______________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest Event
Reported) August 28, 1997
CWABS, INC. (as depositor under the Pooling and Servicing
Agreement, dated as of August 22, 1997, providing for the
issuance of the Countrywide Home Equity Loan Trust 1997-
C, Revolving Home Equity Loan Asset Backed Certificates,
Series 1997-C).
CWABS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 333-11095 95-4596514
- ---------------------------- ------------- ------------------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
4500 Park Granada
Calabasas, California 91302
- ---------------------- ----------
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code (818) 225-3240
----- --------
_____________________________________________________________________
Item 5. Other Events.
- ----- ------------
Description of the Certificates and the Mortgage Pool/*/
On August 28, 1997, CWABS, Inc. (the "Company") entered into a Pooling
and Servicing Agreement dated as of August 22, 1997 (the "Pooling and
Servicing Agreement"), by and among the Company, as depositor, Countrywide
Home Loans, Inc. ("CHL"), as sponsor and as master servicer, and The First
National Bank of Chicago, as trustee (the "Trustee"), providing for the
issuance of the Company's Revolving Home Equity Loan Asset Backed
Certificates, Series 1997-C. The Pooling and Servicing Agreement is annexed
hereto as Exhibit 99.1.
In addition to the Pooling and Servicing Agreement, the Company and CHL
entered into a Purchase Agreement, dated as of August 22, 1997 (the "Purchase
Agreement"), providing for the purchase and sale of the Mortgage Loans to be
delivered pursuant to the Pooling and Servicing Agreement. The Purchase
Agreement is annexed hereto as Exhibit 99.2.
_________________________
* Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to them in the Prospectus dated February 21, 1997 and
the Prospectus Supplement dated August 21, 1997, of CWABS,, Inc.,
relating to its Asset- Backed Certificates, Series 1997-C
Mortgage Loan Statistics
------------------------
The following tables describe characteristics of the Mortgage Loans as
of the Cut-off Date. All percentages set forth below have been calculated
based on the principal balance of the Mortgage Loans as of the date set forth
below. The sum of the columns may not equal the respective totals due to
rounding.
The sum of the columns below may not equal the total indicated due to
rounding. The following tables describe the Cut-off Pool Mortgage Loans and
the related Mortgaged Properties based upon the Cut-off Pool as of the close
of business on the Cut-off Date:
<TABLE>
<CAPTION>
PRINCIPAL BALANCES
- -------------------------------------------------------------------------------------------------------------------------
PERCENT OF
POOL BY CUT-
NUMBER OF OFF DATE
RANGE OF MORTGAGE CUT-OFF DATE PRINCIPAL
PRINCIPAL BALANCES LOANS PRINCIPAL BALANCE BALANCE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 0.00 to $10,000.00 2,220 $ 9,026,503.60 4.95%
10,000.01 to 20,000.00 2,487 38,432,417.57 21.07
20,000.01 to 30,000.00 1,431 35,888,867.74 19.68
30,000.01 to 40,000.00 758 26,580,805.74 14.57
40,000.01 to 50,000.00 454 20,864,321.42 11.44
50,000.01 to 60,000.00 205 11,318,856.25 6.21
60,000.01 to 70,000.00 114 7,423,580.86 4.07
70,000.01 to 80,000.00 85 6,404,944.37 3.51
80,000.01 to 90,000.00 48 4,087,540.68 2.24
90,000.01 to 100,000.00 62 6,018,956.29 3.30
100,000.01 to 125,000.00 24 2,754,846.22 1.51
125,000.01 to 150,000.00 35 4,893,452.40 2.68
150,000.01 to 175,000.00 10 1,657,555.26 0.91
175,000.01 to 200,000.00 11 2,074,313.05 1.14
200,000.01 to 225,000.00 3 643,211.82 0.35
225,000.01 to 250,000.00 8 1,931,495.00 1.06
250,000.01 to 275,000.00 1 273,500.00 0.15
275,000.01 to 300,000.00 1 282,000.00 0.15
300,000.01 to 325,000.00 1 310,000.00 0.17
325,000.01 and up 4 1,540,995.00 0.84
----- ------------------ --------
Total . . . . . . . . . . . . . . . . . 7,962 $ 182,408,163.27 100.00%
===== ================== =========
</TABLE>
<TABLE>
<CAPTION>
GEOGRAPHIC DISTRIBUTION (1)
- -------------------------------------------------------------------------------------------------------------------------
PERCENT OF
POOL BY CUT-
NUMBER OF OFF DATE
MORTGAGE CUT-OFF DATE PRINCIPAL
STATE LOANS PRINCIPAL BALANCE BALANCE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alabama . . . . . . . . . . . . . . 114 $ 2,047,493.76 1.12%
Alaska . . . . . . . . . . . . . . 20 479,716.62 0.26
Arizona . . . . . . . . . . . . . . 230 4,769,445.90 2.61
California . . . . . . . . . . . . 1,829 54,905,332.71 30.10
Colorado . . . . . . . . . . . . . 379 8,181,692.74 4.49
Connecticut . . . . . . . . . . . . 55 1,137,533.85 0.62
Delaware . . . . . . . . . . . . . 3 82,715.25 0.05
District of Columbia . . . . . . . 2 20,000.00 0.01
Florida . . . . . . . . . . . . . . 439 7,905,249.36 4.33
Georgia . . . . . . . . . . . . . . 168 3,294,031.71 1.81
Hawaii . . . . . . . . . . . . . . 21 572,568.85 0.31
Idaho . . . . . . . . . . . . . . . 128 2,824,626.35 1.55
Illinois . . . . . . . . . . . . . 350 6,189,707.57 3.39
Indiana . . . . . . . . . . . . . . 109 1,956,585.37 1.07
Iowa . . . . . . . . . . . . . . . 27 427,377.71 0.23
Kansas . . . . . . . . . . . . . . 63 1,332,502.03 0.73
Kentucky . . . . . . . . . . . . . 50 1,331,642.08 0.73
Louisiana . . . . . . . . . . . . . 98 1,890,201.42 1.04
Maine . . . . . . . . . . . . . . . 16 368,559.53 0.20
Maryland . . . . . . . . . . . . . 135 2,747,122.38 1.51
Massachusetts . . . . . . . . . . . 230 6,005,888.10 3.29
Michigan . . . . . . . . . . . . . 448 8,551,946.08 4.69
Mississippi . . . . . . . . . . . . 27 627,371.22 0.34
Missouri . . . . . . . . . . . . . 126 2,210,356.74 1.21
Montana . . . . . . . . . . . . . . 39 848,807.92 0.47
Nebraska . . . . . . . . . . . . . 54 943,610.96 0.52
Nevada . . . . . . . . . . . . . . 133 2,749,356.78 1.51
New Hampshire . . . . . . . . . . . 41 693,192.08 0.38
New Jersey . . . . . . . . . . . . 228 3,900,569.01 2.14
New Mexico . . . . . . . . . . . . 80 2,053,995.70 1.13
New York . . . . . . . . . . . . . 190 6,722,335.13 3.69
North Carolina . . . . . . . . . . 127 2,258,169.62 1.24
North Dakota . . . . . . . . . . . 4 72,891.98 0.04
Ohio . . . . . . . . . . . . . . . 298 4,796,885.60 2.63
Oklahoma . . . . . . . . . . . . . 36 554,580.80 0.30
Oregon . . . . . . . . . . . . . . 266 6,596,378.60 3.62
Pennsylvania . . . . . . . . . . . 257 3,724,789.98 2.04
Rhode Island . . . . . . . . . . . 31 444,243.91 0.24
South Carolina . . . . . . . . . . 37 663,701.67 0.36
South Dakota . . . . . . . . . . . 12 317,258.48 0.17
Tennessee . . . . . . . . . . . . . 135 2,124,558.14 1.16
Texas . . . . . . . . . . . . . . . 19 543,869.61 0.30
Utah . . . . . . . . . . . . . . . 228 6,328,733.67 3.47
Vermont . . . . . . . . . . . . . . 11 237,892.21 0.13
Virginia . . . . . . . . . . . . . 124 2,478,748.85 1.36
Washington . . . . . . . . . . . . 427 11,206,976.09 6.14
Wisconsin . . . . . . . . . . . . . 86 1,505,498.55 0.83
Wyoming . . . . . . . . . . . . . . 32 781,450.60 0.43
----- ----------------- --------
Total . . . . . . . . . . . . 7,962 $ 182,408,163.27 100.00%
===== ================= ========
</TABLE>
- ------------
(1) Geographic location is determined by the address of the Mortgaged
Property securing the related Mortgage Loan.
<TABLE>
<CAPTION>
COMBINED LOAN-TO-VALUE RATIOS (1)
- -------------------------------------------------------------------------------------------------------------------------
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>
0.00% to 10.00% . . . . . . . . 10 $ 172,872.69 0.09%
10.01% to 20.00% . . . . . . . . 24 458,786.18 0.25
20.01% to 30.00% . . . . . . . . 63 1,709,410.01 0.94
30.01% to 40.00% . . . . . . . . 76 1,905,631.88 1.04
40.01% to 50.00% . . . . . . . . 153 3,461,336.18 1.90
50.01% to 60.00% . . . . . . . . 275 6,113,491.25 3.35
60.01% to 70.00% . . . . . . . . 954 20,926,213.98 11.47
70.01% to 80.00% . . . . . . . . 1,688 39,649,109.10 21.74
80.01% to 90.00% . . . . . . . . 3,713 83,593,342.71 45.83
90.01% to 100.00% . . . . . . . . 1,006 24,417,969.29 13.39
Total . . . . . . . . . . . . . . 7,962 $ 182,408,163.27 100.00%
</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 or of equal priority to the Mortgage Loans
(calculated generally at the date of origination of the Mortgage Loans)
to (B) the lesser of (i) the appraised value of the related Mortgage
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.
<TABLE>
<CAPTION>
PROPERTY TYPE
- -------------------------------------------------------------------------------------------------------------------------
Number of Percent of Pool
Mortgage Cut-off Date by Cut-Off Date
Property Type Loans Principal Balance Principal Balance
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Condo Low Rise . . . . . . . . . . . . . 217 $ 4,049,123.12 2.22%
Two-to-Four Family . . . . . . . . . . . 36 757,470.05 0.42
PUD . . . . . . . . . . . . . . . . . . . 682 16,322,973.33 8.95
Single Family Residence . . . . . . . . . 7,027 161,278,596.77 88.42
Total . . . . . . . . . . . . . . . 7,962 $ 182,408,163.27 100.00%
</TABLE>
<TABLE>
<CAPTION>
LIEN PRIORITY
- -------------------------------------------------------------------------------------------------------------------------
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 . . . . . . . . . . . . . . 160 $ 7,534,816.79 4.13%
Second Lien . . . . . . . . . . . . . . 7,802 174,873,346.48 95.87
Total . . . . . . . . . . . . . . 7,962 $ 182,408,163.27 100.00%
</TABLE>
<TABLE>
<CAPTION>
LOAN RATES (1)
- -------------------------------------------------------------------------------------------------------------------------
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>
5.990% . . . . . . . . . . . . . . . . 7,294 $ 162,663,074.23 89.18%
5.991% to 6.750% . . . . . . . . 2 27,896.85 0.02
6.751% to 8.250% . . . . . . . . 374 10,904,498.00 5.98
8.251% to 9.250% . . . . . . . . 56 1,893,677.65 1.04
9.251% to 9.500% . . . . . . . . 24 735,543.85 0.40
9.501% to 9.750% . . . . . . . . 7 216,670.08 0.12
9.751% to 10.000% . . . . . . . . 14 451,790.60 0.25
10.001% to 10.250% . . . . . . . . 11 435,068.56 0.24
10.251% to 10.500% . . . . . . . . 41 1,323,261.87 0.73
10.501% to 10.750% . . . . . . . . 30 944,087.51 0.52
10.751% to 11.000% . . . . . . . . 13 326,831.96 0.18
11.001% to 11.250% . . . . . . . . 41 1,146,368.34 0.63
11.251% to 11.500% . . . . . . . . 20 498,668.10 0.27
11.501% to 11.750% . . . . . . . . 8 236,567.53 0.13
11.751% to 12.000% . . . . . . . . 7 187,442.05 0.10
12.001% and up . . . . . . . . . . . 20 416,716.09 0.23
Total . . . . . . . . . . . . . . . . 7,962 $ 182,408,163.27 100.00%
</TABLE>
- -------------------
(1) Approximately 89.18% of the Cut-off Pool Mortgage Loans by Cut-off Date
Principal Balance are subject to an introductory rate of 5.99% per
annum.
