<PAGE>
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
December 20, 1996
First Alliance Mortgage Loan Trust 1996-4
_____________________________________________________
(Exact name of registrant as specified in its charter)
APPLICATION
New York 33-99604-03 PENDING
------------------------------ ---------------------- ----------------
(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer
Incorporation) Identification No.)
c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001-2697
- --------------------------------------------- -----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (212) 946-8500
--------------
No Change
-----------------------------------------------------------
(Former name or former address, if changed since last report)
________________________________________________________________________________
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS
Description of the Certificates and the Mortgage Loans
First Alliance Mortgage Company registered issuances of up to
$580,000,000 principal amount of Mortgage Loan Asset Backed Certificates on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Act"), by a Registration Statement on Form S-3
(Registration File No. 33-99604) (as amended, the "Registration Statement").
Pursuant to the Registration Statement, First Alliance Mortgage Loan Trust
1996-4 (the "Registrant" or the "Trust") issued $70,000,000 in aggregate
principal amount of its Mortgaged Loan Asset Backed Certificates, Series 1996-4
(the "Certificates"), on December 20, 1996. This Current Report on Form 8-K is
being filed to satisfy an undertaking to file copies of certain agreements
executed in connection with the issuance of the Certificates, the forms of which
were filed as Exhibits to the Registration Statement.
The Certificates were issued pursuant to a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") attached hereto as Exhibit
4.1, dated as of December 1, 1996, between First Alliance Mortgage Company (the
"Company"), and in its capacity as servicer (the "Servicer") and The Chase
Manhattan Bank, in its capacity as trustee (the "Trustee"). The Certificates
consist of three classes, the Class A-1 and Class A-2 Certificates (the "Class A
Certificates") and the Class R Certificates (the "Class R Certificates" and,
together with the Class A Certificates, the "Certificates"). Only the Class A
Certificates were issued pursuant to the Registration Statement. The
Certificates initially evidence, in the aggregate, 100% of the undivided
beneficial ownership interests in the Trust.
The assets of the Trust initially will include two pools (each, a
"Mortgage Loan Group") of closed-end mortgage loans (the "Mortgage Loans")
secured by mortgages or deeds of trust on one-to-four family residential
properties. The Class A-1 Fixed Rate Group Certificates represent undivided
ownership interests in a pool of fixed rate Mortgage Loans secured by mortgages
that may be either in a first or in a junior lien position. The Class A-2
Variable Rate Group Certificates represent undivided ownership interests in a
pool of variable rate Mortgage Loans secured by mortgages in a first lien
position.
Interest distributions on the Class A Certificates are based on the
Certificate Principal Balance thereof and the then applicable Pass-Through Rate
thereof. The Pass-Through Rate for the Class A-1 Certificates will be 6.835%
per annum. The Pass-Through Rate for the Class A-2 Certificates adjusts monthly
and with respect to the first Payment Date will be 5.8177% per annum.
The Class A-1 Certificates have an aggregate principal amount of
$22,500,000. The Class A-2 Certificates have an aggregate principal amount of
$47,500,000.
As of the Closing Date, the Mortgage Loans possessed the
characteristics described in the Prospectus dated September 10, 1996 and the
Prospectus Supplement dated December 10, 1996, filed pursuant to Rule 424(b)(5)
of the Act on December 18, 1996.
<PAGE>
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated December 10, 1996, between First
Alliance Mortgage Company and Prudential Securities Incorporated.
4.1 Pooling and Servicing Agreement, dated as of December 1, 1996,
among First Alliance Mortgage Company, as Company and Servicer, and The Chase
Manhattan Bank, as Trustee.
<PAGE>
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.
By: FIRST ALLIANCE MORTGAGE COMPANY, as
Company
By: /s/Brian Chisick
----------------------------
Name: Brian Chisick
Title: President
Dated: January 2, 1997
<PAGE>
EXHIBIT 1.1
POOLING AND SERVICING AGREEMENT
Relating to
FIRST ALLIANCE MORTGAGE LOAN TRUST
1996-4
Among
FIRST ALLIANCE MORTGAGE COMPANY,
as Company
FIRST ALLIANCE MORTGAGE COMPANY,
as Servicer
and
THE CHASE MANHATTAN BANK,
as Trustee
Dated as of December 1, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION. . . . . . . 1
1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Use of Words and Phrases. . . . . . . . . . . . . . . . . . . 26
1.3. Captions; Table of Contents . . . . . . . . . . . . . . . . . 26
1.4. Opinions. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST. . . . . 26
2.1. Establishment of the Trust. . . . . . . . . . . . . . . . . . 26
2.2. Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.3. Purposes and Powers . . . . . . . . . . . . . . . . . . . . . 27
2.4. Appointment of the Trustee; Declaration of Trust. . . . . . . 27
2.5. Expenses of Trustee . . . . . . . . . . . . . . . . . . . . . 27
2.6. Ownership of the Trust. . . . . . . . . . . . . . . . . . . . 27
2.7. Situs of the Trust. . . . . . . . . . . . . . . . . . . . . . 27
2.8. Miscellaneous REMIC Provisions. . . . . . . . . . . . . . . . 27
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE COMPANY AND THE SERVICER;
COVENANT OF COMPANY TO CONVEY MORTGAGE LOANS . . . . 28
3.1. Representations and Warranties of the Company . . . . . . . . 28
3.2. Representations and Warranties of the Servicer. . . . . . . . 30
3.3. Representations and Warranties of the Company with Respect to
the Mortgage Loans. . . . . . . . . . . . . . . . . . . . . . 33
3.4. Covenants of the Company to Take Certain Actions with Respect to
the Mortgage Loans In Certain Situations. . . . . . . . . . . 35
3.5. Conveyance of the Mortgage Loans. . . . . . . . . . . . . . . 36
3.6. Acceptance by Trustee; Certain Substitutions of Mortgage Loans;
Certification by Trustee. . . . . . . . . . . . . . . . . . . 40
3.7. Cooperation Procedures. . . . . . . . . . . . . . . . . . . . 41
3.8. Conveyance of the Subsequent Mortgage Loans . . . . . . . . . 41
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES . . . . . . . 44
4.1. Issuance of Certificates. . . . . . . . . . . . . . . . . . . 44
4.2. Sale of Certificates. . . . . . . . . . . . . . . . . . . . . 44
ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS. . . . . . 44
5.1. Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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Page
5.2. Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.3. Execution, Authentication and Delivery. . . . . . . . . . . . 45
5.4. Registration and Transfer of Certificates . . . . . . . . . . 45
5.5. Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . 47
5.6. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . 47
5.7. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . 47
5.8. Limitation on Transfer of Ownership Rights. . . . . . . . . . 48
5.9. Assignment of Rights. . . . . . . . . . . . . . . . . . . . . 48
ARTICLE VI
COVENANTS . . . . . . . . . . . . . 49
6.1. Distributions . . . . . . . . . . . . . . . . . . . . . . . . 49
6.2. Money for Distributions to be Held in Trust; Withholding. . . 49
6.3. Protection of Trust Estate. . . . . . . . . . . . . . . . . . 49
6.4. Performance of Obligations. . . . . . . . . . . . . . . . . . 50
6.5. Negative Covenants. . . . . . . . . . . . . . . . . . . . . . 50
6.6. No Other Powers . . . . . . . . . . . . . . . . . . . . . . . 51
6.7. Limitation of Suits . . . . . . . . . . . . . . . . . . . . . 51
6.8. Unconditional Rights of Owners to Receive Distributions . . . 52
6.9. Rights and Remedies Cumulative. . . . . . . . . . . . . . . . 52
6.10. Delay or Omission Not Waiver. . . . . . . . . . . . . . . . . 52
6.11. Control by Owners . . . . . . . . . . . . . . . . . . . . . . 52
6.12. Access to Owners of Certificates' Names and Addresses . . . . 53
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES . . . . . . 53
7.1. Collection of Money . . . . . . . . . . . . . . . . . . . . . 53
7.2. Establishment of Accounts . . . . . . . . . . . . . . . . . . 53
7.3. The Certificate Insurance Policies. . . . . . . . . . . . . . 53
7.4 Pre-Funding Account and Capitalized Interest Account. . . . . 55
7.5. Flow of Funds . . . . . . . . . . . . . . . . . . . . . . . . 55
7.6. Investment of Accounts. . . . . . . . . . . . . . . . . . . . 58
7.7. Eligible Investments. . . . . . . . . . . . . . . . . . . . . 59
7.8. Reports by Trustee. . . . . . . . . . . . . . . . . . . . . . 60
7.9. Additional Reports by Trustee . . . . . . . . . . . . . . . . 62
ARTICLE VIII
SERVICING AND ADMINISTRATION OF MORTGAGE LOANS. . . . 63
8.1. Servicer and Sub-Servicers. . . . . . . . . . . . . . . . . . 63
8.2. Collection of Certain Mortgage Loan Payments. . . . . . . . . 64
8.3. Sub-Servicing Agreements Between Servicer and Sub-Servicers . 64
8.4. Successor Sub-Servicers . . . . . . . . . . . . . . . . . . . 65
8.5. Liability of Servicer . . . . . . . . . . . . . . . . . . . . 65
8.6. No Contractual Relationship Between Sub-Servicer and Trustee
or the Owners . . . . . . . . . . . . . . . . . . . . . . . . 65
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Page
8.7. Assumption or Termination of Sub-Servicing Agreement by
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
8.8. Principal and Interest Account. . . . . . . . . . . . . . . . 65
8.9. Delinquency Advances, Compensating Interest and Servicing
Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . 67
8.10. Purchase of Mortgage Loans. . . . . . . . . . . . . . . . . . 68
8.11. Maintenance of Insurance. . . . . . . . . . . . . . . . . . . 68
8.12. Due-on-Sale Clauses; Assumption and Substitution Agreements . 69
8.13. Realization Upon Defaulted Mortgage Loans . . . . . . . . . . 69
8.14. Trustee to Cooperate; Release of Files. . . . . . . . . . . . 70
8.15. Servicing Compensation. . . . . . . . . . . . . . . . . . . . 71
8.16. Annual Statement as to Compliance . . . . . . . . . . . . . . 71
8.17. Annual Independent Certified Public Accountants' Reports. . . 72
8.18. Access to Certain Documentation and Information Regarding the
Mortgage Loans. . . . . . . . . . . . . . . . . . . . . . . . 72
8.19. Assignment of Agreement . . . . . . . . . . . . . . . . . . . 72
8.20. Events of Servicing Termination . . . . . . . . . . . . . . . 72
8.21. Resignation of Servicer and Appointment of Successor. . . . . 75
8.22. Waiver of Past Events of Servicing Termination. . . . . . . . 77
8.23. Inspections by Certificate Insurer; Errors and Omissions
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 78
8.24. Merger, Conversion, Consolidation or Succession to Business of
Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . 78
8.25. Notices of Material Events. . . . . . . . . . . . . . . . . . 78
8.26. Monthly Servicing Report and Servicing Certificate. . . . . . 79
8.27. Indemnification by the Company. . . . . . . . . . . . . . . . 81
8.28. Indemnification by the Servicer . . . . . . . . . . . . . . . 81
ARTICLE IX
TERMINATION OF TRUST . . . . . . . . . . 82
9.1. Termination of Trust. . . . . . . . . . . . . . . . . . . . . 82
9.2. Termination Upon Option of Servicer . . . . . . . . . . . . . 82
9.3. Termination Upon Loss of REMIC Status . . . . . . . . . . . . 83
9.4. Disposition of Proceeds . . . . . . . . . . . . . . . . . . . 84
9.5. Netting of Amounts. . . . . . . . . . . . . . . . . . . . . . 84
ARTICLE X
THE TRUSTEE. . . . . . . . . . . . . 84
10.1. Certain Duties and Responsibilities . . . . . . . . . . . . . 84
10.2. Removal of Trustee for Cause. . . . . . . . . . . . . . . . . 87
10.3. Certain Rights of the Trustee . . . . . . . . . . . . . . . . 88
10.4. Not Responsible for Recitals or Issuance of Certificates. . . 89
10.5. May Hold Certificates . . . . . . . . . . . . . . . . . . . . 89
10.6. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . 89
10.7. No Lien for Fees. . . . . . . . . . . . . . . . . . . . . . . 89
10.8. Corporate Trustee Required; Eligibility . . . . . . . . . . . 89
10.9. Resignation and Removal; Appointment of Successor . . . . . . 89
10.10. Acceptance of Appointment by Successor Trustee. . . . . . . . 91
10.11. Merger, Conversion, Consolidation or Succession to Business
of the Trustee. . . . . . . . . . . . . . . . . . . . . . . . 91
iii
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Page
10.12. Reporting; Withholding. . . . . . . . . . . . . . . . . . . . 91
10.13. Liability of the Trustee. . . . . . . . . . . . . . . . . . . 91
10.14. Appointment of Co-Trustee or Separate Trustee . . . . . . . . 92
10.15 Appointment of Custodians . . . . . . . . . . . . . . . . . . 93
ARTICLE XI
MISCELLANEOUS . . . . . . . . . . . . 93
11.1. Compliance Certificates and Opinions. . . . . . . . . . . . . 93
11.2. Form of Documents Delivered to the Trustee. . . . . . . . . . 94
11.3. Acts of Owners. . . . . . . . . . . . . . . . . . . . . . . . 94
11.4. Notices, etc. to Trustee. . . . . . . . . . . . . . . . . . . 95
11.5. Notices and Reports to Owners; Waiver of Notices. . . . . . . 95
11.6. Rules by Trustee and the Company. . . . . . . . . . . . . . . 95
11.7. Successors and Assigns. . . . . . . . . . . . . . . . . . . . 95
11.8. Severability. . . . . . . . . . . . . . . . . . . . . . . . . 96
11.9. Benefits of Agreement . . . . . . . . . . . . . . . . . . . . 96
11.10. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . . 96
11.11. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 96
11.12. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 96
11.13. Usury . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
11.14. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 96
11.15. REMIC Status; Taxes . . . . . . . . . . . . . . . . . . . . . 97
11.16. Additional Limitation on Action and Imposition of Tax . . . . 99
11.17. Appointment of Tax Matters Person . . . . . . . . . . . . . . 99
11.18. The Certificate Insurer . . . . . . . . . . . . . . . . . . . 99
11.19. Maintenance of Records. . . . . . . . . . . . . . . . . . . . 99
11.20. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
EXHIBIT A-1 -- Form of Class A-1 Certificate
EXHIBIT A-2 -- Form of Class A-2 Certificate
EXHIBIT B -- Mortgage Loan Schedule
EXHIBIT C -- Form of Class R Certificate
EXHIBIT D -- Form of Certificate Re: Mortgage Loans Prepaid in full After
the Cut-Off Date
EXHIBIT E -- Form of Initial Certification
EXHIBIT F -- Form of Final Certification
EXHIBIT G -- Form of Delivery Order
EXHIBIT H -- Form of Class R Tax Matters Transfer Certificate
EXHIBIT I -- Form of Notice for Certificate Insurance Policy
EXHIBIT J -- Form of Monthly Report
EXHIBIT K -- Form of Request for Release
EXHIBIT L -- Form of Subsequent Transfer Agreement
EXHIBIT M -- Form of Custodial Agreement
iv
<PAGE>
POOLING AND SERVICING AGREEMENT, relating to FIRST ALLIANCE MORTGAGE
LOAN TRUST 1996-4, dated as of December 1, 1996, by and among FIRST ALLIANCE
MORTGAGE COMPANY, a California corporation (the "Company"), the Company in its
fiduciary capacity as servicer of the Trust (the "Servicer"), and THE CHASE
MANHATTAN BANK, a New York banking corporation, in its capacity as trustee (the
"Trustee").
WHEREAS, the Company wishes to establish a trust and two subtrusts,
which provide for the allocation and sale of the beneficial interests therein
and the maintenance and distribution of the trust estate;
WHEREAS, the Servicer has agreed to service the Mortgage Loans, which
constitute the principal assets of the trust estate;
WHEREAS, all things necessary to make the Certificates, when executed
and authenticated by the Trustee, valid instruments, and to make this Agreement
a valid agreement, in accordance with their and its terms, have been done;
WHEREAS, The Chase Manhattan Bank is willing to serve in the capacity
of Trustee hereunder; and
WHEREAS, MBIA Insurance Corporation (the "Certificate Insurer") is
intended to be a third party beneficiary of this Agreement and is hereby
recognized by the parties hereto to be a third-party beneficiary of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Company, the Servicer and the Trustee hereby
agree as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.1. DEFINITIONS. For all purposes of this Agreement, the
following terms shall have the meanings set forth below, unless the context
clearly indicates otherwise:
"ACCOUNT": Any account established in accordance with Section 7.2 or
8.8 hereof.
"ADDITION NOTICE": With respect to the transfer of Subsequent
Mortgage Loans to the Trust for inclusion in Group I or Group II pursuant to
Section 3.8 hereof, notice given not less than three Business Days prior to the
related Subsequent Transfer Date of the Company's designation of Subsequent
Mortgage Loans to be sold to the Trust for inclusion in Group I or Group II and
the aggregate Loan Balance of such Subsequent Mortgage Loans to be delivered for
inclusion in each such Group.
"AGREEMENT": This Pooling and Servicing Agreement, as it may be
amended from time to time, and including the Exhibits hereto.
"APPRAISED VALUE": The appraised value of any Property based upon the
appraisal or other valuation made at the time of the origination of the related
Mortgage Loan, or, in the case of a Mortgage Loan which is a purchase money
mortgage, the sales price of the Property at such time of origination, if such
sales price is less than such appraised value.
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"AUTHORIZED OFFICER": With respect to any Person, any person who is
authorized to act for such Person in matters relating to this Agreement, and
whose action is binding upon such Person and, with respect to the Company and
the Servicer, initially including those individuals whose names appear on the
lists of Authorized Officers delivered on the Startup Day, and with respect to
the Trustee, any Vice President, Assistant Vice President, Assistant Treasurer
or Assistant Secretary of the Trustee.
"AVAILABLE FUNDS": With respect to Group I, the Group I Available
Funds and with respect to Group II, the Group II Available Funds.
"AVAILABLE FUNDS SHORTFALL": Any of the Group I Available Funds
Shortfall or the Group II Available Funds Shortfall.
"BALLOON LOAN": Any Mortgage Loan which has an amortization schedule
which extends beyond its maturity date, resulting in an unamortized principal
balance due in a single payment at maturity.
"BUSINESS DAY": Any day that is not a Saturday, Sunday or other day
on which commercial banking institutions in the States of New York and
California or in the city in which the Corporate Trust Office is located are
authorized or obligated by law or executive order to be closed.
"CAPITALIZED INTEREST ACCOUNT": The Capitalized Interest Account
established in accordance with Section 7.2(b) hereof and maintained by the
Trustee.
"CERTIFICATE": Any one of the Class A Certificates or the Class R
Certificates, each representing the interests and the rights described in this
Agreement.
"CERTIFICATE ACCOUNT": The Certificate Account established in
accordance with Section 7.2(a) hereof and maintained by the Trustee; provided
that the funds in such account shall not be commingled with any other funds held
by the Trustee.
"CERTIFICATE INSURANCE POLICIES": The Fixed Rate Certificate
Insurance Policy and the Variable Rate Certificate Insurance Policy.
"CERTIFICATE INSURER": MBIA Insurance Corporation or any successor
thereto, as issuer of the Certificate Insurance Policies.
"CERTIFICATE PRINCIPAL BALANCE": As to the Class A-1 Certificates,
the Class A-1 Certificate Principal Balance and as to the Class A-2
Certificates, the Class A-2 Certificate Principal Balance. The Class R
Certificates do not have a "Certificate Principal Balance".
"CLASS": All of the Class A-1 Certificates, all of the Class A-2
Certificates or all of the Class R Certificates.
"CLASS A CERTIFICATE": Any one of the Class A-1 Certificates or the
Class A-2 Certificates.
"CLASS A DISTRIBUTION AMOUNT": Any of the Class A-1 Distribution
Amount or the Class A-2 Distribution Amount.
2
<PAGE>
"CLASS A-1 CARRY-FORWARD AMOUNT": With respect to any Payment Date,
the sum of (i) the amount, if any, by which (x) the Class A-1 Distribution
Amount as of the immediately preceding Payment Date exceeded (y) the amount of
the actual distribution made to the Owners of the Class A-1 Certificates on such
immediately preceding Payment Date and (ii) 30 days' interest on the interest
portion of such amount at the Class A-1 Pass-Through Rate.
"CLASS A-1 CERTIFICATE": Any Certificate designated as a "Class A-1
Certificate" on the face thereof, in the form of Exhibit A-1 hereto,
representing the right to distributions as set forth herein. The Class A-1
Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
"CLASS A-1 CERTIFICATE PRINCIPAL BALANCE": As of any time of
determination, the Original Certificate Principal Balance of the Class A-1
Certificates less any amounts actually distributed on account of the Class A-1
Principal Distribution Amount pursuant to Section 7.5(d)(iv)(B) hereof with
respect to principal thereon on all prior Payment Dates.
"CLASS A-1 CERTIFICATE TERMINATION DATE": The Payment Date on which
the Class A-1 Certificate Principal Balance is reduced to zero.
"CLASS A-1 CURRENT INTEREST": With respect to interest accruing after
the Cut-Off Date and as of any Payment Date, the aggregate amount of interest
accrued on the Class A-1 Certificate Principal Balance immediately prior to such
Payment Date during the related Interest Accrual Period at the Class A-1
Pass-Through Rate.
"CLASS A-1 DISTRIBUTION AMOUNT": The sum of (x) the Group I Principal
Distribution Amount payable to the Owners of the Class A-1 Certificates pursuant
to Section 7.5(d)(iv)(B) and (y) the Class A-1 Current Interest.
"CLASS A-1 PASS-THROUGH RATE": 6.835% per annum; provided that on any
Payment Date after the Clean-Up Call Date, the Class A-1 Pass-Through Rate shall
be the lesser of (x) 7.335% and (y) the Group I Available Funds Cap.
"CLASS A-2 CARRY-FORWARD AMOUNT": With respect to any Payment Date,
the sum of (i) the amount, if any, by which (x) the Class A-2 Distribution
Amount as of the immediately preceding Payment Date exceeded (y) the amount of
the actual distribution made to the Owners of the Class A-2 Certificates on such
immediately preceding Payment Date and (ii) 30 days' interest on the interest
portion of such amount at the Class A-2 Pass-Through Rate.
"CLASS A-2 CERTIFICATE": Any Certificate designated as a "Class A-2
Certificate" on the face thereof, in the form of Exhibit A-2 hereto,
representing the right to distributions as set forth herein. The Class A-2
Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
"CLASS A-2 CERTIFICATE PRINCIPAL BALANCE": As of any time of
determination, the Original Certificate Principal Balance of the Class A-2
Certificates less any amounts actually distributed on account of the Class A-2
Principal Distribution Amount pursuant to Section 7.5(d)(iv)(D) hereof with
respect to principal thereon on all prior Payment Dates.
"CLASS A-2 CERTIFICATE TERMINATION DATE": The Payment Date on which
the Class A-2 Certificate Principal Balance is reduced to zero.
3
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"CLASS A-2 CURRENT INTEREST": With respect to interest accruing after
the Cut-Off Date and as of any Payment Date, the aggregate amount of interest
accrued on the Class A-2 Certificate Principal Balance immediately prior to such
Payment Date during the related Interest Accrual Period at the Class A-2
Pass-Through Rate.
"CLASS A-2 DISTRIBUTION AMOUNT": The sum of (x) the Group II
Principal Distribution Amount payable to the Owners of the Class A-2
Certificates pursuant to Section 7.5(d)(iv)(D) hereof and (y) the Class A-2
Current Interest.
"CLASS A-2 FORMULA PASS-THROUGH RATE": The rate determined by clause
(x) of the definition of "Class A-2 Pass-Through Rate."
"CLASS A-2 PASS-THROUGH RATE": For the initial Payment Date, 5.8177%.
As of any Payment Date thereafter, the lesser of (x) LIBOR plus, in the case of
any Payment Date on or prior to the Clean-Up Call Date, 0.22% per annum, or in
the case of any Payment Date thereafter, 0.44% per annum and (y) the Group II
Available Funds Cap for such Payment Date.
"CLASS A-2 TERMINATION DATE": December 20, 2026.
"CLASS R CERTIFICATE": Any of those Certificates representing certain
residual rights to distributions from the REMIC, designated as a "Class R
Certificate" on the face thereof, in the form of Exhibit C hereto and evidencing
an interest designated as the "residual interest" in the Trust for purposes of
the REMIC Provisions.
"CLEAN-UP CALL DATE": The date on which the outstanding aggregate
Loan Balance of the Mortgage Loans in the Trust has declined to 10% or less of
the Maximum Collateral Amount.
"CODE": The Internal Revenue Code of 1986, as amended and any
successor statute.
"COMBINED LOAN-TO-VALUE RATIO": With respect to any First Mortgage
Loan, the percentage equal to the Original Principal Amount of the related Note
divided by the Appraised Value of the related Property and with respect to any
Second Mortgage Loan the percentage equal to (a) the sum of (i) the remaining
principal balance, as of origination of the Second Mortgage Loan of the Senior
Lien note(s) relating to such Second Mortgage Loan and (ii) the Original
Principal Amount of the Note relating to such Second Mortgage Loan divided by
(b) the Appraised Value of the related Property.
"COMPENSATING INTEREST": As defined in Section 8.9(b) hereof.
"CORPORATE TRUST OFFICE": The principal office of the Trustee at 450
West 33rd Street, New York, New York 10001, attention: First Alliance Mortgage
Loan Trust 1996-4 or any other office of the Trustee designated as such
hereunder.
"COUPON RATE": The rate of interest borne by each Note.
"CURRENT INTEREST": As of any Payment Date, the sum of the Class A-1
Current Interest, and the Class A-2 Current Interest due on the related Payment
Date.
"CURTAILMENT": With respect to a Mortgage Loan, any payment of
principal received during a Remittance Period as part of a payment that is in
excess of the amount of the monthly payment
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due for such Remittance Period and which is not a Paid-in-Full Mortgage Loan,
nor is intended to cure a delinquency.
"CUSTODIAL AGREEMENT": The Custodial Agreement dated as of December
1, 1996 among the Custodian, the Trustee, the Depositor, the Company and the
Servicer.
"CUSTODIAN" The Bank of New York, a New York banking corporation.
"CUT-OFF DATE": December 1, 1996.
"DELINQUENCY ADVANCE": As defined in Section 8.9(a) hereof.
"DELINQUENT": A Mortgage Loan is "Delinquent" if any payment due
thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "30 days Delinquent" if such payment
has not been received by the close of business on the second day of the month
immediately succeeding the month in which such payment was due. Similarly for
"60 days Delinquent," "90 days Delinquent" and so on.
"DELIVERY ORDER": The delivery order in the form set forth as Exhibit
G hereto and delivered by the Company to the Trustee on the Startup Day pursuant
to Section 4.1 hereof.
"DEPOSITORY": The Depository Trust Company, 7 Hanover Square, New
York, New York 10004 and any successor Depository hereafter named.
