with and subject to the terms and conditions set forth
herein. The Master Servicer shall promptly deliver to the Trustee, upon the
execution or receipt thereof, the originals of such other documents or
instruments constituting
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the Mortgage File as come into the possession of the Master Servicer from time
to time.
It is understood and agreed that the obligation of the Seller to
substitute for or to purchase any Mortgage Loan which does not meet the
requirements of Section 2.01 above shall constitute the sole remedy respecting
such defect available to the Trustee, the Depositor and any Certificateholder
against the Seller.
SECTION 2.03. Representations, Warranties and
Covenants of the Seller and Master
Servicer.
(a) _________________________, in its capacities as Seller and
Master Servicer, hereby makes the representations and warranties set forth in
Schedule II hereto, and by this reference incorporated herein, to the Depositor
and the Trustee, as of the Closing Date, or if so specified therein, as of the
Cut-off Date.
(b) The Seller, in its capacity as Seller, hereby makes the
representations and warranties set forth in Schedule III hereto, and by this
reference incorporated herein, to the Depositor and the Trustee, as of the
Closing Date, or if so specified therein, as of the Cut-off Date.
(c) Upon discovery by any of the parties hereto of a breach of a
representation or warranty made pursuant to Section 2.03(b) that materially and
adversely affects the interests of the Certificateholders in any Mortgage Loan,
the party discovering such breach shall give prompt notice thereof to the other
parties. The Seller hereby covenants that within 90 days of the earlier of its
discovery or its receipt of written notice from any party of a breach of any
representation or warranty made pursuant to Section 2.03(b) which materially and
adversely affects the interests of the Certificateholders in any Mortgage Loan,
it shall cure such breach in all material respects, and if such breach is not so
cured, shall, (i) if such 90-day period expires prior to the second anniversary
of the Closing Date, remove such Mortgage Loan (a "Deleted Mortgage Loan") from
the Trust Fund and substitute in its place a Substitute Mortgage Loan, in the
manner and subject to the conditions set forth in this Section; or (ii)
repurchase the affected Mortgage Loan or Mortgage Loans from the Trustee at the
Purchase Price in the manner set forth below; provided, however, that any such
substitution pursuant to (i) above shall not be effected prior to the delivery
to the Trustee of the Opinion of Counsel required by Section 2.05 hereof, if
any, and any such substitution pursuant to (i) above shall not be effected prior
to the additional delivery to the Trustee of a Request for Release substantially
in the form of Exhibit N and the Mortgage File for any such Substitute Mortgage
Loan. The Seller shall promptly reimburse the Master Servicer and the Trustee
for any expenses reasonably
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incurred by the Master Servicer or the Trustee in respect of enforcing the
remedies for such breach. With respect to the representations and warranties
described in this Section which are made to the best of the Seller's knowledge,
if it is discovered by either the Depositor, the Seller or the Trustee that the
substance of such representation and warranty is inaccurate and such inaccuracy
materially and adversely affects the value of the related Mortgage Loan or the
interests of the Certificateholders therein, notwithstanding the Seller's lack
of knowledge with respect to the substance of such representation or warranty,
such inaccuracy shall be deemed a breach of the applicable representation or
warranty.
With respect to any Substitute Mortgage Loan or Loans, the Seller
shall deliver to the Trustee for the benefit of the Certificateholders the
Mortgage Note, the Mortgage, the related assignment of the Mortgage, and such
other documents and agreements as are required by Section 2.01, with the
Mortgage Note endorsed and the Mortgage assigned as required by Section 2.01. No
substitution is permitted to be made in any calendar month after the
Determination Date for such month. Scheduled Payments due with respect to
Substitute Mortgage Loans in the month of substitution shall not be part of the
Trust Fund and will be retained by the Seller on the next succeeding
Distribution Date. For the month of substitution, distributions to
Certificateholders will include the monthly payment due on any Deleted Mortgage
Loan for such month and thereafter the Seller shall be entitled to retain all
amounts received in respect of such Deleted Mortgage Loan. The Master Servicer
shall amend the Mortgage Loan Schedule for the benefit of the Certificateholders
to reflect the removal of such Deleted Mortgage Loan and the substitution of the
Substitute Mortgage Loan or Loans and the Master Servicer shall deliver the
amended Mortgage Loan Schedule to the Trustee. Upon such substitution, the
Substitute Mortgage Loan or Loans shall be subject to the terms of this
Agreement in all respects, and the Seller shall be deemed to have made with
respect to such Substitute Mortgage Loan or Loans, as of the date of
substitution, the representations and warranties made pursuant to Section
2.03(b) with respect to such Mortgage Loan. Upon any such substitution and the
deposit to the Certificate Account of the amount required to be deposited
therein in connection with such substitution as described in the following
paragraph, the Trustee shall release the Mortgage File held for the benefit of
the Certificateholders relating to such Deleted Mortgage Loan to the Seller and
shall execute and deliver at the Seller's direction such instruments of transfer
or assignment prepared by the Seller, in each case without recourse, as shall be
necessary to vest title in the Seller, or its designee, the Trustee's interest
in any Deleted Mortgage Loan substituted for pursuant to this Section 2.03.
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For any month in which the Seller substitutes one or more
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 Substitute Mortgage Loans as of the date of substitution is
less than the aggregate Stated Principal Balance of all such Deleted Mortgage
Loans (after application of the scheduled principal portion of the monthly
payments due in the month of substitution). The amount of such shortage (the
"Substitution Adjustment Amount") plus an amount equal to the aggregate of any
unreimbursed Advances with respect to such Deleted Mortgage Loans shall be
deposited in the Certificate Account by the Seller on or before the Distribution
Account Deposit Date for the Distribution Date in the month succeeding the
calendar month during which the related Mortgage Loan became required to be
purchased or replaced hereunder.
In the event that the Seller shall have repurchased a Mortgage
Loan, the Purchase Price therefor shall be deposited in the Certificate Account
pursuant to Section 3.05 on or before the Distribution Account Deposit Date for
the Distribution Date in the month following the month during which the Seller
became obligated hereunder to repurchase or replace such Mortgage Loan and upon
such deposit of the Purchase Price, the delivery of the Opinion of Counsel
required by Section 2.05 and receipt of a Request for Release in the form of
Exhibit N hereto, the Trustee shall release the related Mortgage File held for
the benefit of the Certificateholders to such Person, and the Trustee shall
execute and deliver at such Person's direction such instruments of transfer or
assignment prepared by such Person, in each case without recourse, as shall be
necessary to transfer title from the Trustee. It is understood and agreed that
the obligation under this Agreement of any Person to cure, repurchase or replace
any Mortgage Loan as to which a breach has occurred and is continuing shall
constitute the sole remedy against such Persons respecting such breach available
to Certificateholders, the Depositor or the Trustee on their behalf.
The representations and warranties made pursuant to this Section
2.03 shall survive delivery of the respective Mortgage Files to the Trustee for
the benefit of the Certificateholders.
SECTION 2.04. Representations and Warranties of the
Depositor as to the Mortgage Loans.
The Depositor hereby represents and warrants to the Trustee with
respect to each Mortgage Loan as of the date hereof or such other date set forth
herein that as of the Closing Date, and following the transfer of the Mortgage
Loans to it by the Seller, the Depositor had good title to the Mortgage Loans
and
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the Mortgage Notes were subject to no offsets, defenses or counterclaims.
The Depositor hereby assigns, transfers and conveys to the
Trustee all of its rights with respect to the Mortgage Loans including, without
limitation, the representations and warranties of the Seller made pursuant to
Section 2.03(b) hereof, together with all rights of the Depositor to require the
Seller to cure any breach thereof or to repurchase or substitute for any
affected Mortgage Loan in accordance with this Agreement.
It is understood and agreed that the representations and
warranties set forth in this Section 2.04 shall survive delivery of the Mortgage
Files to the Trustee. Upon discovery by the Depositor or the Trustee of a breach
of any of the foregoing representations and warranties set forth in this Section
2.04 (referred to herein as a "breach"), which breach materially and adversely
affects the interest of the Certificateholders, the party discovering such
breach shall give prompt written notice to the others and to each Rating Agency.
SECTION 2.05. Delivery of Opinion of Counsel in
Connection with Substitutions.
(a) Notwithstanding any contrary provision of this Agreement, no
substitution pursuant to Section 2.02 or Section 2.03 shall be made more than 90
days after the Closing Date unless the Seller delivers to the Trustee an Opinion
of Counsel, which Opinion of Counsel shall not be at the expense of either the
Trustee or the Trust Fund, addressed to the Trustee, to the effect that such
substitution will not (i) result in the imposition of the tax on "prohibited
transactions" on the Trust Fund or contributions after the Startup Date, as
defined in Sections 860F(a)(2) and 860G(d) of the Code, respectively, or (ii)
cause the Trust Fund to fail to qualify as a REMIC at any time that any
Certificates are outstanding.
(b) Upon discovery by the Depositor, the Seller, the Master
Servicer, or the Trustee that any Mortgage Loan does not constitute a "qualified
mortgage" within the meaning of Section 860G(a)(3) of the Code, the party
discovering such fact shall promptly (and in any event within five (5) Business
Days of discovery) give written notice thereof to the other parties. In
connection therewith, the Trustee shall require the Seller, at the Seller's
option, to either (i) substitute, if the conditions in Section 2.03(c) with
respect to substitutions are satisfied, a Substitute Mortgage Loan for the
affected Mortgage Loan, or (ii) repurchase the affected Mortgage Loan within 90
days of such discovery in the same manner as it would a Mortgage Loan for a
breach of representation or warranty made pursuant to Section 2.03. The Trustee
shall reconvey to the Seller the Mortgage Loan to be released pursuant hereto in
the same manner, and on the
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same terms and conditions, as it would a Mortgage Loan repurchased for breach of
a representation or warranty contained in Section 2.03.
SECTION 2.06. Execution and Delivery of Certificates.
The Trustee acknowledges the transfer and assignment to it of the
Trust Fund and, concurrently with such transfer and assignment, has executed and
delivered to or upon the order of the Depositor, the Certificates in authorized
denominations evidencing directly or indirectly the entire ownership of the
Trust Fund. The Trustee agrees to hold the Trust Fund and exercise the rights
referred to above for the benefit of all present and future Holders of the
Certificates and to perform the duties set forth in this Agreement to the best
of its ability, to the end that the interests of the Holders of the Certificates
may be adequately and effectively protected.
SECTION 2.07. REMIC Matters.
The Preliminary Statement sets forth the designations and "latest
possible maturity date" for federal income tax purposes of all interests created
hereby. The "Startup Day" for purposes of the REMIC Provisions shall be the
Closing Date. The "tax matters person" with respect to the Trust Fund shall be
the Trustee and the Trustee shall hold the Tax Matters Person Certificate. The
Trust Fund's fiscal year shall be the calendar year.
SECTION 2.08. Covenants of the Master Servicer.
The Master Servicer hereby covenants to the
Depositor and the Trustee as follows:
(a) the Master Servicer shall comply in the performance of its
obligations under this Agreement with all reasonable rules and
requirements of the insurer under each Required Insurance Policy; and
(b) no written information, certificate of an officer, statement
furnished in writing or written report delivered to the Depositor, any
affiliate of the Depositor or the Trustee and prepared by the Master
Servicer pursuant to this Agreement will contain any untrue statement of
a material fact or omit to state a material fact necessary to make such
information, certificate, statement or report not misleading.
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ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
SECTION 3.01. Master Servicer to Service Mortgage
Loans.
For and on behalf of the Certificateholders, the Master Servicer
shall service and administer the Mortgage Loans in accordance with the terms of
this Agreement and customary and usual standards of practice of prudent mortgage
loan servicers. In connection with such servicing and administration, the Master
Servicer shall have full power and authority, acting alone and/or through
Subservicers as provided in Section 3.02 hereof, to do or cause to be done any
and all things that it may deem necessary or desirable in connection with such
servicing and administration, including but not limited to, the power and
authority, subject to the terms hereof (i) to execute and deliver, on behalf of
the Certificateholders and the Trustee, customary consents or waivers and other
instruments and documents, (ii) to consent to transfers of any Mortgaged
Property and assumptions of the Mortgage Notes and related Mortgages (but only
in the manner provided in this Agreement), (iii) to collect any Insurance
Proceeds and other Liquidation Proceeds, and (iv) to effectuate foreclosure or
other conversion of the ownership of the Mortgaged Property securing any
Mortgage Loan; provided that the Master Servicer shall not take any action that
is inconsistent with or prejudices the interests of the Trust Fund or the
Certificateholders in any Mortgage Loan or the rights and interests of the
Depositor, the Trustee and the Certificateholders under this Agreement. The
Master Servicer shall represent and protect the interests of the Trust Fund in
the same manner as it protects its own interests in mortgage loans in its own
portfolio in any claim, proceeding or litigation regarding a Mortgage Loan, and
shall not make or permit any modification, waiver or amendment of any Mortgage
Loan which would cause the Trust Fund to fail to qualify as a REMIC or result in
the imposition of any tax under Section 860F(a) or Section 860G(d) of the Code.
Without limiting the generality of the foregoing, the Master Servicer, in its
own name or in the name of the Depositor and the Trustee, is hereby authorized
and empowered by the Depositor and the Trustee, when the Master Servicer
believes it appropriate in its reasonable judgment, to execute and deliver, on
behalf of the Trustee, the Depositor, the Certificateholders or any of them, any
and all instruments of satisfaction or cancellation, or of partial or full
release or discharge and all other comparable instruments, with respect to the
Mortgage Loans, and with respect to the Mortgaged Properties held for the
benefit of the Certificateholders. The Master Servicer shall prepare and deliver
to the Depositor and/or the Trustee such documents requiring execution and
delivery by either or both of them as are necessary or appropriate to enable the
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Master Servicer to service and administer the Mortgage Loans to the extent that
the Master Servicer is not permitted to execute and deliver such documents
pursuant to the preceding sentence. Upon receipt of such documents, the
Depositor and/or the Trustee shall execute such documents and deliver them to
the Master Servicer.
In accordance with the standards of the preceding paragraph, the
Master Servicer shall advance or cause to be advanced funds as necessary for the
purpose of effecting the payment of taxes and assessments on the Mortgaged
Properties, which advances shall be reimbursable in the first instance from
related collections from the Mortgagors pursuant to Section 3.06, and further as
provided in Section 3.08. The costs incurred by the Master Servicer, if any, in
effecting the timely payments of taxes and assessments on the Mortgaged
Properties and related insurance premiums shall not, for the purpose of
calculating monthly distributions to the Certificateholders, be added to the
Stated Principal Balances of the related Mortgage Loans, notwithstanding that
the terms of such Mortgage Loans so permit.
SECTION 3.02. Subservicing; Enforcement of the
Obligations of Servicers.
(a) The Master Servicer may arrange for the subservicing of any
Mortgage Loan by a Subservicer pursuant to a subservicing agreement; provided,
however, that such subservicing arrangement and the terms of the related
subservicing agreement must provide for the servicing of such Mortgage Loans in
a manner consistent with the servicing arrangements contemplated hereunder.
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. Notwithstanding the provisions of any subservicing agreement, any of
the provisions of this Agreement relating to agreements or arrangements between
the Master Servicer and a Subservicer or reference to actions taken through a
Subservicer or otherwise, the Master Servicer shall remain obligated and liable
to the Depositor, the Trustee and the Certificateholders for the servicing and
administration of the Mortgage Loans in accordance with the provisions of this
Agreement without diminution of such obligation or liability by virtue of such
subservicing agreements or arrangements or by virtue of indemnification from the
Subservicer 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.
All actions of each Subservicer performed pursuant to the related subservicing
agreement shall be performed as an agent of the Master Servicer with the same
force and effect as if performed directly by the Master Servicer.
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(b) For purposes of this Agreement, the Master Servicer shall be
deemed to have received any collections, recoveries or payments with respect to
the Mortgage Loans that are received by a Subservicer regardless of whether such
payments are remitted by the Subservicer to the Master Servicer.
SECTION 3.03. Rights of the Depositor and the Trustee
in Respect of 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 and in connection with any such defaulted obligation to
exercise the related 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. Neither the Trustee
nor the Depositor shall have any responsibility or liability for any action or
failure to act by the Master Servicer nor shall the Trustee or the Depositor be
obligated to supervise the performance of the Master Servicer hereunder or
otherwise.
SECTION 3.04. Trustee to Act as Master Servicer.
In the event that the Master Servicer shall for any reason no
longer be the Master Servicer hereunder (including by reason of an Event of
Default), the Trustee or its successor shall thereupon assume all of the rights
and obligations of the Master Servicer hereunder arising thereafter (except that
the Trustee shall not be (i) liable for losses of the Master Servicer pursuant
to Section 3.09 hereof or any acts or omissions of the predecessor Master
Servicer hereunder), (ii) obligated to make Advances if it is prohibited from
doing so by applicable law, (iii) obligated to effectuate repurchases or
substitutions of Mortgage Loans hereunder including, but not limited to,
repurchases or substitutions of Mortgage Loans pursuant to Section 2.02 or 2.03
hereof, (iv) responsible for expenses of the Master Servicer pursuant to Section
2.03 or (v) deemed to have made any representations and warranties of the Master
Servicer hereunder). Any such assumption shall be subject to Section 7.02
hereof. If the Master Servicer shall for any reason no longer be the Master
Servicer (including by reason of any Event of Default), the Trustee or its
successor shall succeed to any rights and obligations of the Master Servicer
under each subservicing agreement.
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 or substitute subservicing
agreement and the Mortgage Loans then being serviced thereunder and an
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accounting of amounts collected or held by it and otherwise use its best efforts
to effect the orderly and efficient transfer of the substitute subservicing
agreement to the assuming party.
SECTION 3.05. Collection of Mortgage Loan Payments;
Certificate Account; Distribution
Account.
(a) The Master Servicer shall make reasonable efforts in
accordance with the customary and usual standards of practice of prudent
mortgage servicers to collect all payments called for under the terms and
provisions of the Mortgage Loans to the extent such procedures shall be
consistent with this Agreement and the terms and provisions of any related
Required Insurance Policy. 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 dates for payments due on a Mortgage Note for a period not
greater than 180 days; provided, however, that the Master Servicer cannot extend
the maturity of any such Mortgage Loan past the date on which the final payment
is due on the latest maturing Mortgage Loan as of the Cut-off Date. In the event
of any such arrangement, the Master Servicer shall make Advances on the related
Mortgage Loan in accordance with the provisions of Section 4.01 during the
scheduled period in accordance with the amortization schedule of such Mortgage
Loan without modification thereof by reason of such arrangements. The Master
Servicer shall not be required to institute or join in litigation with respect
to collection of any payment (whether under a Mortgage, Mortgage Note or
otherwise or against any public or governmental authority with respect to a
taking or condemnation) if it reasonably believes that enforcing the provision
of the Mortgage or other instrument pursuant to which such payment is required
is prohibited by applicable law.
(b) The Master Servicer shall establish and maintain a
Certificate Account into which the Master Servicer shall deposit or cause to be
deposited on a daily basis within one Business Day of receipt, except as
otherwise specifically provided herein, the following payments and collections
remitted by Subservicers or received by it in respect of Mortgage Loans
subsequent to the Cut-off Date (other than in respect of principal and interest
due on the Mortgage Loans on or before the Cut-off Date) and the following
amounts required to be deposited hereunder:
(i) all payments on account of principal on the
Mortgage Loans, including Principal Prepayments;
(ii) all payments on account of interest on the
Mortgage Loans, net of the related Master Servicing Fee;
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(iii) all Insurance Proceeds and Liquidation Proceeds, other than
proceeds 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;
(iv) any amount required to be deposited by the Master Servicer
pursuant to Section 3.05(e) in connection with any losses on Permitted
Investments;
(v) any amounts required to be deposited by the Master Servicer
pursuant to Section 3.09(b), 3.09(d), and in respect of net monthly
rental income from REO Property pursuant to Section 3.11 hereof;
(vi) all Substitution Adjustment Amounts;
(vii) all Advances made by the Master Servicer pursuant
to Section 4.01; and
(viii) any other amounts required to be deposited
hereunder.
In addition, with respect to any Mortgage Loan that is subject to a
buydown agreement, on each Due Date for such Mortgage Loan, in addition to the
monthly payment remitted by the Mortgagor, the Master Servicer shall cause funds
to be deposited into the Certificate Account in an amount required to cause an
amount of interest to be paid with respect to such Mortgage Loan equal to the
amount of interest that has accrued on such Mortgage Loan from the preceding Due
Date at the Mortgage Rate net of the related Master Servicing Fee on such date.
The foregoing requirements for remittance by the Master Servicer shall
be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of prepayment penalties,
late payment charges or assumption fees, if collected, need not be remitted by
the Master Servicer. In the event that the Master Servicer shall remit any
amount not required to be remitted, it may at any time withdraw or direct the
institution maintaining the Certificate Account to withdraw such amount from the
Certificate Account, any provision herein to the contrary notwithstanding. Such
withdrawal or direction may be accomplished by delivering written notice thereof
to the Trustee or such other institution maintaining the Certificate Account
which describes the amounts deposited in error in the Certificate Account. The
Master Servicer shall maintain adequate records with respect to all withdrawals
made pursuant to this Section. All funds deposited in the Certificate Account
shall be held in trust for the Certificateholders until withdrawn in accordance
with Section 3.08.
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(c) The Trustee shall establish and maintain, on behalf of the
Certificateholders, the Distribution Account. The Trustee shall, promptly upon
receipt, deposit in the Distribution Account and retain therein the following:
(i) the aggregate amount remitted by the Master
Servicer to the Trustee pursuant to Section 3.08(a)(ix);
(ii) any amount deposited by the Master Servicer
pursuant to Section 3.05(d) in connection with any losses on
Permitted Investments; and
(iii) any other amounts deposited hereunder which are required to
be deposited in the Distribution Account.
In the event that the Master Servicer shall remit any amount not
required to be remitted, it may at any time direct the Trustee to withdraw such
amount from the Distribution Account, any provision herein to the contrary
notwithstanding. Such direction may be accomplished by delivering an Officer's
Certificate to the Trustee which describes the amounts deposited in error in the
Distribution Account. All funds deposited in the Distribution Account shall be
held by the Trustee in trust for the Certificateholders until disbursed in
accordance with this Agreement or withdrawn in accordance with Section 3.08. In
no event shall the Trustee incur liability for withdrawals from the Distribution
Account at the direction of the Master Servicer.
(d) Each institution at which the Certificate Account or the
Distribution Account is maintained shall invest the funds therein as directed in
writing by the Master Servicer in Permitted Investments, which shall mature not
later than (i) in the case of the Certificate Account, the second Business Day
next preceding the related Distribution Account Deposit Date (except that if
such Permitted Investment is an obligation of the institution that maintains
such account, then such Permitted Investment shall mature not later than the
Business Day next preceding such Distribution Account Deposit Date) and (ii) in
the case of the Distribution Account, the Business Day next preceding the
Distribution Date (except that if such Permitted Investment is an obligation of
the institution that maintains such fund or account, then such Permitted
Investment shall mature not later than such Distribution Date) and, in each
case, shall not be sold or disposed of prior to its maturity. All such Permitted
Investments shall be made in the name of the Trustee, for the benefit of the
Certificateholders. All income and gain net of any losses realized from any such
investment of funds on deposit in the Certificate Account or the Distribution
Account shall be for the benefit of the Master Servicer as servicing
compensation and shall be remitted to it monthly as provided herein. The amount
of any realized losses in the Certificate Account or the Distribution Account
incurred in any such account in respect of
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any such investments shall promptly be deposited by the Master Servicer in the
Certificate Account or paid to the Trustee for deposit into the Distribution
Account, as applicable. The Trustee in its fiduciary capacity shall not be
liable for the amount of any loss incurred in respect of any investment or lack
of investment of funds held in the Certificate Account or the Distribution
Account and made in accordance with this Section 3.05.
(e) The Master Servicer shall give notice to the Trustee, the
Seller, each Rating Agency and the Depositor of any proposed change of the
location of the Certificate Account prior to any change thereof. The Trustee
shall give notice to the Master Servicer, the Seller, each Rating Agency and the
Depositor of any proposed change of the location of the Distribution Account
prior to any change thereof.
SECTION 3.06. Collection of Taxes, Assessments and
Similar Items; Escrow Accounts.
(a) To the extent required by the related Mortgage Note and not
violative of current law, the Master Servicer shall establish and maintain one
or more accounts (each, an "Escrow Account") and deposit and retain therein all
collections from the Mortgagors (or advances by the Master Servicer) for the
payment of taxes, assessments, hazard insurance premiums or comparable items for
the account of the Mortgagors. Nothing herein shall require the Master Servicer
to compel a Mortgagor to establish an Escrow Account in violation of applicable
law.
(b) Withdrawals of amounts so collected from the Escrow Accounts
may be made only to effect timely payment of taxes, assessments, hazard
insurance premiums, condominium or PUD association dues, or comparable items, to
reimburse the Master Servicer out of related collections for any payments made
pursuant to Sections 3.01 hereof (with respect to taxes and assessments and
insurance premiums) and 3.09 hereof (with respect to hazard insurance), to
refund to any Mortgagors any sums determined to be overages, to pay interest, if
required by law or the terms of the related Mortgage or Mortgage Note, to
Mortgagors on balances in the Escrow Account or to clear and terminate the
Escrow Account at the termination of this Agreement in accordance with Section
9.01 hereof. The Escrow Accounts shall not be a part of the Trust Fund.
(c) The Master Servicer shall advance any payments referred to in
Section 3.06(a) that are not timely paid by the Mortgagors 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
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be recoverable by the Master Servicer out of Insurance Proceeds,
Liquidation Proceeds or otherwise.
SECTION 3.07. Access to Certain Documentation and
Information Regarding the Mortgage
Loans.
The Master Servicer shall afford the Depositor and the Trustee
reasonable access to all records and documentation regarding the Mortgage Loans
and all accounts, insurance information and other matters relating to this
Agreement, such access being afforded without charge, but only upon reasonable
request and during normal business hours at the office designated by the Master
Servicer.
Upon reasonable advance notice in writing, the Master Servicer
will provide to each Certificateholder which is a savings and loan association,
bank or insurance company certain reports and reasonable access to information
and documentation regarding the Mortgage Loans sufficient to permit such
Certificateholder to comply with applicable regulations of the OTS or other
regulatory authorities with respect to investment in the Certificates; provided
that the Master Servicer shall be entitled to be reimbursed by each such
Certificateholder for actual expenses incurred by the Master Servicer in
providing such reports and access.
SECTION 3.08. Permitted Withdrawals from the
Certificate Account and Distribution
Account.
(a) The Master Servicer may from time to time make withdrawals
from the Certificate Account for the following purposes:
(i) to pay to the Master Servicer (to the extent not previously
retained by the Master Servicer) the servicing compensation to which it
is entitled pursuant to Section 3.14, and to pay to the Master Servicer,
as additional servicing compensation, earnings on or investment income
with respect to funds in or credited to the Certificate Account;
(ii) to reimburse the Master Servicer for unreimbursed Advances
made by it, such right of reimbursement pursuant to this subclause (ii)
being limited to amounts received on the Mortgage Loan(s) in respect of
which any such Advance was made;
(iii) to reimburse the Master Servicer for any
Nonrecoverable Advance previously made;
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(iv) to reimburse the Master Servicer for Insured
Expenses from the related Insurance Proceeds;
(v) to reimburse the Master Servicer for (a) unreimbursed
Servicing Advances, the Master Servicer's right to reimbursement
pursuant to this clause (a) with respect to any Mortgage Loan being
limited to amounts received on such Mortgage Loan(s) which represent
late recoveries of the payments for which such advances were made
pursuant to Section 3.01 or Section 3.06 and (b) for unpaid Master
Servicing Fees as provided in Section 3.11 hereof;
(vi) to pay to the purchaser, with respect to each Mortgage Loan
or property acquired in respect thereof that has been purchased pursuant
to Section 2.02, 2.03 or 3.11, all amounts received thereon after the
date of such purchase;
(vii) to reimburse the Seller, the Master Servicer or the
Depositor for expenses incurred by any of them and reimbursable pursuant
to Section 6.03 hereof;
(viii) to withdraw any amount deposited in the
Certificate Account and not required to be deposited
therein;
(ix) on or prior to the Distribution Account Deposit Date, to
withdraw an amount equal to the related Available Funds and the Trustee
Fee for such Distribution Date and remit such amount to the Trustee for
deposit in the Distribution Account; and
(x) to clear and terminate the Certificate Account upon
termination of this Agreement pursuant to Section 9.01 hereof.
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 Certificate Account pursuant to such subclauses (i), (ii),
(iv), (v) and (vi). Prior to making any withdrawal from the Certificate Account
pursuant to subclause (iii), the Master Servicer shall deliver to the Trustee an
Officer's Certificate of a Servicing Officer indicating the amount of any
previous Advance determined by the Master Servicer to be a Nonrecoverable
Advance and identifying the related Mortgage Loans(s), and their respective
portions of such Nonrecoverable Advance.
(b) The Trustee shall withdraw funds from the Distribution
Account for distributions to Certificateholders in the manner specified in this
Agreement (and to withhold from the amounts so withdrawn, the amount of any
taxes that it is
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authorized to withhold pursuant to the last paragraph of Section 8.11). In
addition, the Trustee may from time to time make withdrawals from the
Distribution Account for the following purposes:
(i) to pay to itself the Trustee Fee for the related
Distribution Date;
(ii) to pay to the Master Servicer as additional servicing
compensation earnings on or investment income with respect to funds in
the Distribution Account;
(iii) to withdraw and return to the Master Servicer any
amount deposited in the Distribution Account and not
required to be deposited therein; and
(iv) to clear and terminate the Distribution Account upon
termination of the Agreement pursuant to Section 9.01 hereof.
SECTION 3.09. Maintenance of Hazard Insurance;
Maintenance of Primary Insurance
Policies.
(a) The Master Servicer shall cause to be maintained, for each
Mortgage Loan, hazard insurance with extended coverage in an amount that is at
least equal to the lesser of (i) the maximum insurable value of the improvements
securing such Mortgage Loan or (ii) the greater of (y) the outstanding principal
balance of the Mortgage Loan and (z) an amount such that the proceeds of such
policy shall be sufficient to prevent the Mortgagor and/or the mortgagee from
becoming a co-insurer. Each such policy of standard hazard insurance shall
contain, or have an accompanying endorsement that contains, a standard mortgagee
clause. Any amounts collected by the Master Servicer under any such policies
(other than the amounts to be applied to the restoration or repair of the
related Mortgaged Property or amounts released to the Mortgagor in accordance
with the Master Servicer's normal servicing procedures) shall be deposited in
the Certificate Account. Any cost incurred by the Master Servicer in maintaining
any such insurance shall not, for the purpose of calculating monthly
distributions to the Certificateholders or remittances to the Trustee for their
benefit, be added to the principal balance of the Mortgage Loan, notwithstanding
that the terms of the Mortgage Loan so permit. Such costs shall be recoverable
by the Master Servicer out of late payments by the related Mortgagor or out of
Liquidation Proceeds to the extent permitted by Section 3.08 hereof. 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 other than pursuant to such applicable laws
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and regulations as shall at any time be in force and as shall require such
additional insurance. If the Mortgaged Property is located at the time of
origination of the Mortgage Loan in a federally designated special flood hazard
area and such area is participating in the national flood insurance program, the
Master Servicer shall cause flood insurance to be maintained with respect to
such Mortgage Loan. Such flood insurance shall be in an amount equal to the
least of (i) the original principal balance of the related Mortgage Loan, (ii)
the replacement value of the improvements which are part of such Mortgaged
Property, and (iii) the maximum amount of such insurance available for the
related Mortgaged Property under the national flood insurance program.
(b) In the event that the Master Servicer shall obtain and
maintain a blanket policy 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, it being understood and agreed that
such policy may contain a deductible clause on terms substantially equivalent to
those commercially available and maintained by comparable servicers. If such
policy contains a deductible clause, 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, and there shall have
been a loss that 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. In connection with its activities as Master
Servicer of the Mortgage Loans, the Master Servicer agrees to present, on behalf
of itself, the Depositor, and the Trustee for the benefit of the
Certificateholders, claims under any such blanket policy.
(c) The Master Servicer shall not 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, would have been covered
thereunder. The Master Servicer shall not cancel or refuse to renew any such
Primary Insurance Policy 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 a Qualified Insurer. The Master Servicer shall not be required
to maintain any Primary Insurance Policy with respect to any Mortgage Loan with
a Loan-to-Value Ratio less than or equal to 80% as of any date of determination
or, based on a new appraisal, the principal balance of such Mortgage Loan
represents 80% or less of the new appraised value. The Master Servicer agrees to
effect the timely payment of the premiums on each Primary Insurance Policy, and
such costs not otherwise recoverable shall
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be recoverable by the Master Servicer from the related
liquidation proceeds.
(d) In connection with its activities as Master Servicer of the
Mortgage Loans, the Master Servicer agrees to present on behalf of itself, the
Trustee and Certificateholders, claims to the insurer under any Primary
Insurance Policies and, in this regard, to take such reasonable action as shall
be necessary to permit recovery under any Primary Insurance Policies respecting
defaulted Mortgage Loans. Any amounts collected by the Master Servicer under any
Primary Insurance Policies shall be deposited in the Certificate Account.
SECTION 3.10. Enforcement of Due-on-Sale Clauses;
Assumption Agreements.
(a) Except as otherwise provided in this Section, when any
property subject to a Mortgage has been conveyed by the Mortgagor, the Master
Servicer shall to the extent that it has knowledge of such conveyance, 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, the Master
Servicer is not required to exercise such rights with respect to a Mortgage Loan
if the Person to whom the related Mortgaged Property has been conveyed or is
proposed to be conveyed satisfies the terms and conditions contained in the
Mortgage Note and Mortgage related thereto and the consent of the mortgagee
under such Mortgage Note or Mortgage is not otherwise so required under such
Mortgage Note or Mortgage as a condition to such transfer. In the event that the
Master Servicer is prohibited by law from enforcing any such due-on-sale clause,
or if coverage under any Required Insurance Policy would be adversely affected,
or if nonenforcement is otherwise permitted hereunder, the Master Servicer is
authorized, subject to Section 3.10(b), to take or enter into an assumption and
modification agreement from or with the person to whom such property has been or
is about to be conveyed, pursuant to which such person becomes liable under the
Mortgage Note and, unless prohibited by applicable state law, the Mortgagor
remains liable thereon, provided that the Mortgage Loan shall continue to be
covered (if-so covered before the Master Servicer enters such agreement) by the
applicable Required Insurance Policies. The Master Servicer, subject to Section
3.10(b), is also authorized with the prior approval of the insurers under any
Required Insurance Policies to enter into a substitution of liability agreement
with such Person, pursuant to which the original Mortgagor is released from
liability and such Person is substituted as Mortgagor and becomes liable under
the Mortgage Note. Notwithstanding the foregoing, the Master Servicer shall not
be deemed to be in default under this Section
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by reason of any transfer or assumption which the Master Servicer reasonably
believes it is restricted by law from preventing, for any reason whatsoever.
(b) Subject to the Master Servicer's duty to enforce any
due-on-sale clause to the extent set forth in Section 3.10(a) hereof, in any
case in which a Mortgaged Property has been conveyed to a Person by a Mortgagor,
and such Person is to enter into an assumption agreement or modification
agreement or supplement to the Mortgage Note or Mortgage that 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 shall prepare and deliver or cause to be prepared and delivered
to the Trustee for signature and shall direct, in writing, the Trustee to
execute 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. In connection with any such assumption, no material term of the
Mortgage Note may be changed. In addition, the substitute Mortgagor and the
Mortgaged Property must be acceptable to the Master Servicer in accordance with
its underwriting standards as then in effect. Together with each such
substitution, assumption or other agreement or instrument delivered to the
Trustee for execution by it, the Master Servicer shall deliver an Officer's
Certificate signed by a Servicing Officer stating that the requirements of this
subsection have been met in connection therewith. The Master Servicer shall
notify the Trustee that any such substitution or assumption agreement has been
completed by forwarding to the Trustee the original of such substitution or
assumption agreement, which in the case of the original shall be added to the
related Mortgage File and shall, for all purposes, be considered a part of such
Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. Any fee collected by the Master Servicer for
entering into an assumption or substitution of liability agreement will be
retained by the Master Servicer as additional servicing compensation.
SECTION 3.11. Realization Upon Defaulted Mortgage
Loans; Repurchase of Certain Mortgage
Loans.
The Master Servicer shall use reasonable efforts to foreclose
upon or otherwise comparably convert the ownership of properties securing such
of the Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments. In
connection with such foreclosure or other conversion, the Master Servicer
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shall follow such practices and procedures as it shall deem necessary or
advisable and as shall be normal and usual in its general mortgage servicing
activities and meet the requirements of the insurer under any Required Insurance
Policy; provided, however, that the Master Servicer shall not be required to
expend its own funds in connection with any foreclosure 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 after reimbursement to itself of such expenses and (ii) that such expenses
will be recoverable to it through Liquidation Proceeds (respecting which it
shall have priority for purposes of withdrawals from the Certificate Account).
The Master Servicer shall be responsible for all other costs and expenses
incurred by it in any such proceedings; provided, however, that it shall be
entitled to reimbursement thereof from the liquidation proceeds with respect to
the related Mortgaged Property, as provided in the definition of Liquidation
Proceeds. If the Master Servicer has knowledge that a Mortgaged Property which
the Master Servicer is contemplating acquiring in foreclosure or by deed in lieu
of foreclosure is located within a 1 mile radius of any site listed in the
Expenditure Plan for the Hazardous Substance Clean Up Bond Act of 1984 or other
site with environmental or hazardous waste risks known to the Master Servicer,
the Master Servicer will, prior to acquiring the Mortgaged Property, consider
such risks and only take action in accordance with its established environmental
review procedures.
With respect to any REO Property, the deed or certificate of sale
shall be taken in the name of the Trustee for the benefit of the
Certificateholders, or its nominee, on behalf of the Certificateholders. The
Trustee's name shall be placed on the title to such REO Property solely as the
Trustee hereunder and not in its individual capacity. The Master Servicer shall
ensure that the title to such REO Property references the Pooling and Servicing
Agreement and the Trustee's capacity thereunder. Pursuant to its efforts to sell
such REO Property, the Master Servicer shall either itself or through an agent
selected by the Master Servicer protect and conserve such REO Property in the
same manner and to such extent as is customary in the locality where such REO
Property is located and may, incident to its conservation and protection of the
interests of the Certificateholders, rent the same, or any part thereof, as the
Master Servicer deems to be in the best interest of the Certificateholders for
the period prior to the sale of such REO Property. The Master Servicer shall
prepare for and deliver to the Trustee a statement with respect to each REO
Property that has been rented showing the aggregate rental income received and
all expenses incurred in connection with the management and maintenance of such
REO Property at such times as is necessary to enable the Trustee to comply with
the reporting requirements of the REMIC Provisions. The net monthly rental
income, if any, from such REO Property shall be deposited in the Certificate
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Account no later than the close of business on each Determination Date. The
Master Servicer shall perform the tax reporting and withholding required by
Sections 1445 and 6050J of the Code with respect to foreclosures and
abandonments, the tax reporting required by Section 6050H of the Code with
respect to the receipt of mortgage interest from individuals and any tax
reporting required by Section 6050P of the Code with respect to the cancellation
of indebtedness by certain financial entities, by preparing such tax and
information returns as may be required, in the form required, and delivering the
same to the Trustee for filing.
In the event that the Trust Fund acquires any Mortgaged Property
as aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, the Master Servicer shall dispose of such Mortgaged Property
prior to two years after its acquisition by the Trust Fund unless the Trustee
shall have been supplied with an Opinion of Counsel to the effect that the
holding by the Trust Fund of such Mortgaged Property subsequent to such two-year
period will not result in the imposition of taxes on "prohibited transactions"
of the REMIC hereunder as defined in section 860F of the Code or cause the REMIC
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 Mortgaged Property
(subject to any conditions contained in such Opinion of Counsel).
Notwithstanding any other provision of this Agreement, no Mortgaged Property
acquired by the Trust Fund shall be rented (or allowed to continue to be rented)
or otherwise used for the production of income by or on behalf of the Trust Fund
in such a manner or pursuant to any terms that would (i) cause such Mortgaged
Property to fail to qualify as "foreclosure property" within the meaning of
section 860G(a)(8) of the Code or (ii) subject the REMIC to the imposition of
any federal, state or local income taxes on the income earned from such
Mortgaged Property under Section 860G(c) of the Code or otherwise, unless the
Master Servicer has agreed to indemnify and hold harmless the Trust Fund with
respect to the imposition of any such taxes.
The decision of the Master Servicer to foreclose on a defaulted
Mortgage Loan shall be subject to a determination by the Master Servicer that
the proceeds of such foreclosure would exceed the costs and expenses of bringing
such a proceeding. The income earned from the management of any REO Properties,
net of reimbursement to the Master Servicer for expenses incurred (including any
property or other taxes) in connection with such management and net of
unreimbursed Master Servicing Fees, Advances and Servicing Advances, shall be
applied to the payment of principal of and interest on the related defaulted
Mortgage Loans (with interest accruing as though such Mortgage Loans were still
current) and all such income shall be deemed, for all purposes in this
Agreement, to be payments on account of
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principal and interest on the related Mortgage Notes and shall be deposited into
the Certificate Account. To the extent the net income received during any
calendar month is in excess of the amount attributable to amortizing principal
and accrued interest at the related Mortgage Rate on the related Mortgage Loan
for such calendar month, such excess shall be considered to be a partial
prepayment of principal of the related Mortgage Loan.
The proceeds from any liquidation of a Mortgage Loan, as well as
any income from an REO Property, will be applied in the following order of
priority: first, to reimburse the Master Servicer for any related unreimbursed
Servicing Advances and Master Servicing Fees; second, to reimburse the Master
Servicer for any unreimbursed Advances; third, to reimburse the Certificate
Account for any Nonrecoverable Advances (or portions thereof) that were
previously withdrawn by the Master Servicer pursuant to Section 3.08(a)(iii)
that related to such Mortgage Loan; fourth, to accrued and unpaid interest (to
the extent no Advance has been made for such amount or any such Advance has been
reimbursed) on the Mortgage Loan or related REO Property, at the Adjusted Net
Mortgage Rate to the Due Date occurring in the month in which such amounts are
required to be distributed; and fifth, as a recovery of principal of the
Mortgage Loan. Excess Proceeds, if any, from the liquidation of a Liquidated
Mortgage Loan will be retained by the Master Servicer as additional servicing
compensation pursuant to Section 3.14.
The Master Servicer, in its sole discretion, shall have the right
to purchase for its own account from the Trust Fund any Mortgage Loan which is
91 days or more delinquent at a price equal to the Purchase Price. The Purchase
Price for any Mortgage Loan purchased hereunder shall be deposited in the
Certificate Account and the Trustee, upon receipt of a certificate from the
Master Servicer in the form of Exhibit N hereto, shall release or cause to be
released to the purchaser of such Mortgage Loan the related Mortgage File and
shall execute and deliver such instruments of transfer or assignment prepared by
the purchaser of such Mortgage Loan, in each case without recourse, as shall be
necessary to vest in the purchaser of such Mortgage Loan any Mortgage Loan
released pursuant hereto and the purchaser of such Mortgage Loan shall succeed
to all the Trustee's right, title and interest in and to such Mortgage Loan and
all security and documents related thereto. Such assignment shall be an
assignment outright and not for security. The purchaser of such Mortgage Loan
shall thereupon own such Mortgage Loan, and all security and documents, free of
any further obligation to the Trustee or the Certificateholders with respect
thereto.
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SECTION 3.12. Trustee to Cooperate; Release of
Mortgage Files.
Upon the payment in full of any Mortgage Loan, or the receipt by
the Master Servicer of a notification that payment in full will be escrowed in a
manner customary for such purposes, the Master Servicer will immediately notify
the Trustee by delivering, or causing to be delivered a "Request for Release"
substantially in the form of Exhibit N. Upon receipt of such request, the
Trustee shall promptly release the related Mortgage File to the Master Servicer,
and the Trustee shall at the Master Servicer's direction execute and deliver to
the Master Servicer the request for reconveyance, deed of reconveyance or
release or satisfaction of mortgage or such instrument releasing the lien of the
Mortgage in each case provided by the Master Servicer, together with the
Mortgage Note with written evidence of cancellation thereon. Expenses incurred
in connection with any instrument of satisfaction or deed of reconveyance shall
be chargeable to the related Mortgagor. From time to time and as shall be
appropriate for the servicing or foreclosure of any Mortgage Loan, including for
such purpose, collection under any policy of flood insurance, any fidelity bond
or errors or omissions policy, or for the purposes of effecting a partial
release of any Mortgaged Property from the lien of the Mortgage or the making of
any corrections to the Mortgage Note or the Mortgage or any of the other
documents included in the Mortgage File, the Trustee shall, upon delivery to the
Trustee of a Request for Release in the form of Exhibit M signed by a Servicing
Officer, release the Mortgage File to the Master Servicer. Subject to the
further limitations set forth below, the Master Servicer shall cause the
Mortgage File or documents so released to be returned to the Trustee when the
need therefor by the Master Servicer no longer exists, unless the Mortgage Loan
is liquidated and the proceeds thereof are deposited in the Certificate Account,
in which case the Master Servicer shall deliver to the Trustee a Request for
Release in the form of Exhibit N, signed by a Servicing Officer.
If the Master Servicer at any time seeks to initiate a
foreclosure proceeding in respect of any Mortgaged Property as authorized by
this Agreement, the Master Servicer shall deliver or cause to be delivered to
the Trustee, for signature, as appropriate, any court pleadings, requests for
trustee's sale or other documents necessary to effectuate such foreclosure or
any legal action brought to obtain judgment against the Mortgagor on the
Mortgage Note or the Mortgage or to obtain a deficiency judgment or to enforce
any other remedies or rights provided by the Mortgage Note or the Mortgage or
otherwise available at law or in equity.
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SECTION 3.13. Documents Records and Funds in
Possession of Master Servicer to be Held for
the Trustee.
Notwithstanding any other provisions of this Agreement, the
Master Servicer shall transmit to the Trustee as required by this Agreement all
documents and instruments in respect of a Mortgage Loan coming into the
possession of the Master Servicer from time to time and shall account fully to
the Trustee for any funds received by the Master Servicer or which otherwise are
collected by the Master Servicer as Liquidation Proceeds or Insurance Proceeds
in respect of any Mortgage Loan. All Mortgage Files and funds collected or held
by, or under the control of, the Master Servicer in respect of any Mortgage
Loans, whether from the collection of principal and interest payments or from
Liquidation Proceeds, including but not limited to, any funds on deposit in the
Certificate Account, shall be held by the Master Servicer for and on behalf of
the Trustee and shall be and remain the sole and exclusive property of the
Trustee, subject to the applicable provisions of this Agreement. The Master
Servicer also agrees that it shall not create, incur or subject any Mortgage
File or any funds that are deposited in the Certificate Account, Distribution
Account or any Escrow Account, or any funds that otherwise are or may become due
or payable to the Trustee for the benefit of the Certificateholders, to any
claim, lien, security interest, judgment, levy, writ of attachment or other
encumbrance, or assert by legal action or otherwise any claim or right of setoff
against any Mortgage File or any funds collected on, or in connection with, a
Mortgage Loan, except, however, that the Master Servicer shall be entitled to
set off against and deduct from any such funds any amounts that are properly due
and payable to the Master Servicer under this Agreement.
SECTION 3.14. Servicing Compensation.
As compensation for its activities hereunder, the Master Servicer
shall be entitled to retain or withdraw from the Certificate Account an amount
equal to the Master Servicing Fee for each Mortgage Loan, provided that the
aggregate Master Servicing Fee with respect to any Distribution Date shall be
reduced (i) by an amount equal to the aggregate of the Prepayment Interest
Shortfalls, if any, with respect to such Distribution Date, but not below an
amount equal to one-half of the aggregate Master Servicing Fee for such
Distribution Date before reduction thereof in respect of such Prepayment
Interest Shortfalls, and (ii) with respect to the first Distribution Date, an
amount equal to any amount to be deposited into the Distribution Account by the
Depositor pursuant to Section 2.01(a) and not so deposited.
Additional servicing compensation in the form of Excess Proceeds,
Prepayment Interest Excess, prepayment penalties, assumption fees, late payment
charges and all income and gain net
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of any losses realized from Permitted Investments shall be retained by the
Master Servicer to the extent not required to be deposited in the Certificate
Account pursuant to Section 3.05 hereof. The Master Servicer shall be required
to pay all expenses incurred by it in connection with its master servicing
activities hereunder (including payment of any premiums for hazard insurance and
any Primary Insurance Policy and maintenance of the other forms of insurance
coverage required by this Agreement) and shall not be entitled to reimbursement
therefor except as specifically provided in this Agreement.
SECTION 3.15. Access to Certain Documentation.
The Master Servicer shall provide to the OTS and the FDIC and to
comparable regulatory authorities supervising Holders of Subordinated
Certificates and the examiners and supervisory agents of the OTS, the FDIC and
such other authorities, access to the documentation regarding the Mortgage Loans
required by applicable regulations of the OTS and the FDIC. Such access shall be
afforded without charge, but only upon reasonable and prior written request and
during normal business hours at the offices designated by the Master Servicer.
Nothing in this Section shall limit the obligation of the Master Servicer to
observe any applicable law prohibiting disclosure of information regarding the
Mortgagors and the failure of the Master Servicer to provide access as provided
in this Section as a result of such obligation shall not constitute a breach of
this Section.
SECTION 3.16. Annual Statement as to Compliance.
The Master Servicer shall deliver to the Depositor and the
Trustee on or before 120 days after the end of the Master Servicer's fiscal
year, commencing with its 199_ fiscal year, an Officer's Certificate stating, as
to the signer thereof, that (i) a review of the activities of the Master
Servicer during the preceding calendar year and of the performance of the Master
Servicer under this Agreement has been made under such officer's supervision and
(ii) to the best of such officer's knowledge, based on such review, the Master
Servicer has fulfilled all its obligations under this Agreement throughout such
year, or, if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof. The Trustee shall forward a copy of each such statement to each Rating
Agency.
SECTION 3.17. Annual Independent Public Accountants'
Servicing Statement; Financial
Statements.
On or before 120 days after the end of the Master Servicer's
fiscal year, commencing with its 199_ fiscal year, the Master Servicer at its
expense shall cause a nationally or
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regionally recognized firm of independent public accountants (who may also
render other services to the Master Servicer, the Seller or any affiliate
thereof) which is a member of the American Institute of Certified Public
Accountants to furnish a statement to the Trustee and the Depositor to the
effect that-such firm has examined certain documents and records relating to the
servicing of the Mortgage Loans under this Agreement or of mortgage loans under
pooling and servicing agreements substantially similar to this Agreement (such
statement to have attached thereto a schedule setting forth the pooling and
servicing agreements covered thereby) and that, on the basis of such
examination, conducted substantially in compliance with the Uniform Single
Attestation Program for Mortgage Bankers or the Audit Program for Mortgages
serviced for FNMA and 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 Attestation Program for Mortgage Bankers or the Audit Program for
Mortgages serviced for FNMA and 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 Attestation
Program for Mortgage Bankers or the Audit Program for Mortgages serviced for
FNMA and FHLMC (rendered within one year of such statement) of independent
public accountants with respect to the related Subservicer. Copies of such
statement shall be provided by the Trustee to any Certificateholder upon request
at the Master Servicer's expense, provided such statement is delivered by the
Master Servicer to the Trustee.
SECTION 3.18. Errors and Omissions Insurance; Fidelity
Bonds.
The Master Servicer shall for so long as it acts as master
servicer under this Agreement, obtain and maintain in force (a) a policy or
policies of insurance covering errors and omissions in the performance of its
obligations as Master Servicer hereunder and (b) a fidelity bond in respect of
its officers, employees and agents. Each such policy or policies and bond shall,
together, comply with the requirements from time to time of FNMA or FHLMC for
persons performing servicing for mortgage loans purchased by FNMA or FHLMC. In
the event that any such policy or bond ceases to be in effect, the Master
Servicer shall obtain a comparable replacement policy or bond from an insurer or
issuer, meeting the requirements set forth above as of the date of such
replacement.
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ARTICLE IV
DISTRIBUTIONS AND
ADVANCES BY THE MASTER SERVICER
SECTION 4.01. Advances.
The Master Servicer shall determine on or before each Master
Servicer Advance Date whether it is required to make an Advance pursuant to the
definition thereof. If the Master Servicer determines it is required to make an
Advance, it shall, on or before the Master Servicer Advance Date, either (i)
deposit into the Certificate Account an amount equal to the Advance or (ii) make
an appropriate entry in its records relating to the Certificate Account that any
Amount Held for Future Distribution has been used by the Master Servicer in
discharge of its obligation to make any such Advance. Any funds so applied shall
be replaced by the Master Servicer by deposit in the Certificate Account no
later than the close of business on the next Master Servicer Advance Date. The
Master Servicer shall be entitled to be reimbursed from the Certificate Account
for all Advances of its own funds made pursuant to this Section as provided in
Section 3.08. The obligation to make Advances with respect to any Mortgage Loan
shall continue if such Mortgage Loan has been foreclosed or otherwise terminated
and the related Mortgaged Property has not been liquidated.
The Master Servicer shall deliver to the Trustee on the related Master
Servicer Advance Date an Officer's Certificate of a Servicing Officer indicating
the amount of any proposed Advance determined by the Master Servicer to be a
Nonrecoverable Advance.
SECTION 4.02. Priorities of Distribution.
(a) On each Distribution Date, the Trustee shall withdraw the
Available Funds from the Distribution Account and apply such funds to
distributions on the Certificates in the following order and priority and, in
each case, to the extent of Available Funds remaining:
[(i) to each interest-bearing Class of Senior
Certificates, an amount allocable to interest equal to the
related Class Optimal Interest Distribution Amount, any shortfall
being allocated among such Classes in proportion to the amount of
the Class Optimal Interest Distribution Amount that would have
been distributed in the absence of such shortfall, provided,
however, that prior to the Accrual Termination Date, the amount
otherwise distributable as interest on each Class of Accrual
Certificates on such Distribution Date shall be distributed to
the Accretion Directed Certificates as set forth in 4.02(a)(ii)
and added to the Class
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Certificate Balances of certain Classes as set forth in
Section 4.02(b);
(ii) On each Distribution Date until the Accrual
Termination Date, the Accrual Amount will be distributed as
principal of the following Classes of Senior Certificates in the
following order of priority:
(x) to the Class A-_ Certificates, until the
Class Certificate Balance thereof has been reduced to
zero; and
(y) to the Class A-_-_ Component until the
Component Balance thereof has been reduced to zero.
On any Distribution Date that the Accrual Amount is in excess of
the amount necessary to reduce the Component Balance of the Class A-_-_
Component to zero, such excess shall be distributed as provided in Section
4.02(b).
(iii) to each Class of Senior Certificates,
concurrently as follows:
(x) to the Class PO Certificates, an amount
allocable to principal equal to the PO Formula Principal
Amount, up to the outstanding Class Certificate Balance of
the Class PO Certificates;
(y) on each Distribution Date prior to the Senior
Credit Support Depletion Date, the Non-PO Formula
Principal Amount, up to the amount of the Senior Principal
Distribution Amount for such Distribution Date, will be
distributed as follows:
(A) to the Class A-_ Certificates, the
Class A-_ Optimal Amount;
(B) to the Class A-R Certificates until the
Class Certificate Balance thereof has been reduced
to zero;
(C) sequentially, to the Class A-_ and Class
A-_ Certificates in that order, until the
respective Class Certificate Balances thereof have
been reduced to their respective Planned Balances
for such Distribution Date;
(D) sequentially, to the Class A-_
Certificates and the Class A-_-_ and Class A- _-_
Components, in that order, until the respective
Class Certificate Balance or Component Balances
thereof, as the case may
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be, have been reduced to their respective
Targeted Balances for such Distribution Date;
(E) concurrently, to the Class A-_ and Class
A-_ Certificates and the Class A-_-_ Component, pro
rata based on their respective Class Certificate
Balances or Component Balance, as the case may be,
until the Class Certificate Balances and Component
Balance thereof, as the case may be, have been
reduced to zero;
(F) sequentially, to the Class A-_
Certificates and the Class A-_-_ and Class A- _-_
Components, in that order, without regard to their
respective Targeted Balances and until the
respective Class Certificate Balance or Component
Balances thereof, as the case may be, have been
reduced to zero;
(G) sequentially, to the Class A-_ and Class
A-_ Certificates in that order, without regard to
their respective Planned Balances and until the
respective Class Certificate Balances have been
reduced to zero; and
(H) to the Class A-_ Certificates until
the Class Certificate Balance thereof has
been reduced to zero.
(iv) to the Class PO Certificates, any Class PO Deferred
Amounts, up to an amount not to exceed the amount calculated
pursuant to clause (A) of the definition of the Subordinated
Principal Distribution Amount for such Distribution Date (with
such amount to be allocated first from amounts calculated
pursuant to clause (a)(iii) of the definition of Subordinated
Principal Distribution Amount);
(v) to each Class of Subordinated Certificates, subject to
paragraph (e) below, in the following order of priority:
(A) to the Class B-_ Certificates, an amount
allocable to interest equal to the Class Optimal
Interest Distribution Amount for such Distribution
Date;
(B) to the Class B-_ Certificates, an
amount allocable to principal equal to its
Pro Rata Share for such Distribution Date
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until the Class Certificate Balance thereof
is reduced to zero;
(C) to the Class B-_ Certificates, an amount
allocable to interest equal to the Class Optimal
Interest Distribution Amount for such Class for
such Distribution Date;
(D) to the Class B-_ Certificates, an amount
allocable to principal equal to its Pro Rata Share
for such Distribution Date until the Class
Certificate Balance thereof is reduced to zero;
(E) to the Class B-_ Certificates, an amount
allocable to interest equal to the Class Optimal
Interest Distribution Amount for such Class for
such Distribution Date;
(F) to the Class B-_ Certificates, an amount
allocable to principal equal to its Pro Rata Share
for such Distribution Date until the Class
Certificate Balance thereof is reduced to zero;
(G) to the Class B-_ Certificates, an amount
allocable to interest equal to the amount of the
Class Optimal Interest Distribution Amount for such
Class for such Distribution Date;
(H) to the Class B-_ Certificates, an amount
allocable to principal equal to its Pro Rata Share
for such Distribution Date until the Class
Certificate Balance thereof has been reduced to
zero;
(I) to the Class B-_ Certificates, an amount
allocable to interest equal to the amount of the
Class Optimal Interest Distribution Amount for such
Class for such Distribution Date;
(J) to the Class B-_ Certificates, an amount
allocable to principal equal to its Pro Rata Share
for such Distribution Date until the Class
Certificate Balance thereof has been reduced to
zero;
(K) to the Class B-_ Certificates, an
amount allocable to interest equal to the
Class Optimal Interest Distribution Amount
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for such Class for such Distribution Date;
and
(L) to the Class B-_ Certificates, an amount
allocable to principal equal to its Pro Rata Share
for such Distribution Date until the Class
Certificate Balance thereof
is reduced to zero.
(vi) to the Class A-R Certificates, any remaining
Available Funds.]
On any Distribution Date, amounts distributed in respect of Class PO Deferred
Amounts will not reduce the Class Certificate Balance of the Class PO
Certificates.
On any Distribution Date, to the extent the Amount Available for
Senior Principal is insufficient to make the full distribution required to be
made pursuant to clause (iii)(x) above, (A) the amount distributable on the
Class PO Certificates in respect of principal shall be equal to the product of
(1) the Amount Available for Senior Principal and (2) a fraction, the numerator
of which is the PO Formula Principal Amount and the denominator of which is the
sum of the PO Formula Principal Amount and the Senior Principal Distribution
Amount and (B) the amount distributable on the Senior Certificates, other than
the Class PO Certificates, in respect of principal shall be equal to the product
of (1) the Amount Available for Senior Principal and (2) a fraction, the
numerator of which is the Senior Principal Distribution Amount and the
denominator of which is the sum of the Senior Principal Distribution Amount and
the PO Formula Principal Amount.
(b) On each Distribution Date prior to the Accrual Termination
Date, the Accrual Amount for such Distribution Date shall not (except as
provided in the last sentence of this clause (b)) be distributed as interest
with respect to the Class A-_-_ Component but shall instead be added to the
Component Balance of such Component on the related Distribution Date. With
respect to any Distribution Date prior to the Accrual Termination Date on which
principal payments on the Class A-_-_ Component are distributed pursuant to
Section 4.02(a)(iii), the Accrual Amount shall be deemed to have been added on
such Distribution Date to the Class Certificate Balance (and included in the
amount distributable on the Accretion Directed Certificates pursuant to Section
4.02(a)(ii) for such Distribution Date) and the related distribution thereon
shall be deemed to have been applied concurrently towards the reduction of all
or a portion of the amount so added and, to the extent of any excess, towards
the reduction of the Component Balance of the Class A-_-_ Component immediately
prior to such Distribution Date. Notwithstanding any such distribution, the
Class A-_-_ Component shall continue to be
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a Class of Accrual Certificates on each subsequent Distribution Date until the
Accrual Termination Date. Notwithstanding the foregoing with respect to the
Distribution Date on which the Accrual Amount is in excess of the amount
necessary to reduce the Component Balance of the Class A-___ Component to zero,
such excess will be distributed on such Distribution Date as interest on the
Class A-_-_ Component.
(c) On each Distribution Date on or after the Senior Credit
Support Depletion Date, notwithstanding the allocation and priority set forth in
Section 4.02(a)(iii)(y), the portion of Available Funds available to be
distributed as principal of the Senior Certificates (other than the Class PO
Certificates) shall be distributed concurrently, as principal, on such Classes,
pro rata, on the basis of their respective Class Certificate Balances, until the
Class Certificate Balances thereof are reduced to zero.
(d) On each Distribution Date, the amount referred to in clause
(i) of the definition of Class Optimal Interest Distribution Amount for each
Class of Certificates for such Distribution Date shall be reduced by (i) the
related Class' pro rata share of Net Prepayment Interest Shortfalls based on
such Class' Class Optimal Interest Distribution Amount for such Distribution
Date without taking into account such Net Prepayment Interest Shortfalls and
(ii) the related Class' Allocable Share of (A) after the Special Hazard Coverage
Termination Date, with respect to each Mortgage Loan that became a Special
Hazard Mortgage Loan during the calendar month preceding the month of such
Distribution Date, the excess of one month's interest at the related Adjusted
Net Mortgage Rate on the Stated Principal Balance of such Mortgage Loan as of
the Due Date in such month over the amount of Liquidation Proceeds applied as
interest on such Mortgage Loan with respect to such month, (B) after the
Bankruptcy Coverage Termination Date, with respect to each Mortgage Loan that
became subject to a Bankruptcy Loss during the calendar month preceding the
month of such Distribution Date, the interest portion of the related Debt
Service Reduction or Deficient Valuation, (C) each Relief Act Reduction incurred
during the calendar month preceding the month of such Distribution Date and (D)
after the Fraud Coverage Termination Date, with respect to each Mortgage Loan
that became a Fraud Loan during the calendar month preceding the month of such
Distribution Date, the excess of one month's interest at the related Adjusted
Net Mortgage Rate on the Stated Principal Balance of such Mortgage Loan as of
the Due Date in such month over the amount of Liquidation Proceeds applied as
interest on such Mortgage Loan with respect to such month.
(e) Notwithstanding the priority and allocation
contained in Section 4.02(a)(v), if with respect to any Class of
Subordinated Certificates on any Distribution Date the sum of the
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related Class Subordination Percentages of such Class and of all Classes of
Subordinated Certificates which have a higher numerical Class designation than
such Class (the "Applicable Credit Support Percentage") is less than the
Original Applicable Credit Support Percentage for such Class, no distribution of
Principal Prepayments will be made to any such Classes (the "Restricted
Classes") and the amount of such Principal Prepayments otherwise distributable
to the Restricted Classes shall be distributed to any Classes of Subordinated
Certificates having lower numerical Class designations than such Class, pro
rata, based on their respective Class Certificate Balances immediately prior to
such Distribution Date and shall be distributed in the sequential order provided
in Section 4.02(a)(v).
SECTION 4.03. Allocation of Realized Losses.
(a) On or prior to each Determination Date, the Trustee shall
determine the total amount of Realized Losses, including Excess Losses, with
respect to the related Distribution Date.
Realized Losses with respect to any Distribution Date shall be
allocated as follows:
[(i) the applicable PO Percentage of any Realized Loss
shall be allocated to the Class PO Certificates; and
(ii) (A) the applicable Non-PO Percentage of any Realized Loss
(other than an Excess Loss) shall be allocated first to the Subordinated
Certificates in reverse order of their respective numerical Class
designations (beginning with the Class of Subordinated Certificates then
outstanding with the highest numerical Class designation) until the
respective Class Certificate Balance of each such Class is reduced to
zero, and second to the Senior Certificates (other than the Class PO
Certificates), pro rata on the basis of their respective Class
Certificate Balances immediately prior to the related Distribution Date,
or, in the case of the Accrual Certificate, the lesser of the Component
Balance or the initial Component Balance thereof, until the Class
Certificate Balances and Component Balance thereof have been reduced to
zero;
(B) the applicable Non-PO Percentage of any Excess Losses shall
be allocated to the Senior Certificates (other than the Class PO
Certificates) and the Subordinated Certificates then outstanding, pro
rata, on the basis of their respective Class Certificate Balances or, in
the case of the Accrual Certificates, on the basis of the lesser of
their initial Component Balance and their then-current
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Component Balance immediately prior to the related
Distribution Date.]
(b) The Class Certificate Balance of the Class of Subordinated
Certificates then outstanding with the highest numerical Class designation shall
be reduced on each Distribution Date (i) by the amount of any payments on the
Class PO Certificates in respect of Class PO Deferred Amounts and (ii) by the
amount, if any, by which the aggregate of the Class Certificate Balances of all
outstanding Classes of Certificates (after giving effect to the distribution of
principal and the allocation of Realized Losses and Class PO Deferred Amounts on
such Distribution Date) exceeds the Pool Stated Principal Balance for the
following Distribution Date.
(c) Any Realized Loss allocated to a Class of Certificates or any
reduction in the Class Certificate Balance of a Class of Certificates pursuant
to Section 4.03(b) above shall be allocated among the Certificates of such Class
in proportion to their respective Certificate Balances. Any Realized Loss
allocated to a Class of Certificates comprised of Components shall be allocated
among such Components based on their respective Component Balances.
(d) Any allocation of Realized Losses to a Certificate or to any
Component or any reduction in the Certificate Balance of a Certificate, pursuant
to Section 4.03(b) above shall be accomplished by reducing the Certificate
Balance or Component Balance thereof, as applicable, immediately following the
distributions made on the related Distribution Date in accordance with the
definition of "Certificate Balance" or "Component Balance," as the case may be.
SECTION 4.04. Monthly Statements to
Certificateholders.
(a) Not later than each Distribution Date, the Trustee shall
prepare and cause to be forwarded by first class mail to each Certificateholder,
the Master Servicer and the Depositor a statement setting forth with respect to
the related distribution:
(i) the amount thereof allocable to principal, separately
identifying the aggregate amount of any Principal Prepayments and
Liquidation Proceeds included therein;
(ii) the amount thereof allocable to interest, any Class
Unpaid Interest Shortfall included in such distribution and any
remaining Class Unpaid Interest Shortfall after giving effect to
such distribution;
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(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 if there were sufficient funds
available therefor, the amount of the shortfall and the
allocation thereof as between principal and interest;
(iv) the Class Certificate Balance of each Class of
Certificates and the Component Balances of each Component after
giving effect to the distribution of principal on such
Distribution Date;
(v) the Pool Stated Principal Balance for the
following Distribution Date;
(vi) the Senior Percentage and Subordinated
Percentage for the following Distribution Date;
(vii) the amount of the Master Servicing Fees paid to or
retained by the Master Servicer with respect to such Distribution
Date;
(viii) the Pass-Through Rate for each such Class of
Certificates with respect to such Distribution Date;
(ix) the amount of Advances included in the distribution
on such Distribution Date and the aggregate amount of Advances
outstanding as of the close of business on such Distribution
Date;
(x) the number and aggregate principal amounts of
Mortgage Loans (A) delinquent (exclusive of Mortgage Loans in
foreclosure) (1) 1 to 30 days (2) 31 to 60 days (3) 61 to 90 days
and (4) 91 or more days and (B) in foreclosure and delinquent (1)
1 to 30 days (2) 31 to 60 days (3) 61 to 90 days and (4) 91 or
more days, as of the close of business on the last day of the
calendar month preceding such Distribution Date;
(xi) with respect to any Mortgage Loan that became an REO
Property during the preceding calendar month, the loan number and
Stated Principal Balance of such Mortgage Loan as of the close of
business on the Determination Date preceding such Distribution
Date and the date of acquisition thereof;
(xii) the total number and principal balance of any REO
Properties (and market value, if available) as of the close of
business on the Determination Date preceding such Distribution
Date;
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(xiii) the Senior Prepayment Percentage and Class
A-6 Optimal Amount for the following Distribution Date;
(xiv) the aggregate amount of Realized Losses
incurred during the preceding calendar month; and
(xv) the Special Hazard Loss Coverage Amount, the
Fraud Loss Coverage Amount and the Bankruptcy Loss
Coverage Amount, in each case as of the related
Determination Date.
(b) The Trustee's responsibility for disbursing the above
information to the Certificateholders is limited to the availability, timeliness
and accuracy of the information provided by the Master Servicer. The Trustee
will send a copy of each statement provided pursuant to this Section 4.04 to
each Rating Agency.
(c) On or before the fifth Business Day following the end of each
Prepayment Period (but in no event later than the third Business Day prior to
the related Distribution Date), the Master Servicer shall deliver to the Trustee
(which delivery may be by electronic data transmission) a report in
substantially the form set forth as Schedule V hereto.
(d) Within a reasonable period of time after the end of each
calendar year, the Trustee shall cause to be furnished to each Person who at any
time during the calendar year was a Certificateholder, a statement containing
the information set forth in clauses (a)(i), (a)(ii) and (a)(vii) of this
Section 4.04 aggregated for such calendar year or applicable portion thereof
during which such Person was a Certificateholder. Such obligation of the Trustee
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Trustee pursuant to any
requirements of the Code as from time to time in effect.
[SECTION 4.05. Determination of Pass-Through Rates for
COFI Certificates.
The Pass-Through Rate for each Class of COFI Certificates for
each Interest Accrual Period after the initial Interest Accrual Period shall be
determined by the Trustee as provided below on the basis of the Index and the
applicable formulae appearing in footnotes corresponding to the COFI
Certificates in the table relating to the Certificates in the Preliminary
Statement.
Except as provided below, with respect to each Interest Accrual
Period following the initial Interest Accrual Period, the Trustee shall not
later than two Business Days following the publication of the applicable Index
determine the Pass-Through
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Rate at which interest shall accrue in respect of the COFI Certificates during
the related Interest Accrual Period.
Except as provided below, the Index to be used in determining the
respective Pass-Through Rates for the COFI Certificates for a particular
Interest Accrual Period shall be COFI for the second calendar month preceding
such Interest Accrual Period. If at the Outside Reference Date for any Interest
Accrual Period, COFI for the second calendar month preceding such Interest
Accrual Period has not been published, the Trustee shall use COFI for the third
calendar month preceding such Interest Accrual Period. If COFI for neither the
second nor third calendar months preceding any Interest Accrual Period has been
published on or before the related Outside Reference Date, the Index for such
Interest Accrual Period and for all subsequent Interest Accrual Periods shall be
the National Cost of Funds Index for the third calendar month preceding such
Interest Accrual Period (or the fourth preceding calendar month if such National
Cost of Funds Index for the third preceding calendar month has not been
published by such Outside Reference Date). In the event that the National Cost
of Funds Index for neither the third nor fourth calendar months preceding an
Interest Accrual Period has been published on or before the related Outside
Reference Date, then for such Interest Accrual Period and for each succeeding
Interest Accrual Period, the Index shall be LIBOR, determined in the manner set
forth below.
On each Interest Determination Date so long as the COFI
Certificates are outstanding and the applicable Index therefor is LIBOR, the
Trustee shall either (i) request each Reference Bank to inform the Trustee of
the quotation offered by its principal London office for making one-month United
States dollar deposits in leading banks in the London interbank market, as of
11:00 a.m. (London time) on such Interest Determination Date or (ii) in lieu of
making any such request, rely on such Reference Bank quotations that appear at
such time on the Reuters Screen LIBO Page (as defined in the International Swap
Dealers Association Inc. Code of Standard Wording, Assumptions and Provisions
for Swaps, 1986 Edition), to the extent available.
With respect to any Interest Accrual Period for which the
applicable Index is LIBOR, LIBOR for such Interest Accrual Period will be
established by the Trustee on the related Interest Determination Date as
follows:
(a) If on any Interest Determination Date two or more Reference
Banks provide such offered quotations, LIBOR for the next Interest
Accrual Period shall be the arithmetic mean of such offered quotations
(rounding such arithmetic mean upwards if necessary to the nearest whole
multiple of 1/32%).
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(b) If on any Interest Determination Date only one or none of the
Reference Banks provides such offered quotations, LIBOR for the next
Interest Accrual Period shall be whichever is the higher of (i) LIBOR as
determined on the previous Interest Determination Date or (ii) the
Reserve Interest Rate. The "Reserve Interest Rate" shall be the rate per
annum which the Trustee determines to be either (i) the arithmetic mean
(rounded upwards if necessary to the nearest whole multiple of 1/32%) of
the one-month United States dollar lending rates that New York City
banks selected by the Trustee are quoting, on the relevant Interest
Determination Date, to the principal London offices of at least two of
the Reference Banks to which such quotations are, in the opinion of the
Trustee, being so made, or (ii) in the event that the Trustee can
determine no such arithmetic mean, the lowest one-month United States
dollar lending rate which New York City banks selected by the Trustee
are quoting on such Interest Determination Date to leading European
banks.
From such time as the applicable Index becomes LIBOR until all of
the COFI Certificates are paid in full, the Trustee will at all times retain at
least four Reference Banks for the purposes of determining LIBOR with respect to
each interest Determination Date. The Master Servicer initially shall designate
the Reference Banks. Each "Reference Bank" shall be a leading bank engaged in
transactions in Eurodollar deposits in the international Eurocurrency market,
shall not control, be controlled by, or be under common control with, the
Trustee and shall have an established place of business in London. If any such
Reference Bank should be unwilling or unable to act as such or if the Master
Servicer should terminate its appointment as Reference Bank, the Trustee shall
promptly appoint or cause to be appointed another Reference Bank. The Trustee
shall have no liability or responsibility to any Person for (i) the selection of
any Reference Bank for purposes of determining LIBOR or (ii) any inability to
retain at least four Reference Banks which is caused by circumstances beyond its
reasonable control.
In determining LIBOR and any Pass-Through Rate for the COFI
Certificates or any Reserve Interest Rate, the Trustee may conclusively rely and
shall be protected in relying upon the offered quotations (whether written, oral
or on the Reuters Screen) from the Reference Banks or the New York City banks as
to LIBOR or the Reserve Interest Rate, as appropriate, in effect from time to
time. The Trustee shall not have any liability or responsibility to any Person
for (i) the Trustee's selection of New York City banks for purposes of
determining any Reserve Interest Rate or (ii) its inability, following a
good-faith reasonable effort, to obtain such quotations from the Reference Banks
or the New York City banks or to determine such arithmetic mean, all as provided
for in this Section 4.05.
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The establishment of LIBOR and each Pass-Through Rate for the
LIBOR Certificates by the Trustee shall (in the absence of manifest error) be
final, conclusive and binding upon each Holder of a Certificate and the
Trustee.]
[SECTION 4.06. Determination of Pass-Through Rates for
LIBOR Certificates.
On each Interest Determination Date so long as the LIBOR
Certificates are outstanding, the Trustee shall either (i) request each
Reference Bank to inform the Trustee of the quotation offered by its principal
London office for making one-month United States dollar deposits in leading
banks in the London interbank market, as of 11:00 a.m. (London time) on such
Interest Determination Date or (ii) in lieu of making any such request, rely on
such Reference Bank quotations that appear at such time on the Reuters Screen
LIBO Page (as defined in the International Swap Dealers Association Inc. Code of
Standard Wording, Assumptions and provisions for Swaps, 1986 Edition), to the
extent available.
LIBOR for the next Interest Accrual Period will be established by
the Trustee on each interest Determination Date as follows:
(a) If on any interest Determination Date two or more Reference
Banks provide such offered quotations, LIBOR for the next Interest
Accrual Period shall be the arithmetic mean of such offered quotations
(rounding such arithmetic mean upwards if necessary to the nearest whole
multiple of 1/32%).
(b) If on any Interest Determination Date only one or none of the
Reference Banks provides such offered quotations, LIBOR for the next
Interest Accrual Period shall be whichever is the higher of (i) LIBOR as
determined on the previous Interest Determination Date or (ii) the
Reserve Interest Rate. The "Reserve Interest Rate" shall be the rate per
annum which the Trustee determines to be either (i) the arithmetic mean
(rounded upwards if necessary to the nearest whole multiple of 1/32%) of
the one-month United States dollar lending rates that New York City
banks selected by the Trustee are quoting, on the relevant Interest
Determination Date, to the principal London offices of at least two of
the Reference Banks to which such quotations are, in the opinion of the
Trustee, being so made, or (ii) in the event that the Trustee can
determine no such arithmetic mean, the lowest one-month United States
dollar lending rate which New York City banks selected by the Trustee
are quoting on such Interest Determination Date to leading European
banks.
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(c) If on any interest Determination Date the trustee is required
but is unable to determine the Reserve Interest Rate in the manner
provided in paragraph (b) above, LIBOR shall be LIBOR as determined on
the preceding Interest Determination Date, or, in the case of the first
Interest Determination Date, the Initial LIBOR Rate.
Until all of the LIBOR Certificates are paid in full, the Trustee
will at all times retain at least four Reference Banks for the purpose of
determining LIBOR with respect to each Interest Determination Date. The Master
Servicer initially shall designate the Reference Banks. Each "Reference Bank"
shall be a leading bank engaged in transactions in Eurodollar deposits in the
international Eurocurrency market, shall not control, be controlled by, or be
under common control with, the Trustee and shall have an established place of
business in London. If any such Reference Bank should be unwilling or unable to
act as such or if the Master Servicer should terminate its appointment as
Reference Bank, the Trustee shall promptly appoint or cause to be appointed
another Reference Bank. The Trustee shall have no liability or responsibility to
any Person for (i) the selection of any Reference Bank for purposes of
determining LIBOR or (ii) any inability to retain at least four Reference Banks
which is caused by circumstances beyond its reasonable control.
The Pass-Through Rate for each Class of LIBOR Certificates for
each Interest Accrual Period shall be determined by the Trustee on each Interest
Determination Date so long as the LIBOR Certificates are outstanding on the
basis of LIBOR and the respective formulae appearing in footnotes corresponding
to the LIBOR Certificates in the table relating to the Certificates in the
Preliminary Statement.
In determining LIBOR, any Pass-Through Rate for the LIBOR
Certificates or any Reserve Interest Rate, the Trustee may conclusively rely and
shall be protected in relying upon the offered quotations (whether written, oral
or on the Reuters Screen) from the Reference Banks or the New York City banks as
to LIBOR or the Reserve Interest Rate, as appropriate, in effect from time to
time. The Trustee shall not have any liability or responsibility to any Person
for (i) the Trustee's selection of New York City banks for purposes of
determining any Reserve Interest Rate or (ii) its inability, following a
good-faith reasonable effort, to obtain such quotations from the Reference Banks
or the New York City banks or to determine such arithmetic mean, all as provided
for in this Section 4.06.
The establishment of LIBOR and each Pass-Through Rate for the
LIBOR Certificates by the Trustee shall (in the absence of manifest error) be
final, conclusive and binding upon each Holder of a Certificate and the
Trustee.]
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ARTICLE V
THE CERTIFICATES
SECTION 5.01. The Certificates.