<TABLE>
<CAPTION>
MARGIN
- -------------------------------------------------------------------------------------------------------------------------
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>
0.000% . . . . . . . . . . . . . . . . 32 $ 746,783.46 0.41%
0.001% - 0.250% . . . . . . . . . . . . 127 1,906,443.05 1.05
0.251% - 0.500% . . . . . . . . . . . . 1,300 28,307,478.09 15.52
0.501% - 0.750% . . . . . . . . . . . . 41 1,283,020.61 0.70
0.751% - 1.000% . . . . . . . . . . . . 247 8,040,427.04 4.41
1.001% - 1.250% . . . . . . . . . . . . 279 6,615,169.79 3.63
1.251% - 1.500% . . . . . . . . . . . . 602 12,546,069.68 6.88
1.501% - 1.750% . . . . . . . . . . . . 171 4,417,701.00 2.42
1.751% - 2.000% . . . . . . . . . . . . 312 6,647,655.42 3.64
2.001% - 2.250% . . . . . . . . . . . . 1,547 31,829,583.17 17.45
2.251% - 2.500% . . . . . . . . . . . . 145 4,564,328.22 2.50
2.501% - 2.750% . . . . . . . . . . . . 522 16,001,399.34 8.77
2.751% - 3.000% . . . . . . . . . . . . 903 18,303,245.86 10.03
3.001% - 3.250% . . . . . . . . . . . . 149 3,220,613.43 1.77
3.251% - 3.500% . . . . . . . . . . . . 395 10,848,521.13 5.95
3.501% - 3.750% . . . . . . . . . . . . 475 10,954,651.09 6.01
3.751% - 4.000% . . . . . . . . . . . . 99 2,326,343.70 1.28
4.001% - 4.250% . . . . . . . . . . . . 174 4,614,831.16 2.53
4.251% - 4.500% . . . . . . . . . . . . 336 7,311,152.71 4.01
4.501% - 4.750% . . . . . . . . . . . . 41 654,086.90 0.36
4.751% - 5.000% . . . . . . . . . . . . 36 777,815.53 0.43
5.001% and up . . . . . . . . . . . 29 490,842.89 0.27
Total . . . . . . . . . . . . . . 7,962 $ 182,408,163.27 100.00%
</TABLE>
<TABLE>
<CAPTION>
CREDIT LIMIT UTILIZATION RATES
- -------------------------------------------------------------------------------------------------------------------------
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>
0.00% . . . . . . . . . . . . . . . . 1,016 $ 0.00 0.00%
0.01% to 10.00% . . . . . . . . 167 462,219.68 0.25
10.01% to 20.00% . . . . . . . . 198 1,591,287.55 0.87
20.01% to 30.00% . . . . . . . . 210 2,434,073.76 1.33
30.01% to 40.00% . . . . . . . . 317 4,469,330.11 2.45
40.01% to 50.00% . . . . . . . . 381 5,414,635.58 2.97
50.01% to 60.00% . . . . . . . . 383 7,213,119.28 3.95
60.01% to 70.00% . . . . . . . . 560 10,869,232.76 5.96
70.01% to 80.00% . . . . . . . . 478 11,553,084.56 6.33
80.01% to 90.00% . . . . . . . . 465 12,460,881.53 6.83
90.01% to 100.00% . . . . . . . . 3,787 125,940,298.46 69.04
Total . . . . . . . . . . . . . 7,962 $ 182,408,163.27 100.00%
</TABLE>
<TABLE>
<CAPTION>
CREDIT LIMITS
- -------------------------------------------------------------------------------------------------------------------------
Number of Percent of Pool
Range of Mortgage Cut-off Date by Cut-Off Date
Credit Limits Loans Principal Balance Principal Balance
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 0.00 to $ 10,000.00 156 $ 810,022.11 0.44%
10,000.01 to 20,000.00 2,653 30,649,342.31 16.80
20,000.01 to 30,000.00 2,046 36,123,091.90 19.80
30,000.01 to 40,000.00 1,160 29,174,847.38 15.99
40,000.01 to 50,000.00 822 25,035,124.01 13.72
50,000.01 to 60,000.00 321 12,116,660.08 6.64
60,000.01 to 70,000.00 211 8,699,598.73 4.77
70,000.01 to 80,000.00 145 6,393,464.06 3.51
80,000.01 to 90,000.00 92 4,855,166.83 2.66
90,000.01 to 100,000.00 176 9,142,903.38 5.01
100,000.01 to 125,000.00 48 3,348,260.61 1.84
125,000.01 to 150,000.00 60 5,643,684.04 3.09
150,000.01 to 175,000.00 17 1,862,662.55 1.02
175,000.01 to 200,000.00 26 2,678,083.85 1.47
200,000.01 to 225,000.00 4 473,290.12 0.26
225,000.01 to 250,000.00 12 2,571,618.61 1.41
250,000.01 to 275,000.00 3 548,384.56 0.30
275,000.01 to 300,000.00 2 292,000.00 0.16
300,000.01 to 325,000.01 1 310,000.00 0.17
325,000.01 to 350,000.00 1 350,000.00 0.19
350,000.01 and up 6 1,329,958.14 0.73
Total . . . . . . . . . . . . . . . . 7,962 $ 182,408,163.27 100.00%
</TABLE>
<TABLE>
<CAPTION>
MAXIMUM RATES
- -------------------------------------------------------------------------------------------------------------------------
Number of Percent of Pool
Mortgage Cut-off Date by Cut-Off Date
Maximum rates Loans Principal Balance Principal Balance
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
12.250% . . . . . . . . . . . . . . . . . . 1 $ 18,914.25 0.01%
12.500% . . . . . . . . . . . . . . . . . . 135 2,124,558.14 1.16
15.000% . . . . . . . . . . . . . . . . . . 32 703,222.43 0.39
16.000% . . . . . . . . . . . . . . . . . . 129 2,333,548.18 1.28
17.000% . . . . . . . . . . . . . . . . . . 829 16,456,120.11 9.02
18.000% . . . . . . . . . . . . . . . . . . 6,836 160,771,800.16 88.14
Total . . . . . . . . . . . . . . . . 7,962 $ 182,408,163.27 100.00%
</TABLE>
<TABLE>
<CAPTION>
MONTHS REMAINING TO SCHEDULED MATURITY (1)
- -------------------------------------------------------------------------------------------------------------------------
Range of Number of Percent of Pool
Months Remaining to Mortgage Cut-off Date by Cut-Off Date
Scheduled Maturity Loans Principal Balance Principal Balance
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
147 - 156 . . . . . . . . . . . . . . . . 838 $ 19,669,113.98 10.78%
173 - 180 . . . . . . . . . . . . . . . . 80 2,785,443.25 1.53
237 - 294 . . . . . . . . . . . . . . . . 17 420,481.39 0.23
295 - 300 . . . . . . . . . . . . . . . . 6,858 156,292,871.26 85.68
301 - 302 . . . . . . . . . . . . . . . . 169 3,240,253.39 1.78
Total . . . . . . . . . . . . . . . 7,962 $ 182,408,163.27 100.00%
</TABLE>
- --------------------
(1) Assumes that the Draw Period for Cut-off Period Mortgage Loans with
five-year Draw Periods will be extended for an additional five years.
<TABLE>
<CAPTION>
ORIGINATION YEAR
- -------------------------------------------------------------------------------------------------------------------------
Number of Percent of Pool
Mortgage Cut-off Date by Cut-Off Date
Origination Year Loans Principal Balance Principal Balance
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1996 . . . . . . . . . . . . . . . . . 11 $ 228,012.21 0.13%
1997 . . . . . . . . . . . . . . . . . 7,951 182,180,151.06 99.87
Total . . . . . . . . . . . . . . 7,962 $ 182,408,163.27 100.00%
</TABLE>
<TABLE>
<CAPTION>
DELINQUENCY STATUS
- -------------------------------------------------------------------------------------------------------------------------
Number of Percent of Pool
Number of Days Mortgage Cut-off Date by Cut-Off Date
Delinquent Loans Principal Balance Principal Balance
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
30 - 59 days . . . . . . . . . . . . . 40 $ 1,136,822.39 0.62%
Current . . . . . . . . . . . . . . . . 7,922 181,271,340.88 99.38
Total . . . . . . . . . . . . . . 7,962 $ 182,408,163.27 100.00%
</TABLE>
Item 7. Financial Statements, Pro Forma Financial
- ---- -----------------------------------------
Information and Exhibits.
------------------------
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
99.1. The Pooling and Servicing Agreement, dated as of August 22,
1997, by and among the Company, CHL and the Trustee.
99.2. The Purchase Agreement, dated as of August 22, 1997, between
the Company and CHL.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
CWABS, INC.
By: /s/ David Walker
---------------------------
David Walker
Vice President
Dated: August 28, 1997
Exhibit Index
-------------
Exhibit
- -------
99.1. Pooling and Servicing Agreement,
dated as of August 22, 1997, by
and among, the Company, CHL
and the Trustee.
99.2. Purchase Agreement, dated as of
August 22, 1997, between the
Company and CHL.
EXHIBIT 99.1
------------
Execution Copy
--------------
CWABS, INC.,
as Depositor,
COUNTRYWIDE HOME LOANS, INC.
as Sponsor and Master Servicer,
and
THE FIRST NATIONAL BANK OF CHICAGO
as Trustee
_______________________
POOLING AND SERVICING AGREEMENT
Dated as of August 22, 1997
______________________
Revolving Home Equity Loan Asset Backed Certificates
Series 1997-C
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Interest Calculations . . . . . . . . . . . . . . . . 21
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 C r e d i t L i n e
Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.02. Acceptance by Trustee; Retransfer of
Mortgage Loans . . . . . . . . . . . . . . . . . . . 26
Section 2.03. Representations and Warranties Regarding
the Master Servicer . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.04. Representations and Warranties of the Sponsor
Regarding the Mortgage Loans; Retransfer of Certain
Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 2.05. Covenants of the Depositor . . . . . . . . . . . . . 36
Section 2.06. Transfers of Mortgage Loans at Election of
Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 2.07. Execution and Authentication of
Certificates . . . . . . . . . . . . . . . . . . . . 39
Section 2.08. Tax Treatment . . . . . . . . . . . . . . . . . . . . 39
Section 2.09. Representations and Warranties of the
Depositor . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE III
Administration and Servicing
of Mortgage Loans
Section 3.01. The Master Servicer . . . . . . . . . . . . . . . . . 41
Section 3.02. Collection of Certain Mortgage Loan
Payments . . . . . . . . . . . . . . . . . . . . . . 43
Section 3.03. Withdrawals from the Collection Account . . . . . . . 45
Section 3.04. Maintenance of Hazard Insurance; Property
Protection Expenses . . . . . . . . . . . . . . . . . . . . . . 46
Section 3.05. Assumption and Modification Agreements . . . . . . . 46
Section 3.06. Realization Upon Defaulted Mortgage
Loans; Repurchase of Certain Mortgage Loans . . . . . . 47
Section 3.07. Trustee to Cooperate . . . . . . . . . . . . . . . . 48
Section 3.08. Servicing Compensation; Payment of Certain
Expenses by Master Servicer . . . . . . . . . . . . . . . . . . 49
Section 3.09. Annual Statement as to Compliance . . . . . . . . . . 50
Section 3.10. Annual Servicing Report . . . . . . . . . . . . . . . 50
Section 3.11. Annual Opinion of Counsel . . . . . . . . . . . . . . 50
Section 3.12. Access to Certain Documentation and
Information Regarding the Mortgage Loans . . . . . . 51
Section 3.13. Maintenance of Certain Servicing Insurance
Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 3.14. Reports to the Securities and Exchange Commis-
sion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 3.15. Tax Returns . . . . . . . . . . . . . . . . . . . . . 52
Section 3.16. Information Required by the Internal Revenue
Service Generally and Reports of Foreclosures and
Abandonments of Mortgaged Property . . . . . . . . . . 52
ARTICLE IV
Servicing Certificate
Section 4.01. Servicing Certificate . . . . . . . . . . . . . . . . 53
Section 4.02. Claims upon the Policy; Policy Payments
Account . . . . . . . . . . . . . . . . . . . . . . . 56
Section 4.03. Replacement Policy . . . . . . . . . . . . . . . . . 57
Section 4.04. Effect of Payments by the Credit Enhancer;
Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 4.05. Optional Advances of the Master Servicer . . 59
ARTICLE V
Payments and Statements to
Certificateholders; Rights of Certificateholders
Section 5.01. Distributions . . . . . . . . . . . . . . . . . . . . 60
Section 5.02. Calculation of the Investor Certificate
Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 5.03. Statements to Certificateholders . . . . . . . . . . 63
Section 5.04. Rights of Certificateholders . . . . . . . . . . . . 65
ARTICLE VI
The Certificates
Section 6.01. The Certificates . . . . . . . . . . . . . . . . . . 66
Section 6.02. Registration of Transfer and Exchange of
Investor Certificates; Appointment of Registrar . . . . 66
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certif-
icates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 6.04. Persons Deemed Owners . . . . . . . . . . . . . . . . 69
Section 6.05. Restrictions on Transfer of Transferor Certif-
icates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 6.06. Appointment of Paying Agent . . . . . . . . . . . . . 72
Section 6.07. Acceptance of Obligations. . . . . . . . . . . . . . 72
ARTICLE VII
The Master Servicer, the Sponsor and the Depositor
Section 7.01. Liability of the Sponsor, the Master
Servicer and the Depositor . . . . . . . . . . . . . 73
Section 7.02. Merger or Consolidation of, or Assumption
of the Obligations of, the Master Servicer or the
Depositor . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 7.03. Limitation on Liability of the Master
Servicer and Others . . . . . . . . . . . . . . . . . 73
Section 7.05. Delegation of Duties . . . . . . . . . . . . . . . . 75
Section 7.06. Indemnification of the Trust by the Master
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 7.07. Indemnification of the Trust by the Trans-
feror . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 7.08. Limitation on Liability of the
Transferor . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE VIII
Servicing Termination
Section 8.01. Events of Servicing Termination . . . . . . . . . . . 77
Section 8.02. Trustee to Act; Appointment of Successor . . 79
Section 8.03. Notification to Certificateholders . . . . . . . . . 80
ARTICLE IX
The Trustee
Section 9.01. Duties of Trustee . . . . . . . . . . . . . . . . . . 81
Section 9.02. Certain Matters Affecting the Trustee . . . . . . . . 82
Section 9.03. Trustee Not Liable for Certificates or Mort-
gage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 9.04. Trustee May Own Certificates . . . . . . . . . . . . 85
Section 9.05. Master Servicer to Pay Trustee's Fees a n d
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 9.06. Eligibility Requirements for Trustee . . . . . . . . 86
Section 9.07. Resignation or Removal of Trustee . . . . . . . . . . 86
Section 9.08. Successor Trustee . . . . . . . . . . . . . . . . . . 87
Section 9.09. Merger or Consolidation of Trustee . . . . . . . . . 88
Section 9.10. Appointment of Co-Trustee or Separate
Trustee . . . . . . . . . . . . . . . . . . . . . . . 88
Section 9.11. Limitation of Liability . . . . . . . . . . . . . . . 89
Section 9.12. Trustee May Enforce Claims Without
Possession of Certificates . . . . . . . . . . . . . 90
Section 9.13. Suits for Enforcement . . . . . . . . . . . . . . . . 90
ARTICLE X
Termination
Section 10.01. Termination . . . . . . . . . . . . . . . . . . . . 91
ARTICLE XI
Rapid Amortization Events
Section 11.01. Rapid Amortization Events . . . . . . . . . . . . . 94
Section 11.02. Additional Rights Upon the Occurrence o f
Certain Events . . . . . . . . . . . . . . . . . . . . . . . . 95
ARTICLE XII
Miscellaneous Provisions
Section 12.01. Amendment . . . . . . . . . . . . . . . . . . . . . 98
Section 12.02. Recordation of Agreement . . . . . . . . . . . . . . 100
Section 12.03. Limitation on Rights of
Certificateholders . . . . . . . . . . . . . . . . . 100
Section 12.04. Governing Law . . . . . . . . . . . . . . . . . . . 101
Section 12.05. Notices . . . . . . . . . . . . . . . . . . . . . . 101
Section 12.06. Severability of Provisions . . . . . . . . . . . . . 102
Section 12.07. Assignment . . . . . . . . . . . . . . . . . . . . . 102
Section 12.08. Certificates Nonassessable and Fully Paid . 102
Section 12.09. Third-Party Beneficiaries . . . . . . . . . . . . . 102
Section 12.10. Counterparts . . . . . . . . . . . . . . . . . . . . 103
Section 12.11. Effect of Headings and Table of
Contents . . . . . . . . . . . . . . . . . . . . . . 103
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 - ANNUAL OPINION OF COUNSEL . . . . . . . . . . . . . . . . . . D-1
EXHIBIT E - FORM OF CREDIT LINE AGREEMENT . . . . . . . . . . . . . . . . E-1
EXHIBIT F - LETTER OF REPRESENTATIONS . . . . . . . . . . . . . . . . . . F-1
EXHIBIT G - FORM OF INVESTMENT LETTER . . . . . . . . . . . . . . . . . . G-1
EXHIBIT H - FORM OF REQUEST FOR RELEASE . . . . . . . . . . . . . . . . . H-1
This Pooling and Servicing Agreement, dated as of August 22, 1997, among
CWABS, Inc., as Depositor (the "Depositor"), Countrywide Home Loans, Inc., as
Sponsor and Master Servicer (in such capacities, the "Sponsor" and the
"Master Servicer", respectively), and The First National Bank of Chicago, 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 amount
-----------------------------
(but not less than zero) equal to Principal Collections for such Distribution
Date less the aggregate of Additional Balances created 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 $100,000, by a full appraisal, (ii) with respect
to Credit Line Agreements with Credit Limits equal to or less than $100,000,
by a drive by inspection of such Mortgaged Property made to establish compli-
ance with the underwriting criteria then in effect in connection with the
application for the Mortgage Loan secured by such Mortgaged Property, and
(iii) with respect to any Mortgage Loan as to which the Servicer consents to
a new senior lien pursuant to Section 3.01(a), in compliance with the
underwriting criteria then in effect in connection with the application for
the related senior mortgage loan.