"DESIGNATED DEPOSITORY INSTITUTION": With respect to the Principal
and Interest Account or the Certificate Account, an institution whose deposits
are insured by the Bank Insurance Fund or the Savings Association Insurance Fund
of the FDIC, the long-term deposits of which shall be rated (x) A or better by
Standard & Poor's and (y) A2 or better by Moody's and in one of the highest
short-term rating categories, unless otherwise approved in writing by the
Certificate Insurer and each of Moody's and Standard & Poor's, and which is any
of the following: (i) a federal savings and loan association duly organized,
validly existing and in good standing under the federal banking laws, (ii) an
institution duly organized, validly existing and in good standing under the
applicable banking laws of any state, (iii) a national banking association duly
organized, validly existing and in good standing under the federal banking laws,
(iv) a principal subsidiary of a bank holding company, or (v) approved in
writing by the Certificate Insurer, Moody's and Standard & Poor's and, in each
case acting or designated by the Servicer as the depository institution for the
Principal and Interest Account; PROVIDED, HOWEVER, that any such institution or
association shall have combined capital, surplus and undivided profits of at
least $100,000,000. Notwithstanding the foregoing, the Principal and Interest
Account or the Certificate Account may be held by (a) the Trustee or (b) an
institution otherwise meeting the preceding requirements except that the only
applicable rating requirement shall be that the unsecured and uncollateralized
debt obligations thereof shall be rated Baa3 or better by Moody's if such
institution has trust powers and the Principal and Interest Account is held by
such institution in its trust capacity and not in its commercial capacity.
"DETERMINATION DATE": As to each Remittance Date, the 12th day of
each month, or if such day is not a Business Day, the next succeeding Business
Day.
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"DIRECT PARTICIPANT" or "DTC PARTICIPANT": Any broker-dealer, bank or
other financial institution for which the Depository holds Class A Certificates
from time to time as a securities depository.
"DISQUALIFIED ORGANIZATION": "Disqualified Organization" shall have
the meaning set forth from time to time in the definition thereof at Section
860E(e)(5) of the Code (or any successor statute thereto) and applicable to the
Trust.
"DUE DATE": The first day of the month of the related Payment Date.
"DUE PERIOD": With respect to any Payment Date, the period commencing
on the second day of the month preceding the month of such Payment Date (or,
with respect to the first Due Period, the day following the Cut-Off Date) and
ending on the related Due Date.
"ELIGIBLE INVESTMENTS": Those investments so designated pursuant to
Section 7.7 hereof.
"EVENT OF DEFAULT": Any event described in clauses (a) or (b) of
Section 8.20 hereof.
"EVENT OF SERVICING TERMINATION": Any event as described in Section
8.20 hereof.
"EXCESS SUBORDINATED AMOUNT": With respect to any Mortgage Loan Group
and Payment Date, the excess, if any, of (x) the Subordinated Amount that would
apply to the related Mortgage Loan Group on such Payment Date after taking into
account the payment of the related Class A Distribution Amounts on such Payment
Date (except for any distributions of related Subordination Reduction Amounts on
such Payment Date) over (y) the related Specified Subordinated Amount for such
Payment Date.
"FDIC": The Federal Deposit Insurance Corporation, or any successor
thereto.
"FHLMC": The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created pursuant to the Emergency Home
Finance Act of 1970, as amended, or any successor thereof.
"FILE": The documents delivered to the Custodian on behalf of the
Trustee pursuant to Section 3.5 hereof pertaining to a particular Mortgage Loan
and any additional documents required to be added to the mortgage file pursuant
to this Agreement.
"FINAL CERTIFICATION": The final certification in the form set forth
as Exhibit F hereto and delivered by the Trustee to the Company within 90 days
after the Startup Day pursuant to Section 3.6 hereof.
"FINAL DETERMINATION": As defined in Section 9.3(a) hereof.
"FIRST MORTGAGE LOAN": A Mortgage Loan which constitutes a first
priority mortgage lien with respect to any Property.
"FIXED RATE CERTIFICATE INSURANCE POLICY": The certificate guaranty
insurance policy (number 22758) dated December 20, 1996 issued by the
Certificate Insurer to the Trustee for the benefit of the Owners of the Class
A-1 Certificates.
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"FNMA": The Federal National Mortgage Association, a
federally-chartered and privately-owned corporation existing under the Federal
National Mortgage Association Charter Act, as amended, or any successor thereof.
"FUNDING PERIOD": With respect to each of Group I and Group II, the
period commencing on the Startup Day and ending on the earliest to occur of (i)
the date on which the amount on deposit in the Pre-Funding Account with respect
to such Group (exclusive of any Pre-Funding Account Earnings with respect to
such Group) is less than $100,000, (ii) the date on which the Servicer may be
removed pursuant to Section 8.20(a) or (b) hereof and (iii) December 31, 1996.
"GROUP I": The pool of Mortgage Loans identified in the related
Schedules of Mortgage Loans as having been assigned to Group I, including any
Qualified Replacement Mortgages delivered in replacement thereof and each
Subsequent Mortgage Loan delivered to the Trust for inclusion therein.
"GROUP I AMORTIZED SUBORDINATED AMOUNT REQUIREMENT": As of any date
of determination, the product of (x) 2.0% and (y) the Group I Maximum Collateral
Amount.
"GROUP I AVAILABLE FUNDS": As defined in Section 7.3(a)(i) hereof.
"GROUP I AVAILABLE FUNDS CAP": The weighted average of the Coupon
Rates on the Mortgage Loans in Group I less the sum of the rates at which (i)
the Group I Servicing Fee, (ii) the Group I Trustee Fee and (iii) the Group I
Premium Amount are calculated.
"GROUP I AVAILABLE FUNDS SHORTFALL": As defined in Section
7.5(d)(ii)(A).
"GROUP I CAPITALIZED INTEREST REQUIREMENT": $15,259.59.
"GROUP I INITIAL SPECIFIED SUBORDINATED AMOUNT": $0.00.
"GROUP I INSURED PAYMENT": As defined in the Fixed Rate Certificate
Insurance Policy.
"GROUP I INTEREST REMITTANCE AMOUNT": As of any Remittance Date, the
sum, without duplication, of (i) all scheduled interest collected by the
Servicer during the related Due Period, with respect to the Mortgage Loans in
Group I, (ii) all Delinquency Advances relating to interest made by the Servicer
on such Remittance Date with respect to Group I and (iii) all Compensating
Interest paid by the Servicer on such Remittance Date with respect to Group I.
"GROUP I MAXIMUM COLLATERAL AMOUNT": $22,500,000.
"GROUP I MONTHLY REMITTANCE AMOUNT": As of any Remittance Date, the
sum of (i) the Group I Interest Remittance Amount for such Remittance Date and
(ii) the Group I Principal Remittance Amount for such Remittance Date.
"GROUP I ORIGINAL AGGREGATE LOAN BALANCE": The aggregate Loan
Balances of all Initial Mortgage Loans in Group I as of the Cut-Off Date, I.E.,
$18,295,292.12.
"GROUP I PREFERENCE AMOUNT": As defined in the Fixed Rate Certificate
Insurance Policy.
"GROUP I PREMIUM AMOUNT": As to any Payment Date beginning with the
third Payment Date, the product of one-twelfth of (x) the Group I Premium
Percentage and (y) the Class A-1 Certificate
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Principal Balance on such Payment Date (before taking into account any
distributions of principal to be made to the Owners of the Class A-1
Certificates on such Payment Date).
"GROUP I PREMIUM PERCENTAGE": As defined in the Insurance Agreement.
"GROUP I PRINCIPAL DISTRIBUTION AMOUNT": With respect to the Class
A-1 Certificates on the first Payment Date, the Group I Initial Specified
Subordinated Amount, if any and for the first Payment Date and for any Payment
Date thereafter, the lesser of:
(x) the Group I Total Available Funds plus any Group I Insured Payment
minus the Class A-1 Current Interest for such Payment Date; and
(y) the excess, if any, of (i) the sum, without duplication of:
(a) the Class A-1 Carry-Forward Amount,
(b) the principal portion of all scheduled monthly payments on
the Mortgage Loans in Group I due on or prior to the related
Due Date during the related Due Period, to the extent
actually received by the Trustee on or prior to the related
Remittance Date or to the extent advanced by the Servicer on
or prior to the related Remittance Date and any Prepayments
made by the respective Mortgagors during the related
Remittance Period,
(c) the Loan Balance of each Mortgage Loan in Group I that
either was repurchased by the Company or an Originator or
purchased by the Servicer on the related Remittance Date, to
the extent such Loan Balance is actually received by the
Trustee on or prior to the related Remittance Date,
(d) any Substitution Amounts delivered by the Company or an
Originator on the related Remittance Date in connection with
a substitution of a Mortgage Loan in Group I (to the extent
such Substitution Amounts relate to principal), to the
extent such Substitution Amounts are actually received by
the Trustee on or prior to the related Remittance Date,
(e) all Net Liquidation Proceeds actually collected by the
Servicer with respect to the Mortgage Loans in Group I
during the related Remittance Period (to the extent such Net
Liquidation Proceeds relate to principal) to the extent
actually received by the Trustee on or prior to the related
Remittance Date,
(f) the amount of any Group I Subordination Deficit for such
Payment Date,
(g) the proceeds received by the Trustee of any termination as
set forth in Article IX hereof of Group I (to the extent
such proceeds related to principal),
(h) any moneys released from the Pre-Funding Account as a
prepayment of the Class A-1 Certificates on the Payment Date
which immediately follows the end of the Funding Period, and
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(i) the amount of any Subordination Increase Amount with respect
to Group I for such Payment Date, to the extent of any Net
Monthly Excess Cashflow available for such purpose;
over
(ii) the amount of any Subordination Reduction Amount with respect to
Group I for such Payment Date.
"GROUP I PRINCIPAL REMITTANCE AMOUNT": As of any Remittance Date, the
sum, without duplication, of (i) the scheduled principal actually collected by
the Servicer with respect to Mortgage Loans in Group I during the related Due
Period, (ii) Prepayments collected in the related Remittance Period, (iii) the
Loan Balance of each such Mortgage Loan in Group I that either was repurchased
by an Originator or by the Company or purchased by the Servicer on such
Remittance Date, to the extent such Loan Balance was actually deposited in the
Principal and Interest Account, (iv) any Substitution Amounts delivered by the
Company in connection with a substitution of a Mortgage Loan in Group I, to the
extent such Substitution Amounts were actually deposited in the Principal and
Interest Account on such Remittance Date, (v) all Net Liquidation Proceeds
actually collected by the Servicer with respect to such Mortgage Loans in Group
I during the related Due Period (to the extent such Liquidation Proceeds related
to principal), (vi) all Delinquency Advances relating to principal made by the
Servicer on such Remittance Date with respect to Group I and (vii) the amount of
any investment losses required to be deposited by the Company or the Servicer
pursuant to Sections 7.6(e) or 8.8(b).
"GROUP I PROJECTED NET MONTHLY EXCESS CASHFLOW": As of any date of
calculation, Net Monthly Excess Cashflow relating to Group I (other than any
Subordination Reduction Amount included therein), as calculated pursuant to
Section 7.5(d)(iii) hereof on the Payment Date immediately preceding such date
of calculation.
"GROUP I REIMBURSEMENT AMOUNT": As of any Payment Date, the sum of
(x)(i) all Group I Insured Payments previously received by the Trustee and not
previously repaid to the Certificate Insurer pursuant to Section 7.5(d)(ii)(C)
or Section 7.5(d)(ii)(D) hereof plus (ii) interest accrued on each such Group I
Insured Payment not previously repaid calculated at the Late Payment Rate from
the date the Trustee received the related Group I Insured Payment to, but not
including, such Payment Date and (y)(i) any amounts then due and owing to the
Certificate Insurer relating to Group I under the Insurance Agreement plus (ii)
interest on such amounts at the Late Payment Rate. The Certificate Insurer
shall notify the Trustee and the Company of the amount of any Group I
Reimbursement Amount.
"GROUP I SERVICING FEE": With respect to Group I, as to any Payment
Date, the product of (x) one-twelfth of 0.50% and (y) the aggregate Loan
Balances of the Mortgage Loans in Group I as of the opening of business on the
first day of the related Remittance Period. Such Servicing Fee is retained by
the Servicer pursuant to Sections 8.8(c)(i) and 8.15 hereof.
"GROUP I SPECIFIED SUBORDINATED AMOUNT": Means (a) for any Payment
Date occurring during the period commencing on the Startup Day and ending on the
later of (i) the date upon which principal equal to one-half of the Group I
Maximum Collateral Amount has been received and (ii) the 30th Payment Date
following the Startup Day, the greater of (A) the Group I Amortized Subordinated
Amount Requirement and (B) two (2) times the excess of (x) one-half of the
aggregate Loan Balances of all Mortgage Loans in Group I which are 90 or more
days Delinquent (including REO Properties) over (y) five times the Group I
Projected Net Monthly Excess Cashflow as of such Payment Date; and (b) for any
Payment Date occurring after the end of the period in clause (a) above, the
greatest of (i) the lesser
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of (A) the Group I Amortized Subordinated Amount Requirement and (B) two (2)
times the Group I Amortized Subordinated Amount Requirement stated as a
percentage of the Original Certificate Principal Balance of the Class A-1
Certificates times the current Class A-1 Certificate Principal Balance, (ii) two
(2) times the excess of (A) one-half of the aggregate Loan Balances of all
Mortgage Loans in Group I which are 90 or more days Delinquent (including REO
Properties) over (B) three times the Group I Projected Net Monthly Excess
Cashflow as of such Payment Date and (iii) an amount equal to 0.50% of the Group
I Maximum Collateral Amount; PROVIDED, HOWEVER, notwithstanding the above, in
the event that any Group I Insured Payment or Group II Insured Payment is made
by the Certificate Insurer, the amount described in this clause (b) shall remain
equal to the Group I Amortized Subordinated Amount Requirement.
"GROUP I SUBORDINATED AMOUNT": As of any Payment Date, the
difference, if any, between (x) the sum of (i) the aggregate Loan Balances of
the Mortgage Loans in Group I as of the close of business on the last day of the
related Remittance Period and (ii) any amount on deposit in the Pre-Funding
Account at such time exclusive of any Pre-Funding Account Earnings related to
Group I and (y) the Class A-1 Certificate Principal Balance as of such Payment
Date (after taking into account the payment of the Class A-1 Distribution Amount
(except for any portion thereof related to an Insured Payment) on such Payment
Date).
"GROUP I SUBORDINATION DEFICIT": With respect to Group I and any
Payment Date, the amount, if any, by which (x) the Class A-1 Certificate
Principal Balance, after taking into account the payment of the Group I
Principal Distribution Amount on such Payment Date (except any payment to be
made as to principal from the proceeds of the Fixed Rate Certificate Insurance
Policy), exceeds (y) the sum of (a) the aggregate Loan Balances of the Mortgage
Loans in Group I as of the close of business on the last day of the related Due
Period and (b) the amount, if any, on deposit in the Pre-Funding Account
exclusive of any Pre-Funding Account Earnings related to Group I as of the close
of business on the last day of the related Remittance Period; provided that for
the purpose of calculating Loan Balances to determine if a Subordination Deficit
exists, the aggregate amount of the principal component of all unreimbursed
Delinquency Advances shall be deducted from the related actual Loan Balances.
"GROUP I TOTAL AVAILABLE FUNDS": As defined in Section 7.3(a)(i)
hereof.
"GROUP I TOTAL AVAILABLE FUNDS SHORTFALL": As defined in Section
7.3(b) hereof.
"GROUP I TOTAL MONTHLY EXCESS SPREAD": With respect to Group I and
any Payment Date, the difference between (i) the interest which is collected on
the Mortgage Loans in Group I during the related Remittance Period, less the
Group I Servicing Fee plus the interest portion of any Delinquency Advances and
Compensating Interest paid by the Servicer with respect to Group I for such
Remittance Period and (ii) the sum of (x) the interest due on the Class A-1
Certificates on such Payment Date and (y) the Group I Premium Amount and the
Group I Trustee Fee, if any, for such Payment Date.
"GROUP I TRUSTEE FEE": The amount payable monthly to the Trustee on
each Payment Date, in an amount equal to the product of (x) one-twelfth of 0.02%
and (y) the aggregate Loan Balance of the Mortgage Loans in Group I as of the
opening of business on the first day of the preceding Remittance Period.
"GROUP II": The pool of Mortgage Loans identified in the related
Schedules of Mortgage Loans as having been assigned to Group II, including any
Qualified Replacement Mortgages delivered in replacement thereof and each
Subsequent Mortgage Loan delivered to the Trust for inclusion therein.
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"GROUP II AMORTIZED SUBORDINATED AMOUNT REQUIREMENT": As of any date
of determination, the product of (x) 2.25% and (y) the Group II Maximum
Collateral Amount.
"GROUP II AVAILABLE FUNDS": As defined in Section 7.3(a)(ii) hereof.
"GROUP II AVAILABLE FUNDS CAP": As of any Payment Date, the weighted
average of the Coupon Rates on the Mortgage Loans in Group II less the sum of
(a) the rates of which (i) the Group II Servicing Fee, (ii) the Group II Trustee
Fee, (iii) beginning on the third Payment Date, the Group II Premium Amount are
determined and (b) beginning on the seventh Payment Date, 0.50% per annum
expressed as a percentage of the Mortgage Loans in Group II.
"GROUP II AVAILABLE FUNDS CAP CARRY-FORWARD AMORTIZATION AMOUNT": As
of any Payment Date, any amount distributed from the Group II Available Funds
Cap Carry-Forward Amount Account on such Payment Date pursuant to Section 7.5(e)
hereof.
"GROUP II AVAILABLE FUNDS CAP CARRY-FORWARD AMOUNT": As of any Payment
Date, the excess, if any, of (x) the sum of (i) the excess, if any, equal to (a)
the aggregate amount of interest due on the Class A-2 Certificates on all prior
Payment Dates, calculated at the Class A-2 Formula Pass-Through Rate applicable
to each such Payment Date over (b) the aggregate amount of interest due on the
Class A-2 Certificates on all prior Payment Dates, calculated at the Class A-2
Pass-Through Rate applicable to each such Payment Date, (ii) the amount, if any,
described in clause (iii) hereof as of the immediately preceding Payment Date
and (iii) the product of (a) one-twelfth of the Class A-2 Formula Pass-Through
Rate on such Payment Date and (b) the sum of the amounts described in clauses
(i) and (ii) preceding over (y) all Group II Available Funds Cap Carry-Forward
Amortization Amounts actually funded on all prior Payment Dates.
"GROUP II AVAILABLE FUNDS CAP CARRY-FORWARD AMOUNT ACCOUNT": The
Available Funds Cap Carry-Forward Amount Account established in accordance with
Section 7.2 hereof and maintained by the Trustee.
"GROUP II AVAILABLE FUNDS SHORTFALL": As defined in Section
7.5(d)(ii)(A).
"GROUP II CAPITALIZED INTEREST REQUIREMENT": $35,250.08.
"GROUP II INITIAL SPECIFIED SUBORDINATED AMOUNT": $0.00.
"GROUP II INSURED PAYMENT": As defined in the Variable Rate
Certificate Insurance Policy.
"GROUP II INTEREST REMITTANCE AMOUNT": As of any Remittance Date, the
sum, without duplication, of (i) all scheduled interest collected by the
Servicer during the related Due Period with respect to the Mortgage Loans in
Group II, (ii) all Delinquency Advances relating to interest made by the
Servicer on such Remittance Date with respect to Group II, and (iii) all
Compensating Interest paid by the Servicer on such Remittance Date with respect
to Group II.
"GROUP II MAXIMUM COLLATERAL AMOUNT": $47,500,000.
"GROUP II MONTHLY REMITTANCE AMOUNT": As of any Remittance Date, the
sum of (i) the Group II Interest Remittance Amount for such Remittance Date and
(ii) the Group II Principal Remittance Amount for such Remittance Date.
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"GROUP II ORIGINAL AGGREGATE LOAN BALANCE": The aggregate Loan
Balances of all Mortgage Loans in Group II as of the Cut-Off Date, I.E.,
$34,826,571.93.
"GROUP II PREFERENCE AMOUNT": As defined in the Variable Rate
Certificate Insurance Policy.
"GROUP II PREMIUM AMOUNT": As to any Payment Date on or after the
third Payment Date, the product of one-twelfth of (x) the Group II Premium
Percentage and (y) the Class A-2 Certificate Principal Balance on such Payment
Date (before taking into account any distributions of principal to be made to
the Owners of Class A-2 Certificates on such Payment Date).
"GROUP II PREMIUM PERCENTAGE": As defined in the Insurance Agreement.
"GROUP II PRINCIPAL DISTRIBUTION AMOUNT": With respect to the Class
A-2 Certificates on the first Payment Date, the Group II Initial Specified
Subordinated Amount, if any, and for the first Payment Date and for any Payment
Date thereafter, the lesser of:
(x) the Group II Total Available Funds plus any Group II Insured Payment
minus the Class A-2 Current Interest for such Payment Date; and
(y) the excess, if any, of (i) the sum, without any duplication of:
(a) the Class A-2 Carry-Forward Amount,
(b) the principal portion of all scheduled monthly payments on
the Mortgage Loans in Group II due on or prior to the
related Due Date during the related Due Period, to the
extent actually received by the Trustee on or prior to the
related Remittance Date or to the extent advanced by the
Servicer on or prior to the related Remittance Date and any
Prepayments made by the respective Mortgagors during the
related Remittance Period,
(c) the Loan Balance of each Mortgage Loan in Group II that
either was repurchased by the Company or an Originator or
purchased by the Servicer on the related Remittance Date, to
the extent such Loan Balance is actually received by the
Trustee, on or prior to the related Remittance Date,
(d) any Substitution Amounts delivered by the Company or an
Originator on the related Remittance Date in connection with
a substitution of a Mortgage Loan in Group II (to the extent
such Substitution Amounts relate to principal), to the
extent such Substitution Amounts are actually received by
the Trustee, on or prior to the related Remittance Date,
(e) all Net Liquidation Proceeds actually collected by the
Servicer with respect to the Mortgage Loans in Group II
during the related Remittance Period (to the extent such Net
Liquidation Proceeds relate to principal) to the extent
actually received by the Trustee, on or prior to the related
Remittance Date,
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(f) the amount of any Group II Subordination Deficit for such
Payment Date,
(g) the proceeds received by the Trustee of any termination as
set forth in Article IX hereto of Group II (to the extent
such proceeds related to principal),
(h) any moneys released from the Pre-Funding Account as a
prepayment of the Class A-2 Certificates on the Payment Date
which immediately follows the end of the Funding Period, and
(i) the amount of any Subordination Increase Amount with respect
to Group II for such Payment Date, to the extent of any Net
Monthly Excess Cashflow available for such purpose;
over
(ii) the amount of any Subordination Reduction Amount with
respect to Group II for such Payment Date.
"GROUP II PRINCIPAL REMITTANCE AMOUNT": As of any Remittance Date,
the sum, without duplication, of (i) the scheduled principal actually collected
by the Servicer with respect to Mortgage Loans in Group II during the related
Due Period, (ii) the Prepayments collected in the related Remittance Period,
(iii) the Loan Balance of each such Mortgage Loan in Group II that either was
repurchased by an Originator or by the Company or purchased by the Servicer on
such Remittance Date, to the extent such Loan Balance was actually deposited in
the Principal and Interest Account, (iv) any Substitution Amounts delivered by
the Company in connection with a substitution of a Mortgage Loan in Group II, to
the extent such Substitution Amounts were actually deposited in the Principal
and Interest Account on such Remittance Date, (v) all Net Liquidation Proceeds
actually collected by the Servicer with respect to such Mortgage Loans in Group
II during the related Due Period (to the extent such Liquidation Proceeds
related to principal), (vi) all Delinquency Advances relating to principal made
by the Servicer on such Remittance Date with respect to Group II and (vii) the
amount of any investment losses required to be deposited by the Company or the
Servicer pursuant to Sections 7.6(e) and 8.8(b) hereof.
"GROUP II PROJECTED NET MONTHLY EXCESS CASHFLOW": As of any date of
calculation, Net Monthly Excess Cashflow relating to Group II (other than any
Subordination Reduction Amount included therein), as calculated pursuant to
Section 7.5(d)(iii) hereof on the Payment Date immediately preceding such date
of calculation.
"GROUP II REIMBURSEMENT AMOUNT": As of any Payment Date, the sum of
(x)(i) all Group II Insured Payments previously received by the Trustee and not
previously repaid to the Certificate Insurer pursuant to Sections 7.5(d)(ii)(C)
and 7.5(d)(ii)(D) hereof plus (ii) interest accrued on each such Group II
Insured Payment not previously repaid calculated at the Late Payment Rate from
the date the Trustee received the related Group II Insured Payment to, but not
including, such Payment Date and (y)(i) any amounts then due and owing to the
Certificate Insurer relating to Group II under the Insurance Agreement plus (ii)
interest on such amounts at the Late Payment Rate. The Certificate Insurer
shall notify the Trustee and the Company of the amount of any Group II
Reimbursement Amount.
"GROUP II SERVICING FEE": With respect to Group II, as to any Payment
Date, the product of (x) one-twelfth of 0.50% and (y) the aggregate Loan
Balances of the Mortgage Loans in Group II as
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of the opening of business on the first day of the related Remittance Period.
Such Servicing Fee is retained by the Servicer pursuant to Sections 8.8(c)(i)
and 8.15 hereof.
"GROUP II SPECIFIED SUBORDINATED AMOUNT": Means (a) for any Payment
Date occurring during the period commencing on the Startup Day and ending on the
later of (i) the date upon which principal equal to one-half of the Group II
Maximum Collateral Amount has been received and (ii) the 30th Payment Date
following the Startup Day, the greater of (A) the Group II Amortized
Subordinated Amount Requirement and (B) two times the excess of (x) one-half of
the aggregate Loan Balances of all Mortgage Loans in Group II which are 90 or
more days Delinquent (including REO Properties) over (y) five times the Group II
Projected Net Monthly Excess Cashflow as of such Payment Date; and (b) for any
Payment Date occurring after the end of the period in clause (a) above, the
greatest of (i) the lesser of (A) the Group II Amortized Subordinated Amount
Requirement and (B) two (2) times the Group II Amortized Subordinated Amount
Requirement stated as a percentage of the Original Certificate Principal Balance
of the Class A-2 Certificates times the current Class A-2 Certificate Principal
Balance, (ii) two (2) time the excess of (A) one-half of the aggregate Loan
Balances of all Mortgage Loans in Group II which are 90 or more days Delinquent
(including REO Properties) over (B) three times the Group II Projected Net
Monthly Excess Cashflow as of such Payment Date and (iii) an amount equal to
0.50% of the Group II Maximum Collateral Amount; PROVIDED, HOWEVER,
notwithstanding the above, in the event that any Group I Insured Payment or
Group II Insured Payment is made by the Certificate Insurer, the Group II
Specified Subordinated Amount shall remain equal to the Group II Amortized
Subordinated Amount Requirement.