The Certificates shall be substantially in the forms attached
hereto as exhibits. The Certificates shall be issuable in registered form, in
the minimum denominations, integral multiples in excess thereof (except that one
Certificate in each Class may be issued in a different amount which must be in
excess of the applicable minimum denomination) and aggregate denominations per
Class set forth in the Preliminary Statement.
Subject to Section 9.02 hereof respecting the final distribution
on the Certificates, on each Distribution Date the Trustee shall make
distributions to each Certificateholder of record on the preceding Record Date
either (x) by wire transfer in immediately available funds to the account of
such holder at a bank or other entity having appropriate facilities therefor, if
(i) such Holder has so notified the Trustee at least five Business Days prior to
the related Record Date and (ii) such Holder shall hold (A) a Notional Amount
Certificate, (B) 100% of the Class Certificate Balance of any Class of
Certificates or (C) Certificates of any Class with aggregate principal
Denominations of not less than $1,000,000 or (y) by check mailed by first class
mail to such Certificateholder at the address of such holder appearing in the
Certificate Register.
The Certificates shall be executed by manual or facsimile
signature on behalf of the Trustee by an authorized officer. Certificates
bearing the manual or facsimile signatures of individuals who were, at the time
when such signatures were affixed, authorized to sign on behalf of the Trustee
shall bind the Trustee, notwithstanding that such individuals or any of them
have ceased to be so authorized prior to the countersignature and delivery of
such Certificates or did not hold such offices at the date of such Certificate.
No Certificate shall be entitled to any benefit under this Agreement, or be
valid for any purpose, unless countersigned by the Trustee by manual signature,
and such countersignature upon any Certificate shall be conclusive evidence, and
the only evidence, that such Certificate has been duly executed and delivered
hereunder. All Certificates shall be dated the date of their countersignature.
On the Closing Date, the Trustee shall countersign the Certificates to be issued
at the direction of the Depositor, or any affiliate thereof.
The Depositor shall provide, or cause to be provided, to the
Trustee on a continuous basis, an adequate inventory of Certificates to
facilitate transfers.
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SECTION 5.02. Certificate Register; Registration of
Transfer and Exchange of Certificates.
(a) The Trustee shall maintain, or cause to be maintained in
accordance with the provisions of Section 5.06 hereof, a Certificate Register
for the Trust Fund in which, subject to the provisions of subsections (b) and
(c) below and 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. Upon surrender for registration of
transfer of any Certificate, the Trustee shall execute and deliver, in the name
of the designated transferee or transferees, one or more new Certificates of the
same Class and aggregate Percentage Interest.
At the option of a Certificateholder, Certificates may be
exchanged for other Certificates of the same Class in authorized denominations
and evidencing the same aggregate Percentage Interest upon surrender of the
Certificates to be exchanged at the office or agency of the Trustee. Whenever
any Certificates are so surrendered for exchange, the Trustee shall execute,
authenticate, and deliver the Certificates which the Certificate-holder making
the exchange is entitled to receive. Every Certificate presented or surrendered
for registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by the
holder thereof or his attorney duly authorized in writing.
No service charge to the Certificateholders shall be made for any
registration of transfer or exchange of Certificates, but 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 may be required.
All Certificates surrendered for registration of transfer or
exchange shall be cancelled and subsequently destroyed by the Trustee in
accordance with the Trustee's customary procedures.
(b) No transfer of a Private Certificate shall be made unless
such transfer is made pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws or is exempt from the
registration requirements under said Act and such state securities laws. In the
event that a transfer is to be made in reliance upon an exemption from the
Securities Act and such laws, in order to assure compliance with the Securities
Act and such laws, the Certificateholder desiring to effect such transfer and
such Certificateholder's prospective transferee shall each certify to the
Trustee in writing the facts surrounding the transfer in substantially the forms
set forth in Exhibit J (the "Transferor Certificate") and (i) deliver a letter
in substantially the form of either Exhibit K (the "Investment Letter") or
Exhibit L (the "Rule 144A Letter") or (ii) there
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shall be delivered to the Trustee at the expense of the transferor an Opinion of
Counsel that such transfer may be made pursuant to an exemption from the
Securities Act. The Depositor shall provide to any Holder of a Private
Certificate and any prospective transferee designated by any such Holder,
information regarding the related Certificates and the Mortgage Loans and such
other information as shall be necessary to satisfy the condition to eligibility
set forth in Rule 144A(d)(4) for transfer of any such Certificate without
registration thereof under the Securities Act pursuant to the registration
exemption provided by Rule 144A. The Trustee and the Master Servicer shall
cooperate with the Depositor in providing the Rule 144A information referenced
in the preceding sentence, including providing to the Depositor such information
regarding the Certificates, the Mortgage Loans and other matters regarding the
Trust Fund as the Depositor shall reasonably request to meet its obligation
under the preceding sentence. Each Holder of a Private Certificate desiring to
effect such transfer shall, and does hereby agree to, indemnify the Trustee and
the Depositor, the Seller and the Master Servicer 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.
No transfer of an ERISA-Restricted Certificate shall be made
unless the Trustee shall have received either (i) a representation from the
transferee of such Certificate acceptable to and in form and substance
satisfactory to the Trustee (in the event such Certificate is a Private
Certificate, such requirement is satisfied only by the Trustee's receipt of a
representation letter from the transferee substantially in the form of Exhibit K
or Exhibit L), to the effect that such transferee is not an employee benefit
plan or arrangement subject to Section 406 of ERISA or a plan or arrangement
subject to Section 4975 of the Code, nor a person acting on behalf of any such
plan or arrangement, nor using the assets of any such plan or arrangement to
effect such transfer, (ii) if the purchaser is an insurance company, a
representation that the purchaser is an insurance company which is purchasing
such Certificates with funds contained in an "insurance company general account"
(as such term is defined in Section V(e) of Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60")) and that the purchase and holding of such
Certificates are covered under PTCE 95-60 or (iii) in the case of any such
ERISA-Restricted Certificate presented for registration in the name of an
employee benefit plan subject to ERISA, or a plan or arrangement subject to
Section 4975 of the Code (or comparable provisions of any subsequent
enactments), or a trustee of any such plan or any other person acting on behalf
of any such plan or arrangement, or using such plan's or arrangement's assets,
an Opinion of Counsel satisfactory to the Trustee, which Opinion of Counsel
shall not be an expense of either the Trustee or the Trust Fund, addressed to
the Trustee to the effect that the purchase or holding of such ERISA-Restricted
Certificate will not result in the assets of the Trust Fund being
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deemed to be "plan assets" and subject to the prohibited transaction provisions
of ERISA and the Code and will not subject the Trustee to any obligation in
addition to those expressly undertaken in this Agreement or to any liability.
For purposes of the preceding sentence, with respect to an ERISA-Restricted
Certificate that is not a Private Certificate, in the event the representation
letter referred to in the preceding sentence is not so furnished, such
representation shall be deemed to have been made to the Trustee by the
transferee's (including an initial acquiror's) acceptance of the
ERISA-Restricted Certificates. Notwithstanding anything else to the contrary
herein, any purported transfer of an ERISA-Restricted Certificate to or on
behalf of an employee benefit plan subject to ERISA or to the Code without the
delivery to the Trustee of an Opinion of Counsel satisfactory to the Trustee as
described above shall be void and of no effect.
To the extent permitted under applicable law (including, but not
limited to, ERISA), the Trustee shall be under no liability to any Person for
any registration of transfer of any ERISA-Restricted Certificate that is in fact
not permitted by this Section 5.02(b) or for making any payments due on such
Certificate to the Holder thereof or taking any other action with respect to
such Holder under the provisions of this Agreement so long as the transfer was
registered by the Trustee in accordance with the foregoing requirements.
(c) Each Person who has or who acquires any Ownership Interest in
a Residual Certificate shall be deemed by the acceptance or acquisition of such
Ownership Interest to have agreed to be bound by the following provisions, and
the rights of each Person acquiring any Ownership Interest in a Residual
Certificate are expressly subject to the following provisions:
(i) Each Person holding or acquiring any Ownership Interest
in a Residual 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.
(ii) No Ownership Interest in a Residual Certificate may be
registered on the Closing Date or thereafter transferred, and the
Trustee shall not register the Transfer of any Residual Certificate
unless, in addition to the certificates required to be delivered to the
Trustee under sub-paragraph (b) above, the Trustee shall have been
furnished with an affidavit (a "Transfer Affidavit") of the initial
owner or the proposed transferee in the form attached hereto as Exhibit
I.
(iii) Each Person holding or acquiring any Ownership Interest
in a Residual Certificate shall agree (A) to obtain a Transfer Affidavit
from any other Person to whom such
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Person attempts to Transfer its Ownership Interest in a Residual
Certificate, (B) to obtain a Transfer Affidavit from any Person for whom
such Person is acting as nominee, trustee or agent in connection with
any Transfer of a Residual Certificate and (C) not to Transfer its
Ownership Interest in a Residual Certificate or to cause the Transfer of
an Ownership Interest in a Residual Certificate to any other Person if
it has actual knowledge that such Person is not a Permitted Transferee.
(iv) Any attempted or purported Transfer of any Ownership
Interest in a Residual Certificate in violation of the provisions of
this Section 5.02(c) shall be absolutely null and void and shall vest no
rights in the purported Transferee. If any purported transferee shall
become a Holder of a Residual Certificate in violation of the provisions
of this Section 5.02(c), then the last preceding Permitted Transferee
shall be restored to all rights as Holder thereof retroactive to the
date of registration of Transfer of such Residual Certificate. The
Trustee shall be under no liability to any Person for any registration
of Transfer of a Residual Certificate that is in fact not permitted by
Section 5.02(b) and this Section 5.02(c) or for making any payments due
on such Certificate to the Holder thereof or taking any other action
with respect to such Holder under the provisions of this Agreement so
long as the Transfer was registered after receipt of the related
Transfer Affidavit, Transferor Certificate and either the Rule 144A
Letter or the Investment Letter. The Trustee shall be entitled but not
obligated to recover from any Holder of a Residual Certificate that was
in fact not a Permitted Trans-feree at the time it became a Holder or,
at such subsequent time as it became other than a Permitted Transferee,
all payments made on such Residual Certificate at and after either such
time. Any such payments so recovered by the Trustee shall be paid and
delivered by the Trustee to the last preceding Permitted Transferee of
such Certificate.
(v) The Depositor shall use its best efforts to make
available, upon receipt of written request from the Trustee, all
information necessary to compute any tax imposed under Section 860E(e)
of the Code as a result of a Transfer of an Ownership Interest in a
Residual Certificate to any Holder who is not a Permitted Transferee.
The restrictions on Transfers of a Residual Certificate set forth
in this Section 5.02(c) shall cease to apply (and the applicable portions of the
legend on a Residual Certificate may be deleted) with respect to Transfers
occurring after delivery to the Trustee of an Opinion of Counsel, which Opinion
of Counsel shall not be an expense of the Trust Fund, the Trustee, the Seller or
the Master Servicer, to the effect that the elimination of such restrictions
will not cause the Trust Fund hereunder to
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fail to qualify as a REMIC at any time that the Certificates are outstanding or
result in the imposition of any tax on the Trust Fund, a Certificateholder or
another Person. Each Person holding or acquiring any Ownership Interest in a
Residual Certificate hereby consents to any amendment of this Agreement which,
based on an Opinion of Counsel furnished to the Trustee, is reasonably necessary
(a) to ensure that the record ownership of, or any beneficial interest in, a
Residual Certificate is not transferred, directly or indirectly, to a Person
that is not a Permitted Transferee and (b) to provide for a means to compel the
Transfer of a Residual Certificate which is held by a Person that is not a
Permitted Transferee to a Holder that is a Permitted Transferee.
(d) The preparation and delivery of all certificates and opinions
referred to above in this Section 5.02 in connection with transfer shall be at
the expense of the parties to such transfers.
(e) Except as provided below, the Book-Entry Certificates shall
at all times remain registered in the name of the Depository or its nominee and
at all times: (i) registration of the Certificates may not be transferred by the
Trustee except to another Depository; (ii) the Depository shall maintain
book-entry records with respect to the Certificate Owners and with respect to
ownership and transfers of such Book-Entry Certificates; (iii) ownership and
transfers of registration of the Book-Entry Certificates on the books of the
Depository shall be governed by applicable rules established by the Depository;
(iv) the Depository may collect its usual and customary fees, charges and
expenses from its Depository Participants; (v) the Trustee shall deal with the
Depository, Depository Participants and indirect participating firms as
representatives of the Certificate Owners of the Book-Entry Certificates for
purposes of exercising the rights of holders under this Agreement, and requests
and directions for and votes of such representatives shall not be deemed to be
inconsistent if they are made with respect to different Certificate Owners; and
(vi) the Trustee may rely and shall be fully protected in relying upon
information furnished by the Depository with respect to its Depository
Participants and furnished by the Depository Participants with respect to
indirect participating firms and persons shown on the books of such indirect
participating firms as direct or indirect Certificate Owners.
All transfers by Certificate Owners of 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 only transfer 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.
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If (x) (i) the Depository or the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to properly discharge
its responsibilities as Depository, and (ii) the Trustee or the Depositor is
unable to locate a qualified successor, (y) the Depositor at its option advises
the Trustee in writing that it elects to terminate the book-entry system through
the Depository or (z) after the occurrence of an Event of Default, Certificate
Owners representing at least 51% of the Certificate Balance of the Book-Entry
Certificates together advise the Trustee and the Depository through the
Depository Participants in writing that the continuation of a book-entry system
through the Depository is no longer in the best interests of the Certificate
Owners, the Trustee shall notify all Certificate Owners, through the Depository,
of the occurrence of any such event and of the availability of definitive,
fully-register-ed Certificates (the "Definitive Certificates") to Certificate
Owners requesting the same. Upon surrender to the Trustee of the related Class
of Certificates by the Depository, accompanied by the instructions from the
Depository for registration, the Trustee shall issue the Definitive
Certificates. Neither the Master Servicer, the Depositor nor the Trustee shall
be liable for any delay in delivery of such instruction and each may
conclusively rely on, and shall be protected in relying on, such instructions.
The Master Servicer shall provide the Trustee with an adequate inventory of
certificates to facilitate the issuance and transfer of Definitive Certificates.
Upon the issuance of Definitive Certificates all references herein to
obligations imposed upon or to be performed by the Depository shall be deemed to
be imposed upon and performed by the Trustee, to the extent applicable with
respect to such Definitive Certificates and the Trustee shall recognize the
Holders of the Definitive Certificates as Certificateholders hereunder; provided
that the Trustee shall not by virtue of its assumption of such obligations
become liable to any party for any act or failure to act of the Depository.
SECTION 5.03. Mutilated, Destroyed, Lost or Stolen
Certificates.
If (a) any mutilated Certificate is surrendered to the Trustee,
or the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Certificate and (b) there is delivered to the Master Servicer and
the Trustee 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 that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute, countersign and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
Class, tenor and Percentage Interest. In connection with the issuance of any new
Certificate under this Section 5.03, the Trustee may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other
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expenses (including the fees and expenses of the Trustee) connected therewith.
Any replacement Certificate issued pursuant to this Section 5.03 shall
constitute complete and indefeasible evidence of ownership, 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.
The Master Servicer, the Trustee and any agent of the Master
Servicer or the Trustee may treat the Person in whose name any Certificate is
registered as the owner of such Certificate for the purpose of receiving
distributions as provided in this Agreement and for all other purposes
whatsoever, and neither the Master Servicer, the Trustee nor any agent of the
Master Servicer or the Trustee shall be affected by any notice to the contrary.
SECTION 5.05. Access to List of Certificateholders'
Names and Addresses.
If three or more Certificateholders (a) request such information
in writing from the Trustee, (b) state that such Certificateholders desire to
communicate with other Certificate-holders with respect to their rights under
this Agreement or under the Certificates, and (c) provide a copy of the
communication which such Certificateholders propose to transmit, or if the
Depositor or Master Servicer shall request such information in writing from the
Trustee, then the Trustee shall, within ten Business Days after the receipt of
such request, provide the Depositor, the Master Servicer or such
Certificateholders at such recipients' expense the most recent list of the
Certificateholders of such Trust Fund held by the Trustee, if any. The
Depositor and every Certificateholder, by receiving and holding a Certificate,
agree that the Trustee shall not be held accountable by reason of the disclosure
of any such information as to the list of the Certificateholders hereunder,
regardless of the source from which such information was derived.
SECTION 5.06. Maintenance of Office or Agency.
The Trustee will maintain or cause to be maintained at its
expense an office or offices or agency or agencies in New York City where
Certificates may be surrendered for registration of transfer or exchange. The
Trustee initially designates its Corporate Trust Office for such purposes. The
Trustee will give prompt written notice to the Certificateholders of any change
in such location of any such office or agency.
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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 them herein.
SECTION 6.02. Merger or Consolidation of the Depositor
or the Master Servicer.
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 United States or under the laws of one of the states thereof 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, or any of the
Mortgage Loans and to perform its respective duties under this Agreement.
Any Person into which the Depositor or the Master Servicer may be
merged or consolidated, or any Person 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 sell mortgage loans to, and to service
mortgage loans on behalf of, FNMA or FHLMC.
SECTION 6.03. Limitation on Liability of the
Depositor, the Seller, the Master
Servicer and Others.
None of the Depositor, the Seller, the Master Servicer or any of
the directors, officers, employees or agents of the Depositor, the Seller or the
Master Servicer shall be under any liability to 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 Seller, the Master Servicer
or any such Person against any breach of representations or warranties made by
it herein or protect the Depositor, the Seller, the Master Servicer or any such
Person from any liability which would otherwise be imposed by reasons of
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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 Seller, the Master Servicer and any director, officer, employee
or agent of the Depositor, the Seller 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 Seller,
the Master Servicer and any director, officer, employee or agent of the
Depositor, the Seller 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 audit, controversy or judicial proceeding relating to a
governmental taxing authority or any legal action relating to this Agreement or
the Certificates, other than any loss, liability or expense related to any
specific Mortgage Loan or Mortgage Loans (except as any such loss, liability or
expense shall be otherwise reimbursable pursuant to this Agreement) and any
loss, liability or expense incurred by reason of willful misfeasance, bad faith
or gross negligence in the performance of duties hereunder or by reason of
reckless disregard of obligations and duties hereunder. None of the Depositor,
the Seller or the Master Servicer shall be under any obligation to appear in,
prosecute or defend any legal action that is not incidental to its respective
duties hereunder and which in its opinion may involve it in any expense or
liability; provided, however, that any of the Depositor, the Seller or the
Master Servicer may in its discretion undertake any such action that it may deem
necessary or desirable in respect of this Agreement and the rights and duties of
the parties hereto and interests of the Trustee and the Certificateholders
hereunder. In such event, the legal expenses and costs of such action and any
liability resulting therefrom shall be expenses, costs and liabilities of the
Trust Fund, and the Depositor, the Seller and the Master Servicer shall be
entitled to be reimbursed therefor out of the Certificate Account.
SECTION 6.04. Limitation on Resignation of Master
Servicer.
The Master Servicer shall not resign from the obligations and
duties hereby imposed on it except (a) upon appointment of a successor servicer
and receipt by the Trustee of a letter from each Rating Agency that such a
resignation and appointment will not result in a downgrading of the rating of
any of the Certificates, or (b) upon determination that its duties hereunder are
no longer permissible under applicable law. Any such determination under clause
(b) permitting the resignation of the Master Servicer shall be evidenced by an
Opinion of Counsel to such effect delivered to the Trustee. No such resignation
shall become effective until the Trustee or a successor master servicer shall
have assumed the Master Servicer's responsibilities, duties, liabilities and
obligations hereunder.
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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:
(i) any failure by the Master Servicer to deposit in
the Certificate Account or remit to the Trustee any payment
(other than a payment required to be made under Section 4.01
hereof) required to be made with respect to any Class of
Certificates under the terms of this Agreement, which failure
shall continue unremedied for five days after the date upon which
written notice of such failure 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 not less than 25% of the
total distributions allocated to such Class; or
(ii) any failure by the Master Servicer duly to
observe or perform in any material respect any other of the
covenants or agreements on the part of the Master Servicer
contained in this Agreement, which failure shall continue
unremedied for a period of thirty days after the date on which
written notice of such failure 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 not less than 25% of the
total distributions allocated to such Class; or
(iii) a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises for the
appointment of a receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceeding, or for the winding-up or liquidation of its
affairs, shall have been entered against the Master Servicer and
such decree or order shall have remained in force undischarged or
unstayed for a period of 60 consecutive days; or
(iv) the Master Servicer shall consent to the
appointment of a 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 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) so long as the Master Servicer is the Seller, any
failure by the Seller to observe or perform in any material
respect any other of the covenants or agreements on the part of
the Seller contained in this Agreement, which failure shall
continue unremedied for a period of 60 days after the date on
which written notice of such failure shall have been given to the
Seller by the Trustee or the Depositor, or to the Seller and the
Trustee by the Holders of Certificates of any Class evidencing
not less than 25% of the total distributions allocated to such
Class; or]
(vii) any failure of the Master Servicer to make any
Advance in the manner and at the time required to be made
pursuant to Section 4.01 which continues unremedied for a period
of one Business Day after the date of such failure.
If an Event of Default described in clauses (i) to (vi) 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, the Trustee may, or at the
direction of the Holders of Certificates of any Class evidencing not less than
25% of the total distributions allocated to such Class, the Trustee shall by
notice in writing to the Master Servicer (with a copy to each Rating Agency),
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 (vii) hereof shall occur, the Trustee shall, by notice in writing to the
Master Servicer and 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. On
and after the receipt by the Master Servicer of such written notice, all
authority and power of the Master Servicer hereunder, whether with respect to
the Mortgage Loans or otherwise, shall pass to and be vested in the Trustee.
[The Trustee shall thereupon make any Advance described in clause (vii) hereof
subject to Section 3.04 hereof.] 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
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endorsement or assignment of the Mortgage Loans and related documents, or
otherwise. Unless expressly provided in such written notice, no such termination
shall affect any obligation of the Master Servicer to pay amounts owed pursuant
to Article VIII. 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 of all
cash amounts which shall at the time be credited to the Certificate Account, or
thereafter be received with respect to the Mortgage Loans.
Notwithstanding any termination of the activities of the Master
Servicer hereunder, the Master Servicer shall be entitled to receive, out of any
late collection of a Scheduled Payment on a Mortgage Loan which was due prior to
the notice terminating such Master Servicer's rights and obligations as Master
Servicer hereunder and received after such notice, that portion thereof to which
such Master Servicer would have been entitled pursuant to Sections 3.08(a)(i)
through (viii),and any other amounts payable to such Master Servicer hereunder
the entitlement to which arose prior to the termination of its activities
hereunder.
SECTION 7.02. Trustee to Act; Appointment of
Successor.
On and after the time the Master Servicer receives a notice of
termination pursuant to Section 7.01 hereof, the Trustee shall, subject to and
to the extent provided in Section 3.04, be the successor to the Master Servicer
in its capacity as master servicer under this Agreement and the 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 by the
terms and provisions hereof and applicable law including the obligation to make
Advances pursuant to Section 4.01. As compensation therefor, the Trustee shall
be entitled to all funds relating to the Mortgage Loans that the Master Servicer
would have been entitled to charge to the Certificate Account or Distribution
Account if the Master Servicer had continued to act hereunder. Notwithstanding
the foregoing, if the Trustee has become the successor to the Master Servicer in
accordance with Section 7.01 hereof, the Trustee may, if it shall be unwilling
to so act, or shall, if it is prohibited by applicable law from making Advances
pursuant to Section 4.01 hereof or if it is otherwise unable to so act, appoint,
or petition a court of competent jurisdiction to appoint, any established
mortgage loan servicing institution the appointment of which does not adversely
affect the then current rating of the Certificates by each Rating Agency 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.
Any successor to the Master Servicer shall be an institution which is a FNMA and
FHLMC approved seller/servicer in good
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standing, which has a net worth of at least $10,000,000, and which is willing to
service the Mortgage Loans and executes and delivers to the Depositor and the
Trustee an agreement accepting such delegation and assignment, which contains an
assumption by such Person of the rights, powers, duties, responsibilities,
obligations and liabilities of the Master Servicer (other than liabilities of
the Master Servicer under Section 6.03 hereof incurred prior to termination of
the Master Servicer under Section 7.01), with like effect as if originally named
as a party to this Agreement; and provided further that each Rating Agency
acknowledges that its rating of the Certificates in effect immediately prior to
such assignment and delegation will not be qualified or reduced as a result of
such assignment and delegation. Pending appointment of a successor to the Master
Servicer hereunder, the Trustee, unless the Trustee is prohibited by law from so
acting, shall, subject to Section 3.04 hereof, 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 the Master Servicing
Fee permitted the Master Servicer hereunder. The Trustee and such successor
shall take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession. Neither the Trustee nor any other successor
master servicer shall be deemed to be in default hereunder by reason of any
failure to make, or any delay in making, any distribution hereunder or any
portion thereof or any failure to perform, or any delay in performing, any
duties or responsibilities hereunder, in either case caused by the failure of
the Master Servicer to deliver or provide, or any delay in delivering or
providing, any cash, information, documents or records to it.
Any successor to the Master Servicer as master servicer shall
give notice to the Mortgagors of such change of servicer and shall, during the
term of its service as master servicer maintain in force the policy or policies
that the Master Servicer is required to maintain pursuant to Section 6.05.
SECTION 7.03. Notification to Certificateholders.
(a) Upon any termination of or appointment of a successor to the
Master Servicer, the Trustee shall give prompt written notice thereof to
Certificateholders and to each Rating Agency.
(b) Within 60 days after the occurrence of any Event of Default,
the Trustee shall transmit by mail to all Certificateholders notice of each
such Event of Default hereunder known to the Trustee, unless such Event of
Default shall have been cured or waived.
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ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.01. Duties of Trustee.
The Trustee, prior to the occurrence of an Event of Default and
after the curing of all Events of Default that may have occurred, shall
undertake to perform such duties and only such duties as are specifically set
forth in this Agreement. In case an Event of Default has occurred and remains
uncured, the Trustee shall exercise such of the rights and powers vested in it
by this Agreement, and use the same degree of care and skill in their exercise
as a prudent person would exercise or use under the circumstances in the conduct
of such person's own affairs.
The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee that are specifically required to be furnished pursuant to any
provision of this Agreement shall examine them to determine whether they are in
the form required by this Agreement; provided, however, that the Trustee shall
not be responsible for the accuracy or content of any such resolution,
certificate, statement, opinion, report, document, order or other instrument.
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) unless an Event of Default known to the Trustee
shall have occurred and be continuing, 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 the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the Trustee and
conforming to the requirements of this Agreement which it
believed in good faith to be genuine and to have been duly
executed by the proper authorities respecting any matters arising
hereunder;
(ii) the Trustee shall not be liable for an error of
judgment made in good faith by a Responsible Officer or
Responsible Officers of the Trustee, unless it shall be finally
proven that the Trustee was negligent in ascertaining the
pertinent facts; and
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(iii) the Trustee shall not be liable with respect to
any action taken, suffered or omitted to be taken by it in good
faith in accordance with the direction of Holders of Certificates
evidencing not less than 25% of the Voting Rights of Certificates
relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee under this
Agreement.
SECTION 8.02. Certain Matters Affecting the Trustee.
Except as otherwise provided in Section 8.01:
(i) the Trustee may request and rely upon and shall
be protected in acting or refraining from acting upon any
resolution, Officers' Certificate, certificate of auditors or any
other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond or other paper
or document believed by it to be genuine and to have been signed
or presented by the proper party or parties and the Trustee shall
have no responsibility to ascertain or confirm the genuineness of
any signature of any such party or parties;
(ii) the Trustee may consult with counsel, financial
advisers or accountants and the advice of any such counsel,
financial advisers or accountants and any Opinion of Counsel
shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it
hereunder in good faith and in accordance with such Opinion of
Counsel;
(iii) the Trustee shall not be 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;
(iv) 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 evidencing not less than 25% of the Voting Rights
allocated to each Class of Certificates;
(v) the Trustee may execute any of the trusts
or powers hereunder or perform any duties hereunder
either directly or by or through agents, accountants or
attorneys;
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(vi) the Trustee shall not be required to risk or
expend its own funds or otherwise incur any financial liability
in the performance of any of its duties or in the exercise of any
of its rights or powers hereunder if it shall have reasonable
grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not assured to it;
(vii) the Trustee shall not be liable for any loss on
any investment of funds pursuant to this Agreement (other than as
issuer of the investment security);
(viii) the Trustee shall not be deemed to have knowledge
of an Event of Default until a Responsible Officer of the Trustee
shall have received written notice thereof; and
(ix) the Trustee shall be under no obligation to
exercise any of the trusts, rights 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 satisfactory to the Trustee against the costs, expenses
and liabilities which may be incurred therein or thereby.
SECTION 8.03. Trustee Not Liable for Certificates or
Mortgage Loans.
The recitals contained herein and in the Certificates shall be
taken as the statements of the Depositor or the Seller, 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 or of any Mortgage Loan or related document other than with respect
to the Trustee's execution and countersignature of the Certificates. The
Trustee shall not be accountable for the use or application by the Depositor or
the Master Servicer of any funds paid to the Depositor or the Master Servicer in
respect of the Mortgage Loans or deposited in or withdrawn from 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 as it would have if it
were not the Trustee.
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SECTION 8.05. Trustee's Fees and Expenses.
The Trustee, as compensation for its activities hereunder, shall
be entitled to withdraw from the Distribution Account on each Distribution Date
an amount equal to the Trustee Fee for such Distribution Date. The Trustee and
any director, officer, employee or agent of the Trustee shall be indemnified by
the Master Servicer and held harmless against any loss, liability or expense
(including reasonable attorney's fees) (i) incurred in connection with any claim
or legal action relating to (a) this Agreement, (b) the Certificates or (c) in
connection with the performance of any of the Trustee's duties hereunder, other
than any loss, liability or expense incurred by reason of willful misfeasance,
bad faith or negligence in the performance of any of the Trustee's duties
hereunder and (ii) resulting from any error in any tax or information return
prepared by the Master Servicer. Such indemnity shall survive the termination of
this Agreement or the resignation or removal of the Trustee hereunder. Without
limiting the foregoing, the Master Servicer covenants and agrees, except as
otherwise agreed upon in writing by the Depositor and the Trustee, and except
for any such expense, disbursement or advance as may arise from the Trustee's
negligence, bad faith or willful misconduct, to pay or reimburse the Trustee,
for all reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any of the provisions of this Agreement with respect
to: (A) the reasonable compensation and the expenses and disbursements of its
counsel not associated with the closing of the issuance of the Certificates, (B)
the reasonable compensation, expenses and disbursements of any accountant,
engineer or appraiser that is not regularly employed by the Trustee, to the
extent that the Trustee must engage such persons to perform acts or services
hereunder and (C) printing and engraving expenses in connection with preparing
any Definitive Certificates. Except as otherwise provided herein, the Trustee
shall not be entitled to payment or reimbursement for any routine ongoing
expenses incurred by the Trustee in the ordinary course of its duties as
Trustee, Registrar, Tax Matters Person or Paying Agent hereunder or for any
other expenses.
SECTION 8.06. Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a corporation or
association organized and doing business under the laws of a 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 $________ subject to
supervision or examination by federal or state authority and with a credit
rating which would not cause either of the Rating Agencies to reduce their
respective then current ratings of the Certificates (or having provided such
security from time to time as is sufficient to avoid such reduction). If such
corporation or association publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid
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supervising or examining authority, then for the purposes of this Section 8.06
the combined capital and surplus of such corporation or association shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Trustee shall cease to
be eligible in accordance with the provisions of this Section 8.06, the Trustee
shall resign immediately in the manner and with the effect specified in Section
8.07 hereof. The entity serving as Trustee may have normal banking and trust
relationships with the Depositor and its affiliates or the Master Servicer and
its affiliates; provided, however, that such entity cannot be an affiliate of
the Master Servicer other than the Trustee in its role as successor to the
Master Servicer.
SECTION 8.07. Resignation and Removal of Trustee.
The Trustee may at any time resign and be discharged from the
trusts hereby created by giving written notice of resignation to the Depositor
and the Master Servicer and each Rating Agency not less than 60 days before the
date specified in such notice when, subject to Section 8.08, such resignation is
to take effect, and acceptance by a successor trustee in accordance with Section
8.08 meeting the qualifications set forth in Section 8.06. If no successor
trustee meeting such qualifications shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice or
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.06 hereof and shall fail to resign
after written request thereto by the Depositor, or if at any time the Trustee
shall become incapable of acting, or shall be adjudged as 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, or a tax
is imposed with respect to the Trust Fund by any state in which the Trustee or
the Trust Fund is located and the imposition of such tax would be avoided by the
appointment of a different trustee, then the Depositor or the Master Servicer
may remove the Trustee and appoint a successor trustee by written instrument, in
triplicate, one copy of which instrument shall be delivered to the Trustee, one
copy of which shall be delivered to the Master Servicer and one copy to the
successor trustee.
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, one complete set of which instruments
shall be delivered by the successor Trustee to the Master Servicer, one
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complete set to the Trustee so removed and one complete set to the successor so
appointed. Notice of any removal of the Trustee shall be given to each Rating
Agency by the Successor Trustee.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.07 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 8.08 hereof.
SECTION 8.08. Successor Trustee.
Any successor trustee appointed as provided in Section 8.07
hereof shall execute, acknowledge and deliver to the Depositor and to its
predecessor trustee and the Master Servicer an instrument accepting such
appointment hereunder and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with the
like effect as if originally named as trustee herein. The 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.
No successor trustee shall accept appointment as provided in this
Section 8.08 unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 8.06 hereof and its appointment
shall not adversely affect the then current rating of the Certificates.
Upon acceptance of appointment by a successor trustee as provided
in this Section 8.08, the Depositor shall mail notice of the succession of such
trustee hereunder to all Holders of Certificates. 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 into which the Trustee may be merged or converted
or with which it may be consolidated or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to the business of the Trustee, shall be the
successor of the Trustee hereunder, provided that such corporation shall be
eligible under the provisions of Section 8.06 hereof without the execution or
filing of any paper or further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.
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SECTION 8.10. Appointment of Co-Trustee or Separate
Trustee.
Notwithstanding any other provisions of this Agreement, at any
time, for the purpose of meeting any legal requirements of any jurisdiction in
which any part of the Trust Fund or property securing any Mortgage Note 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 and
for the benefit of the Certificateholders, such title to the Trust Fund or any
part thereof, whichever is applicable, 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 to do so, or in the 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 and no notice to Certificateholders of the appointment of any co-trustee or
separate trustee shall be required under Section 8.08.
Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) To the extent necessary to effectuate the
purposes of this Section 8.10, all rights, powers, duties and
obligations conferred or imposed upon the Trustee, except for the
obligation of the Trustee under this Agreement to advance funds
on behalf of the Master Servicer, shall be conferred or imposed
upon and exercised or performed by the Trustee and such separate
trustee or co-trustee jointly (it being understood that such
separate trustee or co-trustee is not authorized to act
separately without the Trustee joining in such act), except to
the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed (whether as Trustee
hereunder or as successor to the Master Servicer hereunder), the
Trustee shall be incompetent or unqualified to perform such act
or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the applicable
Trust Fund or any portion thereof in any such jurisdiction) shall
be exercised and performed singly by such separate trustee or
co-trustee, but solely at the direction of the Trustee;
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(ii) No trustee hereunder shall be held personally
liable by reason of any act or omission of any other trustee
hereunder and such appointment shall not, and shall not be deemed
to, constitute any such separate trustee or co-trustee as agent
of the Trustee;
(iii) The Trustee may at any time accept the
resignation of or remove any separate trustee or
co-trustee; and
(iv) The Master Servicer, and not the Trustee, shall
be liable for the payment of reasonable compensation,
reimbursement and indemnification to any such separate trustee or
co-trustee.
Any notice, request or other writing given to the Trustee shall
be deemed to have been given to each of the separate trustees and co-trustees,
when and 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 and a copy
thereof given to the Master Servicer and the Depositor.
Any separate trustee or co-trustee may, at any time, constitute
the Trustee its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
SECTION 8.11. Tax Matters.
It is intended that the assets with respect to which any REMIC
election is to be made, as set forth in the Preliminary Statement, shall
constitute, and that the conduct of matters relating to such assets shall be
such as to qualify such assets as, a "real estate mortgage investment conduit"
as defined in and in accordance with the REMIC Provisions. In furtherance of
such intention, the Trustee covenants and agrees that it shall act as agent (and
the Trustee is hereby appointed to act as agent) on behalf of the REMIC and that
in such capacity it shall: (a) prepare and file, or cause to be prepared and
filed, in a
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timely manner, a U.S. Real Estate Mortgage Investment Conduit Income Tax Return
(Form 1066 or any successor form adopted by the Internal Revenue Service) and
prepare and file or cause to be prepared and filed with the Internal Revenue
Service and applicable state or local tax authorities income tax or information
returns for each taxable year with respect to the REMIC, containing such
information and at the times and in the manner as may be required by the Code or
state or local tax laws, regulations, or rules, and furnish or cause to be
furnished to Certificateholders the schedules, statements or information at such
times and in such manner as may be required thereby; (b) within thirty days of
the Closing Date, furnish or cause to be furnished to the Internal Revenue
Service, on Forms 8811 or as otherwise may be required by the Code, the name,
title, address, and telephone number of the person that the holders of the
Certificates may contact for tax information relating thereto, together with
such additional information as may be required by such Form, and update such
information at the time or times in the manner required by the Code; (c) make or
cause to be made elections that such assets be treated as a REMIC on the federal
tax return for its first taxable year (and, if necessary, under applicable state
law); (d) prepare and forward, or cause to be prepared and forwarded, to the
Certificateholders and to the Internal Revenue Service and, if necessary, state
tax authorities, all information returns and reports as and when required to be
provided to them in accordance with the REMIC Provisions, including without
limitation, the calculation of any original issue discount using the Prepayment
Assumption; (e) provide information necessary for the computation of tax imposed
on the transfer of a Residual Certificate to a Person that is not a Permitted
Transferee, or an agent (including a broker, nominee or other middleman) of a
Non-Permitted Transferee, or a pass-through entity in which a Non-Permitted
Transferee is the record holder of an interest (the reasonable cost of computing
and furnishing such information may be charged to the Person liable for such
tax); (f) to the extent that they are under its control conduct matters relating
to such assets at all times that any Certificates are outstanding so as to
maintain the status as a REMIC under the REMIC Provisions; (g) not knowingly or
intentionally take any action or omit to take any action that would cause the
termination of the REMIC status; (h) pay, from the sources specified in the last
paragraph of this Section 8.11, the amount of any federal or state tax,
including prohibited transaction taxes as described below, imposed on the REMIC
prior to its termination when and as the same shall be due and payable (but such
obligation shall not prevent the Trustee or any other appropriate Person from
contesting any such tax in appropriate proceedings and shall not prevent the
Trustee from withholding payment of such tax, if permitted by law, pending the
outcome of such proceedings); (i) ensure that federal, state or local income tax
or information returns shall be signed by the Trustee or such other person as
may be required to sign such returns by the Code or state or local laws,
regulations or rules; (j) maintain
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records relating to the REMIC, including but not limited to the income,
expenses, assets and liabilities thereof and the fair market value and adjusted
basis of the assets determined at such intervals as may be required by the Code,
as may be necessary to prepare the foregoing returns, schedules, statements or
information; and (k) as and when necessary and appropriate, represent the REMIC
in any administrative or judicial proceedings relating to an examination or
audit by any governmental taxing authority, request an administrative adjustment
as to any taxable year of the REMIC, enter into settlement agreements with any
governmental taxing agency, extend any statute of limitations relating to any
tax item of the REMIC, and otherwise act on behalf of the REMIC in relation to
any tax matter or controversy involving it.
In order to enable the Trustee to perform its duties as set forth
herein, the Depositor shall provide, or cause to be provided, to the Trustee
within ten (10) days after the Closing Date all information or data that the
Trustee requests in writing and determines to be relevant for tax purposes to
the valuations and offering prices of the Certificates, including, without
limitation, the price, yield, prepayment assumption and projected cash flows of
the Certificates and the Mortgage Loans. Thereafter, the Depositor shall provide
to the Trustee promptly upon written request therefor, any such additional
information or data that the Trustee may, from time to time, reasonably request
in order to enable the Trustee to perform its duties as set forth herein. The
Depositor hereby indemnifies the Trustee for any losses, liabilities, damages,
claims or expenses of the Trustee arising from any errors or miscalculations of
the Trustee that result from any failure of the Depositor to provide, or to
cause to be provided, accurate information or data to the Trustee on a timely
basis.
In the event that any tax is imposed on "prohibited transactions"
of the REMIC as defined in Section 860F(a)(2) of the Code, on the "net income
from foreclosure property" of the REMIC as defined in Section 860G(c) of the
Code, on any contribution to the REMIC after the Startup Day pursuant to Section
860G(d) of the Code, or any other tax is imposed, including, without limitation,
any minimum tax imposed upon the REMIC pursuant to Sections 23153 and 24874 of
the California Revenue and Taxation Code, if not paid as otherwise provided for
herein, such tax shall be paid by (i) the Trustee, if any such other tax arises
out of or results from a breach by the Trustee of any of its obligations under
this Agreement, (ii) the Master Servicer, in the case of any such minimum tax,
or if such tax arises out of or results from a breach by the Master Servicer or
Seller of any of their obligations under this Agreement, (iii) the Seller, if
any such tax arises out of or results from the Seller's obligation to repurchase
a Mortgage Loan pursuant to Section 2.02 or 2.03 or (iv) in all other cases, or
in the event that the Trustee, the Master Servicer or the Seller fails to honor
its obligations under the preceding clause (i),(ii) or (iii), any
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such tax will be paid with amounts otherwise to be distributed to the
Certificateholders, as provided in Section 3.08(b).
SECTION 8.12. Periodic Filings.
[PURSUANT TO WRITTEN INSTRUCTIONS FROM THE DEPOSITOR, THE TRUSTEE
SHALL PREPARE, EXECUTE AND FILE ALL PERIODIC REPORTS REQUIRED UNDER THE
SECURITIES EXCHANGE ACT OF 1934 IN CONFORMITY WITH THE TERMS OF THE RELIEF
GRANTED TO THE DEPOSITOR IN CWABS, INC. (___________, 199_), A COPY OF WHICH HAS
BEEN SUPPLIED TO THE TRUSTEE BY THE ISSUER.] In connection with the preparation
and filing of such periodic reports, the Depositor and the Master Servicer shall
timely provide to the Trustee all material information available to them which
is required to be included in such reports and not known to them to be in the
possession of the Trustee and such other information as the Trustee reasonably
may request from either of them and otherwise reasonably shall cooperate with
the Trustee. The Trustee shall have no liability with respect to any failure to
properly prepare or file such periodic reports resulting from or relating to the
Trustee's inability or failure to obtain any information not resulting from its
own negligence or willful misconduct.
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ARTICLE IX
TERMINATION
SECTION 9.01. Termination upon Liquidation or Purchase
of all Mortgage Loans.
Subject to Section 9.03, the obligations and responsibilities of
the Depositor, the Master Servicer and the Trustee created hereby with respect
to the Trust Fund shall terminate upon the earlier of (a) the purchase by the
Master Servicer of all Mortgage Loans (and REO Properties) remaining in the
Trust Fund at the price equal to the sum of (i) 100% of the Stated Principal
Balance of each Mortgage Loan plus one month's accrued interest thereon at the
applicable Adjusted Mortgage Rate and (ii) the lesser of (x) the appraised value
of any REO Property as determined by the higher of two appraisals completed by
two independent appraisers selected by the Master Servicer at the expense of the
Master Servicer and (y) the Stated Principal Balance of each Mortgage Loan
related to any REO Property, in each case plus accrued and unpaid interest
thereon at the applicable Adjusted Mortgage Rate and (b) the later of (i) the
maturity or other liquidation (or any Advance with respect thereto) of the last
Mortgage Loan remaining in the Trust Fund and the disposition of all REO
Property and (ii) the distribution to Certificateholders of all amounts required
to be distributed to them pursuant to this Agreement. In no event shall the
trusts created hereby continue beyond the earlier of (i) the expiration of 21
years from the death of the survivor of the descendants of Joseph P. Kennedy,
the late Ambassador of the United States to the Court of St. James's, living on
the date hereof and (ii) the Latest Possible Maturity Date. The right to
purchase all Mortgage Loans and REO Properties pursuant to clause (a) above
shall be conditioned upon the Pool Stated Principal Balance, at the time of any
such repurchase, aggregating less than ten percent of the aggregate Cut-off Date
Principal Balance of the Mortgage Loans.
SECTION 9.02. Final Distribution on the Certificates.
If on any Determination Date, the Master Servicer determines that
there are no Outstanding Mortgage Loans and no other funds or assets in the
Trust Fund other than the funds in the Certificate Account, the Master Servicer
shall direct the Trustee promptly to send a final distribution notice to each
Certificateholder. If the Master Servicer elects to terminate the Trust Fund
pursuant to clause (a) of Section 9.01, at least 20 days prior to the date
notice is to be mailed to the affected Certificateholders, the Master Servicer
shall notify the Depositor and the Trustee of the date the Master Servicer
intends to terminate the Trust Fund and of the applicable repurchase price of
the Mortgage Loans and REO Properties.
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Notice of any termination of the Trust Fund, specifying the
Distribution Date on which Certificateholders may surrender their Certificates
for payment of the final distribution and cancellation, shall be given promptly
by the Trustee by letter to Certificateholders mailed not earlier than the 15th
day and no later than the 10th day of the month next preceding the month of such
final distribution. Any such notice shall specify (a) the Distribution Date upon
which final distribution on the Certificates will be made upon presentation and
surrender of Certificates at the office therein designated, (b) the amount of
such final distribution, (c) the location of the office or agency at which such
presentation and surrender must be made, and (d) that the Record Date otherwise
applicable to such Distribution Date is not applicable, distributions being made
only upon presentation and surrender of the Certificates at the office therein
specified. The Master Servicer will give such notice to each Rating Agency at
the time such notice is given to Certificateholders.
In the event such notice is given, the Master Servicer shall
cause all funds in the Certificate Account to be remitted to the Trustee for
deposit in the Distribution Account on the Business Day prior to the applicable
Distribution Date in an amount equal to the final distribution in respect of the
Certificates. Upon such final deposit with respect to the Trust Fund and the
receipt by the Trustee of a Request for Release therefor, the Trustee shall
promptly release to the Master Servicer the Mortgage Files for the Mortgage
Loans.
Upon presentation and surrender of the Certificates, the Trustee
shall cause to be distributed to Certificateholders of each Class, in the order
set forth in Section 4.02 hereof, on the final Distribution Date and in
proportion to their respective Percentage Interests, with respect to
Certificateholders of the same Class, an amount equal to (i) as to each Class of
Regular Certificates, the Certificate Balance thereof plus (a) accrued interest
thereon (or on their Notional Amount, if applicable) in the case of an interest
bearing Certificate and (b) any Class PO Deferred Amounts in the case of the
Class PO Certificates, and (ii) as to the Residual Certificates, the amount, if
any, which remains on deposit in the Distribution Account (other than the
amounts retained to meet claims) after application pursuant to clause (i) above.
In the event that any affected Certificateholders shall not
surrender Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Trustee 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 all the applicable
Certificates shall not have been surrendered for cancellation, the Trustee may
take appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining Certificate-
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holders concerning surrender of their Certificates, and the cost thereof shall
be paid out of the funds and other assets which remain a part of the Trust Fund.
If within one year after the second notice all Certificates shall not have been
surrendered for cancellation, the Class A-R Certificateholders shall be entitled
to all unclaimed funds and other assets of the Trust Fund which remain subject
hereto.
SECTION 9.03. Additional Termination Requirements.
(a) In the event the Master Servicer exercises its purchase
option as provided in Section 9.01, the Trust Fund shall be terminated in
accordance with the following additional requirements, unless the Trustee has
been supplied with an Opinion of Counsel, at the expense of the Master Servicer,
to the effect that the failure to comply with the requirements of this Section
9.03 will not (i) result in the imposition of taxes on "prohibited transactions"
on the REMIC as defined in section 860F of the Code, or (ii) cause the Trust
Fund to fail to qualify as a REMIC at any time that any Certificates are
outstanding:
(1) Within 90 days prior to the final Distribution Date
set forth in the notice given by the Master Servicer under Section 9.02,
the Master Servicer shall prepare and the Trustee, at the expense of the
"tax matters person," shall adopt a plan of complete liquidation within
the meaning of section 860F(a)(4) of the Code which, as evidenced by an
Opinion of Counsel (which opinion shall not be an expense of the Trustee
or the Tax Matters Person), meets the requirements of a qualified
liquidation; and
(2) Within 90 days after the time of adoption of such a
plan of complete liquidation, the Trustee shall sell all of the assets
of the Trust Fund to the Master Servicer for cash in accordance with
Section 9.01.
(b) The Trustee as agent for any REMIC hereby agrees to adopt and
sign such a plan of complete liquidation upon the written request of the Master
Servicer, and the receipt of the Opinion of Counsel referred to in Section
9.03(a)(1) and to take such other action in connection therewith as may be
reasonably requested by the Master Servicer.
(c) By their acceptance of the Certificates, the Holders thereof
hereby authorize the Master Servicer to prepare and the Trustee to adopt and
sign a plan of complete liquidation.
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ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01. Amendment.
This 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 to cure any ambiguity, or to correct or supplement any
provisions herein, or to make such other provisions with respect to matters or
questions arising under this Agreement as shall not be inconsistent with any
other provisions herein; provided that such action shall not, as evidenced by an
Opinion of Counsel (which Opinion of Counsel shall not be an expense of the
Trustee or the Trust Fund), adversely affect in any material respect the
interests of any Certificateholder; provided, however, that the amendment shall
not be deemed to adversely affect in any material respect the interests of the
Certificateholders if the Person requesting the amendment obtains a letter from
each Rating Agency stating that the amendment would not result in the
downgrading or withdrawal of the respective ratings then assigned to the
Certificates; it being understood and agreed that any such letter in and of
itself will not represent a determination as to the materiality of any such
amendment and will represent a determination only as to the credit issues
affecting any such rating. The Trustee, the Depositor and the Master Servicer
also may at any time and from time to time amend this Agreement without the
consent of the Certificateholders to modify, eliminate or add to any of its
provisions to such extent as shall be necessary or helpful to maintain the
qualification of the Trust Fund as a REMIC under the Code or to avoid or
minimize the risk of the imposition of any tax on the REMIC pursuant to the Code
that would be a claim at any time prior to the final redemption of the
Certificates, provided that the Trustee has been provided an Opinion of Counsel,
which opinion shall be an expense of the party requesting such opinion but in
any case shall not be an expense of the Trustee or the Trust Fund, to the effect
that such action is necessary or helpful to maintain such qualification or to
avoid or minimize the risk of the imposition of such a tax.
This 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 a Majority in Interest 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 of modifying in any manner the rights of
the Holders of Certificates; provided, however, that no such amendment shall (i)
reduce in any manner the amount of, or delay the timing of, payments required to
be distributed on any Certificate without the consent of the Holder of such
Certificate, (ii) adversely affect in any material respect the interests of the
Holders of any Class of Certificates in a manner
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other than as described in (i), without the consent of the Holders of
Certificates of such Class evidencing, as to such Class, Percentage Interests
aggregating 66%, or (iii) reduce the aforesaid percentages of Certificates the
Holders of which are required to consent to any such amendment, without the
consent of the Holders of all such Certificates then outstanding.
Notwithstanding any contrary provision of this Agreement, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel, which opinion shall not be an expense
of the Trustee or the Trust Fund, to the effect that such amendment will not
cause the imposition of any tax on the REMIC or the Certificateholders or cause
the Trust Fund to fail to qualify as a REMIC at any time that any Certificates
are outstanding.
Promptly after the execution of any amendment to this Agreement
requiring the consent of Certificateholders, the Trustee shall furnish written
notification of the substance or a copy of such amendment to each
Certificateholder and each Rating Agency.
It shall not be necessary for the consent of Certificateholders
under this Section 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.
Nothing in this Agreement shall require the Trustee to enter into
an amendment without receiving an Opinion of Counsel (which Opinion shall not be
an expense of the Trustee or the Trust Fund, satisfactory to the Trustee that
(i) such amendment is permitted and is not prohibited by this Agreement and that
all requirements for amending this Agreement have been complied with; and (ii)
either (A) the amendment does not adversely affect in any material respect the
interests of any Certificateholder or (B) the conclusion set forth in the
immediately preceding clause (A) is not required to be reached pursuant to this
Section 10.01.
SECTION 10.02. Recordation of Agreement; Counterparts.
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 at its expense, but only
upon direction by the Trustee accompanied by an Opinion of Counsel to the effect
that such recordation materially and beneficially affects the interests of the
Certificateholders.
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For the purpose of facilitating the recordation of this Agreement
as herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
SECTION 10.03. Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION 10.04. Intention of Parties.
It is the express intent of the parties hereto that the
conveyance of the Trust Fund by the Depositor to the Trustee be, and be
construed as, an absolute sale thereof to the Trustee. It is, further, not the
intention of the parties that such conveyance be deemed a pledge thereof by the
Depositor to the Trustee. However, in the event that, notwithstanding the intent
of the parties, such assets are held to be the property of the Depositor, or if
for any other reason this Agreement is held or deemed to create a security
interest in such assets, then (i) this Agreement shall be deemed to be a
security agreement within the meaning of the Uniform Commercial Code of the
State of New York and (ii) the conveyance provided for in this Agreement shall
be deemed to be an assignment and a grant by the Depositor to the Trustee, for
the benefit of the Certificateholders, of a security interest in all of the
assets that constitute the Trust Fund, whether now owned or hereafter acquired.
The Depositor for the benefit of the Certificateholders shall, to
the extent consistent with this Agreement, take such actions as may be necessary
to ensure that, if this Agreement were deemed to create a security interest in
the Trust Fund, such security interest would be deemed to be a perfected
security interest of first priority under applicable law and will be maintained
as such throughout the term of the Agreement. The Depositor shall arrange for
filing any Uniform Commercial Code continuation statements in connection with
any security interest granted or assigned to the Trustee for the benefit of the
Certificateholder.
SECTION 10.05. Notices.
(a) The Trustee shall use its best efforts to promptly provide
notice to each Rating Agency with respect to each of the following of which it
has actual knowledge:
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1. Any material change or amendment to this Agreement;
2. The occurrence of any Event of Default that has not
been cured;
3. The resignation or termination of the Master
Servicer or the Trustee and the appointment of any successor;
4. The repurchase or substitution of Mortgage Loans
pursuant to Section 2.03; and
5. The final payment to Certificateholders.
In addition, the Trustee shall promptly furnish to each Rating
Agency copies of the following:
1. Each report to Certificateholders described in
Section 4.04;
2. Each annual statement as to compliance described in
Section 3.16;
3. Each annual independent public accountants' servic-
ing report described in Section 3.17; and
4. Any notice of a purchase of a Mortgage Loan
pursuant to Section 2.02, 2.03 or 3.11.
(b) All directions, demands and notices hereunder
shall be in writing and shall be deemed to have been duly given
when delivered to (a) in the case of the Depositor, CWABS, Inc.,
155 North Lake Avenue, Pasadena, California 91101, Attention:
_______________, (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 the Trustee may hereafter furnish to the Depositor or Master Servicer
and (d) in the case of the Rating Agencies, the address specified therefor in
the definition corresponding to the name of such Rating Agency. Notices to
Certificateholders shall be deemed given when mailed, first class postage
prepaid, to their respective addresses appearing in the Certificate Register.
SECTION 10.06. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants,
X-4
<PAGE>
<PAGE>
agreements, provisions or terms of this Agreement and shall in no way affect the
validity or enforceability of the other provisions of this Agreement or of the
Certificates or the rights of the Holders thereof.
SECTION 10.07. Assignment.
Notwithstanding anything to the contrary contained herein, except
as provided in Section 6.02, this Agreement may not be assigned by the Master
Servicer without the prior written consent of the Trustee and Depositor.
SECTION 10.08. Limitation on Rights of Certificate-
holders.
The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the trust created hereby, nor entitle
such Certificateholder's legal representative or heirs to claim an accounting or
to take any action or commence any proceeding in any court for a petition or
winding up of the trust created hereby, or otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.
No Certificateholder shall have any right to vote (except as
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 party by reason of any action taken by the parties to this Agreement
pursuant to any provision hereof.
No Certificateholder shall have any right by virtue or by
availing itself of any provisions 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 an Event of Default and of the continuance thereof, as herein
provided, and unless the Holders of Certificates evidencing not less than 25% of
the Voting Rights evidenced by the Certificates shall also have made written
request to 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
shall have any right in any manner whatever by
X-5
<PAGE>
<PAGE>
virtue or by availing itself or themselves of any provisions of this Agreement
to affect, disturb or prejudice the rights of the Holders of any other of the
Certificates, 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 all Certificateholders.
For the protection and enforcement of the provisions of this Section 10.08, each
and every Certificateholder and the Trustee shall be entitled to such relief as
can be given either at law or in equity.
SECTION 10.09. Inspection and Audit Rights.
The Master Servicer agrees that, on reasonable prior notice, it
will permit and will cause each Subservicer to permit any representative of the
Depositor or the Trustee during the Master Servicer's normal business hours, to
examine all the books of account, records, reports and other papers of the
Master Servicer relating to the Mortgage Loans, to make copies and extracts
therefrom, to cause such books to be audited by independent certified public
accountants selected by the Depositor or the Trustee and to discuss its affairs,
finances and accounts relating to the Mortgage Loans with its officers,
employees and independent public accountants (and by this provision the Master
Servicer hereby authorizes said accountants to discuss with such representative
such affairs, finances and accounts), all at such reasonable times and as often
as may be reasonably requested. Any out-of-pocket expense incident to the
exercise by the Depositor or the Trustee of any right under this Section 10.09
shall be borne by the party requesting such inspection; all other such expenses
shall be borne by the Master Servicer or the related Subservicer.
SECTION 10.10. Certificates Nonassessable and Fully
Paid.
It is the intention of the Depositor that Certificateholders
shall not be personally liable for obligations of the Trust Fund, that the
interests in the Trust Fund represented by the Certificates shall be
nonassessable for any reason whatsoever, and that the Certificates, upon due
authentication thereof by the Trustee pursuant to this Agreement, are and shall
be deemed fully paid.
* * * * * *
X-6
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Depositor, the Trustee, the Seller and
the Master Servicer have caused their names to be signed hereto by their
respective officers thereunto duly authorized as of the day and year first above
written.
CWABS, INC.
as Depositor
By: _____________________
Name:
Title:
_________________________,
as Trustee
By: _____________________
Name:
Title:
__________________________,
as Seller and Master Servicer
By: _____________________
Name:
Title:
X-7
<PAGE>
<PAGE>
SCHEDULE I
Mortgage Loan Schedule
[Delivered at Closing to Trustee]
S-I-1
<PAGE>
<PAGE>
SCHEDULE II
CWABS, Inc.
Mortgage Pass-Through Certificates
Series 199_-_
Representations and Warranties of the Seller/Master Servicer
____________________________ ("Seller-Master Servicer") hereby
makes the representations and warranties set forth in this Schedule II to the
Depositor and the Trustee, as of the Closing Date, or if so specified herein, as
of the Cut-off Date. Capitalized terms used but not otherwise defined in this
Schedule II shall have the meanings ascribed thereto in the Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement") relating to the
above-referenced Series, among Seller-Master Servicer, as seller and master
servicer, CWABS, Inc., as depositor, and _____________________, as trustee.
(1) Seller-Master Servicer is duly organized as a _______
corporation and is validly existing and in good standing under the laws
of the State of ___________ and is duly authorized and qualified to
transact any and all business contemplated by the Pooling and Servicing
Agreement to be conducted by Seller-Master Servicer in any state in
which a Mortgaged Property is located or is otherwise not required under
applicable law to effect such qualification and, in any event, is in
compliance with the doing business laws of any such state, to the extent
necessary to ensure its ability to enforce each Mortgage Loan, to
service the Mortgage Loans in accordance with the terms of the Pooling
and Servicing Agreement and to perform any of its other obligations
under the Pooling and Servicing Agreement in accordance with the terms
thereof.
(2) Seller-Master Servicer has the full corporate power
and authority to sell and service each Mortgage Loan, and to execute,
deliver and perform, and to enter into and consummate the transactions
contemplated by the Pooling and Servicing Agreement and has duly
authorized by all necessary corporate action on the part of
Seller-Master Servicer the execution, delivery and performance of the
Pooling and Servicing Agreement; and the Pooling and Servicing
Agreement, assuming the due authorization, execution and delivery
thereof by the other parties thereto, constitutes a legal, valid and
binding obligation of Seller-Master Servicer, enforceable against
Seller-Master Servicer in accordance with its terms, except that (a) the
enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, receivership and other similar laws relating to creditors'
rights generally and (b) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to
equitable defenses and to the
S-II-1
<PAGE>
<PAGE>
discretion of the court before which any proceeding therefor
may be brought.
(3) The execution and delivery of the Pooling and
Servicing Agreement by Seller-Master Servicer, the sale and servicing of
the Mortgage Loans by Seller-Master Servicer under the Pooling and
Servicing Agreement, the consummation of any other of the transactions
contemplated by the Pooling and Servicing Agreement, and the fulfillment
of or compliance with the terms thereof are in the ordinary course of
business of Seller-Master Servicer and will not (A) result in a material
breach of any term or provision of the charter or by-laws of
Seller-Master Servicer or (B) materially conflict with, result in a
material breach, violation or acceleration of, or result in a material
default under, the terms of any other material agreement or instrument
to which Seller-Master Servicer is a party or by which it may be bound,
or (C) constitute a material violation of any statute, order or
regulation applicable to Seller-Master Servicer of any court, regulatory
body, administrative agency or governmental body having jurisdiction
over Seller-Master Servicer; and Seller-Master Servicer is not in breach
or violation of any material indenture or other material agreement or
instrument, or in violation of any statute, order or regulation of any
court, regulatory body, administrative agency or governmental body
having jurisdiction over it which breach or violation may materially
impair Seller-Master Servicer's ability to perform or meet any of its
obligations under the Pooling and Servicing Agreement.
(4) Seller-Master Servicer is an approved servicer of
conventional mortgage loans for FNMA or FHLMC and is a mortgagee
approved by the Secretary of Housing and Urban Development pursuant to
sections 203 and 211 of the National Housing Act.
(5) No litigation is pending or, to the best of
Seller-Master Servicer's knowledge, threatened, against Seller-Master
Servicer that would materially and adversely affect the execution,
delivery or enforceability of the Pooling and Servicing Agreement or the
ability of Seller-Master Servicer to sell or service the Mortgage Loans
or to perform any of its other obligations under the Pooling and
Servicing Agreement in accordance with the terms thereof.
(6) No consent, approval, authorization or order of any
court or governmental agency or body is required for the execution,
delivery and performance by Seller-Master Servicer of, or compliance by
Seller-Master Servicer with, the Pooling and Servicing Agreement or the
consummation of the transactions contemplated thereby, or if any such
S-II-2
<PAGE>
<PAGE>
consent, approval, authorization or order is required,
Seller-Master Servicer has obtained the same.
(7) Seller-Master Servicer intends to treat the transfer
of the Mortgage Loans to the Depositor as a sale of the Mortgage Loans
for all tax, accounting and regulatory purposes.
S-II-3
<PAGE>
<PAGE>
SCHEDULE III
CWABS, Inc.
Asset Backed Certificates
Series 199_-_
Representations and Warranties as to the Mortgage Loans
____________________________ ("Seller") hereby makes the
representations and warranties set forth in this Schedule III to the Depositor
and the Trustee, as of the Closing Date, or if so specified herein, as of the
Cut-off Date. Capitalized terms used but not otherwise defined in this Schedule
III shall have the meanings ascribed thereto in the Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") relating to the
above-referenced Series, among Seller, as seller and master servicer, CWABS,
Inc., as depositor, and ________________________, as trustee.
(1) The information set forth on Schedule I to the Pooling
and Servicing Agreement with respect to each Mortgage Loan is true and
correct in all material respects as of the Closing Date.
(2) As of the Closing Date, all payments due with respect
to each Mortgage Loan prior to the Cut-off Date have been made; and as
of the Cut-off Date, no Mortgage Loan has been contractually delinquent
for __ or more days during the twelve months prior to the Cut-off Date.
(3) No Mortgage Loan had a Loan-to-Value Ratio at
origination in excess of __%.
(4) Each Mortgage is a valid and enforceable first lien on
the Mortgaged Property subject only to (a) the lien of non delinquent
current real property taxes and 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 made in connection
with the origination of the related Mortgage Loan, and (c) 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
such Mortgage.
(5) Immediately prior to the assignment of the Mortgage
Loans to the Depositor, the Seller had good title to, and was the sole
owner of, each Mortgage Loan free and clear of any pledge, lien,
encumbrance or security interest and had full right and authority,
subject to no interest or
S-III-1
<PAGE>
<PAGE>
participation of, or agreement with, any other party, to sell and assign
the same pursuant to the Pooling and Servicing Agreement.
(6) There is no delinquent tax or assessment lien
against any Mortgaged Property.
(7) There is no valid offset, defense or counterclaim to
any Mortgage Note or Mortgage, including the obligation of the Mortgagor
to pay the unpaid principal of or interest on such Mortgage Note.
(8) There are no mechanics' liens or claims for work,
labor or material affecting any Mortgaged Property which are or may be a
lien prior to, or equal with, the lien of such Mortgage, except those
which are insured against by the title insurance policy referred to in
item (12) below.
(9) To the best of the Seller's knowledge, each Mortgaged
Property is free of material damage and in good repair.
(10) Each Mortgage Loan at origination complied in all
material respects with applicable state and federal laws, including,
without limitation, usury, equal credit opportunity, real estate
settlement procedures, truth-in-lending and disclosure laws, and
consummation of the transactions contemplated hereby will not involve
the violation of any such laws.
(11) As of the Closing Date, neither the Seller nor any
prior holder of any Mortgage has modified the Mortgage in any material
respect (except that a Mortgage Loan may have been modified by a written
instrument which has been recorded or submitted for recordation, if
necessary, to protect the interests of the Certificateholders and the
original or a copy of which has been delivered to the Trustee);
satisfied, cancelled or subordinated such Mortgage in whole or in part;
released the related Mortgaged Property in whole or in part from the
lien of such Mortgage; or executed any instrument of release,
cancellation, modification or satisfaction with respect thereto.
(12) A lender's policy of title insurance together with a
condominium endorsement and extended coverage endorsement, if
applicable, in an amount at least equal to the Cut-off Date Stated
Principal Balance of each such Mortgage Loan or a commitment (binder) to
issue the same was effective on the date of the origination of each
Mortgage Loan, each such policy is valid and remains in full force and
effect, and each such policy was issued by a title insurer qualified to
do business in the jurisdiction where the Mortgaged Property is located
and acceptable to FNMA or
S-III-2
<PAGE>
<PAGE>
FHLMC and is in a form acceptable to FNMA or FHLMC, which policy insures
the Seller and successor owners of indebtedness secured by the insured
Mortgage, as to the first priority lien of the Mortgage subject to the
exceptions set forth in paragraph (4) above; to the best of the Seller's
knowledge, no claims have been made under such mortgage title insurance
policy and no prior holder of the related Mortgage, including the
Seller, has done, by act or omission, anything which would impair the
coverage of such mortgage title insurance policy.
(13) Each Mortgage Loan was originated by an entity that
satisfied at the time of origination the requirements of Section
3(a)(41) of the Securities Exchange Act of 1934, as amended.
(14) To the best of the Seller's knowledge, all of the
improvements which were included for the purpose of determining the
Appraised Value of the Mortgaged Property lie wholly within the
boundaries and building restriction lines of such property, and no
improvements on adjoining properties encroach upon the Mortgaged
Property.
(15) To the best of the Seller's knowledge, no improvement
located on or being part of the Mortgaged Property is in violation of
any applicable zoning law or regulation. To the best of the Seller's
knowledge, all inspections, licenses and certificates required to be
made or issued with respect to all occupied portions of the Mortgaged
Property and, with respect to the use and occupancy of the same,
including but not limited to certificates of occupancy and fire
underwriting certificates, have been made or obtained from the
appropriate authorities, unless the lack thereof would not have a
material adverse effect on the value of such Mortgaged Property, and the
Mortgaged Property is lawfully occupied under applicable law.
(16) The Mortgage Note and the related Mortgage are
genuine, and each is the legal, valid and binding obligation of the
maker thereof, enforceable in accordance with its terms and under
applicable law. To the best of the Seller's knowledge, all parties to
the Mortgage Note and the Mortgage had legal capacity to execute the
Mortgage Note and the Mortgage and each Mortgage Note and Mortgage have
been duly and properly executed by such parties.
(17) The proceeds of the Mortgage Loan have been
fully disbursed, there is no requirement for future advances
thereunder and any and all requirements as to completion of
any on-site or off-site improvements and as to disbursements
of any escrow funds therefor have been complied with. All
S-III-3
<PAGE>
<PAGE>
costs, fees and expenses incurred in making, or closing or recording the
Mortgage Loans were paid.
(18) The related Mortgage contains customary and
enforceable provisions which render the rights and remedies of the
holder thereof adequate for the realization against the Mortgaged
Property of the benefits of the security, including, (i) in the case of
a Mortgage designated as a deed of trust, by trustee's sale, and (ii)
otherwise by judicial foreclosure.
(19) With respect to each Mortgage constituting a deed of
trust, a trustee, duly qualified under applicable law to serve as such,
has been properly designated and currently so serves and is named in
such Mortgage, and no fees or expenses are or will become payable by the
Certificateholders to the trustee under the deed of trust, except in
connection with a trustee's sale after default by the Mortgagor.
(20) Each Mortgage Note and each Mortgage is in
substantially one of the forms acceptable to FNMA or FHLMC, with such
riders as have been acceptable to FNMA or FHLMC, as the case may be.
(21) There exist no deficiencies with respect to escrow
deposits and payments, if such are required, for which customary
arrangements for repayment thereof have not been made, and no escrow
deposits or payments of other charges or payments due the Seller have
been capitalized under the Mortgage or the related Mortgage Note.
(22) The origination, underwriting and collection
practices used by the Seller with respect to each Mortgage Loan have
been in all respects legal, prudent and customary in the mortgage
lending and servicing business.
(23) There is no pledged account or other security other
than real estate securing the Mortgagor's obligations.
(24) No Mortgage Loan has a shared appreciation feature,
or other contingent interest feature.
(25) Each Mortgage Loan contains a customary "due
on sale" clause.
(26) None of the Mortgage Loans provides for a
prepayment penalty.
[(27) Each Mortgage Loan which had a Loan-to-Value Ratio
at origination in excess of 80% is the subject of a Primary Insurance
Policy that insures that portion of
S-III-4
<PAGE>
<PAGE>
the principal balance thereof that exceeds the amount equal to 75% of
the Appraised Value of the related Mortgaged Property. Each such Primary
Insurance Policy is issued by a Qualified Insurer. All provisions of any
such Primary Insurance Policy have been and are being complied with, any
such policy is in full force and effect, and all premiums due thereunder
have been paid. Any Mortgage subject to any such Primary Insurance
Policy obligates either the Mortgagor or the mortgagee thereunder to
maintain such insurance and to pay all premiums and charges in
connection therewith. The Mortgage Rate for each Mortgage Loan is net of
any such insurance premium.]
(28) At the Cut-off Date, the improvements upon each
Mortgaged Property are covered by a valid and existing hazard insurance
policy with a generally acceptable carrier that provides for fire and
extended coverage and coverage for such other hazards as are customary
in the area where the Mortgaged Property is located in an amount which
is at least equal to the lesser of (i) the maximum insurable value of
the improvements securing such Mortgage Loan or (ii) the greater of (a)
the outstanding principal balance of the Mortgage Loan and (b) an amount
such that the proceeds of such policy shall be sufficient to prevent the
Mortgagor and/or the mortgagee from becoming a co-insurer. If the
Mortgaged Property is a condominium unit, it is included under the
coverage afforded by a blanket policy for the condominium unit. All such
individual insurance policies and all flood policies referred to in item
(29) below contain a standard mortgagee clause naming the Seller or the
original mortgagee, and its successors in interest, as mortgagee, and
the Seller has received no notice that any premiums due and payable
thereon have not been paid; the Mortgage obligates the Mortgagor
thereunder to maintain all such insurance including flood insurance at
the Mortgagor's cost and expense, and upon the Mortgagor's failure to do
so, authorizes the holder of the Mortgage to obtain and maintain such
insurance at the Mortgagor's cost and expense and to seek reimbursement
therefor from the Mortgagor.
(29) If the Mortgaged Property is in an area identified in
the Federal Register by the Federal Emergency Management Agency as
having special flood hazards, a flood insurance policy in a form meeting
the requirements of the current guidelines of the Flood Insurance
Administration is in effect with respect to such Mortgaged Property with
a generally acceptable carrier in an amount representing coverage not
less than the least of (A) the original outstanding principal balance of
the Mortgage Loan, (B) the minimum amount required to compensate for
damage or loss on a replacement cost basis, or (C) the maximum amount of
insurance that is available under the Flood Disaster Protection Act of
1973, as amended.
S-III-5
<PAGE>
<PAGE>
(30) To the best of the Seller's knowledge, there is no
proceeding occurring, pending or threatened for the total or partial
condemnation of the Mortgaged Property.
(31) There is no material monetary default existing under
any Mortgage or the related Mortgage Note and, to the best of the
Seller's knowledge, there is no material event which, with the passage
of time or with notice and the expiration of any grace or cure period,
would constitute a default, breach, violation or event of acceleration
under the Mortgage or the related Mortgage Note; and the Seller has not
waived any default, breach, violation or event of acceleration.
(32) Each Mortgaged Property is improved by a one- to
four-family residential dwelling including condominium units and
dwelling units in PUDs, which, to the best of Seller's knowledge, does
not include cooperatives or mobile homes and does not constitute other
than real property under state law.
(33) Each Mortgage Loan is being serviced by the
Master Servicer.
(34) Any future advances made prior to the Cutoff Date
have been consolidated with the outstanding principal amount secured by
the Mortgage, and the secured principal amount, as consolidated, bears a
single interest rate and single repayment term reflected on the Mortgage
Loan Schedule. The consolidated principal amount does not exceed the
original principal amount of the Mortgage Loan. The Mortgage Note does
not permit or obligate the Master Servicer to make future advances to
the Mortgagor at the option of the Mortgagor.
(35) All taxes, governmental assessments, insurance
premiums, water, sewer and municipal charges, leasehold payments or
ground rents which previously became due and owing have been paid, or an
escrow of funds has been established in an amount sufficient to pay for
every such item which remains unpaid and which has been assessed, but is
not yet due and payable. Except for (A) payments in the nature of escrow
payments, and (B) interest accruing from the date of the Mortgage Note
or date of disbursement of the Mortgage proceeds, whichever is later, to
the day which precedes by one month the Due Date of the first
installment of principal and interest, including without limitation,
taxes and insurance payments, the Master Servicer has not advanced
funds, or induced, solicited or knowingly received any advance of funds
by a party other than the Mortgagor, directly or indirectly, for the
payment of any amount required by the Mortgage.
S-III-6
<PAGE>
<PAGE>
(36) Each Mortgage Loan was underwritten in all material
respects in accordance with the Seller's underwriting guidelines as set
forth in the Prospectus Supplement.
(37) Other than with respect to any Streamlined
Documentation Mortgage Loan as to which the loan-to-value ratio of the
related Original Mortgage Loan was less than 60% at the time of the
origination of such Original Mortgage Loan, prior to the approval of the
Mortgage Loan application, an appraisal of the related Mortgaged
Property was obtained from a qualified appraiser, duly appointed by the
originator, who had no interest, direct or indirect, in the Mortgaged
Property or in any loan made on the security thereof, and whose
compensation is not affected by the approval or disapproval of the
Mortgage Loan; such appraisal is in a form acceptable to FNMA and FHLMC.
(38) None of the Mortgage Loans is a graduated payment
mortgage loan or a growing equity mortgage loan, no more than five of
the Mortgage Loans are subject to a buydown or similar arrangement.
(39) Any leasehold estate securing a Mortgage Loan has a
term of not less than five years in excess of the term of the related
Mortgage Loan.
(40) The Mortgage Loans were selected from among the
outstanding [fixed-rate] one- to four-family mortgage loans in Seller's
portfolio at the Closing Date as to which the representations and
warranties made as to the Mortgage Loans set forth in this Schedule III
can be made. Such selection was not made in a manner that would
adversely affect the interests of Certificateholders.
(41) Except for ___ Mortgage Loans, each Mortgage Loan has
a payment date on or before the Due Date in the month of the first
Distribution Date.
(42) The Mortgage Loans, individually and in the
aggregate, conform in all material respects to the descriptions thereof
in the Prospectus Supplement.
S-III-7
<PAGE>
<PAGE>
SCHEDULE IV
PRINCIPAL BALANCE SCHEDULES
S-IV-1
<PAGE>
<PAGE>
SCHEDULE V
Form of Monthly Master Servicer Report
<TABLE>
<CAPTION>
======================================================================================================
LOAN LEVEL REPORTING SYSTEM
- ------------------------------------------------------------------------------------------------------
DATABASE STRUCTURE
- ------------------------------------------------------------------------------------------------------
[MONTH, YEAR]
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Field Number Field Name Field Type Field Width Dec
- ------------------------------------------------------------------------------------------------------
1 INVNUM Numeric 4
- ------------------------------------------------------------------------------------------------------
2 INVBLK Numeric 4
- ------------------------------------------------------------------------------------------------------
3 INACNU Character 8
- ------------------------------------------------------------------------------------------------------
4 BEGSCH Numeric 15 2
- ------------------------------------------------------------------------------------------------------
5 SCHPRN Numeric 13 2
- ------------------------------------------------------------------------------------------------------
6 TADPRN Numeric 11 2
- ------------------------------------------------------------------------------------------------------
7 LIQEPB Numeric 11 2
- ------------------------------------------------------------------------------------------------------
8 ACTCOD Numeric 11
- ------------------------------------------------------------------------------------------------------
9 ACTDAT Numeric 4
- ------------------------------------------------------------------------------------------------------
10 INTPMT Numeric 8
- ------------------------------------------------------------------------------------------------------
11 PRNPMT Numeric 13 2
- ------------------------------------------------------------------------------------------------------
12 ENDSCH Numeric 13 2
- ------------------------------------------------------------------------------------------------------
13 SCHNOT Numeric 13 2
- ------------------------------------------------------------------------------------------------------
14 SCHPAS Numeric 7 3
- ------------------------------------------------------------------------------------------------------
15 PRINPT Numeric 7 3
- ------------------------------------------------------------------------------------------------------
16 PRIBAL Numeric 11 2
- ------------------------------------------------------------------------------------------------------
17 LPIDTE Numeric 13 2
- ------------------------------------------------------------------------------------------------------
18 DELPRN Numeric 7
- ------------------------------------------------------------------------------------------------------
19 PPDPRN Numeric 11 2
- ------------------------------------------------------------------------------------------------------
20 DELPRN Numeric 11 2
- ------------------------------------------------------------------------------------------------------
21 NXTCHG Numeric 8
- ------------------------------------------------------------------------------------------------------
22 ARMNOT Numeric 7 3
- ------------------------------------------------------------------------------------------------------
23 ARMPAS Numeric 7 3
- ------------------------------------------------------------------------------------------------------
24 ARMPMT Numeric 11 2
- ------------------------------------------------------------------------------------------------------
25 ZZTYPE Character 2
- ------------------------------------------------------------------------------------------------------
26 ISSUID Character 1
- ------------------------------------------------------------------------------------------------------
27 KEYNAME Character 8
- ------------------------------------------------------------------------------------------------------
TOTAL 240
- ------------------------------------------------------------------------------------------------------
Suggested Format: DBASE file
Modem transmission
======================================================================================================
</TABLE>
S-V-1
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
MASTER SERVICER
- ------------------------------------------------------------------------------------------------------------------------------------
LOAN LEVEL REPORTING SYSTEM
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTOR NUMBER:
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
GENERAL INFORMATION CURRENT MONTH SCHEDULE INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
Beg. Total End Pass-
Inv.# Blk# CFC# Investor# Balance Principal Curtailment Payoff Amt A/Code A/Date Interest Principal Balance Note thru P&I
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Total
Count: Remittance:
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
================================================================================
MASTER SERVICER
- --------------------------------------------------------------------------------
LOAN LEVEL REPORTING SYSTEM
- --------------------------------------------------------------------------------
CUTOFF: [Date]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRIAL BALANCE INFORMATION ARM LOANS ONLY
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Del PPD Next Pass-
UPB LPI Prin. Prin. Chg. Note thru P&I
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
</TABLE>
STATEMENT OF DIFFERENCES
------------------------
The section mark symbol shall be expressed as ss.