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.
Available Transferor Subordinated Amount: As to any Distribution Date,
----------------------------------------
an amount equal to the lesser of (a) the Transferor Principal Balance for
such Distribution Date and (b) the Required Transferor Subordinated Amount
for such Distribution Date.
Bankruptcy Remote Entity: Any special or limited purpose corporation,
------------------------
partnership or other entity structured in all material respects in accordance
with the requirements of one or more nationally recognized statistical rating
organizations and the Credit Enhancer for bankruptcy remote entities.
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.
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 States of New York, California or
Illinois are required or authorized by law to be closed.
Certificate: An Investor Certificate or a Transferor Certificate.
-----------
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 Agree-
ment, (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 Trans-
feror, 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.
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.
Closing Date: August 28, 1997.
------------
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.
Collection Period: With respect to any Distribution Date and any
-----------------
Mortgage Loan, the calendar month preceding the month of such Distribution
Date (or, in the case of the first Collection Period, the period from August
23, 1997 through September 30, 1997).
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 One First National Plaza,
Suite 0126, Chicago, Illinois 60670, Attention: Corporate Trust Services
Division.
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 amount if any deposited in the Collection Account in
respect of such Distribution Date pursuant to Section 4.05, (y) the
Guaranteed Principal Distribution Amount and (z) any Preference Claim for
such Distribution Date.
Credit Enhancer: Capital Markets Assurance Corporation, a New York
---------------
domiciled monoline stock insurance 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.
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: August 22, 1997.
------------
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.
Deficiency Amount: As defined in Section 5.01(d).
-----------------
Definitive Certificates: As defined in Section 6.02(c).
-----------------------
Delivery Event: As defined in Section 2.01.
--------------
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
Investor Certificates evidencing $178,760,000.00 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 fifteenth day of each month, or if such day is
-----------------
not a Business Day, then the next Business Day, beginning in October 1997.
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 Sponsor, 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 "BBB-" by Standard & Poor's and
"Baa3" by Moody's, 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 (a) each Rating Agency to the Trustee, within 30
days of receipt of notice of such deposit, to the effect that such deposit
shall not cause such Rating Agency to reduce or withdraw its then-current
rating of the Certificates without regard to the Policy and (b) from the
Credit Enhancer to the Trustee, within 30 days of receipt of notice of such
deposit, to the effect that such account is acceptable to it.
Eligible Investments: (i) obligations of the United States or any
--------------------
agency thereof, provided the timely payment of 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, or such lower rating as will not result in the downgrading or
withdrawal of the rating then assigned to the Certificates by any Rating
Agency, without regard to the Policy; (iii) commercial paper issued by
Countrywide Home Loans, Inc. or any of its Affiliates; provided that such
commercial paper is rated no lower than A-1 by Standard & Poor's and P-2 by
Moody's, and the long-term debt of Countrywide Home Loans, Inc. is rated at
least A3 by Moody's, or such lower ratings as will not result in the
downgrading or withdrawal of the rating then assigned to the Certificates by
any Rating Agency, without regard to the Policy; (iv) commercial or finance
company paper which is then receiving the highest commercial or finance
company paper rating of each Rating Agency, or such lower rating as will not
result in the downgrading or withdrawal of the rating then assigned to the
Certificates by any Rating Agency, without regard to the Policy;
(v) 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 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 is not a Rating Agency) are then rated one of the two highest
long-term and the highest short-term ratings of each 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 Rating
Agency, without regard to the Policy; (vi) 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;
(vii) 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 Rating
Agency, without regard to the Policy; (viii) 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 (v) above; (ix) 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 Rating Agency, without regard to the Policy, as evidenced by a signed
writing delivered by each Rating Agency; (x) interests in any money market
fund which at the date of acquisition of the interests in such fund and
throughout the time such interests are held in such fund has the highest
applicable rating by each Rating Agency or such lower rating as will not
result in the downgrading or withdrawal of the rating then assigned to the
Certificates by any Rating Agency, without regard to the Policy; (xi) short
term investment funds sponsored by any trust company or national banking
association incorporated under the laws of the United States or any state
thereof which on the date of acquisition has been rated by each Rating Agency
in their respective highest applicable rating category or such lower rating
as will not result in the downgrading or withdrawal of the rating then
assigned to the Certificates by any Rating Agency, without regard to the
Policy; and (xii) 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 Rating Agency, without regard to the
Policy, as evidenced by a signed writing delivered by each Rating Agency;
provided that no such
--------
instrument shall be an Eligible Investment if such instrument evidences
either the right to receive (a) only interest with respect to the obligations
underlying such instrument or (b) both principal and interest payments
derived from obligations underlying such instrument and the interest and
principal payments with respect to such instrument provided a yield to
maturity at par greater than 120% of the yield to maturity at par of the
underlying obligations; and provided, further, that no instrument described
hereunder may be purchased at a price greater than par if such instrument may
be prepaid or called at a price less than its purchase price prior to its
stated maturity.
Eligible Substitute Mortgage Loan: A Mortgage Loan substituted by the
---------------------------------
Sponsor 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 10% more or 10% 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 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 Gross Margin that is not less than the Gross
Margin of the Defective Mortgage Loan and not more than 100 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 six months
earlier and not more than 60 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.
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.
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 to
the end of the Collection Period during which such Mortgage Loan became a
Liquidated Mortgage Loan) 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 (i) any
----------------------------------------
Distribution Date on which the Available Transferor Subordinated Amount and
any Overcollateralization Amount has been reduced to or equals zero, other
than the Distribution Date in September 2022, 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 principal on the Investor Certificates on such Distribution
Date) to the Invested Amount immediately following such Distribution Date and
(ii) the Distribution Date in September 2022, the amount by which the out-
standing Investor Certificate Principal Balance (after giving effect to
Interest Collections allocable and distributable as 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(a).
----------------
Insurance Agreement: The insurance and reimbursement agreement dated
-------------------
as of August 22, 1997 among the Depositor, the Sponsor, the Master Servicer
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 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.
Intervening Assignments: As defined in Section 2.01(iv).
-----------------------
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 Certificateholder: The Holder of an Investor Certificate.
--------------------------
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: A per annum rate equal to, with respect to
-------------------------
the first Interest Period, 5.805%, and for any subsequent Interest Period, a
per annum rate equal to the sum of (a) LIBOR as of the second LIBOR Business
Day prior to the first day of such Interest Period and (b) 0.18%; 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 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 denominator of which is the Pool Balance,
calculated as of the beginning of the related Collection Period.
Investor Fixed Allocation Percentage: 98%.
------------------------------------
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.
LIBOR: As to any date, the rate for United States dollar deposits for
-----
one month which appears on the Telerate Screen LIBO 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 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 the Mortgage Loan
Schedule.
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 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.
Loan-to-Value Ratio: As of any date of determination with respect to
-------------------
any mortgage loan, the percentage equivalent of a fraction, the numerator of
which is the outstanding principal balance of such mortgage loan as of such
date of determination and the denominator of which is the Valuation of the
related Mortgage Property.
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) 5% 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 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
Sponsor 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 Sponsor for a Defective
Mortgage Loan pursuant to Sections 2.02 and 2.04.
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
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 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 Sponsor, the
Master Servicer or the Transferor (except that any opinion pursuant to
Sections 4.03 or 7.04 or relating to taxation must be an opinion of
independent outside counsel) and who, in the case of opinions delivered to
the Credit Enhancer or the Rating Agency, is reasonably acceptable to it.
Original Invested Amount: $178,760,000.
------------------------
Original Investor Certificate Principal Balance: $178,760,000.
-----------------------------------------------
Overcollateralization Amount: At the time of reference thereto, the
----------------------------
amount, if any, by which the Invested Amount exceeds the Investor Certificate
Principal Balance.
Overcollateralization Step-Down Amount: With respect to any
--------------------------------------
Distribution Date, the lesser of (i) the Scheduled Principal Collections
Distribution Amount without giving effect to the proviso in the definition
thereof and (ii) the excess of the Overcollateralization Amount over the
Required Overcollateralization Amount for such Distribution Date.
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 Original Investor Certificate Principal Balance of such Certificate.
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 SB12024, 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(b).
-----------------------
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(d).
----------------
Premium: As defined in the Insurance Agreement.
-------
Premium Fee Rate: As defined 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 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 September 2002 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.
Rated Entity: A Person whose long-term unsecured debt obligations (at
------------
the time of the transfer under Section 6.05(c)) are rated at least "A3" by
Moody's or "A" by Standard & Poor's.
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
Standard & Poor's and P-1 or better in the case of Moody's 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
Standard & Poor's and "Aaa" in the case of Moody's 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 11:00 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 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 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 outstanding Investor Certificate Principal Balance. If no such
quotations can be obtained, the Reference Bank Rate shall be LIBOR applicable
to the preceding Interest Period.
Reference Banks: Three major banks that are engaged in transactions 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 Amount: With respect to any Distribution Date, the amount, if
---------------
any, by which the sum of the amounts distributable pursuant to Sections
5.01(a)(i) through 5.01(a)(iv) on such Distribution Date exceed Investor
Interest Collections for such Distribution Date.
Required Overcollateralization Amount: As defined in the Insurance
-------------------------------------
Agreement.
Required Transferor Subordinated 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; provided, however, that
on any Distribution Date, such amount shall be reduced by the
Overcollateralization Step-Down Amount for such Distribution Date. With
respect to any Distribution Date in respect of the Rapid Amortization Period,
the Maximum Principal Payment; provided, however, that on any Distribution
Date, such amount shall be reduced by the Overcollateralization Step-Down
Amount for such Distribution Date.
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 as of the first day of the Collection Period preceding
such Distribution Date (or as of the close of business on the Cut-off Date
with respect to the first Distribution Date).
Servicing Fee Rate: 0.50% 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.
Sponsor: Countrywide Home Loans, Inc., a New York corporation and any
-------
successor thereto.
Standard & Poor's: Standard & Poor's Ratings Group, a Division of The
-----------------
McGraw-Hill Companies, or its successor in interest.
Subordinated Transferor Collections: With respect to any Distribution
-----------------------------------
Date, Interest Collections and Principal Collections allocable to the
Transferor Interest on such Distribution Date up to the Available Transferor
Subordinated Amount for such Distribution Date.
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(a).
-------------------
Transfer Deposit Amount: As defined in Section 2.02(a).
-----------------------
Transfer Notice Date: As defined in Section 2.06.