"GROUP II SUBORDINATED AMOUNT": As of any Payment Date, the
difference, if any, between (x) the sum of (i) the aggregate Loan Balances of
the Mortgage Loans in Group II as of the close of business on the last day of
the related Remittance Period and (ii) any amount on deposit in the Pre-Funding
Account at such time exclusive of any Pre-Funding Account Earnings related to
Group II and (y) the Class A-2 Certificate Principal Balance as of such Payment
Date (after taking into account the payment of the Class A-2 Distribution Amount
(except for any portion thereof related to an Insured Payment) on such Payment
Date).
"GROUP II SUBORDINATION DEFICIT": With respect to Group II and any
Payment Date, the amount, if any, by which (x) the Class A-2 Certificate
Principal Balance, after taking into account the payment of the Group II
Principal Distribution Amount on such Payment Date (except any payment to be
made as to principal from the proceeds of the Variable Rate Certificate
Insurance Policy), exceeds (y) the sum of (a) the aggregate Loan Balances of the
Mortgage Loans in Group II as of the close of business on the last day of the
related Due Period and (b) the amount, if any, on deposit in the Pre-Funding
Account exclusive of any Pre-Funding Account Earnings related to Group II as of
the close of business on the last day of the related Remittance Period; provided
that for the purpose of calculating Loan Balances to determine if a
Subordination Deficit exists, the aggregate amount of the principal component of
all unreimbursed Delinquency Advances shall be deducted from the related actual
Loan Balances.
"GROUP II TOTAL AVAILABLE FUNDS": As defined in Section 7.3(a)(ii)
hereof.
"GROUP II TOTAL AVAILABLE FUNDS SHORTFALL": As defined in Section
7.3(b) hereof.
"GROUP II TOTAL MONTHLY EXCESS SPREAD": With respect to Group II and
any Payment Date, the difference between (i) the interest which is collected on
the Mortgage Loans in Group II during the related Remittance Period, less the
Group II Servicing Fee for such Remittance Period plus the interest portion of
any Delinquency Advances and Compensating Interest paid by the Servicer with
respect
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to Group II for such Remittance Period and (ii) the sum of (x) the interest due
on the Class A-2 Certificates on such Payment Date and (y) the Group II Premium
Amount, and the Group II Trustee Fee, if any, for such Payment Date.
"GROUP II TRUSTEE FEE": The amount payable monthly to the Trustee on
each Payment Date, in an amount equal to the product of (x) one-twelfth of .02%
and (y) the aggregate Loan Balance of the Mortgage Loan in Group II as of the
opening of business on the first day of the related Remittance Period.
"HIGHEST LAWFUL RATE": As defined in Section 11.13.
"INDEMNIFICATION AGREEMENT": The Indemnification Agreement dated as
of December 10, 1996, among the Certificate Insurer, the Company and the
Underwriters.
"INDIRECT PARTICIPANT": Any financial institution for whom any Direct
Participant holds an interest in a Class A Certificate.
"INITIAL CERTIFICATION": The initial certification in the form set
forth as Exhibit E hereto and delivered by the Trustee to the Company on the
Startup Day pursuant to Section 3.6 hereof.
"INITIAL MORTGAGE LOANS": The Mortgage Loans to be conveyed to the
Trust by the Company on the Startup Day.
"INITIAL PREMIUMS": The initial premium (covering three months) for
Group I and Group II payable by the Company on behalf of the Trust to the
Certificate Insurer in consideration of the delivery to the Trustee of each of
the Certificate Insurance Policies.
"INSURANCE AGREEMENT": The Insurance Agreement dated as of December
1, 1996, among the Company, the Servicer, the Trustee and the Certificate
Insurer, as it may be amended from time to time.
"INSURANCE POLICY": Any hazard, flood, title or primary mortgage
insurance policy relating to a Mortgage Loan.
"INSURED PAYMENT": A Group I Insured Payment or a Group II Insured
Payment.
"INTEREST ACCRUAL PERIOD": With respect to the Class A-1 Certificates
and any Payment Date, the calendar month immediately preceding such Payment
Date. A "Calendar Month" shall be deemed to be 30 days. With respect to the
Class A-2 Certificates and any Payment Date, the period commencing on the
immediately preceding Payment Date (or in the case of the first Payment Date,
the Startup Day) and ending on the day immediately preceding the current Payment
Date. All calculations of interest on the Class A-1 Certificates will be made
on the basis of a 360-day year assumed to consist of twelve 30-day months and
all calculations of interest on the Class A-2 Certificates will be made on the
basis of the actual number of days elapsed in the related Interest Accrual
Period and in a year of 360 days.
"INTEREST DETERMINATION DATE": With respect to any Interest Accrual
Period for the Class A-2 Certificates, the second London Business Day preceding
such Interest Accrual Period.
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"LATE PAYMENT RATE": For any Payment Date, the rate of interest, as
it is publicly announced by State Street Bank and Trust Company, N.A. at its
principal office in New York, New York as its prime rate (any change in such
prime rate of interest to be effective on the date such change is announced by
State Street Bank and Trust Company, N.A.) plus 3%. The Late Payment Rate shall
be computed on the basis of a year of 365 days calculating the actual number of
days elapsed. In no event shall the Late Payment Rate exceed the maximum rate
permissible under any applicable law limiting interest rates.
"LATEST TERMINATION DATE": The later to occur of (i) the Class A-1
Certificate Termination Date and (ii) the Class A-2 Certificate Termination
Date.
"LIBOR": With respect to any Interest Accrual Period for the Class
A-2 Certificates, the rate determined by the Trustee on the related Interest
Determination Date on the basis of the offered rates of the Reference Banks for
one-month U.S. dollar deposits, as such rates appear on the Reuters Screen LIBO
Page, as of 11:00 a.m. (London time) on such Interest Determination Date. On
each Interest Determination Date, LIBOR for the related Interest Accrual Period
will be established by the Trustee as follows:
(i) If on such Interest Determination Date two or more Reference Banks
provide such offered quotations, LIBOR for the related Interest
Accrual Period shall be the arithmetic mean of such offered quotations
(rounded upwards if necessary to the nearest whole multiple of 1/16%).
(ii) If on such Interest Determination Date fewer than two Reference Banks
provide such offered quotations, LIBOR for the related Interest
Accrual Period shall be the higher of (i) LIBOR as determined on the
previous Interest Determination Date and (ii) the Reserve Interest
Rate.
"LIQUIDATED LOAN": As defined in Section 8.13(b) hereof. A Mortgage
Loan which is purchased from the Trust pursuant to Section 3.4, 3.6 or 8.10
hereof is not a "Liquidated Loan".
"LIQUIDATION EXPENSES": Expenses which are incurred by the Servicer
in connection with the liquidation of any defaulted Mortgage Loan, such
expenses, including, without limitation, legal fees and expenses, and any
unreimbursed Servicing Advances expended by the Servicer pursuant to Sections
8.9(c) and 8.13 with respect to the related Mortgage Loan.
"LIQUIDATION PROCEEDS": With respect to any Liquidated Loan, any
amounts (including the proceeds of any Insurance Policy) recovered by the
Servicer in connection with such Liquidated Loan, whether through trustee's
sale, foreclosure sale or otherwise.
"LOAN BALANCE": With respect to each Initial Mortgage Loan, the
principal balance thereof on the Cut-Off Date, and with respect to each
Subsequent Mortgage Loan, the principal balance thereof on the relevant
Subsequent Cut-Off Date less, in either case, any related Principal Remittance
Amounts relating to such Mortgage Loan included in previous related Monthly
Remittance Amounts that were received by the Servicer or any Sub-Servicer
whether or not delivered to the Trustee, HOWEVER, that the Loan Balance for any
Mortgage Loan which has become a Liquidated Loan shall be zero as of the first
day of the Remittance Period following the Remittance Period in which such
Mortgage Loan becomes a Liquidated Loan, and at all times thereafter.
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"LOAN PURCHASE PRICE": With respect to any Mortgage Loan purchased
from the Trust on a Remittance Date pursuant to Section 3.4, 3.6 or 8.10 hereof,
an amount equal to the Loan Balance of such Mortgage Loan as of the date of
purchase, plus one month's interest on the outstanding Loan Balance thereof as
of the beginning of the preceding Remittance Period computed at the Coupon Rate
less the Servicing Fee (expressed as an annual percentage rate), if any,
together with, without duplication, the aggregate amount of (i) all delinquent
interest, all Delinquency Advances and Servicing Advances theretofore made with
respect to such Mortgage Loan and not subsequently recovered from the related
Mortgage Loan and (ii) all Delinquency Advances which the Servicer or any
Sub-Servicer has theretofore failed to remit with respect to such Mortgage Loan.
"LONDON BUSINESS DAY": A day on which banks are open for dealing in
foreign currency and exchange in London and New York City.
"MAXIMUM COLLATERAL AMOUNT": $70,000,000.
"MONTHLY EXCEPTION REPORT": The monthly report delivered by the
Servicer to the Trustee on each Determination Date, commencing with the
Determination Date in January 1997, pursuant to Section 8.8(d)(ii), which shall
be on computer tape and printout. Each Monthly Exception Report shall cover the
immediately preceding Remittance Period and shall consist of (i) a computer
generated activity report of the Mortgage Loans setting forth the Loan Balance
of Mortgage Loans as of the first day of the related Remittance Period,
scheduled payments due, Prepayments, Liquidated Loan balances, and the resulting
Loan Balance of the Mortgage Loans as of the last day of the related Remittance
Period and (ii) separate computer generated reports in computer format of (a)
payoffs, Curtailments, foreclosures and bankruptcies such reports to provide the
payment details for each Mortgage Loan covering the immediately preceding
Remittance Period and any Prepayments not previously reported from a prior
Remittance Period, and (b) Prepayments and delinquencies, such reports to
reflect the current status of each Mortgage Loan with payment details as of the
last day of the related Remittance Period.
"MONTHLY REMITTANCE AMOUNT": With respect to Group I, the Group I
Monthly Remittance Amount and with respect to Group II, the Group II Monthly
Remittance Amount.
"MONTHLY SERVICING REPORT": As defined in Section 8.26.
"MOODY'S": Moody's Investors Service, Inc.
"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 Note.
"MORTGAGE LOANS": Such of the mortgage loans (including Initial
Mortgage Loans and Subsequent Mortgage Loans) transferred and assigned to the
Trust pursuant to Section 3.5(a) and Section 3.8 hereof, together with any
Qualified Replacement Mortgages substituted therefor in accordance with this
Agreement, as from time to time are held as a part of the Trust Estate, the
Mortgage Loans originally so held being identified in the Schedules of Mortgage
Loans. The term "Mortgage Loan" includes the terms "First Mortgage Loan" and
"Second Mortgage Loan." The term "Mortgage Loan" includes any Mortgage Loan
which is Delinquent, which relates to a foreclosure or which relates to a
Property which is REO Property prior to such Property's disposition by the
Trust. Any mortgage loan which, although intended by the parties hereto to have
been, and which purportedly was, transferred and assigned to the Trust by the
Company, in fact was not transferred and assigned to the Trust for any reason
whatsoever shall nevertheless be considered a "Mortgage Loan" for all purposes
of this Agreement.
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"MORTGAGE LOAN GROUP": Either Group I or Group II. References herein
to the related Class of Class A Certificates, when used with respect to a
Mortgage Loan Group, shall mean (A) in the case of Group I, the Class A-1
Certificates and (B) in the case of Group II, the Class A-2 Certificates.
"MORTGAGOR": The obligor on a Note.
"NET LIQUIDATION PROCEEDS": As to any Liquidated Loan, Liquidation
Proceeds net of, without duplication, Liquidation Expenses and unreimbursed
Servicing Advances, unreimbursed Delinquency Advances and accrued and unpaid
Servicing Fees through the date of liquidation relating to such Liquidated Loan.
In no event shall Net Liquidation Proceeds with respect to any Liquidated Loan
be less than zero.
"NET MONTHLY EXCESS CASHFLOW": As defined in Section 7.5(d)(iii)
hereof.
"NOTE": The note or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a Mortgage Loan.
"OFFICER'S CERTIFICATE": A certificate signed by any Authorized
Officer of any Person delivering such certificate and delivered to the Trustee.
"OPERATIVE DOCUMENTS": Collectively, this Agreement, the Certificate
Insurance Policies, the Certificates, the Insurance Agreement, the Underwriting
Agreement, any Sub-Servicing Agreement, the Registration Statement and the
Indemnification Agreement.
"ORIGINAL AGGREGATE LOAN BALANCE": The aggregate Loan Balances of all
Initial Mortgage Loans as of the Cut-Off Date, I.E., $53,121,864.06.
"ORIGINAL CERTIFICATE PRINCIPAL BALANCE": As of the Startup Day and
as to each Class of Class A Certificates, the original Certificate Principal
Balances thereof, as follows:
Class A-1 Certificates $22,500,000
Class A-2 Certificates $47,500,000
The Class R Certificates do not have an Original Certificate Principal
Balance.
"ORIGINAL GROUP I PRE-FUNDED AMOUNT": $4,204,707.88
"ORIGINAL GROUP II PRE-FUNDED AMOUNT": $12,673,428.07
"ORIGINAL PRE-FUNDED AMOUNT": The amount deposited in the Pre-Funding
Account on the Startup Day from the proceeds of the sale of the Certificates,
which amount is $16,878,135.95.
"ORIGINAL PRINCIPAL AMOUNT": With respect to each Note, the principal
amount of such Note on the date of origination thereof.
"ORIGINATOR": The Company and any entity from which the Company
acquires Mortgage Loans.
"OUTSTANDING": With respect to all Certificates of a Class, as of any
date of determination, all such Certificates theretofore executed and delivered
hereunder except:
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(i) Certificates theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Certificates or portions thereof for which full and final
payment of money in the necessary amount has been theretofore deposited
with the Trustee in trust for the Owners of such Certificates;
(iii) Certificates in exchange for or in lieu of which other
Certificates have been executed and delivered pursuant to this Agreement,
unless proof satisfactory to the Trustee is presented that any such
Certificates are held by a bona fide purchaser; and
(iv) Certificates alleged to have been destroyed, lost or stolen
for which replacement Certificates have been issued as provided for in
Section 5.5 hereof.
(v) Certificates as to which the Trustee has made the final
distribution thereon, whether or not such Certificates have been returned
to the Trustee.
"OVERFUNDED INTEREST AMOUNT": With respect to each Subsequent
Transfer Date, the sum, if any, of (A) with respect to the Class A-1
Certificates, the product of (x) a fraction, the numerator of which is the
aggregate Loan Balances of the Subsequent Mortgage Loans related to Group I
acquired by the Trust on such Subsequent Transfer Date and the denominator of
which is the Original Group I Pre-Funded Amount and (y) the amount related to
Group I in the Capitalized Interest Account on such Subsequent Transfer Date
after taking into account any transfers described in Section 7.4(e) hereof and
(B) with respect to the Class A-2 Certificates the product of (x) a fraction,
the numerator of which is the aggregate Loan Balances of the Subsequent Mortgage
Loans related to Group II acquired by the Trust on such Subsequent Transfer Date
and the denominator of which is the Original Group II Pre-Funded Amount and
(y) the amount related to Group II in the Capitalized Interest Account on such
Subsequent Transfer Date after taking into account any transfers described in
Section 7.4(e) hereof.
"OWNER": The Person in whose name a Certificate is registered in the
Register, to the extent described in Section 5.6.
"PAID-IN-FULL MORTGAGE LOAN": With respect to any Payment Date, a
Mortgage Loan which has been paid in full during the related Remittance Period.
"PASS-THROUGH RATE": As to the Class A-1 Certificates, the Class A-1
Pass-Through Rate and as to the Class A-2 Certificates, the Class A-2
Pass-Through Rate.
"PAYMENT DATE": Any date on which the Trustee is required to make
distributions to the Owners, which shall be the 20th day of each month, or if
such day is not a Business Day, the next succeeding Business Day, commencing in
the month following the Startup Day.
"PERCENTAGE INTEREST": As to any Class A Certificate, that
percentage, expressed as a fraction, the numerator of which is the Certificate
Principal Balance set forth on such Certificate as of the Cut-Off Date and the
denominator of which is the Original Certificate Principal Balance of all Class
A Certificates of the same Class as of the Cut-Off Date; and as to any Class R
Certificate, that Percentage Interest set forth on such Class R Certificate.
"PERSON": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
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"POOL CUMULATIVE EXPECTED LOSSES": With respect to any period, the
sum of (i) all Realized Losses with respect to the Mortgage Loans experienced
during such period and (ii) the product of (A) 0.43 and (B) with respect to any
date of determination, the sum of (x) 25% of the Loan Balances of all Mortgage
Loans which are greater than 30 days Delinquent and less than 60 days
Delinquent, (y) 50% of the Loan Balances of all Mortgage Loans which are greater
than 60 days Delinquent and less than 90 days Delinquent, and (z) 100% of the
Loan Balances of all Mortgage Loans which are greater than 90 days Delinquent
(including REO Properties).
"POOL CUMULATIVE REALIZED LOSSES": With respect to any period, the
sum of all Realized Losses with respect to the Mortgage Loans experienced during
such period.
"POOL DELINQUENCY RATE": With respect to any Remittance Period, the
fraction, expressed as a percentage, equal to (x) the aggregate principal
balances of all Mortgage Loans 90 or more days Delinquent (including
foreclosures and REO Properties) as of the close of business on the last day of
such Remittance Period over (y) the Pool Principal Balance as of the close of
business on the last day of such Remittance Period.
"POOL PRINCIPAL BALANCE": The aggregate principal balances of the
Group I Mortgage Loans and the Group II Mortgage Loans.
"POOL ROLLING THREE MONTH DELINQUENCY RATE": As of any Payment Date,
the fraction, expressed as a percentage, equal to the average of the Pool
Delinquency Rates for each of the three (or one and two, in the case of the
first and second Payment Dates) immediately preceding Remittance Periods.
"PREFERENCE AMOUNT": Either of the Group I Preference Amount or the
Group II Preference Amount.
"PRE-FUNDED AMOUNT": With respect to any Determination Date, the
amount remaining on deposit in the Pre-Funding Account.
"PRE-FUNDING ACCOUNT": The Pre-Funding Account established in
accordance with Section 7.2(b) hereof and maintained by the Trustee.
"PRE-FUNDING ACCOUNT EARNINGS": With respect to the initial Payment
Date, the actual investment earnings earned during the period from the Startup
Day through September 30 (inclusive) on the Pre-Funding Account during such
period as calculated by the Trustee pursuant to Section 3.8(e) hereof.
"PREMIUM AMOUNT": As to any Payment Date beginning on the third
Payment Date, the Group I Premium Amount and the Group II Premium Amount.
"PREMIUM PERCENTAGE": The Group I Premium Percentage or the Group II
Premium Percentage.
"PREPAID INSTALLMENT": With respect to any Mortgage Loan, any
installment of principal thereof and interest thereon received by the Servicer
prior to the scheduled due date for such installment, intended by the Mortgagor
as an early payment thereof and not as a Prepayment with respect to such
Mortgage Loan.
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"PREPAYMENT": A Curtailment or a Paid-in-Full Mortgage Loan.
"PRESERVATION EXPENSES": Expenditures made by the Servicer in
connection with a foreclosed Mortgage Loan prior to the liquidation thereof,
including, without limitation, expenditures for real estate property taxes,
hazard insurance premiums, property restoration or preservation.
"PRINCIPAL AND INTEREST ACCOUNT": Collectively, each principal and
interest account created by the Servicer pursuant to Section 8.8(a) hereof, or
pursuant to any Sub-Servicing Agreement.
"PRINCIPAL REMITTANCE AMOUNT": As applicable, the Group I Principal
Remittance Amount or the Group II Principal Remittance Amount.
"PROHIBITED TRANSACTION": The meaning set forth from time to time in
the definition thereof at Section 860F(a)(2) of the Code (or any successor
statute thereto) and applicable to the Trust.
"PROPERTY": The underlying property securing a Mortgage Loan.
"PROSPECTUS": The Company's Prospectus dated September 10, 1996.
"PROSPECTUS SUPPLEMENT": The First Alliance Mortgage Loan Trust
1996-4 Prospectus Supplement dated December 10, 1996 to the Prospectus.
"QUALIFIED LIQUIDATION": The meaning set forth from time to time in
the definition thereof at Section 860F(a)(4) of the Code (or any successor
statute thereto) and applicable to the Trust and the Trust Estate.
"QUALIFIED MORTGAGE": The meaning set forth from time to time in the
definition thereof at Section 860G(a)(4) of the Code (or any successor statute
thereto) and applicable to the Trust and the Mortgage Loan Groups.
"QUALIFIED REPLACEMENT MORTGAGE": A Mortgage Loan substituted for
another pursuant to Section 3.4 or 3.6 hereof, which (i) bears a fixed rate of
interest if the Mortgage Loan to be substituted for is in Group I or bears a
variable rate of interest if the Mortgage Loan to be substituted for is in Group
II, (ii) has a Coupon Rate at least equal to the Coupon Rate of the Mortgage
Loan being replaced (which, in the case of a Mortgage Loan in Group II, shall
mean a Mortgage Loan having the same interest rate index, a margin over such
index and a maximum interest rate at least equal to those applicable to the
Mortgage Loan being replaced), (iii) is of the same or better property type and
the same or better occupancy status as the replaced Mortgage Loan, (iv) shall be
of the same or better credit quality classification (determined in accordance
with the Originators' credit underwriting guidelines) as the Mortgage Loan being
replaced, (v) shall mature no later than February 1, 2027 for Group I and
February 1, 2027 for Group II, (vi) has a Combined Loan-to-Value Ratio as of the
Cut-Off Date, no higher than the Combined Loan-to-Value Ratio of the replaced
Mortgage Loan at such time, (vii) has a Loan Balance as of the related
Replacement Cut-Off Date equal to or less than the Loan Balance of the replaced
Mortgage Loan as of such Replacement Cut-Off Date, (viii) satisfies the criteria
set forth from time to time in the definition thereof at Section 860G(a)(4) of
the Code (or any successor statute thereto) and applicable to the Trust, all as
evidenced by an Officer's Certificate of the Company delivered to the Trustee
and the Certificate Insurer prior to any such substitution, (ix) is of the same
lien status or better lien status (x) is not Delinquent, (xi) meets the
representations and warranties set out in Section 3.3 hereof and (xii) a valid
fixed rate Mortgage Loan, if the Mortgage Loan to be substituted for is in Group
I, and is a valid variable rate Mortgage Loan, if the Mortgage Loan to be
substituted for is in Group II.
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In the event that one or more mortgage loans are proposed to be substituted for
one or more mortgage loans, the Certificate Insurer may allow the foregoing
tests to be met on a weighted average basis or other aggregate basis acceptable
to the Certificate Insurer, as evidenced by a written approval delivered to the
Trustee by the Certificate Insurer, except that the requirement of clauses (vi)
and (viii) hereof must be satisfied as to each Qualified Replacement Mortgage.
"RATING AGENCIES": Moody's and Standard & Poor's or any successors
thereto.
"REALIZED LOSS": As to any Liquidated Loan, the amount, if any, by
which the Loan Balance thereof as of the date of liquidation is in excess of Net
Liquidation Proceeds realized thereon.
"RECORD DATE": With respect to each Payment Date, the last Business
Day of the calendar month immediately preceding the calendar month in which such
Payment Date occurs.
"REFERENCE BANKS": Bankers Trust Company, Barclay's Bank PLC, The
Bank of Tokyo and National Westminster Bank PLC; PROVIDED that if any of the
foregoing banks are not suitable to serve as a Reference Bank, then any leading
banks selected by the Trustee which are engaged in transactions in Eurodollar
deposits in the international Eurocurrency market (i) with an established place
of business in London, (ii) not controlling, under the control of or under
common control with the Company or any affiliate thereof, (iii) whose quotations
appear on the Reuters Screen LIBO Page on the relevant Interest Determination
Date and (iv) which have been designated as such by the Trustee.
"REGISTER": The register maintained by the Trustee in accordance with
Section 5.4 hereof, in which the names of the Owners are set forth.
"REGISTRAR": The Trustee, acting in its capacity as Trustee appointed
pursuant to Section 5.4 hereof, or any duly appointed and eligible successor
thereto.
"REGISTRATION STATEMENT": The Registration Statement filed by the
Company with the Securities and Exchange Commission, including all amendments
thereto and including the Prospectus and Prospectus Supplement constituting a
part thereof.
"REIMBURSEMENT AMOUNT": A Group I Reimbursement Amount or a Group II
Reimbursement Amount.
"REMIC": A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
"REMIC PROVISIONS": Provisions of the federal income tax law relating
to real estate mortgage investment conduits, which appear at Sections 860A
through 860G of the Code, and related provisions, and regulations and rulings
promulgated thereunder, as the foregoing may be in effect from time to time.
"REMITTANCE DATE": Any date on which the Servicer is required to
remit moneys on deposit in the Principal and Interest Account to the Trustee,
which shall be the day two Business Days prior to the related Payment Date,
commencing two days prior to the first Payment Date.
"REMITTANCE PERIOD": The period (inclusive) beginning on the first
day of the calendar month immediately preceding the month in which a Remittance
Date occurs and ending on the last day of such immediately preceding calendar
month.
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"REO PROPERTY": A Property acquired by the Servicer or any
Sub-Servicer on behalf of the Trust through foreclosure or deed-in-lieu of
foreclosure in connection with a defaulted Mortgage Loan.
"REPLACEMENT CUT-OFF DATE": With respect to any Qualified Replacement
Mortgage, the first day of the calendar month in which such Qualified
Replacement Mortgage is conveyed to the Trust.
"REPRESENTATION LETTER": Letters to, or agreements with, the
Depository to effectuate a book entry system with respect to the Class A
Certificates registered in the Register under the nominee name of the
Depository.
"REQUEST FOR RELEASE": The request for release in the form set forth
as Exhibit K hereto.
"RESERVE INTEREST RATE": With respect to any Interest Determination
Date, the rate per annum that the Trustee determines to be either (i) the
arithmetic mean (rounded upwards if necessary to the nearest whole multiple of
1/16%) of the one-month U.S. dollar lending rates which New York City banks
selected by the Trustee are quoting on the relevant Interest Determination Date
to the principal London offices of leading banks in the London interbank market
or (ii) in the event that the Trustee can determine no such arithmetic mean, the
lowest one-month U.S. dollar lending rate which New York City banks selected by
the Trustee are quoting on such Interest Determination Date to leading European
banks.
"RESIDUAL NET MONTHLY EXCESS CASHFLOW": With respect to any Payment
Date, the aggregate Net Monthly Excess Cashflow, if any, remaining with respect
to each of the Mortgage Loan Groups after the making of all applications
described in Sections 7.5(d)(i), 7.5(d)(ii), 7.5(d)(iii) and 7.5(d)(iv) hereof.
"RESPONSIBLE OFFICER": When used with respect to the Trustee, any
officer assigned to the corporate trust group (or any successor thereto),
including any vice president, assistant vice president, trust officer, any
assistant secretary, any assistant treasurer, any trust officer or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and having direct
responsibility for the administration of this Agreement.