S-V-2
<PAGE>
<PAGE>
EXHIBIT A
[FORM OF SENIOR CERTIFICATE]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]
[SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS
A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CON-
DUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G
AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE").]
Certificate No. :
Cut-off Date :
First Distribution Date :
Initial Certificate Balance
of this Certificate
("Denomination") : $
Initial Certificate Balances
of all Certificates of
this Class : $
CUSIP :
CWABS, Inc.
Asset Backed Certificates, Series 199_-__
Class [ ]
evidencing a percentage interest in the distributions allocable to the
Certificates of the above-referenced Class with respect to a Trust Fund
consisting primarily of a pool of conventional mortgage loans (the
"Mortgage Loans") secured by first liens on one- to four-family
residential properties
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<PAGE>
CWABS, Inc., as Depositor
Principal in respect of this Certificate is distributable monthly as set
forth herein. Accordingly, the Certificate Balance at any time may be less than
the Certificate Balance as set forth herein. This Certificate does not evidence
an obligation of, or an interest in, and is not guaranteed by the Depositor, the
Seller, the Master Servicer or the Trustee referred to below or any of their
respective affiliates. Neither this Certificate nor the Mortgage Loans are
guaranteed or insured by any governmental agency or instrumentality.
This certifies that __________ is the registered owner of the Percentage
Interest evidenced by this Certificate (obtained by dividing the denomination of
this Certificate by the aggregate Initial Certificate Balances of all
Certificates of the Class to which this Certificate belongs) in certain monthly
distributions with respect to a Trust Fund consisting primarily of the Mortgage
Loans deposited by CWABS, Inc. (the "Depositor"). The Trust Fund was created
pursuant to a Pooling and Servicing Agreement dated as of the Cut-off Date
specified above (the "Agreement") among the Depositor, ________________________,
as seller (in such capacity, the "Seller") and as master servicer (in such
capacity, the "Master Servicer"), and ___________________, as trustee (the
"Trustee"). 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.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.
* * *
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<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: ____________, 19__
_____________________,
as Trustee
By ______________________
Countersigned:
By ___________________________
Authorized Signatory of
______________________,
as Trustee
A-3
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<PAGE>
EXHIBIT B
[FORM OF SUBORDINATED CERTIFICATE]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]
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, AS AMENDED (THE "CODE").
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO CERTAIN CERTIFICATES AS
DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN.
[THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE PURPOSE OF APPLYING THE
U.S. FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES UNDER THE CODE TO
THIS CERTIFICATE. THE ISSUE DATE OF THIS CERTIFICATE IS _______________, 199_.
THE INITIAL PER ANNUM RATE OF INTEREST ON THIS CERTIFICATE IS ____%. ASSUMING
THAT THE MORTGAGE LOANS PREPAY AT AN ASSUMED RATE OF PREPAYMENT OF ____% PER
ANNUM (THE "PREPAYMENT ASSUMPTION"), THIS CERTIFICATE HAS BEEN ISSUED WITH $
_________ OF OID PER $1,000 OF THE ORIGINAL PRINCIPAL AMOUNT OF THIS
CERTIFICATE; THE ANNUAL YIELD TO MATURITY OF THIS CERTIFICATE FOR PURPOSES OF
COMPUTING THE ACCRUAL OF OID IS APPROXIMATELY ______% (COMPOUNDED MONTHLY); THE
AMOUNT OF OID ALLOCABLE TO THE SHORT FIRST ACCRUAL PERIOD IS $_________ PER
$1,000 OF THE ORIGINAL PRINCIPAL AMOUNT OF THIS CERTIFICATE COMPUTED USING THE
MONTHLY YIELD AND DAILY COMPOUNDING DURING THE SHORT ACCRUAL PERIOD. NO
REPRESENTATION IS MADE THAT THE MORTGAGE LOANS WILL PREPAY AT A RATE BASED ON
THE PREPAYMENT ASSUMPTION OR AT ANY OTHER RATE. THE ACTUAL YIELD TO MATURITY MAY
DIFFER FROM THAT SET FORTH ABOVE, AND THE ACCRUAL OF OID WILL BE ADJUSTED, IN
ACCORDANCE WITH SECTION 1272(a)(6) OF THE CODE, TO TAKE INTO ACCOUNT EVENTS
WHICH HAVE OCCURRED DURING ANY ACCRUAL PERIOD. THE PREPAYMENT ASSUMPTION IS
INTENDED TO BE THE PREPAYMENT ASSUMPTION REFERRED TO IN SECTION
1272(a)(6)(B)(iii) OF THE CODE.]
[THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). ANY RESALE OR TRANSFER OF
THIS CERTIFICATE WITHOUT REGISTRATION THEREOF UNDER THE ACT MAY
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ONLY BE MADE IN A TRANSACTION EXEMPTED FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH THE PROVISIONS OF
THE AGREEMENT REFERRED TO HEREIN.]
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
TRANSFEREE REPRESENTS TO THE TRUSTEE THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE
BENEFIT PLAN SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED, OR A PLAN SUBJECT TO SECTION 4975 OF THE CODE, OR DELIVERS TO THE
TRUSTEE AN OPINION OF COUNSEL IN ACCORDANCE WITH THE PROVISIONS OF THE AGREEMENT
REFERRED TO HEREIN. [SUCH REPRESENTATION SHALL BE DEEMED TO HAVE BEEN MADE TO
THE TRUSTEE BY THE TRANSFEREE'S ACCEPTANCE OF A CERTIFICATE OF THIS CLASS AND BY
A BENEFICIAL OWNER'S ACCEPTANCE OF ITS INTEREST IN A CERTIFICATE OF THIS CLASS.]
NOTWITHSTANDING ANYTHING ELSE TO THE CONTRARY HEREIN, ANY PURPORTED TRANSFER OF
THIS CERTIFICATE TO OR ON BEHALF OF AN EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA OR
TO THE CODE WITHOUT THE OPINION OF COUNSEL SATISFACTORY TO THE TRUSTEE AS
DESCRIBED ABOVE SHALL BE VOID AND OF NO EFFECT.
B-2
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<PAGE>
Certificate No. :
Cut-off Date :
First Distribution Date :
Initial Certificate Balance
of this Certificate
("Denomination") : $
Initial Certificate Balances
of all Certificates of
this Class : $
CWABS, Inc.
Asset Backed Certificates, Series 199_-__
Class [ ]
evidencing a percentage interest in the distributions allocable to the
Certificates of the above-referenced Class with respect to a Trust Fund
consisting primarily of a pool of conventional loans (the "Mortgage
Loans") secured by first liens on one- to four-family residential
properties
CWABS, Inc., as Depositor
Principal in respect of this Certificate is distributable monthly as set
forth herein. Accordingly, the Certificate Balance at any time may be less than
the Certificate Balance as set forth herein. This Certificate does not evidence
an obligation of, or an interest in, and is not guaranteed by the Depositor, the
Seller, the Master Servicer or the Trustee referred to below or any of their
respective affiliates. Neither this Certificate nor the Mortgage Loans are
guaranteed or insured by any governmental agency or instrumentality.
This certifies that is the registered owner of the Percentage Interest
evidenced by this Certificate ________________________(obtained by dividing the
denomination of this Certificate by the aggregate Initial Certificate Balances
of all Certificates of the Class to which this Certificate belongs) in certain
monthly distributions with respect to a Trust Fund consisting primarily of the
Mortgage Loans deposited by CWABS, Inc. (the "Depositor"). The Trust Fund was
created pursuant to a Pooling and Servicing Agreement dated as of the Cut-off
Date specified above (the "Agreement") among the Depositor,
____________________________, as seller (in such capacity, the "Seller") and as
master servicer (in such capacity, the "Master Servicer"), and
__________________, as trustee (the "Trustee").
B-3
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<PAGE>
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.
[No transfer of a Certificate of this Class shall be made unless such
transfer is made pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws or is exempt from the
registration requirements under said Act and such laws. In the event that a
transfer is to be made in reliance upon an exemption from the Securities Act and
such laws, in order to assure compliance with the Securities Act and such laws,
the Certificateholder desiring to effect such transfer and such
Certificateholder's prospective transferee shall each certify to the Trustee in
writing the facts surrounding the transfer. In the event that such a transfer is
to be made within three years from the date of the initial issuance of
Certificates pursuant hereto, there shall also be delivered (except in the case
of a transfer pursuant to Rule 144A of the Securities Act) to the Trustee an
Opinion of Counsel that such transfer may be made pursuant to an exemption from
the Securities Act and such state securities laws, which Opinion of Counsel
shall not be obtained at the expense of the Trustee, the Seller, the Master
Servicer or the Depositor. The Holder hereof desiring to effect such transfer
shall, and does hereby agree to, indemnify the Trustee and the Depositor 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.]
No transfer of a Certificate of this Class shall be made unless the
Trustee shall have received either (i) a representation [letter] from the
transferee of such Certificate, acceptable to and in form and substance
satisfactory to the Trustee, to the effect that such transferee is not an
employee benefit plan subject to Section 406 of ERISA or Section 4975 of the
Code, nor a person acting on behalf of any such plan, which representation
letter shall not be an expense of the Trustee or the Master Servicer, (ii) if
the purchaser is an insurance company, a representation that the purchaser is an
insurance company which is purchasing such Certificates with funds contained in
an "insurance company general account" (as such term is defined in Section V(e)
of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60")) and that the
purchase and holding of such Certificates are covered under PTCE 95-60, or (iii)
in the case of any such Certificate presented for registration in the name of an
employee benefit plan subject to ERISA or Section 4975 of the Code (or
comparable provisions of any subsequent enactments), or a trustee of any such
plan or any other person acting on behalf of any such plan, an Opinion of
Counsel satisfactory to the Trustee and the Master Servicer to the effect that
the purchase or holding of such Certificate will not result in the assets of
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<PAGE>
the Trust Fund being deemed to be "plan assets" and subject to the prohibited
transaction provisions of ERISA and the Code and will not subject the Trustee to
any obligation in addition to those undertaken in the Agreement, which Opinion
of Counsel shall not be an expense of the Trustee or the Master Servicer. [Such
representation shall be deemed to have been made to the Trustee by the
Transferee's acceptance of a Certificate of this Class and by a beneficial
owner's acceptance of its interest in a Certificate of this Class.]
Notwithstanding anything else to the contrary herein, any purported transfer of
a Certificate of this Class to or on behalf of an employee benefit plan subject
to ERISA or to the Code without the opinion of counsel satisfactory to the
Trustee as described above shall be void and of no effect.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.
* * *
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: ____________, 19__
_____________________,
as Trustee
By ______________________
Countersigned:
By ___________________________
Authorized Signatory of
____________________,
as Trustee
B-5
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<PAGE>
EXHIBIT C
[FORM OF RESIDUAL CERTIFICATE]
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, AS AMENDED (THE "CODE").
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
PROPOSED TRANSFEREE DELIVERS TO THE TRUSTEE A TRANSFER AFFIDAVIT IN ACCORDANCE
WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN.
[THIS CERTIFICATE REPRESENTS THE "TAX MATTERS PERSON RESIDUAL INTEREST" ISSUED
UNDER THE POOLING AND SERVICING AGREEMENT REFERRED TO BELOW AND MAY NOT BE
TRANSFERRED TO ANY PERSON EXCEPT IN CONNECTION WITH THE ASSUMPTION BY THE
TRANSFEREE OF THE DUTIES OF THE SERVICER UNDER SUCH AGREEMENT.]
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
TRANSFEREE DELIVERS TO THE TRUSTEE EITHER A REPRESENTATION LETTER TO THE EFFECT
THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR A PLAN SUBJECT TO SECTION
4975 OF THE CODE, OR AN OPINION OF COUNSEL IN ACCORDANCE WITH THE PROVISIONS OF
THE AGREEMENT REFERRED TO HEREIN. NOTWITHSTANDING ANYTHING ELSE TO THE CONTRARY
HEREIN, ANY PURPORTED TRANSFER OF THIS CERTIFICATE TO OR ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA OR TO THE CODE WITHOUT THE OPINION OF
COUNSEL SATISFACTORY TO THE TRUSTEE AS DESCRIBED ABOVE SHALL BE VOID AND OF NO
EFFECT.
C-1
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<PAGE>
Certificate No. :
Cut-off Date :
Initial Certificate Balance
of this Certificate
("Denomination") : $
Initial Certificate Balances
of all Certificates of
this Class : $
CUSIP :
CWABS, Inc.
Asset Backed Certificates, Series 199 -
evidencing the distributions allocable to the Class A-R Certificates
with respect to a Trust Fund consisting primarily of a pool of
conventional loans (the "Mortgage Loans") secured by first liens on one-
to four-family residential properties
CWABS, Inc., as Depositor
Principal in respect of this Certificate is distributable monthly as set
forth herein. Accordingly, the Certificate Balance at any time may be less than
the Certificate Balance as set forth herein. This Certificate does not evidence
an obligation of, or an interest in, and is not guaranteed by the Depositor, the
Seller, the Master Servicer or the Trustee referred to below or any of their
respective affiliates. Neither this Certificate nor the Mortgage Loans are
guaranteed or insured by any governmental agency or instrumentality.
This certifies that ____________________________ is the registered
owner of the Percentage Interest (obtained by dividing the Denomination of this
Certificate by the aggregate Initial Certificate Balances of all Certificates of
the Class to which this Certificate belongs) in certain monthly distributions
with respect to a Trust Fund consisting of the Mortgage Loans deposited by
CWABS, Inc. (the "Depositor"). The Trust Fund was created pursuant to a
Pooling and Servicing Agreement dated as of the Cut-off Date specified above
(the "Agreement") among the Depositor, ____________________________, as seller
(in such capacity, the "Seller") and as master servicer (in such capacity, the
"Master Servicer"), and ___________________, as trustee (the "Trustee"). 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,
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<PAGE>
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.
Any distribution of the proceeds of any remaining assets of the Trust
Fund will be made only upon presentment and surrender of this Class A-R
Certificate at the Corporate Trust Office or the office or agency maintained by
the Trustee in New York, New York.
No transfer of a Class A-R Certificate shall be made unless the Trustee
shall have received either (i) a representation letter from the transferee of
such Certificate, acceptable to and in form and substance satisfactory to the
Trustee, to the effect that such transferee is not an employee benefit plan
subject to Section 406 of ERISA or Section 4975 of the Code, nor a person acting
on behalf of any such plan, which representation letter shall not be an expense
of the Trustee or the Master Servicer, or (ii) in the case of any such Class A-R
Certificate presented for registration in the name of an employee benefit plan
subject to ERISA, or Section 4975 of the Code (or comparable provisions of any
subsequent enactments), or a trustee of any such plan or any other person acting
on behalf of any such plan, an Opinion of Counsel satisfactory to the Trustee
and the Master Servicer to the effect that the purchase or holding of such Class
A-R Certificate will not result in the assets of the Trust Fund being deemed to
be "plan assets" and subject to the prohibited transaction provisions of ERISA
and the Code and will not subject the Trustee or the Master Servicer to any
obligation in addition to those undertaken in this Agreement, which Opinion of
Counsel shall not be an expense of the Trustee or the Master Servicer.
Notwithstanding anything else to the contrary herein, any purported transfer of
a Class A-R Certificate to or on behalf of an employee benefit plan subject to
ERISA or to the Code without the opinion of counsel satisfactory to the Trustee
as described above shall be void and of no effect.
Each Holder of this Class A-R Certificate will be deemed to have agreed
to be bound by the restrictions of the Agreement, including but not limited to
the restrictions that (i) each person holding or acquiring any Ownership
Interest in this Class A-R Certificate must be a Permitted Transferee, (ii) no
Ownership Interest in this Class A-R Certificate may be transferred without
delivery to the Trustee of (a) a transfer affidavit of the proposed transferee
and (b) a transfer certificate of the transferor, each of such documents to be
in the form described in the Agreement, (iii) each person holding or acquiring
any Ownership Interest in this Class A-R Certificate must agree to require a
transfer affidavit and to deliver a transfer certificate to the Trustee as
required pursuant to the Agreement, (iv) each person holding or acquiring an
Ownership Interest in this Class A-R Certificate must agree not to transfer an
Ownership Interest in this Class A-R Certificate if it has actual knowledge that
the
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proposed transferee is not a Permitted Transferee and (v) any attempted or
purported transfer of any Ownership Interest in this Class A-R Certificate in
violation of such restrictions will be absolutely null and void and will vest no
rights in the purported transferee.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.
* * *
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: ____________, 19__
______________________,
as Trustee
By ______________________
Countersigned:
By ___________________________
Authorized Signatory of
______________________,
as Trustee
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<PAGE>
EXHIBIT D
[FORM OF NOTIONAL AMOUNT CERTIFICATE]
[SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS
A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CON-
DUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G
AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE").]
THIS CERTIFICATE HAS NO PRINCIPAL BALANCE AND IS NOT ENTITLED TO ANY
DISTRIBUTIONS IN RESPECT OF PRINCIPAL.
[THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE PURPOSE OF APPLYING THE
U.S. FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES UNDER THE CODE TO
THIS CERTIFICATE. THE ISSUE DATE OF THIS CERTIFICATE IS _____________, 199____.
THE INITIAL PER ANNUM RATE OF INTEREST ON THIS CERTIFICATE IS ____%. ASSUMING
THAT THE MORTGAGE LOANS PREPAY AT AN ASSUMED RATE OF PREPAYMENT OF ____% PER
ANNUM (THE "PREPAYMENT ASSUMPTION"), THIS CERTIFICATE HAS BEEN ISSUED WITH $____
OF OID ON THE INITIAL POOL STATED PRINCIPAL BALANCE; THE ANNUAL YIELD TO
MATURITY OF THIS CERTIFICATE FOR PURPOSES OF COMPUTING THE ACCRUAL OF OID IS
APPROXIMATELY ____% (COMPOUNDED MONTHLY); THE AMOUNT OF OID ALLOCABLE TO THE
SHORT FIRST ACCRUAL PERIOD IS $____ ON THE INITIAL POOL STATED PRINCIPAL
BALANCE; AND THE METHOD USED TO CALCULATE THE ANNUAL YIELD TO MATURITY AND THE
AMOUNT OF OID ALLOCABLE TO THE SHORT FIRST ACCRUAL PERIOD IS THE EXACT METHOD AS
DEFINED IN PROPOSED TREASURY REGULATIONS. NO REPRESENTATION IS MADE THAT THE
MORTGAGE LOANS WILL PREPAY AT A RATE BASED ON THE PREPAYMENT ASSUMPTION OR AT
ANY OTHER RATE. THE ACTUAL YIELD TO MATURITY MAY DIFFER FROM THAT SET FORTH
ABOVE, AND THE ACCRUAL OF OID WILL BE ADJUSTED, IN ACCORDANCE WITH SECTION
1272(a)(6) OF THE CODE, TO TAKE INTO ACCOUNT EVENTS WHICH HAVE OCCURRED DURING
ANY ACCRUAL PERIOD. THE PREPAYMENT ASSUMPTION IS INTENDED TO BE THE PREPAYMENT
ASSUMPTION REFERRED TO IN SECTION 1272(a)(6)(B)(iii) OF THE CODE.]
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Certificate No. :
Cut-off Date :
First Distribution Date :
Initial Notional Amount
of this Certificate
("Denomination") :
Initial Notional Amount
of all Certificates
of this Class :
CUSIP :
CWABS, Inc.
Asset Backed Certificates, Series 199 -
Class [ ]
evidencing a percentage interest in the distributions allocable to the
Certificates of the above-referenced Class with respect to a Trust Fund
consisting primarily of a pool of conventional loans (the "Mortgage
Loans") secured by first liens on one- to four-family residential
properties
CWABS, Inc., as Depositor
This Certificate does not evidence an obligation of, or an interest in,
and is not guaranteed by the Depositor, the Seller, the Master Servicer or the
Trustee referred to below or any of their respective affiliates. Neither this
Certificate nor the Mortgage Loans are guaranteed or insured by any governmental
agency or instrumentality.
This certifies that ________________________ is the registered owner of
the Percentage Interest evidenced by this Certificate specified above in certain
monthly distributions with respect to a Trust Fund consisting primarily of the
Mortgage Loans deposited by CWABS, Inc. (the "Depositor"). The Trust Fund was
created pursuant to a Pooling and Servicing Agreement dated as of Cut-off Date
specified above (the "Agreement") among the Depositor, ________________________,
as seller (in such capacity, the "Seller") and as master servicer (in
suchcapacity, the "Master Servicer"), and _________________, as trustee (the
"Trustee"). 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
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<PAGE>
the Holder of this Certificate by virtue of the acceptance hereof assents and by
which such Holder is bound.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.
* * *
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: ____________, 19__
_______________________,
as Trustee
By ______________________
Countersigned:
By ___________________________
Authorized Signatory of
______________________,
as Trustee
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EXHIBIT E
[Form of Reverse of Certificates]
CWABS, Inc.
Asset Backed Certificates
This Certificate is one of a duly authorized issue of Certificates
designated as CWABS, Inc. Asset Backed Certificates, of the Series specified on
the face hereof (herein collectively called the "Certificates"), and
representing a beneficial ownership interest in the Trust Fund created by the
Agreement.
The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds on deposit in the Distribution Account for
payment hereunder and that the Trustee is not liable to the Certificateholders
for any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.
This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced thereby, and the rights,
duties and immunities of the Trustee.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified on the face hereof, to the Person in whose
name this Certificate is registered at the close of business on the applicable
Record Date in an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to
Holders of Certificates of the Class to which this Certificate belongs on such
Distribution Date pursuant to the Agreement. The Record Date applicable to each
Distribution Date is the last Business Day of the month next preceding the month
of such Distribution Date.
Distributions on this Certificate shall be made by wire transfer of
immediately available funds to the account of the Holder hereof at a bank or
other entity having appropriate facilities therefor, if such Certificateholder
shall have so notified the Trustee in writing at least five Business Days prior
to the related Record Date and such Certificateholder shall satisfy the
conditions to receive such form of payment set forth in the Agreement, or, if
not, by check mailed by first class mail to the address of such
Certificateholder appearing in the Certificate Register. The final distribution
on each Certificate will be made in like manner, but only upon presentment and
surrender of such Certificate at the Corporate Trust Office or
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such other location specified in the notice to Certificateholders
of such final distribution.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of 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 affected by such amendment evidencing the requisite
Percentage Interest, as provided in the Agreement. 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 therefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the Corporate Trust Office or the office or agency maintained by the
Trustee in New York, New York, accompanied by a 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 the same Class in authorized
denominations and evidencing the same aggregate Percentage Interest in the Trust
Fund will be issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates without
coupons 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 the same Class in authorized denominations
and evidencing the same 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 Seller and the Trustee and any
agent of the Depositor or the Trustee may treat the Person in whose name this
Certificate is registered as the owner hereof for all purposes, and neither the
Depositor, the Trustee, nor any such agent shall be affected by any notice to
the contrary.
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<PAGE>
On any Distribution Date on which the Pool Stated Principal Balance is
less than 10% of the aggregate Cut-off Date Principal Balances of the Mortgage
Loans, the Master Servicer will have the option to repurchase, in whole, from
the Trust Fund all remaining Mortgage Loans and all property acquired in respect
of the Mortgage Loans at a purchase price determined as provided in the
Agreement. In the event that no such optional termination occurs, the
obligations and responsibilities created by the Agreement will terminate upon
the later of the maturity 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 in respect thereof and the distribution to
Certificateholders of all amounts required to be distributed pursuant to the
Agreement. In no event, however, will the trust created by the Agreement
continue beyond the expiration of 21 years from the death of the last survivor
of the descendants living at the date of the Agreement of a certain person named
in the Agreement.
Any term used herein that is defined in the Agreement shall have the
meaning assigned in the Agreement, and nothing herein shall be deemed
inconsistent with that meaning.
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<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s),
assign(s) and transfer(s) unto__________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address including postal zip
code of assignee)
the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to assignee
on the Certificate Register of the Trust Fund.
I (We) further direct the Trustee 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
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.
E-4
<PAGE>
<PAGE>
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 who, being by me duly sworn,
did depose and say that he executed the foregoing instrument.
____________________________________
Notary Public
[Notarial Seal]
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<PAGE>
EXHIBIT F
[RESERVED]
F-1
<PAGE>
<PAGE>
EXHIBIT G
FORM OF INITIAL CERTIFICATION OF TRUSTEE
[date]
[Depositor]
[Master Servicer]
[Seller]
_____________________
_____________________
Re: Pooling and Servicing Agreement among
CWABS, Inc., as Depositor, ____________ ______________, as
Seller and Master Servicer, and _________________, as
Trustee, Asset Backed Certificates, Series 199 -
Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), the undersigned, as
Trustee, hereby certifies that, as to each Mortgage Loan listed in the Mortgage
Loan Schedule (other than any Mortgage Loan paid in full or listed on the
attached schedule) it has received:
(i) the original Mortgage Note endorsed in the following
form: "Pay to the order of __________, without recourse"; and
(ii) a duly executed assignment of the Mortgage (which may be included in a
blanket assignment or assignments).
Based on its review and examination and only as to the foregoing
documents, such documents appear regular on their face and related to such
Mortgage Loan.
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
Pooling and Servicing Agreement. The Trustee makes no representations as to: (i)
the validity, legality, sufficiency, enforceability or genuineness of any of the
documents contained in each Mortgage File of any of the Mortgage Loans
identified on the Mortgage Loan Schedule, or (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.
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<PAGE>
<PAGE>
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Pooling and Servicing Agreement.
___________________,
as Trustee
By:__________________________
Name:
Title:
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<PAGE>
<PAGE>
EXHIBIT H
FORM OF FINAL CERTIFICATION OF TRUSTEE
[date]
[Depositor]
[Master Servicer]
[Seller]
_____________________
_____________________
Re: Pooling and Servicing Agreement among
CWABS, Inc., as Depositor, _____________
_________________, as Seller and Master Servicer, and
____________________, as Trustee, Asset Backed
Certificates, Series 199 -
Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), the undersigned, as
Trustee, hereby certifies that as to each Mortgage Loan listed in the Mortgage
Loan Schedule (other than any Mortgage Loan paid in full or listed on the
attached Document Exception Report) it has received:
(i) the original Mortgage Note endorsed in the form provided in
Section 2.01(c) of the Pooling and Servicing Agreement, with all intervening
endorsements showing a complete chain of endorsement from the originator to the
Seller.
(ii) The original recorded Mortgage.
(iii) A duly executed assignment of the Mortgage in the form provided
in Section 2.01(c) of the Pooling and Servicing Agreement, or, if the Depositor
has certified or the Trustee otherwise knows that the related Mortgage has not
been returned from the applicable recording office, a copy of the assignment of
the Mortgage (excluding information to be provided by the recording office).
(iv) The original or duplicate original recorded assignment or
assignments of the Mortgage showing a complete chain of assignment from the
originator to the Seller.
(v) The original or duplicate original lender's title
policy and all riders thereto or, any one of an original title
H-1
<PAGE>
<PAGE>
binder, an original preliminary title report or an original title commitment, or
a copy thereof certified by the title company.
Based on its review and examination and only as to the foregoing
documents, (a) such documents appear regular on their face and related to such
Mortgage Loan, and (b) the information set forth in items (i), (ii), (iii),
(iv), (vi), and (xi) of the definition of the "Mortgage Loan Schedule" in
Section 1.01 of the Pooling and Servicing Agreement accurately reflects
information set forth in the Mortgage File.
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
Pooling and Servicing Agreement. The Trustee makes no representations as to: (i)
the validity, legality, sufficiency, enforceability or genuineness of any of the
documents contained in each Mortgage File of any of the Mortgage Loans
identified on the Mortgage Loan Schedule, or (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Pooling and Servicing Agreement.
_______________________,
as Trustee
By :_____________________________
Name:
Title:
H-2
<PAGE>
<PAGE>
EXHIBIT I
TRANSFER AFFIDAVIT
CWABS, Inc.
Asset Backed Certificates
Series 199 -_
STATE OF )
) ss.:
COUNTY OF )
The undersigned, being first duly sworn, deposes and says as follows:
1. The undersigned is an officer of ____________________,
the proposed Transferee of an Ownership Interest in a Class A-R
Certificate (the "Certificate") issued pursuant to the Pooling
and Servicing Agreement, (the "Agreement"), relating to the
above-referenced Series, by and among CWABS, Inc., as depositor
(the "Depositor"), ___________________________, as seller and
master servicer and ___________________, as Trustee. Capitalized
terms used, but not defined herein or in Exhibit 1 hereto, shall
have the meanings ascribed to such terms in the Agreement. The
Transferee has authorized the undersigned to make this affidavit
on behalf of the Transferee.
2. The Transferee is, as of the date hereof, and will be, as of the date
of the Transfer, a Permitted Transferee. The Transferee is acquiring its
Ownership Interest in the Certificate either (i) for its own account or (ii) as
nominee, trustee or agent for another Person and has attached hereto an
affidavit from such Person in substantially the same form as this affidavit. The
Transferee has no knowledge that any such affidavit is false.
3. The Transferee has been advised of, and understands that (i) a tax
will be imposed on Transfers of the Certificate to Persons that are not
Permitted Transferees; (ii) such tax will be imposed on the transferor, or, if
such Transfer is through an agent (which includes a broker, nominee or
middleman) for a Person that is not a Permitted Transferee, on the agent; and
(iii) the Person otherwise liable for the tax shall be relieved of liability for
the tax if the subsequent Transferee furnished to such Person an affidavit that
such subsequent Transferee is a Permitted Transferee and, at the time of
Transfer, such Person does not have actual knowledge that the affidavit is
false.
4. The Transferee has been advised of, and understands
that a tax will be imposed on a "pass-through entity" holding the
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<PAGE>
Certificate if at any time during the taxable year of the pass-through entity a
Person that is not a Permitted Transferee is the record holder of an interest in
such entity. The Transferee understands that such tax will not be imposed for
any period with respect to which the record holder furnishes to the pass-through
entity an affidavit that such record holder is a Permitted Transferee and the
pass-through entity does not have actual knowledge that such affidavit is false.
(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 and, except as may be provided in
Treasury Regulations, persons holding interests in pass-through entities as a
nominee for another Person.)
5. The Transferee has reviewed the provisions of Section 5.02(c) of the
Agreement (attached hereto as Exhibit 2 and incorporated herein by reference)
and understands the legal consequences of the acquisition of an Ownership
Interest in the Certificate including, without limitation, the restrictions on
subsequent Transfers and the provisions regarding voiding the Transfer and
mandatory sales. The Transferee expressly agrees to be bound by and to abide by
the provisions of Section 5.02(c) of the Agreement and the restrictions noted on
the face of the Certificate. The Transferee understands and agrees that any
breach of any of the representations included herein shall render the Transfer
to the Transferee contemplated hereby null and void.
6. The Transferee agrees to require a Transfer Affidavit from any Person
to whom the Transferee attempts to Transfer its Ownership Interest in the
Certificate, and in connection with any Transfer by a Person for whom the
Transferee is acting as nominee, trustee or agent, and the Transferee will not
Transfer its Ownership Interest or cause any Ownership Interest to be
Transferred to any Person that the Transferee knows is not a Permitted
Transferee. In connection with any such Transfer by the Transferee, the
Transferee agrees to deliver to the Trustee a certificate substantially in the
form set forth as Exhibit J to the Agreement (a "Transferor Certificate") to the
effect that such Transferee has no actual knowledge that the Person to which the
Transfer is to be made is not a Permitted Transferee.
7. The Transferee does not have the intention to impede
the assessment or collection of any tax legally required to be
paid with respect to the Certificate.
8. The Transferee's taxpayer identification number is
______.
9. The Transferee is a U.S. Person as defined in Code
Section 7701(a)(30).
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<PAGE>
<PAGE>
10. The Transferee is aware that the Certificate may be a "noneconomic
residual interest" within the meaning of proposed 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.
11. The Transferee is not an employee benefit plan that is subject to
ERISA or a plan that is subject to Section 4975 of the Code, and the Transferee
is not acting on behalf of such a plan.
* * *
I-3
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Transferee has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by its
duly authorized officer and its corporate seal to be hereunto affixed, duly
attested, this day of ____________________, 19__.
_________________________________
PRINT NAME OF TRANSFEREE
By:______________________________
Name:
Title:
[Corporate Seal]
ATTEST:
__________________________________
[Assistant] Secretary
Personally appeared before me the above-named ___________________, known
or proved to me to be the same person who executed the foregoing instrument and
to be the ___________________ of the Transferee, and acknowledged that he
executed the same as his free act and deed and the free act and deed of the
Transferee.
Subscribed and sworn before me this _____ day of _________,
19__.
_____________________________
NOTARY PUBLIC
My Commission expires the
__ day of ____________, 19__.
I-4
<PAGE>
<PAGE>
EXHIBIT 1
to EXHIBIT I
Certain Definitions
"Ownership Interest": As to any Certificate, any ownership
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.
"Permitted Transferee": Any Person other than (i) the United States, any
State or political subdivision thereof, or any agency or instrumentality of any
of the foregoing, (ii) a foreign government, International Organization or any
agency or instrumentality of either of the foregoing, (iii) an organization
(except certain farmers' cooperatives described in Code Section 521) which is
exempt from tax imposed by Chapter 1 of the Code (including the tax imposed by
Code Section 511 on unrelated business taxable income) on any excess inclusions
(as defined in Code Section 860E(c)(1)) with respect to any Class A-R
Certificate, (iv) rural electric and telephone cooperatives described in Code
Section 1381(a)(2)(c), (v) a Person that is not 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, and (vi) any other Person so designated by the Trustee based upon
an Opinion of Counsel that the Transfer of an Ownership Interest in a Class A-R
Certificate to such Person may cause the Trust Fund to fail to qualify as a
REMIC at any time that certain Certificates are Outstanding. The terms "United
States," "State" and "International Organization" shall have the meanings set
forth in Code Section 7701 or successor provisions. A corporation will not be
treated as an instrumentality of the United States or of any State or political
subdivision thereof if all of its activities are subject to tax, and, with the
exception of the FHLMC, a majority of its board of directors is not selected by
such governmental unit.
"Person": Any individual, corporation, partnership, joint
venture, bank, joint stock company, trust (including any
beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.
"Transfer": Any direct or indirect transfer or sale of any
Ownership Interest in a Certificate, including the acquisition of
a Certificate by the Depositor.
"Transferee": Any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.
I-5
<PAGE>
<PAGE>
EXHIBIT 2
to EXHIBIT I
Section 5.02(c) of the Agreement
(c) Each Person who has or who acquires any Ownership Interest in
a Class A-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
the rights of each Person acquiring any Ownership Interest in a Class A-R
Certificate are expressly subject to the following provisions:
(i) Each Person holding or acquiring any Ownership Interest
in a Class A-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.
(ii) No Ownership Interest in a Class A-R Certificate may be
registered on the Closing Date or thereafter transferred, and the
Trustee shall not register the Transfer of any Class A-R Certificate
unless, in addition to the certificates required to be delivered to the
Trustee under subparagraph (b) above, the Trustee shall have been
furnished with an affidavit (a "Transfer Affidavit") of the initial
owner or the proposed transferee in the form attached hereto as Exhibit
I.
(iii) Each Person holding or acquiring any Ownership Interest
in a Class A-R Certificate shall agree (A) to obtain a Transfer
Affidavit from any other Person to whom such Person attempts to Transfer
its Ownership Interest in a Class A-R Certificate, (B) to obtain a
Transfer Affidavit from any Person for whom such Person is acting as
nominee, trustee or agent in connection with any Transfer of a Class A-R
Certificate and (C) not to Transfer its Ownership Interest in a Class
A-R Certificate or to cause the Transfer of an Ownership Interest in a
Class A-R Certificate to any other Person if it has actual knowledge
that such Person is not a Permitted Transferee.
(iv) Any attempted or purported Transfer of any Ownership
Interest in a Class A-R Certificate in violation of the provisions of
this Section 5.02(c) shall be absolutely null and void and shall vest no
rights in the purported Transferee. If any purported transferee shall
become a Holder of a Class A-R Certificate in violation of the
provisions of this Section 5.02(c), then the last preceding Permitted
Transferee shall be restored to all rights as Holder thereof retroactive
to the date of registration of Transfer of such Class A-R Certificate.
The Trustee shall be under no liability to any Person for any
registration of Transfer of a Class A-R Certificate that is
I-6
<PAGE>
<PAGE>
in fact not permitted by Section 5.02(b) and this Section 5.02(c) or for
making any payments due on such Certificate to the Holder thereof or
taking any other action with respect to such Holder under the provisions
of this Agreement so long as the Transfer was registered after receipt
of the related Transfer Affidavit, Transferor Certificate and either the
Rule 144A Letter or the Investment Letter. The Trustee shall be entitled
but not obligated to recover from any Holder of a Class A-R Certificate
that was in fact not a Permitted Transferee at the time it became a
Holder or, at such subsequent time as it became other than a Permitted
Transferee, all payments made on such Class A-R Certificate at and after
either such time. Any such payments so recovered by the Trustee shall be
paid and delivered by the Trustee to the last preceding Permitted
Transferee of such Certificate.
(v) The Depositor shall use its best efforts to make
available, upon receipt of written request from the Trustee, all
information necessary to compute any tax imposed under Section 860E(e)
of the Code as a result of a Transfer of an Ownership Interest in a
Class A-R Certificate to any Holder who is not a Permitted Transferee.
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<PAGE>
EXHIBIT J
FORM OF TRANSFEROR CERTIFICATE
_____________________
Date
CWABS, Inc.
155 North Lake Avenue
Pasadena, California 91101
Attention: _______________
[Trustee]
_________________________
_________________________
Attention: ____________________________
_______________
Re: CWABS, Inc. Asset Backed Certificates,
Series 199 -_, Class_______,
Ladies and Gentlemen:
In connection with our disposition of the above Certificates we
certify that (a) we understand that the Certificates have not been registered
under the Securities Act of 1933, as amended (the "Act"), and are being disposed
by us in a transaction that is exempt from the registration requirements of the
Act, (b) we have not offered or sold any Certificates to, or solicited offers to
buy any Certificates from, any person, or otherwise approached or negotiated
with any person with respect thereto, in a manner that would be deemed, or taken
any other action which would result in, a violation of Section 5 of the Act and
(c) to the extent we are disposing of a Class A-R Certificate, we have no
knowledge the Transferee is not a Permitted Transferee.
Very truly yours,
__________________________
Print Name of Transferor
By:________________________
Authorized Officer
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<PAGE>
EXHIBIT K
FORM OF INVESTMENT LETTER (NON-RULE 144A)
_____________________________
Date
CWABS, Inc.
155 North Lake Avenue
Pasadena, California 91101
Attention: ________________
[Trustee]
_________________________
_________________________
Attention: _______________________________
_________________
Re: CWABS, Inc. Asset Backed Certificates,
Series 199 -_, Class __
Ladies and Gentlemen:
In connection with our acquisition of the above Certificates we
certify that (a) we understand that the Certificates are not being registered
under the Securities Act of 1933, as amended (the "Act"), or any state
securities laws and are being transferred to us in a transaction that is exempt
from the registration requirements of the Act and any such laws, (b) we are an
"accredited investor," as defined in Regulation D under the Act, and have such
knowledge and experience in financial and business matters that we are capable
of evaluating the merits and risks of investments in the Certificates, (c) we
have had the opportunity to ask questions of and receive answers from the
Depositor concerning the purchase of the Certificates and all matters relating
thereto or any additional information deemed necessary to our decision to
purchase the Certificates, (d) we are not an employee benefit plan that is
subject to the Employee Retirement Income Security Act of 1974, as amended, or a
plan or arrangement that is subject to Section 4975 of the Internal Revenue Code
of 1986, as amended, nor are we acting on behalf of any such plan or
arrangement, nor are we using the assets of any such plan or arrangement to
effect such acquisition, (e) we are acquiring the Certificates for investment
for our own account and not with a view to any distribution of such Certificates
(but without prejudice to our right at all times to sell or otherwise dispose of
the Certificates in accordance with clause (g) below), (f) we have not offered
or sold any Certificates to, or solicited offers to buy any Certificates from,
any person, or otherwise approached or negotiated with any person with respect
thereto, or taken any
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<PAGE>
other action which would result in a violation of Section 5 of the Act, and (g)
we will not sell, transfer or otherwise dispose of any Certificates unless (1)
such sale, transfer or other disposition is made pursuant to an effective
registration statement under the Act or is exempt from such registration
requirements, and if requested, we will at our expense provide an opinion of
counsel satisfactory to the addressees of this Certificate that such sale,
transfer or other disposition may be made pursuant to an exemption from the Act,
(2) the purchaser or transferee of such Certificate has executed and delivered
to you a certificate to substantially the same effect as this certificate, and
(3) the purchaser or transferee has otherwise complied with any conditions for
transfer set forth in the Pooling and Servicing Agreement.
Very truly yours,
_____________________________
Print Name of Transferee
By:__________________________
Authorized Officer
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<PAGE>
EXHIBIT L
FORM OF RULE 144A LETTER
________________________
Date
CWABS, Inc.
155 North Lake Avenue
Pasadena, California 91101
Attention: ________________
[Trustee]
_________________________
_________________________
Attention: _______________________________
____________
Re: CWABS, Inc. Asset Backed Certificates,
Series 199 -_, Class __
Ladies and Gentlemen:
In connection with our acquisition of the above Certificates we
certify that (a) we understand that the Certificates are not being registered
under the Securities Act of 1933, as amended (the "Act"), or any state
securities laws and are being transferred to us in a transaction that is exempt
from the registration requirements of the Act and any such laws, (b) we have
such knowledge and experience in financial and business matters that we are
capable of evaluating the merits and risks of investments in the Certificates,
(c) we have had the opportunity to ask questions of and receive answers from the
Depositor concerning the purchase of the Certificates and all matters relating
thereto or any additional information deemed necessary to our decision to
purchase the Certificates, (d) we are not an employee benefit plan that is
subject to the Employee Retirement Income Security Act of 1974, as amended, or a
plan or arrangement that is subject to Section 4975 of the Internal Revenue Code
of 1986, as amended, nor are we acting on behalf of any such plan or
arrangement, nor are we using the assets of any such plan or arrangement to
effect such acquisition, (e) we have not, nor has anyone acting on our behalf
offered, transferred, pledged, sold or otherwise disposed of the Certificates,
any interest in the Certificates or any other similar security to, or solicited
any offer to buy or accept a transfer, pledge or other disposition of the
Certificates, any interest in the Certificates or any other similar security
from, or otherwise approached or negotiated with respect to the Certificates,
any interest in the Certificates or any other similar security with, any person
in any manner, or made any general solicitation by means of general advertising
or
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<PAGE>
in any other manner, or taken any other action, that would constitute a
distribution of the Certificates under the Securities Act or that would render
the disposition of the Certificates a violation of Section 5 of the Securities
Act or require registration pursuant thereto, nor will act, nor has authorized
or will authorize any person to act, in such manner with respect to the
Certificates, (f) we are a "qualified institutional buyer" as that term is
defined in Rule 144A under the Securities Act and have completed either of the
forms of certification to that effect attached hereto as Annex 1 or Annex 2. We
are aware that the sale to us is being made in reliance on Rule 144A. We are
acquiring the Certificates for our own account or for resale pursuant to Rule
144A and further, understand that such Certificates 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 Securities Act.
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<PAGE>
ANNEX 1 TO EXHIBIT L
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees Other Than Registered Investment Companies]
The undersigned (the "Buyer") hereby certifies as follows to the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:
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, as amended ("Rule 144A") because (i) the Buyer owned
and/or invested on a discretionary basis either at least $100,000 in securities
or, if Buyer is a dealer, Buyer must own and/or invest on a discretionary basis
at least $10,000,000 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 of 1986, as
amended.
___ 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
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as demonstrated in its latest annual financial
statements, a copy of which is attached hereto.
___ Broker-dealer. The Buyer is a dealer registered
pursuant to Section 15 of the Securities Exchange
Act of 1934.
___ 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, 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 Advisor. The Buyer is an investment
advisor registered under the Investment Advisors
Act of 1940.
___ Small Business Investment Company. 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. Buyer is a business
development company as defined in Section
202(a)(22) of the Investment Advisors Act of 1940.
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) securities issued or guaranteed by the U.S. or any
instrumentality thereof, (iv) bank deposit notes and certificates of deposit,
(v) loan participations, (vi) repurchase agreements, (vii) securities owned but
subject to a repurchase agreement and (viii) 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, except (i) where the Buyer reports its
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securities holdings in its financial statements on the basis of their market
value, and (ii) no current information with respect to the cost of those
securities has been published. If clause (ii) in the preceding sentence applies,
the securities may be valued at market. 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, consolidated subsidiary of another enterprise and the Buyer is
not itself a reporting company under the Securities Exchange Act of 1934, as
amended.
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.
6. Until the date of purchase of the Rule 144A Securities, 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 the Certificates will constitute a reaffirmation of this
certification as of the date of such purchase. In addition, if the Buyer is a
bank or savings and loan is provided above, the Buyer agrees that it will
furnish to such parties updated annual financial statements promptly after they
become available.
_______________________________
Print Name of Buyer
By:____________________________
Name:
Title:
Date:__________________________
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ANNEX 2 TO EXHIBIT L
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees That are Registered Investment Companies]
The undersigned (the "Buyer") hereby certifies as follows to the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:
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, as amended ("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, as amended 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, except (i) where the Buyer or the Buyer's Family of
Investment Companies reports its securities holdings in its financial statements
on the basis of their market value, and (ii) no current information with respect
to the cost of those securities has been published. If clause (ii) in the
preceding sentence applies, the securities may be valued at market.
___ 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
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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) securities issued or guaranteed by
the U.S. or any instrumentality thereof, (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.
5. The Buyer is familiar with Rule 144A and understands that the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates 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. Until the date of purchase of the Certificates, the
undersigned will notify the parties listed in the Rule 144A Transferee
Certificate to which this certification relates of any changes in the
information and conclusions herein. Until such notice is given, the Buyer's
purchase of the Certificates will constitute a reaffirmation of this
certification by the undersigned as of the date of such purchase.
_______________________________
Print Name of Buyer or Adviser
By:____________________________
Name:
Title:
IF AN ADVISER:
_______________________________
Print Name of Buyer
Date:__________________________
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EXHIBIT M
REQUEST FOR RELEASE
(for Trustee)
CWABS, Inc.
Asset Backed Certificates
Series 199 -_
Loan Information
Name of Mortgagor: ______________________________
Servicer
Loan No.: ______________________________
Trustee
Name: ______________________________
Address: ______________________________
______________________________
Trustee
Mortgage File No.: ______________________________
The undersigned Master Servicer hereby acknowledges that it has received
from _______________________, as Trustee (the "Trustee") for the Holders of
Asset Backed Certificates, of the above-referenced Series, the documents
referred to below (the "Documents"). All capitalized terms not otherwise defined
in this Request for Release shall have the meanings given them in the Pooling
and Servicing Agreement (the "Pooling and Servicing Agreement") relating to the
above-referenced Series among the Trustee, __________________________, as Seller
and Master Servicer and CWABS, Inc., as Depositor.
( ) Mortgage Note dated ____________, 19__, in the original
principal sum of $__________, made by __________________.
payable to, or endorsed to the order of, the Trustee.
( ) Mortgage recorded on _________________ as instrument no.
________________ in the County Recorder's Office of the
County of ___________________, State of _______________ in
book/reel/docket ________________ of official records at
page/image ________________.
( ) Deed of Trust recorded on __________________ as instrument
no.__________________ in the County Recorder's Office of the
County of ________________, State of _______________ in
book/reel/docket _______________ of official records at
page/image ________________.
( ) Assignment of Mortgage or Deed of Trust to the Trustee,
recorded on _________________ as instrument no._____________
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in the County Recorder's Office of the County of __________,
State of ________________ in book/reel/docket _________________
of official records at page/image _______________.
( ) Other documents, including any amendments, assignments or
other assumptions of the Mortgage Note or Mortgage.
( ) _______________________________________________
( ) _______________________________________________
( ) _______________________________________________
( ) _______________________________________________
The undersigned Master Servicer hereby acknowledges and agrees as
follows:
(1) The Master Servicer shall hold and retain possession of the
Documents in trust for the benefit of the Trustee, solely for the
purposes provided in the Agreement.
(2) The Master Servicer shall not cause or knowingly permit the
Documents to become subject to, or encumbered by, any claim, liens,
security interest, charges, writs of attachment or other impositions nor
shall the Servicer assert or seek to assert any claims or rights of
setoff to or against the Documents or any proceeds thereof.
(3) The Master Servicer shall return each and every Document
previously requested from the Mortgage File to the Trustee when the need
therefor no longer exists, unless the Mortgage Loan relating to the
Documents has been liquidated and the proceeds thereof have been
remitted to the Certificate Account and except as expressly provided in
the Agreement.
(4) The Documents and any proceeds thereof, including any
proceeds of proceeds, coming into the possession or control of the
Master Servicer shall at all times be earmarked for the account of the
Trustee, and the Master Servicer shall keep the Documents and any
proceeds separate and distinct from all other property in the Master
Servicer's possession, custody or control.
[MASTER SERVICER]
By______________________________
Its_____________________________
Date: _________________, 19__
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EXHIBIT N
REQUEST FOR RELEASE OF DOCUMENTS
To: ____________________ Attn: _______________
___________
Re: The Pooling & Servicing Agreement dated ___________ __,
199_ among _______________________, as Seller and as
Master Servicer, CWABS, Inc. and ____________________
as Trustee
Ladies and Gentlemen:
In connection with the administration of the Mortgage Loans held by you
as Trustee for CWABS, Inc., we request the release of the Mortgage Loan File for
the Mortgage Loan(s) described below, for the reason indicated.
FT Account#: Pool #:
Mortgagor's Name, Address and Zip Code:
Mortgage Loan Number:
Reason for Requesting Documents (check one)
1. Mortgage Loan paid in full (_______________________,
Inc. hereby certifies that all amounts have been
received.)
2. Mortgage Loan Liquidated (___________________________ hereby
certifies that all proceeds of foreclosure, insurance, or other
liquidation have been finally received.)
3. Mortgage Loan in Foreclosure.
4. Other (explain):
If item 1 or 2 above is checked, and if all or part of the Mortgage File
was previously released to us, please release to us our previous receipt on file
with you, as well as any additional documents in your possession relating to the
above-specified Mortgage Loan. If item 3 or 4 is checked, upon return of all of
the above documents to you as Trustee, please acknowledge your
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receipt by signing in the space indicated below, and returning
this form.
_____________________________
_____________________________
_____________________________
By:______________________________
Name:____________________________
Title:___________________________
Date:____________________________
TRUSTEE CONSENT TO RELEASE AND
ACKNOWLEDGEMENT OF RECEIPT
By:______________________________
Name:____________________________
Title:___________________________
Date:____________________________
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EXHIBIT 4.3
================================================================================
TRUST AGREEMENT
among
CWABS, INC.,
as Depositor,
[-------------------------------]
and
[-------------------------------]
as Owner Trustee
Dated as of ___________1, 199_
================================================================================
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Table of Contents
<TABLE>
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ARTICLE I
Definitions
SECTION 1.01. Capitalized Terms............................................. 1
SECTION 1.02. Other Definitional Provisions................................. 4
ARTICLE II
Organization
SECTION 2.01. Name.......................................................... 4
SECTION 2.02. Office........................................................ 4
SECTION 2.03. Purposes and Powers........................................... 5
SECTION 2.04. Appointment of Owner Trustee.................................. 5
SECTION 2.05. Initial Capital Contribution of Owner Trust Estate............ 5
SECTION 2.06. Declaration of Trust.......................................... 5
SECTION 2.07. Liability of the Owners....................................... 6
SECTION 2.08. Title to Trust Property....................................... 6
SECTION 2.09. Situs of Trust................................................ 6
SECTION 2.10. Representations and Warranties of the Depositor and the
Company....................................................... 6
SECTION 2.11. Federal Income Tax Allocations................................ 8
ARTICLE III
Trust Certificates and Transfer of Interests
SECTION 3.01. Initial Ownership............................................. 9
SECTION 3.02. The Trust Certificates........................................ 9
SECTION 3.03. Authentication of Trust Certificates.......................... 9
SECTION 3.04. Registration of Transfer and Exchange of Trust
Certificates.................................................. 10
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates....... 10
SECTION 3.06. Persons Deemed Owners......................................... 11
SECTION 3.07. Access to List of Certificateholders' Names and
Addresses..................................................... 11
SECTION 3.08. Maintenance of Office or Agency............................... 11
SECTION 3.09. Appointment of Paying Agent................................... 11
SECTION 3.10. Ownership by Company of Trust Certificates.................... 12
SECTION 3.11. Book-Entry Trust Certificates................................. 12
SECTION 3.12. Notices to Clearing Agency.................................... 13
SECTION 3.13. Definitive Trust Certificates................................. 13
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ARTICLE IV
Actions by Owner Trustee
SECTION 4.01. Prior Notice to Owners with Respect to Certain Matters........ 14
SECTION 4.02. Action by Owners with Respect to Certain Matters.............. 14
SECTION 4.03. Action by Owners with Respect to Bankruptcy................... 14
SECTION 4.04. Restrictions on Owners' Power................................. 15
SECTION 4.05. Majority Control.............................................. 15
ARTICLE V
Application of Trust Funds; Certain Duties
SECTION 5.01. Establishment of Trust Account................................ 15
SECTION 5.02. Application of Trust Funds.................................... 15
SECTION 5.03. Method of Payment............................................. 16
SECTION 5.04. No Segregation of Moneys; No Interest......................... 16
SECTION 5.05. Accounting and Reports to the Noteholders, Owners, the
Internal Revenue Service and Others........................... 16
SECTION 5.06. Signature on Returns; Tax Matters Partner..................... 16
ARTICLE VI
Authority and Duties of Owner Trustee
SECTION 6.01. General Authority............................................. 17
SECTION 6.02. General Duties................................................ 17
SECTION 6.03. Action upon Instruction....................................... 17
SECTION 6.04. No Duties Except as Specified in this Agreement or in
Instructions.................................................. 18
SECTION 6.05. No Action Except Under Specified Documents or
Instructions.................................................. 18
SECTION 6.06. Restrictions.................................................. 18
ARTICLE VII
Concerning the Owner Trustee
SECTION 7.01. Acceptance of Trusts and Duties............................... 19
SECTION 7.02. Furnishing of Documents....................................... 20
SECTION 7.03. Representations and Warranties................................ 20
SECTION 7.04. Reliance; Advice of Counsel.................................. 20
SECTION 7.05. Not Acting in Individual Capacity............................. 21
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SECTION 7.06. Owner Trustee Not Liable for Trust Certificates or
Mortgage Loans. .............................................. 21
SECTION 7.07. Owner Trustee May Own Trust Certificates and Notes............ 21
ARTICLE VIII
Compensation of Owner Trustee
SECTION 8.01. Owner Trustee's Fees and Expenses............................. 21
SECTION 8.02. Indemnification............................................... 22
SECTION 8.03. Payments to the Owner Trustee................................. 22
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement................................ 22
SECTION 10.05. Appointment of Co-Trustee or Separate Trustee................. 25
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments.................................... 26
SECTION 11.02. No Legal Title to Owner Trust Estate in Owners................ 27
SECTION 11.03. Limitations on Rights of Others............................... 27
SECTION 11.04. Notices....................................................... 28
SECTION 11.05. Severability.................................................. 28
SECTION 11.06. Separate Counterparts......................................... 28
SECTION 11.07. Successors and Assigns........................................ 28
SECTION 11.08. Covenants of the Company...................................... 28
SECTION 11.09. No Petition................................................... 28
SECTION 11.10. No Recourse................................................... 29
SECTION 11.11. Headings...................................................... 29
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SECTION 11.12. GOVERNING LAW................................................. 29
SECTION 11.13. Depositor Payment Obligation.................................. 29
</TABLE>
EXHIBIT A Form of Trust Certificate
EXHIBIT B Form of Certificate of Trust
EXHIBIT C Form of Certificate Depository Agreement
iv
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TRUST AGREEMENT (the "Trust Agreement") dated as of ________1,
199_, among CWABS, INC., a Delaware corporation, as depositor (the
"Depositor"), [_______________________], a [_______] corporation (the
"Company"), and [____________], a [__________________], as owner trustee
(the "Owner Trustee").
WHEREAS, the Company has agreed to assign to the Depositor any and all
of the Company's rights and interests with respect to the Mortgage Loans; and
WHEREAS, in connection therewith, the Company is willing to assume
certain obligations pursuant hereto;
NOW, THEREFORE, the Depositor, the Company and the Owner Trustee hereby
agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Capitalized Terms. For all purposes of this Agreement, the
following terms shall have the meanings set forth below:
"Administration Agreement" shall mean the Administration Agreement dated
as of ________1, 199_, among the Trust, the Indenture Trustee and
[_________________________], as Administrator.
"Agreement" shall mean this Trust Agreement, as the same may be amended
and supplemented from time to time.
"Assignment" shall mean the assignment of right, title and interest of
the Depositor in the Mortgage Loans to the Trust.
"Basic Documents" shall mean the Master Servicing Agreement, the
Indenture, the Administration Agreement and the other documents and certificates
delivered in connection therewith.
"Benefit Plan" shall have the meaning assigned to such term in Section
11.13.
"Book-Entry Trust Certificate" shall mean a beneficial interest in the
Trust Certificates, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 3.11.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code ss. 3801 et seq., as the same may be amended from
time to time.
"Certificate" shall mean any of the Book-Entry Trust Certificates or
Definitive Trust Certificates.
"Certificate Distribution Account" shall have the meaning assigned to
such term in Section 5.01.
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"Certificate of Trust" shall mean the Certificate of Trust in the form
of Exhibit B filed for the Trust pursuant to Section 3810(a) of the Business
Trust Statute.
"Certificate Owner" shall mean, with respect to a Book-Entry Trust
Certificate, a Person who is the beneficial owner of such Book-Entry Trust
Certificate, as reflected on the books of the Clearing Agency, or on the books
of a Person maintaining an account with such Clearing Agency (directly as a
Clearing Agency Participant or as an indirect participant, in each case in
accordance with the rules of such Clearing Agency).
"Certificate Register" and "Certificate Registrar" shall mean the
register mentioned in and the registrar appointed pursuant to Section 3.04.
"Certificateholder" or "Holder" shall mean a Person in whose name a
Trust Certificate is registered.
"Clearing Agency" shall mean an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" shall mean a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner Trustee,
the principal corporate trust office of the Owner Trustee located at
[____________________________], or at such other address as the Owner Trustee
may designate by notice to the Owners, the Depositor and the Company, or the
principal corporate trust office of any successor Owner Trustee at the address
designated by such successor Owner Trustee by notice to the Owners, the
Depositor and the Company.
"Definitive Trust Certificates" shall have the meaning set forth in
Section 3.11.
"Depositor" shall mean CWABS, Inc. in its capacity as depositor
hereunder.
"Eligible Distribution Account" shall mean an account that is (i)
maintained with a depository institution whose debt obligations at the time of
any deposit therein have the highest short-term debt rating by the Rating
Agencies, (ii) one or more accounts with a depository institution which accounts
are fully insured by either the Savings Association Insurance Fund or the Bank
Insurance Fund of the Federal Deposit Insurance Corporation established by such
fund, (iii) a segregated trust account maintained with the Owner Trustee or an
affiliate of the Owner Trustee in its fiduciary capacity or (iv) otherwise
acceptable to each Rating Agency as evidenced by a letter from each Rating
Agency to the Owner Trustee, without reduction or withdrawal of their then
currently ratings of the Certificates.
"ERISA" shall have the meaning assigned thereto in Section 11.13.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
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"Expenses" shall have the meaning assigned to such term in Section 8.02.
"Indemnified Parties" shall have the meaning assigned to such term in
Section 8.02.
"Indenture" shall mean the Indenture dated as of ________, 199_ between
the Trust and [_____________________________], as Indenture Trustee.
"Initial Certificate Balance" shall mean $__________.
"Master Servicing Agreement" shall mean the Master Servicing Agreement
dated as of ________1, 199_, among the Trust, as issuer and [Countrywide Home
Loans, Inc.], as master servicer, as the same may be amended or supplemented
from time to time.
"Mortgage Loans" shall mean a pool of [adjustable rate] home equity
revolving credit line loans made or to be made in the future under certain home
quity revolving credit line loan agreements.
"Owner" shall mean each Holder of a Trust Certificate.
"Owner Trust Estate" shall mean all right, title and interest of the
Trust in and to the property and rights assigned to the Trust pursuant to the
Assignment, all funds on deposit from time to time in the Trust Accounts and the
Certificate Distribution Account and all other property of the Trust from time
to time, including any rights of the Owner Trustee and the Trust pursuant to the
Master Servicing Agreement and the Administration Agreement.
"Owner Trustee" shall mean [____________________], a [_________] banking
corporation, not in its individual capacity but solely as owner trustee under
this Agreement, and any successor Owner Trustee hereunder.
"Paying Agent" shall mean any paying agent or co-paying agent appointed
pursuant to Section 3.09 and shall initially be [_____________].
"Rating Agency" shall mean any nationally recognized statistical rating
organization asked to rate the Certificates.
"Record Date" shall mean, with respect to any Distribution Date, the
close of business on the day prior to such Distribution Date occurs or, if
Definitive Trust Certificates are issued pursuant to Section 3.14, the last day
of the month preceding such Distribution Date.
"Secretary of State" shall mean the Secretary of State of the State of
Delaware.
"Treasury Regulations" shall mean regulations, including proposed or
temporary Regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" shall mean the trust established by this Agreement.
"Trust Account" shall mean any account set up by the Owner Trustee
pursuant to the provisions of Section 5.01.
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"Trust Certificate" shall mean a certificate evidencing the beneficial
interest of an Owner in the Trust, substantially in the form attached hereto as
Exhibit A.
SECTION 1.02. Other Definitional Provisions. (a) Capitalized terms used
and not otherwise defined herein have the meanings assigned to them in the
Master Servicing
Agreement or, if not defined therein, in the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles. To the extent that the
definitions of accounting terms in this Agreement or in any such certificate or
other document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement or
in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and Exhibits
in or to this Agreement unless otherwise specified; and the term "including"
shall mean "including without limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
ARTICLE II
Organization
SECTION 2.01. Name. The Trust created hereby shall be known as
"[Countrywide] Home Equity Loan Trust 19 - ," in which name the Owner Trustee
may conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
SECTION 2.02. Office. The office of the Trust shall be in care of the
Owner Trustee at the Corporate Trust Office or at such other address in Delaware
as the Owner Trustee may designate by written notice to the Owners, the
Depositor and the Company.
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SECTION 2.03. Purposes and Powers. (a) The purpose of the Trust is to
engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and the Trust
Certificates pursuant to this Agreement and to sell the Notes and the Trust
Certificates;
(ii) with the proceeds of the sale of the Notes and the Trust
Certificates, to purchase the Mortgage Loans, and to pay the
organizational, start-up and transactional expenses of the Trust and to
pay the balance to the Depositor pursuant to the Master Servicing
Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and convey the
Trust Estate pursuant to the Indenture and to hold, manage and
distribute to the Owners pursuant to the terms of the Master Servicing
Agreement any portion of the Trust Estate released from the Lien of, and
remitted to the Trust pursuant to, the Indenture;
(iv) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
(v) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith; and
(vi) subject to compliance with the Basic Documents, to engage in
such other activities as may be required in connection with conservation
of the Owner Trust Estate and the making of distributions to the Owners
and the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Agreement or the Basic
Documents.
SECTION 2.04. Appointment of Owner Trustee. The Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein.
SECTION 2.05. Initial Capital Contribution of Owner Trust Estate. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $[_____________]. The Owner Trustee
hereby acknowledges receipt in trust from the Depositor, as of the date hereof,
of the foregoing contribution, which shall constitute the initial Owner Trust
Estate and shall be deposited in the Certificate Distribution Account. The
Depositor shall pay organizational expenses of the Trust as they may arise or
shall, upon the request of the Owner Trustee, promptly reimburse the Owner
Trustee for any such expenses paid by the Owner Trustee.
SECTION 2.06. Declaration of Trust. The Owner Trustee hereby declares
that it will hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Owners, subject to
the obligations of the Trust under the Basic Documents. It is the intention of
the parties hereto that the Trust constitute a business trust under the Business
Trust Statute and that this Agreement constitute the governing instrument of
such business trust. It is the intention of the parties hereto that, solely for
income and
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franchise tax purposes, the Trust shall be treated as a partnership, with the
assets of the partnership being the Mortgage Loans and other assets held by the
Trust, the partners of the partnership being the Certificateholders, and the
Notes being debt of the partnership. The parties agree that, unless otherwise
required by appropriate tax authorities, the Trust will file or cause to be
filed annual or other necessary returns, reports and other forms consistent with
the characterization of the Trust as a partnership for such tax purposes.
Effective as of the date hereof, the Owner Trustee shall have all rights, powers
and duties set forth herein and in the Business Trust Statute with respect to
accomplishing the purposes of the Trust.
SECTION 2.07. Liability of the Owners. (a) The Company shall be liable
directly to and will indemnify any injured party for all losses, claims,
damages, liabilities and expenses of the Trust (including Expenses, to the
extent not paid out of the Owner Trust Estate) to the extent that the Company
would be liable if the Trust were a partnership under the Delaware Revised
Uniform Limited Partnership Act in which the Company were a general partner;
provided, however, that the Company shall not be liable for any losses incurred
by a Certificateholder in the capacity of an investor in the Trust Certificates,
or a Noteholder in the capacity of an investor in the Notes. In addition, any
third party creditors of the Trust (other than in connection with the
obligations described in the preceding sentence for which the Company shall not
be liable) shall be deemed third party beneficiaries of this paragraph and
paragraph (c) below. The obligations of the Company under this paragraph shall
be evidenced by the Trust Certificates described in Section 3.10, which for
purposes of the Business Trust Statute shall be deemed to be a separate class of
Trust Certificates from all other Trust Certificates issued by the Trust;
provided that the rights and obligations evidenced by all Trust Certificates,
regardless of class, shall, except as provided in this Section, be identical.
(b) No Owner, other than to the extent set forth in paragraph (a), shall
have any personal liability for any liability or obligation of the Trust.
SECTION 2.08. Title to Trust Property. Legal title to all the Owner
Trust Estate shall be vested at all times in the Trust as a separate legal
entity except where applicable law in any jurisdiction requires title to any
part of the Owner Trust Estate to be vested in a trustee or trustees, in which
case title shall be deemed to be vested in the Owner Trustee, a co-trustee
and/or a separate trustee, as the case may be.
SECTION 2.09. Situs of Trust. The Trust will be located and administered
in the State of Delaware. All bank accounts maintained by the Owner Trustee on
behalf of the Trust shall be located in the State of Delaware or the State of
________. The Trust shall not have any employees in any state other than
Delaware; provided, however, that nothing herein shall restrict or prohibit the
Owner Trustee from having employees within or without the State of Delaware.
Payments will be received by the Trust only in Delaware or ________, and
payments will be made by the Trust only from Delaware or ________. The only
office of the Trust will be at the Corporate Trust Office in Delaware.
SECTION 2.10. Representations and Warranties of the Depositor and the
Company. (a) The Depositor hereby represents and warrants to the Owner Trustee
that:
(i) The Depositor is duly organized and validly existing as a
corporation in good standing under the laws of the State of Delaware,
with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is
presently conducted.
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(ii) The Depositor is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of its
property or the conduct of its business shall require such
qualifications.
(iii) The Depositor has the power and authority to execute and
deliver this Agreement and to carry out its terms; the Depositor has
full power and authority to sell and assign the property to be sold and
assigned to and deposited with the Trust and the Depositor has duly
authorized such sale and assignment and deposit to the Trust by all
necessary corporate action; and the execution, delivery and performance
of this Agreement have been duly authorized by the Depositor by all
necessary corporate action.
(iv) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under,
the certificate of incorporation or bylaws of the Depositor, or any
indenture, agreement or other instrument to which the Depositor is a
party or by which it is bound; nor result in the creation or imposition
of any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument (other than pursuant to the
Basic Documents); nor violate any law or, to the best of the Depositor's
knowledge, any order, rule or regulation applicable to the Depositor of
any court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over
the Depositor or its properties.
(v) To the Depositor's best knowledge, there are no proceedings
or investigations pending or threatened before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties: (A) asserting the
invalidity of this Agreement, (B) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or (C) seeking
any determination or ruling that might materially and adversely affect
the performance by the Depositor of its obligations under, or the
validity or enforceability of, this Agreement.
(vi) The representations and warranties of the Depositor in
Sections [___________] of the [________________________] are true and
correct.
(b) The Company hereby represents and warrants to the Owner Trustee
that:
(i) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of
[_________], with the power and authority to own its properties and to
conduct its business as such properties are currently owned and such
business is presently conducted.
(ii) The Company is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of its
property or the conduct of its business shall require such
qualifications.
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(iii) The Company has the power and authority to execute and
deliver this Agreement and to carry out its terms; the Company has full
power and authority to purchase the Trust Certificates that the Company
has agreed to purchase pursuant to Section 3.10; and the execution,
delivery and performance of this Agreement has been duly authorized by
the Company by all necessary corporate action.
(iv) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under,
the [articles of incorporation] [certificate of incorporation] or bylaws
of the Company, or any indenture, agreement or other instrument to which
the Company is a party or by which it is bound; nor result in the
creation or imposition of any Lien upon any of its properties pursuant
to the terms of any such indenture, agreement or other instrument (other
than pursuant to the Basic Documents); nor violate any law or, to the
best of the Company's knowledge, any order, rule or regulation
applicable to the Company of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Company or its properties.
(v) There are no proceedings or investigations pending or, to the
Company's best knowledge, threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Company or its properties: (A) asserting the
invalidity of this Agreement, (B) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or (C) seeking
any determination or ruling that might materially and adversely affect
the performance by the Company of its obligations under, or the validity
or enforceability of, this Agreement.
(vi) The representatives and warranties of the Company in
Sections [_______] of the [____________________] are true and correct.
SECTION 2.11. Federal Income Tax Allocations. Net income of the Trust
for any month as determined for federal income tax purposes (and each item of
income, gain, loss and deduction entering into the computation thereof) shall be
allocated:
(a) among the Certificate Owners as of the first Record Date following
the end of such month, in proportion to their ownership of principal amount of
Trust Certificates on such date, net income in an amount up to the sum of (i)
the Certificateholders' Monthly Interest Distributable Amount for such month,
(ii) interest on the excess, if any, of the Certificateholders' Interest
Distributable Amount for the preceding Distribution Date over the amount in
respect of interest that is actually deposited in the Certificate Distribution
Account on such preceding Distribution Date, to the extent permitted by law, at
the Pass-Through Rate from such preceding Distribution Date through the current
Distribution Date, (iii) the portion of the market discount on the Mortgage
Loans accrued during such month that is allocable to the excess, if any, of the
initial aggregate principal amount of the Trust Certificates over their initial
aggregate issue price, (iv) any amount expected to be distributed to the
Certificateholders pursuant to the Master Servicing Agreement (to the extent not
previously allocated pursuant to this clause), (v) any Certificateholders'
Prepayment Premium distributable to the Certificateholders with respect to such
month and (vi) any other amounts of income payable to the Certificateholders for
such month; such sum to be reduced by any amortization
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by the Trust of premium on Mortgage Loans that corresponds to any excess of the
issue price of Certificates over their principal amount; and
(b) to the Company, to the extent of any remaining net income.
If the net income of the Trust for any month is insufficient for the allocations
described in clause (a) above, subsequent net income shall first be allocated to
make up such shortfall before being allocated as provided in the preceding
sentence. Net losses of the Trust, if any, for any month as determined for
federal income tax purposes (and each item of income, gain, loss and deduction
entering into the computation thereof) shall be allocated to the Company to the
extent the Company is reasonably expected to bear the economic burden of such
net losses, and any remaining net losses shall be allocated among the
Certificate Owners as of the first Record Date following the end of such month
in proportion to their ownership of principal amount of Trust Certificates on
such Record Date. The Company is authorized to modify the allocations in this
paragraph if necessary or appropriate, in its sole discretion, for the
allocations to fairly reflect the economic income, gain or loss to the Company
or to the Certificate Owners, or as otherwise required by the Code.
ARTICLE III
Trust Certificates and Transfer of Interests
SECTION 3.01. Initial Ownership. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.05 and until the issuance of
the Trust Certificates, the Depositor shall be the sole beneficiary of the
Trust.
SECTION 3.02. The Trust Certificates. The Trust Certificates shall be
issued in minimum denominations of $[_______] and in integral multiples of
$1,000 in excess thereof; provided, however, that the Trust Certificates issued
to the Company pursuant to Section 3.10 may be issued in such denomination as
required to include any residual amount. The Trust Certificates shall be
executed on behalf of the Trust by manual or facsimile signature of an
authorized officer of the Owner Trustee. Trust Certificates bearing the manual
or facsimile signatures of individuals who were, at the time when such
signatures shall have been affixed, authorized to sign on behalf of the Trust,
shall be validly issued and entitled to the benefit of this Agreement,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the authentication and delivery of such Trust Certificates
or did not hold such offices at the date of authentication and delivery of such
Trust Certificates.
A transferee of a Trust Certificate shall become a Certificateholder and
shall be entitled to the rights and subject to the obligations of a
Certificateholder hereunder upon such transferee's acceptance of a Trust
Certificate duly registered in such transferee's name pursuant to Section 3.04.
SECTION 3.03. Authentication of Trust Certificates. Concurrently with
the initial sale of the Mortgage Loans to the Trust pursuant to the Master
Servicing Agreement, the Owner Trustee shall cause the Trust Certificates in an
aggregate principal amount equal to the Initial Certificate Balance to be
executed on behalf of the Trust, authenticated and delivered to or upon the
written order of the Depositor, signed by its chairman of the board, its
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president, any vice president, secretary or any assistant treasurer, without
further corporate action by the Depositor, in authorized denominations. No Trust
Certificate shall entitle its Holder to any benefit under this Agreement or be
valid for any purpose unless there shall appear on such Trust Certificate a
certificate of authentication substantially in the form set forth in Exhibit A,
executed by the Owner Trustee or [____________], as the Owner Trustee's
authenticating agent, by manual signature; such authentication shall constitute
conclusive evidence that such Trust Certificate shall have been duly
authenticated and delivered hereunder. All Trust Certificates shall be dated the
date of their authentication.
SECTION 3.04. Registration of Transfer and Exchange of Trust
Certificates. The Certificate Registrar shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 3.08, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the Owner
Trustee shall provide for the registration of Trust Certificates and of
transfers and exchanges of Trust Certificates as herein provided.
[___________] shall be the initial Certificate Registrar.
Upon surrender for registration of transfer of any Trust Certificate at
the office or agency maintained pursuant to Section 3.08, the Owner Trustee
shall execute, authenticate and deliver (or shall cause [_______________] as its
authenticating agent to authenticate and deliver), in the name of the designated
transferee or transferees, one or more new Trust Certificates in authorized
denominations of a like aggregate amount dated the date of authentication by the
Owner Trustee or any authenticating agent. At the option of a Holder, Trust
Certificates may be exchanged for other Trust Certificates of authorized
denominations of a like aggregate amount upon surrender of the Trust
Certificates to be exchanged at the office or agency maintained pursuant to
Section 3.08.
Every Trust Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the Holder or such Holder's attorney duly authorized in writing.
Each Trust Certificate surrendered for registration of transfer or exchange
shall be cancelled and subsequently disposed of by the Owner Trustee in
accordance with its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Trust Certificates, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Trust Certificates.
The preceding provisions of this Section notwithstanding, the Owner
Trustee shall not make, and the Certificate Registrar shall not register
transfers or exchanges of, Trust Certificates for a period of 15 days preceding
the due date for any payment with respect to the Trust Certificates.
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates.
If (a) any mutilated Trust Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Trust Certificate and (b)
there shall be delivered to the Certificate Registrar and the Owner Trustee such
security or indemnity as may be required by them to save each of them harmless,
then in the absence of notice that such Trust Certificate has been acquired by a
bona fide purchaser, the Owner Trustee on behalf of the Trust shall execute and
the Owner Trustee or
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[_______________], as the Owner Trustee's authenticating agent, shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Trust Certificate, a newn Trust Certificate of like
tenor and denomination. In connection with the issuance of any new Trust
Certificate under this Section, the Owner Trustee or the Certificate Registrar
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith. Any duplicate
Trust Certificate issued pursuant to this Section shall constitute conclusive
evidence of ownership in the Trust, as if originally issued, whether or not the
lost, stolen or destroyed Trust Certificate shall be found at any time.
SECTION 3.06. Persons Deemed Owners. Prior to due presentation of a
Trust Certificate for registration of transfer, the Owner Trustee, the
Certificate Registrar or any Paying Agent may treat the Person in whose name any
Trust Certificate is registered in the Certificate Register as the owner of such
Trust Certificate for the purpose of receiving distributions pursuant to Section
5.02 and for all other purposes whatsoever, and none of the Owner Trustee, the
Certificate Registrar or any Paying Agent shall be bound by any notice to the
contrary.
SECTION 3.07. Access to List of Certificateholders' Names and Addresses.
The Owner Trustee shall furnish or cause to be furnished to the Master Servicer
and the Depositor, within 15 days after receipt by the Owner Trustee of a
written request therefor from the Master Servicer or the Depositor, a list, in
such form as the Master Servicer or the Depositor may reasonably require, of the
names and addresses of the Certificateholders as of the most recent Record Date.
If three or more Certificateholders or one or more Holders of Trust Certificates
evidencing not less than 25% of the Certificate Balance apply in writing to the
Owner Trustee, and such application states that the applicants desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Trust Certificates and such application is
accompanied by a copy of the communication that such applicants propose to
transmit, then the Owner Trustee shall, within five Business Days after the
receipt of such application, afford such applicants access during normal
business hours to the current list of Certificateholders. Each Holder, by
receiving and holding a Trust Certificate, shall be deemed to have agreed not to
hold any of the Depositor, the Company, the Certificate Registrar or the Owner
Trustee accountable by reason of the disclosure of its name and address,
regardless of the source from which such information was derived.
SECTION 3.08. Maintenance of Office or Agency. The Owner Trustee shall
maintain in the Borough of Manhattan, The City of New York, an office or offices
or agency or agencies where Trust Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Owner Trustee in respect of the Trust Certificates and the Basic Documents
may be served. The Owner Trustee initially designates
[_______________________________] as its office for such purposes. The Owner
Trustee shall give prompt written notice to the Company and to the
Certificateholders of any change in the location of the Certificate Register or
any such office or agency.
SECTION 3.09. Appointment of Paying Agent. The Paying Agent shall make
distributions to Certificateholders from the Certificate Distribution Account
pursuant to Section 5.02 and shall report the amounts of such distributions to
the Owner Trustee. Any Paying Agent shall have the revocable power to withdraw
funds from the Certificate Distribution Account for the purpose of making the
distributions referred to above. The Owner Trustee may revoke such power and
remove the Paying Agent if the Owner Trustee determines in its sole discretion
that the Paying Agent shall have failed to perform its
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obligations under this Agreement in any material respect. The Paying Agent
initially shall be [___________], and any co-paying agent chosen by
[___________] and acceptable to the Owner Trustee. [____________] shall be
permitted to resign as Paying Agent upon 30 days' written notice to the Owner
Trustee. In the event that [___________] shall no longer be the Paying Agent,
the Owner Trustee shall appoint a successor to act as Paying Agent (which shall
be a bank or trust company). The Owner Trustee shall cause such successor Paying
Agent or any additional Paying Agent appointed by the Owner Trustee to execute
and deliver to the Owner Trustee an instrument in which such successor Paying
Agent or additional Paying Agent shall agree with the Owner Trustee that, as
Paying Agent, such successor Paying Agent or additional Paying Agent will hold
all sums, if any, held by it for payment to the Certificateholders in trust for
the benefit of the Certificateholders entitled thereto until such sums shall be
paid to such Certificateholders. The Paying Agent shall return all unclaimed
funds to the Owner Trustee and upon removal of a Paying Agent such Paying Agent
shall also return all funds in its possession to the Owner Trustee. The
provisions of Sections 7.01, 7.03, 7.04 and 8.01 shall apply to the Owner
Trustee also in its role as Paying Agent, for so long as the Owner Trustee shall
act as Paying Agent and, to the extent applicable, to any other paying agent
appointed hereunder. Any reference in this Agreement to the Paying Agent shall
include any co-paying agent unless the context requires otherwise.