--------------------
Transferor or Transferor Certificateholders: The Holders of the Trans
-------------------------------------------
feror 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.
Transferor Principal Balance: As of any date of determination, the
----------------------------
amount equal to (i) the Pool Balance as of the close of business on 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).
Trust: The trust created by this Agreement, the corpus of which
-----
consists of the Mortgage Loans, related Credit Agreements 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).
Trustee: The First National Bank of Chicago 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, 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.
Weighted Average Net Loan Rate: As to any Collection Period, the
------------------------------
average of the daily Net Loan Rate for each Mortgage Loan (assuming that each
Mortgage Loan is fully indexed) 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 cent with one-half of
one cent being rounded down.
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 after the Cut-off
Date (excluding payments in respect of accrued interest due on or prior to
the Cut-off Date; (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) all other assets included or to be included in the
Trust for the benefit of Certificateholders; and (vi) all proceeds of the
foregoing; provided, however, neither the Trustee nor the Trust assumes the
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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 California (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) 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 Sponsor, 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 Sponsor 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;
(v) either (1) for each Mortgage Loan with a Credit Limit in
excess of $100,000, a title policy or (2) for all other Mortgage Loans,
either a title policy, a title search, a limited coverage policy or
other assurance 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
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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 Sponsor 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.
Notwithstanding the characterization of the Investor Certificates as
debt for Federal, state and local income and franchise tax purposes, the
parties hereto intend to treat the transfer of the Mortgage Loans as provided
herein as a sale for accounting and other purposes, 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 such transfer is
deemed not to be a sale as contemplated in the immediately preceding
sentence, 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. In the event,
however, that possession of any of such documents or instruments is required
by any Person (including the Trustee) acting as successor master 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 master
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servicer 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
Standard & Poor's and "Baa2" by Moody's. 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
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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 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 Sponsor,
the Depositor and the Credit Enhancer, and the Sponsor 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 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 Sponsor 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
Sponsor on such Business Day and the Asset Balance of such Mortgage Loan
shall be deducted from the Pool Balance; provided, however,
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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 Sponsor, and within five Business Days after the Business
Day of such retransfer the Sponsor 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 Sponsor, in each case without
recourse, representation or warranty, and take such other actions as shall
reasonably be requested by the Sponsor 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 Sponsor 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 Sponsor.
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 Sponsor, 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 Sponsor 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 Sponsor 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 Sponsor
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 Sponsor substitutes
one or more Eligible Substitute Mortgage Loans, the Master Servicer shall
determine the Transfer Deposit Amount which amount shall be deposited by the
Sponsor 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 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 Defec-
tive Mortgage Loan so removed by the Trust 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 Sponsor 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 Sponsor 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
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Servicer. The Master Servicer represents and warrants to the Trustee and the
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Credit Enhancer that as of the Closing Date:
(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 condi-
tion (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 enforce-
able 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
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 Sponsor Regarding
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the Mortgage Loans; Retransfer of Certain Mortgage Loans. (a) The Sponsor
- --------------------------------------------------------
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 Sponsor, enforceable against the
Sponsor 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 Sponsor 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 on or prior to the Cut-off Date), 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 Sponsor, 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 Sponsor 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
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)
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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 Sponsor 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 immediately
prior to the sale of the Mortgage Loans to the Depositor, the Sponsor
was the sole owner and holder of the Mortgage Loan free and clear of any
and all liens, claims, encumbrances, participation interests, equities,
pledges, charges or security interests of any nature, 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
the 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 Sponsor, 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 Sponsor, 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 Sponsor, 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 59 days delinquent
(measured on a contractual basis) and with respect to the Mortgage Loans
no more than 0.62% (by Cut-off Date Pool Balance) were 30-59 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
0.66% 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 Sponsor
to be adverse to the interests of the Certificateholders or the Credit
Enhancer was utilized in selecting the Mortgage Loans;
(xix) The Sponsor 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 Sponsor 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 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 Sponsor 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 E;
(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 281 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 12.25% and 18.00% and the weighted average Loan Rate
Cap is approximately 17.81%. The Gross Margins range between 0.00% and
6.25% and the weighted average Gross Margin is approximately 2.23% as of
the Cut-off Date for the Mortgage Loans. The Loan Rates on such Mort-
gage Loans range between 5.99% and 13.38% and the weighted average Loan
Rate is approximately 6.29%.
(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 11.58% (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 88.42% (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
$10,000 and $500,000 with an average of approximately $34,373.25. As of
the Cut-off Date for the Mortgage Loans, no Mortgage Loan had a
principal balance in excess of approximately $500,000 and the average
principal balance of the Mortgage Loans is equal to approximately
$22,909.84; and
(xxix) Approximately 4.13% and 95.87% 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 Sponsor's knowledge or as to
which the Sponsor has no knowledge, if it is discovered by the Sponsor, 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 Sponsor'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 Sponsor, 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 Sponsor 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 Sponsor 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 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
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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 Sponsor 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 Sponsor 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 Sponsor respecting such breach avail-
able to Investor Certificateholders, the Trustee on behalf of Investor
Certificateholders and the Credit Enhancer; provided, however, that the
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Sponsor 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 Sponsor (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 Sponsor 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 right, title and interest of the Trust in, to and under the Mort-
gage 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
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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 govern-
mental 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. Transfers 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 transfer of Mortgage Loans from the Trust to the
Transferor 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 transfer that
contains a list of the Mortgage Loans to be transferred. Such transfers of
Mortgage Loans shall be permitted upon satisfaction of the following
conditions:
(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 transferred) exceeds 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 the first transfer of Mortgage Loans
pursuant to this Section, each Rating Agency and the Credit Enhancer
shall have received on or prior to the related Transfer Notice Date
notice of such proposed transfer of Mortgage Loans and, prior to the
Transfer Date, shall have notified the Trustee and the Credit Enhancer
in writing that such transfer 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 conclu-
sively 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 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
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 Sponsor) 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.
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 (i) the
new senior lien secures a mortgage loan that refinances an existing first
mortgage loan and (ii) the Loan-to-Value Ratio of the new mortgage loan
(without taking into account any closing costs that may be financed by such
new mortgage loan) is equal to or less than the Loan-to-Value Ratio of the
first mortgage loan to be replaced measured as of the Cut-off Date; provided,
--------
however, that the aggregate Asset Balance of such Mortgage Loans with respect
to which the senior lien may be so modified shall not exceed 10% of the Cut-
off Date Pool Balance (such 10% herein referred to as the "Increased Senior
----------------
Lien Limitation").
- ---------------
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 (i)
increase the Credit Limits on Mortgage Loans having aggregate Asset Balances
of up to 2.5% of the Cut-off Date Pool Balance, provided that (x) the
increase in the Credit Limit of a Mortgage Loan does not cause the Combined
Loan-to-Value Ratio of such Mortgage Loan to exceed 90%, (y) the increase in
the Credit Limit of a Mortgage Loan does not cause the Combined Loan-to-Value
Ratio of such Mortgage Loan to increase by more than 25% (for example, a
Combined Loan-to-Value Ratio of 50% can be increased to 75%, a Combined Loan-
to-Value Ratio of 60% can be increased to 85%, and so forth) and (z) the
increase is consistent with the Master Servicer's underwriting policies and
(ii) increase the Credit Limits on the Mortgage Loans having aggregate Asset
Balances of up to an additional 2.5% of the Cut-off Date Pool Balance,
provided that (x) the increase in the Credit Limit of a Mortgage Loan does
not cause the Combined Loan-to-Value Ratio of such Mortgage Loan to exceed
100%, (y) the increase in the Credit Limit of a Mortgage Loan does not cause
the Combined Loan-to-Value Ratio of such Mortgage Loan to increase by more
than 25% (for example, a Combined Loan-to-Value Ratio of 50% can be increased
to 75%, a Combined Loan-to-Value Ratio of 60% can be increased to 85%, and so
forth) and (z) 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 10% 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 25 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 Certificate-
holders 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
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 Mort-
gagors 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 master 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
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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 "The First National Bank of Chicago, as
------------------
Trustee, in trust for the registered holders of Revolving Home Equity Loan
Asset Backed Certificates, Series 1997-C and Capital Markets Assurance
Corporation." The Collection Account shall be an Eligible Account. The
Master Servicer shall (i) on the Business Day immediately preceding each of
the first three Distribution Dates, deposit in the Collection Account any
shortfall in the amount required to pay the Investor Certificate Interest on
such Distribution Dates resulting solely from the failure of certain Mortgage
Loans to be fully indexed and (ii) on the Business Day immediately preceding
the first Distribution Date, deposit in the Collection Account 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), and thereafter the Master Servicer, or the Sponsor, 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 and the
amount of any unreimbursed optional advance made by the Master Servicer
pursuant to Section 4.05; and provided, further, that, notwithstanding the
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foregoing, so long as Countrywide is the Master Servicer and (x) the Master
Servicer's long-term unsecured debt obligations are rated at least "Baa2" by
Moodys and "BBB-" by Standard and Poor's and (y) the Credit Enhancer's
claims-paying ability is rated "Aaa" by Moody's and "AAA" by Standard and
Poor's, the Master Servicer need not make daily deposits in the Collection
Account for any Collection Period, but instead may make a single deposit in
the Collection Account of amounts to be remitted by it for such Collection
Period in immediately available funds on the Business Day prior to the
related Distribution Date. 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 Sponsor.
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
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.
Amounts on deposit in the Collection Account will, at the direction of
the Master Servicer, be invested in Eligible Investments maturing no later
than the day before the next Distribution Date. 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); and
(iii) To make or to permit the Paying Agent to make distributions
and payments pursuant to Section 5.01;
provided, however, that, if the Master Servicer makes monthly deposits in the
- -------- -------
Collection Account pursuant to the second proviso of Section 3.02(b), in lieu
of making the foregoing withdrawals (except in the case of clause (iii)), the
Master Servicer may make a net deposit in the Collection Account pursuant to
Section 3.02(b).
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 maintained 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, 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 which would have been covered by
such policy, deposit in the Collection Account 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 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 modifi-
cation 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 deed or certificate of
sale shall be issued to the Trustee, or to its nominee on behalf of Certifi-
cateholders.
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
an amount equal to 100% of the Asset 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) shall
be deposited in the Collection Account and the Trustee, upon receipt of a
certificate from the Master Servicer in the form of Exhibit H 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 H 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 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 exists, 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
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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 first, from related Liquidation Proceeds and second, from the
Collection Account pursuant to Section 5.01(a)(ix).
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 May 31st of each year, beginning May 31, 1998, 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 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 May 31 of each
-----------------------
year, beginning May 31, 1998, 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 inde-
pendent 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 May 31 of each
-------------------------
year, beginning May 31, 1998, 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 D hereto.
Section 3.12. Access to Certain Documentation and Information Regarding
---------------------------------------------------------
the Mortgage Loans. (a) The Master Servicer shall provide to the Trustee,
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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 docu-
mentation 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 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 master 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 require-
ments 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 Sponsor, 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 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.
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 Sponsor, 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 Shortfall, if any,
to remain after the distribution on such Distribution Date;
(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
Sponsor 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 Section
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 Collec-
tion 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 and the Available
Transferor Subordinated Amount 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;
(xxiii) whether a Rapid Amortization Event has occurred since the
prior Determination Date, specifying each such Rapid Amortization Event
if one has occurred;
(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 Guaranteed Principal Distribution Amount for such
Distribution Date;
(xxvii) the Credit Enhancement Draw Amount, if any, for such
Distribution Date;
(xxviii) the amount to be distributed to the Transferor pursuant to
Section 5.01(a)(x);
(xxix) the amount to be paid to the Master Servicer pursuant to
Section 5.01(a)(ix);
(xxx) the Maximum Rate for the related Collection Period and the
Weighted Average Net Loan Rate;
(xxxi) 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;
(xxxii) the Overcollateralization Amount after giving effect to the
distribution to be made on such Distribution Date; and
(xxxiii) the number and principal balances of any Mortgage Loans
transferred 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 modified 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) (excluding the amount, if
any, payable pursuant to clause (vii) thereof) and (b) (after giving effect
to the distribution of the Trustee Fee and the Premium) 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 of Notice for
payment set forth as Exhibit A to the Policy, to the Credit Enhancer 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 will pay any amount payable under
the Policy as set forth in such form on the later to occur of (i) 12:00 noon,
New York City time, on the second Business Day following such receipt and
(ii) 12:00 noon, New York City time, on the Distribution Date to which such
deficiency relates.
(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. 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 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.
Section 4.03. Replacement Policy. 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 Investor Certificates (in each case, a "Replacement Event"),
-----------------
the Depositor may, in accordance with and upon satisfaction of the conditions
set forth in the Policy, including, without limitation, payment in full of
all amounts owed to the Credit Enhancer, but shall not be required to,
substitute a new surety bond or surety bonds for the existing Policy,
provided, however, that
-------- -------
in each case the Investor Certificates shall be rated no lower than the
rating assigned by each Rating Agency to the Investor Certificates
immediately prior to such Replacement Event and that such new surety bond
will qualify as a "similar commercially available credit enhancement
contract" within the meaning of Treas. Reg. Section 1.1001-3(e)(4)(iv)(B).
It shall be a condition to substitution of any new credit enhancement that
there be delivered to the Trustee a legal opinion, acceptable in form and
substance to the Trustee, from counsel to the provider of such new credit
enhancement with respect to the enforceability thereof and such other matters
as the Trustee may require. Upon receipt of the items referred to above and
the taking of physical possession of the new credit enhancement, the Trustee
shall, within five Business Days following receipt of such items and such
taking of physical possession, deliver the replaced Policy to the Credit
Enhancer. Any other form of credit enhancement may also be substituted for
the Policy upon the occurrence of a Replacement Event, provided, however,
-------- -------
that the Trustee receives an Opinion of Counsel to the effect that such
substitution will not be treated as a significant modification within the
meaning of Treas. Reg. Section 1.1001-3.