"SCHEDULES OF MORTGAGE LOANS": The Schedules of Mortgage Loans,
separated by Mortgage Loan Group, with respect to the Mortgage Loans listing
each Initial Mortgage Loan in the related Group to be conveyed on the Startup
Day and with respect to Subsequent Mortgage Loans listing each Subsequent
Mortgage Loan conveyed to the Trust for inclusion in Group I or Group II as of
each Subsequent Transfer Date in accordance with Sections 3.5(a) and 3.8 hereof.
Such Schedules of Mortgage Loans shall identify each Mortgage Loan by the
Servicer's loan number and address (including the state) of the Property and
shall set forth as to each Mortgage Loan the lien status, the Combined
Loan-to-Value Ratio, the Loan Balance as of the Cut-Off Date or Subsequent
Cut-Off Date, as the case may be, the Coupon Rate thereof (or, with respect to
Mortgage Loans in Group II, the index, the margin) the current scheduled monthly
payment of principal and interest and the maturity of the related Note, the
property type, occupancy status, Appraised Value and the Originator of the
Mortgage Loan, all as delivered to the Trustee in physical and computer readable
form and delivered to the Certificate Insurer in physical form.
"SECOND MORTGAGE LOAN": A Mortgage Loan which constitutes a second
priority mortgage lien with respect to the related Property.
"SECURITIES ACT": The Securities Act of 1933, as amended.
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"SENIOR LIEN": With respect to any Second Mortgage Loan, the mortgage
loan relating to the corresponding Property having a first priority lien.
"SERVICER": First Alliance Mortgage Company, a California
corporation, and its permitted successors and assigns.
"SERVICER AFFILIATE": A Person (i) controlling, controlled by or
under common control with the Servicer and (ii) which is qualified to service
residential mortgage loans.
"SERVICING ADVANCE": As defined in Section 8.9(c) and Section 8.13
hereof.
"SERVICING CERTIFICATE": A certificate completed by and executed by
an Authorized Officer of the Trustee as attached hereto in the form of Exhibit
J.
"SIX MONTH LIBOR LOANS": Mortgage Loans whose interest rates adjust
semi-annually based on the London interbank offered rate for six-month United
States Dollar deposits in the London Market and as published in THE WALL STREET
JOURNAL.
"SPECIFIED SUBORDINATED AMOUNT": As applicable, the Group I Specified
Subordinated Amount or the Group II Specified Subordinated Amount.
"STANDARD & POOR'S": Standard & Poor's, a Division of The McGraw-Hill
Companies.
"STARTUP DAY": December 20, 1996.
"SUBORDINATED AMOUNT": As applicable, the Group I Subordinated Amount
or the Group II Subordinated Amount.
"SUBORDINATION DEFICIENCY AMOUNT": With respect to any Mortgage Loan
Group and Payment Date, the excess, if any, of (i) the Specified Subordinated
Amount applicable to such Mortgage Loan Group and Payment Date over (ii) the
Subordinated Amount applicable to such Mortgage Loan Group and Payment Date
prior to taking into account the payment of any related Subordination Increase
Amounts on such Payment Date.
"SUBORDINATION DEFICIT": As applicable, the Group I Subordination
Deficit or the Group II Subordination Deficit.
"SUBORDINATION INCREASE AMOUNT": With respect to any Mortgage Loan
Group and Payment Date, the lesser of (i) the Subordination Deficiency Amount as
of such Payment Date (after taking into account the payment of the related Class
A Distribution Amount on such Payment Date (except for any Subordination
Increase Amount)) and (ii) the aggregate amount of Net Monthly Excess Cashflow
to be allocated to such Mortgage Loan Group pursuant to Sections 7.5(d)(iii)(A)
and 7.5(d)(iii)(B) on such Payment Date.
"SUBORDINATION REDUCTION AMOUNT": With respect to any Mortgage Loan
Group and Payment Date, an amount equal to the lesser of (x) the Excess
Subordinated Amount for such Mortgage Loan Group and Payment Date and (y) the
Principal Remittance Amount with respect to such Mortgage Loan Group for the
related Remittance Period.
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"SUBSEQUENT CUT-OFF DATE": The beginning of business on the date
specified in a Subsequent Transfer Agreement with respect to those Subsequent
Mortgage Loans which are transferred and assigned to the Trust pursuant to the
related Subsequent Transfer Agreement.
"SUBSEQUENT MORTGAGE LOANS": The Mortgage Loans sold to the Trust for
inclusion in Group I or Group II pursuant to Section 3.8 hereof, which shall be
listed on the Schedules of Mortgage Loans attached to a Subsequent Transfer
Agreement.
"SUBSEQUENT TRANSFER AGREEMENT": Each Subsequent Transfer Agreement
dated as of a Subsequent Transfer Date executed by the Trustee and the Company
substantially in the form of Exhibit L hereto, by which Subsequent Mortgage
Loans are sold and assigned to the Trust.
"SUBSEQUENT TRANSFER DATE": The date so specified in each Subsequent
Transfer Agreement.
"SUB-SERVICER": Any Person with whom the Servicer has entered into a
Sub-Servicing Agreement and who satisfies any requirements set forth in Section
8.3 hereof in respect of the qualification of a Sub-Servicer.
"SUB-SERVICING AGREEMENT": The written contract between the Servicer
and any Sub-Servicer relating to servicing and/or administration of certain
Mortgage Loans as permitted by Section 8.3.
"SUBSTITUTION AMOUNT": In connection with the delivery of any
Qualified Replacement Mortgage, if the outstanding principal amount of such
Qualified Replacement Mortgage as of the applicable Replacement Cut-Off Date is
less than the Loan Balance of the Mortgage Loan being replaced as of such
Replacement Cut-Off Date, an amount equal to such difference together with
accrued and unpaid interest on such amount calculated at the Coupon Rate net of
the Servicing Fee of the Mortgage Loan being replaced.
"TAX MATTERS PERSON": The Tax Matters Person appointed pursuant to
Section 11.17 hereof.
"TERMINATION NOTICE": As defined in Section 9.3(b) hereof.
"TERMINATION PRICE": As defined in Section 9.2(a) hereof.
"TOTAL MONTHLY EXCESS CASHFLOW": As defined in Section 7.5(d)(ii)
hereof.
"TOTAL MONTHLY EXCESS SPREAD": As applicable, the Group I Total
Monthly Excess Spread or the Group II Total Monthly Excess Spread.
"TRUST": First Alliance Mortgage Loan Trust 1996-4, the trust created
under this Agreement.
"TRUST ESTATE": Collectively, all money, instruments and other
property, to the extent such money, instruments and other property are subject
or intended to be held in trust, and in the subtrusts, for the benefit of the
Owners, including all proceeds thereof, including, without limitation, (i) the
Mortgage Loans, (ii) such amounts, including Eligible Investments, as from time
to time may be held in all Accounts (except as otherwise provided herein), (iii)
any Property, the ownership of which
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has been effected on behalf of the Trust as a result of foreclosure or
acceptance by the Servicer of a deed in lieu of foreclosure and that has not
been withdrawn from the Trust, (iv) any Insurance Policies relating to the
Mortgage Loans and any rights of the Company under such Insurance Policies, (v)
Net Liquidation Proceeds with respect to any Liquidated Loan, (vi) the
Certificate Insurance Policies and (vii) the proceeds of any of the above.
"TRUSTEE": The Chase Manhattan Bank located on the date of execution
of this Agreement at 450 West 33rd Street, New York, New York 10001, not in its
individual capacity but solely as Trustee under this Agreement, and any
successor hereunder.
"TRUSTEE FEE": The fee payable monthly to the Trustee equal to the
sum of the Group I Trustee Fee and the Group II Trustee Fee.
"UNDERWRITERS": Prudential Securities Incorporated and Lehman
Brothers.
"UNDERWRITING AGREEMENT": The Underwriting Agreement dated as of
December 10, 1996 between the Underwriters and the Company.
"VARIABLE RATE CERTIFICATE INSURANCE POLICY": The certificate
guaranty insurance policy (number 22759) dated December 20, 1996 issued by the
Certificate Insurer to the Trustee for the benefit of the Owners of the Class
A-2 Certificates.
Section 1.2. USE OF WORDS AND PHRASES. "Herein", "hereby",
"hereunder", "hereof", "hereinbefore", "hereinafter" and other equivalent words
refer to this Agreement as a whole and not solely to the particular section of
this Agreement in which any such word is used. The definitions set forth in
Section 1.1 hereof include both the singular and the plural. Whenever used in
this Agreement, any pronoun shall be deemed to include both singular and plural
and to cover all genders.
Section 1.3. CAPTIONS; TABLE OF CONTENTS. The captions or headings
in this Agreement and the Table of Contents are for convenience only and in no
way define, limit or describe the scope and intent of any provisions of this
Agreement.
Section 1.4. OPINIONS. Each opinion with respect to the validity,
binding nature and enforceability of documents or Certificates may be qualified
to the extent that the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
considered in a proceeding or action in equity or at law) and may state that no
opinion is expressed on the availability of the remedy of specific enforcement,
injunctive relief or any other equitable remedy. Any opinion required to be
furnished by any Person hereunder must be delivered by counsel upon whose
opinion the addressee of such opinion may reasonably rely, and such opinion may
state that it is given in reasonable reliance upon an opinion of another, a copy
of which must be attached, concerning the laws of a foreign jurisdiction.
ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST
Section 2.1. ESTABLISHMENT OF THE TRUST. The parties hereto do
hereby create and establish, pursuant to the laws of the State of New York and
this Agreement, the Trust, which, for convenience, shall be known as "First
Alliance Mortgage Loan Trust 1996-4" and which shall contain two subtrusts.
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Section 2.2. OFFICE. The office of the Trust shall be in care of
the Trustee, at 450 West 33rd Street, New York, New York 10001, or at such
other address as the Trustee may designate by notice to the Company, the
Servicer, the Owners and the Certificate Insurer.
Section 2.3. PURPOSES AND POWERS. The purpose of the Trust is to
engage in the following activities and only such activities: (i) the issuance
of the Certificates and the acquiring, owning and holding of Mortgage Loans and
the Trust Estate in connection therewith; (ii) activities that are necessary,
suitable or convenient to accomplish the foregoing or are incidental thereto or
connected therewith, including the investment of moneys in accordance with this
Agreement; and (iii) such other activities as may be required in connection with
conservation of the Trust Estate and distributions to the Owners; PROVIDED,
HOWEVER, that nothing contained herein shall permit the Trustee to take any
action which would result in the loss of REMIC status for the Trust.
Section 2.4. APPOINTMENT OF THE TRUSTEE; DECLARATION OF TRUST. The
Company hereby appoints the Trustee as trustee of the Trust effective as of the
Startup Day, to have all the rights, powers and duties set forth herein. The
Trustee hereby acknowledges and accepts such appointment, represents and
warrants its eligibility as of the Startup Day to serve as Trustee pursuant to
Section 10.8 hereof and declares that it will hold the Trust Estate in trust
upon and subject to the conditions set forth herein for the benefit of the
Owners and the Certificate Insurer, as their interests may appear.
Section 2.5. EXPENSES OF TRUSTEE. The expenses of the Trust,
including (i) any portion of the Trustee Fee not paid pursuant to Section
7.5(d)(i) hereof, (ii) any reasonable expenses of the Trustee, and (iii) any
other expenses of the Trust that have been reviewed by the Servicer, which
review shall not be required in connection with the enforcement of a remedy by
the Trustee resulting from a default under this Agreement, shall be paid
directly by the Servicer. The Servicer shall pay directly the reasonable fees
and expenses of counsel to the Trustee. The reasonable fees and expenses of the
Trustee's counsel in connection with the review and delivery of this Agreement
and related documentation shall be paid by the Servicer on the Startup Day.
Section 2.6. OWNERSHIP OF THE TRUST. On the Startup Day the
ownership interests in the Trust and the subtrusts shall be transferred as set
forth in Section 4.2 hereof, such transfer to be evidenced by sale of the
Certificates as described therein. Thereafter, transfer of any ownership
interest shall be governed by Sections 5.4 and 5.8 hereof.
Section 2.7. SITUS OF THE TRUST. It is the intention of the parties
hereto that the Trust constitute a trust under the laws of the State of New
York; provided that it is understood that the Files may be held by the Custodian
on behalf of the Trustee outside the State of New York. The Trust will be
created and administered in, the State of New York. The Trust's only office
will be at the office of the Trustee as set forth in Section 2.2 hereof.
Section 2.8. MISCELLANEOUS REMIC PROVISIONS. (a) The Trust (other
than the Pre-Funding Account and the Capitalized Interest Account) shall elect
to be treated as a REMIC under Section 860D of the Code, as described in Section
11.15. Any inconsistencies or ambiguities in this Agreement or in the
administration of the Trust shall be resolved in a manner that preserves the
validity of the election of the Trust (other than the Pre-Funding Account and
the Capitalized Interest Account) to be treated as a REMIC.
(b) The Class A Certificates are hereby designated as "regular
interests" in the REMIC and the Class R Certificates are hereby designated as
the "residual interest" in the REMIC, as defined in Section 860G(a) of the Code.
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(c) The Startup Day is hereby designated as the "startup day" of the
REMIC within the meaning of Section 860G(a)(9) of the Code.
(d) The final scheduled Payment Date for any Class of Certificates is
hereby set to be the Payment Date succeeding by one year the latest maturity
date of any Mortgage Loan in the related Mortgage Loan Group, as follows:
CLASS FINAL SCHEDULED PAYMENT DATE
Class A-1 Certificates March 20, 2028
Class A-2 Certificates December 20, 2026
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE COMPANY AND THE SERVICER;
COVENANT OF COMPANY TO CONVEY MORTGAGE LOANS
Section 3.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents, warrants and covenants to the Trustee, the
Certificate Insurer and to the Owners as of the Startup Day that:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of California and is in good
standing as a foreign corporation in each jurisdiction in which the nature
of its business, or the properties owned or leased by it, make such
qualification necessary. The Company has all requisite corporate power and
authority to own and operate its properties, to carry out its business as
presently conducted and as proposed to be conducted and to enter into and
discharge its obligations under this Agreement and the other Operative
Documents to which it is a party.
(b) The execution and delivery of this Agreement and the other
Operative Documents to which the Company is a party by the Company and its
performance and compliance with the terms of this Agreement and of the
other Operative Documents to which it is a party have been duly authorized
by all necessary corporate action on the part of the Company and will not
violate the Company's Articles of Incorporation or Bylaws or constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or result in the breach of, any material
contract, agreement or other instrument to which the Company is a party or
by which the Company is bound, or violate any statute or any order, rule or
regulation of any court, governmental agency or body or other tribunal
having jurisdiction over the Company or any of its properties.
(c) This Agreement and the other Operative Documents to which the
Company is a party, assuming due authorization, execution and delivery by
the other parties hereto and thereto, each constitutes a valid, legal and
binding obligation of the Company, enforceable against it in accordance
with the terms hereof and thereof, except as the enforcement hereof and
thereof may
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be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally and by general
principles of equity (whether considered in a proceeding or action in
equity or at law).
(d) The Company is not in default with respect to any order or decree
of any court or any order, regulation or demand of any federal, state,
municipal or governmental agency, which might have consequences that would
materially and adversely affect the condition (financial or otherwise) or
operations of the Company or its properties or might have consequences that
would materially and adversely affect its performance hereunder or under
the other Operative Documents to which it is a party.
(e) No action, suit, proceeding or investigation is pending or, to
the best of the Company's knowledge, threatened against the Company which,
individually or in the aggregate, might have consequences that would
prohibit the Company from entering into this Agreement or any other
Operative Document to which it is a party or that would materially and
adversely affect the condition (financial or otherwise) or operations of
the Company or its properties or might have consequences that would
materially and adversely affect the validity or enforceability of Mortgage
Loans or the Company's performance hereunder or under the other Operative
Documents to which it is a party.
(f) No certificate of an officer, statement furnished in writing or
report delivered pursuant to the terms hereof by the Company contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the certificate, statement or report not misleading.
(g) The statements contained in the Registration Statement which
describe the Company or matters or activities for which the Company is
responsible in accordance with the Operative Documents or which are
attributed to the Company therein are true and correct in all material
respects, and the Registration Statement does not contain any untrue
statement of a material fact with respect to the Company or omit to state a
material fact required to be stated therein or necessary in order to make
the statements contained therein with respect to the Company not
misleading. With respect to matters other than those referred to in the
immediately preceding sentence, to the best of the Company's knowledge and
belief, the Registration Statement does not contain any untrue statement of
a material fact required to be stated therein or omit to state any material
fact required to be stated therein or necessary to make the statements
contained therein not misleading.
(h) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required
to be taken, given or obtained, as the case may be, by or from any federal,
state or other governmental authority or agency (other than any such
actions, approvals, etc. under any state securities laws, real estate
syndication or "Blue Sky" statutes, as to which the Company makes no such
representation or warranty), that are necessary or advisable in connection
with the purchase and sale of the Certificates and the execution and
delivery by the Company of the Operative Documents to which it is a party,
have been duly taken, given or obtained, as the case may be, are in full
force and effect on the Startup Day, are not subject to any pending
proceedings or appeals (administrative, judicial or otherwise) and either
the time within which any appeal therefrom may be taken or review thereof
may be obtained has expired or no review thereof may be obtained or appeal
therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement and the other Operative
Documents on the part of the Company and the performance by the Company
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of its obligations under this Agreement and such of the other Operative
Documents to which it is a party.
(i) The transactions contemplated by this Agreement are in the
ordinary course of business of the Company.
(j) The Company received fair consideration and reasonably equivalent
value in exchange for the sale of the interests in the Mortgage Loans
evidenced by the Certificates.
(k) The Company did not sell any interest in any Mortgage Loan
evidenced by the Certificates with any intent to hinder, delay or defraud
any of its creditors.
(l) The Company is solvent and the Company will not be rendered
insolvent as a result of the sale of the Mortgage Loans to the Trust or the
sale of the Certificates.
(m) On the Startup Day, the Trustee will have good title on behalf of
the Trust to each Initial Mortgage Loan and such other items comprising the
corpus of the Trust Estate free and clear of any lien.
(n) There has been no material adverse change in any information
submitted by the Company in writing to the Certificate Insurer.
(o) To the best knowledge of the Company, no event has occurred which
would allow any purchaser of the Class A Certificates not to be required to
purchase the Class A Certificates on the Startup Day.
(p) To the best knowledge of the Company, no document submitted by or
on behalf of the Company to the Certificate Insurer contains any untrue or
misleading statement of a material fact or fails to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading.
(q) To the best knowledge of the Company, no material adverse change
affecting any security for the Class A Certificates has occurred prior to
delivery of and payment for the Class A Certificates.
(r) The Company is not in default under any agreement involving
financial obligations or on any outstanding obligation which would
materially adversely impact the financial condition or operations of the
Company or legal documents associated with the transaction contemplated in
this Agreement.
It is understood and agreed that the representations and warranties
set forth in this Section 3.1 shall survive delivery of the Mortgage Loans to
the Trustee.
Section 3.2. REPRESENTATIONS AND WARRANTIES OF THE SERVICER. The
Servicer hereby represents, warrants and covenants to the Trustee, the
Certificate Insurer and to the Owners as of the Startup Day that:
(a) The Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of California.
The Servicer is in compliance with the laws of each state in which any
Property is located to the extent necessary to enable it to perform its
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obligations hereunder and is in good standing as a foreign corporation in
each jurisdiction in which the nature of its business, or the properties
owned or leased by it, make such qualification necessary. The Servicer has
all requisite corporate power and authority to own and operate its
properties, to carry out its business as presently conducted and as
proposed to be conducted and to enter into and discharge its obligations
under this Agreement and the other Operative Documents to which it is a
party. The Servicer has equity of at least $20,000,000, as determined in
accordance with generally accepted accounting principles.
(b) The execution and delivery of this Agreement by the Servicer
and its performance and compliance with the terms of this Agreement and the
other Operative Documents to which it is a party have been duly authorized
by all necessary corporate action on the part of the Servicer and will not
violate the Servicer's Articles of Incorporation or Bylaws or constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or result in the breach of, any material
contract, agreement or other instrument to which the Servicer is a party or
by which the Servicer is bound or violate any statute or any order, rule or
regulation of any court, governmental agency or body or other tribunal
having jurisdiction over the Servicer or any of its properties.
(c) This Agreement and the other Operative Documents to which
the Servicer is a party, assuming due authorization, execution and delivery
by the other parties hereto and thereto, each constitutes a valid, legal
and binding obligation of the Servicer, enforceable against it in
accordance with the terms hereof and thereof, except as the enforcement
hereof and thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and by general principles of equity (whether considered in
a proceeding or action in equity or at law).
(d) The Servicer is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency which might have consequences that
would materially and adversely affect the condition (financial or
otherwise) or operations of the Servicer or its properties or might have
consequences that would materially and adversely affect its performance
hereunder or under the other Operative Documents to which the Servicer is a
party.
(e) No action, suit, proceeding or investigation is pending or,
to the best of the Servicer's knowledge, threatened against the Servicer
which, individually or in the aggregate, might have consequences that would
prohibit its entering into this Agreement or any other Operative Document
to which it is a party or that would materially and adversely affect the
condition (financial or otherwise) or operations of the Servicer or its
properties or might have consequences that would materially and adversely
affect the validity or the enforceability of the Mortgage Loans or the
Servicer's performance hereunder or under the other Operative Documents to
which the Servicer is a party.
(f) No certificate of an officer, statement furnished in writing
or report delivered pursuant to the terms hereof by the Servicer contains
any untrue statement of a material fact or omits to state any material fact
necessary to make the certificate, statement or report not misleading.
(g) The statements contained in the Registration Statement which
describe the Servicer or matters or activities for which the Servicer is
responsible in accordance with the Operative Documents or which are
attributed to the Servicer therein are true and correct in all
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material respects, and the Registration Statement does not contain any
untrue statement of a material fact with respect to the Servicer or omit to
state a material fact required to be stated therein or necessary to make
the statements contained therein with respect to the Servicer not
misleading. With respect to matters other than those referred to in the
immediately preceding sentence, to the best of the Servicer's knowledge and
belief, the Registration Statement does not contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements contained therein not
misleading.
(h) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, by or from any
federal, state or other governmental authority or agency (other than any
such actions, approvals, etc. under any state securities laws, real estate
syndication or "Blue Sky" statutes, as to which the Servicer makes no such
representation or warranty), that are necessary or advisable in connection
with the execution and delivery by the Servicer of the Operative Documents
to which it is a party, have been duly taken, given or obtained, as the
case may be, are in full force and effect on the date hereof, are not
subject to any pending proceedings or appeals (administrative, judicial or
otherwise) and either the time within which any appeal therefrom may be
taken or review thereof may be obtained has expired or no review thereof
may be obtained or appeal therefrom taken, and are adequate to authorize
the consummation of the transactions contemplated by this Agreement and the
other Operative Documents on the part of the Servicer and the performance
by the Servicer of its obligations under this Agreement and such of the
other Operative Documents to which it is a party.
(i) The collection practices used by the Servicer with respect
to the Mortgage Loans directly serviced by it have been, and are in all
material respects, legal, proper, prudent and customary in the mortgage
loan servicing business.
(j) The transactions contemplated by this Agreement are in the
ordinary course of business of the Servicer.
(k) There are no Sub-Servicers as of the Startup Day.
(l) The Servicer covenants that it will terminate any
Sub-Servicer within ninety (90) days after being directed by the
Certificate Insurer to do so.
(m) There has been no material adverse change in any information
submitted by the Servicer in writing to the Certificate Insurer.
(n) To the best knowledge of the Servicer, no event has occurred
which would allow any purchaser of the Class A Certificates not to be
required to purchase the Class A Certificates on the Startup Day.
(o) To the best knowledge of the Servicer, no document submitted
by or on behalf of the Servicer to the Certificate Insurer contains any
untrue or misleading statement of a material fact or fails to state a
material fact required to be stated therein or necessary in order to make
the statements therein not misleading.
(p) To the best knowledge of the Servicer, no material adverse
change affecting any security for the Class A Certificates has occurred
prior to delivery of and payment for the Class A Certificates.
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(q) The Servicer is not in default under any agreement involving
financial obligations or on any outstanding obligation which would
materially and adversely impact the financial condition or operations of
the Servicer or legal documents associated with the transaction
contemplated in this Agreement.
It is understood and agreed that the representations and warranties
set forth in this Section 3.2 shall survive delivery of the Mortgage Loans to
the Trustee.
Upon discovery by any of the Originators, the Servicer, the Company,
any Sub-Servicer, the Certificate Insurer or the Trustee of a breach of any of
the representations and warranties set forth in this Section 3.2 or in Section
3.1 hereof which materially and adversely affects the interests of the Owners or
of the Certificate Insurer, without regard to any limitation set forth in such
representation or warranty concerning the knowledge of the party making such
representation or warranty as to the facts stated therein, the party discovering
such breach shall give prompt written notice to the other parties hereto and the
Certificate Insurer. Within 30 days of its discovery or its receipt of notice
of breach, the breaching party shall cure such breach in all material respects
and, if such breaching party is the Servicer and upon the Servicer's continued
failure to cure such breach, the Servicer may be removed by the Trustee or the
Certificate Insurer pursuant to Section 8.20 hereof; PROVIDED, HOWEVER, that if
the Servicer can demonstrate to the reasonable satisfaction of the Certificate
Insurer that it is diligently pursuing remedial action, then the cure period may
be extended with the written approval of the Certificate Insurer.