[SECTION 3.10. Ownership by Company of Trust Certificates. The Company
shall on the Closing Date purchase Trust Certificates representing at least __%
of the Initial Certificate Balance and shall thereafter retain beneficial and
record ownership of Trust Certificates representing at least __% of the
Certificate Balance. Any attempted transfer of any Trust Certificate that would
reduce such interest of the Company below __% of the Certificate Balance shall
be void. The Owner Trustee shall cause any Trust Certificate issued to the
Company to contain a legend stating "THIS CERTIFICATE IS NON-TRANSFERABLE".]
SECTION 3.11. Book-Entry Trust Certificates. The Trust Certificates,
upon original issuance, will be issued in the form of a typewritten Trust
Certificate or Trust Certificates representing Book-Entry Trust Certificates, to
be delivered to The Depository Trust Company, the initial Clearing Agency, by,
or on behalf of, the Trust; provided, however, that one Definitive Trust
Certificate may be issued to the Company pursuant to Section 3.10. Such Trust
Certificate or Trust Certificates shall initially be registered on the
Certificate Register in the name of Cede & Co., the nominee of the initial
Clearing Agency, and no Certificate Owner will receive a definitive Trust
Certificate representing such Certificate Owner's interest in such Trust
Certificate, except as provided in Section 3.13. Unless and until definitive,
fully registered Trust Certificates (the "Definitive Trust Certificates") have
been issued to Certificate Owners pursuant to Section 3.13:
(a) The provisions of this Section shall be in full force and effect;
(b) The Certificate Registrar and the Owner Trustee shall be entitled to
deal with the Clearing Agency for all purposes of this Agreement (including the
payment of principal of and interest on the Trust Certificates and the giving of
instructions or directions hereunder) as the sole Holder of the Trust
Certificates and shall have no obligation to the Certificate Owners;
(c) To the extent that the provisions of this Section conflict with any
other provisions of this Agreement, the provisions of this Section shall
control;
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(d) The rights of Certificate Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and agreements
between such Certificate Owners and the Clearing Agency and/or the Clearing
Agency Participants. Pursuant to the Certificate Depository Agreement, unless
and until Definitive Trust Certificates are issued pursuant to Section 3.13, the
initial Clearing Agency will make book-entry transfers among the Clearing Agency
Participants and receive and transmit payments of principal of and interest on
the Trust Certificates to such Clearing Agency Participants; and
(e) Whenever this Agreement requires or permits actions to be taken
based upon instructions or directions of Holders of Trust Certificates
evidencing a specified percentage of the Certificate Balance, the Clearing
Agency shall be deemed to represent such percentage only to the extent that it
has received instructions to such effect from Certificate Owners and/or Clearing
Agency Participants owning or representing, respectively, such required
percentage of the beneficial interest in the Trust Certificates and has
delivered such instructions to the Owner Trustee.
SECTION 3.12. Notices to Clearing Agency. Whenever a notice or other
communication to the Certificateholders is required under this Agreement, unless
and until Definitive Trust Certificates shall have been issued to Certificate
Owners pursuant to Section 3.13, the Owner Trustee shall give all such notices
and communications specified herein to be given to Certificateholders to the
Clearing Agency, and shall have no obligations to the Certificate Owners.
SECTION 3.13. Definitive Trust Certificates. If (i) the Administrator
advises the Owner Trustee in writing that the Clearing Agency is no longer
willing or able to properly discharge its responsibilities with respect to the
Trust Certificates and the Administrator is unable to locate a qualified
successor, (ii) the Administrator at its option advises the Owner Trustee in
writing that it elects to terminate the book-entry system through the Clearing
Agency or (iii) after the occurrence of an Event of Default or a Master Servicer
Default, Certificate Owners representing beneficial interests aggregating at
least a majority of the Certificate Balance advise the Clearing Agency in
writing that the continuation of a book-entry system through the Clearing Agency
is no longer in the best interest of the Certificate Owners, then the Clearing
Agency shall notify all Certificate Owners and the Owner Trustee of the
occurrence of any such event and of the availability of the Definitive Trust
Certificates to Certificate Owners requesting the same. Upon surrender to the
Owner Trustee of the typewritten Trust Certificate or Trust Certificates
representing the Book-Entry Trust Certificates by the Clearing Agency,
accompanied by registration instructions, the Owner Trustee shall execute and
authenticate the Definitive Trust Certificates in accordance with the
instructions of the Clearing Agency. Neither the Certificate Registrar nor the
Owner Trustee shall be liable for 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 Trust Certificates, the Owner
Trustee shall recognize the Holders of the Definitive Trust Certificates as
Certificateholders. The Definitive Trust Certificates shall be printed,
lithographed or engraved or may be produced in any other manner as is reasonably
acceptable to the Owner Trustee, as evidenced by its execution thereof.
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ARTICLE IV
Actions by Owner Trustee
SECTION 4.01. Prior Notice to Owners with Respect to Certain Matters.
With respect to the following matters, the Owner Trustee shall not take action
unless at least 30 days before the taking of such action, the Owner Trustee
shall have notified the Certificateholders in writing of the proposed action and
the Owners shall not have notified the Owner Trustee in writing prior to the
30th day after such notice is given that such Owners have withheld consent or
provided alternative direction:
(a) the initiation of any claim or lawsuit by the Trust (except claims
or lawsuits brought in connection with the collection of the Mortgage Loans) and
the compromise of any action, claim or lawsuit brought by or against the Trust
(except with respect to the aforementioned claims or lawsuits for collection of
the Mortgage Loans;
(b) the election by the Trust to file an amendment to the Certificate of
Trust (unless such amendment is required to be filed under the Business Trust
Statute);
(c) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is required;
(d) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is not required and such
amendment materially adversely affects the interest of the Owners;
(e) the amendment, change or modification of the Administration
Agreement, except to cure any ambiguity or to amend or supplement any provision
in a manner or add any provision that would not materially adversely affect the
interests of the Owners; or
(f) the appointment pursuant to the Indenture of a successor Note
Registrar, Paying Agent or Indenture Trustee or pursuant to this Agreement of a
successor Certificate Registrar, or the consent to the assignment by the Note
Registrar, Paying Agent or Indenture Trustee or Certificate Registrar of its
obligations under the Indenture or this Agreement, as applicable.
SECTION 4.02. Action by Owners with Respect to Certain Matters. The
Owner Trustee shall not have the power, except upon the direction of the Owners,
to (a) remove the Administrator under the Administration Agreement pursuant to
Section [ ] thereof, (b) appoint a successor Administrator pursuant to Section [
] of the Administration Agreement, (c) remove the Master Servicer under the
Master Servicing Agreement pursuant to Section [ ] thereof or (d) except as
expressly provided in the Basic Documents, sell the Mortgage Loans after the
termination of the Indenture. The Owner Trustee shall take the actions referred
to in the preceding sentence only upon written instructions signed by the
Owners.
SECTION 4.03. Action by Owners with Respect to Bankruptcy. The Owner
Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the unanimous prior approval of all
Owners and the delivery to the Owner Trustee by each such Owner of a certificate
certifying that such Owner reasonably believes that the Trust is insolvent.
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SECTION 4.04. Restrictions on Owners' Power. The Owners shall not direct
the Owner Trustee to take or to refrain from taking any action if such action or
inaction would be contrary to any obligation of the Trust or the Owner Trustee
under this Agreement or any of the Basic Documents or would be contrary to
Section 2.03, nor shall the Owner Trustee be obligated to follow any such
direction, if given.
SECTION 4.05. Majority Control. Except as expressly provided herein, any
action that may be taken by the Owners under this Agreement may be taken by the
Holders of Trust Certificates evidencing not less than a majority of the
Certificate Balance. Except as expressly provided herein, any written notice of
the Owners delivered pursuant to this Agreement shall be effective if signed by
Holders of Trust Certificates evidencing not less than a majority of the
Certificate Balance at the time of the delivery of such notice.
ARTICLE V
Application of Trust Funds; Certain Duties
SECTION 5.01. Establishment of Trust Account. The Owner Trustee, for the
benefit of the Certificateholders, shall establish and maintain in the name of
the Trust an Eligible Deposit Account (the "Certificate Distribution Account"),
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Certificateholders.
The Owner Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Certificate Distribution Account and
in all proceeds thereof. Except as otherwise expressly provided herein, the
Certificate Distribution Account shall be under the sole dominion and control of
the Owner Trustee for the benefit of the Certificateholders. If, at any time,
the Certificate Distribution Account ceases to be an Eligible Deposit Account,
the Owner Trustee (or the Depositor on behalf of the Owner Trustee, if the
Certificate Distribution Account is not then held by the Owner Trustee or an
affiliate thereof) shall within 10 Business Days (or such longer period, not to
exceed 30 calendar days, as to which each Rating Agency may consent) establish a
new Certificate Distribution Account as an Eligible Deposit Account and shall
transfer any cash and/or any investments to such new Certificate Distribution
Account.
SECTION 5.02. Application of Trust Funds. (a) On each Distribution Date,
the Owner Trustee will distribute to Certificateholders, on a pro rata basis,
amounts deposited in the Certificate Distribution Account.
(b) On each Distribution Date, the Owner Trustee shall send to each
Certificateholder the statement or statements provided to the Owner Trustee by
the Master Servicer pursuant to Section [____] of the Master Servicing Agreement
with respect to such Distribution Date.
(c) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to an Owner, such tax shall reduce the amount
otherwise distributable to the Owner in accordance with this Section. The Owner
Trustee is hereby authorized and directed to retain from amounts otherwise
distributable to the Owners sufficient funds for the payment of any tax that is
legally owed by the Trust (but such authorization shall not prevent the Owner
Trustee from contesting any such tax in appropriate proceedings, and withholding
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payment of such tax, if permitted by law, pending the outcome of such
proceedings). The amount of any withholding tax imposed with respect to an Owner
shall be treated as cash distributed to such Owner at the time it is withheld by
the Trust and remitted to the appropriate taxing authority. If there is a
possibility that withholding tax is payable with respect to a distribution (such
as a distribution to a non-U.S. Owner), the Owner Trustee may in its sole
discretion withhold such amounts in accordance with this paragraph (c).
SECTION 5.03. Method of Payment. Subject to Section 9.01(c),
distributions required to be made to Certificateholders on any Distribution Date
shall be made to each Certificateholder of record on the preceding Record Date
either by wire transfer, in immediately available funds, to the account of such
Holder at a bank or other entity having appropriate facilities therefor, if such
Certificateholder shall have provided to the Certificate Registrar appropriate
written instructions at least five Business Days prior to such Distribution Date
and such Holder's Trust Certificates in the aggregate evidence a denomination of
not less than $[____________], or, if not, by check mailed to such
Certificateholder at the address of such holder appearing in the Certificate
Register.
SECTION 5.04. No Segregation of Moneys; No Interest. Subject to Sections
5.01 and 5.02, moneys received by the Owner Trustee hereunder need not be
segregated in any manner except to the extent required by law or the Master
Servicing Agreement and may be deposited under such general conditions as may be
prescribed by law, and the Owner Trustee shall not be liable for any interest
thereon.
SECTION 5.05. Accounting and Reports to the Noteholders, Owners, the
Internal Revenue Service and Others. The Owner Trustee shall (a) maintain (or
cause to be maintained) the books of the Trust on a calendar year basis and the
accrual method of accounting, (b) deliver to each Owner, as may be required by
the Code and applicable Treasury Regulations, such information as may be
required (including Schedule K-1) to enable each Owner to prepare its federal
and state income tax returns, (c) file such tax returns relating to the Trust
(including a partnership information return, IRS Form 1065) and make such
elections as from time to time may be required or appropriate under any
applicable state or federal statute or any rule or regulation thereunder so as
to maintain the Trust's characterization as a partnership for federal income tax
purposes, (d) cause such tax returns to be signed in the manner required by law
and (e) collect or cause to be collected any withholding tax as described in and
in accordance with Section 5.02(c) with respect to income or distributions to
Owners. The Owner Trustee shall elect under Section 1278 of the Code to include
in income currently any market discount that accrues with respect to the
Mortgage Loans. The Owner Trustee shall not make the election provided under
Section 754 of the Code.
SECTION 5.06. Signature on Returns; Tax Matters Partner. (a) The Owner
Trustee shall sign on behalf of the Trust the tax returns of the Trust, unless
applicable law requires an Owner to sign such documents, in which case such
documents shall be signed by the Company.
(b) The Company shall be designated the "tax matters partner" of the
Trust pursuant to Section 6231(a)(7)(A) of the Code and applicable Treasury
Regulations.
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ARTICLE VI
Authority and Duties of Owner Trustee
SECTION 6.01. General Authority. The Owner Trustee is authorized and
directed to execute and deliver the Basic Documents to which the Trust is to be
a party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Trust is to be a party and any
amendment or other agreement or instrument, in each case, in such form as the
Company shall approve, as evidenced conclusively by the Owner Trustee's
execution thereof. In addition to the foregoing, the Owner Trustee is
authorized, but shall not be obligated, to take all actions required of the
Trust pursuant to the Basic Documents. The Owner Trustee is further authorized
from time to time to take such action as the Administrator recommends with
respect to the Basic Documents.
SECTION 6.02. General Duties. It shall be the duty of the Owner Trustee
to discharge (or cause to be discharged) all of its responsibilities pursuant to
the terms of this Agreement and the Basic Documents to which the Trust is a
party and to administer the Trust in the interest of the Owners, subject to the
Basic Documents and in accordance with the provisions of this Agreement.
Notwithstanding the foregoing, the Owner Trustee shall be deemed to have
discharged its duties and responsibilities hereunder and under the Basic
Documents to the extent the Administrator has agreed in the Administration
Agreement to perform any act or to discharge any duty of the Owner Trustee
hereunder or under any Basic Document, and the Owner Trustee shall not be held
liable for the default or failure of the Administrator to carry out its
obligations under the Administration Agreement.
SECTION 6.03. Action upon Instruction. (a) Subject to Article IV and in
accordance with the terms of the Basic Documents, the Owners may by written
instruction direct the Owner Trustee in the management of the Trust. Such
direction may be exercised at any time by written instruction of the Owners
pursuant to Article IV.
(b) The Owner Trustee shall not be required to take any action hereunder
or under any Basic Document if the Owner Trustee shall have reasonably
determined, or shall have been advised by counsel, that such action is likely to
result in liability on the part of the Owner Trustee or is contrary to the terms
hereof or of any Basic Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or under
any Basic Document, the Owner Trustee shall promptly give notice (in such form
as shall be appropriate under the circumstances) to the Owners requesting
instruction as to the course of action to be adopted, and to the extent the
Owner Trustee acts in good faith in accordance with any written instruction of
the Owners received, the Owner Trustee shall not be liable on account of such
action to any Person. If the Owner Trustee shall not have received appropriate
instruction within 10 days of such notice (or within such shorter period of time
as reasonably may be specified in such notice or may be necessary under the
circumstances) it may, but shall be under no duty to, take or refrain from
taking such action not inconsistent with this Agreement or the Basic Documents,
as it shall deem to be in the best interests of the Owners, and shall have no
liability to any Person for such action or inaction.
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(d) In the event that the Owner Trustee is unsure as to the application
of any provision of this Agreement or any Basic Document or any such provision
is ambiguous as to its application, or is, or appears to be, in conflict with
any other applicable provision, or in the event that this Agreement permits any
determination by the Owner Trustee or is silent or is incomplete as to the
course of action that the Owner Trustee is required to take with respect to a
particular set of facts, the Owner Trustee may give notice (in such form as
shall be appropriate under the circumstances) to the Owners requesting
instruction and, to the extent that the Owner Trustee acts or refrains from
acting in good faith in accordance with any such instruction received, the Owner
Trustee shall not be liable, on account of such action or inaction, to any
Person. If the Owner Trustee shall not have received appropriate instruction
within 10 days of such notice (or within such shorter period of time as
reasonably may be specified in such notice or may be necessary under the
circumstances) it may, but shall be under no duty to, take or refrain from
taking such action not inconsistent with this Agreement or the Basic Documents,
as it shall deem to be in the best interests of the Owners, and shall have no
liability to any Person for such action or inaction.
SECTION 6.04. No Duties Except as Specified in this Agreement or in
Instructions. The Owner Trustee shall not have any duty or obligation to manage,
make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement or in any document or written instruction received by the
Owner Trustee pursuant to Section 6.03; and no implied duties or obligations
shall be read into this Agreement or any Basic Document against the Owner
Trustee. The Owner Trustee shall have no responsibility for filing any financing
or continuation statement in any public office at any time or to otherwise
perfect or maintain the perfection of any security interest or lien granted to
it hereunder or to prepare or file any Securities and Exchange Commission filing
for the Trust or to record this Agreement or any Basic Document. The Owner
Trustee nevertheless agrees that it will, at its own cost and expense, promptly
take all action as may be necessary to discharge any liens on any part of the
Owner Trust Estate that result from actions by, or claims against, the Owner
Trustee that are not related to the ownership or the administration of the Owner
Trust Estate.
SECTION 6.05. No Action Except Under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use, sell, dispose of
or otherwise deal with any part of the Owner Trust Estate except (i) in
accordance with the powers granted to and the authority conferred upon the Owner
Trustee pursuant to this Agreement, (ii) in accordance with the Basic Documents
and (iii) in accordance with any document or instruction delivered to the Owner
Trustee pursuant to Section 6.03.
SECTION 6.06. Restrictions. The Owner Trustee shall not take any action
(a) that is inconsistent with the purposes of the Trust set forth in Section
2.03 or (b) that, to the actual knowledge of the Owner Trustee, would result in
the Trust's becoming taxable as a corporation for federal income tax purposes.
The Owners shall not direct the Owner Trustee to take action that would violate
the provisions of this Section.
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ARTICLE VII
Concerning the Owner Trustee
SECTION 7.01. Acceptance of Trusts and Duties. The Owner Trustee accepts
the trusts hereby created and agrees to perform its duties hereunder with
respect to such trusts but only upon the terms of this Agreement. The Owner
Trustee also agrees to disburse all moneys actually received by it constituting
part of the Owner Trust Estate upon the terms of the Basic Documents and this
Agreement. The Owner Trustee shall not be answerable or accountable hereunder or
under any Basic Document under any circumstances, except (i) for its own willful
[malfeasance, bad faith or gross] negligence or (ii) in the case of the
inaccuracy of any representation or warranty contained in Section 7.03 expressly
made by the Owner Trustee. In particular, but not by way of limitation (and
subject to the exceptions set forth in the preceding sentence):
(a) The Owner Trustee shall not be liable for any error of judgment made
by a Trust Officer of the Owner Trustee;
(b) The Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in accordance with the instructions of the
Administrator or any Owner;
(c) No provision of this Agreement or any Basic Document shall require
the Owner Trustee to expend or risk funds or otherwise incur any financial
liability in the performance of any of its rights or powers hereunder or under
any Basic Document if the Owner Trustee shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured or provided to it;
(d) Under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents, including
the principal of and interest on the Notes;
(e) The Owner Trustee shall not be responsible for or in respect of the
validity or sufficiency of this Agreement or for the due execution hereof by the
Depositor or the Company or for the form, character, genuineness, sufficiency,
value or validity of any of the Owner Trust Estate, or for or in respect of the
validity or sufficiency of the Basic Documents, other than the certificate of
authentication on the Trust Certificates, and the Owner Trustee shall in no
event assume or incur any liability, duty, or obligation to any Noteholder or to
any Owner, other than as expressly provided for herein or expressly agreed to in
the Basic Documents;
(f) The Owner Trustee shall not be liable for the default or misconduct
of the Administrator, the Seller or Depositor, the Company, the Indenture
Trustee or the Master Servicer under any of the Basic Documents or otherwise and
the Owner Trustee shall have no obligation or liability to perform the
obligations of the Trust under this Agreement or the Basic Documents that are
required to be performed by the Administrator under the Administration
Agreement, the Indenture Trustee under the Indenture or the Master Servicer or
the Seller or Depositor under the Master Servicing Agreement; and
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(g) The Owner Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation under this Agreement or otherwise or in relation to this
Agreement or any Basic Document, at the request, order or direction of any of
the Owners, unless such Owners have offered to the Owner Trustee security or
indemnity satisfactory to it against the costs, expenses and liabilities that
may be incurred by the Owner Trustee therein or thereby. The right of the Owner
Trustee to perform any discretionary act enumerated in this Agreement or in any
Basic Document shall not be construed as a duty, and the Owner Trustee shall not
be answerable for other than its [willful malfeasance, bad faith or gross
negligence] in the performance of any such act.
SECTION 7.02. Furnishing of Documents. The Owner Trustee shall furnish
to the Owners promptly upon receipt of a written request therefor, duplicates or
copies of all reports, notices, requests, demands, certificates, financial
statements and any other instruments furnished to the Owner Trustee under the
Basic Documents.
SECTION 7.03. Representations and Warranties. The Owner Trustee hereby
represents and warrants to the Company, for the benefit of the Owners, that:
(a) It is a banking corporation duly organized and validly existing in
good standing under the laws of the State of Delaware. It has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement.
(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to execute
and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this Agreement, nor
the consummation by it of the transactions contemplated hereby nor compliance by
it with any of the terms or provisions hereof will contravene any federal or
Delaware law, governmental rule or regulation governing the banking or trust
powers of the Owner Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or bylaws or any indenture,
mortgage, contract, agreement or instrument to which it is a party or by which
any of its properties may be bound.
SECTION 7.04. Reliance; Advice of Counsel. (a) The Owner Trustee shall
incur no liability to anyone in acting upon any signature, instrument, notice,
resolution, request, consent, order, certificate, report, opinion, bond, or
other document or paper believed by it to be genuine and believed by it to be
signed by the proper party or parties. The Owner Trustee may accept a certified
copy of a resolution of the board of directors or other governing body of any
corporate party as conclusive evidence that such resolution has been duly
adopted by such body and that the same is in full force and effect. As to any
fact or matter the method of determination of which is not specifically
prescribed herein, the Owner Trustee may for all purposes hereof rely on a
certificate, signed by the president or any vice president or by the treasurer
or other authorized officers of the relevant party, as to such fact or matter
and such certificate shall constitute full protection to the Owner Trustee for
any action taken or omitted to be taken by it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in the
performance of its duties and obligations under this Agreement or the Basic
Documents, the Owner Trustee
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(i) may act directly or through its agents or attorneys pursuant to agreements
entered into with any of them, and the Owner Trustee shall not be liable for the
conduct or misconduct of such agents or attorneys if such agents or attorneys
shall have been selected by the Owner Trustee with reasonable care, and (ii) may
consult with counsel, accountants and other skilled Persons to be selected with
reasonable care and employed by it. The Owner Trustee shall not be liable for
anything done, suffered or omitted in good faith by it in accordance with the
written opinion or advice of any such counsel, accountants or other such Persons
and not contrary to this Agreement or any Basic Document.
SECTION 7.05. Not Acting in Individual Capacity. Except as provided in
this Article VII, in accepting the trusts hereby created [_____________________]
acts solely as Owner Trustee hereunder and not in its individual capacity, and
all Persons having any claim against the Owner Trustee by reason of the
transactions contemplated by this Agreement or any Basic Document shall look
only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.06. Owner Trustee Not Liable for Trust Certificates or
Mortgage Loans. The recitals contained herein and in the Certificates (other
than the signature and countersignature of the Owner Trustee on the Trust
Certificates) shall be taken as the statements of the Depositor and the Company,
and the Owner Trustee assumes no responsibility for the correctness thereof. The
Owner Trustee makes no representations as to the validity or sufficiency of this
Agreement, of any Basic Document or of the Trust Certificates (other than the
signature and countersignature of the Owner Trustee on the Trust Certificates)
or the Notes, or of any Mortgage Loan or related documents. The Owner Trustee
shall at no time have any responsibility or liability for or with respect to the
legality, validity and enforceability of any Mortgage Loan, or for or with
respect to the sufficiency of the Owner Trust Estate or its ability to generate
the payments to be distributed to Certificateholders under this Agreement or the
Noteholders under the Indenture, including, without limitation: the existence,
condition and ownership of any property securing a Mortgage Loan; the existence
and enforceability of any insurance thereon; the validity of the assignment of
any Mortgage Loan to the Trust or of any intervening assignment; the performance
or enforcement of any Mortgage Loan; the compliance by the Depositor, the
Company or the Master Servicer with any warranty or representation made under
any Basic Document or in any related document or the accuracy of any such
warranty or representation, or any action of the Administrator, the Indenture
Trustee or the Master Servicer or any subservicer taken in the name of the Owner
Trustee.
SECTION 7.07. Owner Trustee May Own Trust Certificates and Notes. The
Owner Trustee in its individual or any other capacity may become the owner or
pledgee of Trust Certificates or Notes and may deal with the Depositor, the
Company, the Administrator, the Indenture Trustee and the Master Servicer in
banking transactions with the same rights as it would have if it were not Owner
Trustee.
ARTICLE VIII
Compensation of Owner Trustee
SECTION 8.01. Owner Trustee's Fees and Expenses. The Owner Trustee shall
receive as compensation for its services hereunder such fees as have been
separately agreed
BWNY2/364035.2/84310/00004/2023 October 12, 1996
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upon before the date hereof between the Depositor and the Owner Trustee, and the
Owner Trustee shall be entitled to be reimbursed by the Depositor for its other
reasonable expenses hereunder, including the reasonable compensation, expenses
and disbursements of such agents, representatives, experts and counsel as the
Owner Trustee may employ in connection with the exercise and performance of its
rights and its duties hereunder.
SECTION 8.02. Indemnification. The Depositor shall be liable as primary
obligor for, and shall indemnify the Owner Trustee and its successors, assigns,
agents and servants (collectively, the "Indemnified Parties") from and against,
any and all liabilities, obligations, losses, damages, taxes, claims, actions
and suits, and any and all reasonable costs, expenses and disbursements
(including reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may at any time be imposed on, incurred by, or
asserted against the Owner Trustee or any Indemnified Party in any way relating
to or arising out of this Agreement, the Basic Documents, the Owner Trust
Estate, the administration of the Owner Trust Estate or the action or inaction
of the Owner Trustee hereunder, except only that the Depositor shall not be
liable for or required to indemnify an Indemnified Party from and against
Expenses arising or resulting from any of the matters described in the third
sentence of Section 7.01. The indemnities contained in this Section shall
survive the resignation or termination of the Owner Trustee or the termination
of this Agreement. In any event of any claim, action or proceeding for which
indemnity will be sought pursuant to this Section, the Owner Trustee's choice of
legal counsel shall be subject to the approval of the Depositor, which approval
shall not be unreasonably withheld.
SECTION 8.03. Payments to the Owner Trustee. Any amounts paid to the
Owner Trustee pursuant to this Article VIII shall be deemed not to be a part of
the Owner Trust Estate immediately after such payment.
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement. (a) This Agreement (other
than Article VIII) and the Trust shall terminate and be of no further force or
effect (i) upon the final distribution by the Owner Trustee of all moneys or
other property or proceeds of the Owner Trust Estate in accordance with the
terms of the Indenture, the Master Servicing Agreement and Article V or (ii) at
the time provided in Section 9.02. The bankruptcy, liquidation, dissolution,
death or incapacity of any Owner, other than the Company as described in Section
9.02, shall not (x) operate to terminate this Agreement or the Trust or (y)
entitle such Owner'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 all
or any part of the Trust or Owner Trust Estate or (z) otherwise affect the
rights, obligations and liabilities of the parties hereto.
(b) Except as provided in Section 9.01(a), none of the Depositor, the
Company or any Owner shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Distribution
Date upon which Certificateholders shall surrender their Trust Certificates to
the Paying Agent for payment of the final distribution and cancellation, shall
be given by the Owner Trustee by letter to Certificateholders mailed within five
Business Days of receipt of notice of such
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termination from the Master Servicer stating (i) the Distribution Date upon or
with respect to which final payment of the Trust Certificates shall be made upon
presentation and surrender of the Trust Certificates at the office of the Paying
Agent therein designated, (ii) the amount of any such final payment and (iii)
that the Record Date otherwise applicable to such Distribution Date is not
applicable, payments being made only upon presentation and surrender of the
Trust Certificates at the office of the Paying Agent therein specified. The
Owner Trustee shall give such notice to the Certificate Registrar (if other than
the Owner Trustee) and the Paying Agent at the time such notice is given to
Certificateholders. Upon presentation and surrender of the Trust Certificates,
the Paying Agent shall cause to be distributed to Certificateholders amounts
distributable on such Distribution Date pursuant to Section 5.02.
In the event that all of the Certificateholders shall not surrender
their Trust Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Owner Trustee shall give a
second written notice to the remaining Certificateholders to surrender their
Trust Certificates for cancellation and receive the final distribution with
respect thereto. If within one year after the second notice all the Trust
Certificates shall not have been surrendered for cancellation, the Owner Trustee
may take appropriate steps, or may appoint an agent to take appropriate steps,
to contact the remaining Certificateholders concerning surrender of their Trust
Certificates, and the cost thereof shall be paid out of the funds and other
assets that shall remain subject to this Agreement. Any funds remaining in the
Trust after exhaustion of such remedies shall be distributed by the Owner
Trustee to the Company.
(d) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be cancelled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810 of the Business Trust Statute.
SECTION 9.02. Dissolution upon Bankruptcy of the Company. In the event
that an Insolvency Event shall occur with respect to the Company, this Agreement
shall be terminated in accordance with Section 9.01 90 days after the date of
such Insolvency Event, unless, before the end of such 90-day period, the Owner
Trustee shall have received written instructions from Holders of Certificates
(other than the Company) representing more than 50% of the Certificate Balance
(not including the Certificate Balance of the Trust Certificates held by the
Company), to the effect that each such party disapproves of the liquidation of
the Mortgage Loans and of the Trust. Promptly after the occurrence of any
Insolvency Event with respect to the Company, (A) the Company shall give the
Indenture Trustee and the Owner Trustee written notice of such Insolvency Event,
(B) the Owner Trustee shall, upon the receipt of such written notice from the
Company, give prompt written notice to the Certificateholders and the Indenture
Trustee, of the occurrence of such event and (C) the Indenture Trustee shall,
upon receipt of written notice of such Insolvency Event from the Owner Trustee
or the Company, give prompt written notice to the Noteholders of the occurrence
of such event; provided, however, that any failure to give a notice required by
this sentence shall not prevent or delay, in any manner, a termination of the
Trust pursuant to the first sentence of this Section 9.02. Upon a termination
pursuant to this Section, the Owner Trustee shall direct the Indenture Trustee
promptly to sell the assets of the Trust (other than the Trust Accounts and the
Certificate Distribution Account) and, on behalf of the Company, in a
commercially reasonable manner and on commercially reasonable terms. The
proceeds of such a sale of the assets of the Trust shall be treated as
collections under the Master Servicing Agreement.
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ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.01. Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be a corporation satisfying the provisions of Section
3807(a) of the Business Trust Statute; authorized 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 authorities; and
having (or having a parent that has) a rating of at least [____] by
[__________]. If such corporation shall publish reports of condition at least
annually pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purpose 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 Owner Trustee shall cease to be eligible in accordance with
the provisions of this Section, the Owner Trustee shall resign immediately in
the manner and with the effect specified in Section 10.02.
SECTION 10.02. Resignation or Removal of Owner Trustee. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Administrator. Upon receiving such
notice of resignation, the Administrator shall promptly appoint a successor
Owner Trustee by written instrument, in duplicate, one copy of which instrument
shall be delivered to the resigning Owner Trustee and one copy to the successor
Owner Trustee. If no successor Owner Trustee shall have been so appointed and
have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Owner Trustee may petition any court of competent
jurisdiction for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.01 and shall fail to resign after
written request therefor by the Administrator, or if at any time the Owner
Trustee shall be legally unable to act, or shall be adjudged bankrupt or
insolvent, or a receiver of the Owner Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Owner
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Administrator may remove the Owner
Trustee. If the Administrator shall remove the Owner Trustee under the authority
of the immediately preceding sentence, the Administrator shall promptly appoint
a successor Owner Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the outgoing Owner Trustee so removed and one
copy to the successor Owner Trustee, and shall pay all fees owed to the outgoing
Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.03 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Administrator shall provide notice of such
resignation or removal of the Owner Trustee to each of the Rating Agencies.
SECTION 10.03. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.02 shall execute, acknowledge and deliver to
the Administrator and to its predecessor Owner Trustee an instrument accepting
such appointment under this Agreement, and thereupon the resignation or removal
of the predecessor Owner Trustee shall
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become effective, and such successor Owner Trustee, without any further act,
deed or conveyance, shall become fully vested with all the rights, powers,
duties and obligations of its predecessor under this Agreement, with like effect
as if originally named as Owner Trustee. The predecessor Owner Trustee shall
upon payment of its fees and expenses deliver to the successor Owner Trustee all
documents and statements and monies held by it under this Agreement; and the
Administrator and the predecessor Owner Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for fully and
certainly vesting and confirming in the successor Owner Trustee all such rights,
powers, duties and obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.01.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Administrator shall mail notice thereof to all
Certificateholders, the Indenture Trustee, the Noteholders and the Rating
Agencies. If the Administrator shall fail to mail such notice within 10 days
after acceptance of such appointment by the successor Owner Trustee, the
successor Owner Trustee shall cause such notice to be mailed at the expense of
the Administrator.
SECTION 10.04. Merger or Consolidation of Owner Trustee. Any corporation
into which the Owner Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, without
the execution or filing of any instrument or any further act on the part of any
of the parties hereto, anything herein to the contrary notwithstanding;
provided, that such corporation shall be eligible pursuant to Section 10.01 and,
provided, further, that the Owner Trustee shall mail notice of such merger or
consolidation to the Rating Agencies.
SECTION 10.05. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Owner Trust Estate may at the time be located, the Administrator and the
Owner Trustee acting jointly shall have the power and shall execute and deliver
all instruments to appoint one or more Persons approved by the Administrator and
Owner Trustee to act as co-trustee, jointly with the Owner Trustee, or as
separate trustee or separate trustees, of all or any part of the Owner Trust
Estate, and to vest in such Person, in such capacity, such title to the Trust or
any part thereof and, subject to the other provisions of this Section, such
powers, duties, obligations, rights and trusts as the Administrator and the
Owner Trustee may consider necessary or desirable. If the Administrator shall
not have joined in such appointment within 15 days after the receipt by it of a
request so to do, the Owner Trustee alone shall have the power to make such
appointment. No co-trustee or separate trustee under this Agreement shall be
required to meet the terms of eligibility as a successor Owner Trustee pursuant
to Section 10.01 and no notice of the appointment of any co-trustee or separate
trustee shall be required pursuant to Section 10.03.
25
<PAGE>
<PAGE>
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(a) All rights, powers, duties and obligations conferred or imposed upon
the Owner Trustee shall be conferred upon and exercised or performed by the
Owner Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to act
separately without the Owner Trustee joining in such act), except to the extent
that under any law of any jurisdiction in which any particular act or acts are
to be performed, the Owner 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 Owner Trust Estate or any
portion thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the direction of
the Owner Trustee;
(b) No trustee under this Agreement shall be personally liable by reason
of any act or omission of any other trustee under this Agreement; and
(c) The Administrator and the Owner Trustee acting jointly may at any
time accept the resignation of or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Owner 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. 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 Owner 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
Owner Trustee. Each such instrument shall be filed with the Owner Trustee and a
copy thereof given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor co-trustee or separate trustee.
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments. This Agreement may be amended
by the Depositor, the Company and the Owner Trustee, with prior written notice
to the Rating Agencies, without the consent of any of the Noteholders or the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement or for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions in this Agreement or
of modifying in any manner the rights of the Noteholders or the
26
<PAGE>
<PAGE>
Certificateholders; provided, however, that such action shall not, as evidenced
by an Opinion of Counsel, adversely affect in any material respect the interests
of any Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the Depositor,
the Company and the Owner Trustee, with prior written notice to the Rating
Agencies, with the consent of the Holders (as defined in the Indenture) of Notes
evidencing not less than a majority of the Principal Balance of the Notes and
the consent of the Holders of Certificates evidencing not less than a majority
of the Certificate Balance, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that no such amendment shall (a) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Mortgage Loans or distributions that shall be
required to be made for the benefit of the Noteholders or the Certificateholders
or (b) reduce the aforesaid percentage of the Principal Balance of the Notes and
the Certificate Balance required to consent to any such amendment, without the
consent of the holders of all the outstanding Notes and Certificates.
Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to each Certificateholder, the Indenture Trustee and each of the Rating
Agencies.
It shall not be necessary for the consent of Certificateholders,
Noteholders or the Indenture Trustee pursuant to this Section to approve the
particular form of any proposed amendment or consent, but it shall be sufficient
if such consent shall approve the substance thereof. The manner of obtaining
such consents (and any other consents of Certificateholders provided for in this
Agreement or in any other Basic Document) and of evidencing the authorization of
the execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Owner Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall not
be obligated to, enter into any such amendment that affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
SECTION 11.02. No Legal Title to Owner Trust Estate in Owners. The
Owners shall not have legal title to any part of the Owner Trust Estate. The
Owners shall be entitled to receive distributions with respect to their
undivided ownership interest therein only in accordance with Articles V and IX.
No transfer, by operation of law or otherwise, of any right, title or interest
of the Owners to and in their ownership interest in the Owner Trust Estate shall
operate to terminate this Agreement or the trusts hereunder or entitle any
transferee to an accounting or to the transfer to it of legal title to any part
of the Owner Trust Estate.
SECTION 11.03. Limitations on Rights of Others. Except for Section 2.07,
the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Depositor, the Company, the Owners, the Administrator and, to the
extent expressly provided herein, the
27
<PAGE>
<PAGE>
Indenture Trustee and the Noteholders, and nothing in this Agreement (other than
Section 2.07), whether express or implied, shall be construed to give to any
other Person any legal or equitable right, remedy or claim in the Owner Trust
Estate or under or in respect of this Agreement or any covenants, conditions or
provisions contained herein.
SECTION 11.04. Notices. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all notices shall be in writing and shall be
deemed given upon receipt by the intended recipient or three Business Days after
mailing if mailed by certified mail, postage prepaid (except that notice to the
Owner Trustee shall be deemed given only upon actual receipt by the Owner
Trustee), if to the Owner Trustee, addressed to the Corporate Trust Office; if
to the Depositor, addressed to CWABS, Inc., 155 North Lake Avenue, Pasadena,
California 91101, Attention: [______________]; if to the Company, addressed to
[_____________________________], Attention: [____________]; or, as to each
party, at such other address as shall be designated by such party in a written
notice to each other party.
(b) Any notice required or permitted to be given 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 11.05. Severability. Any provision of this Agreement that is
prohibited 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 shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 11.06. Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.07. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, each of the
Depositor, the Company, the Owner Trustee and its successors and each Owner and
its successors and permitted assigns, all as herein provided. Any request,
notice, direction, consent, waiver or other instrument or action by an Owner
shall bind the successors and assigns of such Owner.
SECTION 11.08. Covenants of the Company. The Company will not at any
time institute against the Trust any bankruptcy proceedings under any United
States federal or state bankruptcy or similar law in connection with any
obligations relating to the Trust Certificates, the Notes, the Trust Agreement
or any of the Basic Documents.
SECTION 11.09. No Petition. The Owner Trustee, by entering into this
Agreement, each Certificateholder, by accepting a Trust Certificate, and the
Indenture Trustee and each Noteholder, by accepting the benefits of this
Agreement, hereby covenant and agree that they will not at any time institute
against the Company or the Trust, or join in any institution against the Company
or the Trust of, any bankruptcy proceedings under any United States federal or
state bankruptcy or similar law in connection with any obligations relating to
the Trust Certificates, the Notes, this Agreement or any of the Basic Documents.
28
<PAGE>
<PAGE>
SECTION 11.10. No Recourse. Each Certificateholder by accepting a Trust
Certificate acknowledges that such Certificateholder's Trust Certificates
represent beneficial interests in the Trust only and do not represent interests
in or obligations of the Depositor, the Master Servicer, the Company, the
Administrator, the Owner Trustee, the Indenture Trustee or any Affiliate thereof
and no recourse may be had against such parties or their assets, except as may
be expressly set forth or contemplated in this Agreement, the Trust Certificates
or the Basic Documents.
SECTION 11.11. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 11.12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.13. Depositor Payment Obligation. The Depositor shall be
responsible for payment of the Administrator's fees under the Administration
Agreement and shall reimburse the Administrator for all expenses and liabilities
of the Administrator incurred thereunder.
* * * * * *
29
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Trust Agreement to be duly executed by their respective officers
hereunto duly authorized, as of the day and year first above written.
CWABS, INC.,
as Depositor,
by: ______________________________________
Name:
Title:
[_____________________________________],
by: ______________________________________
Name:
Title:
[_____________________________________],
not in its individual capacity but solely as
Owner Trustee,
by: ______________________________________
Name:
Title:
<PAGE>
<PAGE>
EXHIBIT A
FORM OF TRUST CERTIFICATE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
NUMBER $_________
R-__________ CUSIP NO. _________
[COUNTRYWIDE] HOME EQUITY LOAN TRUST 199__-__
[_____]% HOME EQUITY LOAN ASSET BACKED CERTIFICATES, SERIES 199__-__
evidencing a fractional undivided beneficial ownership interest in the Trust, as
defined below, the property of which includes a pool of [fixed-rate] [adjustable
rate] home equity revolving credit line loans caused to be sold to the Trust by
[_______________].
(This Trust Certificate does not represent an interest in or obligation of
CWABS, Inc., Countrywide Home Loans, Inc. or any of their respective affiliates,
except to the extent described below.)
THIS CERTIFIES THAT [________________________] is the registered owner of
[____________________] DOLLARS nonassessable, fully paid, fractional undivided
interest in [COUNTRYWIDE] HOME EQUITY LOAN TRUST 199__-__ (the "Trust") formed
by CWABS, Inc., a Delaware corporation (the "Depositor"), and [_______________],
a [__________] corporation (the "Company").
A-1
<PAGE>
<PAGE>
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the within-mentioned Trust
Agreement.
[___________________], [___________________],
as Owner Trustee or as Owner Trustee
by: _______________________ by: [_______________],
Authorized Signatory as Authenticating Agent
by: [_______________],
Authorized Signatory
A-2
<PAGE>
<PAGE>
The Trust was created pursuant to a Trust Agreement, dated as of , 199__
(the "Trust Agreement"), among the Depositor, the Company and [____________], as
owner trustee (the "Owner Trustee"), a summary of certain of the pertinent
provisions of which is set forth below. To the extent not otherwise defined
herein, the capitalized terms used herein have the meanings assigned to them in
the Trust Agreement or the Master Servicing Agreement dated as of ___________,
199__ (as amended and supplemented from time to time, the "Master Servicing
Agreement"), among the Trust, the Depositor and [_______________], as servicer
(the "Master Servicer"), as applicable.
This Certificate is one of a duly authorized issue of Home Equity Loan
Asset-Backed Certificates, Series 199__-__ (herein called the "Trust
Certificates"). Also issued under the Indenture dated as of ___________, 199__
between the Trust and [________________], as indenture trustee, are the
[_______] classes of Notes designated as [_________________________
_______________________________________________________________________________
______________________________________________] (collectively, the "Notes").
This Trust Certificate is issued under and is subject to the terms, provisions
and conditions of the Trust Agreement, to which Trust Agreement the Holder of
this Trust Certificate by virtue of its acceptance hereof assents and by which
such Holder is bound. The property of the Trust consists of a pool of
[adjustable rate] home equity loan revolving credit line loans made or to be
made int he future (the "Mortgage Loans"), under certain home equity revolving
credit line loan agreements and secured primarily by second [deeds of trust]
[mortgages] on residential properties that are primarily one- to four-family
properties (the "Mortgaged Properties"); the collections in respect of the
Mortgage Loans received after the Cut-off Date; property that secured a Mortgage
Loan which has been acquired by foreclosure or deed in lieu of foreclosure; [a
surety bond] [a letter of credit]; an assignment of the Depositor's rights under
the [________________]; rights under certain hazard insurance policies covering
the Mortgaged Properties; and certain other property. [The rights of the Holders
of the Trust Certificates are subordinated to the rights of the Holders of the
Notes, as set forth in the Master Servicing Agreement.]
Under the Trust Agreement, there will be distributed on the [_______]
day of each month or, if such [_______] day is not a Business Day, the next
Business Day (each, a "Distribution Date"), commencing on ___________, 199__, to
the Person in whose name this Trust Certificates is registered at the close of
business on the first day of the month or, if Definitive Certificates are
issued, the [_______] day of the prior month (the "Record Date"), such
Certificateholder's fractional undivided interest in the amount to be
distributed to Certificateholders on such Distribution Date. No distributions of
principal will be made on any Certificate until all of the Notes have been paid
in full.
[The Holder of this Trust Certificate acknowledges and agrees that its
rights to receive distributions in respect of this Trust Certificate are
subordinated to the rights of the Noteholders as described in the Master
Servicing Agreement and the Indenture.]
It is the intent of the Depositor, the Company, the Master Servicer and
the Certificateholders that, for purposes of federal income, state and local
income and single business tax and any other income taxes, the Trust will be
treated as a partnership and the Certificateholders (including the Company) will
be treated as partners in that partnership. The Company and the other
Certificateholders, by acceptance of a Trust Certificate, agree to treat, and to
take no action inconsistent with the treatment of, the Trust Certificates for
such tax purposes as partnership interests in the Trust.
A-3
<PAGE>
<PAGE>
Each Certificateholder or Certificate Owner, by its acceptance of a
Trust Certificate or, in the case of a Certificate Owner, a beneficial interest
in a Trust Certificate, covenants and agrees that such Certificateholder or
Certificate Owner, as the case may be, will not at any time institute against
the Company, or join in any institution against the Company of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Trust Certificates, the
Notes, the Trust Agreement or any of the Basic Documents.
Distributions on this Trust Certificate will be made as provided in the
Trust Agreement by the Owner Trustee by wire transfer or check mailed to the
Certificateholder of record in the Certificate Register without the presentation
or surrender of this Trust Certificate or the making of any notation hereon,
except that with respect to Trust Certificates registered on the Record Date in
the name of the nominee of the Clearing Agency (initially, such nominee to be
Cede & Co.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Except as otherwise provided in
the Trust Agreement and notwithstanding the above, the final distribution on
this Trust Certificate will be made after due notice by the Owner Trustee of the
pendency of such distribution and only upon presentation and surrender of this
Trust Certificate at the office or agency maintained for that purpose by the
Owner Trustee in the Borough of Manhattan, The City of New York.
Reference is hereby made to the further provisions of this Trust
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 shall have been executed
by an authorized officer of the Owner Trustee, by manual signature, this Trust
Certificate shall not entitle the Holder hereof to any benefit under the Trust
Agreement or the Master Servicing Agreement or be valid for any purpose.
THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in
its individual capacity, has caused this Trust Certificate to be duly executed.
CWABS, INC.
by: [_____________________], not in its individual
capacity but solely as Owner Trustee
Dated: by: ______________________________
Authorized Signatory
A-4
<PAGE>
<PAGE>
[REVERSE OF TRUST CERTIFICATE]
The Trust Certificates do not represent an obligation of, or an interest
in, the Depositor, the Master Servicer, the Company, the Owner Trustee or any
affiliates of any of them and no recourse may be had against such parties or
their assets, except as expressly set forth or contemplated herein or in the
Trust Agreement or the Basic Documents. In addition, this Trust Certificate is
not guaranteed by any governmental agency or instrumentality and is limited in
right of payment to certain collections and recoveries with respect to the
Mortgage Loans (and certain other amounts), all as more specifically set forth
herein and in the Master Servicing Agreement. A copy of each of the Master
Servicing Agreement and the Trust Agreement may be examined by any
Certificateholder upon written request during normal business hours at the
principal office of the Depositor and at such other places, if any, designated
by the Depositor.
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor and the Company and the rights of the Certificateholders under the
Trust Agreement at any time by the Depositor, the Company and the Owner Trustee
with the consent of the Holders of the Trust Certificates and the Notes, each
voting as a class, evidencing not less than a majority of the Certificate
Balance and the outstanding principal balance of the Notes of each such class.
Any such consent by the Holder of this Trust Certificate shall be conclusive and
binding on such Holder and on all future Holders of this Trust Certificate and
of any Trust Certificate issued upon the transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent is made upon this
Trust Certificate. The Trust Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Trust Certificates.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Trust Certificate is registerable in the
Certificate Register upon surrender of this Trust Certificate for registration
of transfer at the offices or agencies of the Certificate Registrar maintained
by the Owner Trustee in the Borough of Manhattan, The City of New York,
accompanied by a written instrument of transfer in form satisfactory to the
Owner 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 Trust Certificates of authorized denominations evidencing the same aggregate
interest in the Trust will be issued to the designated transferee. The initial
Certificate Registrar appointed under the Trust Agreement is
[_________________], New York, New York.
Except as provided in the Trust Agreement, the Trust Certificates are
issuable only as registered Trust Certificates without coupons in denominations
of $[__________] and in integral multiples of $[_______] in excess thereof. As
provided in the Trust Agreement and subject to certain limitations therein set
forth, Trust Certificates are exchangeable for new Trust Certificates of
authorized denominations evidencing the same aggregate denomination, as
requested by the Holder surrendering the same. No service charge will be made
for any such registration of transfer or exchange, but the Owner Trustee or the
Certificate Registrar may require payment of a sum sufficient to cover any tax
or governmental charge payable in connection therewith.
A-5
<PAGE>
<PAGE>
The Owner Trustee, the Certificate Registrar and any agent of the Owner
Trustee or the Certificate Registrar may treat the Person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
Owner Trustee, the Certificate Registrar or any such agent shall be affected by
any notice to the contrary.
The obligations and responsibilities created by the Trust Agreement and
the Trust created thereby shall terminate upon the payment to Certificateholders
of all amounts required to be paid to them pursuant to the Trust Agreement and
the Master Servicing Agreement and the disposition of all property held as part
of the Owner Trust Estate. The Master Servicer of the Mortgage Loans may at its
option purchase the Owner Trust Estate at a price specified in the Master
Servicing Agreement, and such purchase of the Mortgage Loans and other property
of the Trust will effect early retirement of the Trust Certificates; however,
such right of purchase is exercisable only as of the last day of any Collection
Period as of which the Pool Balance is less than or equal to [____]% of the
Original Pool Balance.
The Trust Certificates may not be acquired by (a) an employee benefit
plan (as defined in Section 3(3) of ERISA) that is subject to the provisions of
Title I of ERISA, (b) a plan described in Section 4975(e)(1) of the Code or (c)
any entity whose underlying assets include plan assets by reason of a plan's
investment in the entity (each, a 'Benefit Plan'). By accepting and holding this
Trust Certificate, the Holder hereof shall be deemed to have represented and
warranted that it is not a Benefit Plan.
A-6
<PAGE>
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
_______________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
________________________________________________________________________________
the within Trust Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
________________________________________________________________________________
to transfer said Trust Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated:
___________________________________________*/
Signature Guaranteed:
____________________________*/
_________________
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Trust Certificate in every particular,
without alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
A-7
<PAGE>
<PAGE>
EXHIBIT B
CERTIFICATE OF TRUST OF
[COUNTRYWIDE] HOME EQUITY LOAN TRUST 199___
THIS Certificate of Trust of [COUNTRYWIDE] HOME EQUITY LOAN TRUST
199__-__ (the "Trust"), dated , 199__, is being duly executed and filed by
[_____________________], a [___________________________], as trustee, to form a
business trust under the Delaware Business Trust Act (12 Del. Code, ss. 3801 et
seq.).
1. Name. The name of the business trust formed hereby is [COUNTRYWIDE]
HOME EQUITY LOAN TRUST 199__-__.
2. Delaware Trustee. The name and business address of the trustee of the
Trust in the State of Delaware is [______________], Delaware [____],
Attention: [_______________________________].
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
[_____________________],
not in its individual capacity but solely as
owner trustee under a Trust Agreement dated
_________________, 199__
By: _____________________________
Name:
Title:
B-1
<PAGE>
<PAGE>
EXHIBIT C
[Form of Certificate Depository Agreement]
C-1
<PAGE>
<PAGE>
Exhibit 4.4
[COUNTRYWIDE] HOME EQUITY LOAN TRUST 1996-__,
Issuer
AND
[-----------------]
INDENTURE TRUSTEE
-----------------------------------------
INDENTURE
Dated as of _________, 199_
------------------------------------------
HOME EQUITY LOAN ASSET BACKED NOTES
SERIES 199__-__
<PAGE>
<PAGE>
Cross-reference sheet showing the location in the indenture of the
provisions inserted pursuant to Sections 310 through 318(a) inclusive of the
Trust Indenture Act of 1939.
<TABLE>
<CAPTION>
TIA Indenture Section
--- -------------------
<S> <C> <C>
Section 310
(a) (1) ............................................. 6.11
(a) (2) ............................................. 6.11
(a) (3) ............................................. 6.10(b)(i)
(a) (4) ............................................. Not Applicable
(a) (5) ............................................. 6.11
(b) ............................................. 6.11
............................................. 6.08
............................................. 11.05
(c) ............................................. Not Applicable
Section 311
(a) ............................................. 6.12
(b) ............................................. 6.12
Section 312
(a) ............................................. 7.01(a)(i)
............................................. 7.02(a)(i)
(b) ............................................. 7.02(a)(ii)
(c) ............................................. 7.02(a)(iii)
Section 313
(a) ............................................. 7.04
(b) ............................................. 7.04
(c) ............................................. 7.04
............................................. 11.05
(d) ............................................. 7.04
Section 314
(a) ............................................. 7.03
............................................. 11.05
............................................. 3.11
(b) (1) ............................................. 2.03
(b) (2) ............................................. 3.07
(c) (1) ............................................. 2.03
............................................. 4.10
............................................. 11.01
(c) (2) ............................................. 2.03
............................................. 4.10
............................................. 11.01
(c) (3) ............................................. 1.01
............................................. 2.02
(d) (1) ............................................. 1.01
............................................. 8.05
(d) (2) ............................................. 1.01
............................................. Not Applicable
</TABLE>
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<CAPTION>
TIA Indenture Section
--- -------------------
<S> <C> <C>
(d) (3) ............................................. 1.01
............................................. 2.02
(e) ............................................. 11.01
Section 315
(a) ............................................. 6.01(b)
............................................. 6.01(c)(i)
(b) ............................................. 6.05
............................................. 11.05
(c) ............................................. 6.01(a)
(d) ............................................. 6.01(c)
(d) (1) ............................................. 6.01(b)
(d) (2) ............................................. 6.01(c)(ii)
(d) (3) ............................................. 6.01(c)(iii)
(e) ............................................. 5.16
Section 316
(a) (1) (A).......................................... 5.11
............................................. 8.01
(a) (1) (B).......................................... 5.02
............................................. 5.12
(a) (2) ............................................. Not Applicable
(b) ............................................. 5.07
(c) ............................................. Not Applicable
Section 317
(a) (1) ............................................. 5.03
(a) (2) ............................................. 5.03(d)(iv)
(b) ............................................. 3.03
Section 318
(a) ............................................. 11.07
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
ARTICLE I
Definitions
<S> <C> <C>
1.01. Definitions.............................................................................. 2
1.02. Incorporation by Reference of Trust
Indenture Act..................................................................... 2
1.03. Rules of Construction.................................................................... 2
ARTICLE II
Original Issuance of Notes
2.01. Form .................................................................................. 4
2.02. Execution, Authentication and Delivery................................................... 4
2.03. Opinions of Counsel...................................................................... 5
ARTICLE III
Covenants
3.01. Collection of Payments on Mortgage Loan
Accounts.......................................................................... 6
3.02. Maintenance of Office or Agency.......................................................... 6
3.03. Money for Payments To Be Held in Trust;
Paying Agent; Certificate Paying Agent............................................ 6
3.04. Existence................................................................................ 9
3.05. Payment of Principal and Interest;
Defaulted Interest................................................................ 9
3.06. Protection of Trust Estate............................................................... 12
3.07. Opinions as to Trust Estate.............................................................. 12
3.08. [Reserved]............................................................................... 13
3.09. Performance of Obligations; Master
Servicing Agreement............................................................... 13
3.10. Negative Covenants....................................................................... 15
3.11. Annual Statement as to Compliance........................................................ 16
3.12. Recording of Assignments................................................................. 16
3.13. Representations and Warranties
Concerning the Mortgage Loans..................................................... 16
3.14. Indenture Trustee's Review of Related
Documents......................................................................... 17
3.15. Trust Estate; Related Documents.......................................................... 18
3.16. Amendments to Master Servicing
Agreement......................................................................... 19
3.17. Master Servicer as Agent and Bailee of
Indenture Trustee................................................................. 19
3.18. Investment Company Act................................................................... 20
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3.19. Issuer May Consolidate, etc., Only on
Certain Terms..................................................................... 20
3.20. Successor or Transferee.................................................................. 22
3.21. No Other Business........................................................................ 22
3.22. No Borrowing............................................................................. 23
3.23. Guarantees, Loans, Advances and Other
Liabilities....................................................................... 23
3.24. Capital Expenditures..................................................................... 23
3.25. [Reserved]............................................................................... 23
3.26. Restricted Payments...................................................................... 23
3.27. Notice of Events of Default.............................................................. 23
3.28. Further Instruments and Acts............................................................. 24
3.29. Statements to Noteholders................................................................ 24
3.30. [Reserved] [Grant of the Additional
Loans............................................................................. 24
3.31. Determination of Note Rate and
Certificate Rate.................................................................. 25
3.32. Payments under the Credit Enhancement
Instrument........................................................................ 25
3.33. Replacement Credit Enhancement
Instrument........................................................................ 26
ARTICLE IV
The Notes; Satisfaction and Discharge of Indenture
4.01. The Notes................................................................................ 28
4.02. Registration of and Limitations on
Transfer and Exchange of Notes;
Appointment of Certificate Registrar.............................................. 28
4.03. Mutilated, Destroyed, Lost or Stolen
Notes............................................................................. 30
4.04. Persons Deemed Owners.................................................................... 31
4.05. Cancellation............................................................................. 31
4.06. Book-Entry Notes......................................................................... 31
4.07. Notices to Depository.................................................................... 32
4.08. Definitive Notes......................................................................... 33
4.09. Tax Treatment............................................................................ 33
4.10. Satisfaction and Discharge of Indenture.................................................. 33
4.11. Application of Trust Money............................................................... 35
4.12. Subrogation and Cooperation.............................................................. 35
4.13. Repayment of Moneys Held by Paying
Agent............................................................................. 36
ARTICLE V
Remedies
5.01. Events of Default........................................................................ 37
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5.02. Acceleration of Maturity; Rescission and
Annulment......................................................................... 37
5.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee.................................................. 38
5.04. Remedies; Priorities..................................................................... 40
5.05. Optional Preservation of the Trust
Estate............................................................................ 43
5.06. Limitation of Suits...................................................................... 43
5.07. Unconditional Rights of Noteholders To
Receive Principal and Interest.................................................... 44
5.08. Restoration of Rights and Remedies....................................................... 44
5.09. Rights and Remedies Cumulative........................................................... 44
5.10. Delay or Omission Not a Waiver........................................................... 44
5.11. Control by Noteholders................................................................... 45
5.12. Waiver of Past Defaults.................................................................. 45
5.13. Undertaking for Costs.................................................................... 46
5.14. Waiver of Stay or Extension Laws......................................................... 46
5.15. Sale of Trust Estate..................................................................... 46
5.16. Action on Notes.......................................................................... 48
ARTICLE VI
The Indenture Trustee
6.01. Duties of Indenture Trustee.............................................................. 50
6.02. Rights of Indenture Trustee.............................................................. 51
6.03. Individual Rights of Indenture Trustee................................................... 52
6.04. Indenture Trustee's Disclaimer........................................................... 52
6.05. Notice of Event of Default............................................................... 52
6.06. Reports by Indenture Trustee to Holders.................................................. 52
6.07. Compensation and Indemnity............................................................... 52
6.08. Replacement of Indenture Trustee......................................................... 53
6.09. Successor Indenture Trustee by Merger.................................................... 54
6.10. Appointment of Co-Indenture Trustee or
Separate Indenture Trustee........................................................ 55
6.11. Eligibility; Disqualification............................................................ 56
6.12. Preferential Collection of Claims
Against Issuer.................................................................... 57
6.13. Representation and Warranty.............................................................. 57
6.14. Directions to Indenture Trustee.......................................................... 57
6.15. No Consent to Certain Acts of Depositor.................................................. 57
ARTICLE VII
Noteholders' Lists and Reports
7.01. Issuer To Furnish Indenture Trustee
Names and Addresses of Noteholders................................................ 58
7.02. Preservation of Information;
Communications to Noteholders..................................................... 58
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<S> <C> <C>
7.03. Reports by Issuer........................................................................ 58
7.04. Reports by Indenture Trustee............................................................. 59
ARTICLE VIII
Accounts, Disbursements and Releases
8.01. Collection of Money...................................................................... 60
8.02. Trust Accounts........................................................................... 60
8.03. Opinion of Counsel....................................................................... 62
8.04. Termination Upon Distribution to Note-
holders........................................................................... 62
8.05. Release of Trust Estate.................................................................. 62
8.06. Surrender of Notes Upon Final Payment.................................................... 63
ARTICLE IX
Supplemental Indentures
9.01. Supplemental Indentures Without Consent
of Noteholders.................................................................... 64
9.02. Supplemental Indentures With Consent of
Noteholders....................................................................... 65
9.03. Execution of Supplemental Indentures..................................................... 67
9.04. Effect of Supplemental Indenture......................................................... 67
9.05. Conformity with Trust Indenture Act...................................................... 68
9.06. Reference in Notes to Supplemental
Indentures........................................................................ 68
ARTICLE X
[Reserved]
ARTICLE XI
Miscellaneous
11.01. Compliance Certificates and Opinions,
etc............................................................................... 70
11.02. Form of Documents Delivered to
Indenture Trustee................................................................. 72
11.03. Acts of Noteholders..................................................................... 73
11.04. Notices, etc., to Indenture Trustee,
Issuer, [Credit Enhancer] and Rating
Agencies.......................................................................... 74
11.05. Notices to Noteholders; Waiver.......................................................... 75
11.06. Alternate Payment and Notice
Provisions........................................................................ 75
11.07. Conflict with Trust Indenture Act....................................................... 75
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11.08. Effect of Headings...................................................................... 76
11.09. Successors and Assigns.................................................................. 76
11.10. Separability............................................................................ 76
11.11. Benefits of Indenture................................................................... 76
11.12. Legal Holidays.......................................................................... 76
11.13. GOVERNING LAW........................................................................... 76
11.14. Counterparts............................................................................ 76
11.15. Recording of Indenture.................................................................. 77
11.16. Issuer Obligation....................................................................... 77
11.17. No Petition............................................................................. 77
11.18. Inspection.............................................................................. 78
11.19. Authority of the Administrator.......................................................... 78
Signatures ................................................................................................... 81
Acknowledgments .............................................................................................. 82
</TABLE>
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Mortgage Loan Schedule
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This Indenture, dated as of ______, 199_, between
[COUNTRYWIDE] HOME EQUITY LOAN TRUST 199_-_, a Delaware business trust, as
Issuer (the "Issuer"), and [________________], as Indenture Trustee (the
"Indenture Trustee"),
WITNESSETH THAT:
Each party hereto agrees as follows for the benefit of the
other party and for the equal and ratable benefit of the Holders of the Issuer's
Home Equity Loan Asset Backed Notes, Series 199__-__ (the "Notes").
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the
Closing Date, as Indenture Trustee for the benefit of the Holders of the Notes,
all of the Issuer's right, title and interest in and to whether now existing or
hereafter created (a) the Mortgage Loans and all monies and proceeds due thereon
after the Cut-off Date (exclusive of payments in respect of accrued interest due
on a prior to the Cut-off Date or due in the month of ___________), (b) an
assignment of the Depositor's rights under the Mortgage Loan Purchase Agreement,
(c) all funds on deposit in the Funding Account, including all income from the
investment and reinvestment of funds therein, (d) all funds on deposit from time
to time in the Collection Account allocable to the Mortgage Loans; (e) all funds
on deposit from time to time in the Payment Account and in all proceeds thereof;
[(f) the Policy]; (g) all Additional Balances; (h) all REO properties; and (i)
all present and future claims, demands, causes and choses in action in respect
of any or all of the foregoing and all payments on or under, and all proceeds of
every kind and nature whatsoever in respect of, any or all of the foregoing and
all payments on or under, and all proceeds of every kind and nature whatsoever
in the conversion thereof, voluntary or involuntary, into cash or other liquid
property, all cash proceeds, accounts, accounts receivable, notes, drafts,
acceptances, checks, deposit accounts, rights to payment of any and every kind
(including but not limited to all proceeds of any hazard insurance policy with
respect to any Mortgaged Property), and other forms of obligations and
receivables, instruments and other property which at any time constitute all or
part of or are included in the proceeds of any of the foregoing (collectively,
the "Trust Estate" or the "Collateral").
The foregoing Grant is made in trust to secure the payment of
principal of and interest on, and any other amounts owing in respect of, the
Notes, equally and ratably without prejudice, priority or distinction, and to
secure compliance with the provisions of this Indenture, all as provided in this
Indenture.
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The Indenture Trustee, as Indenture Trustee on behalf of the
Holders of the Notes, acknowledges such Grant, accepts the trust under this
Indenture in accordance with the provisions hereof and agrees to perform its
duties as Indenture Trustee as required herein.
ARTICLE I
Definition
Section 1.01. Definitions. For all purposes of this Indenture, except
as otherwise expressly provided herein or unless the context otherwise requires,
capitalized terms used but not otherwise defined herein shall have the meanings
assigned to such terms in Appendix A hereto which are incorporated by reference
herein. All other capitalized terms used herein shall have the meanings
specified herein.
Section 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commis-
sion.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means
the Indenture Trustee.
"obligor" on the indenture securities means the Issuer
and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning assigned to them by such definitions.
Section 1.03. Rules of Construction. Unless the context
otherwise requires:
(i) a term has the meaning assigned to it;
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(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without
limitation;
(v) words in the singular include the plural
and words in the plural include the singular; and
(vi) any agreement, instrument or statute defined or
referred to herein or in any instrument or certificate delivered in
connection herewith means such agreement, instrument or statute as from
time to time amended, modified or supplemented and includes (in the
case of agreements or instruments) references to all attachments
thereto and instruments incorporated therein; references to a Person
are also to its permitted successors and assigns.
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ARTICLE II
Original Issuance of Notes
Section 2.01. Form. The Notes together with the Indenture Trustee's
certificate of authentication, shall be in substantially the forms set forth in
Exhibit A with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution of the Notes. Any
portion of the text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note.
The Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods (with or without steel engraved
borders), all as determined by the Authorized Officers executing such Notes, as
evidenced by their execution of such Notes.
The terms of the Notes set forth in Exhibit A are part of the terms of
this Indenture.
Section 2.02. Execution, Authentication and Delivery. The Notes shall
be executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were
at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Indenture Trustee shall upon Issuer Request authenticate and
deliver Notes for original issue in an aggregate initial principal amount of
$[______________]. The aggregate principal amount of Notes outstanding at any
time may not exceed $[_________________].
Each Note shall be dated the date of its authentication. The Notes
shall be issuable as registered Notes in the minimum initial Security Balances
of $[________] and in integral multiples of $[______] in excess thereof.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there
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appears on such Note a certificate of authentication substantially in the form
provided for herein executed by the Indenture Trustee by the manual signature of
one of its authorized signatories, and such certificate upon any Note shall be
conclusive evidence, and the only evidence, that such Note has been duly
authenticated and delivered hereunder.
Section 2.03. Opinions of Counsel. On the Closing Date, the Indenture
Trustee shall have received: (i) an Opinion of Counsel, in form and substance
reasonably satisfactory to the Indenture Trustee and its counsel, with respect
to securities law matters; (ii) an Opinion of Counsel, in form and substance
reasonably satisfactory to the Indenture Trustee and its counsel, with respect
to the tax status of the arrangement created by the Indenture; and (iii) an
Opinion of Counsel to the Issuer, in form and substance reasonably satisfactory
to the Indenture Trustee and its counsel, with respect to the due authorization,
valid execution and delivery of this Indenture and with respect to its binding
effect on the Issuer.
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ARTICLE III
Covenants
Section 3.01. Collection of Payments on Mortgage Loan Accounts. The
Indenture Trustee shall establish and maintain with itself a trust account (the
"Payment Account") in which the Indenture Trustee shall, subject to the terms of
this paragraph, deposit, on the same day as it is received from the Master
Servicer, each remittance received by the Indenture Trustee with respect to the
Mortgage Loans. The Indenture Trustee shall make all payments of principal of
and interest on the Notes, subject to Section 3.03 as provided in Section 3.05
herein from moneys on deposit in the Payment Account.
Section 3.02. Maintenance of Office or Agency. The Issuer will maintain
in the Borough of Manhattan, The City of New York, an office or agency where,
subject to satisfaction of conditions set forth herein, Notes may be surrendered
for registration of transfer or exchange, and where notices and demands to or
upon the Issuer in respect of the Notes and this Indenture may be served. The
Issuer hereby initially appoints the Indenture Trustee to serve as its agent for
the foregoing purposes. If at any time the Issuer shall fail to maintain any
such office or agency or shall fail to furnish the Indenture Trustee with the
address thereof, such surrenders, notices and demands may be made or served at
the Corporate Trust Office, and the Issuer hereby appoints the Indenture Trustee
as its agent to receive all such surrenders, notices and demands.
Section 3.03. Money for Payments To Be Held in Trust; Paying Agent;
Certificate Paying Agent. (a) As provided in Section 3.01, all payments of
amounts due and payable with respect to any Notes that are to be made from
amounts withdrawn from the Payment Account pursuant to Section 3.01 shall be
made on behalf of the Issuer by the Indenture Trustee or by the Paying Agent,
and no amounts so withdrawn from the Payment Account for payments of Notes shall
be paid over to the Issuer except as provided in this Section 3.03.
The Issuer will cause each Paying Agent other than the Indenture
Trustee to execute and deliver to the Indenture Trustee an instrument in which
such Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of
this Section 3.03, that such Paying Agent will:
(i) hold all sums held by it for the payment of
amounts due with respect to the Notes in trust for the
benefit of the Persons entitled thereto until such sums
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shall be paid to such Persons or otherwise disposed of as herein
provided and pay such sums to such Persons as herein provided;
(ii) give the Indenture Trustee notice of any default by
the Issuer of which it has actual knowledge in the making of any
payment required to be made with respect to the Notes;
(iii) at any time during the continuance of any such
default, upon the written request of the Indenture Trustee, forthwith
pay to the Indenture Trustee all sums so held in trust by such Paying
Agent;
(iv) immediately resign as Paying Agent and forthwith
pay to the Indenture Trustee all sums held by it in trust for the
payment of Notes if at any time it ceases to meet the standards
required to be met by a Paying Agent at the time of its appointment;
and
(v) comply with all requirements of the Code with
respect to the withholding from any payments made by it on any Notes of
any applicable withholding taxes imposed thereon and with respect to
any applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Request direct any Paying Agent to pay to the Indenture Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Indenture Trustee upon
the same trusts as those upon which the sums were held by such Paying Agent; and
upon such payment by any Paying Agent to the Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such trust
and be paid to the Issuer on Issuer Request; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Indenture Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; provided, however, that the Indenture
Trustee or such Paying Agent, before being required to make any such repayment,
shall at the expense and direction of the Issuer cause to be published once, in
an Authorized Newspaper
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published in the English language, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Issuer. The Indenture Trustee shall also adopt and employ,
at the expense and direction of the Issuer, any other reasonable means of
notification of such repayment (including, but not limited to, mailing notice of
such repayment to Holders whose Notes have been called but have not been
surrendered for redemption or whose right to or interest in moneys due and
payable but not claimed is determinable from the records of the Indenture
Trustee or of any Paying Agent, at the last address of record for each such
Holder).
The Issuer hereby appoints [__________________] as Certificate Paying
Agent and Residual Ownership Interest Paying Agent to make payments to
Certificateholders and holders of the Residual Ownership Interest on behalf of
the Issuer in accordance with the provisions of the Certificates, Section 3.05
hereof and the provisions of the Trust Agreement, and [_______________] hereby
accepts such appointment and further agrees that it will be bound by the
provisions of the Trust Agreement relating to the Certificate Paying Agent and
Residual Ownership Interest Paying Agent and will:
(i) hold all sums held by it for the payment of amounts
due with respect to the Certificates and the Residual Ownership
Interest in trust for the benefit of the Persons entitled thereto until
such sums shall be paid to such Persons or otherwise disposed of as
herein provided and as provided in the Trust Agreement and pay such
sums to such Persons as herein and therein provided;
(ii) give the Owner Trustee notice of any default by the
Issuer of which it has actual knowledge in the making of any payment
required to be made with respect to the Certificates;
(iii) at any time during the continuance of any such
default, upon the written request of the Owner Trustee forthwith pay to
the Owner Trustee on behalf of the Issuer all sums so held in trust by
such Certificate Paying Agent;
(iv) immediately resign as Certificate Paying Agent and
forthwith pay to the Owner Trustee on behalf of the Issuer all sums
held by it in trust for the payment of Certificates and the Residual
Ownership Interest if at any time it ceases to meet the standards
required to be met by the Certificate Paying Agent or the Residual
Ownership Interest Paying Agent at the time of its appointment;
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(v) comply with all requirements of the Code with
respect to the withholding from any payments made by it on any
Certificates or the holders of the Residual Ownership Interest of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith; and
(vi) deliver to the Owner Trustee a copy of the report
to Certificateholders and holders of Residual Ownership Interest
prepared with respect to each Payment Date by the Master Servicer
pursuant to Section 4.01 of the Master Servicing Agreement.
Section 3.04. Existence. The Issuer will keep in full effect its
existence, rights and franchises as a business trust under the laws of the State
of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other state or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Mortgage Loans and each other
instrument or agreement included in the Trust Estate.
Section 3.05. Payment of Principal and Interest; Defaulted Interest.
(a) On each Payment Date from amounts on deposit in the Payment Account after
making (x) any deposit to the Funding Account pursuant to Section 8.02(b) and
(y) any deposits to the Payment Account pursuant to Section 8.02(c)(ii) and
Section 8.02(c)(i)(2), the Indenture Trustee, on behalf of the Issuer shall pay
to the Noteholders and the Certificate Paying Agent, on behalf of the Issuer
shall pay to the Certificateholders and the Certificate Paying Agent, on behalf
of the Issuer shall pay to the holders of the Residual Ownership Interest, and
the Indenture Trustee, in its capacity as agent for the Issuer shall pay to
other Persons, the amounts to which they are entitled as set forth below:
(i) The sum of (x) to the Noteholders the sum of (a)
one month's interest at the Note Rate on the Security Balances of Notes
immediately prior to such Payment Date and (b) any previously accrued
and unpaid interest for prior Payment Dates and (y) to the
Certificateholders, the Certificate Distribution Amount for such
Payment Date;
(ii) as principal on the Notes and the Certificates,
the applicable Security Percentage of the Principal Collec- tion
Distribution Amount;
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(iii) to the Noteholders and the Certificateholders, as
the case may be, as principal on the Notes and the Certificates, pro
rata, based on the Security Balances from the amount remaining on
deposit in the Payment Account, up to the applicable Security
Percentage of Liquidation Loss Amounts for the related Collection
Period;
(iv) to the Noteholders and the Certificateholders, as
the case may be, as principal on the Notes and the Certificates, pro
rata, based on the Security Balances from the amount remaining on
deposit in the Payment Account, up to the applicable Security
Percentage of Carryover Loss Amounts;
[(v) to the Credit Enhancer, in the amount of the
premium for the Credit Enhancement Instrument [and for any
Additional Credit Enhancement Instrument];
(vi) to the Credit Enhancer, to reimburse it for prior
draws made on the Credit Enhancement Instrument [and on any Additional
Credit Enhancement Instrument] (with interest thereon as provided in
the Insurance Agreement);]
(vii) to the Noteholders and the Certificateholders, as
the case may be, as principal on the Notes and the Certificates, pro
rata, based on the Security Balances from Security Interest
Collections, up to the Accelerated Principal Distribution Amount for
such Payment Date (such amount, if any, paid pursuant to this clause
(vii) being referred to herein as the "Accelerated Principal Payment
Amount");
[(viii) to the Credit Enhancer, any other amounts owed
to the Credit Enhancer pursuant to the Insurance Agreement;]
(ix) [Reserved];
(x) to reimburse the Administrator for expenditures
made on behalf of the Issuer with respect to the performance of its
duties under the Indenture; and
(xi) any remaining amounts to the holders of the
Residual Ownership Interest as described in Section 5.01 of the Trust
Agreement;
provided, however, [in the event that on a Payment Date a Credit Enhancer
Default shall have occurred and be continuing then the priorities of
distributions described above will be adjusted such that payments of the
Certificate Distribution Amount and all other amounts to be paid in respect of
principal on the Certifi-
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cates will not be paid until the full amount of interest and principal in
accordance with clauses (i)(x) and (ii) through (iv) above that are due on the
Notes on such Payment Date have been paid and provided, further,] that on the
Final Scheduled Payment Date or other final Payment Date, the amount to be paid
pursuant to clause (ii) above shall be equal to the Security Balances of the
Securities immediately prior to such Payment Date.
The amounts paid to Noteholders shall be paid to each Class in
accordance with paragraph (b) below. Interest will accrue on the Notes during an
Interest Period on the basis of the actual number of days in such Interest
Period and a year assumed to consist of 360 days.
Any installment of interest or principal, if any, payable on any Note
or Certificate that is punctually paid or duly provided for by the Issuer on the
applicable Payment Date shall, if such Holder holds Notes or Certificates other
than the Designated Certificate of an aggregate initial Principal Balance of at
least $[___________] be paid to each Holder of record on the preceding Record
Date, by wire transfer to an account specified in writing by such Holder
reasonably satisfactory to the Indenture Trustee as of the preceding Record Date
or in all other cases or if no such instructions have been delivered to the
Indenture Trustee, by check to such Noteholder mailed to such Holder's address
as it appears in the Note Register the amount required to be distributed to such
Holder on such Payment Date pursuant to such Holder's Securities; provided,
however, that the Indenture Trustee shall not pay to such Holders any amount
required to be withheld from a payment to such Holder by the Code.
(b) The principal of each Note shall be due and payable in full on the
Final Scheduled Payment Date for such Note as provided in the related form of
Note set forth in Exhibit A. All principal payments on each Class of Notes shall
be made to the Noteholders of such Class entitled thereto in accordance with the
Percentage Interests represented by such Notes. Upon notice to the Indenture
Trustee by the Issuer, the Indenture Trustee shall notify the Person in whose
name a Note is registered at the close of business on the Record Date preceding
the Final Scheduled Payment Date or other final Payment Date. Such notice shall
be mailed no later than five Business Days prior to such Final Scheduled Payment
Date or other final Payment Date and shall specify that payment of the principal
amount and any interest due with respect to such Note at the Final Scheduled
Payment Date or other final Payment Date will be payable only upon presentation
and surrender of such Note and shall specify the place where such Note may be
presented and surrendered for such final payment.