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 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 related
Determination Date.
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
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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 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 Distribution Date 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;
(viii) to the Credit Enhancer for any amounts owed to the Credit
Enhancer pursuant to the Insurance Agreement;
(ix) any amounts required to be paid to the Master Servicer
pursuant to Sections 3.08 and 7.03 which have 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 September 2022, on each Distribution
Date, the Trustee shall distribute out of the Collection Account to the
Investor Certificateholders the Principal Collections up to the Scheduled
Principal Collections Distribution Amount but not in excess of the Investor
Certificate Principal Balance. On the Distribution Date in September 2022,
the Trustee shall distribute to Investor Certificateholders Principal
Collections up to the Investor Certificate Principal Balance.
(c) Application of Subordinated Transferor Collections. If, after
--------------------------------------------------
applying Investor Interest Collections as provided in Section 5.01(a) above,
any Required Amount remains unpaid, the Trustee shall, based on information
set forth in the Servicing Certificate for such Distribution Date, apply
Subordinated Transferor Collections to make such payments. If Investor
Interest Collections and Subordinated Transferor Collections are insufficient
to cover the Required Amount for such Distribution Date, then the remaining
Investor Loss Amount (but only to the extent of the Available Transferor
Subordinated Amount) shall be reallocated to the Transferor Principal Balance
and shall not be allocated to the Investor Certificates; provided, however,
that no such allocation of Investor Loss Amounts shall reduce the Transferor
Principal Balance below zero.
(d) Distribution of the Credit Enhancement Draw Amount. With respect
--------------------------------------------------
to any Distribution Date, to the extent that Investor Interest Collections on
the related Distribution Date 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 Certifi-
cateholders 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 Certificateholder 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 Certi-
ficateholder owns of record one or more Investor Certificates having
principal denominations aggregating at least $1,000,000), 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 and subject to Section
5.01(c), 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.
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 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;
(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.
Section 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 Servicer included in the distribution on such
Distribution Date and the aggregate 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;
(xvi) the Investor Certificate Rate applicable to such
distribution;
(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;
(xviii) the amount of Subordinated Transferor Collections, if any,
included in such distribution;
(xix) the amount of Overcollateralization Step-Down Amount, if
any, included in such distribution;
(xx) the Available Transferor Subordinated Amount for such
Distribution Date; and
(xxi) the Overcollateralization Amount for the following
Distribution Date.
In the case of information furnished pursuant to clauses (ii), (iii) in
respect of Investor Certificate Interest, (iv), (v), (vi), (vii) 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 Certifi-
cates 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 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.
ARTICLE VI
The Certificates
Section 6.01. The Certificates. The Investor Certificates and Trans
----------------
feror 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 Sponsor.
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 Certi-
ficates or did not hold such offices at the date of such Transferor Certif-
icate. 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 Certi
-------------------------------------------------------
ficates; 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 Certi-
ficate Registrar shall provide for the registration of Investor Certificates
and of transfers and exchanges of Investor Certificates as 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 satisfac-
tory 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 Book-Entry Certifi-
cates 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 Certifi-
cates; (iii) ownership and transfers of registration of the Investor Certifi-
cates 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 Certifi-
cate 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.
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 Certi-
ficate 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 Certifi-
cate 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 registra-
tion, 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.
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 Certifi-
cate 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 sub-
stance satisfactory to the Trustee certifying to the Trustee the facts
surrounding such transfer, which investment 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 Section 6.05(c) have been complied with and an Opinion of
Counsel stating that all conditions precedent provided by this Section
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 and in no event shall the initial Holder of the Transferor
Certificates dispose of more than 80% of the Transferor Certificates unless
it shall deliver to the Trustee an Opinion of Counsel, in form and substance
satisfactory to the Trustee, to the effect that such transfer would not
adversely affect the classification of the Trust as a partnership for
purposes of California state franchise tax and for purposes of California
state income tax, (c) such transfer will not have any material adverse impact
on the federal or applicable state income taxation of an Investor Certifi-
cateholder 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 in the Mortgage Loans and the other property
conveyed hereunder shall have been taken or made, (vi) the transferee shall
have assumed the obligations of the Transferor pursuant to Section 7.07
hereof and (vii) the Credit Enhancer shall have consented to such transfer in
writing (such consent not to be unreasonably withheld); provided, however,
that no such consent of the Credit Enhancer shall be required if the
transferee is either a Bankruptcy Remote Entity or a Rated Entity; provided,
further, that no such consent of the Credit Enhancer shall be required from
and after the date of delivery to the Trustee of the Opinion of Counsel
specified in Section 11.02(a). 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
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.
ARTICLE VII
The Master Servicer, the Sponsor and the Depositor
Section 7.01. Liability of the Sponsor, the Master Servicer and the
-----------------------------------------------------
Depositor. The Sponsor and the Master Servicer shall be liable in accordance
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herewith only to the extent of the obligations specifically imposed upon and
undertaken by the Sponsor 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
herein.
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 misfeas-
ance, 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 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 result-
ing 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
master servicer to the Trustee in writing and such proposed successor master
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 master servicer stating that the proposed appointment of such
successor master servicer as Master Servicer hereunder will not result in the
reduction or withdrawal of the then current rating of the Investor Certifi-
cates without regard to the Policy; and (c) such proposed successor master
servicer is reasonably acceptable to the Credit Enhancer, as evidenced by a
letter to the Trustee; provided, however, that no such resignation by the
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Master Servicer shall become effective until the Trustee or successor master
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 master 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 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 actions 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 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
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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
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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.
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 con
-------------------------------
tinuing:
(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 (or, if the Master Servicer is permitted to remit collections on a
monthly basis pursuant to Section 3.02(b), three 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 materially and adversely affects the interests of the
Certificateholders or the Credit Enhancer and 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 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) through (iv), above,
either the Trustee, the Credit Enhancer or the Holders of Investor Certifi-
cates evidencing Percentage Interests aggregating not less than 51% with the
consent of the Credit Enhancer, 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, 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 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.
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 hous-
ing and home finance institution, bank or other mortgage loan or home equity
loan servicer having a net worth of not less than $15,000,000 as the succes-
sor 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
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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 Certi-
ficates 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, 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
master servicer shall during the term of its service as master 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 Certi-
ficate Register, the Credit Enhancer and each Rating Agency.
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
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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:
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(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;
(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 Sponsor 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 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
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costs, expenses or liabilities likely to be incurred by it in the making of
such investigation is, in the opinion of the Trustee, not reasonably assured
to the Trustee by the security afforded to it by the terms of this Agreement,
the Trustee may require reasonable indemnity 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 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 complete-
ness 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
Sponsor 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 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
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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, except as otherwise
provided in Section 3.14, 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 Certifi-
cates with the same rights as it would have if it were not Trustee and may
transact any banking and trust business with the Sponsor, 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 ser-
vices 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.
Section 9.06. Eligibility Requirements for Trustee. The Trustee
------------------------------------
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 exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000, 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 require-
ments 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
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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 by any state in which the Trustee or the Trust is located (which tax
cannot be vacated by the appointment of a co-Trustee or separate trustee
pursuant to 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 Trans-
feror 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 50% 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 Trans-
feror, 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.
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 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 direc-
tion 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 this 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.
Section 9.12. Trustee May Enforce Claims Without Possession of
------------------------------------------------
Certificates. All rights of action and claims under this Agreement or the
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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 compen-
sation, 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 Sponsor 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.
ARTICLE X
Termination
Section 10.01. Termination. (a) The respective obligations and
-----------
responsibilities of the Sponsor, 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 and (iv) the Distribution Date in September
2022; 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
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. 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 or equal to 10% 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 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 other-
wise required to be made on such Distribution Date in respect of the Certifi-
cates. 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 available 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 Certificateho-
lders concerning surrender of their Investor Certificates, and the cost
thereof shall be paid out of the funds on deposit in such escrow account.
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 Sponsor (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) to cause the Depositor to duly
observe or perform in any material respect the covenants of the
Depositor set forth in Section 2.05 or (iii) duly to observe or perform
in any material respect any other covenants or agreements of the Sponsor
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 Sponsor by the Trustee, or to the Sponsor 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 Sponsor 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 Sponsor or the
Depositor, as the case may be, by the Trustee, or to the Sponsor, 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
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pursuant to this subparagraph (b) shall not be deemed to have occurred
hereunder if the Sponsor has accepted retransfer of the related Mortgage Loan
or Mortgage Loans or made a substitution therefor 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 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 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 Trans-
feror or the Depositor and such decree or order shall have remained in
force undischarged or unstayed for a period of 30 days; or the Trans-
feror 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;
(d) the Trust shall become subject to registration as an
"investment company" under the Investment Company Act of 1940, as
amended; or
(e) the aggregate of all draws under the Policy exceeds 1% of the
Cut-off Date Pool Balance;
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 Certificate-
holders) may declare that an early amortization event (a "Rapid Amortiza
--------------
tion Event") has occurred as of the date of such notice, and in the case of
- ----------
any event described in subparagraph (c), (d) or (e), 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 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, 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 at least 51% 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 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. Notwithstanding the foregoing, no such sale,
disposition or liquidation of the Mortgage Loans shall be required and the
provisions of this Section 11.02 relating thereto shall be of no further
force and effect upon delivery to the Trustee of an Opinion of Counsel to the
effect that the elimination of such provisions will not cause the Trust to be
taxed as a corporation for purposes of California income or franchise tax.
(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'
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Fixed Allocation Percentage of such remaining proceeds shall be paid to
Investor Certificateholders in the following amounts and order of priority:
(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.
ARTICLE XII
Miscellaneous Provisions
Section 12.01. Amendment. This Agreement may be amended from time to
---------
time by the Sponsor, 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 Sponsor, the Depositor, 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 Transferor, the Sponsor, 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
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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 Sponsor, 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 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 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 Certificate-
holders 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 Certificate-
holders 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 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 what-
ever 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, 4500 Park Granada, Calabasas,
California 91302, Attention: Legal Department, (b) in the case of the Master
Servicer, Countrywide Home Loans, Inc., 4500 Park Granada, Calabasas,
California 91302, Attention: Legal Department, (c) in the case of the
Trustee, at the Corporate Trust Office, (d) in the case of the Credit
Enhancer, 885 Third Avenue, New York, New York 10022, Attention:
Surveillance Department (telecopy number (212) 755-5462), (e) in the case of
Moody's, Residential Loan Monitoring Group, 4th Floor, 99 Church Street, New
York, New York 10007, and (f) in the case of Standard & Poor's, 26 Broadway,
New York, New York 10004, 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 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
General Counsel and the Head Financial Guaranty Group 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 Certi-
ficates 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 66%.
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 Certificate-
holders, 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.
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.
IN WITNESS WHEREOF, the Depositor, the Sponsor, 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 Sponsor and Master Servicer
By:
--------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By:
--------------------------------
Name:
Title:
State of )
) ss.:
County of )
On the __th day of August, 1997 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 CWABS, Inc. a Delaware 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 corpora-
tion; and that he signed his name thereto by like order.
----------------------
Notary Public
(Notarial Seal)
State of )
) ss.:
County of )
On the __th day of August, 1997 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 The First National Bank of Chicago, 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)
State of )
) ss.:
County of )
On the __th day of August, 1997 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
Countrywide Home Loans, Inc., a New York 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)
Exhibit A
---------
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
Original Investor
Certificate Principal Balance
of this Investor
Certificate : $___________
Certificate Rate: : Variable
Initial Aggregate Investor
Certificate Principal Balance
of all Investor Certificates $178,760,000
CUSIP No. : ____________
Date of Pooling
and Servicing
Agreement : August 22, 1997
Certificate No. : __
Cut-Off Date : August 22, 1997
First Distribution
Date: : October 15, 1997
REVOLVING HOME EQUITY LOAN ASSET BACKED CERTIFICATES,
SERIES 1997-C
INVESTOR CERTIFICATE
evidencing a percentage interest in the distributions
allocable to the Investor Certificates evidencing an
undivided interest in a Trust consisting primarily of a
pool of adjustable rate home equity revolving credit line
mortgage loans sold by
CWABS, INC.
This Certificate does not represent an obligation of or interest in
CWABS, Inc. (the "Depositor"), Countrywide Home Loans, Inc. or the Trustee
referred to below or any of their 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
Original Investor Certificate Principal Balance of this Certificate by the
aggregate Original Investor Certificate Principal Balance of all Investor
Certificates) in certain monthly distributions with respect to a Trust
consisting primarily of a pool of mortgage loans (the "Mortgage Loans"),
transferred by the Depositor to the Trustee and serviced by Countrywide Home
Loans, Inc. (in such capacity, the "Master Servicer", including any successor
Master Servicer under the Agreement referred to below). The Trust was
created pursuant to a Pooling and Servicing Agreement dated as specified
above (the "Agreement") among the Depositor, the Master Servicer, Countrywide
Home Loans, Inc., as sponsor (in such capacity, the "Sponsor"), and The First
National Bank of Chicago, as trustee (the "Trustee"), a summary of certain of
the pertinent provisions of which is set forth hereafter. To the extent not
defined herein, 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.
This Certificate is one of the Investor Certificates from a duly
authorized issue of Certificates designated as Revolving Home Equity Loan
Asset Backed Certificates, Series 1997-C, representing, to the extent
specified in the Agreement, an undivided interest in: (i) each Mortgage Loan
including its Asset Balance (including all Additional Balances) and all
collections in respect thereof received after the Cut-off Date (excluding
payments in respect of accrued interest due on or prior to the Cut-Off Date),
(ii) property that secured a Mortgage Loan that is acquired by foreclosure or
deed in lieu of foreclosure, (iii) an irrevocable and unconditional limited
financial guarantee insurance policy (the "Policy"), (iv) the Depositor's
rights under the hazard insurance policies in respect of the Mortgage Loans,
(v) an assignment of the Depositor's rights under the purchase agreement
dated as of August 22, 1997 between the Sponsor, as seller, and the
Depositor, as purchaser (collectively, the "Trust Assets") and (vi) certain
other property described in the Agreement.