Section 3.3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY WITH
RESPECT TO THE MORTGAGE LOANS. (a) The Company makes the following
representations and warranties as to the Mortgage Loans on which the Certificate
Insurer relies in issuing the Certificate Insurance Policies. Such
representations and warranties speak as of the Startup Day (with respect to the
Initial Mortgage Loans) and as of the respective Subsequent Transfer Date (with
respect to the Subsequent Mortgage Loans) but shall survive the sale, transfer,
and assignment of the related Mortgage Loans to the Trust:
(i) The information with respect to each Initial Mortgage
Loan and Subsequent Mortgage Loan set forth in the related Schedule of
Mortgage Loans is true and correct as of the Cut-Off Date (or in the case
of the Subsequent Mortgage Loans, on the related Subsequent Transfer Date);
the Group I Original Aggregate Loan Balance in the Trust as of the Cut-Off
Date is $18,295,292.12 and the Group II Original Aggregate Loan Balance in
the Trust as of the Cut-Off Date is $34,826,571.93;
(ii) All of the original or certified documentation set forth
in Section 3.5 (including all material documents related thereto) with
respect to each Initial Mortgage Loan has been or will be delivered to the
Trustee on the Startup Day (or in the case of the Subsequent Mortgage
Loans, on the related Subsequent Transfer Date) or as otherwise provided in
Section 3.5;
(iii) Each Mortgage Loan is being serviced by the Servicer or a
Servicer Affiliate;
(iv) The Note related to each Initial Mortgage Loan in Group I
bears a fixed Coupon Rate of at least 7.95% per annum and the Note related
to each Mortgage Loan in Group II bears a current Coupon Rate of at least
6.95% per annum;
(v) No more than 0.24% of the Mortgage Loans were 30 or more
days Delinquent;
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(vi) As of the Cut-Off Date, no more than 1.23% of the
Original Aggregate Loan Balance of the Initial Mortgage Loans is secured by
Properties located within any single zip code area;
(vii) Each Mortgage Loan conforms, and all such Mortgage Loans
in the aggregate conform, in all material respects, to the description
thereof set forth in the Registration Statement;
(viii) As of the Cut-Off Date, no more than 0% and 1.75% of the
Group I Original Aggregate Loan Balance and the Group II Original Aggregate
Loan Balance, respectively, are secured by condominiums, townhouses, or
planned unit developments;
(ix) As of the Cut-Off Date, no more than 3.56% and 3.68% of
the Group I Original Aggregate Loan Balance and the Group II Original
Aggregate Loan Balance, respectively, are secured by investor-owned
Properties;
(x) The credit underwriting guidelines applicable to each
Mortgage Loan conform in all material respects to the description thereof
set forth in the Prospectus;
(xi) No funds provided to borrower from a Second Mortgage Loan
originated by the Company were concurrently used as a down payment for a
First Mortgage Loan originated by the Company;
(xii) All of the Notes in Group I and Group II are actuarial
loans;
(xiii) No more than 0.31% of the Original Aggregate Loan
Balance, is secured by Second Mortgage Loans;
(xiv) As of the Cut-Off Date, 100% of the Mortgage Loans in
Group II had interest rates which were not fully indexed;
(xv) The gross margin range for Six Month LIBOR Loans is 4.49%
to 10.49% and, the gross margin for all Six Month LIBOR Loans when added to
the current index, creates the fully-indexed range;
(xvi) No Mortgage Loan has a remaining term in excess of 360
months;
(xvii) With respect to each Mortgage Loan in Group II, each
Mortgagor's debt-to-income ratio will qualify for the related Originator's
underwriting guidelines for a similar credit grade borrower when the
related Mortgage Loan in Group II is at a rate equal to the applicable
initial Coupon Rate plus 2.0%;
(xviii)There is no proceeding pending or threatened for the total
or partial condemnation of any Property. No Property is damaged by waste,
fire, earthquake or earth movement, windstorm, flood, other types of water
damage, tornado, or other casualty so as to affect adversely the value of
such Property as security for the Mortgage Loans or the use for which the
premises were intended and each Property is in good repair;
(xix) Each Mortgage Loan complies in all material respects with
all applicable federal and state laws including without limitation the
Truth-in-Lending Act, as amended;
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(xx) Each Mortgage Loan is secured by a Property having
an appraised value of less than $750,000;
(xxi) The first Due Date of each Initial Mortgage Loan is no
later than March 1, 1997;
(xxii) On the Startup Day with respect to each Initial Mortgage
Loan and on the related Subsequent Transfer Date with respect to each
Subsequent Mortgage Loan, the Trustee will have good title on behalf of the
Trust to each Mortgage Loan transferred on such date; and
(xxiii) Each Mortgage Loan constitutes a qualified mortgage under
Section 860G(a)(3)(A) of the Code and Treasury Regulations Section
1-860G-2(a)(1).
(b) Upon the discovery by the Company, the Servicer, the Certificate
Insurer or the Trustee of a breach of any of the representations and warranties
made herein in respect of any Mortgage Loan, without regard to any limitation
set forth in such representation or warranty concerning the knowledge of the
Company or any related Originator as to the facts stated therein, which
materially and adversely affects the interests of the Owners or of the
Certificate Insurer in such Mortgage Loan the party discovering such breach
shall give prompt written notice to the other parties hereto and the Certificate
Insurer, as their interests may appear. The Servicer shall promptly notify the
related Originator of such breach and request that such Originator cure such
breach or take the actions described in Section 3.4(b) hereof within the time
periods required thereby, and if such Originator does not cure such breach in
all material respects, the Company shall cure such breach or take such actions.
Except as set forth in Section 3.4, the obligations of the Company or Servicer,
as the case may be, shall be limited to the remedies for cure set forth in
Section 3.4 with respect to any Mortgage Loan as to which such a breach has
occurred and is continuing; the remedies set forth in Section 3.4 shall
constitute the sole remedy with respect to such breach available to the Owners,
the Trustee and the Certificate Insurer.
The Company acknowledges that a breach of any representation or
warranty (x) relating to marketability of title sufficient to transfer
unencumbered title to a Mortgage Loan and (y) relating to enforceability of the
Mortgage Loan against the related Mortgagor or Property is A PRIORI the breach
of a representation or warranty which "materially and adversely affects the
interests of the Owners or of the Certificate Insurer" in such Mortgage Loan.
Section 3.4. COVENANTS OF THE COMPANY TO TAKE CERTAIN ACTIONS WITH
RESPECT TO THE MORTGAGE LOANS IN CERTAIN SITUATIONS. (a) With the provisos and
limitations as to remedies set forth in this Section 3.4, upon the discovery by
any Originator, the Company, the Servicer, the Certificate Insurer, any
Sub-Servicer or the Trustee that the representations and warranties set forth in
Section 3.3 of this Agreement were untrue in any material respect as of the
Startup Day (or in the case of the Subsequent Mortgage Loans, as of the
respective Subsequent Transfer Date), and that such breach of the
representations and warranties materially and adversely affects the interests of
the Owners or of the Certificate Insurer, the party discovering such breach
shall give prompt written notice to the other parties hereto and to the
Certificate Insurer.
(b) Upon the earliest to occur of the Company's discovery, its
receipt of notice of breach from any one of the other parties hereto or from the
Certificate Insurer or such time as a breach of any representation and warranty
materially and adversely affects the interests of the Owners or of the
Certificate Insurer as set forth above, the Company hereby covenants and
warrants that it shall promptly cure such breach in all material respects or it
shall (or shall cause an affiliate of the Company to or an Originator to),
subject to the further requirements of this paragraph, on the second Remittance
Date next
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succeeding such discovery, receipt of notice or such other time (i) substitute
in lieu of each Mortgage Loan in the related Mortgage Loan Group which has given
rise to the requirement for action by the Company a Qualified Replacement
Mortgage and deliver the Substitution Amount applicable thereto, together with
the aggregate amount of all Delinquency Advances and Servicing Advances
theretofore made with respect to such Mortgage Loan, to the Servicer for deposit
in the Principal and Interest Account or (ii) purchase such Mortgage Loan from
the Trust at a purchase price equal to the Loan Purchase Price thereof, which
purchase price shall be delivered to the Servicer for deposit in the Principal
and Interest Account. In connection with any such proposed purchase or
substitution, the Company, at its expense, shall cause to be delivered to the
Trustee and to the Certificate Insurer an opinion of counsel experienced in
federal income tax matters stating whether or not such a proposed purchase or
substitution would constitute a Prohibited Transaction for the Trust or would
jeopardize the status of the Trust as a REMIC, and the Company shall only be
required to take either such action to the extent such action would not
constitute a Prohibited Transaction for the Trust or would not jeopardize the
status of the Trust as a REMIC. Any required purchase or substitution, if
delayed by the absence of such opinion shall nonetheless occur upon the earlier
of (i) the occurrence of a default or imminent default with respect to the
Mortgage Loan or (ii) the delivery of such opinion. It is understood and agreed
that the obligation of the Company to cure the defect, or substitute for or
purchase any Mortgage Loan as to which a representation or warranty is untrue in
any material respect and has not been remedied shall constitute the sole remedy
available to the Owners, the Trustee and the Certificate Insurer.
(c) In the event that any Qualified Replacement Mortgage is delivered
by an Originator or by the Company to the Trust pursuant to this Section 3.4 or
Section 3.6 hereof, the related Originator and the Company shall be obligated to
take the actions described in Section 3.4(b) with respect to such Qualified
Replacement Mortgage upon the discovery by any of the Owners, the Company, the
Servicer, the Certificate Insurer, any Sub-Servicer or the Trustee that any of
the representations and warranties set forth in Section 3.3 above are untrue in
any material respect on the date such Qualified Replacement Mortgage is conveyed
to the Trust such that the interests of the Owners or the Certificate Insurer in
the related Qualified Replacement Mortgage are materially and adversely
affected; PROVIDED, HOWEVER, that for the purposes of this subsection (c) the
representations and warranties in Section 3.3 above referring to items "as of
the Cut-Off Date" or "as of the Startup Day" shall be deemed to refer to such
items as of the date such Qualified Replacement Mortgage is conveyed to the
Trust.
(d) It is understood and agreed that the covenants set forth in this
Section 3.4 shall survive delivery of the respective Mortgage Loans (including
Qualified Replacement Mortgages) to the Trustee.
(e) The Trustee shall have no duty to conduct any affirmative
investigation other than as specifically set forth in this Agreement as to the
occurrence of any condition requiring the repurchase or substitution of any
Mortgage Loan pursuant to this section or the eligibility of any Mortgage Loan
for purposes of this Agreement.
Section 3.5. CONVEYANCE OF THE MORTGAGE LOANS. (a) The Company,
concurrently with the execution and delivery hereof, hereby transfers, assigns,
sets over and otherwise conveys without recourse, to the Trustee for the benefit
of the Owners of the Certificates and the Certificate Insurer, all right, title
and interest of the Company in and to each Initial Mortgage Loan listed on the
Schedules of Mortgage Loans delivered by the Company on the Startup Day, all
right, title and interest in and to principal and interest due on each such
Initial Mortgage Loan after the Cut-Off Date (other than payments of principal
due and interest accrued on or before the Cut-Off Date) and all its right, title
and interest in and to all Insurance Policies; PROVIDED, HOWEVER, that the
Company reserves and retains all its right, title and interest in and to
principal (including Prepayments) collected and principal and interest due on
each
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Initial Mortgage Loan on or prior to the Cut-Off Date. The transfer by the
Company of the Initial Mortgage Loans and the Subsequent Mortgage Loans set
forth on the Schedules of Mortgage Loans is absolute and is intended by the
Owners and all parties hereto to be treated as a sale by the Company.
It is intended that the sale, transfer, assignment and conveyance
herein contemplated constitute a sale of the Mortgage Loans conveying good title
thereto free and clear of any liens and encumbrances from the Company to the
Trust and that the Mortgage Loans not be part of the Company's estate in the
event of an insolvency. In the event that any such conveyance or a conveyance
pursuant to Section 3.8 and any Subsequent Transfer Agreement is deemed to be a
loan, the parties intend that the Company shall be deemed to have granted to the
Trustee a security interest of first priority in all of the Company's right,
title and interest in the Mortgage, Note and the File, and that this Agreement
shall constitute a security agreement under applicable law.
In connection with the sale, transfer, assignment, and conveyance,
from the Company to the Trustee, the Company has filed, in the appropriate
office or offices in the States of California and New York, a UCC-1 financing
statement executed by the Company as debtor, naming the Trustee as secured party
and listing the Initial Mortgage Loans and the other property described above as
collateral, and on or prior to each Subsequent Transfer Date the Company will
file in such offices a UCC-1 financing statement listing the Subsequent Mortgage
Loans so transferred as collateral. The characterization of the Company as a
debtor and the Trustee as the secured party in such financing statements is
solely for protective purposes and shall in no way be construed as being
contrary to the intent of the parties that this transaction be treated as a sale
of the Company's entire right, title and interest in the Mortgage Loans and the
related Files to the Trust. In connection with such filing, the Company shall
cause to be filed all necessary continuation statements thereof and to take or
cause to be taken such actions and execute such documents as are necessary to
perfect and protect the Trustee's and the Owners' interests in the Mortgage
Loans and the related Files.
(b) In connection with the transfer and assignment of the Mortgage
Loans, the Company agrees to:
(i) cause to be delivered, on or prior to the Startup Day
(except as otherwise stated below) without recourse to the Custodian, on
behalf of Trustee, on the Startup Day with respect to each Initial Mortgage
Loan listed on the Schedule of Mortgage Loans or on each Subsequent
Transfer Date with respect to each Subsequent Mortgage Loan:
(a) the original Notes or certified copies thereof,
endorsed without recourse by the related Originator, "Pay to the order
of ______________________________, without recourse" or "Pay to the
order of holder, without recourse." In the event that the Mortgage
Loan was acquired by the related Originator in a merger, the
endorsement must be by the "(related Originator), successor by merger
to (name of predecessor)"; and in the event that the Mortgage Loan was
acquired or originated by the related Originator while doing business
under another name, the endorsement must be by the "(related
Originator), formerly known as (previous name)";
(b) originals of all intervening assignments, showing
a complete chain of assignment from origination to the related
Originator, if any, including warehousing assignments, with evidence
of recording thereon (or, if an original intervening assignment has
not been returned from the recording office, a certified copy
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thereof, the original to be delivered to Custodian on behalf of the
Trustee forthwith after return);
(c) originals of all assumption and modification
agreements, if any (or, if an original assumption and/or modification
agreement has not been returned from the recording office, a certified
copy thereof, the original to be delivered to the Custodian on behalf
of the Trustee forthwith after return);
(d) either (A) the original Mortgage with evidence of
recording thereon or a certified copy of the Mortgage as recorded, or
(B) if the original Mortgage has not yet been returned from the
recording office, a certified copy of the Mortgage, together with a
receipt from the recording office or from a title insurance company or
a certificate of an Authorized Person of the related Originator
indicating that such Mortgage has been delivered for recording;
(e) the original assignment of Mortgage for each
Mortgage Loan conveying the Mortgage to The Chase Manhattan Bank, as
Trustee of the First Alliance Mortgage Loan Trust 1996-4, which
assignment shall be in form and substance acceptable for recording in
the state or other jurisdiction where the mortgaged property is
located and, within 75 Business Days following the Startup Day with
respect to the Initial Mortgage Loans, or within 75 Business Days of
each Subsequent Transfer Date with respect to the Subsequent Mortgage
Loans, a recorded assignment of each such Mortgage; provided that in
the event that the Mortgage Loan was acquired by the related
Originator in a merger, the assignment of Mortgage must be by the
"(related Originator), successor by merger to (name of predecessor)";
and in the event that the Mortgage Loan was acquired or originated by
the related Originator while doing business under another name, the
assignment of Mortgage must be by the "(related Originator), formerly
known as (previous name)" (subject to the foregoing, and where
permitted under the applicable laws of the jurisdiction where the
mortgaged property is located, the assignments of Mortgage may be made
by blanket assignments for Mortgage Loans covering mortgaged
properties situated within the same county or other permitted
governmental subdivision); and
(f) evidence of title insurance with respect to the
mortgaged property in the form of a binder or commitment.
(ii) except with respect to Mortgage Loans covered by
opinions of counsel delivered in the manner set forth below ("Assignment
Opinions"), cause, as soon as possible but no more than 75 Business Days
following the Startup Day with respect to the Initial Mortgage Loans, or
within 75 Business Days of each Subsequent Transfer Date with respect to
the Subsequent Mortgage Loans, the Originators to deliver to the Custodian,
on behalf of the Trustee, copies of all Mortgage assignments submitted for
recording, together with a list of (x) all Mortgages for which no Mortgage
assignment has yet been submitted for recording by the related Originator
(y) reasons why the related Originator has not yet submitted such Mortgage
assignments for recording; PROVIDED, HOWEVER, that with respect to Mortgage
Loans subject to jurisdiction in the states of California, Colorado, Idaho,
Illinois, Ohio, Oregon, Pennsylvania, Washington, Georgia and Arizona an
Originator shall not be required to record an assignment of a Mortgage if
the Company furnishes to the Trustee and the Certificate Insurer, on or
before the Startup Day with respect to the Initial Mortgage Loans, or on
each Subsequent Transfer Date with respect to the Subsequent Mortgage
Loans, at the Company's expense, the Assignment
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Opinions which opine that recording is not necessary to perfect the rights
of the Trustee in the related Mortgage (in form satisfactory to the
Certificate Insurer, Moody's and Standard & Poor's). With respect to any
Mortgage assignment set forth on the aforementioned list which has not been
submitted for recording for a reason other than a lack of original
recording information or with respect to Mortgages not covered by the
Assignment Opinions, the Custodian, on behalf of the Trustee shall make an
immediate demand on the Company to cause such Mortgage assignments to be
prepared and shall inform the Certificate Insurer of the Company's failure
to cause such Mortgage assignments to be prepared. Thereafter, the
Custodian and the Trustee shall cooperate in executing any documents
prepared by the Certificate Insurer and submitted to the Custodian and the
Trustee in connection with this provision. Following the expiration of the
75-Business Day period following the Startup Day with respect to the
Initial Mortgage Loans, or within 75 Business Days of each Subsequent
Transfer Date with respect to the Subsequent Mortgage Loans and except with
respect to Mortgages covered by the Assignment Opinions, the Company shall
cause to be prepared a Mortgage assignment for any Mortgage for which
original recording information is subsequently received by the related
Originator and shall promptly deliver a copy of such Mortgage assignment to
the Custodian, on behalf of the Trustee.
All recording required pursuant to this Section 3.5 shall be
accomplished at the expense of the Originators or of the Company.
Notwithstanding anything to the contrary contained in this Section 3.5, in those
instances where the public recording office retains the original Mortgage, the
assignment of a Mortgage or the intervening assignments of the Mortgage after it
has been recorded, the Company shall be deemed to have satisfied its obligations
hereunder upon delivery to the Custodian, on behalf of the Trustee, of a copy of
such Mortgage, such assignment or assignments of Mortgage certified by the
public recording office to be a true copy of the recorded original thereof.
Copies of all Mortgage assignments received by the Custodian, on
behalf of the Trustee shall be kept in the related File.
(c) In the case of Initial Mortgage Loans which have been prepaid in
full on or after the Cut-Off Date and prior to the Startup Day, the Company, in
lieu of the foregoing, will deliver within 15 Business Days after the Startup
Day to the Trustee a certification of an Authorized Officer in the form set
forth in Exhibit D.
(d) The Company shall transfer, assign, set over and otherwise convey
without recourse, to the Trustee all right, title and interest of the Company in
and to any Qualified Replacement Mortgage delivered to the Custodian, on behalf
of the Trustee, on behalf of the Trust by the Company pursuant to Section 3.4 or
Section 3.6 hereof and all its right, title and interest to principal and
interest due on such Qualified Replacement Mortgage after the applicable
Replacement Cut-Off Date; PROVIDED, HOWEVER, that the Company shall reserve and
retain all right, title and interest in and to payments of principal and
interest due on such Qualified Replacement Mortgage on and prior to the
applicable Replacement Cut-Off Date.
(e) As to each Mortgage Loan released from the Trust in connection
with the conveyance of a Qualified Replacement Mortgage therefor, the Custodian,
on behalf of the Trustee, will transfer, assign, set over and otherwise convey
without recourse, on the Company's order, all of its right, title and interest
in and to such released Mortgage Loan and all the Trust's right, title and
interest to principal and interest due on such released Mortgage Loan after the
applicable Replacement Cut-Off Date; PROVIDED, HOWEVER, that the Trust shall
reserve and retain all right, title and interest in and to payments of principal
and interest due on such released Mortgage Loan on and prior to the applicable
Replacement Cut-Off Date.
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(f) In connection with any transfer and assignment of a Qualified
Replacement Mortgage to the Trustee on behalf of the Trust, the Company agrees
to cause to be delivered to the Custodian, on behalf of the Trustee, the items
described in Section 3.5(b) on the date of such transfer and assignment or if a
later delivery time is permitted by Section 3.5(b) then no later than such later
delivery time.
(g) As to each Mortgage Loan released from the Trust in connection
with the conveyance of a Qualified Replacement Mortgage the Custodian, on behalf
of the Trustee, shall deliver on the date of conveyance of such Qualified
Replacement Mortgage, and on the order of the Company (i) the original Note, or
the certified copy, relating thereto, endorsed without recourse, to the Company
and (ii) such other documents as constituted the File with respect thereto.
(h) If a Mortgage assignment is lost during the process of recording,
or is returned from the recorder's office unrecorded due to a defect therein,
the Company shall prepare a substitute assignment or cure such defect, as the
case may be, and thereafter cause each such assignment to be duly recorded.
(i) The Company shall reflect on its records that the Mortgage Loans
have been sold to the Trust.
Section 3.6. ACCEPTANCE BY TRUSTEE; CERTAIN SUBSTITUTIONS OF
MORTGAGE LOANS; CERTIFICATION BY TRUSTEE.
(a) The Trustee agrees to cause the Custodian to execute and deliver
to the Company, the Servicer and the Certificate Insurer on the Startup Day an
Initial Certification in the form annexed hereto as Exhibit E to the effect
that, as to each Mortgage Loan listed in the Schedules of Mortgage Loans (other
than any Mortgage Loan paid in full or any Mortgage Loan specifically identified
in such certification as not covered by such certification), (i) all documents
required to be delivered to it pursuant to this Agreement with respect to such
Mortgage Loan are in its possession, (ii) such documents have been reviewed by
it and appear regular on their face and relate to such Mortgage Loan and
(iii) based on its examination and only as to the foregoing documents, the
information set forth on the Schedules of Mortgage Loans as to loan number and
address accurately reflects information set forth in the File. The Trustee and
the Custodian shall not be under any duty or obligation to inspect, review or
examine said documents, instruments, certificates or other papers to determine
that the same are genuine, enforceable or appropriate for the represented
purpose or that they have actually been recorded or that they are other than
what they purport to be on their face. Within 90 days of the Startup Date (or,
with respect to any document delivered after the Startup Day, within 45 days of
receipt and with respect to any Subsequent Mortgage Loan or Qualified
Replacement Mortgage, within 45 days after the assignment thereof) the Trustee
shall cause the Custodian to deliver to the Company, Certificate Insurer and the
Servicer a Final Certification in the form annexed hereto as Exhibit F
evidencing the completeness of the Files, with any applicable exceptions noted
thereon.
(b) If in the process of reviewing the Files and preparing the
certifications referred to above the Custodian, on behalf of the Trustee, finds
any document or documents constituting a part of a File which is not properly
executed, has not been received within the specified period or is unrelated to
the Mortgage Loans identified in the Schedules of Mortgage Loans, or that any
Mortgage Loan does not conform as to loan number and address as set forth in the
Schedules of Mortgage Loans, the Custodian, on behalf of the Trustee, shall
promptly notify the Company and the Certificate Insurer. The Company shall use
reasonable efforts to cure any such defect within 60 days from the date on which
the Company was notified of such defect, and if the Company does not cure such
defect in all material respects during such period, the Company will (or will
cause the related Originator or an affiliate of the
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Company to) on the next succeeding Remittance Date (i) substitute in lieu of
such Mortgage Loan a Qualified Replacement Mortgage and deliver the Substitution
Amount applicable thereto to the Servicer for deposit in the Principal and
Interest Account or (ii) purchase such Mortgage Loan at a purchase price equal
to the Loan Purchase Price thereof, which purchase price shall be delivered to
the Servicer for deposit in the Principal and Interest Account. In connection
with any such proposed purchase or substitution the Company shall cause at the
Company's expense to be delivered to the Trustee and to the Certificate Insurer
an opinion of counsel experienced in federal income tax matters stating whether
or not such a proposed purchase or substitution would constitute a Prohibited
Transaction for the Trust or would jeopardize the status of the Trust as a
REMIC, and the Company shall only be required to take either such action to the
extent such action would not constitute a Prohibited Transaction for the Trust
or would not jeopardize the status of the Trust as a REMIC. Any required
purchase or substitution, if delayed by the absence of such opinion shall
nonetheless occur upon the earlier of (i) the occurrence of a default or
imminent default with respect to the Mortgage Loan or (ii) the delivery of such
opinion.
Section 3.7. COOPERATION PROCEDURES. (a) The Company shall, in
connection with the delivery of each Qualified Replacement Mortgage to the
Custodian, on behalf of the Trustee, provide the Trustee with the information
set forth in the Schedules of Mortgage Loans with respect to such Qualified
Replacement Mortgage.
(b) The Company, the Servicer and the Trustee covenant to provide
each other with all data and information required to be provided by them
hereunder at the times required hereunder, and additionally covenant reasonably
to cooperate with each other in providing any additional information required to
be obtained by any of them in connection with their respective duties hereunder.
(c) The Servicer shall maintain such accurate and complete accounts,
records and computer systems pertaining to each File as shall enable it and the
Trustee to comply with this Agreement. In performing its recordkeeping duties
the Servicer shall act in accordance with the servicing standards set forth in
this Agreement. The Servicer shall conduct, or cause to be conducted, periodic
audits of its accounts, records and computer systems as set forth in Sections
8.16 and 8.17 hereof. The Servicer shall promptly report to the Trustee any
failure on its part to maintain its accounts, records and computer systems as
herein provided and promptly take appropriate action to remedy any such failure.
(d) The Company further confirms to the Trustee that it has caused
the portions of the electronic ledger relating to the Mortgage Loans to be
clearly and unambiguously marked to indicate that such Mortgage Loans have been
sold, transferred, assigned and conveyed to the Trustee and constitute part of
the Trust Estate in accordance with the terms of the trust created hereunder and
that the Company will treat the transaction contemplated by such sale, transfer,
assignment and conveyance as a sale for accounting purposes.
Section 3.8. CONVEYANCE OF THE SUBSEQUENT MORTGAGE LOANS.
(a) Subject to the satisfaction of the conditions set forth in Section 3.5 and
paragraphs (b), (c) and (d) below (based on the Trustee's review of such
conditions) in consideration of the Trustee's delivery on the relevant
Subsequent Transfer Dates to or upon the order of the Company of all or a
portion of the balance of funds in the Pre-Funding Account, the Company shall on
any Subsequent Transfer Date sell, transfer, assign, set over and otherwise
convey without recourse, to the Trustee, all of the Company's right, title and
interest in and to each Subsequent Mortgage Loan listed on the related Schedule
of Mortgage Loans (other than any principal and interest payments due thereon on
or prior to the relevant Subsequent Cut-Off Date) which the Company is causing
to be delivered to the Custodian, on behalf of the Trustee herewith (and all
substitutions therefor as provided by Sections 3.3, 3.4 and 3.6) together with
the related Subsequent Mortgage Loan documents and the Company's interest in any
Property which secured a Subsequent
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Mortgage Loan but which has been acquired by foreclosure or deed in lieu of
foreclosure, and all payments thereon and proceeds of the conversion, voluntary
or involuntary, of the foregoing and proceeds of all the foregoing (including,
but not by way of limitation, all proceeds of any mortgage insurance, hazard
insurance and title insurance policy relating to the Subsequent Mortgage Loans,
cash proceeds, accounts, accounts receivable, notes, drafts, acceptances,
chattel paper, checks, deposit accounts, rights to payment of any and every
kind, and other forms of obligations and receivables which at any time
constitute all or part of or are included in the proceeds of any of the
foregoing).