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Section 3.06. Protection of Trust Estate. (a) The Issuer will from time
to time execute and deliver all such supplements and amendments hereto and all
such financing statements, continuation statements, instruments of further
assurance and other instruments, and will take such other action necessary or
advisable to:
(i) maintain or preserve the lien and security interest
(and the priority thereof) of this Indenture or carry out more
effectively the purposes hereof;
(ii) perfect, publish notice of or protect the validity
of any Grant made or to be made by this Indenture;
(iii) enforce any of the Mortgage Loans; or
(iv) preserve and defend title to the Trust Estate and
the rights of the Indenture Trustee and the Noteholders in such Trust
Estate against the claims of all persons and parties.
(b) Except as otherwise provided in the Master Servicing Agreement or
this Indenture, the Indenture Trustee shall not remove any portion of the Trust
Estate that consists of money or is evidenced by an instrument, certificate or
other writing from the jurisdiction in which it was held at the date of the most
recent Opinion of Counsel delivered pursuant to Section 3.06 (or from the
jurisdiction in which it was held as described in the Opinion of Counsel
delivered at the Closing Date pursuant to Section 3.07(a), if no Opinion of
Counsel has yet been delivered pursuant to Section 3.07(b) unless the Trustee
shall have first received an Opinion of Counsel to the effect that the lien and
security interest created by this Indenture with respect to such property will
continue to be maintained after giving effect to such action or actions.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required to be executed pursuant to this Section 3.06.
Section 3.07. Opinions as to Trust Estate. (a) On the Closing Date, the
Issuer shall furnish to the Indenture Trustee, the Owner Trustee and to the
Administrator an Opinion of Counsel either stating that, in the opinion of such
counsel, such action has been taken with respect to the delivery of the Mortgage
Notes, the recording of the Assignments of Mortgage, the recording and filing of
this Indenture, any indentures supplemental hereto, and any other requisite
documents, and with respect to the execution and filing of any financing
statements and continu-
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ation statements, as are necessary to perfect and make effective the lien and
security interest of this Indenture and reciting the details of such action, or
stating that, in the opinion of such counsel, no such action is necessary to
make such lien and security interest effective.
(b) On or before December 31 in each calendar year, beginning in 199_,
the Issuer shall furnish to the Indenture Trustee and to the Administrator an
Opinion of Counsel at the expense of the Issuer either stating that, in the
opinion of such counsel, such action has been taken with respect to the
recording of the Assignments of Mortgage, the recording, filing, re-recording
and refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and with respect to the execution and filing of any
financing statements and continuation statements as is necessary to maintain the
lien and security interest created by this Indenture and reciting the details of
such action or stating that in the opinion of such counsel no such action is
necessary to maintain such lien and security interest. Such Opinion of Counsel
shall also describe the recording, filing, re-recording and refiling of this
Indenture, any indentures supplemental hereto and any other requisite documents
and the execution and filing of any financing statements and continuation
statements that will, in the opinion of such counsel, be required to maintain
the lien and security interest of this Indenture until December 31 in the
following calendar year.
Section 3.08. [Reserved]
Section 3.09. Performance of Obligations; Master Servicing Agreement.
(a) The Issuer will punctually perform and observe all of its obligations and
agreements contained in this Indenture, the Basic Documents and in the
instruments and agreements included in the Trust Estate. Except as otherwise
expressly provided therein, the Issuer shall not waive, amend, modify,
supplement or terminate any Basic Document, including without limitation the
Master Servicing Agreement or any provision thereof without the consent of the
Indenture Trustee or the Holders of at least a majority of the Security Balances
of the Notes, the Master Servicer [and the Credit Enhancer]. Upon the taking of
any such action with respect to any Basic Document the Issuer shall give written
notice thereof to the Rating Agencies.
(b) The Issuer may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such duties
by a Person identified to the Indenture Trustee in an Officer's Certificate of
the Issuer shall be deemed to be action taken by the Issuer. Initially, the
Issuer has con-
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tracted with the Administrator to assist the Issuer in performing its duties
under this Indenture.
(c) The Issuer will not take any action or permit any action to be
taken by others which would release any Person from any of such Person's
covenants or obligations under any of the documents relating to the Mortgage
Loans or under any instrument included in the Trust Estate, or which would
result in the amendment, hypothecation, subordination, termination or discharge
of, or impair the validity or effectiveness of, any of the documents relating to
the Mortgage Loans or any such instrument, except such actions as the Master
Servicer is expressly permitted to take in the Master Servicing Agreement.
(d) If the Issuer shall have knowledge of the occurrence of an Event of
Servicing Termination, the Issuer shall promptly notify the Indenture Trustee
thereof, and shall specify in such notice the action, if any, the Issuer is
taking in respect of such Event of Servicing Termination. If such Event of
Servicing Termination arises from the failure of the Master Servicer to perform
any of its duties or obligations under the Master Servicing Agreement with
respect to the Mortgage Loans, the Issuer may remedy such failure, provided that
if such Event of Servicing Termination arises from the failure by the Master
Servicer to comply with requirements imposed upon it under Section 3.04 of the
Master Servicing Agreement with respect to hazard insurance for the Mortgaged
Properties securing the Mortgage Loans, the Issuer shall promptly, as the case
may be, pay such premiums or obtain substitute insurance coverage meeting the
requirements of said Section 3.04. So long as any such Event of Servicing
Termination shall be continuing, the Indenture Trustee may exercise its remedies
set forth in Section 7.01 of the Master Servicing Agreement. Unless granted or
permitted by [the Credit Enhancer or] the Holders of Securities to the extent
provided above, the Issuer may not waive any such Event of Servicing Termination
or terminate the rights and powers of the Master Servicer under the Master
Servicing Agreement.
(e) Upon any termination of the Master Servicer's rights and powers
pursuant to Section 7.01 of the Master Servicing Agreement, all rights, powers,
duties and responsibilities of the Master Servicer with respect to the Mortgage
Loans shall vest in and be assumed by the Indenture Trustee, and the Indenture
Trustee shall be the successor in all respect to the Master Servicer in its
capacity as servicer with respect to the Mortgage Loans under the Master
Servicing Agreement. Upon any such termination, the Indenture Trustee is hereby
authorized, and the Indenture Trustee hereby agrees, to mail a notice to each
Mortgagor directing each such Mortgagor to mail all payments in respect of the
related Mortgage Loan to the Indenture Trustee or
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its agent at the address specified in such notice. The Indenture Trustee may
resign as the Master Servicer by giving written notice of such resignation to
the Issuer [and the Credit Enhancer] and in such event will be released from
such duties and obligations, such release to be effective on the date a new
servicer enters into a servicing agreement with the Issuer as provided below.
Upon delivery of any such notice to the Issuer, the Issuer shall obtain a new
servicer, satisfactory in all respects to the Indenture Trustee [and the Credit
Enhancer], which shall enter into a servicing agreement with the Issuer and the
Indenture Trustee, [such agreement to be not less favorable to the Credit
Enhancer in its reasonable judgment, or the Noteholders if a Credit Enhancer
Default shall have occurred and be continuing,] than the Master Servicing
Agreement in any material respect. If, within 30 days after the delivery of the
notice referred to above, the Issuer shall not have obtained such new servicer,
the Indenture Trustee may appoint, or may petition a court of competent
jurisdiction to appoint, a successor servicer [acceptable to the Credit
Enhancer] to service the Mortgage Loans. In connection with any such
appointment, the Indenture Trustee may make such arrangements for the
compensation of such successor as it and such successor shall agree, and the
Issuer shall enter into an agreement with such successor for the servicing of
the Mortgage Loans, such agreement to be substantially similar to the Master
Servicing Agreement [or otherwise acceptable to the Credit Enhancer]; provided
that any such compensation of the successor servicer [unless otherwise agreed to
by the Credit Enhancer,] shall not be in excess of the Servicing Fee payable to
the Master Servicer under the Master Servicing Agreement. If the Indenture
Trustee shall succeed to the Master Servicer's duties as servicer of the
Mortgage Loans as provided herein, it shall do so in its individual capacity and
not in its capacity as Indenture Trustee.
(f) The Issuer shall at all times retain an Administrator [(approved by
the Credit Enhancer under the Administration Agreement)] and may enter into
contracts with other Persons for the performance of the Issuer's obligations
hereunder, and performance of such obligations by such Persons shall be deemed
to be performance of such obligations by the Issuer.
Section 3.10. Negative Covenants. So long as any Notes are
Outstanding, the Issuer shall not:
(i) except as expressly permitted by this Indenture,
sell, transfer, exchange or otherwise dispose of the Trust Estate,
unless directed to do so by the Indenture Trustee;
(ii) claim any credit on, or make any deduction from
the principal or interest payable in respect of, the Notes
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(other than amounts properly withheld from such payments under the
Code) or assert any claim against any present or former Noteholder by
reason of the payment of the taxes levied or assessed upon any part of
the Trust Estate; or
(iii) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien of this Indenture to be
amended, hypothecated, subordinated, terminated or discharged, or
permit any Person to be released from any covenants or obligations with
respect to the Notes under this Indenture except as may be expressly
permitted hereby, (B) permit any lien, charge, excise, claim, security
interest, mortgage or other encumbrance (other than the lien of this
Indenture) to be created on or extend to or otherwise arise upon or
burden the Trust Estate or any part thereof or any interest therein or
the proceeds thereof or (C) permit the lien of this Indenture not to
constitute a valid first priority security interest in the Trust
Estate.
Section 3.11. Annual Statement as to Compliance. The Issuer will
deliver to the Indenture Trustee, within 120 days after the end of each fiscal
year of the Issuer (commencing with the fiscal year 199_), an Officer's
Certificate stating, as to the Authorized Officer signing such Officer's
Certificate, that:
(i) a review of the activities of the Issuer during
such year and of its performance under this Indenture has been made
under such Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge,
based on such review, the Issuer has complied with all conditions and
covenants under this Indenture throughout such year, or, if there has
been a default in its compliance with any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
Section 3.12. Recording of Assignments. The Issuer shall exercise its
right under the Mortgage Loan Purchase Agreement with respect to the obligation
of the Seller to submit or cause to be submitted for recording all Assignments
of Mortgages on or prior to _________, 199_ with respect to the Initial Loans
and within [__] days following the related Deposit Date with respect to any
Additional Loans.
Section 3.13. Representations and Warranties Concerning the Mortgage
Loans. The Issuer has pledged to the Indenture Trustee all of its right under
the Mortgage Loan Purchase Agreement and the Indenture Trustee has the benefit
of the representations and
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warranties made by the Seller in Section [_____] thereof, Section [____] thereof
and Section [__] thereof concerning the Mortgage Loans and the right to enforce
any remedy against the Seller provided in such Section [_____] or Section
[_____] to the same extent as though such representations and warranties were
made directly to the Indenture Trustee.
Section 3.14. Indenture Trustee's Review of Related Documents. (a) The
Indenture Trustee agrees, for the benefit of the holders of the Notes, to
review, or the related Custodian shall review, unless the Indenture Trustee or
such Custodian made such review prior to the Closing Date, on or prior to
________, 199_ the Related Documents delivered to it on or prior to the Closing
Date and within 90 days of the related Deposit Date, the Related Documents
delivered to it in connection with any Additional Loan, in each case in
connection with the Grant of the Mortgage Loan listed on the Schedule of
Mortgage Loans as security for the Notes. Such review shall be limited to a
determination that all documents referred to in the definition of the term
Related Documents have been executed and are appropriately endorsed in the
manner called for in the Mortgage Loan Purchase Agreement and that the Related
Documents have been delivered with respect to each such Mortgage Loan (other
than the documents related to (i) any Mortgage Loan so listed which has been
subject to a Prepayment in full and termination of related Mortgage Loan, the
proceeds of which have been deposited in the Collection Account in lieu of
delivery of the applicable Related Documents, (ii) any Mortgage Loan with
respect to which the related Mortgaged Property was foreclosed, repossessed or
otherwise converted subsequent to the Cut-off Date and prior to the Closing Date
or with respect to which foreclosure proceedings have been commenced and for
which the related Related Documents are required in connection with the
prosecution of such foreclosure proceedings and for which the Issuer has
delivered a trust receipt called for by Section 3.15(c) and (iii) any Mortgage
Loan as to which the original Assignment of Mortgage has been submitted for
recording), that all such documents have been executed, and that all such
documents relate to the Mortgage Loans listed on the Schedule of Mortgage Loans.
In performing such review, the Trustee may rely upon the purported genuineness
and due execution of any such document and on the purported genuineness of any
signature thereon.
(b) If any Related Document is defective in any material respect which
may materially and adversely affect the value of the related Mortgage Loan, the
interest of the Indenture Trustee or the Noteholders in such Mortgage Loan, or
if any document required to be delivered to the Indenture Trustee has not been
delivered, the Indenture Trustee or the related Custodian on behalf of the
Indenture Trustee shall notify the Issuer, the
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Seller, [the Credit Enhancer] and the Master Servicer immediately after
obtaining knowledge thereof and the Indenture Trustee, as assignee of the
Issuer's rights under the Mortgage Loan Purchase Agreement, shall exercise its
remedies in respect of any such defect against the Seller as provided in the
Mortgage Loan Purchase Agreement.
Section 3.15. Trust Estate; Related Documents. (a) When required by the
provisions of this Indenture, the Indenture Trustee shall execute instruments to
release property from the lien of this Indenture, or convey the Indenture
Trustee's interest in the same, in a manner and under circumstances which are
not inconsistent with the provisions of this Indenture. No party relying upon an
instrument executed by the Indenture Trustee as provided in this Article III
shall be bound to ascertain the Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
moneys.
(b) In order to facilitate the servicing of the Mortgage Loans, the
Master Servicer is hereby authorized in the name and on behalf of the Indenture
Trustee and the Issuer, to execute assumption agreements, substitution
agreements, and instruments of satisfaction or cancellation or of partial or
full release or discharge, or any other document contemplated by the Master
Servicing Agreement and other comparable instruments with respect to the
Mortgage Loans and with respect to the Mortgaged Properties subject to the
Mortgages (and the Indenture Trustee and the Owner Trustee shall promptly
execute any such documents on request of the Master Servicer), subject to the
obligations of the Master Servicer under the Master Servicing Agreement. If from
time to time the Master Servicer shall deliver to the Indenture Trustee or the
related Custodian copies of any written assurance, assumption agreement or
substitution agreement or other similar agreement pursuant to Section 3.05 of
the Master Servicing Agreement, the Indenture Trustee or the related Custodian
shall check that each of such documents purports to be an original executed copy
(or a copy of the original executed document if the original executed copy has
been submitted for recording and has not yet been returned) and, if so, shall
file such documents, and upon receipt of the original executed copy from the
applicable recording office or receipt of a copy thereof certified by the
applicable recording office shall file such originals or certified copies with
the Related Documents. If any such documents submitted by the Master Servicer do
not meet the above qualifications, such documents shall promptly be returned by
the Indenture Trustee or the related Custodian to the Master Servicer, with a
direction to the Master Servicer to forward the correct documentation.
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(c) Upon Issuer Request accompanied by an Officers' Certificate of the
Master Servicer pursuant to Section 3.07 of the Master Servicing Agreement to
the effect that a Mortgage Loan has been the subject of a final payment or a
prepayment in full and the related Mortgage Loan has been terminated or that
substantially all Liquidation Proceeds which have been determined by the Master
Servicer in its reasonable judgment to be finally recoverable have been
recovered, and upon deposit to the Collection Account of such final monthly
payment, prepayment in full together with accrued and unpaid interest to the
date of such payment with respect to such Mortgage Loan or, if applicable,
Liquidation Proceeds, the Indenture Trustee and the Issuer shall promptly
release the Related Documents to the Master Servicer upon the order of the
Issuer, along with such documents as the Master Servicer or the Mortgagor may
request as contemplated by the Master Servicing Agreement to evidence
satisfaction and discharge of such Mortgage Loan. If from time to time and as
appropriate for the servicing or foreclosure of any Mortgage Loan, the Master
Servicer requests the Indenture Trustee or the related Custodian to release the
Related Documents and delivers to the Indenture Trustee or the related Custodian
a trust receipt reasonably satisfactory to the Indenture Trustee or the related
Custodian and signed by a Responsible Officer of the Master Servicer, the Issuer
and the Indenture Trustee or the related Custodian shall release the Related
Documents to the Master Servicer. If such Mortgage Loans shall be liquidated and
the Indenture Trustee or the related Custodian receives a certificate from the
Master Servicer as provided above, then, upon request of the Issuer, the
Indenture Trustee or the related Custodian shall release the trust receipt to
the Master Servicer upon the order of the Issuer.
(d) The Indenture Trustee shall, at such time as there are no Notes
Outstanding [and no amounts due to the Credit Enhancer], release all of the
Trust Estate to the Issuer (other than any cash held for the payment of the
Notes pursuant to Section 3.03 or 4.11), subject, however, to the rights of the
Indenture Trustee under Section 6.07.
Section 3.16. Amendments to Master Servicing Agreement. The Indenture
Trustee may enter into any amendment or supplement to the Master Servicing
Agreement only in accordance with Section 8.01 of the Master Servicing
Agreement. The Indenture Trustee may, in its discretion, decline to enter into
or consent to any such supplement or amendment if its own rights, duties or
immunities shall be adversely affected.
Section 3.17. Master Servicer as Agent and Bailee of Indenture
Trustee. Solely for purposes of perfection under Section
9-305 of the Uniform Commercial Code or other similar applicable
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law, rule or regulation of the state in which such property is held by the
Master Servicer, the Indenture Trustee hereby acknowledges that the Master
Servicer is acting as agent and bailee of the Indenture Trustee in holding
amounts on deposit in the Collection Account pursuant to Section 3.02 of the
Master Servicing Agreement, as well as its agent and bailee in holding any
Related Documents released to the Master Servicer pursuant to Section 3.15(c),
and any other items constituting a part of the Trust Estate which from time to
time come into the possession of the Master Servicer. It is intended that, by
the Master Servicer's acceptance of such agency pursuant to Section 3.02 of the
Master Servicing Agreement, the Trustee, as a secured party, will be deemed to
have possession of such Related Documents, such moneys and such other items for
purposes of Section 9-305 of the Uniform Commercial Code of the state in which
such property is held by the Master Servicer.
Section 3.18. Investment Company Act. The Issuer shall not become an
"investment company" or under the "control" of an "investment company" as such
terms are defined in the Investment Company Act of 1940, as amended (or any
successor or amendatory statute), and the rules and regulations thereunder
(taking into account not only the general definition of the term "investment
company" but also any available exceptions to such general definition);
provided, however, that the Issuer shall be in compliance with this Section 3.18
if it shall have obtained an order exempting it from regulation as an
"investment company" so long as it is in compliance with the conditions imposed
in such order.
Section 3.19. Issuer May Consolidate, etc., Only on Certain
Terms. (a) The Issuer shall not consolidate or merge with or
into any other Person, unless:
(i) the Person (if other than the Issuer) formed by or
surviving such consolidation or merger shall be a Person organized and
existing under the laws of the United States of America or any state or
the District of Columbia and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Indenture Trustee,
in form reasonably satisfactory to the Indenture Trustee, the due and
punctual payment of the principal of and interest on all Notes and
Certificates and the performance or observance of every agreement and
covenant of this Indenture on the part of the Issuer to be performed or
observed, all as provided herein;
(ii) immediately after giving effect to such
transaction, no Event of Default shall have occurred and be continuing;
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(iii) the Rating Agencies shall have notified the Issuer
that such transaction shall not cause the rating of the Notes or the
Certificates to be reduced, suspended or withdrawn or to be considered
by either Rating Agency to be below investment grade [without taking
into account the Credit Enhancement Instrument];
(iv) the Issuer shall have received an Opinion of
Counsel (and shall have delivered copies thereof to the Indenture
Trustee) to the effect that such transaction will not have any material
adverse tax consequence to the Issuer, any Noteholder or any
Certificateholder;
(v) any action that is necessary to maintain the lien
and security interest created by this Indenture shall have been taken;
and
(vi) the Issuer shall have delivered to the Indenture
Trustee an Officer's Certificate and an Opinion of Counsel each stating
that such consolidation or merger and such supplemental indenture
comply with this Article III and that all conditions precedent herein
provided for relating to such transaction have been complied with
(including any filing required by the Exchange Act).
(b) The Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any Person, unless:
(i) the Person that acquires by conveyance or transfer
the properties and assets of the Issuer the conveyance or transfer of
which is hereby restricted shall (A) be a United States citizen or a
Person organized and existing under the laws of the United States of
America or any state, (B) expressly assumes, by an indenture
supplemental hereto, executed and delivered to the Indenture Trustee,
in form satisfactory to the Indenture Trustee, the due and punctual
payment of the principal of and interest on all Notes and the
performance or observance of every agreement and covenant of this
Indenture on the part of the Issuer to be performed or observed, all as
provided herein, (C) expressly agrees by means of such supplemental
indenture that all right, title and interest so conveyed or transferred
shall be subject and subordinate to the rights of Holders of the Notes,
(D) unless otherwise provided in such supplemental indenture, expressly
agrees to indemnify, defend and hold harmless the Issuer against and
from any loss, liability or expense arising under or related to this
Indenture and the Notes and (E) expressly agrees by means of such
supplemental indenture that such Person (or if a group
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of Persons, then one specified Person) shall make all filings with the
Commission (and any other appropriate Person) required by the Exchange
Act in connection with the Notes;
(ii) immediately after giving effect to such trans-
action, no Default or Event of Default shall have occurred and be
continuing;
(iii) the Rating Agencies shall have notified the Issuer
that such transaction shall not cause the rating of the Notes or the
Certificates to be reduced, suspended or withdrawn;
(iv) the Issuer shall have received an Opinion of
Counsel (and shall have delivered copies thereof to the Indenture
Trustee) to the effect that such transaction will not have any material
adverse tax consequence to the Issuer, any Noteholder or any
Certificateholder;
(v) any action that is necessary to maintain the lien
and security interest created by this Indenture shall have been taken;
and
(vi) the Issuer shall have delivered to the Indenture
Trustee an Officer's Certificate and an Opinion of Counsel each stating
that such conveyance or transfer and such supplemental indenture comply
with this Article III and that all conditions precedent herein provided
for relating to such transaction have been complied with (including any
filing required by the Exchange Act).
Section 3.20. Successor or Transferee. (a) Upon any consolidation or
merger of the Issuer in accordance with Section 3.19(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.19(b), the Issuer will be released from every
covenant and agreement of this Indenture to be observed or performed on the part
of the Issuer with respect to the Notes immediately upon the delivery of written
notice to the Indenture Trustee that the Issuer is to be so released.
Section 3.21. No Other Business. The Issuer shall not engage in any
business other than financing, purchasing, owning and selling and managing the
Mortgage Loans in the manner
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contemplated by this Indenture and the Basic Documents and all activities
incidental thereto.
Section 3.22. No Borrowing. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes.
Section 3.23. Guarantees, Loans, Advances and Other Liabilities. Except
as contemplated by this Indenture, the Issuer shall not make any loan or advance
or credit to, or guarantee (directly or indirectly or by an instrument having
the effect of assuring another's payment or performance on any obligation or
capability of so doing or otherwise), endorse or otherwise become contingently
liable, directly or indirectly, in connection with the obligations, stocks or
dividends of, or own, purchase, repurchase or acquire (or agree contingently to
do so) any stock, obligations, assets or securities of, or any other interest
in, or make any capital contribution to, any other Person.
Section 3.24. Capital Expenditures. The Issuer shall not make any
expenditure (by long-term or operating lease or other- wise) for capital assets
(either realty or personalty).
Section 3.25. [Reserved]
Section 3.26. Restricted Payments. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer, (ii) redeem, purchase, retire or otherwise acquire for
value any such ownership or equity interest or security or (iii) set aside or
otherwise segregate any amounts for any such purpose; provided, however, that
the Issuer may make, or cause to be made, (w) distributions to the Owner Trustee
and the Certificateholders as contemplated by, and to the extent funds are
available for such purpose under the Trust Agreement, (x) payment to the Master
Servicer pursuant to the terms of the Master Servicing Agreement and (y)
payments to the Indenture Trustee pursuant to Section 1(a)(ii) of the
Administration Agreement and (z) make distributions to the holders of the
Residual Ownership Interest as contemplated by the Trust Agreement. The Issuer
will not, directly or indirectly, make payments to or distributions from the
Collection Account except in accordance with this Indenture and the Basic
Documents.
Section 3.27. Notice of Events of Default. The Issuer shall give the
Indenture Trustee, [the Credit Enhancer] and the
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Rating Agencies prompt written notice of each Event of Default hereunder and
under the Trust Agreement.
Section 3.28. Further Instruments and Acts. Upon request of the
Indenture Trustee, the Issuer will execute and deliver such further instruments
and do such further acts as may be reasonably necessary or proper to carry out
more effectively the purpose of this Indenture.
Section 3.29. Statements to Noteholders. The Indenture Trustee and the
Certificate Registrar shall forward by mail to each Noteholder and
Certificateholder, respectively, the Statement delivered to it pursuant to
Section 4.01 of the Master Servicing Agreement.
Section 3.30. [Reserved] [Grant of the Additional Loans. (a) In
consideration of the delivery on each Deposit Date to or upon the order of the
Issuer of all or a portion of the amount in respect of Security Principal
Collections on deposit in the Funding Account, the Issuer shall, to the extent
of the availability thereof, on such Deposit Date during the Funding Period
Grant to the Indenture Trustee all of its right, title and interest in the
Additional Loans and simultaneously with the Grant of the Additional Loans the
Issuer will deliver the related Related Documents to the Indenture Trustee or
the related Custodian.
(b) The obligation of the Indenture Trustee to accept the Grant of the
Additional Loans and the other property and rights related thereto described in
paragraph (a) above is subject to the satisfaction of each of the following
conditions on or prior to each Deposit Date:
(i) the Indenture Trustee shall not have received
written notice from any Rating Agency [or the Credit Enhancer] to the
effect that such transfer of Additional Loans would adversely affect
the then current rating of the Notes or cause the rating assigned to
the Securities to be below investment grade [without taking into
account the Credit Enhancement Instrument];
(ii) the Indenture Trustee shall have received a revised
Mortgage Loan Schedule, listing the Additional Loans;
(iii) the Master Servicer shall confirm to the Indenture
Trustee that it has deposited in the Collection Account all Principal
Collections and Interest Collections in respect of such Additional
Loans on or after the related Deposit Date for the Additional Loans;
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(iv) the Indenture Trustee shall have received a duly
completed and executed Transfer Certificate in the form of Exhibit 1 to
the Mortgage Loan Purchase Agreement;
(v) the Seller at its expense and the Issuer at its
expense, as appropriate, shall have provided the Rating Agencies [and
the Credit Enhancer] with an opinion of counsel relating to the sale of
the Additional Loans to the Issuer and the Grant of the Additional
Loans to the Indenture Trustee which opinion shall be in the form of
Exhibit 2 to the Mortgage Loan Purchase Agreement; and
(vi) the Issuer shall have delivered to the Indenture
Trustee an Officer's Certificate and an Opinion of Counsel confirming
the satisfaction of each condition precedent specified in this
paragraph (b).
(c) The obligation of the Indenture Trustee to accept the Grant of an
Additional Loan on the related Deposit Date is subject to each Additional Loan
and the Additional Loans in the aggregate, as the case may be, satisfying the
conditions set forth in the Mortgage Loan Purchase Agreement.]
[Section 3.31. Determination of Note Rate and Certificate Rate. On the
second LIBOR Business Day immediately preceding (i) the Closing Date in the case
of the first Interest Period and (ii) the first day of each succeeding Interest
Period, the Indenture Trustee shall determine LIBOR and the Note Rate and the
Certificate Rate for such Interest Period and shall inform the Issuer, the
Master Servicer and the Depositor at their respective facsimile numbers given to
the Indenture Trustee in writing thereof.]
[Section 3.32. Payments under the Credit Enhancement Instrument. (a) On
any Payment Date, other than a Dissolution Payment Date, the Indenture Trustee
on behalf of the Noteholders, and in its capacity as Certificate Paying Agent on
behalf of the Certificateholders shall make a draw on the Credit Enhancement
Instrument in an amount if any equal to the sum of (x) the amount by which the
sum of (i) interest accrued at the Note Rate on the Security Balance of the
Notes plus (ii) the Certificate Distribution Amount exceeds the amount on
deposit in the Payment Account available to be distributed therefor on such
Payment Date and (y) the Guaranteed Principal Payment Amount (the "Credit
Enhancement Draw Amount").
(b) The Indenture Trustee shall submit, if a Credit Enhancement Draw
Amount is specified in any Statement to Holders prepared by the Master Servicer
pursuant to Section 4.01 of the Master Servicing Agreement, the Notice for
Payment (as defined in
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the Credit Enhancement Instrument) in the amount of the Credit Enhancement Draw
Amount to the Credit Enhancer no later than 2:00 P.M., New York City time, on
the second Business Day prior to the applicable Payment Date. Upon receipt of
such Credit Enhancement Draw Amount in accordance with the terms of the Credit
Enhancement Instrument, the Indenture Trustee shall deposit such Credit
Enhancement Draw Amount in the Payment Account for distribution to Holders
pursuant to Section 3.05.
In addition, a draw may be made under the Credit Enhancement Instrument
in respect of any Avoided Payment (as defined in and pursuant to the terms and
conditions of the Credit Enhancement Instrument) and the Indenture Trustee shall
submit a Notice for Payment with respect thereto together with the other
documents required to be delivered to the Credit Enhancer pursuant to the Credit
Enhancement Instrument in connection with a draw in respect of any Avoided
Payment.
(c) In the event that any Additional Credit Enhancement Instruments are
issued pursuant to Section 4.01 and Section 2.02(B) of the Insurance Agreement,
the Indenture Trustee shall be authorized to make draws thereon subject to the
terms and conditions therein.]
[Section 3.33. Replacement Credit Enhancement Instrument. In the event
of a Credit Enhancer Default or if the claims paying ability rating of the
Credit Enhancer is downgraded and such downgrade results in a downgrading of the
then current rating of the Securities (in each case, a "Replacement Event"), the
Issuer, at its expense, in accordance with and upon satisfaction of the
conditions set forth in the Credit Enhancement Instrument, including, without
limitation, payment in full of all amounts owed to the Credit Enhancer, may, but
shall not be required to, substitute a new surety bond or surety bonds for the
existing Credit Enhancement Instrument or may arrange for any other form of
credit enhancement; provided, however, that in each case the Notes and the
Certificates shall be rated no lower than the rating assigned by each Rating
Agency to the Notes and the Certificates immediately prior to such Replacement
Event and the timing and mechanism for drawing on such new credit enhancement
shall be reasonably acceptable to the Indenture Trustee and provided further
that the premiums under the proposed credit enhancement shall not exceed such
premiums under the existing Credit Enhancement Instrument. It shall be a
condition to substitution of any new credit enhancement that there be delivered
to the Indenture Trustee (i) an Opinion of Counsel, acceptable in form to the
Indenture Trustee, from counsel to the provider of such new credit enhancement
with respect to the enforceability thereof and such other matters as the
Indenture Trustee may require and (ii) an Opinion of Counsel to the effect
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that such substitution would not (a) adversely affect in any material respect
the tax status of the Notes and the Certificates or (b) cause the Issuer to be
subject to a tax at the entity level or to be classified as a taxable mortgage
pool within the meaning of Section 7701(i) of the Code. Upon receipt of the
items referred to above and payment of all amounts owing to the Credit Enhancer
and the taking of physical possession of the new credit enhancement, the
Indenture Trustee shall, within five Business Days following receipt of such
items and such taking of physical possession, deliver the replaced Credit
Enhancement Instrument to the Credit Enhancer. In the event of any such
replacement the Issuer shall give written notice thereof to the Rating
Agencies.]
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ARTICLE IV
The Notes; Satisfaction and Discharge of Indenture
Section 4.01. The Notes. (a) The Notes shall be registered in the name
of a nominee designated by the Depository. Beneficial Owners will hold interests
in the Notes through the book-entry facilities of the Depository in minimum
initial Principal Balances of $[________] and integral multiples of $[_________]
in excess thereof.
The Indenture Trustee may for all purposes (including the making of
payments due on the Notes) deal with the Depository as the authorized
representative of the Beneficial Owners with respect to the Notes for the
purposes of exercising the rights of Holders of Notes hereunder. Except as
provided in the next succeeding paragraph of this Section 4.01, the rights of
Beneficial Owners with respect to the Notes shall be limited to those
established by law and agreements between such Beneficial Owners and the
Depository and Depository Participants. Except as provided in Section 4.08,
Beneficial Owners shall not be entitled to definitive certificates for the Notes
as to which they are the Beneficial Owners. Requests and directions from, and
votes of, the Depository as Holder of the Notes shall not be deemed inconsistent
if they are made with respect to different Beneficial Owners. The Indenture
Trustee may establish a reasonable record date in connection with solicitations
of consents from or voting by Noteholders and give notice to the Depository of
such record date. Without the consent of the Issuer and the Indenture Trustee,
no Note may be transferred by the Depository except to a successor Depository
that agrees to hold such Note for the account of the Beneficial Owners.
In the event the Depository Trust Company resigns or is removed as
Depository, the Indenture Trustee with the approval of the Issuer may appoint a
successor Depository. If no successor Depository has been appointed within 30
days of the effective date of the Depository's resignation or removal, each
Beneficial Owner shall be entitled to certificates representing the Notes it
beneficially owns in the manner prescribed in Section 4.08.
The Notes shall, on original issue, be executed on behalf of the Issuer
by the Owner Trustee, not in its individual capacity but solely as Owner
Trustee, authenticated by the Note Registrar and delivered by the Indenture
Trustee to or upon the order of the Issuer.
Section 4.02. Registration of and Limitations on Transfer and Exchange
of Notes; Appointment of Certificate Registrar. The Note Registrar shall cause
to be kept at its Corporate Trust
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Office a Note Register in which, subject to such reasonable regulations as it
may prescribe, the Note Registrar shall provide for the registration of Notes
and of transfers and exchanges of Notes as herein provided.
Subject to the restrictions and limitations set forth below, upon
surrender for registration of transfer of any Note at the Corporate Trust
Office, the Indenture Trustee shall execute and the Note Registrar shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes in authorized initial Security Balances
evidencing the same aggregate Percentage Interests.
Subject to the foregoing, at the option of the Noteholders, Notes may
be exchanged for other Notes of like tenor or, in each case in authorized
initial Principal Balances evidencing the same aggregate Percentage Interests
upon surrender of the Notes to be exchanged at the Corporate Trust Office of the
Note Registrar. Whenever any Notes are so surrendered for exchange, the
Indenture Trustee shall execute and the Note Registrar shall authenticate and
deliver the Notes which the Noteholder making the exchange is entitled to
receive. Each Note presented or surrendered for registration of transfer or
exchange shall (if so required by the Note Registrar) be duly endorsed by, or be
accompanied by a written instrument of transfer in form reasonably satisfactory
to the Note Registrar duly executed by, the Holder thereof or his attorney duly
authorized in writing. Notes delivered upon any such transfer or exchange will
evidence the same obligations, and will be entitled to the same rights and
privileges, as the Notes surrendered.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Note Registrar shall require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes.
All Notes surrendered for registration of transfer and exchange shall
be cancelled by the Note Registrar and delivered to the Indenture Trustee for
subsequent destruction without liability on the part of either.
The Issuer hereby appoints [___________________] as Certificate
Registrar to keep at its Corporate Trust Office a Certificate Register pursuant
to Section 3.09 of the Trust Agreement in which, subject to such reasonable
regulations as it may prescribe, the Certificate Registrar shall provide for the
registration of Residual Ownership Interests and of transfers and exchanges
thereof pursuant to Section 3.05 of the Trust
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Agreement. [___________________] hereby accepts such appoint- ment.
Section 4.03. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by it to hold the Issuer and the Indenture Trustee
harmless, then, in the absence of notice to the Issuer, the Note Registrar or
the Indenture Trustee that such Note has been acquired by a bona fide purchaser,
and provided that the requirements of Section 8-405 of the UCC are met, the
Issuer shall execute, and upon its request the Indenture Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a replacement Note of the same Class; provided,
however, that if any such destroyed, lost or stolen Note, but not a mutilated
Note, shall have become or within seven days shall be due and payable, instead
of issuing a replacement Note, the Issuer may pay such destroyed, lost or stolen
Note when so due or payable without surrender thereof. If, after the delivery of
such replacement Note or payment of a destroyed, lost or stolen Note pursuant to
the proviso to the preceding sentence, a bona fide purchaser of the original
Note in lieu of which such replacement Note was issued presents for payment such
original Note, the Issuer and the Indenture Trustee shall be entitled to recover
such replacement Note (or such payment) from the Person to whom it was delivered
or any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by
the Issuer or the Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section 4.03, the
Issuer may require the payment by the Holder of such Note of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section 4.03 in
replacement of any mutilated, destroyed, lost or stolen Note shall constitute an
original additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
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proportionately with any and all other Notes duly issued here- under.
The provisions of this Section 4.03 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.
Section 4.04. Persons Deemed Owners. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee and any
agent of the Issuer or the Indenture Trustee may treat the Person in whose name
any Note is registered (as of the day of determination) as the owner of such
Note for the purpose of receiving payments of principal of and interest, if any,
on such Note and for all other purposes whatsoever, whether or not such Note be
overdue, and neither the Issuer, the Indenture Trustee nor any agent of the
Issuer or the Indenture Trustee shall be affected by notice to the contrary.
Section 4.05. Cancellation. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly cancelled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly cancelled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for
any Notes cancelled as provided in this Section 4.05, except as expressly
permitted by this Indenture. All cancelled Notes may be held or disposed of by
the Indenture Trustee in accordance with its standard retention or disposal
policy as in effect at the time unless the Issuer shall direct by an Issuer
Request that they be destroyed or returned to it; provided, that such Issuer
Request is timely and the Notes have not been previously disposed of by the
Indenture Trustee.
Section 4.06. Book-Entry Notes. The Notes, upon original issuance, will
be issued in the form of typewritten Notes representing the Book-Entry Notes, to
be delivered to The Depository Trust Company, the initial Depository, by, or on
behalf of, the Issuer. Such Notes shall initially be registered on the Note
Register in the name of Cede & Co., the nominee of the initial Depository, and
no Beneficial Owner will receive a definitive Note representing such Beneficial
Owner's interest in such Note, except as provided in Section 4.08. Unless and
until
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definitive, fully registered Notes (the "Definitive Notes") have been issued to
Beneficial Owners pursuant to Section 4.08:
(i) the provisions of this Section 4.06 shall be in full
force and effect;
(ii) the Note Registrar and the Indenture Trustee shall
be entitled to deal with the Depository for all purposes of this
Indenture (including the payment of principal of and interest on the
Notes and the giving of instructions or directions hereunder) as the
sole holder of the Notes, and shall have no obligation to the Owners of
Notes;
(iii) to the extent that the provisions of this Section
4.06 conflict with any other provisions of this Indenture, the
provisions of this Section 4.06 shall control;
(iv) the rights of Beneficial Owners shall be exercised
only through the Depository and shall be limited to those established
by law and agreements between such Owners of Notes and the Depository
and/or the Depository Participants pursuant to the Note Depository
Agreement. Unless and until Definitive Notes are issued pursuant to
Section 4.08, the initial Depository will make book-entry transfers
among the Depository Participants and receive and transmit payments of
principal of and interest on the Notes to such Depository Participants;
and
(v) whenever this Indenture requires or permits actions
to be taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Security Balances of the
Notes, the Depository shall be deemed to represent such percentage only
to the extent that it has received instructions to such effect from
Beneficial Owners and/or Depository Participants owning or
representing, respectively, such required percentage of the beneficial
interest in the Notes and has delivered such instructions to the
Indenture Trustee.
Section 4.07. Notices to Depository. Whenever a notice or other
communication to the Note Holders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Beneficial Owners pursuant to
Section 4.08, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Notes to the
Depository, and shall have no obligation to the Beneficial Owners.
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Section 4.08. Definitive Notes. If (i) the Administrator advises the
Indenture Trustee in writing that the Depository is no longer willing or able to
properly discharge its responsibilities with respect to the Notes and the
Administrator is unable to locate a qualified successor, (ii) the Administrator
at its option advises the Indenture Trustee in writing that it elects to
terminate the book-entry system through the Depository or (iii) after the
occurrence of an Event of Default, Owners of Notes representing beneficial
interests aggregating at least a majority of the Security Balances of the Notes
advise the Depository in writing that the continuation of a book-entry system
through the Depository is no longer in the best interests of the Beneficial
Owners, then the Depository shall notify all Beneficial Owners and the Indenture
Trustee of the occurrence of any such event and of the availability of
Definitive Notes to Beneficial Owners requesting the same. Upon surrender to the
Indenture Trustee of the typewritten Notes representing the Book-Entry Notes by
the Depository, accompanied by registration instructions, the Issuer shall
execute and the Indenture Trustee shall authenticate the Definitive Notes in
accordance with the instructions of the Depository. None of the Issuer, the Note
Registrar or the Indenture Trustee shall be liable for 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 Notes, the
Indenture Trustee shall recognize the Holders of the Definitive Notes as
Noteholders.
Section 4.09. Tax Treatment. The Issuer has entered into this
Indenture, and the Notes will be issued, with the intention that, for federal,
state and local income, single business and franchise tax purposes, the Notes
will qualify as indebtedness of the Issuer. The Issuer, by entering into this
Indenture, and each Noteholder, by its acceptance of its Note (and each
Beneficial Owner by its acceptance of an interest in the applicable Book-Entry
Note), agree to treat the Notes for federal, state and local income, single
business and franchise tax purposes as indebtedness of the Issuer.
Section 4.10. Satisfaction and Discharge of Indenture. This Indenture
shall cease to be of further effect with respect to the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.03, 3.04, 3.06, 3.10,
3.19, 3.21 and 3.22, (v) the rights, obligations and immunities of the Indenture
Trustee hereunder (including the rights of the Indenture Trustee under Section
6.07 and the obligations of the Indenture Trustee under Section 4.11) and (vi)
the rights of Noteholders as beneficiaries hereof with respect to the property
so deposited with the Indenture Trustee payable to all
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or any of them, and the Indenture Trustee, on demand of and at the expense of
the Issuer, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other
than (i) Notes that have been destroyed, lost or stolen and that have
been replaced or paid as provided in Section 4.03 and (ii) Notes for
whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Issuer and thereafter repaid to the
Issuer or discharged from such trust, as provided in Section 3.03) have
been delivered to the Indenture Trustee for cancellation; or
(2) all Notes not theretofore delivered to the Inden-
ture Trustee for cancellation
a. have become due and payable, or
b. will become due and payable at the Final
Scheduled Payment Date within one year,
and the Issuer, in the case of a. or b. above, has irrevocably
deposited or caused to be irrevocably deposited with the Indenture
Trustee cash or direct obligations of or obligations guaranteed by the
United States of America (which will mature prior to the date such
amounts are payable), in trust for such purpose, in an amount
sufficient to pay and discharge the entire indebtedness on such Notes
and Certificates then outstanding not theretofore delivered to the
Indenture Trustee for cancellation when due on the Final Scheduled
Payment Date;
(B) the Issuer has paid or caused to be paid all other
sums payable hereunder and under the Insurance Agreement by
the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee [and the
Credit Enhancer] an Officer's Certificate, an Opinion of Counsel and
(if required by the TIA or the Indenture Trustee) an Independent
Certificate from a firm of certified public accountants, each meeting
the applicable requirements of Section 11.01 and, subject to Section
11.01 each stating that all conditions precedent herein provided for
relating to the satisfaction and discharge of this Indenture have been
complied with and, if the Opinion of Counsel relates to a deposit made
in connection with Section
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4.10(A)(2)b. above, such opinion shall further be to the effect that
such deposit will not have any material adverse tax consequences to the
Issuer, any Noteholders or any Certificateholders.
Section 4.11. Application of Trust Money. All moneys deposited with the
Indenture Trustee pursuant to Section 4.10 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent or
Certificate Paying Agent, as the Indenture Trustee may determine, to the Holders
of Securities, of all sums due and to become due thereon for principal and
interest; but such moneys need not be segregated from other funds except to the
extent required herein or required by law.
[Section 4.12. Subrogation and Cooperation. (a) The Issuer and the
Indenture Trustee acknowledge that (i) to the extent the Credit Enhancer makes
payments under the Credit Enhancement Instrument on account of principal of or
interest on the Notes or the Certificates, the Credit Enhancer will be fully
subrogated to the rights of such Holders to receive such principal and interest
from the Issuer, and (ii) the Credit Enhancer shall be paid such principal and
interest but only from the sources and in the manner provided herein and in the
Insurance Agreement for the payment of such principal and interest.
The Indenture Trustee shall cooperate in all respects with any
reasonable request by the Credit Enhancer for action to preserve or enforce the
Credit Enhancer's rights or interest under this Indenture or the Insurance
Agreement without limiting the rights of the Noteholders as otherwise set forth
in the Indenture, including, without limitation, upon the occurrence and
continuance of a default under the Insurance Agreement, a request to take any
one or more of the following actions:
(i) institute Proceedings for the collection of all
amounts then payable on the Notes, or under this Indenture in respect
to Notes and all amounts payable under the Insurance Agreement enforce
any judgment obtained and collect from the Issuer moneys adjudged due;
(ii) sell the Trust Estate or any portion thereof or
rights or interest therein, at one or more public or private Sales
called and conducted in any manner permitted by law;
(iii) file or record all Assignments that have not
previously been recorded;
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(iv) institute Proceedings from time to time for the
complete or partial foreclosure of this Indenture; and
(v) exercise any remedies of a secured party under the
Uniform Commercial Code and take any other appropriate action to
protect and enforce the rights and remedies of the Credit Enhancer
hereunder.]
Section 4.13. Repayment of Moneys Held by Paying Agent. In connection
with the satisfaction and discharge of this Indenture with respect to the Notes,
all moneys then held by any Admini- strator other than the Indenture Trustee
under the provisions of this Indenture with respect to such Notes shall, upon
demand of the Issuer, be paid to the Indenture Trustee to be held and applied
according to Section 3.05 and thereupon such Paying Agent shall be released from
all further liability with respect to such moneys.
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ARTICLE V
Remedies
Section 5.01. Events of Default. "Event of Default," wherever used
herein, shall have the meaning provided in Appendix A[; provided, however, that
no Event of Default will occur under clause (i) or clause (ii) of the definition
of "Event of Default" if the Issuer fails to make payments of principal of and
interest on the Notes so long as the Credit Enhancer makes payments sufficient
therefore under the Credit Enhancement Instrument].
The Issuer shall deliver to the Indenture Trustee [and the Credit
Enhancer], within five days after the occurrence of an Event of Default, written
notice in the form of an Officer's Certificate of any event which with the
giving of notice and the lapse of time would become an Event of Default under
clause (iii) of the definition of "Event of Default", its status and what action
the Issuer is taking or proposes to take with respect thereto.
Section 5.02. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default should occur and be continuing, then and in every such case the
Indenture Trustee or the Holders of Notes representing not less than a majority
of the Security Balances of all Notes may declare the Notes to be immediately
due and payable, by a notice in writing to the Issuer (and to the Indenture
Trustee if given by Noteholders), and upon any such declaration the unpaid
principal amount of such Class of Notes, together with accrued and unpaid
interest thereon through the date of acceleration, shall become immediately due
and payable. [Unless the prior written consent of the Credit Enhancer shall have
been obtained by the Indenture Trustee, the Payment Date upon which such
accelerated payment is due and payable shall not be a Payment Date under the
Credit Enhancement Instrument and the Indenture Trustee shall not be authorized
under Section 3.32 to make a draw therefor.]
At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided, the
Holders of Notes representing a majority of the Security Balances of all Notes,
by written notice to the Issuer and the Indenture Trustee, may rescind and annul
such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Inden- ture Trustee a sum
sufficient to pay:
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(A) all payments of principal of and interest on the
Notes and all other amounts that would then be due hereunder
or upon the Notes if the Event of Default giving rise to such
acceleration had not occurred; and
(B) all sums paid or advanced by the Indenture
Trustee hereunder and the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee and its
agents and counsel; and
(ii) all Events of Default, other than the nonpayment of
the principal of the Notes that has become due solely by such
acceleration, have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee. (a) The Issuer covenants that if (i) default is made in the
payment of any interest on any Note when the same becomes due and payable, and
such default continues for a period of five days, or (ii) default is made in the
payment of the principal of or any installment of the principal of any Note when
the same becomes due and payable, the Issuer will, upon demand of the Indenture
Trustee, pay to it, for the benefit of the Holders of Notes [and of the Credit
Enhancer], the whole amount then due and payable on the Notes for principal and
interest, with interest upon the overdue principal, and in addition thereto such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Indenture Trustee and its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Indenture Trustee, in its own name and as trustee of an express
trust, subject to the provisions of Section 11.17 hereof may institute a
Proceeding for the collection of the sums so due and unpaid, and may prosecute
such Proceeding to judgment or final decree, and may enforce the same against
the Issuer or other obligor upon the Notes and collect in the manner provided by
law out of the property of the Issuer or other obligor the Notes, wherever
situated, the moneys adjudged or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the Indenture
Trustee subject to the provisions of Section 11.17 hereof may, as more
particularly provided in Section 5.04, in its discretion, proceed to protect and
enforce its rights and the rights of the Noteholders [and the Credit Enhancer],
by such
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appropriate Proceedings as the Indenture Trustee shall deem most effective to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy or legal or equitable
right vested in the Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Estate, Proceedings under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole
amount of principal and interest owing and unpaid in respect of the
Notes and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Indenture Trustee
(including any claim for reasonable compensation to the Indenture
Trustee and each predecessor Indenture Trustee, and their respective
agents, attorneys and counsel, and for reimbursement of all expenses
and liabilities incurred, and all advances made, by the Indenture
Trustee and each predecessor Indenture Trustee, except as a result of
negligence or bad faith) and of the Noteholders allowed in such
Proceedings;
(ii) unless prohibited by applicable law and
regulations, to vote on behalf of the Holders of Notes in any election
of a trustee, a standby trustee or Person performing similar functions
in any such Proceedings;
(iii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Noteholders and of the
Indenture Trustee on their behalf; and
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(iv) to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims
of the Indenture Trustee or the Holders of Notes allowed in any
judicial proceedings relative to the Issuer, its creditors and its
property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee, and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture,
or under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Holders of the Notes, and it shall not be necessary to
make any Noteholder a party to any such Proceedings.
Section 5.04. Remedies; Priorities. (a) If an Event of Default shall
have occurred and be continuing, the Indenture Trustee subject to the provisions
of Section 11.17 hereof may do one or more of the following (subject to Section
5.05):
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(i) institute Proceedings in its own name and as
trustee of an express trust for the collection of all amounts then
payable on the Notes or under this Indenture with respect thereto,
whether by declaration or otherwise, and all amounts payable under the
Insurance Agreement, enforce any judgment obtained, and collect from
the Issuer and any other obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the
complete or partial foreclosure of this Indenture with respect to the
Trust Estate;
(iii) exercise any remedies of a secured party under the
UCC and take any other appropriate action to protect and enforce the
rights and remedies of the Indenture Trustee, the Holders of the Notes
[and the Credit Enhancer]; and
(iv) sell the Trust Estate or any portion thereof or
rights or interest therein, at one or more public or private sales
called and conducted in any manner permitted by law;
provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the Trust Estate following an Event of Default, other than a default
in the payment of any principal or interest on the Notes for thirty (30) days or
more, unless (A) the Holders of 100% of the Security Balances of the Securities
[and the Credit Enhancer], which consent will not be unreasonably withheld
consent thereto, (B) the proceeds of such sale or liquidation distributable to
Holders are sufficient to discharge in full all amounts then due and unpaid upon
the Securities for principal and interest [and to reimburse the Credit Enhancer
for any amounts drawn under the Credit Enhancement Instrument and any other
amounts due the Credit Enhancer under the Insurance Agreement] or (C) the
Indenture Trustee determines that the Mortgage Loans will not continue to
provide sufficient funds for the payment of principal of and interest on either
the Notes or the Certificates, as they would have become due if the Notes had
not been declared due and payable, and the Indenture Trustee obtains the consent
of [the Credit Enhancer, which consent will not be unreasonably withheld, and
of] the Holders of not less than 66-2/3% of the Security Balances of the
Securities. In determining such sufficiency or insufficiency with respect to
clause (B) and (C), the Indenture Trustee may, but need not, obtain and rely
upon an opinion of an Independent investment banking or accounting firm of
national reputation as to the feasibility of such proposed action and as to the
sufficiency of the Trust Estate for such purpose. Notwithstanding the foregoing,
so long as an Event of Servicer Termination has not occurred, any Sale of the
Trust Estate shall be made subject to the continued Servicing of the Mortgage
Loans
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by the Master Servicer as provided in the Master Servicing Agreement.
(b) If the Indenture Trustee collects any money or property pursuant to
this Article V, it shall pay out the money or property in the following order:
FIRST: to the Indenture Trustee for amounts due under
Section 6.07;
SECOND: to each Class of Noteholders for amounts due and
unpaid on the related Class of Notes for interest and to each
Noteholder of such Class in each case, ratably, without
preference or priority of any kind, according to the amounts
due and payable on such Class of Notes for interest from
amounts available in the Trust Estate for such Noteholders;
THIRD: to Holders of each Class of Notes for amounts due and
unpaid on the related Class of Notes for principal, from
amounts available in the Trust Estate for such Noteholders,
and to each Noteholder of such Class in each case ratably,
without preference or priority of any kind, according to the
amounts due and payable on such Class of Notes for principal,
until the Security Balances of each Class of Notes is reduced
to zero;
FOURTH: to the Issuer for amounts required to be distributed
to the Certificateholders in respect of interest and principal
pursuant to the Trust Agreement;
FIFTH: [Reserved] [To the payment of all amounts due and owing
to the Credit Enhancer under the Insurance Agreement];
SIXTH: to the Issuer for amounts due under Article VIII of the
Trust Agreement; and
SEVENTH: to the payment of the remainder, if any to the Issuer
or any other person legally entitled thereto.
The Indenture Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section 5.04. At least 15 days before
such record date, the Issuer shall mail to each Noteholder and the Indenture
Trustee a notice that states the record date, the payment date and the amount to
be paid.
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Section 5.05. Optional Preservation of the Trust Estate. If the Notes
have been declared to be due and payable under Section 5.02 following an Event
of Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture Trustee may, but need not, elect to maintain possession
of the Trust Estate. It is the desire of the parties hereto and the Noteholders
that there be at all times sufficient funds for the payment of principal of and
interest on the Securities and other obligations of the Issuer [including
payment to the Credit Enhancer], and the Indenture Trustee shall take such
desire into account when determining whether or not to maintain possession of
the Trust Estate. In determining whether to maintain possession of the Trust
Estate, the Indenture Trustee may, but need not, obtain and rely upon an opinion
of an Independent investment banking or accounting firm of national reputation
as to the feasibility of such proposed action and as to the sufficiency of the
Trust Estate for such purpose.
Section 5.06. Limitation of Suits. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless and subject to the provisions of Section 11.17 hereof:
(i) such Holder has previously given written notice to
the Indenture Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Security
Balances of the Notes have made written request to the Indenture
Trustee to institute such Proceeding in respect of such Event of
Default in its own name as Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture
Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt
of such notice, request and offer of indemnity has failed to institute
such Proceedings; and
(v) no direction inconsistent with such written request
has been given to the Indenture Trustee during such 60-day period by
the Holders of a majority of the Security Balances of the Notes.
It is understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect,
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disturb or prejudice the rights of any other Holders of Notes or to obtain or to
seek to obtain priority or preference over any other Holders or to enforce any
right under this Indenture, except in the manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of the Security Balances of the Notes,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.
Section 5.07. Unconditional Rights of Noteholders To Receive Principal
and Interest. Notwithstanding any other provisions in this Indenture, the Holder
of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest, if any, on such Note on or
after the respective due dates thereof expressed in such Note or in this
Indenture and to institute suit for the enforcement of any such payment, and
such right shall not be impaired without the consent of such Holder.
Section 5.08. Restoration of Rights and Remedies. If the Indenture
Trustee or any Noteholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee or to such Noteholder, then and in every such case the Issuer, the
Indenture Trustee and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Indenture
Trustee and the Noteholders shall continue as though no such Proceeding had been
instituted.
Section 5.09. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Indenture Trustee or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 5.10. Delay or Omission Not a Waiver. No delay or omission of
the Indenture Trustee or any Holder of any Note to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every
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right and remedy given by this Article V or by law to the Indenture Trustee or
to the Noteholders may be exercised from time to time, and as often as may be
deemed expedient, by the Indenture Trustee or by the Noteholders, as the case
may be.
Section 5.11. Control by Noteholders. The Holders of a majority of the
Security Balances of Notes shall have the right to direct the time, method and
place of conducting any Proceeding for any remedy available to the Indenture
Trustee with respect to the Notes or exercising any trust or power conferred on
the Indenture Trustee; provided that:
(i) such direction shall not be in conflict with any
rule of law or with this Indenture;
(ii) subject to the express terms of Section 5.04, any
direction to the Indenture Trustee to sell or liquidate the Trust
Estate shall be by Holders of Notes representing not less than 100% of
the Security Balances of Notes;
(iii) if the conditions set forth in Section 5.05 have
been satisfied and the Indenture Trustee elects to retain the Trust
Estate pursuant to such Section, then any direction to the Indenture
Trustee by Holders of Notes representing less than 100% of the Security
Balances of Notes to sell or liquidate the Trust Estate shall be of no
force and effect; and
(iv) the Indenture Trustee may take any other action
deemed proper by the Indenture Trustee that is not inconsistent with
such direction.
Notwithstanding the rights of Noteholders set forth in this Section, subject to
Section 6.01, the Indenture Trustee need not take any action that it determines
might involve it in liability or might materially adversely affect the rights of
any Noteholders not consenting to such action.
Section 5.12. Waiver of Past Defaults. Prior to the declaration of the
acceleration of the maturity of the Notes as provided in Section 5.02, the
Holders of Notes of not less than a majority of the Security Balances of the
Notes may waive any past Event of Default and its consequences except an Event
of Default (a) with respect to payment of principal of or interest on any of the
Notes or (b) in respect of a covenant or provision hereof which cannot be
modified or amended without the consent of the Holder of each Note [or (c) the
waiver of which would materially and adversely affect the interests of the
Credit Enhancer or modify its obligation under the Credit Enhancement
Instrument]. In the case of any such waiver, the Issuer, the Indenture Trustee
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and the Holders of the Notes shall be restored to their former positions and
rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other Event of Default or impair any right consequent thereto.
Upon any such waiver, any Event of Default arising therefrom shall be
deemed to have been cured and not to have occurred, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Event of
Default or impair any right consequent thereto.
Section 5.13. Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.13 shall not apply to (a) any suit instituted by
the Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the Security
Balances of the Notes or (c) any suit instituted by any Noteholder for the
enforcement of the payment of principal of or interest on any Note on or after
the respective due dates expressed in such Note and in this Indenture.
Section 5.14. Waiver of Stay or Extension Laws. The Issuer covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead or in any manner whatsoever, claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Indenture Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
Section 5.15. Sale of Trust Estate. (a) The power to effect any sale or
other disposition (a "Sale") of any portion of the Trust Estate pursuant to
Section 5.04 is expressly subject to the provisions of Section 5.05 and this
Section 5.15. The power to effect any such Sale shall not be exhausted by any
one or more
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Sales as to any portion of the Trust Estate remaining unsold, but shall continue
unimpaired until the entire Trust Estate shall have been sold or all amounts
payable on the Notes and under this Indenture and under the Insurance Agreement
shall have been paid. The Indenture Trustee may from time to time postpone any
public Sale by public announcement made at the time and place of such Sale. The
Indenture Trustee hereby expressly waives its right to any amount fixed by law
as compensation for any Sale.
(b) The Indenture Trustee shall not in any private Sale sell the Trust
Estate, or any portion thereof, unless
(1) the Holders of all Securities and the Credit Enhancer
consent to or direct the Indenture Trustee to make, such Sale, or
(2) the proceeds of such Sale would be not less than the
entire amount which would be payable to the Noteholders under the Notes,
Certificateholders under the Certificates [and the Credit Enhancer in respect of
amounts drawn under the Credit Enhancement Instrument and any other amounts due
the Credit Enhancer under the Insurance Agreement], in full payment thereof in
accordance with Section 5.02, on the Payment Date next succeeding the date of
such Sale, or
(3) The Indenture Trustee determines, in its sole discretion,
that the conditions for retention of the Trust Estate set forth in Section 5.05
cannot be satisfied (in making any such determination, the Indenture Trustee may
rely upon an opinion of an Independent investment banking firm obtained and
delivered as provided in Section 5.05, [and the Credit Enhancer consents to such
Sale, which consent will not be unreasonably withheld] and the Holders
representing at least 66-2/3% of the Security Balances of the Securities consent
to such Sale.
The purchase by the Indenture Trustee of all or any portion of the Trust Estate
at a private Sale shall not be deemed a Sale or other disposition thereof for
purposes of this Section 5.15(b).
(c) Unless the Holders [and the Credit Enhancer] have otherwise
consented or directed the Indenture Trustee, at any public Sale of all or any
portion of the Trust Estate at which a minimum bid equal to or greater than the
amount described in paragraph (2) of subsection (b) of this Section 5.15 has not
been established by the Indenture Trustee and no Person bids an amount equal to
or greater than such amount, the Indenture Trustee shall bid an amount at least
$1.00 more than the highest other bid.
(d) In connection with a Sale of all or any portion of the Trust Estate
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(1) any Holder or Holders of Notes may bid for and [with the
consent of the Credit Enhancer] purchase the property offered for sale, and upon
compliance with the terms of sale may hold, retain and possess and dispose of
such property, without further accountability, and may, in paying the purchase
money therefor, deliver any Notes or claims for interest thereon in lieu of cash
up to the amount which shall, upon distribution of the net proceeds of such
sale, be payable thereon, and such Notes, in case the amounts so payable thereon
shall be less than the amount due thereon, shall be returned to the Holders
thereof after being appropriately stamped to show such partial payment;
(2) the Indenture Trustee may bid for and acquire the property
offered for Sale in connection with any Sale thereof, and, subject to any
requirements of, and to the extent permitted by, applicable law in connection
therewith, may purchase all or any portion of the Trust Estate in a private
sale, and, in lieu of paying cash therefor, may make settlement for the purchase
price by crediting the gross Sale price against the sum of (A) the amount which
would be distributable to the Holders of the Notes and Holders of Certificates
[and amounts owing to the Credit Enhancer] as a result of such Sale in
accordance with Section 5.04(b) on the Payment Date next succeeding the date of
such Sale and (B) the expenses of the Sale and of any Proceedings in connection
therewith which are reimbursable to it, without being required to produce the
Notes in order to complete any such Sale or in order for the net Sale price to
be credited against such Notes, and any property so acquired by the Indenture
Trustee shall be held and dealt with by it in accordance with the provisions of
this Indenture;
(3) the Indenture Trustee shall execute and deliver an
appropriate instrument of conveyance transferring its interest in any portion of
the Trust Estate in connection with a Sale thereof;
(4) the Indenture Trustee is hereby irrevocably appointed the
agent and attorney-in-fact of the Issuer to transfer and convey its interest in
any portion of the Trust Estate in connection with a Sale thereof, and to take
all action necessary to effect such Sale; and
(5) no purchaser or transferee at such a Sale shall be bound
to ascertain the Indenture Trustee's authority, inquire into the satisfaction of
any conditions precedent or see to the application of any moneys.
Section 5.16. Action on Notes. The Indenture Trustee's right to seek
and recover judgment on the Notes or under this Indenture shall not be affected
by the seeking, obtaining or
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application of any other relief under or with respect to this Indenture. Neither
the lien of this Indenture nor any rights or remedies of the Indenture Trustee
or the Noteholders shall be impaired by the recovery of any judgment by the
Indenture Trustee against the Issuer or by the levy of any execution under such
judgment upon any portion of the Trust Estate or upon any of the assets of the
Issuer. Any money or property collected by the Indenture Trustee shall be
applied in accordance with Section 5.04(b).
Section 5.17. Performance and Enforcement of Certain Obligations. (a)
Promptly following a request from the Indenture Trustee to do so and at the
Administrator's expense, the Issuer shall take all such lawful action as the
Indenture Trustee may request to compel or secure the performance and observance
by the Seller and the Master Servicer, as applicable, of each of their
obligations to the Issuer under or in connection with the Mortgage Loan Purchase
Agreement and the Master Servicing Agreement, and to exercise any and all
rights, remedies, powers and privileges lawfully available to the Issuer under
or in connection with the Mortgage Loan Purchase Agreement and the Master
Servicing Agreement to the extent and in the manner directed by the Indenture
Trustee, including the transmission of notices of default on the part of the
Seller or the Master Servicer thereunder and the institution of legal or
administrative actions or proceedings to compel or secure performance by the
Seller or the Master Servicer of each of their obligations under the Mortgage
Loan Purchase Agreement and the Master Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the
Indenture Trustee [subject to the rights of the Credit Enhancer under the Master
Servicing Agreement] may, and at the direction (which direction shall be in
writing or by telephone (confirmed in writing promptly thereafter)) of the
Holders of 66- 2/3% of the Security Balances of the Notes shall, exercise all
rights, remedies, powers, privileges and claims of the Issuer against the Seller
or the Master Servicer under or in connection with the Mortgage Loan Purchase
Agreement and the Master Servicing Agreement, including the right or power to
take any action to compel or secure performance or observance by the Seller or
the Master Servicer, as the case may be, of each of their obligations to the
Issuer thereunder and to give any consent, request, notice, direction, approval,
extension or waiver under the Mortgage Loan Purchase Agreement and the Master
Servicing Agreement, as the case may be, and any right of the Issuer to take
such action shall not be suspended.
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ARTICLE VI
The Indenture Trustee
Section 6.01. Duties of Indenture Trustee. (a) If an Event of Default
has occurred and is continuing, the Indenture Trustee shall exercise the rights
and powers vested in it by this Indenture and use the same degree of care and
skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such
duties and only such duties as are specifically set forth in this
Indenture and no implied covenants or obligations shall be read into
this Indenture against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the
Indenture Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Indenture Trustee and
conforming to the requirements of this Indenture; however, the
Indenture Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section 6.01;
(ii) the Indenture Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer unless it
is proved that the Indenture Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Indenture Trustee shall not be liable with
respect to any action it takes or omits to take in good faith in
accordance with a direction received by it (A) pursuant to Section 5.11
[or (B) from the Credit Enhancer, which it is entitled to give under
any of the Basic Documents].
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this Section
6.01.
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(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(f) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture.
(g) No provision of this Indenture shall require the Indenture Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of the
TIA.
Section 6.02. Rights of Indenture Trustee. (a) The Inden- ture Trustee
may rely on any document believed by it to be genuine and to have been signed or
presented by the proper person. The Indenture Trustee need not investigate any
fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on an Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Indenture Trustee's conduct does
not constitute willful misconduct, [______] negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete
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authorization and protection from liability in respect to any action taken,
omitted or suffered by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.
Section 6.03. Individual Rights of Indenture Trustee. The Indenture
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Issuer or its Affiliates with the same
rights it would have if it were not Indenture Trustee. Any Administrator, Note
Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Indenture Trustee must comply with Sections 6.11 and 6.12.
Section 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Notes, and it shall not be responsible for
any statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Indenture
Trustee's certificate of authentication.
Section 6.05. Notice of Event of Default. If an Event of Default occurs
and is continuing and if it is known to a Responsible Officer of the Indenture
Trustee, [the Indenture Trustee shall give notice thereof to the Credit
Enhancer.] The Indenture Trustee shall mail to each Noteholder notice of the
Event of Default within 90 days after it occurs. Except in the case of an Event
of Default in payment of principal of or interest on any Note, the Indenture
Trustee may withhold the notice if and so long as a committee of its Responsible
Officers in good faith determines that withholding the notice is in the
interests of Noteholders.
Section 6.06. Reports by Indenture Trustee to Holders. The Indenture
Trustee shall deliver to each Noteholder such information as may be required to
enable such holder to prepare its federal and state income tax returns. In
addition, upon the Issuer's written request, the Indenture Trustee shall
promptly furnish information reasonably requested by the Issuer that is
reasonably available to the Indenture Trustee to enable the Issuer to perform
its federal and state income tax reporting obligations.
Section 6.07. Compensation and Indemnity. The Issuer shall or shall
cause the Administrator to pay to the Indenture Trustee on each Payment Date
reasonable compensation for its services. The Indenture Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Issuer shall or shall cause the Administrator to reimburse the
Indenture
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Trustee for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services.
Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Indenture Trustee's agents, counsel,
accountants and experts. The Issuer shall or shall cause the Administrator to
indemnify the Indenture Trustee against any and all loss, liability or expense
(including attorneys' fees) incurred by it in connection with the administration
of this trust and the performance of its duties hereunder. The Indenture Trustee
shall notify the Issuer and the Administrator promptly of any claim for which it
may seek indemnity. Failure by the Indenture Trustee to so notify the Issuer and
the Administrator shall not relieve the Issuer or the Administrator of its
obligations hereunder. The Issuer shall or shall cause the Administrator to
defend any such claim, and the Indenture Trustee may have separate counsel and
the Issuer shall or shall cause the Administrator to pay the fees and expenses
of such counsel. Neither the Issuer nor the Administrator need reimburse any
expense or indemnify against any loss, liability or expense incurred by the
Indenture Trustee through the Indenture Trustee's own willful misconduct,
negligence or bad faith.
The Issuer's payment obligations to the Indenture Trustee pursuant to
this Section 6.07 shall survive the discharge of this Indenture. When the
Indenture Trustee incurs expenses after the occurrence of an Event of Default
specified in Section 5.01(iv) or (v) with respect to the Issuer, the expenses
are intended to constitute expenses of administration under Title 11 of the
United States Code or any other applicable federal or state bankruptcy,
insolvency or similar law.
Section 6.08. Replacement of Indenture Trustee. No resignation or
removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this Section 6.08. The Indenture Trustee
may resign at any time by so notifying the Issuer [and the Credit Enhancer]. The
Holders of a majority of Security Balances of the Notes may remove the Indenture
Trustee by so notifying the Indenture Trustee [and the Credit Enhancer] and may
appoint a successor Indenture Trustee. The Issuer shall remove the Indenture
Trustee if:
(i) the Indenture Trustee fails to comply with Section
6.11;
(ii) the Indenture Trustee is adjudged a bankrupt or
insolvent;
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(iii) a receiver or other public officer takes charge of
the Indenture Trustee or its property; or
(iv) the Indenture Trustee otherwise becomes incapable
of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists
in the office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the Issuer
shall promptly appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee under this Indenture. The successor Indenture Trustee
shall mail a notice of its succession to Noteholders. The retiring Indenture
Trustee shall promptly transfer all property held by it as Indenture Trustee to
the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Holders of a majority of Security Balances
of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's and the Administrator's obligations under Section
6.07 shall continue for the benefit of the retiring Indenture Trustee.
Section 6.09. Successor Indenture Trustee by Merger. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee; provided, that
such corporation or banking association shall be otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall provide the Rating
Agencies prior written notice of any such transaction.
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In case at the time such successor or successors by merger, conversion
or consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
Section 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
Trustee. (a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Trust Estate may at the time be located, the Indenture
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Trust, and to vest in
such Person or Persons, in such capacity and for the benefit of the Noteholders,
such title to the Trust Estate, or any part hereof, and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and trusts
as the Indenture Trustee may consider necessary or desirable. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 6.11 and no notice to Noteholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred
or imposed upon the Indenture Trustee shall be conferred or imposed
upon and exercised or performed by the Indenture Trustee and such
separate trustee or co-trustee jointly (it being understood that such
separate trustee or co-trustee is not authorized to act separately
without the Indenture Trustee joining in such act), except to the
extent that under any law of any jurisdiction in which any particular
act or acts are to be performed the Indenture Trustee shall be
incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including the holding of
title to the Trust Estate
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or any portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at
the direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by
reason of any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture 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 VI. 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
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 6.11. Eligibility; Disqualification. The Indenture Trustee
shall at all times satisfy the requirements of TIA ss. 310(a). The Indenture
Trustee shall have a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition and it or its
parent shall have a long-term debt rating of [____] or better by [______]. The
Indenture Trustee shall comply with TIA ss. 310(b), including the optional
provision permitted by the second sentence of TIA ss. 310(b)(9); provided,
however, that there shall be excluded from the operation of TIA ss. 310(b)(1)
any indenture or indentures under which other securities of the Issuer are
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outstanding if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met.
Section 6.12. Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). An Indenture Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated.
Section 6.13. Representation and Warranty. The Indenture Trustee
represents and warrants to the Issuer, for the benefit of the Noteholders, that
this Indenture has been executed and delivered by one of its Responsible
Officers who is duly authorized to execute and deliver such document in such
capacity on its behalf.
Section 6.14. Directions to Indenture Trustee. The Indenture Trustee is
hereby directed:
(a) to accept assignment of the Mortgage Loans and hold the assets of
the Trust in trust for the Noteholders;
(b) to issue, execute and deliver the Notes substantially in the form
prescribed by Exhibit A in accordance with the terms of this Indenture; and
(c) to take all other actions as shall be required to be taken by the
terms of this Indenture.
Section 6.15. No Consent to Certain Acts of Depositor. The Indenture
Trustee shall not consent to any action proposed to be taken by the Depositor
pursuant to Article [_______________] of the Depositor's Certificate of
Incorporation.
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ARTICLE VII
Noteholders' Lists and Reports
Section 7.01. Issuer To Furnish Indenture Trustee Names and Addresses
of Noteholders. The Issuer will furnish or cause to be furnished to the
Indenture Trustee (a) not more than five days after each Record Date, a list, in
such form as the Indenture Trustee may reasonably require, of the names and
addresses of the Holders of Notes as of such Record Date, (b) at such other
times as the Indenture Trustee [and the Credit Enhancer] may request in writing,
within 30 days after receipt by the Issuer of any such request, a list of
similar form and content as of a date not more than 10 days prior to the time
such list is furnished; provided, however, that so long as the Indenture Trustee
is the Note Registrar, no such list shall be required to be furnished.
Section 7.02. Preservation of Information; Communications to
Noteholders. (a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Indenture Trustee as provided
in Section 7.01 and the names and addresses of Holders of Notes received by the
Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may
destroy any list furnished to it as provided in such Section 7.01 upon receipt
of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA ss. 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA ss. 312(c).
Section 7.03. Reports by Issuer. (a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days
after the Issuer is required to file the same with the Commission,
copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as
the Commission may from time to time by rules and regulations
prescribe) that the Issuer may be required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee, and the Commission
in accordance with rules and regulations prescribed from time to time
by the Commission such additional information, documents and reports
with respect to compliance by
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the Issuer with the conditions and covenants of this Indenture as may
be required from time to time by such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture
Trustee shall transmit by mail to all Noteholders described in TIA ss.
313(c)) such summaries of any information, documents and reports
required to be filed by the Issuer pursuant to clauses (i) and (ii) of
this Section 7.03(a) and by rules and regulations prescribed from time
to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
Section 7.04. Reports by Indenture Trustee. If required by TIA ss.
313(a), within 60 days after each January 1 beginning with ___________, 199_,
the Indenture Trustee shall mail to each Noteholder as required by TIA ss.
313(c) [and to the Credit Enhancer] a brief report dated as of such date that
complies with TIA ss. 313(a). The Indenture Trustee also shall comply with TIA
ss. 313(b).
A copy of each report at the time of its mailing to Noteholders shall
be filed by the Indenture Trustee with the Commission and each stock exchange,
if any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee if and when the Notes are listed on any stock exchange.
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ARTICLE VIII
Accounts, Disbursements and Releases
Section 8.01. Collection of Money. Except as otherwise expressly
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable to
or receivable by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it as provided in this Indenture.
Except as otherwise expressly provided in this Indenture, if any default occurs
in the making of any payment or performance under any agreement or instrument
that is part of the Trust Estate, the Indenture Trustee may take such action as
may be appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate Proceedings. Any such action shall be
without prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V.
Section 8.02. Trust Accounts. (a) On or prior to the Closing Date, the
Issuer shall cause the Indenture Trustee to establish and maintain, in the name
of the Indenture Trustee, for the benefit of the Noteholders and the
Certificateholders [and the Credit Enhancer], the Payment Account as provided in
Section 3.01 of this Indenture.
(b) All moneys deposited from time to time in the Payment Account
pursuant to the Master Servicing Agreement and all deposits therein pursuant to
this Indenture are for the benefit of the Noteholders, the Certificateholders
and the holders of the Residual Ownership Interest and all investments made with
such moneys including all income or other gain from such investments are for the
benefit of the Master Servicer as provided by the Master Servicing Agreement.
On each Payment Date during the Funding Period the Indenture Trustee
shall withdraw Net Principal Collections from the Payment Account and deposit
Net Principal Collections to the Funding Account.
On each Payment Date, the Indenture Trustee shall distribute all
amounts on deposit in the Payment Account (after giving effect to the withdrawal
referred to in the preceding paragraph) to Noteholders in respect of the Notes
and in its capacity as Certificate Paying Agent to Certificateholders in the
order of priority set forth in Section 3.05 (except as otherwise provided in
Section 5.04(b).
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The Master Servicer may direct the Indenture Trustee to invest any
funds in the Payment Account in Eligible Investments maturing no later than the
Business Day preceding each Payment Date and shall not be sold or disposed of
prior to the maturity. Unless otherwise instructed by the Master Servicer, the
Indenture Trustee shall invest all funds in the Payment Account in its
[__________] Short Term Investment Fund so long as it is an Eligible Investment.
[(c) On or before the Closing Date the Issuer shall open, at the
Corporate Trust Office, an account which shall be the "Funding Account". The
Master Servicer may direct the Indenture Trustee to invest any funds in the
Funding Account in Eligible Investments maturing no later than the Business Day
preceding each Payment Date and shall not be sold or disposed of prior to the
maturity. [Unless otherwise instructed by the Master Servicer, the Indenture
Trustee shall invest all funds in the Payment Account in its
_________________________ Fund so long as it is an Eligible Investment.] During
the Funding Period, any amounts received by the Indenture Trustee in respect of
Net Principal Collections for deposit in the Funding Account, together with any
Eligible Investments in which such moneys are or will be invested or reinvested
during the term of the Notes, shall be held by the Indenture Trustee in the
Funding Account as part of the Trust Estate, subject to disbursement and
withdrawal as herein provided.
(i) Amounts on deposit in the Funding Account in respect
of Net Principal Collections may be withdrawn on each Deposit Date and
(1) paid to the Issuer in payment for Additional Loans by the deposit
of such amount to the Collection Account and (2) at the end of the
Funding Period any amounts remaining in the Funding Account after the
withdrawal called for by clause (1) shall be deposited in the Payment
Account to be included in the payment of principal on the Payment Date
that is the last day of the Funding Period.
(ii) Amounts on deposit in the Funding Account in respect
of investment earnings shall be withdrawn on each Payment Date and
deposited in the Payment Account and included in the amounts paid to
Noteholders and Certificateholders.
(d) (i) Any investment in the institution with which the Funding
Account is maintained may mature on such Payment Date and (ii) any other
investment may mature on such Payment Date if the Indenture Trustee shall
advance funds on such Payment Date to the Funding Account in the amount payable
on such investment on such Payment Date, pending receipt thereof to the extent
necessary to
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make distributions on the Notes and the Certificates) and shall not be sold or
disposed of prior to maturity.]
Section 8.03. Opinion of Counsel. The Indenture Trustee shall receive
at least seven days notice when requested by the Issuer to take any action
pursuant to Section 8.05(a), accompanied by copies of any instruments to be
executed, and the Indenture Trustee shall also require, as a condition to such
action, an Opinion of Counsel, in form and substance satisfactory to the
Indenture Trustee, stating the legal effect of any such action, outlining the
steps required to complete the same, and concluding that all conditions
precedent to the taking of such action have been complied with and such action
will not materially and adversely impair the security for the Notes or the
rights of the Noteholders in contravention of the provisions of this Indenture;
provided, however, that such Opinion of Counsel shall not be required to express
an opinion as to the fair value of the Trust Estate. Counsel rendering any such
opinion may rely, without independent investigation, on the accuracy and
validity of any certificate or other instrument delivered to the Indenture
Trustee in connection with any such action.