Distributions on this Certificate will be made by the Trustee, or by the
Paying Agent, if any, appointed pursuant to the Agreement, by check mailed to
the Person entitled thereto as such name and address shall appear on the
Certificate Register or, upon written request by such Person delivered to the
Trustee at least five Business Days prior to the related Record Date, by wire
transfer (but only if such Person owns of record one or more Investor
Certificates having principal denominations aggregating at least $1,000,000),
or by such other means of payment as such Person and the Trustee shall agree.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee or the Paying Agent, if one has been
appointed, of the pendency of such distribution, and only upon presentation
and surrender of this Certificate at the office or agency appointed by the
Trustee for that purpose.
Pursuant to the terms of the Agreement, a distribution will be made
on the 15th day of each month or if such day is not a Business Day, then on
the next succeeding Business Day (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last day preceding
such Distribution Date (the "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 Investor Certificates on such
Distribution Date under the terms of the Agreement. Notwithstanding the
foregoing, if Definitive Certificates have become available pursuant to the
Agreement, the Record Date shall be the last day of the calendar month
preceding the month of such Distribution Date.
The Certificates are limited in right of payment to certain
payments on and collections in respect of the Mortgage Loans, all as more
specifically set forth in the Agreement. The Certificateholder, by its
acceptance of this Certificate, agrees that it will look solely to the funds
on deposit in the Collection Account for payment hereunder, and that the
Trustee in its individual capacity is not personally 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.
As provided in the Agreement, withdrawals from the Collection
Account may be made from time to time for purposes other than distributions
to the Investor Certificateholders and, subject to certain conditions in the
Agreement, Mortgage Loans may, at the election of the Transferor, be removed
from the Trust and transferred to the Transferor (as defined in 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 hereby, and the rights,
duties and immunities of the Trustee.
It is the intention of the Transferor, the Depositor and the
Investor Certificateholders that the Investor Certificates will be
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
Depositor, the Trustee and the Holder of this Certificate for Certificate
Owner) by acceptance of this Certificate (or, in the case of a Certificate
Owner, by virtue of such Certificate Owner's acquisition of a beneficial
interest herein) 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 secured by the Trust Assets and to report the transactions
contemplated by the Agreement on all applicable tax returns in a manner
consistent with such treatment. Each Holder of this Certificate agrees that
it will cause any Certificate Owner acquiring an interest in this Certificate
through it to comply with the Agreement as to treatment 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 Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Sponsor, the Master Servicer, the Depositor and the Trustee, and the rights
of the Certificateholders under the Agreement, at any time by the Sponsor,
the Master Servicer, the Depositor and the Trustee with the consent (i) of
the Holders of Investor Certificates evidencing Percentage Interests
aggregating not less than 51% and (ii) of the Credit Enhancer. Any such
consent by the Holder of this Certificate shall be conclusive and binding on
such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Investor
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 Certificate Registrar upon surrender of this Certificate for
registration of transfer at the office or agency maintained by the
Certificate Registrar for such purpose, accompanied by a written instrument
of transfer in form satisfactory to the Master Servicer, the Trustee and the
Certificate Registrar duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new
Certificates of authorized denominations, if applicable, and evidencing the
same aggregate Percentage Interest 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 a like tenor in authorized
denominations (in the case of the Investor Certificates) 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 or the Certificate Registrar may require payment of
a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Trustee, the Sponsor, the Master Servicer, the Depositor, the Credit
Enhancer and the Certificate Registrar and any agent of the foregoing may
treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and neither the Trustee, the Sponsor, the Master
Servicer, the Depositor, the Credit Enhancer, the Certificate Registrar nor
any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby shall terminate upon distribution to the
Certificateholders, or provision therefor, of the amount required to be so
distributed in accordance with the Agreement upon the later of (i) payment in
full of all amounts owing to the Credit Enhancer and (ii) the earliest of (a)
the transfer, under the conditions specified in the Agreement, to the
Transferor (as defined in the Agreement) of the interest of the Holders of
the Investor Certificates in each Mortgage Loan and all property acquired in
respect of any Mortgage Loan remaining in the Trust, (b) the day following
the Distribution Date on which distributions reduce the Investor Certificate
Principal Balance to zero, (c) the final payment or other liquidation of the
last Mortgage Loan remaining in the Trust and (d) the Distribution Date in
September 2022. The Transferor may effect an early retirement of the
Certificates by paying the retransfer price and accepting retransfer of the
Trust Assets pursuant to the terms of the Agreement on any Distribution Date
after the Investor Certificate Principal Balance is less than or equal to 10%
of the Original Investor Certificate Principal Balance; provided, however,
that in no event shall the Trust continue beyond the expiration of 21 years
from the death of certain person named in the Agreement. Upon retirement of
the Certificates in accordance with Section 10.01 of the Agreement, the
Trustee shall execute such documents and instruments of transfer presented by
the Transferor and take such other actions as the Transferor may reasonably
request to effect the retransfer of the Mortgage Loans to the Transferor.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee, by manual or facsimile signature, this Certificate
shall not be entitled to any benefit under the Agreement, or be valid for any
purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated:
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity
but solely as Trustee on behalf of the Trust
By:
--------------------------------
Certificate of Authentication:
This is one of the Investor
Certificates referenced in the
within-mentioned Agreement.
By:
-------------------------------
Authorized Officer
Exhibit B
---------
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND LAWS
OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION
UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 6.05 OF THE AGREEMENT REFERRED TO
HEREIN. 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, THAT IF SUCH
TRANSFEREE IS AN INSURANCE COMPANY THAT THE TRANSFEREE IS AN INSURANCE
COMPANY WHICH IS PURCHASING THIS CERTIFICATE 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 THIS CERTIFICATE ARE COVERED UNDER PTCE 95-60 OR A
PLAN SUBJECT TO SECTION 4975 OF THE CODE, OR AN OPINION OF COUNSEL IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 6.05(d) 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.
Date of Pooling and Servicing
Agreement: : August 22, 1997
Cut-off Date : August 22, 1997
Percentage Interest : 100%
Certificate No. : __
First Distribution Date : October 15, 1997
REVOLVING HOME EQUITY LOAN ASSET BACKED CERTIFICATES,
SERIES 1997-C
TRANSFEROR CERTIFICATE
evidencing a percentage interest in the distributions
allocable to the Transferor Certificates evidencing an
undivided interest in a Trust consisting primarily of a
pool of adjustable rate home equity revolving credit line
mortgage loans sold by
CWABS, INC.
This Certificate does not represent an obligation of or interest in
CWABS, Inc. (the "Depositor"), Countrywide Home Loans, Inc. or the Trustee
referred to below or any of their affiliates. Neither this Certificate nor
the underlying Assets 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 in the entire
interest not allocated to the Investor Certificates in certain monthly
distributions with respect to a Trust consisting primarily of a pool of
mortgage loans (the "Mortgage Loans"), transferred by the Depositor and
serviced by Countrywide Home Loans, Inc. (in such capacity, the "Master
Servicer", including any successor Master Servicer under the Agreement
referred to below). The Trust was created pursuant to a Pooling and
Servicing Agreement dated as specified above (the "Agreement") among the
Depositor, the Master Servicer, as sponsor and as master servicer (the
"Sponsor" or the "Master Servicer," as appropriate), and The First National
Bank of Chicago, as trustee (the "Trustee"), a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not
defined herein, 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.
This Certificate is one of the Transferor Certificates from a duly
authorized issue of Certificates designated as Revolving
Home Equity Loan Asset Backed Certificates, Series 1997-C, representing, to
the extent specified in the Agreement, an undivided interest in: (i) each
Mortgage Loan including its Asset Balance (including all Additional Balances)
and all collections in respect thereof received after the Cut-off Date
(excluding payments in respect of accrued interest due on or prior to the
Cut-off Date), (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 hazard insurance policies in respect of the Mortgage Loans, (iv) an
assignment of the Depositor's rights under the purchase agreement dated as of
August 22, 1997 between the Sponsor, as seller, and the Depositor, as
purchaser, and (v) certain other property described in the Agreement
(collectively, the "Trust Assets").
The certificates are limited in right of payment to certain payments on
and collections in respect of the Trust Assets, all as more specifically set
forth in the Agreement. The Certificateholder, by its acceptance of this
Certificate, agrees that it will look solely to the funds available in
accordance with the terms of the Agreement for payment hereunder and that the
Trustee in its individual capacity is not personally 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 hereby, and the rights,
duties and immunities of the Trustee.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Sponsor, the Master Servicer, the Depositor and the Trustee, and the rights
of the Certificateholders under the Agreement, at any time by the Sponsor,
the Master Servicer, the Depositor and the Trustee with the consent (i) of
the Holders of Investor Certificates evidencing Percentage Interests
aggregating not less than 51% and (ii) of the Credit Enhancer. Any such
consent by the Holder of this Certificate shall be conclusive and binding on
such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Investor
Certificates.
No transfer of this 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. There shall be delivered to the Trustee
either (i) 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 letter shall not be an expense of the
Trustee, or (ii) if such letter is not delivered, an Opinion of Counsel
acceptable to and in form and substance satisfactory to the Trustee and the
Depositor that such transfer is exempt (describing the applicable exemption
and the basis therefor) from or is being made pursuant to the registration
requirements of the Securities Act of 1933, as amended, which Opinion of
Counsel shall not be an expense of the Trustee. The Holder hereof 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.
As provided in the Agreement and subject to certain limitations set
forth therein, and subject to the restrictions set forth on the first page
hereof, neither this Certificate nor any legal or beneficial interest herein
may be, directly or indirectly, purchased, transferred, sold, pledged,
assigned or otherwise disposed of, and any proposed transferee hereof shall
not become the registered Holder hereof, without the satisfaction of the
conditions set forth in Section 6.05 of the Agreement.
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 Trustee, the Master Servicer, the Depositor, the Credit Enhancer and
the Certificate Registrar and any agent of the foregoing may treat the Person
in whose name this Certificate is registered as the owner hereof for all
purposes, and neither the Trustee, the Master Servicer, the Depositor, the
Credit Enhancer, the Certificate Registrar nor any such agent shall be
affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby shall terminate upon distribution to the
Certificateholders, or provision therefor, of the amount required to be so
distributed in accordance with the Agreement upon the later of (i) payment in
full of all amounts owing to the Credit Enhancer and (ii) the earliest of (a)
the transfer, under the conditions specified in the Agreement, to the
Transferor (as defined in the Agreement) of the interest of the Holders of
the Investor Certificates in each Mortgage Loan and all property acquired in
respect of any Mortgage Loan remaining in the Trust, (b) the day following
the Distribution Date on which distributions reduce the Investor Certificate
Principal Balance to zero, (c) the final payment or other liquidation of the
last Mortgage Loan remaining in the Trust or (d) the Distribution Date in
September 2022. The Transferor may effect an early retirement of the
Certificates by paying the retransfer price and accepting retransfer of the
Trust Assets pursuant to the terms of the Agreement on any Distribution Date
after the Investor Certificate Principal Balance is less than or equal to 10%
of the Original Investor Certificate Principal Balance; provided, however,
that in no event shall the Trust continue beyond the expiration of 21 years
from the death of certain person named in the Agreement. Upon retirement of
the Certificates in accordance with Section 10.01 of the Agreement, the
Trustee shall execute such documents and instruments of transfer presented by
the Transferor and take such other actions as the Transferor may reasonably
request to effect the retransfer of the Mortgage Loans to the Transferor.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee, by manual or facsimile signature this Certificate
shall not be entitled to any benefit under the Agreement, or be valid for any
purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated:
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely as
Trustee on behalf of the Trust
Auth
------------------------------
orized Officer
Certificate of Authentication:
This is one of the Transferor
Certificates referenced in the
within-mentioned Agreement.
By:
--------------------------------
Authorized Officer
EXHIBIT C
---------
MORTGAGE LOAN SCHEDULE
(Delivered to Trustee Only)
EXHIBIT D
---------
ANNUAL OPINION OF COUNSEL
The opinions set forth below, which are to be delivered pursuant to
Section 3.11 of the Pooling and Servicing Agreement, may be subject to
certain qualifications, assumptions, limitations and exceptions taken or made
in the opinion of counsel to the Depositor or the Transferor, as appropriate,
with respect to similar matters delivered on the Closing Date.
With respect to the Depositor: Insofar as the Mortgage Loans are
"general intangibles" and if the Pooling and Servicing Agreement is
considered a security instrument, no filings or other actions are necessary
to perfect or continue the perfected status of the security or other interest
of the Trust in the Mortgage Loans transferred by the Pooling and Servicing
Agreement, and the proceeds thereof, against any other Person.
With respect to the Transferor: Insofar as the Mortgage Loans are
"general intangibles" and if the Purchase Agreement is considered a security
instrument, no filings or other actions are necessary to perfect or continue
the perfected status of the security or other interest of the Depositor in
the Mortgage Loans transferred pursuant to the Purchase Agreement, and the
proceeds thereof, against any other Person.