The transfer by the Company of the Subsequent Mortgage Loans set forth
on the related Schedule of Mortgage Loans to the Trustee shall be absolute and
shall be intended by the Owners and all parties hereto to be treated as a sale
by the Company. Any Subsequent Mortgage Loan so transferred will be included in
one and only one of either Group I or Group II. The amount released from the
Pre-Funding Account shall be one hundred percent (100%) of the aggregate
principal balances of the Subsequent Mortgage Loans so transferred. Upon the
transfer by the Company of the Subsequent Mortgage Loans hereunder, such
Subsequent Mortgage Loans (and all principal and interest due thereon subsequent
to the Subsequent Cut Off Date) and all other rights and interests with respect
to such Subsequent Mortgage Loans transferred pursuant to a Subsequent Transfer
Agreement shall be deemed for all purposes hereunder to be part of the Trust
Estate. The Company hereby covenants and agrees to use its best efforts to
ensure that a sufficient amount of Subsequent Mortgage Loans will be transferred
to the Trust during the Funding Period to reduce the Pre-Funded Amount to less
than $100,000 for each Group.
(b) The obligation of the Trustee to accept the transfer of the
Subsequent Mortgage Loans and the other property and rights related thereto
described in paragraph (a) above is subject to the satisfaction of each of the
following conditions on or prior to the related Subsequent Transfer Date:
(i) the Company shall have provided the Trustee and the
Certificate Insurer with an Addition Notice and shall have provided
any information reasonably requested by any of the foregoing with
respect to the Subsequent Mortgage Loans;
(ii) the Company shall have delivered to the Trustee a duly
executed Subsequent Transfer Agreement (including an acceptance by the
Trustee) in substantially the form of Exhibit L, which shall include a
Schedule of Mortgage Loans, listing the Subsequent Mortgage Loans and
any other exhibits listed thereon;
(iii) the Company shall have deposited in the Principal and
Interest Account all principal collected and interest due in respect
of such Subsequent Mortgage Loans on or after the related Subsequent
Cut Off Date;
(iv) as of each Subsequent Transfer Date, the Company is not
insolvent, nor will it be made insolvent by such transfer, nor is it
aware of any pending insolvency;
(v) the Funding Period shall not have ended;
(vi) the Company shall have delivered to the Trustee and the
Certificate Insurer an Officer's Certificate confirming the
satisfaction of each condition precedent specified in items (i)
through (v) of this paragraph (b) and paragraphs (c) and (d) below and
in the related Subsequent Transfer Agreement; and
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(vii) the Company shall have delivered to the Trustee, the
Rating Agencies and the Certificate Insurer opinions of counsel with
respect to the transfer of the Subsequent Mortgage Loans substantially
in the form of the opinions of counsel delivered to the Certificate
Insurer and the Trustee on the Startup Day with respect to the Initial
Mortgage Loans (bankruptcy, corporate and tax).
(c) The obligation of the Trust to purchase Subsequent Mortgage Loans
for addition to Group I on a Subsequent Transfer Date is subject to the
following requirements: (i) such Subsequent Mortgage Loan may not be 30 or
more days contractually delinquent as of the related Subsequent Cut Off Date;
(ii) the remaining term to maturity of such Subsequent Mortgage Loan may not
exceed 30 years; (iii) such Subsequent Mortgage Loan will have a Combined
Loan-to-Value Ratio of not more than 80% and (iv) following the purchase of such
Subsequent Mortgage Loans by the Trust, the Mortgage Loans (including the
Subsequent Mortgage Loans) in Group I (a) will have a weighted average Coupon
Rate of at least 10.37%; (b) will have a weighted average Combined Loan-to-Value
Ratio of not more than 59.90%; (c) will have no Mortgage Loan with a principal
balance in excess of $76,500 and not more than 1.35% of the Mortgage Loans in
Group I may have a principal balance in excess of $225,000 and will satisfy the
representations and warranties set forth in Section 3.3 hereof. In addition,
the final pool of Mortgage Loans in Group I shall conform to the guidelines set
forth in paragraph 29 of the "Commitment to Issue a Financial Guaranty Insurance
Policy dated December 20, 1996" from the Certificate Insurer to the Company
relating to the Fixed Rate Certificate Insurance Policy.
(d) The obligation of the Trust to purchase Subsequent Mortgage Loans
for addition to Group II on a Subsequent Transfer Date is subject to the
following requirements: (i) such Subsequent Mortgage Loan may not be 30 or more
days contractually delinquent as of the related Subsequent Cut Off Date; (ii)
the remaining term to maturity of such Subsequent Mortgage Loan may not exceed
30 years; (iii) such Subsequent Mortgage Loan will have a Combined Loan to Value
Ratio of not more than 80%; and (iv) following the purchase of such Subsequent
Mortgage Loans by the Trust, the Mortgage Loans (including the Subsequent
Mortgage Loans) in Group II (a) will have a weighted average margin of at least
9.06%; (b) will have a weighted average Combined Loan to Value Ratio of not more
than 61.57%; and (c) will have no Mortgage Loan with a principal balance in
excess of $87,500 and not more than 1.0% of the Mortgage Loans in Group II may
have a principal balance in excess of $250,000 and (d) will satisfy the
representations and warranties set forth in Section 3.3 hereof. In addition,
the final pool of Mortgage Loans in Group II shall conform to the guidelines set
forth in paragraph 29 of the "Commitment to Issue a Financial Guaranty Insurance
Policy dated December 20, 1996 from the Certificate Insurer to the Company
relating to the Variable Rate Certificate Insurance Policy.
(e) In connection with each Subsequent Transfer Date and on the
Payment Date occurring in January 1997, the Trustee shall determine: (i) the
amount and correct dispositions of the Group I and Group II Capitalized Interest
Requirements, Overfunded Interest Amounts, Pre-Funding Account Earnings and the
Pre-Funded Amount and (ii) any other necessary matters in connection with the
administration of the Pre-Funding Account and of the Capitalized Interest
Account. In the event that any amounts are released as a result of an error in
calculation to the Owners or the Company from the Pre-Funding Account or from
the Capitalized Interest Account, such Owners or the Company shall immediately
repay such amounts to the Trustee.
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ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES
Section 4.1. ISSUANCE OF CERTIFICATES. On the Startup Day, upon the
Trustee's receipt from the Company of an executed Delivery Order in the form set
forth as Exhibit G hereto, the Trustee shall execute, authenticate and deliver
the Certificates on behalf of the Trust in accordance with the directions set
forth in such Delivery Order.
Section 4.2. SALE OF CERTIFICATES. At 10:00 a.m. New York City time
on the Startup Date, at the offices of Dewey Ballantine, 1301 Avenue of the
Americas, New York, New York, the Company will sell and convey the Mortgage
Loans and the money, instruments and other property related thereto to the
Trustee, and the Trustee will (i) deliver to the Underwriter the Class A
Certificates with an aggregate Percentage Interest in each Class equal to 100%,
registered in the name of Cede & Co. or in such other names as the Underwriters
shall direct, against payment of the purchase price thereof by wire transfer of
immediately available funds to the Trustee, (ii) deliver to First Alliance
Residual Holding Company a Class R Certificate, with a Percentage Interest equal
to 99.99%, and (iii) deliver to the Company a Class R Certificate with a
Percentage Interest equal to 0.01%. Upon the Trustee's receipt of the entire
net proceeds of the sale of the Class A Certificates the Company shall instruct
the Trustee to: (a) deposit (i) an amount equal to the Original Pre-Funded
Amount in the Pre-Funding Account and (ii) an amount equal to $50,509.67 in the
Capitalized Interest Account contributed by the Company out of such proceeds or
otherwise, (b) pay any fees and expenses identified by the Company and (c) pay
to the Company the balance after deducting such amounts. The Company shall pay
directly to the Certificate Insurer the Initial Premiums.
ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS
Section 5.1. TERMS. (a) The Certificates are pass-through
securities having the rights described therein and herein. Notwithstanding
references herein or therein with respect to the Certificates as to "principal"
and "interest" no debt of any Person is represented thereby, nor are the
Certificates or the underlying Notes guaranteed by any Person (except that the
Notes may be recourse to the Mortgagors thereof to the extent permitted by law
and except for the rights of the Trustee with respect to the Certificate
Insurance Policies). Distributions on the Certificates are payable solely from
payments received on or with respect to the Mortgage Loans (other than the
Servicing Fees), moneys in the Principal and Interest Account, except as
otherwise provided herein, moneys in the Pre-Funding Account and the Capitalized
Interest Account from earnings on moneys and the proceeds of property held as a
part of the Trust Estate and, upon the occurrence of certain events, from
Insured Payments. Each Certificate entitles the Owner thereof to receive
monthly on each Payment Date, in order of priority of distributions with respect
to such Class of Certificates a specified portion of such payments with respect
to the Mortgage Loans in the related Mortgage Loan Group and certain related
Insured Payments, PRO RATA in accordance with such Owner's Percentage Interest.
(b) Each Owner is required, and hereby agrees, to return to the
Trustee at the Corporate Trust Office any Certificate prior to the final
distribution due thereon. Any such Certificate as to which the Trustee has made
the final distribution thereon shall be deemed canceled and shall no longer be
Outstanding for any purpose of this Agreement.
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Section 5.2. FORMS. The Class A-1 Certificates, the Class A-2
Certificates and the Class R Certificates shall be in substantially the forms
set forth in Exhibits A-1, A-2 and C hereof, respectively, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Agreement or as may in the Company's judgment be necessary,
appropriate or convenient to comply, or facilitate compliance, with applicable
laws, and may have such letters, numbers or other marks of identification and
such legends or endorsements placed thereon as may be required to comply with
the rules of any applicable securities laws or as may, consistently herewith, be
determined by the Authorized Officer of the Trustee executing such Certificates,
as evidenced by his execution thereof.
Section 5.3. EXECUTION, AUTHENTICATION AND DELIVERY. Each
Certificate shall be executed on behalf of the Trust, by the manual or facsimile
signature of one of the Trustee's Authorized Officers and shall be authenticated
by the manual or facsimile signature of one of the Trustee's Authorized
Officers.
Certificates bearing the manual signature of individuals who were at
any time the proper officers of the Trustee shall, upon proper authentication by
the Trustee, bind the Trust, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the execution and delivery of
such Certificates or did not hold such offices at the date of authentication of
such Certificates.
The initial Certificates shall be dated as of the Startup Day and
delivered at the Closing to the parties specified in Section 4.2 hereof.
No Certificate shall be valid until executed and authenticated as set
forth above.
Section 5.4. REGISTRATION AND TRANSFER OF CERTIFICATES. (a) The
Trustee, as registrar, shall cause to be kept a register (the "Register") in
which, subject to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of Certificates and the registration of
transfer of Certificates. The Trustee is hereby appointed registrar (the
"Registrar") for the purpose of registering Certificates and transfers of
Certificates as herein provided. The Owners and the Certificate Insurer shall
have the right to inspect the Register during business hours upon reasonable
notice (but no less than 2 Business Days) and to obtain copies thereof.
(b) Subject to the provisions of Section 5.8 hereof, upon surrender
for registration of transfer of any Certificate at the office designated as the
location of the Register, the Trustee shall execute, authenticate and deliver,
in the name of the designated transferee or transferees, one or more new
Certificates of a like Class and in the aggregate principal amount of the
Certificate so surrendered.
(c) At the option of any Owner, Certificates of any Class owned by
such Owner may be exchanged for other Certificates authorized of like Class,
tenor, aggregate original principal amount and bearing numbers not
contemporaneously outstanding, upon surrender of the Certificates to be
exchanged at the office designated as the location of the Register. Whenever
any Certificate is so surrendered for exchange, the Trustee shall execute,
authenticate and deliver the Certificate or Certificates which the Owner making
the exchange is entitled to receive.
(d) All Certificates issued upon any registration of transfer or
exchange of Certificates shall be valid evidence of the same ownership interests
in the Trust and entitled to the same benefits under this Agreement as the
Certificates surrendered upon such registration of transfer or exchange.
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(e) Every Certificate presented or surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by the
Owner thereof or his attorney duly authorized in writing.
(f) No service charge shall be made to an Owner for any registration
of transfer or exchange of Certificates, but the Trustee may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Certificates; any other expenses in connection with such transfer or exchange
shall be an expense of the Trust.
(g) It is intended that the Class A Certificates be registered so as
to participate in a global book-entry system with the Depository, as set forth
herein. Each Class of Class A Certificates shall, except as otherwise provided
in the next paragraph, be initially issued in the form of a single fully
registered Class A Certificate with a denomination equal to the Original
Certificate Principal Balance of such Class. Upon initial issuance, the
ownership of each such Class A Certificate shall be registered in the Register
in the name of Cede & Co., or any successor thereto, as nominee for the
Depository.
On the Startup Day, no Class A Certificates shall be issued in
denominations of less than $1,000 except for one Certificate of each Class which
may be in a denomination of less than $1,000; accordingly the Trust shall not
issue tail certificates on the Startup Day.
The Company and the Trustee are hereby authorized to execute and
deliver the Representation Letter with the Depository.
With respect to Class A Certificates registered in the Register in the
name of Cede & Co., as nominee of the Depository, the Company, the Servicer and
the Trustee shall have no responsibility or obligation to Direct or Indirect
Participants or beneficial owners for which the Depository holds Class A
Certificates from time to time as a Depository. Without limiting the
immediately preceding sentence, the Company, the Servicer and the Trustee shall
have no responsibility or obligation with respect to (i) the accuracy of the
records of the Depository, Cede & Co., or any Direct or Indirect Participant
with respect to the ownership interest in the Class A Certificates, (ii) the
delivery to any Direct or Indirect Participant or any other Person, other than a
registered Owner of a Class A Certificate as shown in the Register, of any
notice with respect to the Class A Certificates or (iii) the payment to any
Direct or Indirect Participant or any other Person, other than a registered
Owner of a Class A Certificate as shown in the Register, of any amount with
respect to any distribution of principal or interest on the Class A
Certificates. No Person other than a registered Owner of a Class A Certificate
as shown in the Register shall receive a certificate evidencing such Class A
Certificate.
Upon delivery by the Depository to the Trustee of written notice to
the effect that the Depository has determined to substitute a new nominee in
place of Cede & Co., and subject to the provisions hereof with respect to the
payment of interest by the mailing of checks or drafts to the registered Owners
of Class A Certificates appearing as registered Owners in the registration books
maintained by the Trustee at the close of business on a Record Date, the name
"Cede & Co." in this Agreement shall refer to such new nominee of the
Depository.
(h) In the event that (i) the Depository or the Company advises the
Trustee and the Certificate Insurer in writing that the Depository is no longer
willing or able to discharge properly its responsibilities as nominee and
depository with respect to the Class A Certificates and the Company or the
Trustee is unable to locate a qualified successor or (ii) the Company at its
sole option elects to terminate the book-entry system through the Depository,
the Class A Certificates shall no longer be
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restricted to being registered in the Register in the name of Cede & Co. (or a
successor nominee) as nominee of the Depository. At that time, the Company may
determine that the Class A Certificates shall be registered in the name of and
deposited with a successor depository operating a global book-entry system, as
may be acceptable to the Company and at the Company's expense, or such
depository's agent or designee but, if the Company does not select such
alternative global book-entry system, then the Class A Certificates may be
registered in whatever name or names registered Owners of Class A Certificates
transferring Class A Certificates shall designate, in accordance with the
provisions hereof.
(i) Notwithstanding any other provision of this Agreement to the
contrary, so long as any Class A Certificate is registered in the name of Cede &
Co., as nominee of the Depository, all distributions of principal or interest on
such Class A Certificates and all notices with respect to such Class A
Certificates shall be made and given, respectively, in the manner provided in
the Representation Letter.
Section 5.5. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If
(i) any mutilated Certificate is surrendered to the Trustee, or the Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (ii) in the case of any mutilated Certificate, such mutilated
Certificate shall first be surrendered to the Trustee, and in the case of any
destroyed, lost or stolen Certificate, there shall be first delivered to the
Trustee such security or indemnity as may be reasonably required by it to hold
the Trustee harmless, then, in the absence of notice to the Trustee that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute, authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
Class, tenor and aggregate principal amount, bearing a number not
contemporaneously outstanding.
Upon the issuance of any new Certificate under this Section, the
Trustee may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto; any other expenses
in connection with such issuance shall be an expense of the Trust.
Every new Certificate issued pursuant to this Section in exchange for
or in lieu of any mutilated, destroyed, lost or stolen Certificate shall
constitute evidence of a substitute interest in the Trust and shall be entitled
to all the benefits of this Agreement equally and proportionately with any and
all other Certificates of the same Class duly issued hereunder and such
mutilated, destroyed, lost or stolen Certificate shall not be valid for any
purpose.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Certificates.
Section 5.6. PERSONS DEEMED OWNERS. The Trustee and any agent of
the Trustee may treat the Person in whose name any Certificate is registered as
the Owner of such Certificate for the purpose of receiving distributions with
respect to such Certificate and for all other purposes whatsoever, and neither
the Trustee nor any agent of the Trustee shall be affected by notice to the
contrary.
Section 5.7. CANCELLATION. All Certificates surrendered for
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly canceled by
it. No Certificate shall be authenticated in lieu of or in exchange for any
Certificate canceled as provided in this Section, except as expressly permitted
by this Agreement. All canceled Certificates may be held by the Trustee in
accordance with its standard retention policy.
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Section 5.8. LIMITATION ON TRANSFER OF OWNERSHIP RIGHTS. (a) No
sale or other transfer of any Class A Certificate shall be made to the Company,
any Originator or any of their respective affiliates. Furthermore, before the
earlier of (i) the date on which the Funding Period expires and (ii) the date on
which the Department of Labor amends Prohibited Transaction Exemption 90-32 to
permit the use of pre-funding accounts thereunder, no sale or other transfer of
record or beneficial ownership of any Class A Certificate shall be made to any
Person until such Person delivers to the Trustee an opinion of counsel from the
prospective transferee of such Certificate, from the prospective transferee of
such Certificate, acceptable to, and in form and substance satisfactory to the
Company, to the effect that such transferee is not a pension or benefit plan or
individual retirement arrangement that is subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or to Section 4975 of the Code
or an entity whose underlying assets are deemed to be assets of such a plan or
arrangement by reason of such plan's or arrangement's investment in the entity,
as determined under U.S. Department of Labor Regulations 29 C.F.R. Section
2510.3-101 or otherwise (collectively, a "Plan").
(b) No sale or other transfer of record or beneficial ownership of a
Class R Certificate (whether pursuant to a purchase, a transfer resulting from a
default under a secured lending agreement or otherwise) shall be made to a
Disqualified Organization or agent of a Disqualified Organization. The
transfer, sale or other disposition of a Class R Certificate (whether pursuant
to a purchase, a transfer resulting from a default under a secured lending
agreement or otherwise) to a Disqualified Organization shall be deemed to be of
no legal force or effect whatsoever and such transferee shall not be deemed to
be an Owner for any purpose hereunder, including, but not limited to, the
receipt of distributions on such Class R Certificate. Furthermore, in no event
shall the Trustee accept surrender for transfer, registration of transfer, or
register the transfer, of any Class R Certificate nor authenticate and make
available any new Class R Certificate unless the Trustee has received an
affidavit from the proposed transferee that such transferee is not a Plan. Each
holder of a Class R Certificate, by his acceptance thereof, shall be deemed for
all purposes to have consented to the provisions of this Section 5.8(b).
(c) No other sale or other transfer of record or beneficial ownership
of a Class R Certificate shall be made unless such transfer is exempt from the
registration requirements of the Securities Act, as amended, and any applicable
state securities laws or is made in accordance with said Act and laws. In the
event such a transfer is to be made within three years from the Startup Day, (i)
the Trustee and the Company shall require a written opinion of counsel
acceptable to and in form and substance satisfactory to the Company and the
Certificate Insurer in the event that such transfer may be made pursuant to an
exemption, describing the applicable exemption and the basis therefor, from said
Act and laws or is being made pursuant to said Act and laws, which opinion of
counsel shall not be an expense of the Trustee, the Trust Estate or the
Certificate Insurer, and (ii) the Trustee shall require the Transferee to
execute an investment letter acceptable to and in form and substance
satisfactory to the Company and the Certificate Insurer certifying to the
Trustee, the Certificate Insurer and the Company the facts surrounding such
transfer, which investment letter shall not be an expense of the Trustee, the
Trust Estate, the Certificate Insurer or the Company. The Owner of a Class R
Certificate desiring to effect such transfer shall, and does hereby agree to,
indemnify the Trustee, the Certificate Insurer and the Company 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.
Section 5.9. ASSIGNMENT OF RIGHTS. An Owner may pledge, encumber,
hypothecate or assign all or any part of its right to receive distributions
hereunder, but such pledge, encumbrance, hypothecation or assignment shall not
constitute a transfer of an ownership interest sufficient to render the
transferee an Owner of the Trust without compliance with the provisions of
Section 5.4 and Section 5.8 hereof.
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ARTICLE VI
COVENANTS
Section 6.1. DISTRIBUTIONS. On each Payment Date, the Trustee will
withdraw amounts from the Certificate Account and make the distributions with
respect to the Certificates in accordance with the terms of the Certificates and
this Agreement. Such distributions shall be made (i) by check mailed on each
Payment Date or (ii) if requested by any Owner, to such Owner by wire transfer
to an account within the United States designated no later than five Business
Days prior to the related Record Date, made on each Payment Date, in each case
to each Owner of record on the immediately preceding Record Date; PROVIDED,
HOWEVER, that an Owner of a Class A Certificate shall only be entitled to
payment by wire transfer if such Owner owns Class A Certificates in the
aggregate denomination of at least $5,000,000.
Section 6.2. MONEY FOR DISTRIBUTIONS TO BE HELD IN TRUST;
WITHHOLDING. (a) All payments of amounts due and payable with respect to any
Certificate that are to be made from amounts withdrawn from the Certificate
Account pursuant to Section 7.5 hereof or from Insured Payments shall be made by
and on behalf of the Trustee, and no amounts so withdrawn from the Certificate
Account for payments of the Certificates and no Insured Payment shall be paid
over to the Trustee except as provided in this Section.
(b) The Trustee on behalf of the Trust shall comply with all
requirements of the Code and applicable state and local law with respect to the
withholding from any distributions made by it to any Owner of any applicable
withholding taxes imposed thereon and with respect to any applicable reporting
requirements in connection therewith.
(c) Any money held by the Trustee in trust for the payment of any
amount due with respect to any Class A Certificate and remaining unclaimed by
the Owner of such Class A Certificate for the period then specified in the
escheat laws of the State of New York after such amount has become due and
payable shall be discharged from such trust and be paid first to the Certificate
Insurer on account of any Reimbursement Amounts and second to the Owners of the
Class R Certificates; and the Owner of such Class A Certificate shall
thereafter, as an unsecured general creditor, look only to the Certificate
Insurer or the Owners of the Class R Certificates for payment thereof (but only
to the extent of the amounts so paid to the Certificate Insurer or the Owners of
the Class R Certificates), and all liability of the Trustee with respect to such
trust money shall thereupon cease; PROVIDED, HOWEVER, that the Trustee, before
being required to make any such payment, shall at the expense of the Trust cause
to be published once, in the eastern edition of THE WALL STREET JOURNAL, notice
that such money remains unclaimed and that, after a date specified therein,
which shall be not fewer than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be paid to the Certificate
Insurer or the Owners of the Class R Certificates. The Trustee shall, at the
direction of the Company, also adopt and employ, at the expense of the Trust,
any other reasonable means of notification of such payment (including but not
limited to mailing notice of such payment to Owners whose right to or interest
in moneys due and payable but not claimed is determinable from the Register at
the last address of record for each such Owner).
Section 6.3. PROTECTION OF TRUST ESTATE. (a) The Trustee will hold
the Trust Estate in trust for the benefit of the Owners and, upon request of the
Certificate Insurer, or, with the consent of the Certificate Insurer, at the
request and expense of the Company, will from time to time execute and deliver
all such supplements and amendments hereto pursuant to Section 11.14 hereof and
all
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instruments of further assurance and other instruments, and will take such other
action upon such request from the Company or the Certificate Insurer, to:
(i) more effectively hold in trust all or any portion of the Trust
Estate;
(ii) perfect, publish notice of or protect the validity of any grant
made or to be made by this Agreement;
(iii) enforce any of the Mortgage Loans; or
(iv) preserve and defend title to the Trust Estate and the rights of
the Trustee, and the ownership interests of the Owners represented thereby,
in such Trust Estate against the claims of all Persons and parties.
The Trustee shall send copies of any request received from the
Certificate Insurer or the Company to take any action pursuant to this
Section 6.3 to the other party.
(b) The Trustee shall have the power to enforce, shall enforce the
obligations of the other parties to this Agreement and of the Certificate
Insurer, by action, suit or proceeding at law or equity and shall also have the
power to enjoin, by action or suit in equity, any acts or occurrences which may
be unlawful or in violation of the rights of the Owners; PROVIDED, HOWEVER, that
nothing in this Section shall require any action by the Trustee unless the
Trustee shall first (i) have been furnished indemnity satisfactory to it and
(ii) when required by this Agreement, have been requested to take such action by
a majority of the Percentage Interests represented by the affected Class or
Classes of Class A Certificates then Outstanding or, if there are no longer any
affected Class A Certificates then outstanding, by such majority of the
Percentage Interests represented by the Class R Certificates.
(c) The Trustee shall execute any instrument required pursuant to
this Section so long as such instrument does not conflict with this Agreement or
with the Trustee's fiduciary duties.
Section 6.4. PERFORMANCE OF OBLIGATIONS. The Trustee will not take
any action that would release the Company or the Certificate Insurer from any of
their respective covenants or obligations under any instrument or document
relating to the Trust Estate or the Certificates or which would result in the
amendment, hypothecation, subordination, termination or discharge of, or impair
the validity or effectiveness of, any such instrument or document, except as
expressly provided in this Agreement or such other instrument or document.
The Trustee may contract with other Persons to assist it in performing
its duties hereunder.
Section 6.5. NEGATIVE COVENANTS. The Trustee will not, to the
extent within the control of the Trustee, take any of the following actions:
(i) sell, transfer, exchange or otherwise dispose of any of the
Trust Estate except as expressly permitted by this Agreement;
(ii) claim any credit on or make any deduction from the
distributions payable in respect of, the Certificates (other than amounts
properly withheld from such payments under the Code) or assert any claim
against any present or former Owner by reason of the payment of any taxes
levied or assessed upon any of the Trust Estate;
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(iii) incur, assume or guaranty on behalf of the Trust any
indebtedness of any Person except pursuant to this Agreement;
(iv) dissolve or liquidate the Trust Estate in whole or in part,
except pursuant to Article IX hereof; or
(v) (A) impair the validity or effectiveness of this Agreement, or
release any Person from any covenants or obligations with respect to the
Trust or to the Certificates under this Agreement, except as may be
expressly permitted hereby or (B) create or extend any lien, charge,
adverse claim, security interest, mortgage or other encumbrance to or upon
the Trust Estate or any part thereof or any interest therein or the
proceeds thereof.
Section 6.6. NO OTHER POWERS. The Trustee will not, to the extent
within the control of the Trustee, permit the Trust to engage in any business
activity or transaction other than those activities permitted by Section 2.3
hereof.