Section 8.04. Termination Upon Distribution to Noteholders. This
Indenture and the respective obligations and responsibilities of the Issuer and
the Indenture Trustee created hereby shall terminate upon the distribution to
Noteholders, Certificateholders, holders of the Residual Ownership Interest and
the Indenture Trustee of all amounts required to be distributed pursuant to
Article III; provided, however, that in no event shall the trust created hereby
continue beyond the expiration of 21 years from the death of the 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.
Section 8.05. Release of Trust Estate. (a) Subject to the payment of
its fees and expenses, the Indenture Trustee may, and when required by the
provisions of this Indenture shall, execute instruments to release property from
the lien of this Indenture, or convey the Indenture Trustee's interest in the
same, in a manner and under circumstances that are not inconsistent with the
provisions of this Indenture. No party relying upon an instrument executed by
the Indenture Trustee as provided in Article IV hereunder shall be bound to
ascertain the Indenture Trustee's authority, inquire into the satisfaction of
any conditions precedent, or see to the application of any moneys.
(b) The Indenture Trustee shall, at such time as (i) there are no Notes
Outstanding, (ii) all sums due the Indenture Trustee pursuant to this Indenture
have been paid, [and (iii) all sums due the Credit Enhancer have been paid,]
release any remaining
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portion of the Trust Estate that secured the Notes from the lien of this
Indenture. The Indenture Trustee shall release property from the lien of this
Indenture pursuant to this Section 8.05 only upon receipt of an request from the
Issuer accompanied by an Officers' Certificate, an Opinion of Counsel, and (if
required by the TIA) Independent Certificates in accordance with TIA ss. 314(c)
and 314(d)(1) meeting the applicable requirements as described herein[, and a
letter from the President or any Vice President or any Secretary of the Credit
Enhancer, if any, stating that the Credit Enhancer has no objection to such
request from the Issuer].
Section 8.06. Surrender of Notes Upon Final Payment. By acceptance of
any Note, the Holder thereof agrees to surrender such Note to the Indenture
Trustee promptly, prior to such Noteholder's receipt of the final payment
thereon.
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ARTICLE IX
Supplemental Indentures
Section 9.01. Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of the Holders of any Notes but with [the consent of the
Credit Enhancer and] prior notice to the Rating Agencies [and the Credit
Enhancer], the Issuer and the Indenture Trustee, when authorized by an Issuer
Request, at any time and from time to time, may enter into one or more
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as in force at the date of the execution thereof), in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any
property at any time subject to the lien of this Indenture, or better
to assure, convey and confirm unto the Indenture Trustee any property
subject or required to be subjected to the lien of this Indenture, or
to subject to the lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the
benefit of the Holders of the Notes, or to surrender any right or power
herein conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture that may be
inconsistent with any other provision herein or in any supplemental
indenture or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental
indenture; provided, that such action shall not adversely affect the
interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI; or
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(vii) to modify, eliminate or add to the provisions of
this Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA;
provided, however, that no such indenture supplements shall be entered into
unless the Indenture Trustee shall have received an Opinion of Counsel that
entering into such indenture supplement will not have any material adverse tax
consequences to the Noteholders.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Request, may, also without the consent of any of the Holders of the Notes but
with [the consent of the Credit Enhancer and] prior notice to the Rating
Agencies [and the Credit Enhancer], enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel, (i) adversely affect in any material respect the interests
of any Noteholder or (ii) cause the Issuer to be subject to an entity level tax
or be classified as a taxable mortgage pool within the meaning of Section
7701(i) of the Code.
Section 9.02. Supplemental Indentures With Consent of Noteholders. The
Issuer and the Indenture Trustee, when authorized by an Issuer Request, also
may, with prior notice to the Rating Agencies and, [with the written consent of
the Credit Enhancer and] with the consent of the Holders of not less than a
majority of the Security Balances of each Class of Notes, by Act of such Holders
delivered to the Issuer and the Indenture Trustee, enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to, or
changing in any manner or eliminating any of the provisions of, this Indenture
or of modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that no such supplemental indenture shall, without
the consent of the Holder of each Note affected thereby:
(i) change the date of payment of any installment of
principal of or interest on any Note, or reduce the
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principal amount thereof or the interest rate thereon, change the
provisions of this Indenture relating to the application of collections
on, or the proceeds of the sale of, the Trust Estate to payment of
principal of or interest on the Notes, or change any place of payment
where, or the coin or currency in which, any Note or the interest
thereon is payable, or impair the right to institute suit for the
enforcement of the provisions of this Indenture requiring the
application of funds available therefor, as provided in Article V, to
the payment of any such amount due on the Notes on or after the
respective due dates thereof;
(ii) reduce the percentage of the Security Balances of
the Notes, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture;
(iii) modify or alter the provisions of the proviso to
the definition of the term "Outstanding" or modify or alter the
exception in the definition of the term "Holder";
(iv) reduce the percentage of the Security Balances of
the Notes required to direct the Indenture Trustee to direct the Issuer
to sell or liquidate the Trust Estate pursuant to Section 5.04;
(v) modify any provision of this Section 9.02 except to
increase any percentage specified herein or to provide that certain
additional provisions of this Indenture or the Basic Documents cannot
be modified or waived without the consent of the Holder of each Note
affected thereby;
(vi) modify any of the provisions of this Indenture in
such manner as to affect the calculation of the amount of any payment
of interest or principal due on any Note on any Payment Date (including
the calculation of any of the individual components of such
calculation); or
(vii) permit the creation of any lien ranking prior to or
on a parity with the lien of this Indenture with respect to any part of
the Trust Estate or, except as otherwise permitted or contemplated
herein, terminate the lien of this Indenture on any property at any
time subject hereto or deprive the Holder of any Note of the security
provided by the lien of this Indenture; and provided, further, that
such action shall not, as evidenced by an Opinion of Counsel, cause the
Issuer to be subject to an entity level tax or be
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classified as a taxable mortgage pool within the meaning of Section
7701(i) of the Code.
The Indenture Trustee may in its discretion determine whether or not
any Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The Indenture
Trustee shall not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under this Section
9.02 to approve the particular form of any proposed supplemental indenture, but
it shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of
any supplemental indenture pursuant to this Section 9.02, the Indenture Trustee
shall mail to the Holders of the Notes to which such amendment or supplemental
indenture relates a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
Section 9.03. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.01 and 6.02, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
Section 9.04. Effect of Supplemental Indenture. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and shall be deemed to be modified and amended in accordance therewith
with respect to the Notes affected thereby, and the respective rights,
limitations of rights, obligations, duties, liabilities and immunities under
this Indenture of the Indenture Trustee, the Issuer and the Holders of the Notes
shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of
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the terms and conditions of this Indenture for any and all purposes.
Section 9.05. Conformity with Trust Indenture Act. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
Section 9.06. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
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ARTICLE X
[Reserved]
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ARTICLE XI
Miscellaneous
Section 11.01. Compliance Certificates and Opinions, etc. (a) Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Indenture
Trustee [and to the Credit Enhancer] (i) an Officer's Certificate stating that
all conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, (ii) an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section 11.01, except that, in the case of any such application or request
as to which the furnishing of such documents is specifically required by any
provision of this Indenture, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate or
opinion has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
(3) a statement that, in the opinion of each such signatory,
such signatory has made such examination or investigation as is
necessary to enable such signatory to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each
such signatory, such condition or covenant has been complied with; and
(5) if the signer of such Certificate or Opinion is
required to be Independent, the Statement required by the definition of
the term "Independent".
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(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture, the
Issuer shall, in addition to any obligation imposed in Section 11.01(a) or
elsewhere in this Indenture, furnish to the Indenture Trustee an Officer's
Certificate certifying or stating the opinion of each person signing such
certificate as to the fair value (within 90 days of such deposit) to the Issuer
of the Collateral or other property or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the
Indenture Trustee an Officer's Certificate certifying or stating the opinion of
any signer thereof as to the matters described in clause (i) above, the Issuer
shall also deliver to the Indenture Trustee an Independent Certificate as to the
same matters, if the fair value to the Issuer of the securities to be so
deposited and of all other such securities made the basis of any such withdrawal
or release since the commencement of the then-current fiscal year of the Issuer,
as set forth in the certificates delivered pursuant to clause (i) above and this
clause (ii), is 10% or more of the Security Balances of the Notes, but such a
certificate need not be furnished with respect to any securities so deposited,
if the fair value thereof to the Issuer as set forth in the related Officer's
Certificate is less than $25,000 or less than one percent of the Security
Balances of the Notes.
(iii) Whenever any property or securities are to be
released from the lien of this Indenture, the Issuer shall also furnish to the
Indenture Trustee an Officer's Certificate certifying or stating the opinion of
each person signing such certificate as to the fair value (within 90 days of
such release) of the property or securities proposed to be released and stating
that in the opinion of such person the proposed release will not impair the
security under this Indenture in contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the
Indenture Trustee an Officer's Certificate certifying or stating the opinion of
any signer thereof as to the matters described in clause (iii) above, the Issuer
shall also furnish to the Indenture Trustee an Independent Certificate as to the
same matters if the fair value of the property or securities and of all other
property, other than property as contemplated by clause (v) below or securities
released from the lien of this Indenture since the commencement of the
then-current calendar year, as set forth in the certificates required by clause
(iii) above and this clause (iv), equals 10% or more of the Security Balances of
the Notes, but such certificate need not be furnished in the case of
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any release of property or securities if the fair value thereof as set forth in
the related Officer's Certificate is less than $25,000 or less than one percent
of the then Security Balances of the Notes.
(v) Notwithstanding any provision of this Indenture, the
Issuer may, without compliance with the requirements of the other provisions of
this Section 11.01, (A) collect, sell or otherwise dispose of Mortgage Loans and
Mortgaged Properties as and to the extent permitted or required by the Basic
Documents or (B) make cash payments out of the Payment Account as and to the
extent permitted or required by the Basic Documents, so long as the Issuer shall
deliver to the Indenture Trustee every six months, commencing __________, 199_,
an Officer's Certificate of the Issuer stating that all the dispositions of
Collateral described in clauses (A) or (B) above that occurred during the
preceding six calendar months were in the ordinary course of the Issuer's
business and that the proceeds thereof were applied in accordance with the Basic
Documents.
Section 11.02. Form of Documents Delivered to Indenture Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Seller, the Issuer or the Administrator, stating that the information with
respect to such factual matters is in the possession of the Seller, the Issuer
or the Administrator, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements,
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opinions or other instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.
Section 11.03. Acts of Noteholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders in person or by agents duly appointed in writing; and except as
herein otherwise expressly provided such action shall become effective when such
instrument or instruments are delivered to the Indenture Trustee, and, where it
is hereby expressly required, to the Issuer. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes referred
to as the "Act" of the Noteholders signing such instrument or instruments. Proof
of execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and (subject to Section
6.01) conclusive in favor of the Indenture Trustee and the Issuer, if made in
the manner provided in this Section 11.03.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Indenture
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Trustee or the Issuer in reliance thereon, whether or not notation of such
action is made upon such Note.
Section 11.04. Notices, etc., to Indenture Trustee, Issuer, [Credit
Enhancer] and Rating Agencies. Any request, demand, authorization, direction,
notice, consent, waiver or Act of Noteholders or other documents provided or
permitted by this Indenture shall be in writing and if such request, demand,
authorization, direction, notice, consent, waiver or act of Noteholders is to be
made upon, given or furnished to or filed with:
(i) the Indenture Trustee by any Noteholder or by the
Issuer shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Indenture Trustee at the
Corporate Trust Office, or
(ii) the Issuer by the Indenture Trustee or by any
Noteholder shall be sufficient for every purpose hereunder if in
writing and mailed first-class, postage prepaid to the Issuer addressed
to: [Countrywide] Home Equity Loan Trust 199_-__ in care of
[_____________], [______________] Attention of [_________] with a copy
to the Administrator at [______________], Attention: [_____________],
or at any other address previously furnished in writing to the
Indenture Trustee by the Issuer or the Administrator. The Issuer shall
promptly transmit any notice received by it from the Noteholders to the
Indenture Trustee, or
[(iii) the Credit Enhancer by the Issuer, the Indenture
Trustee or by any Noteholders shall be sufficient for every purpose
hereunder to in writing and mailed, first-class postage pre-paid, or
personally delivered or telecopied to: [_______________], Attention:
[______________], Telephone: [_____________],
Telecopier: [___________].]
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally delivered
or mailed by certified mail, return receipt requested, to [(i) in the case of
DCR, at the following address: [________________];] [and] [(ii) in the case of
Fitch Investors Service, L.P., at the following address: [______________];]
[and] [(iii) in the case of Moody's, at the following address: Moody's Investors
Service, ABS Monitoring Department, 99 Church Street, New York, New York 10007];
[and] [(iv) in the case of Standard & Poor's, at the following address: Standard
& Poor's Corporation, 26 Broadway (15th Floor), New York, New York 10004,
Attention of Asset Backed Surveillance Department;] or as to each of the
foregoing, at such other address as shall be designated by written notice to the
other parties.
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Section 11.05. Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed to
be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute an Event of
Default.
Section 11.06. Alternate Payment and Notice Provisions. Notwithstanding
any provision of this Indenture or any of the Notes to the contrary, the Issuer
may enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Indenture Trustee or any Administrator to such Holder,
that is different from the methods provided for in this Indenture for such
payments or notices. The Issuer will furnish to the Indenture Trustee a copy of
each such agreement and the Indenture Trustee will cause payments to be made and
notices to be given in accordance with such agreements.
Section 11.07. Conflict with Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this
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Indenture by any of the provisions of the Trust Indenture Act, such required
provision shall control.
The provisions of TIA ss.ss. 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
Section 11.08. Effect of Headings. The Article and Section
headings herein are for convenience only and shall not affect the
construction hereof.
Section 11.09. Successors and Assigns. All covenants and agreements in
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee in
this Indenture shall bind its successors, co-trustees and agents.
Section 11.10. Separability. In case any provision in this Indenture or
in the Notes shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Section 11.11. Benefits of Indenture. [The Credit Enhancer and its
successors and assigns shall be a third-party beneficiary to the provisions of
this Indenture.] Nothing in this Indenture or in the Notes, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, and the Noteholders, and any other party secured hereunder, and any
other Person with an ownership interest in any part of the Trust Estate, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
Section 11.12. Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
Section 11.13. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.14. Counterparts. This Indenture may be executed in any
number of counterparts, each of which so executed
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shall be deemed to be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 11.15. Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
Section 11.16. Issuer Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Indenture Trustee on the Notes or under this Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or
of any successor or assign of the Indenture Trustee or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity. For all purposes of
this Indenture, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Article VI, VII and VIII of the Trust Agreement.
Section 11.17. No Petition. The Indenture Trustee, by entering into
this Indenture, and each Noteholder, by accepting a Note, hereby covenant and
agree that they will not at any time institute against the Depositor or the
Issuer, or join in any institution against the Depositor or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, this
Indenture or any of the Basic Documents.
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Section 11.18. Inspection. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent certified public accountants,
and to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees, and Independent certified public accountants, all at such
reasonable times and as often as may be reasonably requested. The Indenture
Trustee shall and shall cause its representatives to hold in confidence all such
information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to
the extent that the Indenture Trustee may reasonably determine that such
disclosure is consistent with its obligations hereunder.
Section 11.19. Authority of the Administrator. Each of the parties to
this Indenture acknowledges that the Issuer and the Owner Trustee have each
appointed the Administrator to act as its agent to perform the duties and
obligations of the Issuer hereunder. Unless otherwise instructed by the Issuer
or the Owner Trustee, copies of all notices, requests, demands and other
documents to be delivered to the Issuer or the Owner Trustee pursuant to the
terms hereof shall be delivered to the Administrator. Unless otherwise
instructed by the Issuer or the Owner Trustee, all notices, requests, demands
and other documents to be executed or delivered, and any action to be taken, by
the Issuer or the Owner Trustee pursuant to the terms hereof may be executed,
delivered and/or taken by the Administrator pursuant to the Administration
Agreement.
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IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
their names to be signed hereto by their respective officers thereunto duly
authorized, all as of the day and year first above written.
[COUNTRYWIDE] HOME EQUITY LOAN
TRUST 199_-__ as Issuer
By: [______________________],
not in its individual capacity
but solely as Owner Trustee
By:___________________________________
Name:
Title:
[_________________________________],
as Indenture Trustee, as Certificate
Paying Agent and as Certificate
Registrar
By:____________________________________
Name:
Title:
[___________________]
hereby accepts the appointment as Certificate Paying Agent pursuant to Section
3.03 hereof and as Certificate Registrar pursuant to Section 4.02 hereof.
______________________________
By:
Title:
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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of __________, before me personally appeared
______________, to me known, who being by me duly sworn, did depose and say,
that he resides at _________________, __________________ _____, that he is the
________________________ of the Owner Trustee, one of the corporations described
in and which executed the above instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said corporation;
and that he signed his name thereto by like order.
___________________________
Notary Public
[NOTARIAL SEAL]
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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of __________, before me personally appeared ________
__________________, to me known, who being by me duly sworn, did depose and say,
that he resides at ________________________________________, that he is the
______________ of _________________, as Indenture Trustee, one of the
corporations described in and which executed the above instrument; that he knows
the seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by order of the Board of Directors of
said corporation; and that he signed his name thereto by like order.
___________________________
Notary Public
[NOTARIAL SEAL]
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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of __________, before me personally appeared _________
________________, to me known, who being by me duly sworn, did depose and say,
that he resides at ________________________________________, that he is an
________________ of _______________, as Indenture Trustee, one of the
corporations described in and which executed the above instrument; that he knows
the seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by order of the Board of Directors of
said corporation; and that he signed his name thereto by like order.
___________________________
Notary Public
[NOTARIAL SEAL]
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APPENDIX A
DEFINITIONS
Accelerated Principal Distribution Amount: With respect to any Payment
Date, the lesser of (x) the amount remaining in the Payment Account after the
application of funds on deposit therein in accordance with clauses (i) through
(vi) of Section 3.05 of the Indenture and (y) the amount required to reach the
Required Overcollateralization Amount.
Accelerated Principal Payment Amount: As defined in Section
3.05 of the Indenture.
Additional Balance: With respect to any Mortgage Loan, any future Draw
made by the related Mortgagor pursuant to the related Loan Agreement after the
Cut-off Date in the case of an Initial Loan, or after the Deposit Date in the
case of an Additional Loan; provided, however, that if an Amortization Event
occurs, then any Draw after such Amortization Event shall not be acquired by the
Issuer and shall not be an Additional Balance.
Additional Loans: All home equity line of credit loans sold by the
Seller to the Issuer after the Closing Date pursuant to Section 2 of the Loan
Purchase Agreement.
Administration Agreement: The Administration Agreement
dated as of ___________, 199_ among the Issuer, the Indenture
Trustee and [______________], as Administrator, as it may be
amended from time to time.
Administrator: [______________], as administrator under the
Administration Agreement or any successor Administrator appointed
pursuant to the terms of the Administration Agreement.
Affiliate: With respect to any Person, any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" means the power to direct the management and policies of a
Person, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise and "controlling" and "controlled" shall have meanings
correlative to the foregoing.
Aggregate Security Balance: With respect to any Payment
Date, the aggregate of the Principal Balances of all Securities
as of such date.
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[Amortization Event: Any one of the following events:
(a) the failure on the part of the Seller (i) to make any payment
or deposit required to be made under the Loan Purchase Agreement within
four Business Days after the date such payment or deposit is required to
be made; or (ii) to observe or perform in any material respect any other
covenants or agreements of the Seller set forth in the Loan Purchase
Agreement, which failure continues unremedied for a period of 60 days
after written notice and such failure materially and adversely affects
the interests of the Securityholders or the Credit Enhancer;
(b) if any representation or warranty made by the Seller in the
Loan Purchase Agreement proves to have been incorrect in any material
respect when made and which continues to be incorrect in any material
respect for a period of 45 days with respect to any representation or
warranty of the Seller made in Section [___] of the Loan Purchase
Agreement or 90 days with respect to any representation or warranty made
in Section [___] or [___] of the Loan Purchase Agreement after written
notice and as a result of which the interests of the Securityholders or
the Credit Enhancer are materially and adversely affected; provided,
however, that an Amortization Event shall not be deemed to occur if the
Seller has repurchased or substituted for the related Mortgage Loans or
all Mortgage Loans, if applicable, during such period (or within an
additional 60 days with the consent of the Indenture Trustee and the
Credit Enhancer) in accordance with the provisions of the Indenture;
(c) The entry against the Seller of a decree or order by a court
or agency or supervisory authority having jurisdiction in the premises
for the appointment of a trustee, conservator, receiver or liquidator in
any insolvency, con- servatorship, receivership, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for
the winding up or liquidation of its affairs, and the continuance of any
such decree or order unstayed and in effect for a period of 60
consecutive days;
(d) The Seller shall voluntarily go into liquidation, consent to
the appointment of a conservator, receiver, liquidator or similar person
in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to the Seller or of or
relating to all or substantially all of its property, or a decree or
order of a court, agency or supervisory authority having jurisdiction in
the premises for the appointment of a conservator, receiver, liquidator
or similar person 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
Seller and such decree or order shall have remained in
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force undischarged, unbonded or unstayed for a period of 60 days; or the
Seller shall admit in writing its inability to pay its debts generally
as they become due, file a petition to take advantage of any applicable
insolvency or reorganization statute, make an assignment for the benefit
of its creditors or voluntarily suspend payment of its obligations;
(e) the Issuer becomes subject to regulation by the Commission as
an investment company within the meaning of the Investment Company Act
of 1940, as amended;
(f) an Event of Servicing Termination relating to the Master
Servicer occurs under the Master Servicing Agreement and the Master
Servicer is the Seller; or
(g) the aggregate of all draws under the Credit Enhancement
Instrument exceed 1% of the sum of (i) the Cutoff Date Asset Balance and
(ii) the amount by which the Pool Balance as of the latest date that the
Additional Loans have been transferred to the Issuer exceeds the Cut-off
Date Asset Balance.
In the case of any event described in (a), (b) or (f), an Amortization
Event will be deemed to have occurred only if, after any applicable grace period
described in such clauses, either the Indenture Trustee, the Credit Enhancer or,
with the consent of the Credit Enhancer, Securityholders evidencing not less
than 51% of the Security Balance of each of the Notes and the Certificates by
written notice to the Seller, the Master Servicer, the Depositor and the Owner
Trustee (and to the Indenture Trustee, if given by the Credit Enhancer or the
Securityholders) may declare that an Amortization Event has occurred as of the
date of such notice. In the case of any event described in clauses (c), (d),
(e), (g) or (h), an Amortization Event will be deemed to have occurred without
any notice or other action on the part of the Indenture Trustee, the
Securityholders or the Credit Enhancer immediately upon the occurrence of such
event; provided, that any Amortization Event described in clauses (g) or (h) may
be waived and deemed of no effect with the written consent of the Credit
Enhancer and each Rating Agency, subject to the satisfaction of any conditions
to such waiver.]
Appraised Value: With respect to any Mortgaged Property, either (x) the
value set forth in an appraisal of such Mortgaged Property made to establish
compliance with the underwriting criteria then in effect in connection with the
later of the application for the Mortgage Loan secured by such Mortgaged
Property or any subsequent increase or decrease in the related Credit Limit or
to reduce or eliminate the amount of any primary insurance, or (y) if the sales
price of the Mortgaged Property is considered in accordance with the
underwriting criteria applicable to the Mortgage Loan, the lesser of (i) the
appraised
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value referred to in (x) above and (ii) the sales price of such
Mortgaged Property.
Asset Balance: With respect to any Mortgage Loan, other than a
Liquidated Mortgage Loan, and as of any day, the related Cut-off Date Asset
Balance or Deposit Date Asset Balance, [plus (i) any Additional Balances in
respect of such Mortgage Loan conveyed to the Issuer,] minus [(ii)] all
collections credited as principal in respect of any such Mortgage Loan in
accordance with the related Loan Agreement (except for any such collections that
are allocable to the Excluded Amount) and applied in reduction of the Asset
Balance thereof. For purposes of this definition, a Liquidated Mortgage Loan
shall be deemed to have an Asset Balance equal to the Asset Balance of the
related Mortgage Loan immediately prior to the final recovery of all related
Liquidation Proceeds and an Asset Balance of zero thereafter.
Assignment of Mortgage: With respect to any Mortgage, an assignment,
notice of transfer or equivalent instrument, in recordable form, sufficient
under the laws of the jurisdiction in which the related Mortgaged Property is
located to reflect the conveyance of the Mortgage, which assignment, notice of
transfer or equivalent instrument may be in the form of one or more blanket
assignments covering the Mortgage Loans secured by Mortgaged Properties located
in the same jurisdiction.
Authorized Newspaper: A newspaper of general circulation in the Borough
of Manhattan, The City of New York, printed in the English language and
customarily published on each Business Day, whether or not published on
Saturdays, Sundays or holidays.
Authorized Officer: With respect to the Issuer, any officer of the Owner
Trustee who is authorized to act for the Owner Trustee in matters relating to
the Issuer and who is identified on the list of Authorized Officers delivered by
the Owner Trustee to the Indenture Trustee on the Closing Date (as such list may
be modified or supplemented from time to time thereafter) and, so long as the
Administration Agreement is in effect, any Responsible Officer of the
Administrator who is authorized to act for the Administrator in matters relating
to the Issuer and to be acted upon by the Administrator pursuant to the
Administration Agreement and who is identified on the list of Authorized
Officers delivered by the Administrator to the Indenture Trustee on the Closing
Date (as such list may be modified or supplemented from time to time
thereafter).
Basic Documents: The Trust Agreement, the Certificate of Trust, the
Indenture, the Loan Purchase Agreement, the Insurance Agreement, the
Administration Agreement, the Master Servicing Agreement, the Custodial
Agreement and the other documents and certificates delivered in connection with
any of the above.
Beneficial Owner: With respect to any Note, the Person who
is the beneficial owner of such Note as reflected on the books of
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the Depository or on the books of a Person maintaining an account with such
Depository (directly as a Depository Participant or indirectly through a
Depository Participant, in accordance with the rules of such Depository).
Billing Cycle: With respect to any Mortgage Loan and Due
Date, the calendar month preceding such Due Date.
Book-Entry Notes: Beneficial interests in the Notes, ownership and
transfers of which shall be made through book entries by the Depository as
described in Section 4.06 of the Indenture.
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
[_____________] are required or authorized by law to be closed.
Business Trust Statute: Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code ss.ss.3801 et seq., as the same may be
amended from time to time.
Carryover Loss Amount: With respect to any Payment Date, the aggregate
of Loss Amounts (other than Loss Amounts arising during the related Collection
Period) with respect to which either (i) payments of principal have not been
previously made on the Notes and the Certificates or (ii) were not reflected in
a reduction (not below zero) of the Overcollateralization Amount.
Certificate Distribution Amount: With respect to any Payment Date, the
sum of (x) the amount accrued during the related Interest Period on the
Principal Balance of the Certificates at the Certificate Rate for such Interest
Period and (y) any Unpaid Certificate Distribution Amount Shortfall. The amount
available for distribution on any Payment Date shall be allocated first to the
amount in clause (x) above, and second to the amount in clause (y) above.
Certificate Paying Agent: The meaning specified in Section
3.03 of the Indenture.
Certificate Percentage: With respect to any Payment Date, the ratio,
expressed as a percentage, of the aggregate of the Principal Balance of the
Certificates immediately prior to such Payment Date to the sum of the aggregate
of the Principal Balance of the Securities immediately prior to such date.
Certificate Rate: With respect to any Interest Period, the per annum
rate determined by the Master Servicer equal to the sum of (i) LIBOR and (ii)
[______]%; provided, however, that in no event shall the Certificate Rate with
respect to any Interest Period exceed the Maximum Rate.
Certificate Register: The register maintained by the
Certificate Registrar in which the Certificate Registrar shall
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provide for the registration of Certificates and of transfers and
exchanges of Certificates.
Certificate Registrar: Initially, [______________], in its
capacity as Certificate Registrar, or any successor to the
Indenture Trustee in such capacity.
Certificate of Trust: The Certificate of Trust filed for
the Trust pursuant to Section 3810(a) of the Business Trust
Statute.
Certificates: The Home Equity Loan Asset-Backed Certificates, Series
199_-_, each evidencing undivided beneficial interests in the Issuer and
executed by the Owner Trustee in substantially the form set forth in Exhibit A
to the Trust Agreement.
Certificateholder: The Person in whose name a Certificate is registered
in the Certificate Register except that, any Certificate registered in the name
of the Issuer, the Owner Trustee or the Indenture Trustee or any Affiliate of
any of them shall be deemed not to be outstanding and the registered holder will
not be considered a Certificateholder or a holder for purposes of giving any
request, demand, authorization, direction, notice, consent or waiver under the
Indenture or the Trust Agreement provided that, in determining whether the
Indenture Trustee or the Owner Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
Certificates that the Indenture Trustee or the Owner Trustee knows to be so
owned shall be so disregarded. Owners of Certificates that have been pledged in
good faith may be regarded as Holders if the pledgee establishes to the
satisfaction of the Indenture Trustee or the Owner Trustee, as the case may be,
the pledgee's right so to act with respect to such Certificates and that the
pledgee is not the Issuer, any other obligor upon the Certificates or any
Affiliate of any of the foregoing Persons.
Class: The Notes or the Certificates, as the case may be.
Closing Date: ___________, 199_.
Code: The Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
Collateral: The meaning specified in the Granting Clause of
the Indenture.
Collection Account: The account or accounts created and
maintained pursuant to Section [ ] of the Master Servicing
Agreement. The Collection Account shall be an Eligible Account.
Collection Period: With respect to any Mortgage Loan and
Payment Date other than the first Payment Date, the calendar
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month preceding any such Payment Date and with respect to the first Payment
Date, the period from _____________ through
[___________].
Combined Loan-to-Value Ratio: With respect to any Mortgage Loan and any
date, the percentage equivalent of a fraction, the numerator of which is the sum
of (i) the greater of (x) the Credit Limit and (y) the Cut-off Date Asset
Balance of such Mortgage Loan and (ii) the outstanding principal balance as of
the date of the origination of such Mortgage Loan (or any subsequent date as of
which such outstanding principal balance may be determined in connection with an
increase or decrease in the Credit Limit or to reduce the amount of primary
insurance for such Mortgage Loan) of any mortgage loan or mortgage loans that
are secured by liens on the Mortgaged Property that are senior or subordinate to
the Mortgage and the denominator of which is the Appraised Value of the related
Mortgaged Property.
Corporate Trust Office: With respect to the Indenture Trustee,
Certificate Registrar, Certificate Paying Agent and Paying Agent, the principal
corporate trust office of the Indenture Trustee and Note Registrar at which at
any particular time its corporate trust business shall be administered, which
office at the date of the execution of this instrument is located at
[______________], except that for purposes of Section 4.02 of the Indenture and
Section 3.09 of the Trust Agreement, such term shall include the Indenture
Trustee's office or agency at [__________] to the Owner Trustee, the principal
corporate trust office of the Owner Trustee at which at any particular time its
corporate trust business shall be administered, which office at the date of the
execution of this Trust Agreement is located at [___________], Attention:
[__________________].
[Credit Enhancement Draw Amount: As defined in Section 3.32
of the Indenture.
Credit Enhancement Instrument: The security bond number [__________],
dated as of the Closing Date, issued by the Credit Enhancer to the Indenture
Trustee for the benefit of the Noteholders and to the Certificate Paying Agent
as agent for the Issuer for the benefit of the Certificateholders.
Credit Enhancer: [______________________], a
[_______________], any successor thereto or any replacement
credit enhancer substituted pursuant to Section 3.33 of the
Indenture.
Credit Enhancer Default: If the Credit Enhancer fails to
make a payment required under the Credit Enhancement Instrument
in accordance with its terms.]
Credit Limit: With respect to any Mortgage Loan, the
maximum Asset Balance permitted under the terms of the related
Loan Agreement.
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Custodial Agreement: Any Custodial Agreement between the Custodian, the
Indenture Trustee, the Issuer and the Master Servicer relating to the custody of
the Mortgage Loans and the Related Documents.
Custodian: With respect to the Mortgage Loans,
[______________], a [_______________], and its successors and
assigns.
Cut-Off Date: With respect to the Initial Loans ________,
199_.
DCR: Duff & Phelps Credit Rating Co. or its successor in
interest.
Default: Any occurrence which is or with notice or the
lapse of time or both would become an Event of Default.
Definitive Notes: The meaning specified in Section 4.06 of
the Indenture.
Deleted Mortgage Loan: A Mortgage Loan replaced or to be
replaced with an Eligible Substitute Mortgage Loan.
[Deposit Date: The applicable date as of which any
Additional Loan is sold to the Issuer pursuant to the Loan
Purchase Agreement.
Deposit Date Asset Balance: With respect to any Additional
Loan, the Asset Balance thereof as of the Deposit Date.]
Depositor: CWABS, Inc., a Delaware corporation, or its
successor in interest.
Depository or Depository Agency: The Depository Trust Company or a
successor appointed by the Indenture Trustee with the approval of the Depositor.
Any successor to the Depository shall be an organization registered as a
"clearing agency" pursuant to Section 17A of the Exchange Act and the
regulations of the Securities and Exchange Commission thereunder.
Depository Participant: A Person for whom, from time to
time, the Depository effects book-entry transfers and pledges of
securities deposited with the Depository.
Designated Certificate: The meaning specified in Section
3.11 of the Trust Agreement.
Dissolution Payment Date: Following an Event of Default under the
Indenture and an acceleration of the Maturity Date of the Notes, a date on which
the proceeds of the sale of the Trust Estate are paid to Securityholders.
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Draw: With respect to any Mortgage Loan, a borrowing by the
Mortgagor under the related Loan Agreement.
Due Date: With respect to the Mortgage Loans, the [__]th
day of the month.
Eligible Account: An account that is any of the following: (i)
maintained with a depository institution the short-term 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
deposit 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 Indenture Trustee and each Rating Agency) the Indenture
Trustee 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
Eligible 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 Collection Account, either
(A) a trust account or accounts maintained at the Corporate Trust Department of
the Indenture Trustee or (B) an account or accounts maintained at the Corporate
Trust Department of the Indenture Trustee, as long as its short term debt
obligations are rated [___] by [_____] and [___] by [_____________] or the
equivalent or better by each Rating Agency and its long term debt obligations
are rated [___] by [___] and [___] by [___________] or the equivalent or better
by each Rating Agency, or (iv) in the case of the Collection Account and the
Payment Account, a trust account or accounts maintained in the corporate trust
division of the Indenture Trustee, or (v) 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 Collection Account or the
Payment Account will not reduce the rating assigned to any of the Securities by
such Rating Agency below investment grade [without taking into account the
Credit Enhancement Instrument.]
Eligible Investments: One or more of the following:
(i) obligations of the United States or any agency thereof, provided such
obligations are backed by the full faith and credit of the United States; (ii)
general obligations of or obligations guaranteed by any state of the United
States or the District of Columbia receiving the highest long-term debt rating
of each Rating Agency rating the related Series of Securities, or such lower
rating as will not result in the downgrading or withdrawal of the ratings then
assigned to the Securities by each such Rating Agency; (iii) commercial or
finance company paper (including, without limitation, commercial paper issued by
Countrywide Home Loans, Inc. or any of its Affiliates) which is then receiving
the highest commercial or finance company paper
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rating of each such Rating Agency, or such lower rating as will not result in
the downgrading or withdrawal of the ratings then assigned to the Securities by
each such Rating Agency; (iv) certificates of deposit, demand or time deposits,
or bankers' acceptances issued by any depository institution or trust company
incorporated under the laws of the United States or of any state thereof and
subject to supervision and examination by federal and/or state banking
authorities, provided that the commercial paper and/or long term unsecured debt
obligations of such depository institution or trust company (or in the case of
the principal depository institution in a holding company system, the commercial
paper or long-term unsecured debt obligations of such holding company, but only
if Moody's Investors Service, Inc. ("Moody's") is not a Rating Agency) are then
rated one of the two highest long-term and the highest short-term ratings of
each such Rating Agency for such securities, or such lower ratings as will not
result in the downgrading or withdrawal of the rating then assigned to the
Securities by any such Rating Agency; (iv) demand or time deposits or
certificates of deposit issued by any bank or trust company or savings
institution to the extent that such deposits are fully insured by the FDIC; (v)
guaranteed reinvestment agreements issued by any bank, insurance company or
other corporation containing, at the time of the issuance of such agreements,
such terms and conditions as will not result in the downgrading or withdrawal of
the rating then assigned to the Securities by any such Rating Agency; (vi)
repurchase obligations with respect to any security described in clauses (i) and
(ii) above, in either case entered into with a depository institution or trust
company (acting as principal) described in clause (iv) above; (vii) securities
(other than stripped bonds, stripped coupons or instruments sold at a purchase
price in excess of 115% of the face amount thereof) bearing interest or sold at
a discount issued by any corporation incorporated under the laws of the United
States or any state thereof which, at the time of such investment, have one of
the two highest ratings of each Rating Agency (except if the Rating Agency is
Moody's, such rating shall be the highest commercial paper rating of Moody's for
any such securities), or such lower rating as will not result in the downgrading
or withdrawal of the rating then assigned to the Securities by any such Rating
Agency, as evidenced by a signed writing delivered by each such Rating Agency;
and (viii) such other investments having a specified stated maturity and bearing
interest or sold at a discount acceptable to each Rating Agency as will not
result in the downgrading or withdrawal of the rating then assigned to the
Securities of such Series by any such Rating Agency, as evidenced by a signed
writing delivered by each such Rating Agency; provided that no such instrument
shall be a Permitted Investment if such instrument evidences the right to
receive interest only payments with respect to the obligations underlying such
instrument.
Eligible Substitute Mortgage Loan: A Mortgage Loan substi-
tuted by the Depositor for a Deleted Mortgage Loan which must, on
the date of such substitution, as confirmed in an Officers'
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Certificate delivered to the Indenture 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
outstanding principal balance of the Deleted Mortgage Loan (the amount of any
shortfall to be deposited by the Seller in the Collection Account in the month
of substitution); (ii) have a Loan Rate not less than the Loan Rate of the
Deleted Mortgage Loan and not more than __% in excess of the Loan Rate of such
Deleted Mortgage Loan; (iii) have a Loan Rate based on the same index with
adjustments to such Loan Rate made on the same interest rate adjustment date as
that of the Deleted Mortgage Loan; (iv) have a Margin that is not less than the
Margin of the Deleted Mortgage Loan and not more than _____ basis points higher
than the Margin for the Deleted Mortgage Loan; (v) have a mortgage of the same
or higher level of priority as the mortgage relating to the Deleted Mortgage
Loan; (vi) have a remaining term to maturity not more than ____ months earlier
and not more than ____ months later than the remaining term to maturity of the
Deleted Mortgage Loan; (vii) comply with each representation and warranty as to
the Mortgage Loans set forth in the Loan Purchase Agreement (deemed to be made
as of the date of substitution); (viii) in general, have an original Combined
Loan-to-Value Ratio not greater than that of the Deleted Mortgage Loans; and
(ix) satisfy certain other conditions specified in the Purchase Agreement. To
the extent the Principal Balance of an Eligible Substitute Mortgage Loan is less
than the Principal Balance of the related Deleted Mortgage Loan, the Seller will
be required to make a deposit tot he Collection Account equal to such
difference; and (x) not be __ days or more delinquent.
ERISA: The Employee Retirement Income Security Act of 1974,
as amended.
Event of Default: With respect to the Indenture, any one of the
following events (whatever the 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) a default in the payment of any interest on any Note when the
same becomes due and payable, and such default shall continue for a
period of five days; or
(ii) a default in the payment of the principal of or
any installment of the principal of any Note when the same
becomes due and payable; or
(iii) [a Credit Enhancer Default shall have occurred and be
continuing and] there occurs a default in the observance or performance
of any covenant or agreement of
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the Issuer made in the Indenture, or any representation or warranty of
the Issuer made in the Indenture or in any certificate or other writing
delivered pursuant hereto or in connection herewith proving to have been
incorrect in any material respect as of the time when the same shall
have been made, and such default shall continue or not be cured, or the
circumstance or condition in respect of which such representation or
warranty was incorrect shall not have been eliminated or otherwise
cured, for a period of 30 days after there shall have been given, by
registered or certified mail, to the Issuer by the Indenture Trustee or
to the Issuer and the Indenture Trustee by the Holders of at least 25%
of the Outstanding Amount of the Notes, a written notice specifying such
default or incorrect representation or warranty and requiring it to be
remedied and stating that such notice is a notice of default hereunder;
or
(iv) [a Credit Enhancer Default shall have occurred and be
continuing and] there occurs the filing of a decree or order for relief
by a court having jurisdiction in the premises in respect of the Issuer
or any substantial part of the Trust Estate in an involuntary case under
any applicable federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Issuer or for any substantial part of the Trust Estate, or ordering the
winding-up or liquidation of the Issuer's affairs, and such decree or
order shall remain unstayed and in effect for a period of 60 consecutive
days; or
(v) [a Credit Enhancer Default shall have occurred and be
continuing and] there occurs the commencement by the Issuer of a
voluntary case under any applicable federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or the
consent by the Issuer to the entry of an order for relief in an
involuntary case under any such law, or the consent by the Issuer to the
appointment or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Issuer or
for any substantial part of the assets of the Trust Estate, or the
making by the Issuer of any general assignment for the benefit of
creditors, or the failure by the Issuer generally to pay its debts as
such debts become due, or the taking of any action by the Issuer in
furtherance of any of the foregoing.
Event of Servicer Termination: With respect to the Master Servicing
Agreement, an Event of Default as defined in Section 7.01 of the Master
Servicing Agreement.
Exchange Act: The Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
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Excluded Amount: For any Payment Date on or after the occurrence of an
Amortization Event, with respect to all collections whether interest or
principal (other than any amounts received in respect of a Repurchase Price and
pursuant to Section [ ] of the Master Servicing Agreement) ("Total Collections")
on all Initial Loans and Additional Loans in each case including all Draws
whether or not transferred to the Issuer (collectively, "Total Balances of
Obligors"), an amount equal to the product of (A) Total Collections during the
related Collection Period and (B) a fraction equal to one (1) minus a fraction
the numerator of which is (x) the aggregate Asset Balances of the end of the
last Collection Period and the denominator of which is (y) the Total Balances of
Obligors.
Expenses: The meaning specified in Section 8.02 of the
Trust Agreement.
FDIC: The Federal Deposit Insurance Corporation or any
successor thereto.
Final Scheduled Payment Date: To the extent not previously
paid, the principal balance of each Class of Notes will be due on
the Payment Date in ____________ ____.
Fitch: Fitch Investors Service, L.P. or its successor in
interest.
FNMA: The Federal National Mortgage Association, or any
successor thereto.
Foreclosure Profit: With respect to a Liquidated Mortgage Loan, the
amount, if any, by which (i) the aggregate of its Net Liquidation Proceeds
exceeds (ii) the related Asset Balance (plus accrued and unpaid interest thereon
at the applicable Loan Rate from the date interest was last paid through the
date of receipt of the final Liquidation Proceeds) of such Liquidated Mortgage
Loan immediately prior to the final recovery of its Liquidation Proceeds.
[Funding Account: The trust account created and maintained with the
Indenture Trustee pursuant to Section 8.02 of the Indenture and referred to
therein as the Funding Account. Funds deposited in the Funding Account shall be
held in trust for the uses and purposes set forth in Article VIII of the
Indenture.
Funding Period: The period commencing on the Cut-off Date
and ending on the earlier of (x) the Payment Date in __________,
199_ and (y) the occurrence of an Amortization Event.]
Grant: Mortgage, pledge, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, create, and grant a lien upon and a security
interest in and right of set-off against, deposit, set over and confirm pursuant
to the Indenture. A Grant of the Collateral or of any other agreement or
instrument
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shall include all rights, powers and options (but none of the obligations) of
the granting party thereunder, including the immediate and continuing right to
claim for, collect, receive and give receipt for principal and interest payments
in respect of such collateral or other agreement or instrument and all other
moneys payable thereunder, to give and receive notices and other communications,
to make waivers or other agreements, to exercise all rights and options, to
bring proceedings in the name of the granting party or otherwise, and generally
to do and receive anything that the granting party is or may be entitled to do
or receive thereunder or with respect thereto.
Gross Margin: With respect to any Mortgage Loan, the percentage set
forth as the "Gross Margin" for such Mortgage Loan on the Mortgage Loan
Schedule, as adjusted from time to time with respect to any [______________]
Loan in accordance with the terms of the Master Servicing Agreement.
[Guaranteed Principal Payment Amount: With respect to any Payment Date,
other than the Dissolution Payment Date, the amount, if any, by which the
Aggregate Security Balance (after giving effect to all amounts allocable and
distributable to principal on the Securities on such Payment Date) exceeds the
sum of (A) the Pool Balance plus (B) all amounts on deposit in the Funding
Account on such date (after giving effect to all withdrawals therefrom and
deposits thereto pursuant to Sections 8.02(b) and 8.02(c) of the Indenture on
such Payment Date). With respect to the Payment Date in ________ 20__, if such
Payment Date is not a Dissolution Payment Date, the amount, if any, by which the
aggregate of the Security Balances (after giving effect to all amounts allocable
and distributable to principal on the Securities) exceeds the amount on deposit
in the Payment Account available to be paid as principal on the Securities
(after giving effect to all amounts allocable and distributable as principal on
the Securities on such date).]
Holder: Any of the Noteholders or Certificateholders.
Indemnified Party: The meaning specified in Section 8.02 of
the Trust Agreement.
Indenture: The indenture dated as of _________, 199_
between the Issuer and the Indenture Trustee, as Indenture
Trustee.
Indenture Trustee: [______________], and its successors and
assigns or any successor indenture trustee appointed pursuant to
the terms of the Indenture.
Independent: When used with respect to any specified Person, the Person
(i) is in fact independent of the Issuer, any other obligor on the Notes, the
Seller, the Depositor and any Affiliate of any of the foregoing Persons, (ii)
does not have any direct financial interest or any material indirect financial
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interest in the Issuer, any such other obligor, the Seller, the Depositor or any
Affiliate of any of the foregoing Persons and (iii) is not connected with the
Issuer, any such other obligor, the Seller, the Depositor or any Affiliate of
any of the foregoing Persons as an officer, employee, promoter, underwriter,
trustee, partner, director or person performing similar functions.
Independent Certificate: A certificate or opinion to be delivered to the
Indenture Trustee under the circumstances described in, and otherwise complying
with, the applicable requirements of Section 11.01 of the Indenture, made by an
Independent appraiser or other expert appointed by an Issuer Order and approved
by the Indenture Trustee in the exercise of reasonable care, and such opinion or
certificate shall state that the signer has read the definition of "Independent"
in this Indenture and that the signer is Independent within the meaning thereof.
Index Rate: [The rate [equal to] [based on] the highest
"prime rate" published in the 'Money Rates' table of The Wall
Street Journal as of the first Business Day of each calendar
month.]
Initial Loans: All home equity lines of credit sold by the Seller to the
Purchaser on ________, 199_ pursuant to the terms of the Loan Purchase
Agreement, as specified in the Mortgage Loan Schedule.
Initial Principal Balance: With respect to the
Certificates, $______________; and the Notes, $___________.
Insolvency Event: With respect to a specified Person, (a) the filing of
a decree or order for relief by a court having jurisdiction in the premises in
respect of such Person or any substantial part of its property in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official for such Person or for any substantial
part of its property, or ordering the winding-up or liquidation of such Person's
affairs, and such decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; or (b) the commencement by such Person of a
voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or the consent by such Person to the entry of an
order for relief in an involuntary case under any such law, or the consent by
such Person to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or the making by such
Person of any general assignment for the benefit of creditors, or the failure by
such Person generally to pay its debts as such debts become due or the admission
by such Person in writing (as to which the Indenture
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Trustee shall have notice) of its inability to pay its debts generally, or the
adoption by the Board of Directors or managing member of such Person of a
resolution which authorizes action by such Person in furtherance of any of the
foregoing.
[Insurance Agreement: The insurance and reimbursement
agreement dated as of ______________, 199_ among the Master
Servicer, the Seller, the Depositor, the Issuer and the Credit
Enhancer, including any amendments and supplements thereto.]
Insurance Proceeds: Proceeds paid by any insurer pursuant to any
insurance policy covering a Mortgage Loan which are required to be remitted to
the Master Servicer, or amounts required to be paid by the Master Servicer
pursuant to the last sentence of Section [ ] of the Master Servicing Agreement,
net of any component thereof (i) covering any expenses incurred by or on behalf
of the Master Servicer in connection with obtaining such proceeds, (ii) that is
applied to the restoration or repair of the related Mortgaged Property, (iii)
released to the Mortgagor in accordance with the Master Servicer's normal
servicing procedures or (iv) required to be paid to any holder of a mortgage
senior to such Mortgage Loan.
Interest Collections: With respect to any Payment Date, the sum of all
payments by or on behalf of Mortgagors and any other amounts constituting
interest (including without limitation such portion of Insurance Proceeds, Net
Liquidation Proceeds and Repurchase Prices as is allocable to interest on the
applicable Mortgage Loan) as is paid by the Seller or the Master Servicer or is
collected by the Servicer under the Mortgage Loans, reduced by the Servicing
Fees for the related Collection Period and by any fees (including annual fees)
or late charges or similar administrative fees paid by Mortgagors during the
related Collection Period. The terms of the related Loan Agreement shall
determine the portion of each payment in respect of such Mortgage Loan that
constitutes principal or interest.
Interest Period: With respect to any Payment Date other than the first
Payment Date, the period beginning on the preceding Payment Date and ending on
the day preceding such Payment Date, and in the case of the first Payment Date,
the period beginning on the Closing Date and ending on the day preceding the
first Payment Date.
Issuer: [Countrywide] Home Equity Loan Trust 199_-_, a
Delaware business trust, or its successor in interest.
Issuer Request: A written order or request signed in the
name of the Issuer by any one of its Authorized Officers and
delivered to the Indenture Trustee.
[LIBOR: For any Interest Period other than the first
Interest Period, the rate for United States dollar deposits for
one month which appears on the Telerate Screen Page 3750 as of
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11:00 A.M., London time, on the second LIBOR Business Day prior to the first day
of such Interest Period. With respect to the first Interest Period, the rate for
United States dollar deposits for one month which appears on the Telerate Screen
Page 3750 as of _____ A.M., _________________ time, two LIBOR Business Days
prior to the Closing Date. If such rate does not appear on such page (or such
other page as may replace that page on that service, or if such service is no
longer offered, such other service for displaying LIBOR or comparable rates as
may be reasonably selected by the Indenture Trustee after consultation with the
Master Servicer), the rate will be the Reference Bank Rate. If no such
quotations can be obtained and no Reference Bank Rate is available, LIBOR will
be LIBOR applicable to the preceding Payment Date.]
LIBOR 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 [________], or in the city of London, England are required or authorized by
law to be closed.
Lien: Any mortgage, deed of trust, pledge, conveyance, hypothecation,
assignment, participation, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority right or interest or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement under the UCC (other than
any such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing; provided,
however, that any assignment pursuant to Section [ ] of the Master Servicing
Agreement shall not be deemed to constitute a Lien.
Lifetime Rate Cap: With respect to each Mortgage Loan with respect to
which the related Mortgage Note provides for a lifetime rate cap, the maximum
Loan Rate permitted over the life of such Mortgage Loan under the terms of such
Mortgage Note, as set forth on the Mortgage Loan Schedule and initially as set
forth on Exhibit A to the Master Servicing Agreement.
Liquidated Mortgage Loan: With respect to any Payment Date, any Mortgage
Loan in respect of which the Master Servicer has determined, in accordance with
the servicing procedures specified in the Master Servicing Agreement, as of the
end of the related Collection Period that substantially all Liquidation Proceeds
which it reasonably expects to recover with respect to the disposition of the
related REO have been recovered.
Liquidation Expenses: Out-of-pocket expenses (exclusive of overhead)
which are incurred by or on behalf of the Master Servicer in connection with the
liquidation of any Mortgage Loan and not recovered under any insurance policy,
such expenses including, without limitation, legal fees and expenses, any
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unreimbursed amount expended (including, without limitation, amounts advanced to
correct defaults on any mortgage loan which is senior to such Mortgage Loan and
amounts advanced to keep current or pay off a mortgage loan that is senior to
such Mortgage Loan) respecting the related Mortgage Loan and any related and
unreimbursed expenditures for real estate property taxes or for property
restoration, preservation or insurance against casualty loss or damage.
Liquidation Loss Amounts: With respect to any Payment Date and any
Mortgage Loan that became a Liquidated Mortgage Loan during the related
Collection Period, the unrecovered portion of the related Asset Balance thereof
at the end of such Collection Period, after giving effect to the Net Liquidation
Proceeds applied in reduction of the Asset Balance.
Liquidation Proceeds: Proceeds (including Insurance Proceeds [but not
including amounts drawn under the Credit Enhancement Instrument]) received in
connection with the liquidation of any Mortgage Loan or related REO, whether
through trustee's sale, foreclosure sale or otherwise.
Loan Agreement: With respect to any Mortgage Loan, the
credit line account agreement executed by the related Mortgagor
and any amendment or modification thereof.
Loan Purchase Agreement: The Loan Purchase Agreement, dated as of the
Cut-off Date, between the Seller, as seller, and the Depositor, as purchaser,
with respect to the Mortgage Loans.
Loan Rate: With respect to any Mortgage Loan and any day,
the sum of the Index Rate and the Margin.
Margin: The [spread].
Master Servicer: [Countrywide Home Loans, Inc.], and its
successors and assigns.
Master Servicing Agreement: The Master Servicing Agreement dated as of
______________, 199_ between [______________], as Indenture Trustee, and the
Master Servicer, as master servicer.
Master Servicing Fee: With respect to any Collection Period, the product
of (i) the Master Servicing Fee Rate divided by 12 and (ii) the aggregate Asset
Balance of the Mortgage Loans, as of the first day of such Collection Period.
Master Servicing Fee Rate: With respect to any
[______________] Loan, [____]% per annum.
Maximum Pool Balance: As to any Payment Date the highest Pool Balance at
the end of any Collection Period from the Closing Date up to and including the
related Collection Period.
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Maximum Rate: With respect to any Interest Period, the Weighted Average
Net Loan Rate related to the Due Date in the month preceding the month in which
such Interest Period ends (adjusted to an effective rate reflecting accrued
interest calculated on the basis of the actual number of days in the Collection
Period commencing in the month in which such Interest Period commences and a
year assumed to consist of 360 days).
Moody's: Moody's Investors Service, Inc. or its successor
in interest.
Mortgage: The mortgage, deed of trust or other instrument creating a
first or second lien on an estate in fee simple interest in real property
securing a Mortgage Loan.
Mortgage File: The file containing the Related Documents pertaining to a
particular Mortgage Loan and any additional documents required to be added to
the Mortgage File pursuant to the Loan Purchase Agreement or the Master
Servicing Agreement.
Mortgage Loan Schedule: With respect to any date, the schedule of
Mortgage Loans included in the Trust Estate on such date. The initial schedule
of Mortgage Loans as of the Cut-Off Date is the schedule set forth in Exhibit A
of the Master Servicing Agreement, which schedule sets forth as to each Mortgage
Loan (i) the Cut-Off Date Trust Balance, (ii) the Credit Limit, (iii) the Gross
Margin, (iv) the name of the Mortgagor, (v) the Lifetime Rate Cap, if any, (vi)
the loan number, (vii) an indication as to the applicable Mortgage Loan Group,
and (viii) the lien position of the related Mortgage. The Mortgage Loan Schedule
will be amended from time to time by annex to reflect Additional Loans.
Mortgage Loans: At any time, collectively, all Initial Loans [and
Additional Loans, in each case including Additional Balances, if any, that have
been sold to the Depositor under the Loan Purchase Agreement,] in each case
together with the Related Documents, and that remain subject to the terms
thereof.
Mortgage Note: With respect to a Mortgage Loan, the Loan Agreement
pursuant to which the related mortgagor agrees to pay the indebtedness evidenced
thereby and secured by the related Mortgage as modified or amended.
Mortgaged Property: The underlying property, including real
property and improvements thereon, securing a Mortgage Loan.
Mortgagor: The obligor or obligors under a Loan Agreement.
Net Liquidation Proceeds: With respect to any Liquidated
Mortgage Loan, Liquidation Proceeds net of Liquidation Expenses.
Net Loan Rate: With respect to any Mortgage Loan and any
day, the related Loan Rate less the related Servicing Fee Rate.
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[Net Principal Collections: With respect to any
Distribution Date, the excess, if any, of Security Principal
Collections for the related Collection Period over the amount of
Additional Balances created during the related Collection
Period.]
Notes: The Notes designated as the "Notes" in the
Indenture.
Note Owner: The Beneficial Owner of a Note.
Note Rate: With respect to any Interest Period, a per annum rate
determined by the Master Servicer equal to [LIBOR as of the second LIBOR
Business Day] prior to the first day of such Interest Period and [___]%;
provided however, that in no event shall the Note Rate with respect to any
Interest Period exceed the Maximum Rate for such Interest Period.
Note Register: The register maintained by the Note
Registrar in which the Note Registrar shall provide for the
registration of Notes and of transfers and exchanges of Notes.
Note Registrar: The Indenture Trustee, in its capacity as
Note Registrar.
Noteholder: The Person in whose name a Note is registered in the Note
Register, except that, any Note registered in the name of the Depositor, the
Issuer or the Indenture Trustee or any Affiliate of any of them shall be deemed
not to be outstanding and the registered holder will not be considered a
Noteholder or holder for purposes of giving any request, demand, authorization,
direction, notice, consent or waiver under the Indenture or the Trust Agreement
provided that, in determining whether the Indenture Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Notes that the Indenture Trustee or the Owner Trustee
knows to be so owned shall be so disregarded. Owners of Notes that have been
pledged in good faith may be regarded as Holders if the pledgee establishes to
the satisfaction of the Indenture Trustee or the Owner Trustee the pledgee's
right so to act with respect to such Notes and that the pledgee is not the
Issuer, any other obligor upon the Notes or any Affiliate of any of the
foregoing Persons.
Officer's Certificate: With respect to the Master Servicer, a
certificate signed by the President, Managing Director, a Director, a Vice
President or an Assistant Vice President, of the Master Servicer and delivered
to the Indenture Trustee. With respect to the Issuer, a certificate signed by
any Authorized Officer of the Issuer, under the circumstances described in, and
otherwise complying with, the applicable requirements of Section [11.01] of the
Indenture, and delivered to the Indenture Trustee. Unless otherwise specified,
any reference in the Indenture to an
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Officer's Certificate shall be to an Officer's Certificate of any Authorized
Officer of the Issuer.
Opinion of Counsel: A written opinion of counsel who may be in-house
counsel for the Master Servicer if acceptable to the Indenture Trustee, [the
Credit Enhancer] and the Rating Agencies or counsel for the Depositor, as the
case may be.
Outstanding: With respect to the Notes, as of the date of
determination, all Notes theretofore executed, authenticated and
delivered under this Indenture except:
(i) Notes theretofore cancelled by the Note Registrar
or delivered to the Indenture Trustee for cancellation; and
(ii) Notes in exchange for or in lieu of which other Notes have been
executed, authenticated and delivered pursuant to the Indenture unless
proof satisfactory to the Indenture Trustee is presented that any such
Notes are held by a holder in due course;
[provided, however, that for purposes of effectuating the Credit Enhancer's
right of subrogation as set forth in Section 4.12 of the Indenture only, all
Notes that have been paid with funds provided under the Credit Enhancement
Instrument shall be deemed to be Outstanding until the Credit Enhancer has been
reimbursed with respect thereto.]
Overcollateralization Amount: With respect to any Payment Date, the
amount by which the sum of (x) the Pool Balance as of the last day of the
related Collection Period and (y) the amount on deposit in the Funding Account
in respect of Net Principal Collections, on such Payment Date exceeds the
Aggregate Security Balance on such Payment Date (after giving effect to all
amounts distributed and allocable to principal on the Securities and deposits to
and withdrawals from the Funding Account that are applied to reduce the Security
Balances on such Payment Date).
Owner Trust Estate: The corpus of the Issuer created by the Trust
Agreement which consists of the Mortgage Loans, such assets as shall from time
to time be deposited in the Collection Account and/or the Payment Account
allocable to the Mortgage Loans in accordance with the Trust Agreement, property
that secured a Mortgage Loan and that has become REO, certain hazard insurance
policies maintained by the Mortgagors or by or on behalf of the Master Servicer
in respect of the Mortgage Loans, [the Credit Enhancement Instrument,] an
assignment of the Depositor's rights under the Loan Purchase Agreement and the
obligation of the Depositor to purchase Additional Balances under the Loan
Purchase Agreement and all proceeds of each of the foregoing.
Owner Trustee: [______________], and its successors and
assigns or any successor owner trustee appointed pursuant to the
terms of the Trust Agreement.
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Paying Agent: Any paying agent or co-paying agent appointed
pursuant to Section 3.03 of the Indenture, which initially shall
be [______________].
Payment Account: The account established by the Indenture
Trustee pursuant to Section 8.02 of the Indenture and Section
[ ] of the Master Servicing Agreement. The Payment Account
shall be an Eligible Account.
Payment Date: The [___] day of each month, or if such day
is not a Business Day, then the next Business Day.
Percentage Interest: With respect to any Note, the percentage obtained
by dividing the Security Balance of such Note by the aggregate of the Security
Balances of all Notes of the same Class. With respect to any Certificate, the
percentage obtained by dividing the denomination specified on such Certificate
by the Initial Principal Balance of the Certificates.
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
[Policy: The irrevocable and unconditional limited
financial guaranty insurance policy number [__________], dated as
of the Closing Date, issued by the Credit Enhancer to the
Indenture Trustee for the benefit of the Noteholders and to the
Certificate Paying Agent as agent for the Issuer for the benefit
of the Certificateholders.]
Pool Balance: With respect to any date, the aggregate of
the Asset Balances of all Mortgage Loans as of such date.
Principal Balance: With respect to any Payment Date, the Initial
Principal Balance thereof, reduced by all distributions of principal thereon
prior to such Payment Date.
Principal Collection Distribution Amount: For any Payment Date, (i) so
long as an Amortization Event has not occurred, Net Principal Collections and
(ii) following an Amortization Event, Security Principal Collections; provided,
however, on any Payment Date with respect to which the Overcollateralization
Amount that would result if determined without regard to this proviso exceeds
the Required Overcollateralization Amount the Principal Collection Distribution
Amount will be reduced by the amount of such excess until the
Overcollateralization Amount equals the Required Overcollateralization Amount.
Principal Collections: With respect to any Payment Date and
any Mortgage Loan, the aggregate of the following amounts:
(i) the total amount of payments made by or on behalf
of the Mortgagor, received and applied as payments of prin-
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cipal on the Mortgage Loan during the related Collection
Period, as reported by the related Subservicer;
(ii) any Net Liquidation Proceeds, allocable as a recovery of
principal, received in connection with the Mortgage Loan during the
related Collection Period;
(iii) if the Mortgage Loan was purchased by the Master Servicer
pursuant to Section 3.14 of the Master Servicing Agreement, or was
repurchased by the Seller pursuant to the Loan Purchase Agreement,
during the related Collection Period, 100% of the Asset Balance of the
Mortgage Loan as of the date of such purchase or repurchase; and
(iv) any other amounts received as payments on or proceeds of the
Mortgage Loan during the Collection Period to the extent applied in
reduction of the principal amount thereof;
provided that Principal Collections shall not include any Foreclosure Profits,
and shall be reduced by any amounts withdrawn from the Collection Account
pursuant to clauses (iii), (iv), (vii) and (viii) of Section [ ] of the Master
Servicing Agreement other than any portion of such amounts that are attributable
to the Excluded Amount in respect of any Mortgage Loan that are allocable to
principal of such Mortgage Loan and not otherwise excluded from the amounts
specified in (i) - (iv) above.
Proceeding: Any suit in equity, action at law or other
judicial or administrative proceeding.
Purchaser: CWABS, Inc., a Delaware corporation, and its
successors and assigns.
Qualified Insurer: A mortgage guaranty insurance company duly qualified
as such under the laws of the state of its principal place of business and each
state having jurisdiction over such insurer in connection with the insurance
policy issued by such insurer, duly authorized and licensed in such states to
transact a mortgage guaranty insurance business in such states and to write the
insurance provided by the insurance policy issued by it, approved as an insurer
by the Master Servicer and as a FNMA-approved mortgage insurer.
Rating Agency: Any nationally recognized statistical rating
organization, or its successor, that rated the Securities at the request of the
Depositor at the time of the initial issuance of the Securities. Initially,
[________] or [__________]. If such organization or a successor is no longer in
existence, "Rating Agency" shall be such nationally recognized statistical
rating organization, or other comparable Person, designated by the Depositor,
notice of which designation shall be given to the Indenture Trustee. References
herein to the highest short term
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unsecured rating category of a Rating Agency shall mean [___] or better in the
case of [__________]and [___] or better in the case of [_____] and in the case
of any other Rating Agency shall mean such equivalent ratings. References herein
to the highest long-term rating category of a Rating Agency shall mean "[___]"
in the case of [__________] and [_____] in the case of [________] and in the
case of any other Rating Agency, such equivalent rating.
Record Date: With respect to the Notes and any Payment Date, the
Business Day next preceding such Payment Date and with respect to the
Certificates and any Payment Date, the last Business Day of the month preceding
the month of such Payment Date.
[Reference Bank Rate: With respect to any Interest Period, as follows:
the arithmetic mean (rounded upwards, if necessary, to the nearest one sixteenth
of a percent) of the offered rates for United States dollar deposits for one
month which are offered by the Reference Banks as of _____ A.M.,
_________________ time, on the second LIBOR Business Day prior to the first day
of such Interest Period to prime banks in the London interbank market for a
period of one month in amounts approximately equal to the sum of the Outstanding
Amount of Notes and the Certificate Principal Balance; provided that at least
two such Reference Banks provide such rate. If fewer than two offered rates
appear, the Reference Bank Rate will be the arithmetic mean of the rates quoted
by one or more major banks in New York City, selected by the Depositor after
consultation with the Indenture Trustee, as of ______ a.m., ______________ time,
on such date for loans in U.S. Dollars to leading European Banks for a period of
one month in amounts approximately equal to the Aggregate Security Balance. If
no such quotations can be obtained, the Reference Bank Rate shall be the
Reference Bank Rate applicable to the preceding Interest Period.]
Reference Banks: [_________________________________________
____ and ______________________.]
Related Documents: With respect to each Mortgage Loan, the documents
specified in Section 1(a) of the Loan Purchase Agreement and any documents
required to be added to such documents pursuant to the Loan Purchase Agreement,
the Trust Agreement or the Master Servicing Agreement.
REO: A Mortgaged Property that is acquired by the Issuer in
foreclosure or by deed in lieu of foreclosure.
Repurchase Price: With respect to any Mortgage Loan required to be
repurchased on any date pursuant to the Loan Purchase Agreement or purchased by
the Master Servicer pursuant to the Master Servicing Agreement, an amount equal
to the sum of (i) 100% of the Asset Balance thereof (without reduction for any
amounts charged off) and (ii) unpaid accrued interest at the Loan Rate on the
outstanding principal balance thereof from the Due
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Date to which interest was last paid by the Mortgagor to the first day of the
month following the month of purchase. No portion of any Repurchase Price shall
be included in the Excluded Amount for any Payment Date.
[Required Overcollateralization Percentage: The greater of
[___]% and a percentage as determined by [_________] during the
Funding Period in connection with the delivery of Additional
Loans.
Required Overcollateralization Amount: As to any Payment Date prior to
the Payment Date in [___________], the Required Overcollateralization Percentage
of the greater of (i) the Pool Balance as of the Cut-off Date and (ii) the
Maximum Pool Balance as of the end of the Related Collection Period (the
"Initial Required Overcollateralization Amount"). As to any Payment Date on or
after the Payment Date in [_______], the greater of (A) the lesser of (x) the
Initial Required Overcollateralization Amount and (y) [___]% of the Pool Balance
as of the end of the related Collection Period and (B) [___]% of the greater of
(i) the Pool Balance as of the Cut-off Date and (ii) the Maximum Pool Balance;
Any scheduled reduction to the Required Overcollateralization Amount described
above shall not be made as of any Payment Date unless (i) the outstanding
Principal Balance of the Mortgage Loans delinquent __ days or more averaged over
the last 12 months as a percentage of the aggregate outstanding Principal
Balance of all Mortgage Loans averaged over the last 12 months does not exceed
[____]% (or if the Pool Balance is less than [___]% of the Maximum Pool Balance,
[___]%) and (ii) aggregate Liquidated Loss Amounts on the Mortgage Loans to date
for such Payment Date occurring during the first two years after the Closing
Date or occurring during the ___, ___, ___, or ___ year (or any year thereafter)
after the Closing Date, are less than [___], [___], [____], [___] or [___]%
respectively, of the Maximum Pool Balance and (iii) there has been no draw on
the Credit Enhancement Instrument. The Required Overcollateralization Amount may
be reduced with the prior written consent of the Credit Enhancer and the Rating
Agencies.]
Residual Ownership Interest: Collectively, the beneficial ownership
interests in the Issuer established under the Trust Agreement that are entitled
to receive all amounts to be paid to the Issuer or its designee pursuant to
Section 3.05(a)(xi) of the Indenture, over the term thereof.
Residual Ownership Interest Paying Agent: Any residual ownership
interest paying agent appointed pursuant to Section 3.03 of the Indenture, which
initially shall be [______________].
Responsible Officer: With respect to the Indenture Trustee,
any officer of the Indenture Trustee with direct responsibility
for the administration of the Trust Agreement and also, with
respect to a particular matter, any other officer to whom such
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matter is referred because of such officer's knowledge of and familiarity with
the particular subject.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
Security: Any of the Certificates or Notes.
Security Balance: The Principal Balance of the Notes or the
Certificates, as the case may be.
Securityholder or Holder: Any Noteholder or a Certificateholder.
Security Interest Collections: With respect to any Payment Date,
Interest Collections during the related Collection Period excluding the portion
thereof allocable to the Excluded Amount.
Security Percentage: With respect to any Payment Date and Security, the
percentage equivalent of a fraction the numerator of which is the Security
Balance of such Security immediately prior to such Payment Date and the
denominator of which is the aggregate of the Security Balances of all Securities
as of such date.
Security Principal Collections: With respect to any Payment Date,
Principal Collections during the related Collection Period excluding the portion
thereof allocable to the Excluded Amount.
Seller: [Countrywide Home Loans, Inc.], and its successors
and assigns.
Servicing Fee: With respect to any Mortgage Loan, the sum
of the related Master Servicing Fee and the related Subservicing
Fee.
Servicing Fee Rate: With respect to any Mortgage Loan, the
sum of the related Master Servicing Fee Rate and the related Subservicing
Fee Rate.
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 Indenture Trustee by the Master Servicer, as such list may be amended from
time to time.
Standard & Poor's: Standard & Poor's Ratings Group or its
successor in interest.
Subservicer: Any Person with whom the Master Servicer has
entered into a Subservicing Agreement as a Subservicer by the
Master Servicer, including the Initial Subservicers.
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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 [ ] of the Master Servicing Agreement.
Subservicing Fee: With respect to any Mortgage Loan and any Collection
Period, the fee retained monthly by the Subservicer (or, in the case of a
nonsubserviced Mortgage Loan, by the Master Servicer) equal to the product of
(i) the Subservicing Fee Rate divided by 12 and (ii) the aggregate Asset Balance
of the Mortgage Loans as of the first day of such Collection Period.
Subservicing Fee Rate: With respect to any Mortgage Loan,
[____]% per annum.
[Substitution Adjustment Amounts: With respect to any
Eligible Substitute Mortgage Loan, the amount as defined in
Section [ ] of the Loan Purchase Agreement.]
[Telerate Screen Page 3750: The display designated as page 3750 on the
Telerate Service (or such other page as may replace page 3750 on that service
for the purpose of displaying London interbank offered rates of major banks). If
such rate does not appear on such page (or such other page as may replace that
page on that service, or if such service is no longer offered, such other
service for displaying LIBOR or comparable rates as may be selected by the
Issuer after consultation with the Indenture Trustee), the rate will be the
Reference Bank Rate.]
Treasury Regulations: Regulations, including proposed or temporary
Regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
Trust Agreement: The Trust Agreement dated as of
__________, 199_ between the Owner Trustee, and the Depositor.
Trust Estate: The meaning specified in the Granting Clause
of the Indenture.
Trust Indenture Act or TIA: The Trust Indenture Act of 1939, as amended
from time to time, as in effect on any relevant date.
UCC: The Uniform Commercial Code, as amended from time to
time, as in effect in any specified jurisdiction.
Unpaid Certificate Distribution Amount Shortfall: With respect to any
Payment Date, the aggregate amount, if any, of Certificate Distribution Amount
that was accrued in respect of a prior Payment Date and has not been distributed
to Certificateholders.
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Weighted Average Net Loan Rate: With respect to the Mortgage Loans in
the aggregate, and any Due Date, the average of the Net Loan Rate for each
Mortgage Loan as of the last day of the related Billing Cycle weighted on the
basis of the related Asset Balances outstanding as of the last day of the
related Billing Cycle (except for the [______________] Loans where the Net Loan
Rate will represent the average Net Loan Rate during the related Billing Cycles
weighted on the basis of the daily Asset Balance during the related Billing
Cycle for such Mortgage Loans) for each Mortgage Loan as determined by the
Master Servicer in accordance with the Master Servicer's normal servicing
procedures.
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MASTER SERVICING AGREEMENT
Dated as of [ ]
among
[Countrywide] Home Equity Loan Trust 199_, Issuer
and
[Countrywide Home Loans, Inc.], Seller and Master Servicer
and
[ ], Trustee
Relating to the Mortgage Loans
Pledged as Collateral for the Issuer's
Asset Backed Notes and Asset Backed Certificates,
Series 199_,
in the Aggregate Initial
Principal Amount of $[ ]
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PRELIMINARY STATEMENT...................................................................... 1
1. Defined Terms.......................................................................... 1
Advance............................................................................ 2
Collection Account................................................................. 6
Corporate Trust Office............................................................. 8
Determination Date................................................................. 9
Distribution Date.................................................................. 10
Eligible Account................................................................... 10
Excess Proceeds.................................................................... 11
FDIC ............................................................................ 12
FHLMC ............................................................................ 12
FIRREA ............................................................................ 12
Fitch ............................................................................ 12
FNMA ............................................................................ 12
Loan-to-Value Ratio................................................................ 17
Master Servicing Fee............................................................... 18
Moody's............................................................................ 19
Mortgage File...................................................................... 19
Nonrecoverable Advance............................................................. 20
Officer's Certificate.............................................................. 20
Opinion of Counsel................................................................. 20
Outstanding........................................................................ 20
Payment Account....................................................................
Payment Account Deposit Date.......................................................
Permitted Investments.............................................................. 22
Person ............................................................................ 23
Prepayment Period.................................................................. 24
Principal Prepayment............................................................... 25
Principal Prepayment in Full....................................................... 25
Purchase Price..................................................................... 25
Qualified Insurer.................................................................. 25
Realized Loss...................................................................... 26
Relief Act......................................................................... 27
Relief Act Reductions.............................................................. 27
REO Property....................................................................... 27
Request for Release................................................................ 27
Required Insurance Policy.......................................................... 27
Servicing Advances................................................................. 29
Servicing Officer.................................................................. 30
Substitute Mortgage Loan........................................................... 30
Substitution Adjustment Amount..................................................... 30
Trustee Fee........................................................................ 30
Trustee Fee Rate................................................................... 30
</TABLE>
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TABLE OF CONTENTS (CONT'D)
<TABLE>
<CAPTION>
Page
----
<S> <C>
2. Conveyance of Mortgage Loans; Representations and
Warranties......................................................................... 31
(a) Conveyance of Mortgage Loans; Retention of Obligation
to Fund Advances Under Credit Line Agreements............................... 31
(b) Acceptance by Trustee; Retransfer of Mortgage
Loans....................................................................... 36
(c) Documents, Records and Funds in Possession of
Master Servicer to be Held for Trustee...................................... 38
(d) Representations, Warranties and Covenants of the
Seller and the Master Servicer.............................................. 40
(e) Covenants of the Master Servicer............................................ 42
(f) Covenants of the Depositor.................................................. 43
3. Administration and Servicing of Mortgage Loans.............................. 44
(a) Master Servicer to Service Mortgage Loans................................... 44
(b) Subservicing; Enforcement of the Obligations of
Servicers................................................................... 47
(c) Successor Servicers......................................................... 48
(d) Liability of the Master Servicer............................................ 48
(e) No Contractual Relationship Between Servicers and the
Trustee..................................................................... 49
(f) Rights of the Depositor and the Trustee in Respect of
the Master Servicer......................................................... 49
(g) Trustee to Act as Master Servicer........................................... 49
(h) Collection of Mortgage Loan Payments; Collection
Accounts; Payment Account................................................... 50
(i) Collection of Taxes, Assessments and Similar
Items; Escrow Accounts...................................................... 53
(j) Access to Certain Documentation and Information
Regarding the Mortgage Loans................................................ 54
(k) Permitted Withdrawals from the Note Account................................. 54
(l) Maintenance of Hazard Insurance; Maintenance of
Primary Insurance Policies.................................................. 56
(m) Enforcement of Due-On-Sale Clauses; Assumption
Agreements.................................................................. 58
(n) Realization Upon Defaulted Mortgage Loans; Repurchase
of Certain Mortgage Loans................................................... 60
(o) Access to Certain Documentation............................................. 63
(p) Annual Statement as to Compliance........................................... 64
(q) Annual Independent Public Accountants' Servicing
Statement; Financial Statements............................................. 64
(r) Errors and Omissions Insurance; Fidelity Bonds.............................. 65
(s) Master Servicer Monthly Data................................................ 65
4. Advances........................................................................... 65
</TABLE>
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<PAGE>
TABLE OF CONTENTS (CONT'D)
<TABLE>
<CAPTION>
Page
----
<S> <C>
5. Servicing Compensation................................................................. 66
6. The Master Servicer................................................................ 66
(a) Respective Liabilities of the Depositor and the
Master Servicer............................................................. 66
(b) Merger or Consolidation of the Depositor or the
Master Servicer............................................................. 66
(c) Limitation on Liability of the Depositor, the
Seller, Master Servicer and Others.......................................... 67
(d) Limitation on Resignation of the Master Servicer............................ 68
7. Default............................................................................ 68
(a) Events of Default........................................................... 68
(b) Trustee to Act; Appointment of Successor.................................... 71
(c) Notification to Securityholders............................................. 72
8. Miscellaneous...................................................................... 72
(a) Term of Master Servicing Agreement.......................................... 72
(b) Assignment.................................................................. 73
(c) Notices..................................................................... 73
(d) Inspection and Audit Rights................................................. 74
(e) Governing Law............................................................... 74
(f) Amendment..................................................................... 75
(g) Severability of Provisions.................................................. 76
(h) No Joint Venture............................................................ 77
(i) Recordation of Agreement; Counterparts...................................... 77
(j) Limitation of Liability of [owner trustee].
(k) Nonpetition Covenants....................................................... 78
SCHEDULE I: Mortgage Loan Schedule....................................................S-I-1
SCHEDULE II: Representations and Warranties of
the Master Servicer ..............................................S-II-1
SCHEDULE III: Representations and Warranties as
to the Mortgage Loans............................................S-III-1
SCHEDULE IV: Representations and Warranties of
the Issuer .......................................................S-IV-1
EXHIBITS
EXHIBIT A FORM OF INITIAL CERTIFICATION OF TRUSTEE.............................A-1
EXHIBIT B FORM OF FINAL CERTIFICATION OF TRUSTEE...............................B-1
EXHIBIT C REQUEST FOR RELEASE
(for Trustee)........................................................C-1
EXHIBIT D REQUEST FOR RELEASE (Mortgage Loan
Paid in Full, Repurchased and Released)..............................D-1
</TABLE>
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MASTER SERVICING AGREEMENT
THIS MASTER SERVICING AGREEMENT is made and entered into as of
[ ], by and among [Countrywide] Home Equity Loan Trust 199_, a statutory
business trust formed under the laws of the State of [Delaware] (the "Issuer"),
[ ], a [state] corporation (the "Master Servicer" or, in its capacity as
seller, the "Seller") and [Countrywide Home Loans, Inc.], a [ ] corporation
(in its capacity as trustee under the Indenture referred to below,
the "Trustee").