EXHIBIT E
---------
FORM OF CREDIT LINE AGREEMENT
EXHIBIT F
---------
FORM OF LETTER OF REPRESENTATIONS
EXHIBIT G
---------
FORM OF INVESTMENT LETTER (NON-RULE 144A)
FOR TRANSFEROR CERTIFICATES
Date:
CWABS, Inc.
as Depositor
4500 Park Granada
Calabasas, California 91302
Attention: ________________
The First National Bank of Chicago
as Trustee
One First National Plaza
Suite 0126
Chicago Illinois 60670
Attn: Corporate Trust Services Division
Re: CWABS, Inc.;
Countrywide Home Equity Loan Trust 1997-C,
Revolving Home Equity Loan Asset Backed Certificates,
Series 1997-C, Transferor Certificates
-----------------------------------------------------
Ladies and Gentlemen:
In connection with our acquisition of Transferor Certificates in the
Denomination of , we certify that
---------------------------------------
(a) we understand that the Transferor 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
Transferor Certificates, (c) we have had the opportunity to ask questions of
and receive answers from the Depositor concerning the purchase of the
Transferor Certificates and all matters relating thereto or any additional
information deemed necessary to our decision to purchase the Transferor
Certificates, (d) either (i) we are not an employee benefit plan that is
subject to the Employee Retirement Income Security Act of 1974, as amended,
nor a plan subject to Section 4975 of the Internal Revenue Code of 1986, as
amended, nor are we acting on behalf of any such employee benefit plan, or
(ii) if we are an insurance company, a representation that we are 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,
(e) we are acquiring the Transferor 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 Transferor Certificates in accordance with clause (g) below), (f) we have
not offered or sold any Transferor Certificates to, or solicited offers to
buy any Transferor Certificates from, any person, or otherwise approached or
negotiated with any person with respect thereto, or taken any 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 Transferor 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 Transferor 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 Transferor
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 dated as of August 22, 1997 (the "Agreement"), among
CWABS, Inc. as Depositor, Countrywide Home Loans, Inc., as Master Servicer,
and The First National Bank of Chicago, as Trustee. All capitalized terms
used herein but not defined herein shall have the meanings assigned to them
in the Agreement.
Very truly yours,
----------------------------
Name of Transferee
By:
------------------------
Name:
Title:
FORM OF INVESTMENT LETTER RULE 144A LETTER
FOR TRANSFEROR CERTIFICATES
Date:
CWABS, Inc.
as Depositor
4500 Park Granada
Calabasas, California 91302
Attention: ________________
The First National Bank of Chicago
as Trustee
One First National Plaza
Suite 0126
Chicago Illinois 60670
Attn: Corporate Trust Services Division
Re: CWABS, Inc.;
Countrywide Home Equity Loan Trust 1997-C,
Revolving Home Equity Loan Asset Backed Certificates,
Series 1997-C, Transferor Certificates
-----------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of the Transferor Certificates,
we certify that (a) we understand that the Transferor 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 Transferor Certificates, (c) we have had the opportunity to ask
questions of and receive answers from the Depositor concerning the purchase
of the Transferor Certificates and all matters relating thereto or any
additional information deemed necessary to our decision to purchase the
Transferor Certificates, (d) either (i) we are not an employee benefit plan
that is subject to the Employee Retirement Income Security Act of 1974, as
amended, nor a plan subject to Section 4975 of the Internal Revenue Code of
1986, nor are we acting on behalf of any such employee benefit plan, or (ii)
if we are an insurance company, a representation that we are 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, (e)
we have not, nor has anyone acting on our behalf offered, transferred,
pledged, sold or otherwise disposed of the Transferor Certificates, any
interest in the Transferor Certificates or any other similar security to, or
solicited any offer to buy or accept a transfer, pledge or other disposition
of the Transferor Certificates, any interest in the Transferor Certificates
or any other similar security from, or otherwise approached or negotiated
with respect to the Transferor Certificates, any interest in the Transferor
Certificates or any other similar security with, any person in any manner, or
made any general solicitation by means of general advertising or in any other
manner, or taken any other action, that would constitute a distribution of
the Transferor Certificates under the Act or that would render the
disposition of the Transferor Certificates a violation of Section 5 of the
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 Transferor Certificates and (f) we are a "qualified institutional
buyer" as that term is defined in Rule 144A under the 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 Transferor Certificates for our own account
or for resale pursuant to Rule 144A and further, understand that such
Transferor 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 Act. All capitalized terms used herein but not
defined herein shall have the meanings assigned to them in the Pooling and
Servicing Agreement dated as of August 22, 1997 among CWABS, Inc. as
Depositor, Countrywide Home Loans, Inc., as Sponsor Master Servicer, and The
First National Bank of Chicago, as Trustee.
Name of Buyer
By:_______________________
Name:
Title:
ANNEX 1 TO EXHIBIT G
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE
(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 Transferor 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 $ /1/ 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.
- ------------------
/1/ Buyer must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Buyer is a dealer, and, in that case,
Buyer must own and/or invest on a discretionary basis at least
$10,000,000 in securities.
Savings and Loan. The Buyer (a) is a savings and loan
------------ ----------------
association, building and loan association, cooperative bank, homestead
association or similar institution, which is supervised and examined by a
State or Federal authority having supervision over any such institutions or
is a foreign savings and loan association or equivalent institution and (b)
has an audited net worth of at least $25,000,000 as demonstrated in its
latest annual financial statements, 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. The Buyer is a
------------ ---------------------------------
small business investment company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment
Act of 1958.
Business Development Company. The Buyer is a business
------------ ----------------------------
development company as defined in Section 202(a)(22) of the Investment
Advisors Act of 1940.
Trust Fund. The Buyer is a trust fund whose trustee
------------ ----------
is a bank or trust company and whose participants are exclusively State or
Local Plans or ERISA Plans as defined above, and no participant of the Buyer
is an individual retirement account or an H.R. 10 (Keogh) plan.
3. The term "securities" as used herein does not include (i)
---------- -----------------
securities of issuers that are affiliated with the Buyer, (ii) securities
that are part of an unsold allotment to or subscription by the Buyer, if the
Buyer is a dealer, (iii) bank deposit notes and certificates of deposit, (iv)
loan participations, (v) repurchase agreements, (vi) securities owned but
subject to a repurchase agreement and (vii) currency, interest rate and
commodity swaps.
4. For purposes of determining the aggregate amount of securities
owned and/or invested on a discretionary basis by the Buyer, the Buyer used
the cost of such securities to the Buyer and did not include any of the
securities referred to in the preceding paragraph, except (i) where the Buyer
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. 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 Transferor
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 Transferor 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 as provided above, the
Buyer agrees that it will furnish to such parties updated annual financial
statements promptly after they become available.
-----------------------------
Name of Buyer
By:
-------------------------
Name:
Title:
Date:
----------------------
ANNEX 2 TO EXHIBIT G
--------------------
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 Transferor 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 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 owned subsidiaries of the same parent or because one
investment adviser is a majority owned subsidiary of the other).
4. The term "securities" as used herein does not include (i)
----------
securities of issuers that are affiliated with the Buyer or are part of the
Buyer's Family of Investment Companies, (ii) bank deposit notes and
certificates of deposit, (iii) loan participations, (iv) repurchase
agreements, (v) securities owned but subject to a repurchase agreement and
(vi) currency, interest rate and commodity swaps.
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 Transferor 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 Transferor Certificates will constitute a reaffirmation of
this certification by the undersigned as of the date of such purchase.
-----------------------------
Name of Buyer
By:
-------------------------
Name:
Title:
IF AN ADVISER:
-----------------------------
Name of Adviser
Date:
EXHIBIT H
---------
FORM OF REQUEST FOR RELEASE OF DOCUMENTS
(DATE)
The First National Bank of Chicago
as Trustee
One First National Plaza
Suite 0126
Chicago Illinois 60670
Attn: Corporate Trust Services Division
Re: CWABS, Inc. Revolving Home Equity Loan
Asset Backed Certificates, Series 1997-C
----------------------------------------
Gentlemen:
In connection with the administration of the Mortgage Loans held by you
as Trustee under the Pooling and Servicing Agreement dated as of August 22,
1997, among CWABS, Inc. as Depositor, Countrywide Home Loans, Inc., as
Sponsor and Master Servicer, and you, as Trustee (the "Agreement"), we hereby
request a release of the Mortgage File held by you as Trustee with respect to
the following described Mortgage Loan for the reason indicated below.
Loan No.:
- -------
Reason for requesting file:
- --------------------------
1. Mortgage Loan paid in full. (The Master Servicer
- ----------
hereby certifies that all amounts received in connection with the payment in
full of the Mortgage Loan which are required to be deposited in the
Collection Account pursuant to Section 3.02 of the Agreement have been so
deposited).
2. Retransfer of Mortgage Loan. (The Master Servicer
- ----------
hereby certifies that the Transfer Deposit Amount has been deposited in the
Collection Account pursuant to the Agreement).
3. The Mortgage Loan is being foreclosed.
- ----------
4. The Mortgage Loan is being re-financed by another
- ----------
depository institution. (The Master Servicer hereby certifies that all
amounts received in connection with the payment in full of the Mortgage Loan
which are required to be deposited in the Collection Account pursuant to
Section 3.02 of the Agreement have been so deposited).
5. Other (Describe).
- ----------
The undersigned acknowledges that the above Mortgage File will be held
by the undersigned in accordance with the provisions of the Agreement and
will promptly be returned to the Trustee when the need therefor by the Master
Servicer no longer exists unless the Mortgage Loan has been liquidated or
retransferred.
Capitalized terms used herein shall have the meanings ascribed to them
in the Agreement.
COUNTRYWIDE HOME LOANS, INC.
By:
-------------------------
Name:
Title: Servicing Officer
EXHIBIT 99.2
------------
Execution Copy
--------------
CWABS, INC.
as Purchaser,
and
COUNTRYWIDE HOME LOANS, INC.
as Seller,
PURCHASE AGREEMENT
Dated as of August 22, 1997
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITION
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
SALE OF MORTGAGE LOANS; PAYMENT OF PURCHASE PRICE
Section 2.1 Sale of the Mortgage Loans . . . . . . . . . . . . . . . . 1
Section 2.2 Obligations of Seller Upon Sale . . . . . . . . . . . . . 2
Section 2.3 Payment of Purchase Price for the Mortgage Loans . . . . . 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES;
REMEDIES FOR BREACH
Section 3.1 Seller Representations and Warranties . . . . . . . . . . 5
Section 3.2 Seller Representations and Warranties
Relating to the Mortgage Loans . . . . . . . . . . . . . 6
ARTICLE IV
SELLER'S COVENANTS
Section 4.1 Covenants of the Seller . . . . . . . . . . . . . . . . . . 13
ARTICLE V
SERVICING
Section 5.1 Servicing . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VI
TERMINATION
Section 6.1 Termination . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1 Amendment . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 7.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . 14
Section 7.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 7.4 Severability of Provisions . . . . . . . . . . . . . . . . 14
Section 7.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 15
Section 7.6 Further Agreements . . . . . . . . . . . . . . . . . . . . 15
Section 7.7 Successors and Assigns: Assignment of
Purchase Agreement . . . . . . . . . . . . . . . . . . . 15
Section 7.8 Survival . . . . . . . . . . . . . . . . . . . . . . . . . 15
PURCHASE AGREEMENT, dated as of August 22, 1997 (this "Agreement"),
between Countrywide Home Loans, Inc., a New York corporation (the "Seller"),
and CWABS, Inc., a Delaware corporation (the "Purchaser").
W I T N E S S E T H
-------------------
WHEREAS, the Seller is the owner of the notes or other evidence of
indebtedness (the "Mortgage Notes") so indicated on Schedule I hereto, and
Related Documentation (as defined below) (collectively, the "Mortgage
Loans"); and
WHEREAS, the Seller owns the mortgages (the "Mortgages") on the
properties (the "Mortgaged Properties") securing such Mortgage Loans,
including rights to (a) any property acquired by foreclosure or deed in lieu
of foreclosure or otherwise and (b) the proceeds of any hazard insurance
policies in respect of the Mortgage Loans; and
WHEREAS, the parties hereto desire that the Seller sell the Mortgage
Loans to the Purchaser pursuant to the terms of this Agreement; and
WHEREAS, pursuant to the terms of a Pooling and Servicing Agreement
dated as of August 22, 1997 (the "Pooling and Servicing Agreement") among the
Purchaser, as depositor, the Seller, as seller and master servicer, and The
First National Bank of Chicago, as trustee (the "Trustee"), the Purchaser
will convey the Mortgage Loans to the Trust.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE I
DEFINITION
Section 1.1 Definitions. Capitalized terms used but not defined
herein shall have the meanings assigned thereto in the Pooling and Servicing
Agreement.
ARTICLE II
SALE OF MORTGAGE LOANS; PAYMENT OF PURCHASE PRICE
Section 2.1 Sale of the Mortgage Loans. The Seller, concurrently
--------------------------
with the execution and delivery of this Agreement, does hereby sell, assign,
set over, and otherwise convey to the Purchaser, without recourse, all of its
right, title and interest in, to and under the following, whether now
existing or hereafter created: (i) each Mortgage Loan, including its Asset
Balance (including all Additional Balances) and all collections in respect
thereof received after the Cut-off Date (excluding payments in respect of
accrued interest due on or prior to the Cut-off Date); (ii) property that
secured a Mortgage Loan that is acquired by foreclosure or deed in lieu of
foreclosure; (iii) the interest of the Seller in any hazard insurance
policies in respect of the Mortgage Loans; (iv) all rights under any guaranty
executed in connection with a Mortgage Loan; and (v) all proceeds of the
foregoing.