Section 6.7. LIMITATION OF SUITS. No Owner shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Agreement
or the Certificate Insurance Policies or for the appointment of a receiver or
trustee, or for any other remedy hereunder, unless:
(1) such Owner has previously given written notice to the Company and
the Trustee of such Owner's intention to institute such
proceeding;
(2) the Owners of not less than 25% of the Percentage Interests
represented by the affected Class or Classes of Certificates then
Outstanding or, if there are no affected Classes of Class A
Certificates then Outstanding, by such percentage of the
Percentage Interests represented by the Class R Certificates
shall have made written request to the Trustee to institute such
proceeding in respect of such Event of Default;
(3) such Owner or Owners have offered to the Trustee indemnity
against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute such proceeding;
(5) as long as any Class A Certificates are Outstanding, the
Certificate Insurer has consented in writing thereto; and
(6) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Certificate
Insurer or by the Owners of a majority of the Percentage
Interests represented by the Class A Certificates or, if there
are no Class A Certificates then Outstanding, by such majority of
the Percentage Interests represented by the Class R Certificates;
it being understood and intended that no one or more Owners shall have any right
in any manner whatever by virtue of, or by availing themselves of, any provision
of this Agreement to affect, disturb or prejudice the rights of any other Owner
of the same Class or to obtain or to seek to obtain priority or preference over
any other Owner of the same Class or to enforce any right under this Agreement,
except in the manner herein provided and for the equal and ratable benefit of
all the Owners of the same Class.
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In the event the Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Owners, each representing less
than a majority of the applicable Class of Certificates, the Trustee in its sole
discretion may determine what action, if any, shall be taken, notwithstanding
any other provision of this Agreement.
Section 6.8. UNCONDITIONAL RIGHTS OF OWNERS TO RECEIVE
DISTRIBUTIONS. Notwithstanding any other provision in this Agreement, the Owner
of any Certificate shall have the right, which is absolute and unconditional, to
receive distributions to the extent provided herein and therein with respect to
such Certificate or to institute suit for the enforcement of any such
distribution, and such right shall not be impaired without the consent of such
Owner.
Section 6.9. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise
provided herein, no right or remedy herein conferred upon or reserved to the
Trustee, the Certificate Insurer or to the Owners is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
Except as otherwise provided herein, the assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 6.10. DELAY OR OMISSION NOT WAIVER. No delay of the Trustee,
the Certificate Insurer or any Owner of any Certificate to exercise any right or
remedy under this Agreement to any Event of Default shall impair any such right
or remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article VI or by law to the
Trustee, the Certificate Insurer or the Owners may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee, the Certificate
Insurer or the Owners, as the case may be.
Section 6.11. CONTROL BY OWNERS. The Certificate Insurer or the
Owners of a majority of the Percentage Interests represented by the Class A
Certificates then Outstanding, with the consent of the Certificate Insurer
(which may not be unreasonably withheld), or, if there are no longer any Class A
Certificates then Outstanding, by such majority of the Percentage Interests
represented by the Class R Certificates then Outstanding, with the consent of
the Certificate Insurer (which may not be unreasonably withheld), may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee with respect to the Certificates or exercising any trust or power
conferred on the Trustee with respect to the Certificates or the Trust Estate,
including, but not limited to, those powers set forth in Section 6.3, Section
8.20 and Section 10.1 hereof, PROVIDED THAT:
(1) such direction shall not be in conflict with any rule of law or
with this Agreement;
(2) the Trustee shall have been provided with indemnity satisfactory
to it; and
(3) the Trustee may take any other action deemed proper by the
Trustee, which is not inconsistent with such direction; PROVIDED,
HOWEVER, that the Trustee need not take any action which it
determines might involve it in liability or may be unjustly
prejudicial to the Owners not so directing.
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Section 6.12. ACCESS TO OWNERS OF CERTIFICATES' NAMES AND ADDRESSES.
(a) If any Owner (for purposes of this Section 6.12, an "Applicant") applies in
writing to the Trustee, and such application states that the Applicant desires
to communicate with other Owners with respect to their rights under this
Agreement or under the Certificates and is accompanied by a copy of the
communication which such Applicant proposes to transmit, then the Trustee shall,
at the expense of such Applicant, within ten (10) Business Days after the
receipt of such application, furnish or cause to be furnished to such Applicant
a list of the names and addresses of the Owners of record as of the most recent
Payment Date.
(b) Every Owner, by receiving and holding such list, agrees with the
Trustee that the Trustee shall not be held accountable in any way by reason of
the disclosure of any information as to the names and addresses of the Owners
hereunder, regardless of the source from which such information was derived.
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 7.1. COLLECTION OF MONEY. Except as otherwise expressly
provided herein, the Trustee may demand payment or delivery of all money and
other property payable to or receivable by the Trustee pursuant to this
Agreement, including (a) all payments due on the Mortgage Loans in accordance
with the respective terms and conditions of such Mortgage Loans and required to
be paid over to the Trustee by the Servicer or by any Sub-Servicer and (b)
Insured Payments. The Trustee shall hold all such money and property received
by it, other than pursuant to or as contemplated by Section 6.2(b) hereof, as
part of the Trust Estate and shall apply it as provided in this Agreement.
Section 7.2. ESTABLISHMENT OF ACCOUNTS. (a) The Company shall cause
to be established, and the Trustee shall maintain, at the Corporate Trust
Office, a Certificate Account and a Group II Available Funds Cap Carry-Forward
Amount Account, each to be held by the Trustee so long as the Trustee qualifies
as a Designated Depository Institution and if the Trustee does not so qualify,
then by any Designated Depository Institution in the name of the Trust for the
benefit of the Owners of the Certificates and the Certificate Insurer, as their
interests may appear.
(b) The Company shall cause to be established, and the Trustee shall
maintain, at the corporate trust office of the Trustee, a Pre-Funding Account
and a Capitalized Interest Account to be held by the Trustee in the name of the
Trust for the benefit of the Owners of the Certificates and the Certificate
Insurer, as their interests may appear.
Section 7.3. THE CERTIFICATE INSURANCE POLICIES. (a) (i) On the
Business Day prior to each Payment Date the Trustee shall determine with respect
to the immediately following Payment Date, the amount on deposit in the
Certificate Account on such Payment Date and available to be distributed to the
Owners on such Payment Date with respect to Group I (disregarding the sum of (x)
the amount of any Insured Payments and (y) the amount of any expected investment
earnings) and equal to the sum of (A) such amount excluding the amount of any
Total Monthly Excess Cashflow from Group I included in such amount plus (B) any
amount of Total Monthly Excess Cashflow from either Group to be applied on
account of Group I on such Payment Date to the Class A-1 Certificates plus (C)
any deposit to the Certificate Account from the Pre-Funding Account or the
Capitalized Interest Account expected to be made with respect to Group I on such
Payment Date. The amount described in clause (A) of the preceding sentence with
respect to each Payment Date is the "Group I Available Funds"; the sum of the
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amounts described in clauses (A), (B) and (C) of the preceding sentence with
respect to each Payment Date is the "Group I Total Available Funds."
(ii) On the Business Day prior to each Payment Date, the Trustee
shall determine with respect to the immediately following Payment Date, the
amount on deposit in the Certificate Account on such Payment Date and available
to be distributed to the Owners on such Payment Date with respect to Group II
(disregarding the sum of (x) the amount of any Insured Payments and (y) the
amount of any expected investment earnings), and equal to the sum of (A) such
amount excluding the amount of any Total Monthly Excess Cashflow from Group II
included in such amount plus (B) any amounts of Total Monthly Excess Cashflow
from either Group to be applied on account of Group II on such Payment Date to
the Class A-2 Certificates plus (C) any deposit to the Certificate Account from
the Pre-Funding Account or the Capitalized Interest Account expected to be made
with respect to Group II on such Payment Date. The amount described in clause
(A) of the preceding sentence with respect to each Payment Date is the "Group II
Available Funds"; the sum of the amounts described in clauses (A), (B) and (C)
of the preceding sentence with respect to each Payment Date is the "Group II
Total Available Funds".
(b) If (i) the Class A-1 Current Interest for any Payment Date
exceeds the Group I Total Available Funds for such Payment Date after deducting
amounts payable therefrom, if any, for the Group I Premium Amount and the
Group I Trustee Fee due on such Payment Date and/or (ii) a Group I Subordination
Deficit exists for such Payment Date (any such event being a "Group I Total
Available Funds Shortfall"), the Trustee shall complete a Notice in the form of
Exhibit A to the Fixed Rate Certificate Insurance Policy and submit such notice
to the Certificate Insurer no later than 12:00 noon New York City time on the
Business Day preceding such Payment Date as a claim for an Insured Payment in an
amount equal to such Group I Total Available Funds Shortfall. Similarly, if (i)
the Class A-2 Current Interest for any Payment Date exceeds the Group II Total
Available Funds for such Payment Date after deducting amounts payable therefrom,
if any, for the Group II Premium Amount and the Group II Trustee Fee due on such
Payment Date and/or (ii) the Group II Subordination Deficit exists for such
Payment Date (any such event being a "Group II Total Available Funds
Shortfall"), the Trustee shall complete a Notice in the form of Exhibit A to the
Variable Rate Certificate Insurance Policy and submit such notice to the
Certificate Insurer no later than 12:00 noon New York City time on the Business
Day preceding such Payment Date as a claim for an Insured Payment in an amount
equal to such Group II Total Available Funds Shortfall.
(c) The Certificate Insurer shall forward to the Trustee Insured
Payments at such time and in the manner specified in the related Certificate
Insurance Policy. Upon receipt of Insured Payments from the Certificate Insurer
on behalf of Owners, the Trustee shall deposit such Insured Payments in the
Certificate Account and shall distribute such Insured Payments, or the proceeds
thereof, in accordance with Section 7.5(d)(iv) to the Owners of the Class A
Certificates of the related Class.
(d) The Trustee shall (i) receive Insured Payments as
attorney-in-fact of each Owner of the Class A Certificates of the related Class
receiving any Insured Payment from the Certificate Insurer and (ii) disburse
such Insured Payment to the Owners of Offered Certificates as set forth in
Section 7.5(d)(iv). Insured Payments disbursed by the Trustee from proceeds of
a Certificate Insurance Policy shall not be considered payment by the Trust nor
shall such payments discharge the obligation of the Trust with respect to the
related Class A Certificates, and the Certificate Insurer shall be entitled to
receive the related Reimbursement Amount pursuant to Sections 7.5(d)(ii)(C) and
7.5(d)(ii)(D) hereof. Each Owner of Class A Certificates by its acceptance
thereof recognizes that to the extent the Certificate Insurer makes Insured
Payments, either directly or indirectly (as by paying through the Trustee), to
the
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Owners of such Class A Certificates the Certificate Insurer will be entitled to
receive the related Reimbursement Amount pursuant to Sections 7.5(d)(ii)(C) and
7.5(d)(ii)(D) hereof.
Section 7.4 PRE-FUNDING ACCOUNT AND CAPITALIZED INTEREST ACCOUNT (a)
On the Startup Day, the Company will deposit, on behalf of the Owners of the
Class A Certificates, in the Pre-Funding Account the Original Pre-Funded Amount,
from the proceeds of the sale of the Class A Certificates in an amount equal to
the sum of (i) the Original Group I Pre-Funded Amount, from the proceeds of the
sale of the Class A-1 Certificates and (ii) the Original Group II Pre-Funded
Amount, from the proceeds of the sale of the Class A-2 Certificates.
(b) On any Subsequent Transfer Date, the Company shall instruct the
Trustee to withdraw from the Pre-Funding Account an amount equal to 100% of the
aggregate Loan Balances of the Subsequent Mortgage Loans sold to the Trust on
such Subsequent Transfer Date and pay such amount to or upon the order of the
Company upon satisfaction of the conditions set forth in Sections 3.5 and 3.8
hereof with respect to such transfer; in connection with such instructions the
Company shall additionally inform the Trustee whether such Subsequent Mortgage
Loans are being transferred to Group I or Group II. In no event shall the
Company be permitted to instruct the Trustee to release from the Pre-Funding
Account to the Certificate Account with respect to Subsequent Mortgage Loans to
be transferred to Group I an amount in excess of the Original Group I Pre-Funded
Amount or to release from the Pre-Funding Account to the Certificate Account
with respect to Subsequent Mortgage Loans to be transferred to Group II an
amount in excess of the Original Group II Pre-Funded Amount.
(c) On the January 1997 Payment Date, the Trustee shall withdraw from
the Pre-Funding Account the amount (exclusive of any related Pre-Funding Account
Earnings still on deposit therein) remaining in the Pre-Funding Account, with
respect to a Group of Mortgage Loans and deposit such amount to the Certificate
Account, for the benefit of the Owners of the related Certificates, as
applicable.
(d) On the January 1997 Payment Date, the Trustee shall transfer from
the Pre-Funding Account to the Capitalized Interest Account, the Pre-Funding
Account Earnings, if any, applicable to such Payment Date.
(e) On the January 1997 Payment Date the Trustee shall transfer from
the Capitalized Interest Account to the Certificate Account, (i) with respect to
Group I, the Group I Capitalized Interest Requirement for such Payment Date and
(ii) with respect to Group II, the Group II Capitalized Interest Requirement for
such Payment Date.
(f) On each Subsequent Transfer Date the Trustee shall distribute
from the Capitalized Interest Account the Overfunded Interest Amount (calculated
by the Trustee on the day prior to such Subsequent Transfer Date) to the Company
and on the Payment Date in January 1997, the Trustee shall distribute to the
Company any amounts remaining in the Capitalized Interest Account after taking
into account the transfers on such Payment Date described in clause (e) above.
Thereafter, the Capitalized Interest Account shall be closed. All amounts, if
any, remaining in the Capitalized Interest Account on such day shall be
transferred to the Company.
Section 7.5. FLOW OF FUNDS. (a) The Trustee shall deposit to the
Certificate Account with respect to Group I, without duplication, (i) upon
receipt, any Insured Payments relating to Group I, the proceeds of any
liquidation of the assets of the Trust, insofar as such assets relate to Group
I, the Group I Monthly Remittance Amount remitted by the Servicer or any
Sub-Servicer, together with any Substitution Amounts and any Loan Purchase Price
amounts received by the Trustee (each with respect
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to Group I), (ii) on the first Payment Date, the Group I Capitalized Interest
Requirement and any Pre-Funding Account Earnings related to Group I to be
transferred on such Payment Date from the Capitalized Interest Account for the
Payment Date, pursuant to Section 7.4(e) hereof and (iii) the amount, if any, to
be transferred on such Payment Date from the Pre-Funding Account pursuant to
Section 7.4(c) hereof.
(b) The Trustee shall deposit to the Certificate Account with respect
to Group II, without duplication, (i) upon receipt, any Insured Payments
relating to Group II, the proceeds of any liquidation of the assets of the
Trust, insofar as such assets relate to Group II, the Group II Monthly
Remittance Amount remitted by the Servicer or any Sub-Servicer, together with
any Substitution Amounts and any Loan Purchase Price amounts received by the
Trustee (each with respect to Group II), (ii) on the first Payment Date, the
Group II Capitalized Interest Requirement and any Pre-Funding Account Earnings
related to Group II to be transferred on such Payment Date pursuant to Section
7.4(e) hereof and (iii) the amount, if any, to be transferred on such Payment
Date from the Pre-Funding Account pursuant to Section 7.4(c) hereof.
(c) [Reserved].
(d) With respect to the Certificate Account, on each Payment Date,
the Trustee shall make the following allocations, disbursements and transfers
for each Mortgage Loan Group from amounts deposited therein pursuant to
subsections (a) and (b), respectively in the following order of priority, and
each such allocation, transfer and disbursement shall be treated as having
occurred only after all preceding allocations, transfers and disbursements have
occurred:
(i) FIRST, on each Payment Date from amounts then on deposit in the
Certificate Account (A) to the Trustee, the Trustee Fee and (B) commencing
on the third Payment Date following the Startup Day and each Payment Date
thereafter, to the Certificate Insurer, from amounts then on deposit in
the Certificate Account, (x) from amounts then on deposit therein with
respect to Group I, the Group I Premium Amount for such Payment Date and
(y) from amounts then on deposit therein with respect to Group II, the
Group II Premium Amount for such Payment Date;
(ii) SECOND, on each Payment Date, the Trustee shall allocate an amount equal
to the sum of (x) the Total Monthly Excess Spread with respect to such
Mortgage Loan Group and Payment Date plus (y) any Subordination Reduction
Amount with respect to such Mortgage Loan Group and Payment Date (such sum
being the "Total Monthly Excess Cashflow" with respect to such Mortgage
Loan Group and Payment Date) with respect to each Mortgage Loan Group in
the following order of priority:
(A) FIRST, such Total Monthly Excess Cashflow with respect to each
Group shall be allocated to the payment of the related Class A
Distribution Amount pursuant to clause (iv) below on such Payment
Date with respect to the related Mortgage Loan Group in an amount
equal to the difference, if any, between (x) the related Class A
Distribution Amount (calculated only with respect to clause (y)
of the definition of the related Group I or Group II Principal
Distribution Amount and without any Subordination Increase
Amount) for such Payment Date and (y) the Available Funds with
respect to such Mortgage Loan Group for such Payment Date (the
amount of such difference being the "Group I or the Group II
Available Funds Shortfall" with respect to the related Mortgage
Loan Group);
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(B) SECOND, any portion of the Total Monthly Excess Cashflow with
respect to such Mortgage Loan Group remaining after the
application described in clause (A) above shall be allocated
against any Available Funds Shortfall with respect to the other
Mortgage Loan Group and to the payment of the Class A
Distribution Amount with respect to the other Mortgage Loan Group
pursuant to clause (iv) below;
(C) THIRD, any portion of the Total Monthly Excess Cashflow with
respect to such Mortgage Loan Group remaining after the
allocations described in clauses (A) and (B) above shall be
disbursed to the Certificate Insurer in respect of amounts owed
on account of any Reimbursement Amount with respect to the
related Mortgage Loan Group; and
(D) FOURTH, any portion of the Total Monthly Excess Cashflow with
respect to such Mortgage Loan Group remaining after the
allocations described in clauses (A), (B) and (C) above shall be
paid to the Certificate Insurer in respect of any Reimbursement
Amount with respect to the other Mortgage Loan Group.
(iii) THIRD, the amount, if any, of the Total Monthly Excess Cashflow with
respect to a Mortgage Loan Group on a Payment Date remaining after the
allocations described in clause (ii) above is the "Net Monthly Excess
Cashflow" with respect to such Mortgage Loan Group for such Payment
Date; such Net Monthly Excess Cashflow is required to be allocated in
the following order of priority:
(A) FIRST, such Net Monthly Excess Cashflow shall be used to reduce
to zero, through the allocation of a Subordination Increase
Amount to the payment of the related Class A Distribution Amount
pursuant to clause (iv) below, any Subordination Deficiency
Amount with respect to the related Mortgage Loan Group as of such
Payment Date;
(B) SECOND, the Net Monthly Excess Cashflow remaining after the
application described in clause (A) above shall be used to reduce
to zero, through the allocation of a Subordination Increase
Amount to the payment of the related Class A Distribution Amount
pursuant to clause (iv) below, any Subordination Deficiency
Amounts with respect to the other Mortgage Loan Group;
(C) THIRD, an amount equal to the lesser of (i) any portion of the
Net Monthly Excess Cashflow remaining after the applications
described in clauses (A) and (B) above and (ii) the excess of (a)
the Group II Available Funds Cap Carry-Forward Amount for such
Payment Date over (b) the amount then on deposit in the Group II
Available Funds Cap Carry-Forward Amount Account shall be
allocated to the Group II Available Funds Cap Carry-Forward
Amount Account.
(D) FOURTH, any Net Monthly Excess Cashflow remaining after the
applications described in clauses (A), (B) and (C) above shall be
paid to the Servicer to the extent of any unreimbursed
Delinquency Advances, unreimbursed Servicing Advances and accrued
and unpaid Servicing Fees, in each case as certified to the
Trustee by the Servicer to be owing to it as of such Payment
Date;
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(iv) FOURTH, following the making by the Trustee of all allocations, transfers
and disbursements described above under Section 7.3 hereof and the prior
clauses of this Section 7.5, from amounts (including any related Insured
Payment which shall be paid only to the Owners of the Class A
Certificates) then on deposit in the Certificate Account with respect to
the related Mortgage Loan Group, the Trustee shall distribute in the
following order of priority:
(A) from the amounts then on deposit in the Certificate Account with
respect to Group I, to the Owners of the Class A-1 Certificates,
the Class A-1 Current Interest thereon until the Class A-1
Certificate Termination Date;
(B) from the amounts then on deposit in the Certificate Account with
respect to Group I, to the Owners of the Class A-1 Certificates,
the Group I Principal Distribution Amount until the Class A-1
Certificate Termination Date.
(C) from the amounts then on deposit in the Certificate Account with
respect to Group II, to the Owners of the Class A-2 Certificates,
the Class A-2 Current Interest until the Class A-2 Certificate
Termination Date; and
(D) from the amounts then on deposit in the Certificate Account with
respect to Group II, to the Owners of the Class A-2 Certificates,
the Group II Principal Distribution Amount until the Class A-2
Certificate Termination Date;
Notwithstanding anything to the contrary herein, the amounts described in
Section 7.5(d)(iv)(A) and (C) shall be distributed prior to all other
allocations, distributions and transfers described in Section 7.3 and 7.5
hereof (other than the amount described in Section 7.5(d)(i)).
(v) FIFTH, following the making by the Trustee of all allocations, transfers
and disbursements described above under Section 7.3 hereof and the prior
clauses of this Section 7.5, from amounts then on deposit in the
Certificate Account for both Mortgage Loan Groups, the Trustee shall
distribute to the Owners of the Class R Certificates, the Residual Net
Monthly Excess Cashflow, if any, for such Payment Date.
(e) On each Payment Date the Trustee shall distribute to the Owners of the
Class A-2 Certificates the amount, if any, then on deposit in the Group II
Available Funds Cap Carry-Forward Amount Account.
(f) Notwithstanding clause (d)(iv) above, the aggregate amounts
distributed on all Payment Dates to the Owners of the related Class A
Certificates on account of principal shall not exceed the Original Certificate
Principal Balance for the related Class A Certificates.
Section 7.6. INVESTMENT OF ACCOUNTS. (a) So long as no event
described in Sections 8.20(a) or (b) hereof shall have occurred and be
continuing, and consistent with any requirements of the Code, all or a portion
of the Accounts held by the Trustee shall be invested and reinvested by the
Trustee in the name of the Trustee for the benefit of the Owners and the
Certificate Insurer, as their interests may appear, directed in writing by the
Servicer on the Closing Date and from time to time thereafter, in one or more
Eligible Investments bearing interest or sold at a discount. During the
continuance of an event described in Sections 8.20(a) or (b) hereof and
following any removal of the Servicer, the Certificate Insurer shall direct such
investments. No investment in any Account shall mature later than the second
Business Day preceding the next Payment Date.
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(b) If any amounts are needed for disbursement from any Account held
by the Trustee and sufficient uninvested funds are not available to make such
disbursement, the Trustee shall cause to be sold or otherwise converted to cash
a sufficient amount of the investments in such Account. No investments will be
liquidated prior to maturity unless the proceeds thereof are needed for
disbursement.
(c) Subject to Section 10.1 hereof, the Trustee shall not in any way
be held liable by reason of any insufficiency in any Account held by the Trustee
resulting from any loss on any Eligible Investment included therein.
(d) The Trustee shall hold funds in the Accounts held by the Trustee
uninvested upon the occurrence of either of the following events:
(i) the Servicer or the Certificate Insurer, as the case may
be, shall have failed to give investment directions to the Trustee within
ten days after receipt of a written request for such directions from the
Trustee; or
(ii) the Servicer or the Certificate Insurer, as the case may
be, shall have failed to give investment directions to the Trustee with
respect to any investment by the Trustee that shall mature during the
ten-day period described in clause (i).
(e) For purposes of investment, the Trustee shall aggregate all
amounts on deposit in each Account. All income or other gain from investments
in any Account shall be deposited in such Account immediately on receipt, and
any loss resulting from such investments shall be charged to the Company, and
upon request by the Trustee, the Company shall reimburse the Trust Estate for
such losses.
(f) Each institution at which the Certificate Account is maintained
shall invest the funds therein in Eligible Investments, which shall mature not
later than the Business Day next preceding the related Payment Date (except that
if such Eligible Investment is an obligation of the institution that maintains
such account, then such Eligible Investment shall mature not later than such
Payment Date) and, in each case, shall not be sold or disposed of prior to its
maturity. All such Eligible Investments shall be made in the name of the
Trustee, for the benefit of the Owners and the Certificate Insurer. All income
and gain (net of any losses) realized from any such investment of funds on
deposit in the Certificate Account shall be for the benefit of the Servicer as
servicing compensation and shall be remitted to it monthly as provided herein.
The amount of any realized losses in the Certificate Account incurred in any
such account in respect of any such investments shall promptly be deposited by
the Servicer in the Certificate Account or paid to the Trustee as applicable.
The Trustee in its fiduciary capacity shall not be liable for the amount of any
loss incurred in respect of any investment or lack of investment of funds held
in the Certificate Account and made in accordance with this Section 7.6(f).
(g) The Servicer shall give notice to the Trustee, the Company, each
Rating Agency, and the Certificate Insurer of any proposed change of the
location of the Certificate Account not later than 30 days and not more than 45
days prior to any change thereof.
Section 7.7. ELIGIBLE INVESTMENTS. The following are Eligible
Investments:
(a) Direct general obligations of the United States or the
obligations of any agency or instrumentality of the United States fully and
unconditionally guaranteed, the timely payment or the guarantee of which
constitutes a full faith and credit obligation of the United States.
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(b) Federal funds, certificates of deposit, time and demand deposits,
and bankers' acceptances (having original maturities of not more than 365 days)
of any domestic bank, the short-term debt obligations of which have been rated
A-1 or better by Standard & Poor's and P-1 by Moody's.
(c) Investment agreements approved by the Certificate Insurer
provided:
1. The agreement is with a bank or insurance company which has an
unsecured, uninsured and unguaranteed obligation (or claims-paying ability)
rated Aa2 or better by Moody's and AA or better by Standard & Poor's,
2. Moneys invested thereunder may be withdrawn without any penalty,
premium or charge upon not more than one day's notice (provided such notice
may be amended or canceled at any time prior to the withdrawal date),
3. The agreement is not subordinated to any other obligations of such
insurance company or bank,
4. The same guaranteed interest rate will be paid on any future
deposits made pursuant to such agreement, and
5. The Trustee and the Certificate Insurer receive an opinion of
counsel that such agreement is an enforceable obligation of such insurance
company or bank.
(d) Commercial paper (having original maturities of not more than 365
days) rated A-1 or better by Standard & Poor's and P-1 or better by Moody's.
(e) Investments in no load money market funds rated AAAm or AAAm-G by
Standard & Poor's and Aaa by Moody's.
(f) Investments approved in writing by the Certificate Insurer and
acceptable to Moody's and Standard & Poor's.
PROVIDED that no instrument described above is permitted to evidence either the
right to receive (a) only interest with respect to obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and PROVIDED, FURTHER,
that no instrument described above may be purchased at a price greater than par.