PRELIMINARY STATEMENT
The Issuer was formed for the purpose of issuing asset backed
notes and asset backed certificates secured by mortgage collateral. The Issuer
has entered into a trust indenture, dated as of [ ] (the "Indenture"), between
the Issuer and the Trustee, pursuant to which the Issuer intends to issue its
Home Equity Loan Asset Backed Notes and Home Equity Loan Asset Backed
Certificates, Series 199_, in the aggregate initial principal amount of $[ ]
(the "Securities"). Pursuant to the Indenture, as security for the indebtedness
represented by such Securities, the Issuer is and will be pledging to the
Trustee, or granting the Trustee a security interest in, among other things,
certain Mortgage Loans and Additional Balances, its rights under this Agreement,
the Payment Account, the Collection Account [and certain Insurance Policies] (as
each such term is defined herein).
The parties desire to enter into this Agreement to provide, among
other things, for the servicing of the Mortgage Loans by the Master Servicer.
The Master Servicer acknowledges that, in order further to secure the
Securities, the Issuer is and will be granting to the Trustee a security
interest in, among other things, its rights under this Agreement, and the Master
Servicer agrees that all covenants and agreements made by the Master Servicer
herein with respect to the Mortgage Loans shall also be for the benefit and
security of the Trustee and Holders of the Securities. For its services
hereunder, the Master Servicer will receive a Master Servicing Fee (as defined
herein) with respect to each Mortgage Loan serviced hereunder.
1. Defined Terms.
Except as otherwise specified or as the context may otherwise
require, the following terms have the respective meanings set forth below for
all purposes of this Agreement, and the definitions of such terms are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms:
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Advance: The payment required to be made by the Master Servicer with
respect to any Distribution Date pursuant to Section 4, the amount of any such
payment being equal to the aggregate of payments of principal and interest (net
of the Master Servicing Fee and net of any net income in the case of any REO
Property) on the Mortgage Loans that were due on the related Due Date and not
received as of the close of business on the related Determination Date, less the
aggregate amount of any such delinquent payments that the Master Servicer has
determined would constitute a Nonrecoverable Advance if advanced.
Additional Balance: With respect to any Mortgage Loan, any future Draw
made by the related Mortgagor pursuant to the related Loan Agreement after the
Cut-off Date in the case of an Initial Loan, or after the Deposit Date in the
case of an Additional Loan; provided, however, that if an Amortization Event
occurs, then any Draw after such Amortization Event shall not be acquired by the
Issuer and shall not be an Additional Balance.
Additional Loans: All home equity line of credit loans sold by the
Depositor to the Issuer after the Closing Date pursuant to Section 2 of the Loan
Purchase Agreement.
Administration Agreement: The Administration Agreement
dated as of ___________, 199_ among the Issuer, the Trustee and
[______________], as Administrator, as it may be amended from
time to time.
Administrator: [______________], as administrator under the
Administration Agreement or any successor Administrator appointed
pursuant to the terms of the Administration Agreement.
Agreement: Means this Master Servicing Agreement, as the
same may be amended or supplemented from time to time.
Appraised Value: With respect to any Mortgaged Property, either (x) the
value set forth in an appraisal of such Mortgaged Property made to establish
compliance with the underwriting criteria then in effect in connection with the
later of the application for the Mortgage Loan secured by such Mortgaged
Property or any subsequent increase or decrease in the related Credit Limit or
to reduce or eliminate the amount of any primary insurance, or (y) if the sales
price of the Mortgaged Property is considered in accordance with the
underwriting criteria applicable to the Mortgage Loan, the lesser of (i) the
appraised value referred to in (x) above and (ii) the sales price of such
Mortgaged Property.
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<PAGE>
Asset Balance: With respect to any Mortgage Loan, other than a
Liquidated Mortgage Loan, and as of any day, the related Cut-off Date Asset
Balance or Deposit Date Asset Balance, [plus (i) any Additional Balances in
respect of such Mortgage Loan conveyed to the Issuer,] minus [(ii)] all
collections credited as principal in respect of any such Mortgage Loan in
accordance with the related Loan Agreement (except for any such collections that
are allocable to the Excluded Amount) and applied in reduction of the Asset
Balance thereof. For purposes of this definition, a Liquidated Mortgage Loan
shall be deemed to have an Asset Balance equal to the Asset Balance of the
related Mortgage Loan immediately prior to the final recovery of all related
Liquidation Proceeds and an Asset Balance of zero thereafter.
Assignment of Mortgage: With respect to any Mortgage, an assignment,
notice of transfer or equivalent instrument, in recordable form, sufficient
under the laws of the jurisdiction in which the related Mortgaged Property is
located to reflect the conveyance of the Mortgage, which assignment, notice of
transfer or equivalent instrument may be in the form of one or more blanket
assignments covering the Mortgage Loans secured by Mortgaged Properties located
in the same jurisdiction.
Bankruptcy Code: Means the United States Bankruptcy Reform
Act of 1978, as amended.
Basic Documents: The Trust Agreement, the Certificate of Trust, the
Indenture, the Loan Purchase Agreement, the Insurance Agreement, the
Administration Agreement, the Master Servicing Agreement, the Custodial
Agreement and the other documents and certificates delivered in connection with
any of the above.
Billing Cycle: With respect to any Mortgage Loan and Due
Date, the calendar month preceding such Due Date.
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
[_____________] are required or authorized by law to be closed.
Certificateholder: The Person in whose name a Certificate is registered
in the Certificate Register except that, any Certificate registered in the name
of the Issuer, the Owner Trustee or the Trustee or any Affiliate of any of them
shall be deemed not to be outstanding and the registered holder will not be
considered a Certificateholder or a holder for purposes of giving any request,
demand, authorization, direction, notice, consent or waiver under the Indenture
or the Trust Agreement provided that, in determining whether the Trustee or the
Owner Trustee shall be protected in relying upon any such request,
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demand, authorization, direction, notice, consent or waiver, only Certificates
that the Trustee or the Owner Trustee knows to be so owned shall be so
disregarded. Owners of Certificates that have been pledged in good faith may be
regarded as Holders if the pledgee establishes to the satisfaction of the
Trustee or the Owner Trustee, as the case may be, the pledgee's right so to act
with respect to such Certificates and that the pledgee is not the Issuer, any
other obligor upon the Certificates or any Affiliate of any of the foregoing
Persons.
Certificates: The Home Equity Loan Asset Backed Certificates, Series
199_-_, each evidencing undivided beneficial interests in the Issuer and
executed by the Owner Trustee in substantially the form set forth in Exhibit A
to the Trust Agreement.
[CHL]: Means [Countrywide Home Loans, Inc.], a [New York]
corporation, and its successors and assigns.
Class: The Notes or the Certificates, as the case may be.
Closing Date: ___________, 199_.
Code: The Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
Collateral: The meaning specified in the Granting Clause of
the Indenture.
Collection Account: Means the Eligible Account or Accounts
established and maintained by the Master Servicer in accordance
with Section 3(h)(iii).
Collection Period: With respect to any Mortgage Loan and Payment Date
other than the first Payment Date, the calendar month preceding any such Payment
Date and with respect to the first Payment Date, the period from _____________
through [___________].
Combined Loan-to-Value Ratio: With respect to any Mortgage Loan and any
date, the percentage equivalent of a fraction, the numerator of which is the sum
of (i) the greater of (x) the Credit Limit and (y) the Cut-off Date Asset
Balance of such Mortgage Loan and (ii) the outstanding principal balance as of
the date of the origination of such Mortgage Loan (or any subsequent date as of
which such outstanding principal balance may be determined in connection with an
increase or decrease in the Credit Limit or to reduce the amount of primary
insurance for such Mortgage Loan) of any mortgage loan or mortgage loans that
are secured by liens on the Mortgaged Property that are senior or
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subordinate to the Mortgage and the denominator of which is the
Appraised Value of the related Mortgaged Property.
Corporate Trust Office: The designated office of the Trustee in the
State of ________ 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 Agreement is located at ____________________________
(Attn: ___________________________, facsimile no. ________________, and which is
the address to which notices to and correspondence with the Trustee should be
directed.
Credit Limit: With respect to any Mortgage Loan, the maximum
Asset Balance permitted under the terms of the related Loan Agreement.
Custodial Agreement: Any Custodial Agreement between the
Custodian, the Trustee, the Issuer and the Master Servicer
relating to the custody of the Mortgage Loans and the Related
Documents.
Custodian: With respect to the Mortgage Loans,
[______________], a [_______________], and its successors and
assigns.
Cut-Off Date: With respect to the Initial Loans ________,
199_.
DCR: Means Duff & Phelps Credit Rating Company, or any successor
thereto. If DCR is designated as a Rating Agency in the Indenture, for purposes
of Section 8(c) the address for notices to DCR shall be Duff & Phelps Credit
Rating Company, 55 E. Monroe Street, 35th Floor, Chicago, Illinois 60603,
Attention: MBS Monitoring, or such other address as DCR may hereafter furnish to
the Issuer and the Master Servicer.
Deleted Mortgage Loan: Has the meaning ascribed thereto in Section 5.
[Deposit Date: The applicable date as of which any Additional Loan is
sold to the Issuer pursuant to the Loan Purchase Agreement.
Deposit Date Asset Balance: With respect to any Additional
Loan, the Asset Balance thereof as of the Deposit Date.]
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Depositor: CWABS, Inc., a Delaware corporation, or its
successor in interest.
Determination Date: As to any Distribution Date, the ____ day of each
month or if such ____ day is not a Business Day the next preceding Business Day;
provided, however, that if such ____ day or such Business Day, whichever is
applicable, is less than two Business Days prior to the related Distribution
Date, the Determination Date shall be the first Business Day which is two
Business Days preceding such Distribution Date.
Distribution Date: The ____ day of each calendar month after the initial
issuance of the Certificates, or if such ____ day is not a Business Day, the
next succeeding Business Day, commencing in ____________, 199_.
Draw: With respect to any Mortgage Loan, a borrowing by the Mortgagor
under the related Loan Agreement.
Due Date: With respect to the Mortgage Loans, the [__]th day of the
month.
Eligible Account: Any of (i) an account or accounts maintained with a
federal or state chartered depository institution or trust company the
short-term unsecured debt obligations of which (or, in the case of a depository
institution or trust company that is the principal subsidiary of a holding
company, the debt obligations of such holding company) have the highest
short-term ratings of each Rating Agency at the time any amounts are held on
deposit therein, or (ii) an account or accounts in a depository institution or
trust company in which such accounts are insured by the FDIC (to the limits
established by the FDIC) and the uninsured deposits in which accounts are
otherwise secured such that, as evidenced by an Opinion of Counsel delivered to
the Trustee and to each Rating Agency, the Securityholders have a claim with
respect to the funds in such account or a perfected first priority 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 or trust company in which
such account is maintained, or (iii) a trust account or accounts maintained with
(a) the trust department of a federal or state chartered depository institution
or (b) a trust company, acting in its fiduciary capacity or (iv) any other
account acceptable to each Rating Agency. Eligible Accounts may
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bear interest, and may include, if otherwise qualified under this definition,
accounts maintained with the Trustee.
Eligible Substitute Mortgage Loan: A Mortgage Loan substituted by the
Depositor 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 outstanding principal balance of the Deleted Mortgage Loan (the amount of
any shortfall to be deposited by the Seller in the Collection Account in the
month of substitution); (ii) have a Loan Rate not less than the Loan Rate of the
Deleted Mortgage Loan and not more than __% in excess of the Loan Rate of such
Deleted Mortgage Loan; (iii) have a Loan Rate based on the same index with
adjustments to such Loan Rate made on the same interest rate adjustment date as
that of the Deleted Mortgage Loan; (iv) have a Margin that is not less than the
Margin of the Deleted Mortgage Loan and not more than _____ basis points higher
than the Margin for the Deleted Mortgage Loan; (v) have a mortgage of the same
or higher level of priority as the mortgage relating to the Deleted Mortgage
Loan; (vi) have a remaining term to maturity not more than ____ months earlier
and not more than ____ months later than the remaining term to maturity of the
Deleted Mortgage Loan; (vii) comply with each representation and warranty as to
the Mortgage Loans set forth in the Loan Purchase Agreement (deemed to be made
as of the date of substitution); (viii) in general, have an original Combined
Loan-to-Value Ratio not greater than that of the Deleted Mortgage Loans; and
(ix) satisfy certain other conditions specified in the Purchase Agreement. To
the extent the Principal Balance of an Eligible Substitute Mortgage Loan is less
than the Principal Balance of the related Deleted Mortgage Loan, the Seller will
be required to make a deposit tot he Collection Account equal to such
difference; and (x) not be __ days or more delinquent.
Escrow Account: Means the Eligible Account or Accounts
established and maintained pursuant to Section 3(i) hereof.
Excess Proceeds: With respect to any Liquidated Mortgage Loan, the
amount, if any, by which the sum of any Liquidation Proceeds of such Mortgage
Loan received in the calendar month in which such Mortgage Loan became a
Liquidated Mortgage Loan, net of any amounts previously reimbursed to the Master
Servicer as Nonrecoverable Advance(s) with respect to such Mortgage Loan
pursuant to Section 3(k)(i)(C), exceeds (i) the unpaid principal balance of such
Liquidated Mortgage Loan as of the Due Date in
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the month in which such Mortgage Loan became a Liquidated Mortgage Loan plus
(ii) accrued interest at the Mortgage Rate from the Due Date as to which
interest was last paid or advanced (and not reimbursed) to Securityholders up to
the Due Date applicable to the Distribution Date immediately following the
calendar month during which such liquidation occurred.
FDIC: The Federal Deposit Insurance Corporation, or any
successor thereto.
FHLMC: The 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.
FIRREA: The Financial Institutions Reform, Recovery, and
Enforcement Act of 1989.
Fitch: Fitch Investors Service, L.P., or any successor thereto. If Fitch
is designated as a Rating Agency in the Preliminary Statement, for purposes of
Section 8(c) the address for notices to Fitch shall be Fitch Investors Service,
L.P., One State Street Plaza, New York, New York 10004, Attention:
_______________________________________, or such other address as Fitch may
hereafter furnish to the Depositor and the Master Servicer.
FNMA: The 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.
Gross Margin: With respect to any Mortgage Loan, the percentage set
forth as the "Gross Margin" for such Mortgage Loan on the Mortgage Loan
Schedule, as adjusted from time to time with respect to any [______________]
Loan in accordance with the terms of this Agreement.
Holder: Any of the Noteholders or Securityholders.
Increased Senior Lien Limitation: shall have the meaning
set forth in Section 3(a).
Indenture: Means the trust indenture, dated as of the date hereof,
between the Issuer and the Trustee, as such Indenture may be amended or
supplemented from time to time in accordance with its terms.
[Insurance Agreement: The insurance and reimbursement
agreement dated as of ______________, 199_ among the Master
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Servicer, the Seller, the Depositor, the Issuer and the Credit Enhancer,
including any amendments and supplements thereto.]
Insurance Policy: Means, with respect to any Mortgage Loan, any
insurance policy, including all riders and endorsements thereto in effect,
including any replacement policy or policies for any Insurance Policies.
Insurance Proceeds: Proceeds paid by any insurer pursuant to any
insurance policy covering a Mortgage Loan which are required to be remitted to
the Master Servicer, or amounts required to be paid by the Master Servicer
pursuant to the last sentence of Section [_____] of the Master Servicing
Agreement, net of any component thereof (i) covering any expenses incurred by or
on behalf of the Master Servicer in connection with obtaining such proceeds,
(ii) that is applied to the restoration or repair of the related Mortgaged
Property, (iii) released to the Mortgagor in accordance with the Master
Servicer's normal servicing procedures or (iv) required to be paid to any holder
of a mortgage senior to such Mortgage Loan.
Interest Period: With respect to any Payment Date other than the first
Payment Date, the period beginning on the preceding Payment Date and ending on
the day preceding such Payment Date, and in the case of the first Payment Date,
the period beginning on the Closing Date and ending on the day preceding the
first Payment Date.
Issuer: [Countrywide] Home Equity Loan Trust 199_-_, a
Delaware business trust, or its successor in interest.
Issuer Request: A written order or request signed in the name of the
Issuer by any one of its Authorized Officers and delivered to the Trustee.
Lien: Any mortgage, deed of trust, pledge, conveyance, hypothecation,
assignment, participation, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority right or interest or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement under the UCC (other than
any such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing; provided,
however, that any assignment pursuant to Section [_____] of the Master Servicing
Agreement shall not be deemed to constitute a Lien.
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Lifetime Rate Cap: With respect to each Mortgage Loan with respect to
which the related Mortgage Note provides for a lifetime rate cap, the maximum
Loan Rate permitted over the life of such Mortgage Loan under the terms of such
Mortgage Note, as set forth on the Mortgage Loan Schedule and initially as set
forth on Exhibit A to the Master Servicing Agreement.
Liquidated Mortgage Loan: With respect to any Payment Date, any Mortgage
Loan in respect of which the Master Servicer has determined, in accordance with
the servicing procedures specified in the Master Servicing Agreement, as of the
end of the related Collection Period that substantially all Liquidation Proceeds
which it reasonably expects to recover with respect to the disposition of the
related REO have been recovered.
Liquidation Expenses: Out-of-pocket expenses (exclusive of overhead)
which are incurred by or on behalf of the Master Servicer in connection with the
liquidation of any Mortgage Loan and not recovered under any insurance policy,
such expenses including, without limitation, legal fees and expenses, any
unreimbursed amount expended (including, without limitation, amounts advanced to
correct defaults on any mortgage loan which is senior to such Mortgage Loan and
amounts advanced to keep current or pay off a mortgage loan that is senior to
such Mortgage Loan) respecting the related Mortgage Loan and any related and
unreimbursed expenditures for real estate property taxes or for property
restoration, preservation or insurance against casualty loss or damage.
Liquidation Loss Amounts: With respect to any Payment Date and any
Mortgage Loan that became a Liquidated Mortgage Loan during the related
Collection Period, the unrecovered portion of the related Asset Balance thereof
at the end of such Collection Period, after giving effect to the Net Liquidation
Proceeds applied in reduction of the Asset Balance.
Liquidation Proceeds: Proceeds (including Insurance Proceeds [but not
including amounts drawn under the Credit Enhancement Instrument]) received in
connection with the liquidation of any Mortgage Loan or related REO, whether
through trustee's sale, foreclosure sale or otherwise.
Loan Agreement: With respect to any Mortgage Loan, the credit line
account agreement executed by the related Mortgagor and any amendment or
modification thereof.
Loan Purchase Agreement: The Loan Purchase Agreement, dated as of the
Cut-off Date, between the Seller, as seller, and the Depositor, as purchaser,
with respect to the Mortgage Loans.
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Loan Rate: With respect to any Mortgage Loan and any day,
the sum of the Index Rate and the Margin.
Loan-to-Value Ratio: With respect to any Mortgage Loan and as to any
date of determination, (i) the principal balance of such Mortgage Loan divided
by (ii) the Collateral Value of the related Mortgaged Property.
Margin: The [spread].
Master Servicer: Means [Countrywide Home Loans, Inc.], a [New York]
corporation, and its successors and assigns, in its capacity as master servicer
hereunder.
Master Servicer Advance Date: Means as to any Distribution
Date, 12:30 p.m. Pacific time on the Business Day immediately
preceding such Distribution Date.
Master Servicing Fee: As to each Mortgage Loan and any Distribution
Date, an amount payable out of each full payment of interest received on such
Mortgage Loan and equal to one-twelfth of the Master Servicing Fee Rate
multiplied by the Stated Principal Balance of such Mortgage Loan as of the Due
Date in the month of such Distribution Date (prior to giving effect to any
Scheduled Payments due on such Mortgage Loan on such Due Date), subject to
reduction as provided in Section 5.
Master Servicing Fee Rate: Means with respect to each
Mortgage Loan, [ ]% per annum.
Moody's: Moody's Investors Service, Inc., or any successor thereto. If
Moody's is designated as a Rating Agency in the Preliminary Statement, for
purposes of Section 8(c) the address for notices to Moody's shall be Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10007, Attention:
___________________________________, or such other address as Moody's may
hereafter furnish to the Depositor or the Master Servicer.
Mortgage: The mortgage, deed of trust or other instrument creating a
first or second lien on an estate in fee simple interest in real property
securing a Mortgage Loan.
Mortgage File: The file containing the Related Documents pertaining to a
particular Mortgage Loan and any additional documents required to be added to
the Mortgage File pursuant to the Loan Purchase Agreement or the Master
Servicing Agreement.
Mortgage Loan Schedule: With respect to any date, the
schedule of Mortgage Loans included in the Trust Estate on such
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date. The initial schedule of Mortgage Loans as of the Cut-Off Date is the
schedule set forth in Exhibit A of the Master Servicing Agreement, which
schedule sets forth as to each Mortgage Loan (i) the Cut-Off Date Trust Balance,
(ii) the Credit Limit, (iii) the Gross Margin, (iv) the name of the Mortgagor,
(v) the Lifetime Rate Cap, if any, (vi) the loan number, (vii) an indication as
to the applicable Mortgage Loan Group, and (viii) the lien position of the
related Mortgage. The Mortgage Loan Schedule will be amended from time to time
by annex to reflect Additional Loans.
Mortgage: Means the mortgage, deed of trust or other 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(a)(i) hereof
pertaining to a particular Mortgage Loan and any additional documents delivered
to the Trustee to be added to the Mortgage File pursuant to this Agreement.
Mortgage Loans: At any time, collectively, all Initial Loans [and
Additional Loans, in each case including Additional Balances, if any, that have
been sold to the Depositor under the Loan Purchase Agreement,] in each case
together with the Related Documents, and that remain subject to the terms
thereof. Such schedule shall also set forth the total of the amounts described
under (iv) and (v) above for all of the Mortgage Loans.
Mortgage Note: With respect to a Mortgage Loan, the Loan Agreement
pursuant to which the related mortgagor agrees to pay the indebtedness evidenced
thereby and secured by the related Mortgage as modified or amended.
Mortgaged Property: The underlying property, including real
property and improvements thereon, securing a Mortgage Loan.
Mortgagor: The obligor or obligors under a Loan Agreement.
Net Liquidation Proceeds: With respect to any Liquidated
Mortgage Loan, Liquidation Proceeds net of Liquidation Expenses.
Net Loan Rate: With respect to any Mortgage Loan and any
day, the related Loan Rate less the related Servicing Fee Rate.
Nonrecoverable Advance: Any portion of an Advance previously made or
proposed to be made by the Master Servicer that, in the good faith judgment of
the Master Servicer, will not be ultimately recoverable by the Master Servicer
from the related Mortgagor, related Liquidation Proceeds or otherwise.
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Notes: The Notes designated as the "Notes" in the
Indenture.
Noteholder or Holder: Means the Person in whose name a Note
is registered in the Note Register (as defined in the Indenture).
Officer's Certificate: A certificate (i) signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, a Managing Director, a
Vice President (however denominated), an Assistant Vice President, the
Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant
Secretaries of the Depositor or the Master Servicer, or (ii), if provided for in
this Agreement, signed by a Servicing Officer, as the case may be, and delivered
to the Depositor and the Trustee, as the case may be, as required by this
Agreement.
Opinion of Counsel: A written opinion of counsel, who may be counsel for
the Depositor or the Master Servicer, including, in-house counsel, reasonably
acceptable to the Trustee; provided, however, that with respect to the
interpretation or application of the REMIC Provisions, such counsel must (i) in
fact be independent of the Depositor and the Master Servicer, (ii) not have any
direct financial interest in the Depositor or the Master Servicer or in any
affiliate of either, and (iii) not be connected with the-Depositor or the Master
Servicer as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.
Outstanding: With respect to the Certificates as of any date of
determination, all Certificates theretofore executed and authenticated under
this Agreement except:
(i) Certificates theretofore canceled by the Trustee
or delivered to the Trustee for cancellation; and
(ii) Certificates in exchange for which or in lieu of which other
Certificates have been executed and delivered by the Trustee
pursuant to this Agreement.
Owner Trust Estate: The corpus of the Issuer created by the Trust
Agreement which consists of the Mortgage Loans, such assets as shall from time
to time be deposited in the Collection Account and/or the Payment Account
allocable to the Mortgage Loans in accordance with the Trust Agreement, property
that secured a Mortgage Loan and that has become REO, certain hazard insurance
policies maintained by the Mortgagors or by or on behalf of the Master Servicer
in respect of the Mortgage Loans, [the Credit Enhancement Instrument,] an
assignment of the Depositor's rights under the Loan Purchase Agreement and the
obligation of the
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Depositor to purchase Additional Balances under the Loan Purchase Agreement and
all proceeds of each of the foregoing.
Owner Trustee: [______________], and its successors and assigns or any
successor owner trustee appointed pursuant to the terms of the Trust Agreement.
Paying Agent: Any paying agent or co-paying agent appointed
pursuant to Section 3.03 of the Indenture, which initially shall
be [______________].
Payment Account: The account established by the Trustee pursuant to
Section 8.02 of the Indenture and Section [ ] of the Master Servicing
Agreement. The Payment Account shall be an Eligible Account.
Payment Account: The separate Eligible Account created and maintained by
the Trustee pursuant to Section 3(h) in the name of the Trustee for the benefit
of the Securityholders and designated "_________________________ in trust for
registered holders of Home Equity Loan Trust Asset Backed Certificates, Series
199_-_." Funds in the Payment Account shall be held in trust for the
Securityholders for the uses and purposes set forth in this Agreement.
Payment Account Deposit Date: As to any Distribution Date,
12:30 p.m. Pacific time on the Business Day immediately preceding
such Distribution Date.
Payment Date: The [___] day of each month, or if such day
is not a Business Day, then the next Business Day.
Percentage Interest: With respect to any Note, the percentage obtained
by dividing the Security Balance of such Note by the aggregate of the Security
Balances of all Notes of the same Class. With respect to any Certificate, the
percentage obtained by dividing the denomination specified on such Certificate
by the Initial Principal Balance of the Certificates.
Permitted Investments: At any time, any one or more of the following
obligations and securities: (i) obligations of the United States or any agency
thereof, provided such obligations are backed by the full faith and credit of
the United States; (ii) general obligations of or obligations guaranteed by any
state of the United States or the District of Columbia receiving the highest
long-term debt rating of each Rating Agency rating the related Series of
Securities, or such lower rating as will not result in the downgrading or
withdrawal of the ratings then assigned to the Securities by each such Rating
Agency; (iii) commercial or finance company paper (including, without
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limitation, commercial paper issued by Countrywide Home Loans, Inc. or any of
its affiliates) which is then receiving the highest commercial or finance
company paper rating of each such Rating Agency, or such lower rating as will
not result in the downgrading or withdrawal of the ratings then assigned to the
Securities by each such Rating Agency; (iv) certificates of deposit, demand or
time deposits, or bankers' acceptances issued by any depository institution or
trust company incorporated under the laws of the United States or of any state
thereof and subject to supervision and examination by federal and/or state
banking authorities, provided that the commercial paper and/or long term
unsecured debt obligations of such depository institution or trust company (or
in the case of the principal depository institution in a holding company system,
the commercial paper or long-term unsecured debt obligations of such holding
company, but only if Moody's Investors Service, Inc. ("Moody's") is not a Rating
Agency) are then rated one of the two highest long-term and the highest
short-term ratings of each such Rating Agency for such securities, or such lower
ratings as will not result in the downgrading or withdrawal of the rating then
assigned to the Securities by any such Rating Agency; (iv) demand or time
deposits or certificates of deposit issued by any bank or trust company or
savings institution to the extent that such deposits are fully insured by the
FDIC; (v) guaranteed reinvestment agreements issued by any bank, insurance
company or other corporation containing, at the time of the issuance of such
agreements, such terms and conditions as will not result in the downgrading or
withdrawal of the rating then assigned to the Securities by any such Rating
Agency; (vi) repurchase obligations with respect to any security described in
clauses (i) and (ii) above, in either case entered into with a depository
institution or trust company (acting as principal) described in clause (iv)
above; (vii) securities (other than stripped bonds, stripped coupons or
instruments sold at a purchase price in excess of 115% of the face amount
thereof) bearing interest or sold at a discount issued by any corporation
incorporated under the laws of the United States or any state thereof which, at
the time of such investment, have one of the two highest ratings of each Rating
Agency (except if the Rating Agency is Moody's, such rating shall be the highest
commercial paper rating of Moody's for any such securities), or such lower
rating as will not result in the downgrading or withdrawal of the rating then
assigned to the Securities by any such Rating Agency, as evidenced by a signed
writing delivered by each such Rating Agency; and (viii) such other investments
having a specified stated maturity and bearing interest or sold at a discount
acceptable to each Rating Agency as will not result in the downgrading or
withdrawal of the rating then assigned to the Securities of such Series by any
such Rating Agency, as evidenced by a signed writing delivered by each such
Rating Agency; provided that no such instrument shall be a
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Permitted Investment if such instrument evidences the right to receive interest
only payments with respect to the obligations underlying such instrument.
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government, or any agency or political subdivision thereof.
[Policy: The irrevocable and unconditional limited financial guaranty
insurance policy number [__________], dated as of the Closing Date, issued by
the Credit Enhancer to the Trustee for the benefit of the Noteholders and to the
Certificate Paying Agent as agent for the Issuer for the benefit of the
Securityholders.]
Pool Balance: With respect to any date, the aggregate of
the Asset Balances of all Mortgage Loans as of such date.
Prepayment Period: As to any Distribution Date, the period from the __th
day of the calendar month preceding the month of such Distribution Date (or, in
the case of the first Distribution Date, from the Cut-off Date) through the __th
of the month of such Distribution Date.
Principal Balance: With respect to any Payment Date, the Initial
Principal Balance thereof, reduced by all distributions of principal thereon
prior to such Payment Date.
Principal Prepayment: Any payment of principal by a Mortgagor on a
Mortgage Loan that is received in advance of its scheduled Due Date and is not
accompanied by an amount representing scheduled interest due on any date or
dates in any month or months subsequent to the month of prepayment. Partial
Principal Prepayments shall be applied by the Master Servicer in accordance with
the terms of the related Mortgage Note.
Principal Prepayment in Full: Any Principal Prepayment made
by a Mortgagor of the entire principal balance of a Mortgage
Loan.
Prospectus Supplement: Means the Prospectus Supplement
dated [ ] relating to the Notes.
Purchase Price: With respect to any Mortgage Loan required to be
purchased by the Seller pursuant to Section 2(a)(ii) or 2(d)(iv) hereof or
purchased at the option of the Master Servicer pursuant to Section 3(n), an
amount equal to the sum of (i) 100% of the unpaid principal balance of the
Mortgage Loan on the date of such purchase, and (ii) accrued interest thereon at
the
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applicable Mortgage Rate (or at the applicable Adjusted Mortgage Rate if (x) the
purchaser is the Master Servicer or (y) if the purchaser is the Seller and the
Seller is the Master Servicer) from the date through which interest was last
paid by the Mortgagor to the Due Date in the month in which the Purchase Price
is to be distributed to Securityholders.
Qualified Insurer: A mortgage guaranty insurance company duly qualified
as such under the laws of the state of its principal place of business and each
state having jurisdiction over such insurer in connection with the insurance
policy issued by such insurer, duly authorized and licensed in such states to
transact a mortgage guaranty insurance business in such states and to write the
insurance provided by the insurance policy issued by it, approved as a
FNMA-approved mortgage insurer and having a claims paying ability rating of at
least "AA" or equivalent rating by a nationally recognized statistical rating
organization. Any replacement insurer with respect to a Mortgage Loan must have
at least as high a claims paying ability rating as the insurer it replaces had
on the Closing Date.
Rating Agency: Any nationally recognized statistical rating
organization, or its successor, that rated the Securities at the request of the
Depositor at the time of the initial issuance of the Securities. Initially,
[________] or [__________]. If such organization or a successor is no longer in
existence, "Rating Agency" shall be such nationally recognized statistical
rating organization, or other comparable Person, designated by the Depositor,
notice of which designation shall be given to the Trustee. References herein to
the highest short term unsecured rating category of a Rating Agency shall mean
[___] or better in the case of [__________]and [___] or better in the case of
[_____] and in the case of any other Rating Agency shall mean such equivalent
ratings. References herein to the highest long-term rating category of a Rating
Agency shall mean "[___]" in the case of [__________] and [_____] in the case of
[________] and in the case of any other Rating Agency, such equivalent rating.
Realized Loss: With respect to each Liquidated Mortgage Loan, an amount
(not less than zero or more than the Stated Principal Balance of the Mortgage
Loan) as of the date of such liquidation, equal to (i) the Stated Principal
Balance of the Liquidated Mortgage Loan as of the date of such liquidation, plus
(ii) interest at the Adjusted Net Mortgage Rate from the Due Date as to which
interest was last paid or advanced (and not reimbursed) to Securityholders up to
the Due Date in the month in which Liquidation Proceeds are required to be
distributed on the Stated Principal Balance of such Liquidated Mortgage Loan
from time to time, minus (iii) the Liquidation Proceeds, if any, received during
the month in which such liquidation occurred, to
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the extent applied as recoveries of interest at the Adjusted Net Mortgage Rate
and to principal of the Liquidated Mortgage Loan. With respect to each Mortgage
Loan which has become the subject of a Deficient Valuation, if the principal
amount due under the related Mortgage Note has been reduced, 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 subject of a Debt Service Reduction and any Distribution Date, the
amount, if any, by which the principal portion of the related Scheduled Payment
has been reduced.
Relief Act: The Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
Relief Act Reductions: With respect to any Distribution Date and any
Mortgage Loan as to which there has been a reduction in the amount of interest
collectible thereon for the most recently ended calendar month as a result of
the application of the Relief Act, the amount, if any, by which (i) interest
collectible on such Mortgage Loan for the most recently ended calendar month is
less than (ii) interest accrued thereon for such month pursuant to the Mortgage
Note.
REO Property: A Mortgaged Property acquired by the Issuer through
foreclosure or deed-in-lieu of foreclosure in connection with a defaulted
Mortgage Loan.
Repurchase Price: With respect to any Mortgage Loan required to be
repurchased on any date pursuant to the Loan Purchase Agreement or purchased by
the Master Servicer pursuant to the Master Servicing Agreement, an amount equal
to the sum of (i) 100% of the Asset Balance thereof (without reduction for any
amounts charged off) and (ii) unpaid accrued interest at the Loan Rate on the
outstanding principal balance thereof from the Due Date to which interest was
last paid by the Mortgagor to the first day of the month following the month of
purchase. No portion of any Repurchase Price shall be included in the Excluded
Amount for any Payment Date.
Request for Release: The Request for Release submitted by the Master
Servicer to the Trustee, substantially in the form of Exhibits C and D, as
appropriate.
Required Insurance Policy: With respect to any Mortgage Loan, any
insurance policy that is required to be maintained from time to time under this
Agreement.
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SAIF: Means the Savings Association Insurance Fund, or any
successor thereto.
S&P: Means Standard & Poor's Ratings Group, a division of McGraw-Hill
Inc. If S&P is designated as a Rating Agency in the Indenture, for purposes of
Section 8(c) the address for notices to S&P shall be Standard & Poor's Ratings
Group, 26 Broadway, 15th Floor, New York, New York 10004, Attention: Mortgage
Surveillance Monitoring, or such other address as S&P may hereafter furnish to
the Issuer and the Master Servicer.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
Security: Any of the Certificates or Notes.
Securityholder or Holder: Any Noteholder or any
Certificateholder.
Seller: [Countrywide Home Loans, Inc.], and its successors
and assigns.
Servicer Advance: Means the meaning ascribed to such term
in Section 3(h)(iv).
Servicing Account: Means the separate Eligible Account or
Accounts created and maintained pursuant to Section 3(h)(ii).
Servicing Advances: All customary, reasonable and necessary "out of
pocket" costs and expenses incurred in the performance by the Master Servicer of
its servicing obligations, including, but not limited to, the cost of (i) the
preservation, restoration and protection of a Mortgaged Property, (ii) any
expenses reimbursable to the Master Servicer pursuant to Section 3(n) and any
enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of any REO Property and (iv) compliance with the
obligations under Section 3(l).
Servicing Default: Means a servicing default as described
under Section 7(a) of this Agreement.
Servicing Fee: Means, as to each Mortgage Loan and any Distribution
Date, an amount equal to one month's interest at the applicable Servicing Fee
Rate on the Stated Principal Balance of such Mortgage Loan.
Servicing Fee Rate: Means, with respect to any Mortgage
Loan, the per annum rate set forth in the Mortgage Loan Schedule
for such Mortgage Loan.
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Servicing Officer: Any officer of the Master Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and facsimile signature appear on a list of servicing officers furnished to
the Trustee by the Master Servicer on the Closing Date pursuant to this
Agreement, as such list may from time to time be amended.
Subservicer: Any Person with whom the Master Servicer has entered into a
Subservicing Agreement as a Subservicer by the Master Servicer pursuant to
Section 3(b).
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 [ ] of the Master Servicing Agreement.
Subservicing Fee: With respect to any Mortgage Loan and any Collection
Period, the fee retained monthly by the Subservicer (or, in the case of a
nonsubserviced Mortgage Loan, by the Master Servicer) equal to the product of
(i) the Subservicing Fee Rate divided by 12 and (ii) the aggregate Asset Balance
of the Mortgage Loans as of the first day of such Collection Period.
Substitute Mortgage Loan: A Mortgage Loan substituted by the Seller for
a Deleted Mortgage Loan which must, on the date of such substitution, as
confirmed in a Request for Release, substantially in the form of Exhibit C, (i)
have a Stated Principal Balance, after deduction of the principal portion of the
Scheduled Payment due in the month of substitution, not in excess of, and not
more than 10% less than the Stated Principal Balance of the Deleted Mortgage
Loan; (ii) be accruing interest at a rate no lower than and not more than 1% per
annum higher than, that of the Deleted Mortgage Loan; (iii) have a Loan-to-Value
Ratio no higher than that of the Deleted Mortgage Loan; (iv) have a remaining
term to maturity no greater than (and not more than one year less than that of)
the Deleted Mortgage Loan; and (v) comply with each representation and warranty
set forth in Section 2(d) hereof.
Substitution Adjustment Amount: The meaning ascribed to
such term pursuant to Section 2(d)(iv).
Trust Agreement: Means the Trust Agreement, dated as of [ ],
between the Depositor and the Owner Trustee, as such Trust Agreement may
be amended or supplemented from time to time.
Trustee: Shall mean [______________], and its successors and assigns or
any successor trustee appointed pursuant to the terms of the Indenture.
Trustees: Shall mean the Trustee and the Owner Trustee.
Trust Estate: Shall have the meaning ascribed to such term
in the Indenture.
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UCC: The Uniform Commercial Code, as amended from time to
time, as in effect in any specified jurisdiction.
Withdrawal Date: Means the ____ day of each month, or if
such day is not a Business Day, the next preceding Business Day.
2. Conveyance of Mortgage Loans; Representations and
Warranties.
(a) Conveyance of Mortgage Loans; Retention of Obligation to
Fund Advances Under Credit Line Agreements.
The Depositor, concurrently with the execution and delivery of this
Agreement, does hereby transfer, assign, set over and otherwise convey to the
Trust without recourse (subject to Sections 2(b)and 2(d) all of its right, title
and interest in and to (i) each Mortgage Loan, including its Asset Balance
(including all Additional Balances) and all collections in respect thereof
received on or after the Cut-off Date (excluding payments in respect of accrued
interest due prior to the Cut-off Date or due in the month of ____________);
(ii) property that secured a Mortgage Loan that is acquired by foreclosure or
deed in lieu of foreclosure; (iii) the Depositor's rights under the Loan
Purchase Agreement; (iv) [the Depositor's rights under the hazard insurance
policies,] (v) the Collection Account (excluding net earnings thereon); (vi) the
Policy, (vii) the Payment Account and (viii) all other assets included or to be
included in the Trust for the benefit of Securityholders; provided, however,
neither the Trustee nor the Trust assumes the obligation under any Credit Line
Agreement that provides for the funding of future advances to the Mortgagor
thereunder, and neither the Trust nor the Trustee shall be obligated or
permitted to fund any such future advances. Additional Balances shall be part of
the related Asset Balance and are hereby transferred to the Trust on the Closing
Date pursuant to this Section 2(a), and therefore part of the Trust property. In
addition, on or prior to the Closing Date, the Depositor shall cause the Credit
Enhancer to deliver the Policy to the Trustee for the benefit of the
Securityholders. The foregoing transfer, assignment, set-over and conveyance to
the Trust shall be made to the Trustee, on behalf of the Trust, and each
reference in this Agreement to such transfer, assignment, set-over and
conveyance shall be construed accordingly.
The Depositor agrees to take or cause to be taken such actions and
execute such documents (including without limitation the filing of all necessary
continuation statements for the UCC-1 financing statements filed in the State of
__________ (which shall have been filed within 90 days of the Closing Date)
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describing the Cut-off Date Asset Balances and Additional Balances and naming
the Depositor as debtor and the Trustee as secured party and any amendments to
UCC-1 financing statements required to reflect a change in the name or corporate
structure of the Depositor or the filing of any additional UCC-1 financing
statements due to the change in the principal office of the Depositor (within 90
days of any event necessitating such filing) as are necessary to perfect and
protect the Securityholders' and Credit Enhancer's interests in each Cut-off
Date Asset Balance and Additional Balances and the proceeds thereof (other than
maintaining possession by the Trustee of the Mortgage Loans and the Mortgage
Files, which possession will, subject to the terms hereof, be maintained by the
Master Servicer as custodian and bailee of the Trustee).
In connection with such transfer and assignment by the Depositor, the
Master Servicer acknowledges that it is holding as custodian and bailee for the
Trustee the following documents or instruments (the "Related Documents") with
respect to each Mortgage Loan:
(A) the original Mortgage Note endorsed in blank;
(B) an original Assignment of Mortgage in blank in
recordable form;
(C) the original recorded Mortgage or, if, in connection
with any Mortgage Loan, the original recorded Mortgage with evidence of
recording thereon cannot be delivered on or prior to the Closing Date
because of a delay caused by the public recording office where such
original Mortgage has been delivered for recordation or because such
original Mortgage has been lost, the Seller, at the direction of the
Depositor, shall deliver or cause to be delivered to the Custodian, as
agent for the Trustee, a true and correct copy of such Mortgage,
together with (i) in the case of a delay caused by the public recording
office, an Officer's Certificate of the Depositor stating that such
original Mortgage has been dispatched to the appropriate public
recording official or (ii) in the case of an original Mortgage that has
been lost, a certificate by the appropriate county recording office
where such Mortgage is recorded;
(D) if applicable, the original intervening assignments, if
any ("Intervening Assignments"), with evidence of recording thereon,
showing a complete chain of title to the Mortgage from the originator to
the Depositor or, if any such original Intervening Assignment has not
been returned from the applicable recording office or has been lost, a
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true and correct copy thereof, together with (i) in the case of a delay
caused by the public recording office, an Officer's Certificate of the
Seller stating that such original Intervening Assignment has been
dispatched to the appropriate public recording official for recordation
or (ii) in the case of an original Intervening Assignment that has been
lost, a certificate by the appropriate county recording office where
such Mortgage is recorded;
(E) either (1) for each Mortgage Loan with a Credit Limit in
excess of $_________, a title policy or (2) for all other Mortgage
Loans, either a title policy, a title search or guaranty of title with
respect to the related Mortgaged Property;
(F) the original of any guaranty executed in connec-
tion with the Mortgage Note;
(G) the original of each assumption, modification,
consolidation or substitution agreement, if any, relating to
the Mortgage Loan; and
(H) any security agreement, chattel mortgage or
equivalent instrument executed in connection with the Mortgage;
provided, however, that as to any Mortgage Loan, if (a) as evidenced by an
Opinion of Counsel delivered to and in form and substance satisfactory to the
Trustee and the Credit Enhancer, (x) an optical image or other representation of
the related documents specified in clauses (i) through (viii) above are
enforceable in the relevant jurisdictions to the same extent as the original of
such document and (y) such optical image or other representation does not impair
the ability of an owner of such Mortgage Loan to transfer its interest in such
Mortgage Loan, and (b) the retention of such documents in such format will not
result in a reduction in the then current rating of the Notes or Certificates,
without regard to the Policy, such optical image or other representation may be
held by the Master Servicer, as custodian for the Trustee or assignee in lieu of
the physical documents specified above.
The Seller hereby confirms to the Trustee that it has caused the
portions of its electronic ledgers relating to the Mortgage Loans to be clearly
and unambiguously marked, and has made the appropriate entries in its general
accounting records, to indicate that such Mortgage Loans have been transferred
to the Trust at the direction of the Depositor. The Master Servicer hereby
confirms to the Trustee that it has clearly and unambiguously made appropriate
entries in its general accounting records
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indicating that such Mortgage Loans constitute part of the Trust and are
serviced by it on behalf of the Trust in accordance with the terms hereof.
The parties hereto intend that the transaction set forth herein be a
sale by the Depositor to the Trust of all the Depositor's right, title and
interest in and to the Mortgage Loans and other property described above. In the
event the transaction set forth herein is deemed not to be a sale, the Depositor
hereby grants to the Trust a security interest in all of the Depositor's right,
title and interest in, to and under the Mortgage Loans whether now existing or
hereafter created, all monies due or to become due on the Mortgage Loans and all
proceeds of any thereof; and this Agreement shall constitute a security
agreement under applicable law.
Except as hereinafter provided, the Master Servicer shall be entitled to
maintain possession of all of the foregoing documents and instruments and shall
not be required to deliver any of them to the Trustee or the Owner Trustee. In
the event, however, that possession of any of such documents or instruments is
required by any Person (including any such Trustee) acting as successor servicer
pursuant to Section 6(d) or 7(b) in order to carry out the duties of Master
Servicer hereunder, then such successor shall be entitled to request delivery,
at the expense of the Master Servicer, of such documents or instruments by the
Master Servicer and to retain such documents or instruments for servicing
purposes; provided that the Trustee or such servicers shall maintain such
documents at such offices as may be required by any regulatory body having
jurisdiction over such Mortgage Loans.
The Master Servicer's right to maintain possession of the documents
enumerated above shall continue so long as the long term unsecured debt of
[Countrywide Home Loans, Inc.] is assigned ratings of at least "____" by
__________________ and "____" by _______________. At such time as the condition
specified in the preceding sentence is not satisfied, as promptly as practicable
but in no event more than __ days in the case of clause (i) below and __ days in
the case of clause (ii) below following the occurrence of such event (a
"Delivery Event"), the Master Servicer shall, at its expense, (i) either (x)
record an assignment of Mortgage in favor of the Trustee (which may be a blanket
assignment if permitted by applicable law) in the appropriate real property or
other records or (y) deliver to the Trustee the assignment of such Mortgage in
favor of the Trustee in form for recordation, together with an Opinion of
Counsel addressed to the Trustee and the Credit Enhancer to the effect that
recording is not required to protect the Trustee's right, title and interest in
and to the related Mortgage Loan or, in
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case a court should recharacterize the sale of the Mortgage Loans as a
financing, to perfect a first priority security interest in favor of the Trustee
in the related Mortgage Loan, which Opinion of Counsel also shall be reasonably
acceptable to each of the Rating Agencies (as evidenced in writing) and the
Credit Enhancer, and (ii) unless an Opinion of Counsel, reasonably acceptable to
the Trustee, the Rating Agencies (as evidenced in writing) and the Credit
Enhancer, is delivered to the Trustee and the Credit Enhancer to the effect that
delivery of the Mortgage Files is not necessary to protect the Trustee's right,
title and interest in the related Mortgage Loans; provided that the lack of
delivery will not result in a reduction in the then current rating of the "Notes
or Certificates", without regard to the Policy, deliver the related Mortgage
Files to the Trustee or to a custodian located in the State of [California]
appointed by the Trustee and acceptable to the Rating Agencies and the Credit
Enhancer to be held by the Custodian on behalf of the Trustees in trust, upon
the terms herein set forth, for the use and benefit of all present and future
Securityholders and the Custodian on behalf of the Trustee shall retain
possession thereof except to the extent the Master Servicer requires any
Mortgage Files for normal servicing as contemplated by Section _____. The
Trustee is hereby appointed as the attorney-in-fact of the Master Servicer with
the power to prepare, execute and record Assignments of Mortgages in the event
that the Master Servicer fails to do so on a timely basis as provided in this
paragraph.
Within 90 days following delivery, if any, of the Mortgage Files to the
Trustee pursuant to the preceding paragraph, the Trustee shall review each such
Mortgage File to ascertain that all required documents set forth in this Section
2(a) have been executed and received, and that such documents relate to the
Mortgage Loans identified on the Mortgage Loan Schedule and in so doing the
Trustee may rely on the purported due execution and genuineness of any signature
thereon. If within such 90-day period the Trustee finds any document
constituting a part of a Mortgage File not to have been executed or received or
to be unrelated to the Mortgage Loans identified in said Mortgage Loan Schedule
or, if in the course of its review, the Trustee determines that such Mortgage
File is otherwise defective in any material respect, the Trustee shall promptly
upon the conclusion of its review notify the Issuer and the Credit Enhancer, and
the Seller shall have a period of 90 days after such notice within which to
correct or cure any such defect.
The Trustee shall have no responsibility for reviewing any Mortgage File
except as expressly provided in this Section 2(a). In reviewing any Mortgage
File pursuant to this Section, the Trustee shall have no responsibility for
determining whether any document is valid and binding, whether the text of any
assignment
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or endorsement is in proper or recordable form (except, if applicable, to
determine if the Trustee is the assignee or endorsee), whether any document has
been recorded in accordance with the requirements of any applicable
jurisdiction, or whether a blanket assignment is permitted in any applicable
jurisdiction, whether any Person executing any document is authorized to do so
or whether any signature thereon is genuine, but shall only be required to
determine whether a document has been executed, that it appears to be what it
purports to be, and, where applicable, that it purports to be recorded.
(b) Acceptance by Trustee; Retransfer of Mortgage
Loans.
The Trustee hereby acknowledges its receipt of the Policy and the
Mortgage Loans, and declares that the Trustee holds and will hold such
instrument, and to the extent that any documents are delivered to it pursuant to
Section 2(a), will hold such documents, and all amounts received by it
thereunder and hereunder, in trust, upon the terms herein set forth, for the use
and benefit of all present and future Securityholders and the Credit Enhancer.
If the time to cure any defect in respect of any Mortgage Loan of which the
Trustee has notified the Issuer and the Depositor following the review pursuant
to Section 2(a) has expired or if at any time any loss is suffered by the
Trustee on behalf of the Securityholders or the Credit Enhancer, in respect of
any Mortgage Loan as a result of (i) a defect in any document constituting a
part of its Mortgage File or (ii) an Assignment of Mortgage to the Trustee not
having been recorded as required by Section 2(a),then on the next succeeding
Business Day upon satisfaction of the applicable conditions described herein,
all right, title and interest of the Trust in and to such Mortgage Loan shall be
deemed to be retransferred, reassigned and otherwise reconveyed, without
recourse, representation or warranty, to the Depositor on such Business Day and
the Asset Balance of such Mortgage Loan shall be deducted from the Pool Balance;
provided, however, that interest accrued on the Asset Balance of such Mortgage
Loan to the end of the related Collection Period shall be the property of the
Trust. Upon receipt of any Eligible Substitute Mortgage Loan or then as promptly
as practicable following such deemed transfer, the Trustee shall execute such
documents and instruments of transfer presented by the Seller, in each case
without recourse, representation or warranty, and take such other actions as
shall reasonably be requested by the Seller to effect such transfer by the Trust
of such Defective Mortgage Loan pursuant to this Section.
The Master Servicer, promptly following the transfer of a Defective
Mortgage Loan from or to the Trust pursuant to this Section, shall amend the
Mortgage Loan Schedule and make
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appropriate entries in its general account records to reflect such transfer. The
Master Servicer shall, following such retransfer, appropriately mark its records
to indicate that it is no longer servicing such Mortgage Loan on behalf of the
Trust. The Seller, promptly following such transfer, shall appropriately mark
its electronic ledger and make appropriate entries in its general account
records to reflect such transfer.
As to any Eligible Substitute Mortgage Loan or Loans, the Seller shall,
if a Delivery Event has occurred, deliver to the Trustee with respect to such
Eligible Substitute Mortgage Loan or Loans such documents and agreements as are
required to be held by the Trustee in accordance with Section 2(a). For any
Collection Period during which the Seller substitutes one or more Eligible
Substitute Mortgage Loans, the Master Servicer shall determine the Substitution
Adjustment Deposit Amount which amount shall be deposited by the Seller in the
Collection Account at the time of substitution. All amounts received in respect
of the Eligible Substitute Mortgage Loan or Loans during the Collection Period
in which the circumstances giving rise to such substitution occur shall not be a
part of the Issuer and shall not be deposited by the Master Servicer in the
Collection Account. All amounts received by the Master Servicer during the
Collection Period in which the circumstances giving rise to such substitution
occur in respect of any Defective Mortgage Loan so removed by the Issuer shall
be deposited by the Master Servicer in the Collection Account. Upon such
substitution, the Eligible Substitute Mortgage Loan or Loans shall be subject to
the terms of this Agreement in all respects, and the Seller shall be deemed to
have made with respect to such Eligible Substitute Mortgage Loan or Loans, as of
the date of substitution, the covenants, representations and warranties set
forth in Section 2(d). The procedures applied by the Seller in selecting each
Eligible Substitute Mortgage Loan shall not be materially adverse to the
interests of the Trustees, the Securityholders and the Credit Enhancer.
(c) Documents, Records and Funds in Possession of
Master Servicer to be Held for Trustee.
(i) Notwithstanding any other provisions of this Agreement, the
Master Servicer shall transmit to the Trustee as required by this Agreement all
documents and instruments in respect of a Mortgage Loan coming into the
possession of the Master Servicer from time to time and shall account fully to
the Trustees for any funds received by the Master Servicer or which otherwise
are collected by the Master Servicer as Liquidation Proceeds or Insurance
Proceeds in respect of any Mortgage Loan. All Mortgage Files and funds collected
or held by, or under the control of, the Master Servicer in respect of any
Mortgage Loans,
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whether from the collection of principal and interest payments or from
Liquidation Proceeds, including but not limited to, any funds on deposit in the
Collection Account, shall be held by the Master Servicer for and on behalf of
the Trustees and shall be and remain the sole and exclusive property of the
Trustees, subject to the applicable provisions of this Agreement. The Master
Servicer also agrees that it shall not create, incur or subject any Mortgage
File or any funds that are deposited in the Collection Account, Payment Account
or any Escrow Account, or any funds that otherwise are or may become due or
payable to the Trustee for the benefit of the Securityholders, to any claim,
lien, security interest, judgment, levy, writ of attachment or other
encumbrance, or assert by legal action or otherwise any claim or right of setoff
against any Mortgage File or any funds collected on, or in connection with, a
Mortgage Loan, except, however, that the Master Servicer shall be entitled to
set off against and deduct from any such funds any amounts that are properly due
and payable to the Master Servicer under this Agreement.
(ii) The Master Servicer hereby acknowledges that concurrently
with the execution of this Agreement, the Trustee has acquired and holds a
security interest in the Trustee Mortgage Files and in all Mortgage Loans
represented by such Mortgage Files and in all funds now or hereafter held by, or
under the control of, the Master Servicer that are collected by the Master
Servicer in connection with the Mortgage Loans, whether as Scheduled Payments,
as Principal Prepayments, or as Liquidation Proceeds or Insurance Proceeds, and
in all proceeds of the foregoing and proceeds of proceeds (but excluding any
Master Servicing Fees, Servicing Fees, Trustee Fees and any other amounts or
reimbursements to which the Master Servicer is entitled under this Agreement).
The Master Servicer agrees that so long as the Mortgage Loans are assigned to
the Trustee, all Master Servicer Mortgage Files and Trustee Mortgage Files (and
any documents or instruments constituting a part of such files), and such funds
which come into the possession or custody of, or which are subject to the
control of, the Master Servicer shall be held by the Master Servicer for and on
behalf of the Trustee as the Trustee's agent and bailee for purposes of
perfecting the Trustee's security interest therein, as provided by Section 9-305
of the Uniform Commercial Code of the state in which such property is located,
or by other laws, as specified in Section _____ of the Indenture. The Master
Servicer hereby accepts such agency and acknowledges that the Trustee, as
secured party, will be deemed to have possession at all times of all Mortgage
Files and any other documents or instruments constituting a part of such files,
such funds and other items for purposes of Section 9-305 of the Uniform
Commercial Code of the state in which such property is held by the Master
Servicer.
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(d) Representations, Warranties and Covenants of the
Seller and the Master Servicer.
(i) [Countrywide Home Loans, Inc.], in its capacities as Seller and
Master Servicer, hereby makes the representations and warranties set forth in
Schedule II hereto, and by this reference incorporated herein, to the Depositor
and the Trustee, as of the Closing Date, or if so specified therein, as of the
Cut-off Date.
(ii) The Seller, in its capacity as Seller, hereby makes the
representations and warranties set forth in Schedule III hereto, and by this
reference incorporated herein, to the Depositor and the Trustee, as of the
Closing Date, or if so specified therein, as of the Cut-off Date.
(iii) Upon discovery by any of the parties hereto of a breach of a
representation or warranty made pursuant to Section 2(d)(ii) that materially and
adversely affects the interests of the Securityholders in any Mortgage Loan, the
party discovering such breach shall give prompt notice thereof to the other
parties. The Seller hereby covenants that within 90 days of the earlier of its
discovery or its receipt of written notice from any party of a breach of any
representation or warranty made pursuant to Section 2(d)(ii) which materially
and adversely affects the interests of the Securityholders in any Mortgage Loan,
it shall cure such breach in all material respects, and if such breach is not so
cured, shall, (i) if such 90-day period expires prior to the second anniversary
of the Closing Date, remove such Mortgage Loan (a "Deleted Mortgage Loan") from
the Issuer and substitute in its place a Substitute Mortgage Loan, in the manner
and subject to the conditions set forth in this Section; or (ii) repurchase the
affected Mortgage Loan or Mortgage Loans from the Trustee at the Purchase Price
in the manner set forth below; provided, however, that any such substitution
pursuant to (i) above shall not be effected prior to the delivery to the
Trustees of the Opinion of Counsel required by [Section ____ {delivery of
opinion}] hereof, if any, and any such substitution pursuant to (i) above shall
not be effected prior to the additional delivery to the Trustee of a Request for
Release substantially in the form of Exhibit D and the Mortgage File for any
such Substitute Mortgage Loan. The Seller shall promptly reimburse the Master
Servicer and the Trustee for any expenses reasonably incurred by the Master
Servicer or any Trustee in respect of enforcing the remedies for such breach.
With respect to the representations and warranties described in this Section
which are made to the best of the Seller's knowledge, if it is discovered by
either the Depositor, the Seller or any Trustee that the substance of such
representation and warranty is inaccurate and such inaccuracy materially and
adversely affects the value of the related Mortgage Loan or the
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interests of the Securityholders therein, notwithstanding the Seller's lack of
knowledge with respect to the substance of such representation or warranty, such
inaccuracy shall be deemed a breach of the applicable representation or
warranty.
With respect to any Substitute Mortgage Loan or Loans, the Seller shall
deliver to the Trustee for the benefit of the Securityholders the Mortgage Note,
the Mortgage, the related assignment of the Mortgage, and such other documents
and agreements as are required by Section 2(a), with the Mortgage Note endorsed
and the Mortgage assigned as required by Section 2(a). No substitution is
permitted to be made in any calendar month after the Determination Date for such
month. Scheduled Payments due with respect to Substitute Mortgage Loans in the
month of substitution shall not be part of the Issuer and will be retained by
the Seller on the next succeeding Distribution Date. For the month of
substitution, distributions to Securityholders will include the monthly payment
due on any Deleted Mortgage Loan for such month and thereafter the Seller shall
be entitled to retain all amounts received in respect of such Deleted Mortgage
Loan. The Master Servicer shall amend the Mortgage Loan Schedule for the benefit
of the Securityholders to reflect the removal of such Deleted Mortgage Loan and
the substitution of the Substitute Mortgage Loan or Loans and the Master
Servicer shall deliver the amended Mortgage Loan Schedule to the Trustees. Upon
such substitution, the Substitute Mortgage Loan or Loans shall be subject to the
terms of this Agreement in all respects, and the Seller shall be deemed to have
made with respect to such Substitute Mortgage Loan or Loans, as of the date of
substitution, the representations and warranties made pursuant to Section
2(d)(ii) with respect to such Mortgage Loan. Upon any such substitution and the
deposit to the Collection Account of the amount required to be deposited therein
in connection with such substitution as described in the following paragraph,
the Trustee shall release the Mortgage File held for the benefit of the
Securityholders relating to such Deleted Mortgage Loan to the Seller and shall
execute and deliver at the Seller's direction such instruments of transfer or
assignment prepared by the Seller, in each case without recourse, as shall be
necessary to vest title in the Seller, or its designee, the Trustee's interest
in any Deleted Mortgage Loan substituted for pursuant to this Section 2(d).
For any month in which the Seller substitutes one or more 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 Substitute Mortgage Loans as of the date of substitution is less than the
aggregate Stated Principal Balance of all such Deleted Mortgage Loans (after
application of the scheduled principal portion of the
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monthly payments due in the month of substitution). The amount of such shortage
(the "Substitution Adjustment Amount") plus an amount equal to the aggregate of
any unreimbursed Advances with respect to such Deleted Mortgage Loans shall be
deposited in the Collection Account by the Seller on or before the Payment
Account Deposit Date for the Distribution Date in the month succeeding the
calendar month during which the related Mortgage Loan became required to be
purchased or replaced hereunder.
In the event that the Seller shall have repurchased a Mortgage Loan, the
Purchase Price therefor shall be deposited in the Collection Account pursuant to
Section 3(h) on or before the Payment Account Deposit Date for the Distribution
Date in the month following the month during which the Seller became obligated
hereunder to repurchase or replace such Mortgage Loan and upon such deposit of
the Purchase Price, the delivery of the Opinion of Counsel required by Section
2(d) and receipt of a Request for Release in the form of Exhibit D hereto, the
Trustee shall release the related Mortgage File held for the benefit of the
Securityholders to such Person, and the Trustee shall execute and deliver at
such Person's direction such instruments of transfer or assignment prepared by
such Person, in each case without recourse, as shall be necessary to transfer
title from the Trustee. It is understood and agreed that the obligation under
this Agreement of any Person to cure, repurchase or replace any Mortgage Loan as
to which a breach has occurred and is continuing shall constitute the sole
remedy against such Persons respecting such breach available to Securityholders,
the Depositor or the Trustees on their behalf.
The representations and warranties made pursuant to this Section 2(d)
shall survive delivery of the respective Mortgage Files to the Trustee for the
benefit of the Securityholders.
(e) Covenants of the Master Servicer.
The Master Servicer hereby covenants to the Depositor and the Trustees
as follows:
(i) the Master Servicer shall comply in the performance of
its obligations under this Agreement with all reasonable rules and
requirements of the insurer under each Required Insurance Policy; and
(ii) no written information, certificate of an officer,
statement furnished in writing or written report delivered to the
Depositor, any affiliate of the Depositor or any Trustee and prepared by
the Master Servicer pursuant to this Agreement will contain any untrue
statement of a material fact or omit to state a material fact necessary
to
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make such information, certificate, statement or report not
misleading.
(f) Covenants of the Depositor.
The Depositor hereby covenants that, except for the transfer
under the Indenture, the Depositor will not sell, pledge, assign or
transfer to any other Person, or grant, create, incur, assume or suffer
to exist any Lien on any Mortgage Loan, whether now existing or
hereafter created, or any interest therein; the Depositor will notify
the Trustee of the existence of any Lien on any Mortgage Loan
immediately upon discovery thereof; and the Depositor will defend the
right, title and interest of the Trust in, to and under the Mortgage
Loans, whether now existing or hereafter created, against all claims of
third parties claiming through or under the Depositor; provided,
however, that nothing in this Section 2(e) shall prevent or be deemed to
prohibit the Depositor from suffering to exist upon any of the Mortgage
Loans any Liens for municipal or other local taxes and other
governmental charges if such taxes or governmental charges shall not at
the time be due and payable or if the Depositor shall currently be
contesting the validity thereof in good faith by appropriate proceedings
and shall have set aside on its books adequate reserves with respect
thereto.
3. Administration and Servicing of Mortgage Loans.
The parties agree that, subject to the provisions of Section 7 hereof,
the Master Servicer shall service the Mortgage Loans in the manner and on the
terms and conditions set forth below:
(a) Master Servicer to Service Mortgage Loans.
(i) The Master Servicer shall service and administer the Mortgage
Loans in a manner consistent with the terms of this Agreement and with
general industry practice and shall have full power and authority,
acting alone or through a subservicer, to do any and all things in
connection with such servicing and administration which it may deem
necessary or desirable, it being understood, however, that the Master
Servicer shall at all times remain responsible to the Trustees, the
Securityholders and the Credit Enhancer for the performance of its
duties and obligations hereunder in accordance with the terms hereof.
Any amounts received by any subservicer in respect of a Mortgage Loan
shall be deemed to have been received by the Master Servicer whether or
not actually received by it. Without limiting the generality of the
foregoing, the Master Servicer shall
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continue, and is hereby authorized and empowered by the Trustee, to
execute and deliver, on behalf of itself, the Securityholders and the
Trustee, or any of them, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge and all other
comparable instruments, with respect to the Mortgage Loans and with
respect to the Mortgaged Properties. The Trustee shall, upon the written
request of a Servicing Officer, furnish the Master Servicer with any
powers of attorney and other documents necessary or appropriate to
enable the Master Servicer to carry out its servicing and administrative
duties hereunder. The Master Servicer in such capacity may also consent
to the placing of a lien senior to that of any Mortgage on the related
Mortgaged Property, provided that
(x) such Mortgage succeeded to a first lien position after
the related Mortgage Loan was conveyed to the Trust and,
immediately following the placement of such senior lien, such
Mortgage is in a second lien position and the outstanding
principal amount of the mortgage loan secured by such subsequent
senior lien is no greater than the outstanding principal amount
of the senior mortgage loan secured by the Mortgaged Property as
of the date the related Mortgage Loan was originated; or
(y) the Mortgage relating to such Mortgage Loan was in a
second lien position as of the Cut-off Date and the new senior
lien secures a mortgage loan that refinances an existing first
mortgage loan and the outstanding principal amount of the
replacement first mortgage loan immediately following such
refinancing is not greater than the outstanding principal amount
of such existing first mortgage loan at the date of origination
of such Mortgage Loan;
provided, further, that such senior lien does not secure a note that provides
for negative amortization. Notwithstanding the foregoing, the Master Servicer
can consent to the placing of liens senior to that of a Mortgage on the related
Mortgaged Property which have a principal balance in excess of the principal
balance of the senior lien it replaces on Mortgage Loans having in the aggregate
Asset Balances not in excess of ___% of the Cut-off Date Pool Balance; provided,
however, that, with respect to Mortgage Loans which as of the Cut-off Date had
Combined Loan-to-Value Ratios in excess of ___%, the aggregate Asset Balance of
such Mortgage Loans with respect to which the senior lien may be so modified
shall not exceed _____% of the Cut-off Date Pool Balance (such ___% and _____%
herein referred to as the "Increased Senior Lien Limitation"). Any such increase
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to the principal balance of the senior lien shall not exceed the greater of
$_______ and _____% of the principal balance of the senior lien prior to such
increase.
The Master Servicer may also, without prior approval from the Rating
Agencies or the Credit Enhancer, increase the Credit Limits on Mortgage Loans
provided that (i) new appraisals are obtained and the Combined Loan-to-Value
Ratios of the Mortgage Loans after giving effect to such increase are less than
or equal to the Combined Loan-to-Value Ratios or the Mortgage Loans as of the
Cut-off Date and (ii) such increases are consistent with the Master Servicer's
underwriting policies. In addition, the Master Servicer may increase the Credit
Limits on Mortgage Loans having aggregate balances of up to ____% of the
aggregate Cut-off Date Pool Balance, without obtaining new appraisals provided
that (i) the increase in the Credit Limit does not cause the Combined
Loan-to-Value Ratios of the Mortgage Loans to exceed _____% and (ii) the
increase is consistent with the Master Servicer's underwriting policies.
Furthermore, the Master Servicer may, without prior approval from the
Rating Agencies and the Credit Enhancer solicit Mortgagors for a reduction in
Loan Rates; provided that the Master Servicer can only reduce such Loan Rates on
up to ____% of the Mortgage Loans by Cut-off Date Pool Balance. Any such
solicitations shall not result in a reduction in the weighted average Gross
Margin of the Mortgage Loans in the pool by more than ____ basis points taking
into account any such prior reductions.
In addition, the Master Servicer may agree to changes in the terms of a
Mortgage Loan at the request of the Mortgagor provided that such changes (i) do
not materially and adversely affect the interests of Securityholders or the
Credit Enhancer and (ii) are consistent with prudent and customary business
practice as evidenced by a certificate signed by a Servicing Officer delivered
to the Trustee and the Credit Enhancer.
In addition to the foregoing, the Master Servicer may solicit Mortgagors
to change any other terms of the related Mortgage Loans, provided that such
changes (i) do not materially and adversely affect the interest of
Securityholders or the Credit Enhancer and (ii) are consistent with prudent and
customary business practice as evidenced by a certificate signed by a Servicing
Officer delivered to the Trustee and the Credit Enhancer. Nothing herein shall
limit the right of the Master Servicer to solicit Mortgagors with respect to new
loans (including mortgage loans) that are not Mortgage Loans.
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The relationship of the Master Servicer (and of any successor to the
Master Servicer as servicer under this Agreement) to the Trustee under this
Agreement is intended by the parties to be that of an independent contractor and
not that of a joint venturer, partner or agent.
(ii) In the event that the rights, duties and obligations of the
Master Servicer are terminated hereunder, any successor to the Master
Servicer in its sole discretion may, to the extent permitted by
applicable law, terminate the existing subservicer arrangements with any
subservicer or assume the terminated Master Servicer's rights under such
subservicing arrangements which termination or assumption will not
violate the terms of such arrangements.
(b) Subservicing; Enforcement of the Obligations of
Servicers.
(i) The Master Servicer may arrange for the subservicing of any
Mortgage Loan by a Subservicer pursuant to a subservicing agreement; provided,
however, that such subservicing arrangement and the terms of the related
subservicing agreement must provide for the servicing of such Mortgage Loans in
a manner consistent with the servicing arrangements contemplated hereunder.
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. Notwithstanding the provisions of any subservicing agreement, any of
the provisions of this Agreement relating to agreements or arrangements between
the Master Servicer and a Subservicer or reference to actions taken through a
Subservicer or otherwise, the Master Servicer shall remain obligated and liable
to the Depositor, the Trustees and the Securityholders for the servicing and
administration of the Mortgage Loans in accordance with the provisions of this
Agreement without diminution of such obligation or liability by virtue of such
subservicing agreements or arrangements or by virtue of indemnification from the
Subservicer 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.
All actions of each Subservicer performed pursuant to the related subservicing
agreement shall be performed as an agent of the Master Servicer with the same
force and effect as if performed directly by the Master Servicer.
(ii) For purposes of this Agreement, the Master Servicer shall be
deemed to have received any collections, recoveries or payments with respect to
the Mortgage Loans that
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are received by a Subservicer regardless of whether such payments are remitted
by the Subservicer to the Master Servicer.
(iii) As part of its servicing activities hereunder, the Master
Servicer, for the benefit of the Trustees and the Securityholders, shall use its
best reasonable efforts to enforce the obligations of each Subservicer under the
related Subservicing Agreement, to the extent that the non-performance of any
such obligation would have material and adverse effect on a Mortgage Loan. Such
enforcement, including, without limitation, the legal prosecution of claims,
termination of Subservicing Agreements and the pursuit of other appropriate
remedies, shall be in such form and carried out to such an extent and at such
time as the Master Servicer, in its good faith business judgment, would require
were it the owner of the related Mortgage Loans. 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.
(c) Successor Servicers.
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 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 Subservicer or any affiliate of
the Master Servicer acts as Subservicer, it will not assume liability for the
representations and warranties of the Subservicer which it replaces. If the
Master Subservicer 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
Servicer from liability for such representations and warranties.
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(d) 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 references to actions taken through a Subservicer
or otherwise, the Master Servicer shall remain obligated and liable to the
Trustees and Securityholders for the servicing and administering of the Pledged
Mortgages in accordance with the provisions of Section 3(a) without diminution
of such obligation or liability by virtue of such Subservicing Agreements or
arrangements or by virtue of indemnification from the Subservicer and to the
same extent and under the same terms and conditions as if the Master Servicer
alone were servicing and administering the Pledged Mortgages. The Master
Servicer shall be entitled to enter into any agreement with a Subservicer for
indemnification of the Master Servicer and nothing contained in this Agreement
shall be deemed to limit or modify such indemnification.
(e) No Contractual Relationship Between Subservicers
and the Trustees.
Any Servicing Agreement that may be entered into and any other
transactions or services relating to the Mortgage Loans involving a Servicer 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 Trustees and Securityholders
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(g).
(f) Rights of the Depositor and the Trustees in
Respect of 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 and in connection with any such defaulted obligation to exercise the
related 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. Neither the Trustees nor the
Depositor shall have any responsibility or liability for any action or failure
to act by the Master Servicer nor shall the Trustees or the Depositor be
obligated to supervise the performance of the Master Servicer hereunder or
otherwise.
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(g) Trustee to Act as Master Servicer.
In the event that the Master Servicer shall for any reason no longer be
the Master Servicer hereunder (including by reason of an Event of Default), the
Trustee or its successor shall thereupon assume all of the rights and
obligations of the Master Servicer hereunder arising thereafter (except that the
Trustee shall not be (i) liable for losses of the Master Servicer pursuant to
Section 3(l) hereof or any acts or omissions of the predecessor Master Servicer
hereunder), (ii) obligated to make Advances if it is prohibited from doing so by
applicable law, (iii) obligated to effectuate repurchases or substitutions of
Mortgage Loans hereunder including, but not limited to, repurchases or
substitutions of Mortgage Loans pursuant to Section 2(c)(ii) or 2(d) hereof,
(iv) responsible for expenses of the Master Servicer pursuant to Section 2(d) or
(v) deemed to have made any representations and warranties of the Master
Servicer hereunder). Any such assumption shall be subject to Section 7(b)
hereof. If the Master Servicer shall for any reason no longer be the Master
Servicer (including by reason of any Event of Default), the Trustee or its
successor shall succeed to any rights and obligations of the Master Servicer
under each subservicing agreement.
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 or substitute subservicing
agreement and the Mortgage Loans then being serviced thereunder and an
accounting of amounts collected or held by it and otherwise use its best efforts
to effect the orderly and efficient transfer of the substitute subservicing
agreement to the assuming party.
(h) Collection of Mortgage Loan Payments; Collection
Accounts; Payment Account.
(i) The Master Servicer shall make reasonable efforts in
accordance with the customary and usual standards of practice of prudent
mortgage servicers to collect all payments called for under the terms and
provisions of the Mortgage Loans to the extent such procedures shall be
consistent with this Agreement and the terms and provisions of any related
Required Insurance Policy. 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 dates for payments due on a Mortgage Note for a period not
greater than 180 days; provided, however, that the Master Servicer cannot extend
the maturity of any such Mortgage Loan past the date on which the final payment
is due on the latest maturing Mortgage Loan as of
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the Cut-off Date. In the event of any such arrangement, the Master Servicer
shall make Advances on the related Mortgage Loan in accordance with the
provisions of Section 4 during the scheduled period in accordance with the
amortization schedule of such Mortgage Loan without modification thereof by
reason of such arrangements. The Master Servicer shall not be required to
institute or join in litigation with respect to collection of any payment
(whether under a Mortgage, Mortgage Note or otherwise or against any public or
governmental authority with respect to a taking or condemnation) if it
reasonably believes that enforcing the provision of the Mortgage or other
instrument pursuant to which such payment is required is prohibited by
applicable law.
(ii) The Master Servicer shall establish and maintain a
Collection Account into which the Master Servicer shall deposit or cause to be
deposited on a daily basis within one Business Day of receipt, except as
otherwise specifically provided herein, the following payments and collections
remitted by Subservicers or received by it in respect of Mortgage Loans
subsequent to the Cut-off Date (other than in respect of principal and interest
due on the Mortgage Loans on or before the Cut-off Date) and the following
amounts required to be deposited hereunder:
(A) all collections on account of principal on the
Mortgage Loans;
(B) all collections on account of interest on the
Mortgage Loans, net of the related Master Servicing Fee;
(C) all Insurance Proceeds and Liquidation Proceeds, other than
proceeds 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;
(D) any amount required to be deposited by the Master Servicer
pursuant to Section 3(h)(v) in connection with any losses on Permitted
Investments;
(E) any amounts required to be deposited by the Master Servicer
pursuant to Section 3(l)(ii), 3(l)(iv), and in respect of net monthly
rental income from REO Property pursuant to Section 3(n) hereof;
(F) all Substitution Adjustment Amounts;
(G) all Advances made by the Master Servicer pursuant
to Section 4; and
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(H) any other amounts required to be deposited hereunder.
The foregoing requirements for remittance by the Master Servicer shall
be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of prepayment penalties,
late payment charges or assumption fees, if collected, need not be remitted by
the Master Servicer. In the event that the Master Servicer shall remit any
amount not required to be remitted, it may at any time withdraw or direct the
institution maintaining the Collection Account to withdraw such amount from the
Collection Account, any provision herein to the contrary notwithstanding. Such
withdrawal or direction may be accomplished by delivering written notice thereof
to the Trustee or such other institution maintaining the Collection Account
which describes the amounts deposited in error in the Collection Account. The
Master Servicer shall maintain adequate records with respect to all withdrawals
made pursuant to this Section. All funds deposited in the Collection Account
shall be held in trust for the Securityholders until withdrawn in accordance
with Section 3(k).
(iii) The Trustee shall establish and maintain, on behalf of the
Securityholders, the Payment Account. The Trustee shall, promptly upon receipt,
deposit in the Payment Account and retain therein the following:
(A) the aggregate amount remitted by the Master
Servicer to the Trustee pursuant to Section 3(k)(i)(I);
(B) any amount deposited by the Master Servicer pursuant to
Section 3(h)(iv) in connection with any losses on Permitted Investments;
and
(C) any other amounts deposited hereunder which are required to
be deposited in the Payment Account.
In the event that the Master Servicer shall remit any amount not
required to be remitted, it may at any time direct the Trustee to withdraw such
amount from the Payment Account, any provision herein to the contrary
notwithstanding. Such direction may be accomplished by delivering an Officer's
Certificate to the Trustee which describes the amounts deposited in error in the
Payment Account. All funds deposited in the Payment Account shall be held by the
Trustee in trust for the Securityholders until disbursed in accordance with this
Agreement or withdrawn in accordance with Section 3(k). In no event shall the
Trustee incur liability for withdrawals from the Payment Account at the
direction of the Master Servicer.
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(iv) Each institution at which the Collection Account or the
Payment Account is maintained shall invest the funds therein as directed in
writing by the Master Servicer in Permitted Investments, which shall mature not
later than (i) in the case of the Collection Account, the second Business Day
next preceding the related Payment Account Deposit Date (except that if such
Permitted Investment is an obligation of the institution that maintains such
account, then such Permitted Investment shall mature not later than the Business
Day next preceding such Payment Account Deposit Date) and (ii) in the case of
the Payment Account, the Business Day next preceding the Distribution Date
(except that if such Permitted Investment is an obligation of the institution
that maintains such fund or account, then such Permitted Investment shall mature
not later than such Distribution Date) and, in each case, shall not be sold or
disposed of prior to its maturity. All such Permitted Investments shall be made
in the name of the Trustee, for the benefit of the Securityholders. All income
and gain net of any losses realized from any such investment of funds on deposit
in the Collection Account or the Payment Account shall be for the benefit of the
Master Servicer as servicing compensation and shall be remitted to it monthly as
provided herein. The amount of any realized losses in the Collection Account or
the Payment Account incurred in any such account in respect of any such
investments shall promptly be deposited by the Master Servicer in the Collection
Account or paid to the Trustee for deposit into the Payment Account, as
applicable. The Trustee in its fiduciary capacity shall not be liable for the
amount of any loss incurred in respect of any investment or lack of investment
of funds held in the Collection Account or the Payment Account and made in
accordance with this Section 3(h).