Section 2.2 Obligations of Seller Upon Sale. In connection with
-------------------------------
any transfer pursuant to Section 2.1 hereof, the Seller further agrees, at
its own expense, on or prior to the Closing Date, (a) to indicate in its
books and records that the Mortgage Loans have been sold to the Trustee, as
assignee of the Purchaser, pursuant to this Agreement and (b) to deliver to
the Purchaser a Mortgage Loan Schedule containing a true and complete list of
all such Mortgage Loans specifying for each such Mortgage Loan, among other
things, as of the Cut-Off Date (i) its account number and (ii) the related
Cut-Off Date Asset Balance. Such Mortgage Loan Schedule forms a part of
Exhibit C to the Pooling and Servicing Agreement and shall also be marked as
Schedule I to this Agreement and is hereby incorporated into and made a part
of this Agreement.
The Seller agrees to prepare, execute and file a UCC-1 financing
statement with the Secretary of State in the State of California (which shall
have been filed on or before the Closing Date with respect to the Mortgage
Loans) describing the applicable Mortgage Loans and naming the Seller as
debtor and the Purchaser as secured party (and indicating that such loans
have been assigned to the Trustee) and all necessary continuation statements
and any amendments to the UCC-1 financing statements required to reflect a
change in the name or corporate structure of the Seller or the filing of any
additional UCC-1 financing statements due to the change in the principal
offices of the Seller, as are necessary to perfect and protect the Trustee's
interest in each Mortgage Loan and the proceeds thereof.
In connection with any conveyance by the Seller, the Seller will deliver
to the Master Servicer, as custodian and bailee for the Trustee, the
following documents or instruments with respect to each Mortgage Loan (the
"Related Documentation"):
(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 Purchaser, 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 Purchaser 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
Purchaser 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;
(v) either (1) for each Mortgage Loan with a Credit Limit in
excess of $100,000, a title policy or (2) for all other Mortgage Loans,
either a title policy, a title search or, a limited coverage policy or
other assurance 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.
The Seller further hereby confirms to the Purchaser that, as of the
Closing Date, it has caused the portions of the Electronic Ledger relating to
the Mortgage Loans maintained by the Seller to be clearly and unambiguously
marked to indicate that the Mortgage Loans have been sold to the Trustee, as
assignee of the Purchaser.
The Purchaser hereby acknowledges its acceptance of all right, title and
interest to the Mortgage Loans and other property, now existing and hereafter
created, conveyed to it pursuant to this Section 2.2.
Notwithstanding the characterization of the Investor Certificates as
debt for Federal, state and local income and franchise tax purposes, the
parties hereto intend to treat the transfer of the Mortgage Loans as provided
herein as a sale for accounting and other purposes, by the Seller to the
Purchaser of all the Seller's right, title and interest in and to the
Mortgage Loans and other property described above. In the event such
transfer is deemed not to be a sale, the Seller hereby grants to the
Purchaser a security interest in all of the Seller's right, title and
interest in, to and under the Mortgage Loans and other property described
above, whether now existing or hereafter created, to secure all of the
Seller's obligations hereunder; and this Agreement shall constitute a
security agreement under applicable law.
The Master Servicer shall be entitled to maintain possession of all of
the foregoing documents and instruments to the extent such possession is
permitted under the Pooling and Servicing Agreement and at such time as such
possession is no longer permitted, the Seller shall or shall cause the Master
Servicer to deliver such documents and instruments and or opinion of counsel
referred to in the Pooling and Servicing Agreement and in accordance with the
provisions of the Pooling and Servicing Agreement.
Section 2.3 Payment of Purchase Price for the Mortgage Loans. In
------------------------------------------------
consideration of the sale of the Mortgage Loans from the Seller to the
Purchaser on the Closing Date, the Purchaser agrees to pay to the Seller on
the Closing Date by transfer of immediately available funds, an amount equal
to $178,357,790 (the "Purchase Price"), and to transfer to the Seller
on the Closing Date the Transferor Certificates.
ARTICLE III
REPRESENTATIONS AND WARRANTIES;
REMEDIES FOR BREACH
Section 3.1 Seller Representations and Warranties. The Seller
-------------------------------------
represents and warrants to the Purchaser as of the Closing Date:
(i) The Seller 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 Seller 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
Seller;
(ii) The Seller 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 Seller enforceable in
accordance with its terms, except as enforcement of such terms may be
limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and by the availability of
equitable remedies;
(iii) The Seller 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 Seller will not violate any provision of any existing law or
regulation or any order or decree of any court applicable to the Seller
or any provision of the Certificate of Incorporation or Bylaws of the
Seller, or constitute a material breach of any mortgage, indenture,
contract or other agreement to which the Seller is a party or by which
the Seller 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 Seller threatened, against the Seller or any of its
properties or with respect to this Agreement or the Investor
Certificates which in the opinion of the Seller has a reasonable
likelihood of resulting in a material adverse effect on the transactions
contemplated by this Agreement.
It is understood and agreed that the representations and warranties set
forth in this Section 3.1 shall survive the sale and assignment of the
Mortgage Loans to the Purchaser. The Seller shall cure a breach of any
representations and warranties in accordance with the Pooling and Servicing
Agreement. It is understood and agreed that the remedy specified in the
Pooling and Servicing Agreement shall constitute the sole remedy against the
Seller respecting such breach.
Section 3.2 Seller Representations and Warranties Relating to the
-----------------------------------------------------
Mortgage Loans. The Seller represents and warrants to the Purchaser 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) this Agreement constitutes a valid
transfer and assignment to the Purchaser 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 on or prior to the Cut-off Date), 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" in the Pooling and Servicing
Agreement as being part of the corpus of the Trust Fund conveyed to the
Trust Fund by the Purchaser, and upon payment for the Additional
Balances, will constitute a valid transfer and assignment to the
Purchaser 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) this Agreement constitutes a grant of a
security interest (as defined in the UCC as in effect in California) in
such property to the Purchaser. If this Agreement constitutes the grant
of a security interest to the Purchaser in such property, and if the
Purchaser obtains and maintains possession of the Mortgage File for each
Mortgage Loan, the Purchaser 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) of the Pooling and Servicing
Agreement; provided, however, that nothing in this clause (ii) shall be
construed to obligate the Seller to deliver any Mortgage Files other
than as set forth in Section 2.2 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 this 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 immediately
prior to the sale of the Mortgage Loans to the Purchaser, the Seller was
the sole owner and holder of the Mortgage Loan free and clear of any and
all liens, claims, encumbrances, participation interests, equities,
pledges, charges or security interests of any nature, 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 this 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
the 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 59 days delinquent
(measured on a contractual basis); and with respect to the Mortgage
Loans no more than 0.62% (by Cut-off Date Pool Balance) were 30-59 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
0.66% 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
Purchaser 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 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;
(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 E of the
Pooling and Servicing Agreement;
(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 281 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 12.25% and 18.00% and the weighted average Loan Rate
Cap is apprixmately 17.81%. The Gross Margins range between 0.00% and
6.25% and the weighted average Gross Margin is approximately 2.23% as of
the Cut-off Date for the Mortgage Loans. The Loan Rates on such
Mortgage Loans range between 5.99% and 13.38% and the weighted average
Loan Rate is approximately 6.29%.
(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 11.58% (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 88.42% (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
approximately $10,000 and $500,000 with an average of approximately
$34,373.25. As of the Cut-off Date for the Mortgage Loans, no Mortgage
Loan had a principal balance in excess of approximately $500,000 and the
average principal balance of the Mortgage Loans is equal to
approximately $22,909.84; and
(xxix) Approximately 4.13% and 95.87% of the Mortgage Loans, by
aggregate principal balance as of the Cut-off Date for the Mortgage
Loans, are first and second liens, respectively.
In the event of a breach of representation or warranty under the Pooling
and Servicing Agreement, and with respect to the representations and
warranties set forth in this Section 3.2 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 Purchaser, the Seller, 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
interest of the Purchaser or its assignee in 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 and with respect to any breach
of such representation or warranty or of any other representation or warranty
that materially and adversely affects the interest of the Purchaser or its
assignee in the related Mortgage Loan, the Seller shall cure, repurchase or
substitute in accordance with the Pooling and Servicing Agreement.
It is understood and agreed that the representations and warranties set
forth in this Section 3.2 shall survive the transfer and assignment of the
Mortgage Loans to the Purchaser. 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 has not been cured and to make
any required deposit in the Collection Account or to substitute an Eligible
Substitute Mortgage Loan, as the case may be, under Section 2.04 of the
Pooling and Servicing Agreement, shall constitute the sole remedy against the
Seller respecting such breach available to the Purchaser, Investor
Certificateholders, the Trustee on behalf of Investor Certificateholders and
the Credit Enhancer.
The Purchaser acknowledges that the Seller, as 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 of the Pooling and Servicing Agreement) shall be deposited in
the Collection Account and the Trustee, upon receipt of a certificate from
the Master Servicer in the form of Exhibit H of the Pooling and Servicing
Agreement, 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, the Credit Enhancer or the
Certificateholders with respect thereto.
ARTICLE IV
SELLER'S COVENANTS
Section 4.1 Covenants of the Seller. The Seller hereby covenants
-----------------------
that except for the transfer hereunder, the Seller 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, or any interest therein; the
Seller will notify the Trustee, as assignee of the Purchaser, of the
existence of any Lien on any Mortgage Loan immediately upon discovery
thereof; and the Seller will defend the right, title and interest of the
Trustee, as assignee of the Purchaser, in, to and under the Mortgage Loans,
against all claims of third parties claiming through or under the Seller;
provided, however, that nothing in this Section 4.1 shall prevent or be
deemed to prohibit the Seller 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 Seller 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.
ARTICLE V
SERVICING
Section 5.1 Servicing. The Seller will be the Master Servicer of
---------
the Mortgage Loans pursuant to the terms and conditions of the Pooling and
Servicing Agreement.
ARTICLE VI
TERMINATION
Section 6.1 Termination. The respective obligations and
-----------
responsibilities of the Seller and the Purchaser created hereby shall
terminate upon the termination of the Trust Fund as provided in Article X of
the Pooling and Servicing Agreement.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1 Amendment. This Agreement may be amended from time to
---------
time by the Seller and the Purchaser, with the consent of the Credit
Enhancer, by written agreement signed by the Seller and the Purchaser.
Section 7.2 Governing Law. This Agreement shall be governed by
-------------
and 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 7.3 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 registered mail, postage prepaid,
addressed as follows:
(i) if to the Seller:
Countrywide Home Loans, Inc.
4500 Park Granada
Calabasas, CA 91302
Attention: David Walker
or, such other address as may hereafter be furnished to the Purchaser in
writing by the Seller.
(ii) if to the Purchaser:
CWABS, Inc.
4500 Park Granada
Calabasas, CA 91302
Attention: David Walker
or such other address as may hereafter be furnished to the Seller in writing
by the Purchaser.
Section 7.4 Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions of terms of this Agreement shall be held
invalid for any reason whatsoever, 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 of enforceability of the other provisions of this Agreement.
Section 7.5 Counterparts. This Agreement may be executed in one
------------
or more counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed to be an
original and such counterparts, together, shall constitute one and the same
agreement.
Section 7.6 Further Agreements. The Purchaser and the Seller each
------------------
agree to execute and deliver to the other such additional documents,
instruments or agreements as may be necessary or reasonable and appropriate
to effectuate the purposes of this Agreement or in connection with the
issuance of any series of Investor Certificates representing interests in the
Mortgage Loans.
Section 7.7 Successors and Assigns: Assignment of Purchase
----------------------------------------------
Agreement. This Agreement shall bind and inure to the benefit of and be
- ---------
enforceable by the Seller, the Purchaser, the Trustee and the Credit
Enhancer. The obligations of the Seller under this Agreement cannot be
assigned or delegated to a third party without the consent of the Purchaser,
except that the Purchaser acknowledges and agrees that the Seller may assign
its obligations hereunder to any Person into which the Seller is merged or
any corporation resulting from any merger, conversion or consolidation to
which the Seller is a party or any Person succeeding to the business of the
Seller. The parties hereto acknowledge that the Purchaser is acquiring the
Mortgage Loans for the purpose of contributing them to a trust that will
issue a series of Investor Certificates representing undivided interests in
such Mortgage Loans. As an inducement to the Purchaser to purchase the
Mortgage Loans, the Seller acknowledges and consents to the assignment by the
Purchaser to the Trustee of all of the Purchaser's rights against the Seller
pursuant to this Agreement insofar as such rights relate to Mortgage Loans
transferred to such Trustee and to the enforcement or exercise of any right
or remedy against the Seller pursuant to this Agreement by the Trustee or the
Credit Enhancer under the Pooling and Servicing Agreement. Such enforcement
of a right or remedy by the Trustee or the Credit Enhancer shall have the
same force and effect as if the right or remedy had been enforced or
exercised by the Purchaser directly.
Section 7.8 Survival. The representations and warranties set
--------
forth in Article III shall survive the purchase of the Mortgage Loans
hereunder.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused their names
to be signed to this Purchase Agreement by their respective officers
thereunto duly authorized as of the day and year first above written.
CWABS, Inc.,
as Purchaser
By:____________________________________
Name: David Walker
Title: Vice President
COUNTRYWIDE HOME LOANS, INC.,
as Seller
By:____________________________________
Name: David Walker
Title: Executive Vice President
Schedule I
SCHEDULE OF
MORTGAGE LOANS
--------------
(Delivered to the Trustee only)
STATE OF CALIFORNIA )
) ss.:
COUNTY OF _________ )
On the __________ day of August 1997 before me, a Notary Public in and
for said State, personally appeared David Walker, known to me to be a Vice
President of CWABS, Inc., the corporation that executed the within
instrument, and also known to me to be the person who executed it on behalf
of said corporation, and acknowledged to me that such corporation executed
the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
_________________________________
Notary Public
STATE OF CALIFORNIA )
) ss.:
COUNTY OF _________ )
On the ____ day of August 1997 before me, David Walker of Countrywide
Home Loans, Inc., personally appeared, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed
the same in his authorized capacity, and that by his signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
_________________________________
Notary Public