(v) The Master Servicer shall give notice to the Trustee, the
Seller, each Rating Agency and the Depositor of any proposed change of the
location of the Collection Account prior to any change thereof. The Trustee
shall give notice to the Master Servicer, the Seller, each Rating Agency and the
Depositor of any proposed change of the location of the Payment Account prior to
any change thereof.
(i) Collection of Taxes, Assessments and Similar
Items; Escrow Accounts.
(i) To the extent required by the related Mortgage Note and not
violative of current law, the Master Servicer shall establish and maintain one
or more accounts (each, an "Escrow Account") and deposit and retain therein all
collections from the Mortgagors (or advances by the Master Servicer) for the
payment of taxes, assessments, hazard insurance premiums or comparable items for
the account of the Mortgagors. Nothing herein shall
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require the Master Servicer to compel a Mortgagor to establish an Escrow Account
in violation of applicable law.
(ii) Withdrawals of amounts so collected from the Escrow Accounts
may be made only to effect timely payment of taxes, assessments, hazard
insurance premiums, condominium or PUD association dues, or comparable items, to
reimburse the Master Servicer out of related collections for any payments made
pursuant to Sections 3(a) hereof (with respect to taxes and assessments and
insurance premiums) and 3(l) hereof (with respect to hazard insurance), to
refund to any Mortgagors any sums determined to be overages, to pay interest, if
required by law or the terms of the related Mortgage or Mortgage Note, to
Mortgagors on balances in the Escrow Account or to clear and terminate the
Escrow Account at the termination of this Agreement in accordance with Section
8(a) hereof. The Escrow Accounts shall not be a part of the Issuer.
(iii) The Master Servicer shall advance any payments referred to
in Section 3(i)(i) that are not timely paid by the Mortgagors 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.
(j) Access to Certain Documentation and Information
Regarding the Mortgage Loans.
The Master Servicer shall afford the Depositor and the Trustee
reasonable access to all records and documentation regarding the Mortgage Loans
and all accounts, insurance information and other matters relating to this
Agreement, such access being afforded without charge, but only upon reasonable
request and during normal business hours at the office designated by the Master
Servicer.
Upon reasonable advance notice in writing, the Master Servicer will
provide to each Securityholder which is a savings and loan association, bank or
insurance company certain reports and reasonable access to information and
documentation regarding the Mortgage Loans sufficient to permit such
Securityholder to comply with applicable regulations of the OTS or other
regulatory authorities with respect to investment in the Certificates; provided
that the Master Servicer shall be entitled to be reimbursed by each such
Securityholder for actual expenses incurred by the Master Servicer in providing
such reports and access.
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(k) Permitted Withdrawals from the Note Account.
(i) The Master Servicer may from time to time make withdrawals
from the Collection Account for the following purposes:
(A) to pay to the Master Servicer (to the extent not previously
retained by the Master Servicer) the servicing compensation to which it
is entitled pursuant to Section 5, and to pay to the Master Servicer, as
additional servicing compensation, earnings on or investment income with
respect to funds in or credited to the Collection Account;
(B) to reimburse the Master Servicer for unreimbursed Advances
made by it, such right of reimbursement pursuant to this subclause (ii)
being limited to amounts received on the Mortgage Loan(s) in respect of
which any such Advance was made;
(C) to reimburse the Master Servicer for any
Nonrecoverable Advance previously made;
(D) to reimburse the Master Servicer for Insured
Expenses from the related Insurance Proceeds;
(E) to reimburse the Master Servicer for (a) unreimbursed
Servicing Advances, the Master Servicer's right to reimbursement
pursuant to this clause (a) with respect to any Mortgage Loan being
limited to amounts received on such Mortgage Loan(s) which represent
late recoveries of the payments for which such advances were made
pursuant to Section 3(a) or Section 3(i) and (b) for unpaid Master
Servicing Fees as provided in Section 3(n) hereof;
(F) to pay to the purchaser, with respect to each Mortgage Loan
or property acquired in respect thereof that has been purchased pursuant
to Section 2(c)(ii), 2(d) or 3(n), all amounts received thereon after
the date of such purchase;
(G) to reimburse the Seller, the Master Servicer or the Depositor
for expenses incurred by any of them and reimbursable pursuant to
Section 6(c) hereof;
(H) to withdraw any amount deposited in the Collection
Account and not required to be deposited therein;
(I) on or prior to the Payment Account Deposit Date, to withdraw
an amount equal to the related Available Funds and the Trustees Fees for
such Distribution Date and remit
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such amount to the Trustee for deposit in the Payment
Account; and
(J) to clear and terminate the Collection Account upon
termination of this Agreement pursuant to Section 8 (a) hereof.
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 Collection Account pursuant to such subclauses (i), (ii),
(iv), (v) and (vi). Prior to making any withdrawal from the Collection Account
pursuant to subclause (iii), the Master Servicer shall deliver to the Trustee an
Officer's Certificate of a Servicing Officer indicating the amount of any
previous Advance determined by the Master Servicer to be a Nonrecoverable
Advance and identifying the related Mortgage Loans(s), and their respective
portions of such Nonrecoverable Advance.
(ii) The Trustee shall withdraw funds from the Payment Account
for distributions to Securityholders in the manner specified in this Agreement
(and to withhold from the amounts so withdrawn, the amount of any taxes that it
is authorized to withhold pursuant to the last paragraph of [Section
8.11/trustee]). In addition, the Trustee may from time to time make withdrawals
from the Payment Account for the following purposes:
(A) to pay to itself the Trustee Fee for the related
Distribution Date;
(B) to pay to the Master Servicer as additional servicing
compensation earnings on or investment income with respect to funds in
the Payment Account;
(C) to withdraw and return to the Master Servicer any amount
deposited in the Payment Account and not required to be deposited
therein; and
(D) to clear and terminate the Payment Account upon termination
of the Agreement pursuant to 8(a) hereof.
(l) Maintenance of Hazard Insurance; Maintenance of
Primary Insurance Policies.
(i) The Master Servicer shall cause to be maintained, for each
Mortgage Loan, hazard insurance with extended coverage in an amount that is at
least equal to the lesser of (i) the maximum insurable value of the improvements
securing such Mortgage Loan or (ii) the greater of (y) the outstanding
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principal balance of the Mortgage Loan and (z) an amount such that the proceeds
of such policy shall be sufficient to prevent the Mortgagor and/or the mortgagee
from becoming a co-insurer. Each such policy of standard hazard insurance shall
contain, or have an accompanying endorsement that contains, a standard mortgagee
clause. Any amounts collected by the Master Servicer under any such policies
(other than the amounts to be applied to the restoration or repair of the
related Mortgaged Property or amounts released to the Mortgagor in accordance
with the Master Servicer's normal servicing procedures) shall be deposited in
the Collection Account. Any cost incurred by the Master Servicer in maintaining
any such insurance shall not, for the purpose of calculating monthly
distributions to the Securityholders or remittances to the Trustee for their
benefit, be added to the principal balance of the Mortgage Loan, notwithstanding
that the terms of the Mortgage Loan so permit. Such costs shall be recoverable
by the Master Servicer out of late payments by the related Mortgagor or out of
Liquidation Proceeds to the extent permitted by Section 3(k) hereof. 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 other than pursuant to such applicable laws and regulations as shall at
any time be in force and as shall require such additional insurance. If the
Mortgaged Property is located at the time of origination of the Mortgage Loan in
a federally designated special flood hazard area and such area is participating
in the national flood insurance program, the Master Servicer shall cause flood
insurance to be maintained with respect to such Mortgage Loan. Such flood
insurance shall be in an amount equal to the least of (i) the original principal
balance of the related Mortgage Loan, (ii) the replacement value of the
improvements which are part of such Mortgaged Property, and (iii) the maximum
amount of such insurance available for the related Mortgaged Property under the
national flood insurance program.
(ii) In the event that the Master Servicer shall obtain and
maintain a blanket policy 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, it being understood and agreed that
such policy may contain a deductible clause on terms substantially equivalent to
those commercially available and maintained by comparable servicers. If such
policy contains a deductible clause, 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, and there shall have
been a loss that would have been covered by such policy, deposit in the
Collection Account the amount not otherwise payable under the blanket policy
because of such
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deductible clause. In connection with its activities as Master Servicer of the
Mortgage Loans, the Master Servicer agrees to present, on behalf of itself, the
Depositor, and the Trustee for the benefit of the Securityholders, claims under
any such blanket policy.
(iii) The Master Servicer shall not 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, would have been covered
thereunder. The Master Servicer shall not cancel or refuse to renew any such
Primary Insurance Policy that is in effect at the date of the initial issuance
of the Notes and 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 a Qualified Insurer. The Master Servicer shall not be
required to maintain any Primary Insurance Policy with respect to any Mortgage
Loan with a Loan-to-Value Ratio less than or equal to 80% as of any date of
determination or, based on a new appraisal, the principal balance of such
Mortgage Loan represents 80% or less of the new appraised value. The Master
Servicer agrees to effect the timely payment of the premiums on each Primary
Insurance Policy, and such costs not otherwise recoverable shall be recoverable
by the Master Servicer from the related liquidation proceeds.
(iv) In connection with its activities as Master Servicer of the
Mortgage Loans, the Master Servicer agrees to present on behalf of itself, the
Trustee and Securityholders, claims to the insurer under any Primary Insurance
Policies and, in this regard, to take such reasonable action as shall be
necessary to permit recovery under any Primary Insurance Policies respecting
defaulted Mortgage Loans. Any amounts collected by the Master Servicer under any
Primary Insurance Policies shall be deposited in the Collection Account.
(m) Enforcement of Due-On-Sale Clauses; Assumption
Agreements.
(i) Except as otherwise provided in this Section, when any
property subject to a Mortgage has been conveyed by the Mortgagor, the Master
Servicer shall to the extent that it has knowledge of such conveyance, 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, the Master
Servicer is not required to exercise such rights with respect to a Mortgage Loan
if the Person to whom the related Mortgaged Property has
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been conveyed or is proposed to be conveyed satisfies the terms and conditions
contained in the Mortgage Note and Mortgage related thereto and the consent of
the mortgagee under such Mortgage Note or Mortgage is not otherwise so required
under such Mortgage Note or Mortgage as a condition to such transfer. In the
event that the Master Servicer is prohibited by law from enforcing any such
due-on-sale clause, or if coverage under any Required Insurance Policy would be
adversely affected, or if nonenforcement is otherwise permitted hereunder, the
Master Servicer is authorized, subject to Section 3(m)(ii), to take or enter
into an assumption and modification agreement from or with the person to whom
such property has been or is about to be conveyed, pursuant to which such person
becomes liable under the Mortgage Note and, unless prohibited by applicable
state law, the Mortgagor remains liable thereon, provided that the Mortgage Loan
shall continue to be covered (if-so covered before the Master Servicer enters
such agreement) by the applicable Required Insurance Policies. The Master
Servicer, subject to Section 3(m)(ii), is also authorized with the prior
approval of the insurers under any Required Insurance Policies to enter into a
substitution of liability agreement with such Person, pursuant to which the
original Mortgagor is released from liability and such Person is substituted as
Mortgagor and becomes liable under the Mortgage Note. Notwithstanding the
foregoing, the Master Servicer shall not be deemed to be in default under this
Section by reason of any transfer or assumption which the Master Servicer
reasonably believes it is restricted by law from preventing, for any reason
whatsoever.
(ii) Subject to the Master Servicer's duty to enforce any
due-on-sale clause to the extent set forth in Section 3(m)(i) hereof, in any
case in which a Mortgaged Property has been conveyed to a Person by a Mortgagor,
and such Person is to enter into an assumption agreement or modification
agreement or supplement to the Mortgage Note or Mortgage that 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 shall prepare and deliver or cause to be prepared and delivered
to the Trustee for signature and shall direct, in writing, the Trustee to
execute 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. In connection with any such assumption, no material term of the
Mortgage Note may be changed. In addition, the substitute Mortgagor and the
Mortgaged Property must be acceptable to the Master Servicer in accordance with
its
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underwriting standards as then in effect. Together with each such substitution,
assumption or other agreement or instrument delivered to the Trustee for
execution by it, the Master Servicer shall deliver an Officer's Certificate
signed by a Servicing Officer stating that the requirements of this subsection
have been met in connection therewith. The Master Servicer shall notify the
Trustee that any such substitution or assumption agreement has been completed by
forwarding to the Trustee the original of such substitution or assumption
agreement, which in the case of the original shall be added to the related
Mortgage File and shall, for all purposes, be considered a part of such Mortgage
File to the same extent as all other documents and instruments constituting a
part thereof. Any fee collected by the Master Servicer for entering into an
assumption or substitution of liability agreement will be retained by the Master
Servicer as additional servicing compensation.
(n) Realization Upon Defaulted Mortgage Loans;
Repurchase of Certain Mortgage Loans.
The Master Servicer shall use reasonable efforts to foreclose upon or
otherwise comparably convert the ownership of properties securing such of the
Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments. In
connection with such foreclosure or other conversion, the Master Servicer shall
follow such practices and procedures as it shall deem necessary or advisable and
as shall be normal and usual in its general mortgage servicing activities and
meet the requirements of the insurer under any Required Insurance Policy;
provided, however, that the Master Servicer shall not be required to expend its
own funds in connection with any foreclosure 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 after
reimbursement to itself of such expenses and (ii) that such expenses will be
recoverable to it through Liquidation Proceeds (respecting which it shall have
priority for purposes of withdrawals from the Collection Account). The Master
Servicer shall be responsible for all other costs and expenses incurred by it in
any such proceedings; provided, however, that it shall be entitled to
reimbursement thereof from the liquidation proceeds with respect to the related
Mortgaged Property, as provided in the definition of Liquidation Proceeds. If
the Master Servicer has knowledge that a Mortgaged Property which the Master
Servicer is contemplating acquiring in foreclosure or by deed in lieu of
foreclosure is located within a one mile radius of any site listed in the
Expenditure Plan for the Hazardous Substance Clean Up Bond Act of 1984 or other
site with environmental or hazardous waste risks known to the Master Servicer,
the Master Servicer will, prior to acquiring the
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Mortgaged Property, consider such risks and only take action in accordance with
its established environmental review procedures.
With respect to any REO Property, the deed or certificate of sale shall
be taken in the name of the Trustee for the benefit of the Securityholders, or
its nominee, on behalf of the Securityholders. The Trustee's name shall be
placed on the title to such REO Property solely as the Trustee under the
Indenture and not in its individual capacity. The Master Servicer shall ensure
that the title to such REO Property references the Indenture and the Trustee's
capacity thereunder. Pursuant to its efforts to sell such REO Property, the
Master Servicer shall either itself or through an agent selected by the Master
Servicer protect and conserve such REO Property in the same manner and to such
extent as is customary in the locality where such REO Property is located and
may, incident to its conservation and protection of the interests of the
Securityholders, rent the same, or any part thereof, as the Master Servicer
deems to be in the best interest of the Securityholders for the period prior to
the sale of such REO Property. The Master Servicer shall prepare for and deliver
to the Trustee a statement with respect to each REO Property that has been
rented showing the aggregate rental income received and all expenses incurred in
connection with the management and maintenance of such REO Property at such
times as is necessary to enable the Trustee to comply with the reporting
requirements of the REMIC Provisions. The net monthly rental income, if any,
from such REO Property shall be deposited in the Collection Account no later
than the close of business on each Determination Date. [The Master Servicer
shall perform the tax reporting and withholding required by Sections 1445 and
6050J of the Code with respect to foreclosures and abandonments, the tax
reporting required by Section 6050H of the Code with respect to the receipt of
mortgage interest from individuals and any tax reporting required by Section
6050P of the Code with respect to the cancellation of indebtedness by certain
financial entities, by preparing such tax and information returns as may be
required, in the form required, and delivering the same to the Trustee for
filing.]
In the event that the Issuer acquires any Mortgaged Property as
aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, the Master Servicer shall dispose of such Mortgaged Property
prior to two years after its acquisition by the Issuer unless the Trustee shall
have been supplied with an Opinion of Counsel to the effect that the holding by
the Issuer of such Mortgaged Property subsequent to such two-year period will
not result in the imposition of taxes on "prohibited transactions" of the REMIC
defined in Section 860F of the Code or cause the REMIC to fail to qualify as a
REMIC at any time that any Notes or Certificates are outstanding, in which
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case the Issuer may continue to hold such Mortgaged Property (subject to any
conditions contained in such Opinion of Counsel). Notwithstanding any other
provision of this Agreement, no Mortgaged Property acquired by the Issuer shall
be rented (or allowed to continue to be rented) or otherwise used for the
production of income by or on behalf of the Issuer in such a manner or pursuant
to any terms that would (i) cause such Mortgaged Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code or
(ii) subject the REMIC to the imposition of any federal, state or local income
taxes on the income earned from such Mortgaged Property under Section 860G(c) of
the Code or otherwise, unless the Master Servicer has agreed to indemnify and
hold harmless the Issuer with respect to the imposition of any such taxes.
The decision of the Master Servicer to foreclose on a defaulted Mortgage
Loan shall be subject to a determination by the Master Servicer that the
proceeds of such foreclosure would exceed the costs and expenses of bringing
such a proceeding. The income earned from the management of any REO Properties,
net of reimbursement to the Master Servicer for expenses incurred (including any
property or other taxes) in connection with such management and net of
unreimbursed Master Servicing Fees, Advances and Servicing Advances, shall be
applied to the payment of principal of and interest on the related defaulted
Mortgage Loans (with interest accruing as though such Mortgage Loans were still
current) and all such income shall be deemed, for all purposes in this
Agreement, to be payments on account of principal and interest on the related
Mortgage Notes and shall be deposited into the Collection Account. To the extent
the net income received during any calendar month is in excess of the amount
attributable to amortizing principal and accrued interest at the related
Mortgage Rate on the related Mortgage Loan for such calendar month, such excess
shall be considered to be a partial prepayment of principal of the related
Mortgage Loan.
The proceeds from any liquidation of a Mortgage Loan, as well as any
income from an REO Property, will be applied in the following order of priority:
first, to reimburse the Master Servicer for any related unreimbursed Servicing
Advances and Master Servicing Fees; second, to reimburse the Master Servicer for
any unreimbursed Advances; third, to reimburse the Collection Account for any
Nonrecoverable Advances (or portions thereof) that were previously withdrawn by
the Master Servicer pursuant to Section 3(k)(i)(C) that related to such Mortgage
Loan; fourth, to accrued and unpaid interest (to the extent no Advance has been
made for such amount or any such Advance has been reimbursed) on the Mortgage
Loan or related REO Property, at the Adjusted Net Mortgage Rate to the Due Date
occurring in the month in which such amounts are required to be distributed; and
fifth, as a
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recovery of principal of the Mortgage Loan. Excess Proceeds, if any, from the
liquidation of a Liquidated Mortgage Loan will be retained by the Master
Servicer as additional servicing compensation pursuant to Section 5.
The Master Servicer, in its sole discretion, shall have the right to
purchase for its own account from the Issuer any Mortgage Loan which is 91 days
or more delinquent at a price equal to the Purchase Price. The Purchase Price
for any Mortgage Loan purchased hereunder shall be deposited in the Collection
Account and the Trustee, upon receipt of a certificate from the Master Servicer
in the form of Exhibit D hereto, shall release or cause to be released to the
purchaser of such Mortgage Loan the related Mortgage File and shall execute and
deliver such instruments of transfer or assignment prepared by the purchaser of
such Mortgage Loan, in each case without recourse, as shall be necessary to vest
in the purchaser of such Mortgage Loan any Mortgage Loan released pursuant
hereto and the purchaser of such Mortgage Loan shall succeed to all the
Trustee's right, title and interest in and to such Mortgage Loan and all
security and documents related thereto. Such assignment shall be an assignment
outright and not for security. The purchaser of such Mortgage Loan shall
thereupon own such Mortgage Loan, and all security and documents, free of any
further obligation to the Trustee or the Securityholders with respect thereto.
(o) Access to Certain Documentation.
The Master Servicer shall provide to the OTS and the FDIC and to
comparable regulatory authorities supervising Holders of subordinated Notes or
Certificates and the examiners and supervisory agents of the OTS, the FDIC and
such other authorities, access to the documentation regarding the Mortgage Loans
required by applicable regulations of the OTS and the FDIC. Such access shall be
afforded without charge, but only upon reasonable and prior written request and
during normal business hours at the offices designated by the Master Servicer.
Nothing in this Section shall limit the obligation of the Master Servicer to
observe any applicable law prohibiting disclosure of information regarding the
Mortgagors and the failure of the Master Servicer to provide access as provided
in this Section as a result of such obligation shall not constitute a breach of
this Section.
(p) Annual Statement as to Compliance.
The Master Servicer shall deliver to the Depositor and the Trustees on
or before 120 days after the end of the Master Servicer's fiscal year,
commencing with its 199_ fiscal year, an Officer's Certificate stating, as to
the signer thereof, that (i)
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a review of the activities of the Master Servicer during the preceding calendar
year and of the performance of the Master Servicer under this Agreement has been
made under such officer's supervision and (ii) to the best of such officer's
knowledge, based on such review, the Master Servicer has fulfilled all its
obligations under this Agreement throughout such year, or, if there has been a
default in the fulfillment of any such obligation, specifying each such default
known to such officer and the nature and status thereof. The Trustee shall
forward a copy of each such statement to each Rating Agency.
(q) Annual Independent Public Accountants' Servicing
Statement; Financial Statements.
On or before 120 days after the end of the Master Servicer's fiscal
year, commencing with its 199_ fiscal year, the Master Servicer at its expense
shall cause a nationally or regionally recognized firm of independent public
accountants (who may also render other services to the Master Servicer, the
Seller or any affiliate thereof) which is a member of the American Institute of
Certified Public Accountants to furnish a statement to the Trustees and the
Depositor to the effect that-such firm has examined certain documents and
records relating to the servicing of the Mortgage Loans under this Agreement or
of mortgage loans under pooling and servicing agreements substantially similar
to this Agreement (such statement to have attached thereto a schedule setting
forth the pooling and servicing agreements covered thereby) and that, on the
basis of such examination, conducted substantially in compliance with the
Uniform Single Attestation Program for Mortgage Bankers or the Audit Program for
Mortgages serviced for FNMA and 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 Attestation Program for Mortgage Bankers or the Audit Program
for Mortgages serviced for FNMA and 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 FNMA and FHLMC
(rendered within one year of such statement) of independent public accountants
with respect to the related Subservicer. Copies of such statement shall be
provided by the Trustee to any Securityholder upon request at the Master
Servicer's expense, provided such statement is delivered by the Master Servicer
to the Trustee.
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(r) Errors and Omissions Insurance; Fidelity Bonds.
The Master Servicer shall for so long as it acts as master servicer
under this Agreement, obtain and maintain in force (a) a policy or policies of
insurance covering errors and omissions in the performance of its obligations as
Master Servicer hereunder and (b) a fidelity bond in respect of its officers,
employees and agents. Each such policy or policies and bond shall, together,
comply with the requirements from time to time of FNMA or FHLMC for persons
performing servicing for mortgage loans purchased by FNMA or FHLMC. In the event
that any such policy or bond ceases to be in effect, the Master Servicer shall
obtain a comparable replacement policy or bond from an insurer or issuer,
meeting the requirements set forth above as of the date of such replacement.
(s) Master Servicer Monthly Data.
On or before noon California time on the Determination Date, the Master
Servicer shall provide by modem to the Trustee with respect to the Mortgage
Loans, an electronic data file (accompanied by a hardcopy report) in a format
which is mutually agreed upon by the Master Servicer and the Trustee. The
Trustee shall be under no duty to recalculate, verify or recompute the
information provided to it by the Master Servicer hereunder.
4. Advances.
The Master Servicer shall determine on or before each Master Servicer
Advance Date whether it is required to make an Advance pursuant to the
definition thereof. If the Master Servicer determines it is required to make an
Advance, it shall, on or before the Master Servicer Advance Date, deposit into
the Collection Account an amount equal to the Advance. The Master Servicer shall
be entitled to be reimbursed from the Collection Account for all Advances of its
own funds made pursuant to this Section as provided in Section 3(k). The
obligation to make Advances with respect to any Mortgage Loan shall continue if
such Mortgage Loan has been foreclosed or otherwise terminated and the related
Mortgaged Property has not been liquidated.
5. Servicing Compensation.
As compensation for its activities hereunder, the Master Servicer shall
be entitled to retain or withdraw from the Collection Account an amount equal to
the Master Servicing Fee for each Mortgage Loan, provided that the aggregate
Master Servicing Fee with respect to any Distribution Date shall be reduced (i)
by an amount equal to the aggregate of the Prepayment Interest Shortfalls, if
any, with respect to such Distribution Date, but not below an amount equal to
one-half of the aggregate
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Master Servicing Fee for such Distribution Date before reduction thereof in
respect of such Prepayment Interest Shortfalls, and (ii) with respect to the
first Distribution Date, an amount equal to any amount to be deposited into the
Payment Account by the Depositor pursuant to Section 2(a)(i) and not so
deposited.
Additional servicing compensation in the form of Excess Proceeds,
Prepayment Interest Excess, prepayment penalties, assumption fees, late payment
charges and all income and gain net of any losses realized from Permitted
Investments shall be retained by the Master Servicer to the extent not required
to be deposited in the Collection Account pursuant to Section 3(h) hereof. The
Master Servicer shall be required to pay all expenses incurred by it in
connection with its master servicing activities hereunder (including payment of
any premiums for hazard insurance and any Primary Insurance Policy and
maintenance of the other forms of insurance coverage required by this Agreement)
and shall not be entitled to reimbursement therefor except as specifically
provided in this Agreement.
6. The Master Servicer.
(a) Respective Liabilities of the Depositor and the
Master Servicer.
The Master Servicer shall be liable in accordance herewith only to the
extent of the obligations specifically imposed upon and undertaken by it herein.
(b) Merger or Consolidation of the Depositor or the
Master Servicer.
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 United
States or under the laws of one of the states thereof 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, or any of the Mortgage Loans and
to perform its respective duties under this Agreement.
Any Person into which the Depositor or the Master Servicer may be merged
or consolidated, or any Person 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,
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anything herein to the contrary notwithstanding; provided, however, that the
successor or surviving Person to the Master Servicer shall be qualified to sell
mortgage loans to, and to service mortgage loans on behalf of, FNMA or FHLMC.
(c) Limitation on Liability of the Depositor, the
Seller, Master Servicer and Others.
None of the Depositor, the Seller, the Master Servicer or any of the
directors, officers, employees or agents of the Depositor, the Seller or the
Master Servicer shall be under any liability to the Securityholders 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 Seller, the Master Servicer
or any such Person against any breach of representations or warranties made by
it herein or protect the Depositor, the Seller, the Master Servicer or any such
Person from any liability which would otherwise be imposed by reasons 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 Seller, the Master Servicer and any director, officer, employee or agent of
the Depositor, the Seller 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 Seller, the Master
Servicer and any director, officer, employee or agent of the Depositor, the
Seller or the Master Servicer shall be indemnified by the Issuer and held
harmless against any loss, liability or expense incurred in connection with any
audit, controversy or judicial proceeding relating to a governmental taxing
authority or any legal action relating to this Agreement, the Notes 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. None of the Depositor, the Seller
or the Master Servicer shall be under any obligation to appear in, prosecute or
defend any legal action that is not incidental to its respective duties
hereunder and which in its opinion may involve it in any expense or liability;
provided, however, that any of the Depositor, the Seller or the Master Servicer
may in its discretion undertake any such action that it may deem necessary or
desirable in respect of this Agreement and the rights and duties of the parties
hereto and interests of the Trustees and the Securityholders hereunder. In such
event, the legal expenses and costs of such action and any
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liability resulting therefrom shall be expenses, costs and liabilities of the
Issuer, and the Depositor, the Seller and the Master Servicer shall be entitled
to be reimbursed therefor out of the Collection Account.
(d) Limitation on Resignation of the Master Servicer.
The Master Servicer shall not resign from the obligations and duties
hereby imposed on it except (a) upon appointment of a successor servicer and
receipt by the Trustee of a letter from each Rating Agency that such a
resignation and appointment will not result in a downgrading of the rating of
any of the Certificates, or (b) upon determination that its duties hereunder are
no longer permissible under applicable law. Any such determination under clause
(b) permitting the resignation of the Master Servicer shall be evidenced by an
Opinion of Counsel to such effect delivered to the Trustee. No such resignation
shall become effective until the Trustee or a successor master servicer shall
have assumed the Master Servicer's responsibilities, duties, liabilities and
obligations hereunder.
7. Default.
(a) Events of Default.
"Event of Default," wherever used herein, means any one of
the following events:
(i) any failure by the Master Servicer to deposit in
the Collection Account or remit to the Trustee any payment (other
than a payment required to be made under Section 4 hereof)
required to be made with respect to any Class of Certificates
under the terms of this Agreement, which failure shall continue
unremedied for five days after the date upon which written notice
of such failure 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 Notes or Certificates
of such Class evidencing not less than 25% of the total
distributions allocated to such Class; or
(ii) any failure by the Master Servicer duly to
observe or perform in any material respect any other of the
covenants or agreements on the part of the Master Servicer
contained in this Agreement, which failure shall continue
unremedied for a period of thirty days after the date on which
written notice of such failure shall have been given to the
Master Servicer by the Trustee or the Depositor, or to the Master
Servicer,
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the Depositor and the Trustee by the Holders of Notes or
Certificates of any Class evidencing not less than 25% of the
total distributions allocated to such Class; or
(iii) a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises for the
appointment of a receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceeding, or for the winding-up or liquidation of its
affairs, shall have been entered against the Master Servicer and
such decree or order shall have remained in force undischarged or
unstayed for a period of 60 consecutive days; or
(iv) the Master Servicer shall consent to the
appointment of a 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 all
or substantially all of the property of the Master Servicer; or
(v) the Master Servicer shall admit in writing its
inability to pay its debts generally as they become due, file a
petition to take advantage of, 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) so long as the Master Servicer is the Seller, any
failure by the Seller to observe or perform in any material
respect any other of the covenants or agreements on the part of
the Seller contained in this Agreement, which failure shall
continue unremedied for a period of 60 days after the date on
which written notice of such failure shall have been given to the
Seller by the Trustee or the Depositor, or to the Seller and the
Trustee by the Holders of Notes or Certificates of any Class
evidencing not less than 25% of the total distributions allocated
to such Class; or]
(vii) any failure of the Master Servicer to make any
Advance in the manner and at the time required to be made
pursuant to Section 4 which continues unremedied for a period of
one Business Day after the date of such failure.
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If an Event of Default described in clauses (i) to (vi) 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, the Trustee may, or at the direction of
the Holders of Notes or Certificates of any Class evidencing not less than 25%
of the total distributions allocated to such Class, the Trustee shall by notice
in writing to the Master Servicer (with a copy to each Rating Agency), 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 Securityholder. If an Event of Default described in clause (vii) hereof
shall occur, the Trustee shall, by notice in writing to the Master Servicer and
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 Securityholder. On and after the receipt by
the Master Servicer of such written notice, all authority and power of the
Master Servicer hereunder, whether with respect to the Mortgage Loans or
otherwise, shall pass to and be vested in the Trustee. [The Trustee shall
thereupon make any Advance described in clause (vii) hereof subject to Section
3(g) hereof.] 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. Unless expressly
provided in such written notice, no such termination shall affect any obligation
of the Master Servicer to pay amounts owed pursuant to Article VIII. 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 of all cash amounts which shall at the
time be credited to the Collection Account, or thereafter be received with
respect to the Mortgage Loans.
Notwithstanding any termination of the activities of the Master Servicer
hereunder, the Master Servicer shall be entitled to receive, out of any late
collection of a Scheduled Payment on a Mortgage Loan which was due prior to the
notice terminating such Master Servicer's rights and obligations as Master
Servicer hereunder and received after such notice, that portion thereof to which
such Master Servicer would have been entitled pursuant to Sections 3(k)(i)(A)
through (H),and any other amounts payable to such Master Servicer hereunder the
entitlement to which arose prior to the termination of its activities hereunder.
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(b) Trustee to Act; Appointment of Successor.
On and after the time the Master Servicer receives a notice of
termination pursuant to Section 7(a) hereof, the Trustee shall, subject to and
to the extent provided in Section 3(g), be the successor to the Master Servicer
in its capacity as master servicer under this Agreement and the 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 by the
terms and provisions hereof and applicable law including the obligation to make
Advances pursuant to Section 4. As compensation therefor, the Trustee shall be
entitled to all funds relating to the Mortgage Loans that the Master Servicer
would have been entitled to charge to the Collection Account or Payment Account
if the Master Servicer had continued to act hereunder. Notwithstanding the
foregoing, if the Trustee has become the successor to the Master Servicer in
accordance with Section 7(a) hereof, the Trustee may, if it shall be unwilling
to so act, or shall, if it is prohibited by applicable law from making Advances
pursuant to Section 4 hereof or if it is otherwise unable to so act, appoint, or
petition a court of competent jurisdiction to appoint, any established mortgage
loan servicing institution the appointment of which does not adversely affect
the then current rating of the Securities by each Rating Agency 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. Any
successor to the Master Servicer shall be an institution which is a FNMA and
FHLMC approved seller/servicer in good standing, which has a net worth of at
least $10,000,000, and which is willing to service the Mortgage Loans and
executes and delivers to the Depositor and the Trustees an agreement accepting
such delegation and assignment, which contains an assumption by such Person of
the rights, powers, duties, responsibilities, obligations and liabilities of the
Master Servicer (other than liabilities of the Master Servicer under Section
6(c) hereof incurred prior to termination of the Master Servicer under Section
7(a)), with like effect as if originally named as a party to this Agreement; and
provided further that each Rating Agency acknowledges that its rating of the
Securities in effect immediately prior to such assignment and delegation will
not be qualified or reduced as a result of such assignment and delegation.
Pending appointment of a successor to the Master Servicer hereunder, the
Trustee, unless the Trustee is prohibited by law from so acting, shall, subject
to Section 3(g) hereof, 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 the Master Servicing Fee permitted the
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Master Servicer hereunder. The Trustee and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession. Neither the Trustee nor any other successor master servicer
shall be deemed to be in default hereunder by reason of any failure to make, or
any delay in making, any distribution hereunder or any portion thereof or any
failure to perform, or any delay in performing, any duties or responsibilities
hereunder, in either case caused by the failure of the Master Servicer to
deliver or provide, or any delay in delivering or providing, any cash,
information, documents or records to it.
Any successor to the Master Servicer as master servicer shall give
notice to the Mortgagors of such change of servicer and shall, during the term
of its service as master servicer maintain in force the policy or policies that
the Master Servicer is required to maintain pursuant to 3(r).
(c) Notification to Securityholders.
(i) Upon any termination of or appointment of a successor to the
Master Servicer, the Trustee shall give prompt written notice thereof to
Securityholders and to each Rating Agency.
(ii) Within 60 days after the occurrence of any Event of Default,
the Trustee shall transmit by mail to all Securit-yholders notice of each such
Event of Default hereunder known to the Trustee, unless such Event of Default
shall have been cured or waived.
8. Miscellaneous.
(a) Term of Master Servicing Agreement.
The obligations to be performed by the Master Servicer under this
Agreement shall commence on and as of the date on which the Issuer issues the
Securities and shall terminate as to each Mortgage Loan upon (i) the payment in
full of all principal and interest due under such Mortgage Loan or other
liquidation of such Mortgage Loan as contemplated by this Agreement, (ii) the
termination of the Master Servicer's rights and powers under this Agreement by
the Trustee as provided in Section 7(a) of this Agreement, or (iii) the release
by the Trustee of its security interest in any Mortgage Loan.
(b) Assignment.
Notwithstanding anything to the contrary contained herein,
except as provided in Section 6(b), this Agreement may not be
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assigned by the Master Servicer without the prior written consent
of the Trustee and Depositor.
(c) Notices.
(i) The Trustee shall use its best efforts to promptly provide
notice to each Rating Agency with respect to each of the following of which it
has actual knowledge:
1. Any material change or amendment to this Agreement;
2. The occurrence of any Event of Default that has not
been cured;
3. The resignation or termination of the Master
Servicer or the Trustee and the appointment of any successor;
4. The repurchase or substitution of Mortgage Loans
pursuant to Section 2(d); and
5. The final payment to Securityholders.
In addition, the Trustee shall promptly furnish to each Rating Agency
copies of the following:
1. Each report to Securityholders described in the
Indenture;
2. Each annual statement as to compliance described in
Section 3(p);
3. Each annual independent public accountants' servic-
ing report described in Section 3(q); and
4. Any notice of a purchase of a Mortgage Loan
pursuant to Section 2(c)(ii), 2(d) or 3(n).
(ii) All directions, demands and notices hereunder shall be in
writing and shall be deemed to have been duly given when delivered to (a) in the
case of the Depositor, CWABS, Inc., 155 North Lake Avenue, Pasadena, California
91101, Attention: _______________, (b) in the case of the Master Servicer,
_____________________________________________, Attention: _________________ or
such other address as may be hereafter furnished to the Depositor and the
Trustees by the Master Servicer in writing, (c) in the case of the Trustees,
_______________________________________________________,
Attention: __________________________________________________, or
such other address as the Trustee may hereafter furnish to the
Depositor or Master Servicer and (d) in the case of the Rating
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Agencies, the address specified therefor in the definition corresponding to the
name of such Rating Agency. Notices to Securityholders shall be deemed given
when mailed, first class postage prepaid, to their respective addresses
appearing in the Certificate Register.
(d) Inspection and Audit Rights.
The Master Servicer agrees that, on reasonable prior notice, it will
permit and will cause each Subservicer to permit any representative of the
Depositor or the Trustee during the Master Servicer's normal business hours, to
examine all the books of account, records, reports and other papers of the
Master Servicer relating to the Mortgage Loans, to make copies and extracts
therefrom, to cause such books to be audited by independent certified public
accountants selected by the Depositor or the Trustee and to discuss its affairs,
finances and accounts relating to the Mortgage Loans with its officers,
employees and independent public accountants (and by this provision the Master
Servicer hereby authorizes said accountants to discuss with such representative
such affairs, finances and accounts), all at such reasonable times and as often
as may be reasonably requested. Any out-of-pocket expense incident to the
exercise by the Depositor or the Trustee of any right under this Section 8(d)
shall be borne by the party requesting such inspection; all other such expenses
shall be borne by the Master Servicer or the related Subservicer.
(e) Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
SUBSTANTIVE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO
BE PERFORMED IN THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HERETO AND THE SECURITYHOLDERS SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS.
(f) Amendment.
This Agreement may be amended from time to time by the Issuer, the
Master Servicer and the Trustee without the consent of any of the
Securityholders to cure any ambiguity, or to correct or supplement any
provisions herein, or to make such other provisions with respect to matters or
questions arising under this Agreement as shall not be inconsistent with any
other provisions herein; provided that such action shall not, as evidenced by an
Opinion of Counsel (which Opinion of Counsel shall not be an expense of the
Trustee or the Issuer), adversely affect in any material respect the interests
of any Securityholder; provided, however, that the amendment shall not
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be deemed to adversely affect in any material respect the interests of the
Securityholders if the Person requesting the amendment obtains a letter from
each Rating Agency stating that the amendment would not result in the
downgrading or withdrawal of the respective ratings then assigned to the
Securities; it being understood and agreed that any such letter in and of itself
will not represent a determination as to the materiality of any such amendment
and will represent a determination only as to the credit issues affecting any
such rating. The Trustee, the Depositor and the Master Servicer also may at any
time and from time to time amend this Agreement without the consent of the
Securityholders to modify, eliminate or add to any of its provisions to such
extent as shall be necessary or helpful to maintain the qualification of the
Issuer as a REMIC under the Code or to avoid or minimize the risk of the
imposition of any tax on the REMIC pursuant to the Code that would be a claim at
any time prior to the final redemption of the Securities, provided that the
Trustee has been provided an Opinion of Counsel, which opinion shall be an
expense of the party requesting such opinion but in any case shall not be an
expense of the Trustee or the Issuer, to the effect that such action is
necessary or helpful to maintain such qualification or to avoid or minimize the
risk of the imposition of such a tax.
This 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 a
Majority in Interest of each Class of Notes or 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 of modifying in any manner the rights
of the Holders of Notes or Certificates; provided, however, that no such
amendment shall (i) reduce in any manner the amount of, or delay the timing of,
payments required to be distributed on any Certificate without the consent of
the Holder of such Note or Certificate, (ii) adversely affect in any material
respect the interests of the Holders of any Class of Notes or Certificates in a
manner other than as described in (i), without the consent of the Holders of
Notes or Certificates of such Class evidencing, as to such Class, Percentage
Interests aggregating 66%, or (iii) reduce the aforesaid percentages of Notes or
Certificates the Holders of which are required to consent to any such amendment,
without the consent of the Holders of all such Notes or Certificates then
outstanding.
[Notwithstanding any contrary provision of this Agreement, the Trustee
shall not consent to any amendment to this Agreement unless it shall have first
received an Opinion of Counsel, which opinion shall not be an expense of the
Trustee or the Issuer, to the effect that such amendment will not cause the
imposition of any tax on the REMIC or the Securityholders or cause the Issuer
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to fail to qualify as a REMIC at any time that any Certificates
are outstanding.]
Promptly after the execution of any amendment to this Agreement
requiring the consent of Securityholders, the Trustee shall furnish written
notification of the substance or a copy of such amendment to each Securityholder
and each Rating Agency.
It shall not be necessary for the consent of Securityholders under this
Section 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 Securityholders shall be subject to such reasonable regulations as
the Trustee may prescribe.
Nothing in this Agreement shall require the Trustee to enter into an
amendment without receiving an Opinion of Counsel (which Opinion shall not be an
expense of the Trustee or the Issuer, satisfactory to the Trustee that (i) such
amendment is permitted and is not prohibited by this Agreement and that all
requirements for amending this Agreement have been complied with; and (ii)
either (A) the amendment does not adversely affect in any material respect the
interests of any Securityholder or (B) the conclusion set forth in the
immediately preceding clause (A) is not required to be reached pursuant to this
Section 8(f).
(g) 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.
(h) No Joint Venture.
The Master Servicer and the Issuer are not partners or joint venturers
with each other and nothing herein shall be construed to make them such partners
or joint venturers or impose any liability as such of either of them.
(i) Recordation of Agreement; Counterparts.
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
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other appropriate public recording office or elsewhere, such recordation to be
effected by the Master Servicer at its expense, but only upon direction by the
Trustee accompanied by an Opinion of Counsel to the effect that such recordation
materially and beneficially affects the interests of the Securityholders.
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.
(j) Limitation of Liability of [owner trustee].
It is expressly understood and agreed by the parties hereto that (a)
this Agreement is executed and delivered by [owner trustee], not individually or
personally but solely as owner trustee of [Countrywide] Home Equity Loan Trust
199_ under the Trust Agreement, in the exercise of the powers and
authority conferred and vested in it, (b) each of the representations,
undertakings and agreements herein made on the part of the Issuer is made and
intended not as personal representations, undertakings and agreements by [owner
trustee] but is made and intended for the purpose for binding only the Issuer,
(c) nothing herein contained shall be construed as creating any liability on
[owner trustee], other than any liability arising out of its gross negligence,
bad faith or willful misconduct, and (d) under no circumstances shall [owner
trustee] be personally liable for the payment of any indebtedness or expenses of
the Issuer or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Issuer under this
Agreement or the other Operative Documents.
(k) Nonpetition Covenants.
Notwithstanding any prior termination of this Agreement, the Master
Servicer shall not, prior to the date which is one year and one day after the
termination of this Agreement with respect to the Issuer or the Depositor,
acquiesce, petition or otherwise invoke or cause the Issuer or the Depositor (or
any assignee) to invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Issuer or the Depositor
under any federal or state bankruptcy, insolvency or similar law, or appointing
a receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or the Depositor or any substantial part of its
property, or ordering the winding up or liquidation of the affairs of the Issuer
or the Depositor.
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IN WITNESS WHEREOF, each party has caused this Master Servicing
Agreement to be executed by its duly authorized officer or officers as of the
day and year first above written.
[Countrywide] Home Equity Loan Trust
199_,
as Issuer
By: [owner trustee]
not in its
individual capacity
but solely as
Owner Trustee
By:
Its:
[COUNTRYWIDE HOME LOANS, INC.]
as Seller and Master Servicer
By:_________________________________________
Its:________________________________________
[ ],
as Trustee
By:_________________________________________
Its:________________________________________
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SCHEDULE I
Mortgage Loan Schedule
S-I-1
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SCHEDULE II
[Countrywide] Home Equity Loan Trust 199_
Asset Backed Notes and Asset Backed Certificates
Series 199_
Representations and Warranties of the Master Servicer
____________________________ ("Seller-Master Servicer") hereby makes the
representations and warranties set forth in this Schedule II to the Issuer, the
Depositor and the Trustees, as of the Closing Date, or if so specified herein,
as of the Cut-off Date. Capitalized terms used but not otherwise defined in this
Schedule II shall have the meanings ascribed thereto in the Indenture (the
"Indenture") relating to the above-referenced Series, among Seller-Master
Servicer, as seller and master servicer, CWABS, Inc., as depositor, and
_____________________, as trustee.
(i) The Master Servicer is a [New York] corporation, validly
existing and in good standing under the laws of the State of [New York],
and has the corporate power to own its assets and to transact the
business in which it is currently engaged. The Master Servicer is duly
qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the character of the business
transacted by it or any properties owned or leased by it requires such
qualification and in which the failure so to qualify would have a
material adverse effect on the business, properties, assets, or
condition (financial or other) of the Master Servicer;
(ii) The Master Servicer has the power and authority to make,
execute, deliver and perform this Agreement and all of the transactions
contemplated under the Agreement, and has taken all necessary corporate
action to authorize the execution, delivery and performance of this
Agreement. When executed and delivered, this Agreement will constitute
the legal, valid and binding obligation of the Master Servicer
enforceable in accordance with its terms, except as enforcement of such
terms may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors'
rights generally and by the availability of equitable remedies;
(iii) The Master Servicer is not required to obtain the
consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any
governmental authority, bureau or
S-II-1
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agency in connection with the execution, delivery, performance, validity
or enforceability of this Agreement, except for such consent, license,
approval or authorization, or registration or declaration, as shall have
been obtained or filed, as the case may be, prior to the Closing Date;
(iv) The execution, delivery and performance of this
Agreement by the Master Servicer will not violate any provision of any
existing law or regulation or any order or decree of any court
applicable to the Master Servicer or any provision of the Certificate of
Incorporation or Bylaws of the Master Servicer, or constitute a material
breach of any mortgage, indenture, contract or other agreement to which
the Master Servicer is a party or by which the Master Servicer may be
bound; and
(v) No litigation or administrative proceeding of or before
any court, tribunal or governmental body is currently pending, or to the
knowledge of the Master Servicer threatened, against the Master Servicer
or any of its properties or with respect to this Agreement or the
Certificates which in the opinion of the Master Servicer has a
reasonable likelihood of resulting in a material adverse effect on the
transactions contemplated by this Agreement.
S-II-2
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SCHEDULE III
[Countrywide] Home Equity Loan Trust 199_
Asset Backed Notes and Asset Backed Certificates
Series 199_
Representations and Warranties as to the Mortgage Loans
____________________________ ("Seller") hereby makes the
representations and warranties set forth in this Schedule III to the Depositor
and the Trustee, as of the Closing Date, or if so specified herein, as of the
Cut-off Date. Capitalized terms used but not otherwise defined in this Schedule
III shall have the meanings ascribed thereto in the Indenture (the "Indenture")
relating to the above-referenced Series, among Seller, as seller and master
servicer, CWABS, Inc., as depositor, and ________________________, as trustee.
(i) As of the Closing Date, this Agreement constitutes a legal,
valid and binding obligation of the Seller, enforceable against the
Seller in accordance with its terms, except as enforcement of such terms
may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect affecting the enforcement
of creditors' rights generally and by the availability of equitable
remedies;
(ii) As of the Closing Date with respect to the Mortgage Loans
and as of the applicable Transfer Date with respect to any Eligible
Substitute Mortgage Loan, either (A) the Purchase Agreement constitutes
a valid transfer and assignment to the Depositor of all right, title and
interest of the Seller in and to the Cut-off Date Asset Balances with
respect to the applicable Mortgage Loans, all monies due or to become
due with respect thereto (excluding payments in respect of accrued
interest due prior to the Cut-off Date or due in the month of
_________), and all proceeds of such Cut-off Date Asset Balances with
respect to the Mortgage Loans and such funds as are from time to time
deposited in the Collection Account (excluding any investment earnings
thereon) and all other property specified in the definition of "Asset"
as being part of the corpus of the Trust conveyed to the Trust by the
Seller, and upon payment for the Additional Balances, will constitute a
valid transfer and assignment to the Trustee of all right, title and
interest of the Seller in and to the Additional Balances, all monies due
or to become due with respect thereto, and all proceeds of such
Additional Balances and all other property specified in the definition
of "Asset" relating to the Additional Balances or (B) the Purchase
Agreement or this Agreement, as
S-III-1
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appropriate, constitutes a grant of a security interest (as defined in
the UCC as in effect in California) in such property to the Trustee on
behalf of the Trust. If this Agreement constitutes the grant of a
security interest to the Trust in such property, and if the Trustee
obtains and maintains possession of the Mortgage File for each Mortgage
Loan, the Trust shall have a first priority perfected security interest
in such property, subject to the effect of Section 9-306 of the UCC with
respect to collections on the Mortgage Loans that are deposited in the
Collection Account in accordance with the next to last paragraph of
Section _______; provided, however, that nothing in this clause (ii)
shall be construed to obligate the Master Servicer to deliver any
Mortgage Files other than as set forth in Section 2(a) hereof;
(iii) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan and as of the date any Additional Balance is created, the
information set forth in the Mortgage Loan Schedule for such Mortgage
Loans is true and correct in all material respects;
(iv) The applicable Cut-off Date Asset Balance has not been
assigned or pledged, and the Seller is the sole owner and holder of such
Cut-off Date Asset Balance free and clear of any and all liens, claims,
encumbrances, participation interests, equities, pledges, charges or
security interests of any nature, and has full right and authority,
under all governmental and regulatory bodies having jurisdiction over
the ownership of the applicable Mortgage Loan, to sell, assign or
transfer the same pursuant to the Purchase Agreement;
(v) As of the Closing Date with respect to the Mortgage Loans and
the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, the related Mortgage Note and the Mortgage with respect
to each Mortgage Loan have not been assigned or pledged, and the Seller
is the sole owner and holder of the Mortgage Loan free and clear of any
and all liens, claims, encumbrances, participation interests, equities,
pledges, charges or security interests of any nature, and has full right
and authority, under all governmental and regulatory bodies having
jurisdiction over the ownership of the applicable Mortgage Loans, to
sell and assign the same pursuant to the Purchase Agreement;
(vi) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, the related Mortgage
S-III-2
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is a valid and subsisting first or second lien, as set forth on the
Mortgage Loan Schedule with respect to each related Mortgage Loan, on
the property therein described, and as of the applicable Cut-off Date
the related Mortgaged Property is free and clear of all encumbrances and
liens having priority over the first or second lien, as applicable, of
such Mortgage except for liens for (i) real estate taxes and special
assessments not yet delinquent; (ii) any first mortgage loan secured by
such Mortgaged Property and specified on the Mortgage Loan Schedule;
(iii) covenants, conditions and restrictions, rights of way, easements
and other matters of public record as of the date of recording that are
acceptable to mortgage lending institutions generally; and (iv) 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 such Mortgage;
(vii) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, there is no valid offset, defense or counterclaim of any
obligor under any Credit Line Agreement or Mortgage;
(viii) To the best knowledge of the Seller, as of the Closing
Date with respect to the Mortgage Loans and the applicable Transfer Date
with respect to any Eligible Substitute Mortgage Loan, there is no
delinquent recording or other tax or fee or assessment lien against any
related Mortgaged Property;
(ix) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, there is no proceeding pending or, to the best knowledge
of the Seller, threatened for the total or partial condemnation of the
related Mortgaged Property, and such property is free of material
damage;
(x) To the best knowledge of the Seller, as of the Closing Date
with respect to the Mortgage Loans and the applicable Transfer Date with
respect to any Eligible Substitute Mortgage Loan, there are no
mechanics' or similar liens or claims which have been filed for work,
labor or material affecting the related Mortgaged Property which are, or
may be, liens prior or equal to the lien of the related Mortgage, except
liens which are fully insured against by the title insurance policy
referred to in clause (xiv);
(xi) No Minimum Monthly Payment is more than 89 days delinquent
(measured on a contractual basis); and with
S-III-3
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respect to the Mortgage Loans no more than _____% (by Cut-off Date Pool
Balance) were 30-59 days delinquent (measured on a contractual basis)
and no more than _____% (by Cut-off Date Pool Balance) were 60-89 days
delinquent (measured on a contractual basis);
(xii) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, for each Mortgage Loan, the related Mortgage File
contains each of the documents and instruments specified to be included
therein;
(xiii) The related Mortgage Note and the related Mortgage at
origination complied in all material respects with applicable state and
federal laws, including, without limitation, usury, truth-in-lending,
real estate settlement procedures, consumer credit protection, equal
credit opportunity or disclosure laws applicable to the Mortgage Loan;
(xiv) Either a lender's title insurance policy or binder was
issued on the date of origination of the Mortgage Loan and each such
policy is valid and remains in full force and effect, or a title search
or guaranty of title customary in the relevant jurisdiction was obtained
with respect to a Mortgage Loan as to which no title insurance policy or
binder was issued;
(xv) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, none of the Mortgaged Properties is a mobile home or a
manufactured housing unit that is not considered or classified as part
of the real estate under the laws of the jurisdiction in which it is
located;
(xvi) As of the Cut-off Date for the Mortgage Loans no more than
_____% of such Mortgage Loans, by aggregate principal balance, are
secured by Mortgaged Properties located in one United States postal zip
code;
(xvii) The Combined Loan-to-Value Ratio for each Mort-
gage Loan was not in excess of 100%;
(xviii) No selection procedure reasonably believed by the Seller
to be adverse to the interests of the Securit-yholders or the Credit
Enhancer was utilized in selecting the Mortgage Loans;
S-III-4
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(xix) The Seller has not transferred the Mortgage
Loans to the Trust with any intent to hinder, delay or
defraud any of its creditors;
(xx) The Minimum Monthly Payment with respect to any Mortgage
Loan is not less than the interest accrued at the applicable Loan Rate
on the average daily Asset Balance during the interest period relating
to the date on which such Minimum Monthly Payment is due;
(xxi) Within 90 days of the Closing Date with respect to the
Mortgage Loans and, to the extent not already included in such filing
with respect to the Mortgage Loans, the applicable Transfer Date with
respect to any Eligible Substitute Mortgage Loan, the Seller will file
UCC-1 financing statements with respect to the Mortgage Loans;
(xxii) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, each Credit Line Agreement and each Mortgage Loan is an
enforceable obligation of the related Mortgagor, except as the
enforceability thereof may be limited by the bankruptcy, insolvency or
similar laws affecting creditors' rights generally;
(xxiii) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, the Seller has not received a notice of default of any
senior mortgage loan related to a Mortgaged Property that has not been
cured by a party other than the Master Servicer;
(xxiv) The definition of Prime Rate in each Credit Line Agreement
relating to a Mortgage Loan does not differ materially from the
definition in the form of Credit Line Agreement in ____________;
(xxv) The weighted average remaining term to maturity of the
Mortgage Loans on a contractual basis as of the Cutoff Date for the
Mortgage Loans is approximately ___ months. On each date that the Loan
Rates have been adjusted, interest rate adjustments on the Mortgage
Loans were made in compliance with the related Mortgage and Mortgage
Note and applicable law. Over the term of each Mortgage Loan, the Loan
Rate may not exceed the related Loan Rate Cap, if any. The Loan Rate
Caps range between ____% and ____%. The Margins range between ____% and
____% and the weighted average Margin is approximately ____% as of the
Cut-off Date for the Mortgage Loans. The Loan Rates on such Mortgage
S-III-5
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Loans range between ____% and _____% and the weighted average Loan Rate
is approximately _____%.
(xxvi) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, each Mortgaged Property consists of a single parcel of
real property with a one-to-four unit single family residence erected
thereon, or an individual condominium unit, planned unit development
unit or townhouse;
(xxvii) No more than _____% (by Cut-off Date Pool Balance) of the
Mortgage Loans are secured by real property improved by individual
condominium units, planned development units, townhouses or two-to-four
family residences erected thereon, and at least _____% (by Cut-off Date
Pool Balance) of the Mortgage Loans are secured by real property with a
detached one-family residence erected thereon;
(xxviii) The Credit Limits on the Mortgage Loans range between
$________ and $__________ with an average of $_________. As of the
Cut-off Date for the Mortgage Loans, no Mortgage Loan had a principal
balance in excess of approximately $__________ and the average principal
balance of the Mortgage Loans is equal to approximately $_________; and
(xxix) Approximately ____% and _____% of the Mortgage Loans, by
aggregate principal balance as of the Cut-off Date for the Mortgage
Loans, are first and second liens, respectively.
S-III-6
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SCHEDULE IV
[Countrywide] Home Equity Loan Trust 199_
Asset Backed Notes and Asset Backed Certificates
Series 199_
Representations and Warranties of the Issuer.
[Countrywide] Home Equity Loan Trust 199_ (the "Issuer") hereby makes
the representations and warranties set forth in this Schedule IV to the Master
Servicer and the Trustee, as of the Closing Date. Capitalized terms used but not
otherwise defined in this Schedule IV shall have the meanings ascribed thereto
in the Master Servicing Agreement (the "Master Servicing Agreement") relating to
the above-referenced Series, among [Countrywide Home Loans, Inc.], as Master
Servicer, [Countrywide] Home Equity Loan Trust 199_, as Issuer, and [ ], as
Trustee.
(1) The Issuer is a statutory business trust duly organized,
validly existing and in good standing under the laws of the State of
[Delaware], and possesses all requisite authority, power, licenses,
permits and franchises to conduct any and all business contemplated by
the Master Servicing Agreement and to comply with its obligations under
the terms of this Agreement, the performance of which have been duly
authorized by all necessary action.
(2) Neither the execution and delivery of the Master Servicing
Agreement by the Issuer, nor the performance and compliance with the
terms thereof by the Issuer will (A) result in a material breach of any
term or provision of the instruments creating the Issuer or governing
its operations, or (B) materially conflict with, result in a material
breach, violation or acceleration of, or result in a material default
under, the terms of any other material agreement or instrument to which
the Issuer is a party or by which it may be bound, or (C) constitute a
material violation of any statute, order or regulation applicable to the
Issuer of any court, regulatory body, administrative agency or
governmental body having jurisdiction over the Issuer; and the Issuer is
not in breach or violation of any material indenture or other material
agreement or instrument, or in violation of any statute, order or
regulation of any court, regulatory body, administrative agency or
governmental body having jurisdiction over it which breach or violation
may materially impair the Issuer's ability to perform or meet any of its
obligations under the Master Servicing Agreement.
S-IV-1
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(3) This Agreement, and all documents and instruments
contemplated hereby, which are executed and delivered by the Issuer,
will, assuming due authorization, execution by and delivery to the other
parties hereto and thereto, constitute valid, legal and binding
obligations of the Issuer, enforceable in accordance with their
respective terms, except that (a) the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, receivership and other
similar laws relating to creditors' rights generally and (b) the remedy
of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
(4) No litigation is pending or, to the best of the Issuer's
knowledge, threatened against the Issuer that would materially and
adversely affect the execution, delivery or enforceability of the Master
Servicing Agreement or the ability of the Issuer to perform its
obligations thereunder.
(5) Immediately prior to the transfer and assignment of the
Mortgage Loans to the Trustee, the Issuer had good title to, and was the
sole owner of, each Mortgage Loan free and clear of any liens, charges
or encumbrances or any ownership or participation interests in favor of
any other Person.
S-IV-2
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EXHIBIT A
FORM OF INITIAL CERTIFICATION OF TRUSTEE
[date]
[Master Servicer]
[Issuer]
_____________________
_____________________
Re: Master Servicing Agreement among
[Countrywide] Home Equity Loan Trust 199_, as
Issuer, [Countrywide Home Loans, Inc.], as
Master Servicer, and [ ], as Trustee,
Asset Backed Notes and Asset Backed
Certificates, Series 199_
Gentlemen:
In accordance with Section 2(b) of the above-captioned Master Servicing
Agreement (the "Master Servicing Agreement"), the undersigned, as Trustee,
hereby certifies that, as to each Mortgage Loan listed in the Mortgage Loan
Schedule (other than any Mortgage Loan listed in the attached schedule), it has
received:
(i) the original Mortgage Note, endorsed as provided in the
following form: "Pay to the order of ________, without
recourse"; and
(ii) a duly executed assignment of the Mortgage (which may be included in a
blanket assignment or assignments).
Based on its review and examination and only as to the foregoing
documents, such documents appear regular on their face and related to such
Mortgage Loan.
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
Master Servicing Agreement. The Trustee makes no representations as to: (i) the
validity, legality, sufficiency, enforceability or genuineness of any of the
documents contained in each Mortgage File of any of the Mortgage Loans
identified on the Mortgage Loan Schedule, (ii) the collectability, insurability,
effectiveness or suitability of any such Mortgage Loan or (iii) the correctness
of any information
A-1
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set forth in the Mortgage Loan Schedule, other than the information specified in
items (i) through (iv) and (vi) thereof.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Master Servicing Agreement.
[ ]
as Trustee
By:_________________________________________
Name:_______________________________________
Title:______________________________________
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EXHIBIT B
FORM OF FINAL CERTIFICATION OF TRUSTEE
[date]
[Master Servicer]
[Issuer]
_____________________
_____________________
Re: Master Servicing Agreement among [Countrywide]
Home Equity Loan Trust 199_, as Issuer,
[Countrywide Home Loans, Inc.], as Master
Servicer, and [ ], as Trustee, Asset Backed
Notes and Asset Backed Certificates,
Series 199_
Gentlemen:
In accordance with Section 2(b) of the above-captioned Master Servicing
Agreement (the "Master Servicing Agreement"), the undersigned, as Trustee,
hereby certifies that as to each Mortgage Loan listed in the Mortgage Loan
Schedule (other than any Mortgage Loan paid in full or listed on the attached
Document Exception Report) it has received:
(i) The original Mortgage Note, endorsed in the form provided in Section
2(a) of the Master Servicing Agreement, with all intervening endorsements
showing a complete chain of endorsement from the originator to the Issuer.
(ii) The original recorded Mortgage.
(iii) A duly executed assignment of the Mortgage in the form provided in
Section 2(a) of the Master Servicing Agreement, or, if the Master Servicer has
certified or the Trustee otherwise knows that the related Mortgage has not been
returned from the applicable recording office, a copy of the assignment of the
Mortgage (excluding information to be provided by the recording office).
(iv) The original or duplicate original recorded assignment or assignments
of the Mortgage showing a complete chain of assignment from the originator to
the Issuer.
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(v) The original or duplicate original lender's title policy and all riders
thereto or, any one of an original title binder, an original preliminary title
report or an original title commitment, or a copy thereof certified by the title
company.
Based on its review and examination and only as to the foregoing
documents, (a) such documents appear regular on their face and related to such
Mortgage Loan, and (b) the information set forth in items (i), (ii), (iii),
(iv), (vi) and (xi) of the definition of the "Mortgage Loan Schedule" in Section
1 of the Master Servicing Agreement accurately reflects information set forth in
the Trustee Mortgage File.
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
Master Servicing Agreement. The Trustee makes no representations as to: (i) the
validity, legality, sufficiency, enforceability or genuineness of any of the
documents contained in each Mortgage File of any of the Mortgage Loans
identified on the Mortgage Loan Schedule, or (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.
Notwithstanding anything herein to the contrary, the Trustee has made no
determination and makes no representations as to whether (i) any endorsement is
sufficient to transfer all right, title and interest of the party so endorsing,
as noteholder or assignee thereof, in and to that Mortgage Note or (ii) any
assignment is in recordable form or sufficient to effect the assignment of and
transfer to the assignee thereof, under the Mortgage to which the assignment
relates.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Master Servicing Agreement.
[ ],
as Trustee
By:_________________________________________
Name:_______________________________________
Title:______________________________________
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EXHIBIT C
REQUEST FOR RELEASE
(for Trustee)
[Countrywide] Home Equity Loan Trust 199_
Asset Backed Notes and Asset Backed Certificates
Series 199_
Loan Information
Name of Mortgagor: _________________________________________
Servicer
Loan No.: _________________________________________
Trustee
Name: _________________________________________
Address: _________________________________________
_________________________________________
Trustee
Mortgage File No.: _________________________________________
The undersigned Master Servicer hereby acknowledges that it has received
from [ ], as Trustee for the Holders of Notes of the above-referenced Series,
the documents referred to below (the "Documents"). All capitalized terms not
otherwise defined in this Request for Release shall have the meanings given them
in the Master Servicing Agreement (the "Master Servicing Agreement") relating to
the above-referenced Series among the Trustee, [Countrywide Home Loans, Inc.],
as Master Servicer, and [Countrywide] Home Equity Loan Trust 199_, as Issuer.
( ) Mortgage Note dated ____________, 19__, in the original
principal sum of $__________, made by __________________.
payable to, or endorsed to the order of, the Trustee.
( ) Mortgage recorded on _________________ as instrument no.
________________ in the County Recorder's Office of the
County of ___________________, State of _______________ in
book/reel/docket ________________ of official records at
page/image ________________.
( ) Deed of Trust recorded on __________________ as instrument
no. _________________ in the County Recorder's Office of the
County of ________________, State of _______________ in
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book/reel/docket _______________ of official records at
page/image ________________.
( ) Assignment of Mortgage or Deed of Trust to the Trustee,
recorded on _________________ as instrument no. _________
in the County Recorder's Office of the County of __________,
State of ________________ in book/reel/docket
of official records at page/image _______________.
( ) Other documents, including any amendments, assignments or
other assumptions of the Mortgage Note or Mortgage.
( ) ___________________________________________________________________
( ) ___________________________________________________________________
( ) ___________________________________________________________________
( ) ___________________________________________________________________
The undersigned Master Servicer hereby acknowledges and agrees as
follows:
(1) The Master Servicer shall hold and retain possession of the
Documents in trust for the benefit of the Trustee, solely for the
purposes provided in the Agreement.
(2) The Master Servicer shall not cause or knowingly permit the
Documents to become subject to, or encumbered by, any claim, liens,
security interest, charges, writs of attachment or other impositions nor
shall the Master Servicer assert or seek to assert any claims or rights
of setoff to or against the Documents or any proceeds thereof.
(3) The Master Servicer shall return each and every Document
previously requested from the Mortgage File to the Trustee when the need
therefor no longer exists, unless the Mortgage Loan relating to the
Documents has been liquidated and the proceeds thereof have been
remitted to the Note Account and except as expressly provided in the
Master Servicing Agreement.
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(4) The Documents and any proceeds thereof, including any
proceeds of proceeds, coming into the possession or control of the
Master Servicer shall at all times be earmarked for the account of the
Trustee, and the Master Servicer shall keep the Documents and any
proceeds separate and distinct from all other property in the Master
Servicer's possession, custody or control.
[COUNTRYWIDE HOME LOANS, INC.]
By ____________________________________________
Its ___________________________________________
Date: _________________, 19___
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EXHIBIT D
REQUEST FOR RELEASE OF DOCUMENTS
To: [Trustee] Attn: Mortgage Custody
Services
Re: The Master Servicing Agreement dated [ ] among [Countrywide
Home Loans, Inc.] ("[CHL]"), as Master Servicer, [Countrywide]
Home Equity Loan Trust 199_, as Issuer, and [ ], as Trustee
Ladies and Gentlemen:
In connection with the administration of the Mortgage Loans held by you as
Trustee for [Countrywide] Home Equity Loan Trust 199_, as Issuer, we request the
release of the Mortgage File for the Mortgage Loan(s) described below, for the
reason indicated.
FT Account#: Pool #:
Mortgagor's Name, Address and Zip Code:
Mortgage Loan Number:
Reason for Requesting Documents (check one)
_______1. Mortgage Loan paid in full ([CHL] hereby certifies that
all amounts have been received.)
_______2. Mortgage Loan Liquidated ([CHL] hereby certifies that all
proceeds of foreclosure, insurance, or other liquidation have
been finally received.)
_______3. Mortgage Loan in Foreclosure.
_______4. Other (explain): ____________________________________
If item 1 or 2 above is checked, and if all or part of the Trustee Mortgage File
was previously released to us, please release to us our previous receipt on file
with you, as well as an additional documents in your possession relating to the
above-specified Mortgage Loan. If item 3 or 4 is checked, upon return of all of
the above documents to you as Trustee, please acknowledge your receipt by
signing in the space indicated below, and returning this form.
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[COUNTRYWIDE HOME LOANS, INC.] [address]
By:________________________
Name:______________________
Title:____________________
Date:______________________
TRUSTEE CONSENT TO RELEASE AND
ACKNOWLEDGEMENT OF RECEIPT
By:________________________
Name:______________________
Title:____________________
Date:______________________
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October __, 1996
CWABS, Inc.
155 North Lake Avenue
Pasadena, CA 91101
Re: CWABS, Inc.
Registration Statement on Form S-3
-----------------------------------
Ladies and Gentlemen:
We have acted as counsel for CWABS, Inc., a Delaware corporation (the
"Company"), in connection with the preparation of a registration statement on
Form S-3 (the "Registration Statement") relating to the issuance from time to
time of up to $2,000,000,000 aggregate principal amount of Asset-Backed Notes
and Asset-Backed Certificates (the "Securities"), issuable in series. As set
forth in the Registration Statement, each Series of Securities will be issued
under and pursuant to the conditions of a separate pooling and servicing
agreement, trust agreement or indenture (each, an "Agreement") among the
Company, a trustee (the "Trustee") and, where appropriate, a master servicer
(the "Master Servicer"), each to be identified (together with any other relevant
parties) in the prospectus supplement for such Series of Securities.
We have examined copies of the Company's Certificate of Incorporation,
the Company's By-laws and forms of each Agreement, as filed or incorporated by
reference as exhibits to the Registration Statement, and the forms of Securities
included in any Agreement so filed or incorporated by reference in the
Registration Statement and such other records, documents and statutes as we have
deemed necessary for purposes of this opinion.
Based upon the foregoing, we are of the opinion that:
1. When any Agreement relating to a Series of Securities has been duly
and validly authorized by all necessary action on the part of the Company and
has been duly executed and delivered by the Company, the Master Servicer, if
any, the Trustee and any other party thereto, such Agreement will constitute a
legal, valid and
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binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as enforcement thereof may be
limited by bankruptcy, insolvency or other laws relating to or affecting
creditors' rights generally or by general equity principles.
2. When a Series of Securities has been duly authorized by all necessary
action on the part of the Company (subject to the terms thereof being otherwise
in compliance with applicable law at such time), duly executed and authenticated
by the Trustee for such Series in accordance with the terms of the related
Agreement and issued and delivered against payment therefor as described in the
Registration Statement, such Series of Securities will be legally and validly
issued, fully paid and nonassessable, and the holders thereof will be entitled
to the benefits of the related Agreement.
3. The information set forth in the Prospectus under the caption under
"Federal Income Tax Consequences," to the extent it constitutes matters of law
or legal conclusions, is correct in all material respects.
In rendering the foregoing opinions, we express no opinion as to the
laws of any jurisdiction other than the laws of the State of New York (excluding
choice of law principles therein) and the federal laws of the United States of
America.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to the references to this firm under the heading
"Legal Matters" in each prospectus supplement and the prospectus forming a part
of the Registration Statement, without admitting that we are "experts" within
the meaning of the Securities Act of 1933, as amended, or the Rules and
Regulations of the Commission issued thereunder, with respect to any part of
the Registration Statement, including this exhibit.
Very truly yours,
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Included in Exhibit 5.1
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LOAN PURCHASE AGREEMENT
This Loan Purchase Agreement (the "Agreement") is made as of
_________, 199_, by and among [Countrywide Home Loans, Inc., a Delaware
Corporation ("CHL")], CWABS, Inc., a Delaware corporation (the "Company"), and
[Countrywide] Home Equity Loan Trust 199_-__ (the "Issuer"), a Delaware
statutory business trust.
Section 1. Representations and Warranties.
1. Representations and Warranties of all Parties.
The Company, [CHL] and the Issuer, each as to itself and not
the other, hereby represents, warrants and agrees that:
(a) Authorization. The execution, delivery and performance of
this Agreement by it are within its respective powers and have been duly
authorized by all necessary action on its part.
(b) No Conflict. The execution, delivery and performance of this
Agreement will not violate or conflict with (i) its charter, bylaws or trust
agreement, (ii) any resolution or other corporate action by it, (iii) any
decisions, statutes, ordinances, rulings, directions, rules, regulations,
orders, writs, decrees, injunctions, permits, certificates or other requirements
of any court or other governmental or public authority in any way applicable to
or binding upon it, and (iv) will not result in or require the creation, except
as provided in or contemplated by this Agreement, of any lien, mortgage, pledge,
security interest, charge or encumbrance of any kind upon the Original Mortgage
Loans.
(c) Binding Obligation. This Agreement has been duly executed by
it and is its legally valid and binding obligation, enforceable against it in
accordance with this Agreement's terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, and by general principles of equity.
Section 2. Additional Representations, Warranties and Agreements
of [CHL] and the Company.
(a) [CHL] represents and warrants to, and agrees with, the Company
and the Issuer that (i) [CHL] has good and valid title to the home equity
loans identified in Schedule __ to the Indenture [Pooling and Servicing
Agreement] (the "Loans") free and clear of all liens, mortgages, deeds of trust,
pledges, security interests, charges, encumbrances or other claims; and (ii)
upon transfer to the Company, the Company will receive good, valid and
marketable title to all of the Loans, free and clear of
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any liens, mortgages, deeds of trust, pledges, security interests, charges,
encumbrances or other claims.
(b) The Company represents and warrants to, and agrees with, the
Issuer that upon transfer of the Loans from CHL to the Company, it will have
good and valid title to the Loans free and clear of all liens, mortgages, deeds
of trust, pledges, security interests, charges, encumbrances or other claims,
and, upon transfer to the Issuer, the Issuer will receive good, valid
and marketable title to all of the Loans, free and clear of any liens,
mortgages, deeds of trust, pledges, security interests, charges, encumbrances or
other claims.
Section 3. Conveyance of Loans.
[CHL], concurrently with the execution and delivery hereof, hereby sells,
transfers, assigns, sets over and otherwise conveys to the Company, without
recourse, all of [CHL]'s right, title and interest in and to (a) the Loans,
including the Related Documents and all interest and principal received or
receivable by [CHL] on or with respect to the Loans after the Cut-off Date and
all interest and principal payments on the Loans received prior to the Cut-off
Date in respect of installments of interest and principal due thereafter, but
not including payments of interest and principal due and payable on the Loans on
or before the Cutoff Date, and all other proceeds received in respect of such
Loans, (b) [CHL]'s rights under the Master Servicing Agreement, (c) the
Insurance Policies, (d) all cash, instruments or other property held or required
to be deposited in the Collection Account or the Payment Account, (e) all
Additional Balances and (f) all proceeds of the conversion, voluntary or
involuntary, of any of the foregoing into cash or other liquid assets,
including, without limitation, all Insurance Proceeds, Liquidation Proceeds and
condemnation awards. On or prior to the Closing Date, [CHL] shall deliver to the
Company or, at the Company's direction, to the Trustee or other designee of the
Company, the Trustee Loan File for each Mortgage Loan. Such delivery of the
Trustee Loan Files shall be made against payment by the Company of the purchase
price, previously agreed to by [CHL] not the Company, for the Loans.
The Company, concurrently with the execution and delivery hereof,
hereby sells, transfers, assigns, sets over and otherwise conveys to the Issuer
Fund, without recourse, all of the Company's right, title and interest in and to
(a) the Loans, including the Related Documents and all interest and principal
received or receivable by the Company on or with respect to the Loans after the
Cut-Off Date and all interest and principal payments on the Loans received prior
to the Cut-off Date in respect of installments of interest and principal due
thereafter, but not including payments of interest and principal due and payable
on the Loans on or before the Cut-off Date, and all other
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proceeds received in respect of such Loans, (b) the Company's rights under the
Master Servicing Agreement, (c) the Insurance Policies, (d) all cash,
instruments or other property held or required to be deposited in the Collection
Account or the Payment Account, (e) all Additional Balances and (f) all
proceeds of the conversion, voluntary or involuntary, of any of the foregoing
into cash or other liquid assets, including, without limitation, all Insurance
Proceeds, Liquidation Proceeds and condemnation awards. On or prior to the
Closing Date, the Company shall deliver, or cause to be delivered, to the
Indenture Trustee the Trustee Loan Files for each Mortgage Loan. [Such delivery
of the Trustee Loan Files shall be made against delivery by (i) the Trustee of
the Senior Bonds and the Subordinated Bonds and (ii) the Issuer of the Investor
Certificate, in each case to or upon the order of the Company.]
Section 4. Intention of Parties.
It is the express intent of the parties hereto that the
conveyance (i) of the Loans by [CHL] to the Company and (ii) of the Loans by the
Company to the Issuer each be, and be construed as, an absolute sale thereof.
It is, further, not the intention of the parties that such conveyances be deemed
a pledge thereof. However, in the event that, notwithstanding the intent of the
parties, such assets are held to be the property of the granting party, or if
for any other reason this Agreement is held or deemed to create a security
interest in the Loans, then (i) this Agreement shall be deemed to be a security
agreement within the meaning of the Uniform Commercial Code of the State of
__________ and (ii) the conveyances provided for in this Agreement shall be
deemed to be an assignment and a grant (i) by [CHL] to the Company or (ii) by
the Company to the Issuer of a security interest in all of the assets
transferred, whether now owned or hereafter acquired.
[CHL], the Company and the Issuer shall, to the extent consistent
with this Agreement, take such actions as may be necessary to ensure that, if
this Agreement were deemed to create a security interest in the Loans, such
security interest would be deemed to be a perfected security interest of first
priority under applicable law and will be maintained as such throughout the term
of this Agreement. [CHL] and the Company shall arrange for filing any Uniform
Commercial Code continuation statements in connection with any security interest
granted or assigned hereunder.
Section 5. Miscellaneous.
(a) Amendments, Etc. No rescission, modification,
amendment, supplement or change of this Agreement shall be valid
or effective unless in writing and signed by all of the parties
to this Agreement.
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(b) Binding Upon Successors, Etc. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties to this
Agreement and their respective legal representatives, heirs, successors or
assigns.
(c) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(d) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York.
(e) Headings. The headings of the several parts of this Agreement
are inserted for convenience of reference and are not intended to be a part of
or affect the meaning or interpretation of this Agreement.
(f) Authorization. The Company, pursuant to Section 6.03 of the
Trust Agreement, dated as of _______ __, 199_, between the Owner Trustee and the
Company, as Depositor, hereby authorizes and directs the Owner Trustee to enter
into this Agreement.
(g) Definitions. Capitalized terms not otherwise defined herein
have the meanings ascribed to such terms in the Indenture dated as of _________,
199_ between the Issuer and ___________________________ _______, as owner
trustee.
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IN WITNESS WHEREOF, each party has caused this Loan Purchase
Agreement to be executed by its duly authorized officer or officers as of the
day and year first above written.
[COUNTRYWIDE HOME LOANS, INC.]
By:___________________________________
Name:
Title:
CWABS, INC.
By:___________________________________
Name:
Title:
[COUNTRYWIDE] HOME EQUITY LOAN TRUST 199_-_
By: ________________________, not in
its individual capacity but solely
as Owner Trustee
By:___________________________________
Name:
Title:
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