Section 7.8. REPORTS BY TRUSTEE. (a) On each Payment Date the
Trustee shall provide to each Owner, the Servicer, the Certificate Insurer, each
of the Underwriters, the Company, Standard & Poor's and Moody's a written report
(based solely upon the information contained in the Monthly Servicing Report) in
substantially the form set forth as Exhibit J hereto with respect to each
Mortgage Loan Group, as such form may be revised by the Trustee, the Servicer,
Moody's and Standard & Poor's from time to time, but in every case setting forth
the information requested on Exhibit J hereto and the following information:
(i) the amount of the distribution with respect to the
related Class of the Class A Certificates and the Class R Certificates;
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(ii) the amount of such distributions allocable to principal,
separately identifying the aggregate amount of any Prepayments or Prepaid
Installments of principal included therein, any Pre-Funded Amounts
distributed as a prepayment (based on a Certificate in the original
principal amount of $1,000) and separately identifying any Subordination
Increase Amounts with respect to the related Mortgage Loan Group;
(iii) the amount of such distributions allocable to interest;
(iv) the Certificate Principal Balance for each Class of Class
A Certificates as of such Payment Date together with the principal amount
of such Class of Class A Certificates (based on a Certificate in an
original principal amount of $1,000) then outstanding, in each case after
giving effect to any payment of principal on such Payment Date;
(v) the amount of any Insured Payment included in the amounts
distributed with respect to the Class A Certificates on such Payment Date;
(vi) information to the extent and in the form furnished by
the Company pursuant to Section 6049(d)(7)(C) of the Code and the
regulations promulgated thereunder to assist the Owners in computing their
market discount;
(vii) the total of any Substitution Amounts and any Loan
Purchase Price amounts included in such distribution;
(viii) the amount of any Subordination Reduction Amount with
respect to each Mortgage Loan Group;
(ix) the amounts, if any, of any Realized Losses in each
Mortgage Loan Group for the related Remittance Period and the cumulative
amount of Realized Losses in each Mortgage Loan Group since the Startup
Day;
(x) for the related Remittance Period and cumulatively since
the Startup Day, the number and aggregate Loan Balance of Mortgage Loans in
each Group bought back by the Servicer or the Company pursuant to Sections
3.4, 3.6 and 8.10 (identified separately for each such section);
(xi) the amount of any Group II Available Funds Cap
Carry-Forward Amount;
(xii) a number with respect to each Class (the "Pool Factor"
for such Class) computed by dividing the Certificate Principal Balance for
such Class (after giving effect to any distribution of principal to be made
on such Payment Date) by the Original Certificate Principal Balance for
such Class on the Startup Day; and,
(xiii) for Payment Dates during the Funding Period, the
remaining Pre-Funded Amount.
Items (i) through (iii) above shall, with respect to each Class of
Class A Certificates, be presented on the basis of a Certificate having a $1,000
denomination. In addition, by January 31 of each calendar year following any
year during which the Certificates are outstanding, the Trustee shall furnish a
report to each Owner of record at any time during each calendar year as to the
aggregate of amounts reported pursuant to (i), (ii) and (iii) with respect to
the Certificates for such calendar year.
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(b) In addition, on each Payment Date the Trustee will distribute to
each Owner, the Certificate Insurer, each of the Underwriters, the Servicer, the
Company, Standard & Poor's and Moody's, together with the information described
in Subsection (a) preceding, the following information with respect to each
Mortgage Loan Group as of the last day of the related Remittance Period, which
is hereby required to be prepared by the Servicer and furnished to the Trustee
for such purpose on or prior to the related Remittance Date:
(i) the total number of Mortgage Loans in each Mortgage Loan
Group and the aggregate Loan Balances thereof, together with the number,
aggregate principal balances of such Mortgage Loans in such Mortgage Loan
Group and the percentage (based on the aggregate Loan Balances of the
Mortgage Loans in such Mortgage Loan Group) (a) 30-59 days Delinquent, (b)
60-89 days Delinquent and (c) 90 or more days Delinquent;
(ii) the number and aggregate Loan Balances of all Mortgage
Loans in each Mortgage Loan Group and percentage (based on the aggregate
Loan Balances of the Mortgage Loans in such Mortgage Loan Group) in
foreclosure proceedings (and whether any such Mortgage Loans are also
included in any of the statistics described in the foregoing clause (i));
(iii) the number, aggregate Loan Balances of all Mortgage Loans
in each Mortgage Loan Group and percentage (based on the aggregate Loan
Balances of the Mortgage Loans in such Mortgage Loan Group) relating to
Mortgagors in bankruptcy proceedings (and whether any such Mortgage Loans
are also included in any of the statistics described in the foregoing
clause (i));
(iv) the number, aggregate Loan Balances of all Mortgage
Loans in each Mortgage Loan Group and percentage (based on the aggregate
Loan Balances of the Mortgage Loans in such Mortgage Loan Group) relating
to REO Properties (and whether any such Mortgage Loans are also included in
any of the statistics described in the foregoing clause (i));
(v) the aggregate Loan Balance of all Mortgage Loans, the
aggregate Loan Balance of the Mortgage Loans in each Group and the
aggregate Loan Balance of the Initial Mortgage Loans and the Subsequent
Mortgage Loans in each Group in each case after giving effect to any
payment of principal on such Payment Date; and
(vi) the book value of any REO Property in each Mortgage Loan
Group.
(c) The foregoing reports shall be sent to an Owner only insofar as
such Owner owns a Certificate with respect to the related Mortgage Loan Group.
Section 7.9. ADDITIONAL REPORTS BY TRUSTEE. (a) The Trustee shall
report to the Company, the Servicer, Standard & Poor's, Moody's and the
Certificate Insurer with respect to the amount then held in each Account
(including investment earnings accrued or scheduled to accrue) held by the
Trustee and the identity of the investments included therein, as the Company,
the Servicer or the Certificate Insurer may from time to time request.
(b) Not later than 20 days after each Payment Date, the Trustee shall
forward to the Company, the Servicer and the Certificate Insurer a statement,
setting forth the status of the Certificate Account as of the close of business
on the last Business Day of the related Remittance Period showing, for the
period covered by such statement, the aggregate of deposits into and withdrawals
from the Certificate Account.
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ARTICLE VIII
SERVICING AND ADMINISTRATION OF MORTGAGE LOANS
Section 8.1. SERVICER AND SUB-SERVICERS. (a) Acting directly or
through one or more Sub-Servicers as provided in Section 8.3, the Servicer, as
servicer, shall service and administer the Mortgage Loans in accordance with
this Agreement and with reasonable care, and using that degree of skill and
attention that the Servicer exercises with respect to comparable mortgage loans
that it services for itself or others, and shall have full power and authority,
acting alone, to do or cause to be done any and all things in connection with
such servicing and administration which it may deem necessary or desirable.
(b) The duties of the Servicer shall include collecting and posting
of all payments, responding to inquiries of Mortgagors or by federal, state or
local government authorities with respect to the Mortgage Loans, investigating
delinquencies, reporting tax information to Mortgagors in accordance with its
customary practices and accounting for collections, furnishing monthly and
annual statements to the Trustee with respect to distributions, paying
Compensating Interest and making Delinquency Advances and Servicing Advances
pursuant hereto. The Servicer shall follow its customary standards, policies
and procedures in performing its duties as Servicer. The Servicer shall
cooperate with the Trustee and furnish to the Trustee with reasonable promptness
information in its possession as may be necessary or appropriate to enable the
Trustee to perform its tax reporting duties hereunder. The Trustee shall
furnish the Servicer with any powers of attorney and other documents necessary
or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder.
(c) Without limiting the generality of the foregoing, the Servicer
(i) shall continue, and is hereby authorized and empowered by the Trustee, to
execute and deliver, on behalf of itself, the Owners 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 related Properties; (ii) may consent
to any modification of the terms of any Note not expressly prohibited hereby if
the effect of any such modification (x) will not be to affect materially and
adversely the security afforded by the related Property, the timing of receipt
of any payments required hereby or the interests of the Certificate Insurer and
(y) will not cause the Trust to fail to qualify as a REMIC.
(d) The parties intend that the Trust (other than the Pre-Funding
Account and the Capitalized Interest Account) shall constitute and that the
affairs of Trust shall (other than the Pre-Funding Account and the Capitalized
Interest Account) shall be conducted so as to qualify it as a REMIC. In
furtherance of such intention, the Servicer covenants and agrees that it shall
act as agent (and the Servicer is hereby appointed to act as agent) on behalf of
the Trust and that in such capacity it shall: (i) use its best efforts to
conduct the affairs of the Trust at all times that any Class of Certificates are
outstanding so as to maintain the status of the Trust as a REMIC under the REMIC
Provisions; (ii) not knowingly or intentionally take any action or omit to take
any action that would cause the termination of the REMIC status of the Trust or
that would subject the Trust to tax and (iii) exercise reasonable care not to
allow the Trust to receive income from the performance of services or from
assets not permitted under the REMIC Provisions to be held by a REMIC.
(e) The Servicer may, and is hereby authorized to, perform any of its
servicing responsibilities with respect to all or certain of the Mortgage Loans
through a Sub-Servicer as it may from time to time designate but no such
designation of a Sub-Servicer shall serve to release the Servicer
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from any of its obligations under this Agreement. Such Sub-Servicer shall have
all the rights and powers of the Servicer with respect to such Mortgage Loans
under this Agreement.
(f) Without limiting the generality of the foregoing, but subject to
Sections 8.13 and 8.14, the Servicer in its own name or in the name of a
Sub-Servicer may be authorized and empowered pursuant to a power of attorney
executed and delivered by the Trustee to execute and deliver, on behalf of
itself, the Owners and the Trustee or any of them, (i) 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 Properties, (ii) to institute foreclosure proceedings or obtain a
deed in lieu of foreclosure so as to effect ownership of any Property on behalf
of the Trustee and (iii) to hold title to any Property upon such foreclosure or
deed in lieu of foreclosure on behalf of the Trustee; PROVIDED, HOWEVER, that
Section 8.14(a) shall constitute a power of attorney from the Trustee to the
Servicer to execute an instrument of satisfaction (or assignment of mortgage
without recourse) with respect to any Mortgage Loan paid in full (or with
respect to which payment in full has been escrowed). Subject to Sections 8.13
and 8.14, the Trustee shall execute a power of attorney to the Servicer and any
Sub-Servicer and furnish them with any other documents as the Servicer or such
Sub-Servicer shall reasonably request to enable the Servicer and such
Sub-Servicer to carry out their respective servicing and administrative duties
hereunder.
(g) The Servicer shall give prompt notice to the Trustee and the
Certificate Insurer of any action, of which the Servicer has actual knowledge,
to (i) assert a claim against the Trust or (ii) assert jurisdiction over the
Trust.
(h) Servicing Advances incurred by the Servicer or any Sub-Servicer
in connection with the servicing of the Mortgage Loans (including any penalties
in connection with the payment of any taxes and assessments or other charges) on
any Property shall be recoverable by the Servicer or such Sub-Servicer to the
extent described in Section 8.9(c) and in Section 7.5(d)(iii)(D) hereof.
Section 8.2. COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS. (a) The
Servicer shall, to the extent such procedures shall be consistent with this
Agreement and the terms and provisions of any applicable Insurance Policies
follow such collection procedures as it follows from time to time with respect
to mortgage loans in its servicing portfolio that are comparable to the Mortgage
Loans; PROVIDED that the Servicer shall always at least follow collection
procedures that are consistent with or better than standard industry practices.
Consistent with the foregoing, the Servicer may in its discretion (i) waive any
assumption fees, late payment charges, charges for checks returned for
insufficient funds, prepayment fees, if any, or other fees which may be
collected in the ordinary course of servicing the Mortgage Loans, (ii) if a
Mortgagor is in default or about to be in default because of a Mortgagor's
financial condition, arrange with the Mortgagor a schedule for the payment of
delinquent payments due on the related Mortgage Loan; PROVIDED, HOWEVER, the
Servicer shall not reschedule the payment of delinquent payments more than one
time in any twelve (12) consecutive months with respect to any Mortgagor or
(iii) modify payments of monthly principal and interest on any Mortgage Loan
becoming subject to the terms of the Soldiers' and Sailors' Civil Relief Act of
1940, as amended, in accordance with the Servicer's general policies of the
comparable mortgage loans subject to such Act.
(b) The Servicer shall hold in escrow on behalf of the related
Mortgagor all Prepaid Installments received by it, and shall apply such Prepaid
Installments as directed by such Mortgagor and as set forth in the related Note.
Section 8.3. SUB-SERVICING AGREEMENTS BETWEEN SERVICER AND
SUB-SERVICERS. The Servicer may enter into Sub-Servicing Agreements for any
servicing and administration of Mortgage
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Loans with any institution which is acceptable to the Certificate Insurer and
which is in compliance with the laws of each state necessary to enable it to
perform its obligations under such Sub-Servicing Agreement and (x) has (i) been
designated an approved seller-servicer by FHLMC or FNMA for Mortgage Loans and
(ii) has equity of at least $5,000,000, as determined in accordance with
generally accepted accounting principles or (y) is a Servicer Affiliate. The
Servicer shall give notice to the Certificate Insurer and the Trustee of the
appointment of any Sub-Servicer and shall furnish to the Certificate Insurer and
the Trustee a copy of such Sub-Servicing Agreement. For purposes of this
Agreement, the Servicer shall be deemed to have received payments on Mortgage
Loans when any Sub-Servicer has received such payments. Any such Sub-Servicing
Agreement shall be consistent with and not violate the provisions of this
Agreement.
Section 8.4. SUCCESSOR SUB-SERVICERS. The Servicer may terminate
any Sub-Servicing Agreement in accordance with the terms and conditions of such
Sub-Servicing Agreement and either itself directly service the related Mortgage
Loans or enter into a Sub-Servicing Agreement with a successor Sub-Servicer that
qualifies under Section 8.3.
Section 8.5. LIABILITY OF SERVICER. The Servicer shall not be
relieved of its obligations under this Agreement notwithstanding any
Sub-Servicing Agreement or any of the provisions of this Agreement relating to
agreements or arrangements between the Servicer and a Sub-Servicer or otherwise,
and the Servicer shall be obligated to the same extent and under the same terms
and conditions as if it alone were servicing and administering the Mortgage
Loans. The Servicer shall be entitled to enter into any agreement with a
Sub-Servicer for indemnification of the Servicer by such Sub-Servicer and
nothing contained in such Sub-Servicing Agreement shall be deemed to limit or
modify this Agreement. The Trust shall not indemnify the Servicer for any
losses due to the Servicer's negligence.
Section 8.6. NO CONTRACTUAL RELATIONSHIP BETWEEN SUB-SERVICER AND
TRUSTEE OR THE OWNERS. Any Sub-Servicing Agreement and any other transactions
or services relating to the Mortgage Loans involving a Sub-Servicer shall be
deemed to be between the Sub-Servicer and the Servicer alone and the Certificate
Insurer, the Trustee and the Owners shall not be deemed parties thereto and
shall have no claims, rights, obligations, duties or liabilities with respect to
any Sub-Servicer except as set forth in Section 8.7.
Section 8.7. ASSUMPTION OR TERMINATION OF SUB-SERVICING AGREEMENT BY
TRUSTEE. In connection with the assumption of the responsibilities, duties and
liabilities and of the authority, power and rights of the Servicer hereunder by
the Trustee pursuant to Section 8.20, it is understood and agreed that the
Servicer's rights and obligations under any Sub-Servicing Agreement then in
force between the Servicer and a Sub-Servicer may be assumed or terminated by
the Trustee at its option without the payment of a fee notwithstanding any
contrary provision in any Sub-Servicing Agreement.
The Servicer shall, upon reasonable request of the Trustee, but at the
expense of the Servicer, deliver to the assuming party documents and records
relating to each Sub-Servicing Agreement and an accounting of amounts collected
and held by it and otherwise use its best reasonable efforts to effect the
orderly and efficient transfer of the Sub-Servicing Agreements to the assuming
party.
Section 8.8. PRINCIPAL AND INTEREST ACCOUNT.
(a) The Servicer shall establish in the name of the Trust for the
benefit of the Owners of the Certificates and the Certificate Insurer and
maintain at one or more Designated Depository Institutions the Principal and
Interest Account. The funds held in the Principal and Interest Account shall
not be commingled with any other funds.
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Subject to Subsection (c) below, the Servicer and any Sub-Servicer
shall deposit all receipts related to the Mortgage Loans into the Principal and
Interest Account on a daily basis (but no later than the first Business Day
after receipt).
Subject to Subsection (c) below, within one Business Day following the
Startup Day, the Company and/or the Servicer shall deposit into the Principal
and Interest Account all receipts related to the related Mortgage Loans received
after the Cut-Off Date.
(b) Any investment of funds in the Principal and Interest Account
shall mature or be withdrawable at par on or prior to the immediately succeeding
Remittance Date. All funds in the Principal and Interest Account may only be
held (i) uninvested, up to the limits insured by the FDIC or (ii) invested in
Eligible Investments. The Principal and Interest Account shall be held in trust
in the name of the Trust and for the benefit of the Owners of the Certificates.
Any investment earnings on funds held in the Principal and Interest Account
shall be for the account of the Servicer and may only be withdrawn from the
Principal and Interest Account by the Servicer on the second Business Day of the
month for the investment earnings for the previous calendar month. The Servicer
shall withdraw from the Principal and Interest Account held by the Trustee, on
the second Business Day of the month, investment earnings for the previous
calendar month. The Servicer shall deposit into the Principal and Interest
Account the amount of all losses on investment of funds in the Principal and
Interest Account upon request from the Trustee. Any references herein to
amounts on deposit in the Principal and Interest Account shall refer to amounts
net of investment earnings.
(c) The Servicer shall deposit to the Principal and Interest Account
all principal and interest collections on the Mortgage Loans received after the
Cut-Off Date, including any Prepayments and Net Liquidation Proceeds, all Loan
Purchase Prices and Substitution Amounts received or paid by the Servicer with
respect to the Mortgage Loans, other recoveries or amounts related to the
Mortgage Loans received by the Servicer, Compensating Interest and Delinquency
Advances together with any amounts which are reimbursable from the Principal and
Interest Account but net of (i) the Servicing Fee with respect to each Mortgage
Loan and other servicing compensation to the Servicer as permitted by Section
8.15 hereof, (ii) principal (including Prepayments) due on the related Mortgage
Loans on or prior to the Cut-Off Date, (iii) interest accruing on the related
Mortgage Loans on or prior to the Cut-Off Date and (iv) Net Liquidation Proceeds
to the extent such Net Liquidation Proceeds exceed the Loan Balance of the
related Mortgage Loan.
(d) (i) The Servicer may make withdrawals from the Principal and
Interest Account only for the following purposes:
(A) to effect the timely remittance to the Trustee of the Monthly
Remittance Amounts due on the Remittance Date;
(B) to reimburse itself pursuant to Section 8.9(a) hereof for
unrecovered Delinquency Advances and Servicing Advances;
(C) to withdraw investment earnings on amounts on deposit in the
Principal and Interest Account;
(D) to withdraw amounts that have been deposited to the Principal and
Interest Account in error; and
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(E) to clear and terminate the Principal and Interest Account
following the termination of the Trust Estate pursuant to
Article IX hereof.
(ii) On the Determination Date of each month, commencing in January
1997 the Servicer shall send to the Trustee the Monthly Exception Report, in the
form of a computer tape, detailing the payments on the Mortgage Loans during the
prior Remittance Period and certifying the amounts and purpose of withdrawals
permitted pursuant to (d) above from the Principal and Interest Account. Such
tape shall contain the specified data, as described in Section 8.26 hereof, and
shall be in the form and have the specifications as may be agreed to between the
Servicer, the Certificate Insurer and the Trustee from time to time.
(iii) On each Remittance Date, commencing in January 1997 the
Servicer shall remit to the Trustee by wire transfer, or otherwise make funds
available in immediately available funds for deposit to the Certificate Account,
(x) for Group I, the Group I Interest Remittance Amount and the Group I
Principal Remittance Amount and (y) for Group II, the Group II Interest
Remittance Amount and the Group II Principal Remittance Amount.
Section 8.9. DELINQUENCY ADVANCES, COMPENSATING INTEREST AND
SERVICING ADVANCES. (a) The Servicer is required, not later than each
Remittance Date, to deposit into the Principal and Interest Account an amount
equal to the sum of (i) the interest due (net of the Servicing Fees due) but not
collected, (ii) on the Remittance Date in January 1997, interest accrued on each
Subsequent Mortgage Loan transferred to the Trust during the related Due Period
from the related Subsequent Cut Off Date to the last day of the related
Remittance Period and (iii) scheduled principal due, but not collected, with
respect to Delinquent Mortgage Loans during the related Due Period but only if,
in its good faith business judgment, the Servicer reasonably believes that such
amount will ultimately be recovered from the related Mortgage Loan. Such
amounts are "Delinquency Advances".
The Servicer shall be permitted to fund its payment of Delinquency
Advances on any Remittance Date and to reimburse itself for any Delinquency
Advances paid from the Servicer's own funds, from collections on any Mortgage
Loan deposited to the Principal and Interest Account subsequent to the related
Due Period and shall deposit into the Principal and Interest Account with
respect thereto (i) collections from the Mortgagor whose Delinquency gave rise
to the shortfall which resulted in such Delinquency Advance and (ii) Net
Liquidation Proceeds recovered on account of the related Mortgage Loan to the
extent of the amount of aggregate Delinquency Advances related thereto. If not
thereto recovered from the related Mortgagor or the related Net Liquidation
Proceeds, Delinquency Advances shall be recoverable pursuant to Section
7.5(d)(iii)(D).
(b) On or prior to each Remittance Date, the Servicer shall deposit
in the Principal and Interest Account with respect to any Paid-in-Full Mortgage
Loan during the related Remittance Period out of its own funds without any right
of reimbursement therefor an amount equal to the difference between (x) 30 days'
interest at such Mortgage Loan's Coupon Rate (less the Servicing Fee) on the
Loan Balance of such Mortgage Loan as of the first day of the related Remittance
Period and (y) to the extent not previously advanced, the interest (less the
Servicing Fee) paid by the Mortgagor with respect to the Mortgage Loan during
such Remittance Period (any such amount paid by the Servicer, "Compensating
Interest"). The Servicer shall in no event be required to pay Compensating
Interest with respect to any Remittance Period in an amount in excess of the
aggregate Servicing Fee received by the Servicer with respect to all Mortgage
Loans for such Remittance Period. Further, the Servicer is not obligated to
cover shortfalls in collections in interest due to Curtailments.
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(c) The Servicer will pay all "out-of-pocket" costs and expenses
incurred in the performance of its servicing obligations, including, but not
limited to, the cost of (i) Preservation Expenses, (ii) any enforcement or
judicial proceedings, including foreclosures, and (iii) the management and
liquidation of REO Property, but is only required to pay such costs and expenses
to the extent the Servicer reasonably believes such costs and expenses will
increase Net Liquidation Proceeds on the related Mortgage Loan. Each such
amount so paid will constitute a "Servicing Advance". The Servicer may recover
Servicing Advances (x) from the Mortgagors to the extent permitted by the
Mortgage Loans, from Liquidation Proceeds realized upon the liquidation of the
related Mortgage Loan, and (y) as provided in Section 7.5(d)(iii)(D) hereof. In
no case may the Servicer recover Servicing Advances from principal and interest
payments on any Mortgage Loan or from any amounts relating to any other Mortgage
Loan except as provided pursuant to Section 7.5(d)(iii)(D) hereof.
Section 8.10. PURCHASE OF MORTGAGE LOANS. The Servicer may, but is
not obligated to, purchase for its own account any Mortgage Loan which becomes
Delinquent, in whole or in part, as to four consecutive monthly installments or
any Mortgage Loan as to which enforcement proceedings have been brought by the
Servicer or by any Sub-Servicer pursuant to Section 8.13. Any such Loan so
purchased shall be purchased by the Servicer not later than the related
Remittance Date at a purchase price equal to the Loan Purchase Price thereof,
which purchase price shall be deposited in the Principal and Interest Account.
Section 8.11. MAINTENANCE OF INSURANCE. (a) The Servicer shall
cause to be maintained with respect to each Mortgage Loan a hazard insurance
policy with a generally acceptable carrier that provides for fire and extended
coverage, and which provides for a recovery by the Servicer on behalf of the
Trust of insurance proceeds relating to such Mortgage Loan in an amount not less
than the least of (i) the outstanding principal balance of the Mortgage Loan,
(ii) the minimum amount required to compensate for damage or loss on a
replacement cost basis and (iii) the full insurable value of the premises.
(b) If the Mortgage Loan at the time of origination relates to a
Property in an area identified in the Federal Register by the Federal Emergency
Management Agency as having special flood hazards, the Servicer will cause to be
maintained with respect thereto a flood insurance policy in a form meeting the
requirements of the current guidelines of the Federal Insurance Administration
with a generally acceptable carrier in an amount representing coverage, and
which provides for a recovery by the Servicer on behalf of the Trust of
insurance proceeds relating to such Mortgage Loan of not less than the least of
(i) the outstanding principal balance of the Mortgage Loan, (ii) the minimum
amount required to compensate for damage or loss on a replacement cost basis and
(iii) the maximum amount of insurance that is available under the Flood Disaster
Protection Act of 1973. The Servicer shall indemnify the Trust and the
Certificate Insurer out of the Servicer's own funds for any loss to the Trust
and the Certificate Insurer resulting from the Servicer's failure to maintain
the insurance required by this Section.
(c) In the event that the Servicer shall obtain and maintain a
blanket policy insuring against fire, flood and hazards of extended coverage on
all of the Mortgage Loans, then, to the extent such policy names the Servicer as
loss payee and provides coverage in an amount equal to the aggregate unpaid
principal balance on the Mortgage Loans without co-insurance and otherwise
complies with the requirements of this Section 8.11, the Servicer shall be
deemed conclusively to have satisfied its obligations with respect to fire and
hazard insurance coverage under this Section 8.11, it being understood and
agreed that such blanket policy may contain a deductible clause, in which case
the Servicer shall, in the event that there shall not have been maintained on
the related Property a policy complying with the preceding paragraphs of this
Section 8.11, and there shall have been a loss which would have been covered by
such policy, deposit in the Principal and Interest Account from the Servicer's
own funds the
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difference, if any, between the amount that would have been payable under a
policy complying with the preceding paragraphs of this Section 8.11 and the
amount paid under such blanket policy. Upon the request of the Trustee or the
Certificate Insurer, the Servicer shall cause to be delivered to the Trustee or
the Certificate Insurer a certified true copy of such policy.
Section 8.12. DUE-ON-SALE CLAUSES; ASSUMPTION AND SUBSTITUTION
AGREEMENTS. When a Property has been or is about to be conveyed by the
Mortgagor, the Servicer shall, to the extent it has knowledge of such conveyance
or prospective conveyance, exercise its rights to accelerate the maturity of the
related Mortgage Loan under any "due-on-sale" clause contained in the related
Mortgage or Note; PROVIDED, HOWEVER, that the Servicer shall not exercise any
such right if (i) the "due-on-sale" clause, in the reasonable belief of the
Servicer, is not enforceable under applicable law or (ii) the Servicer
reasonably believes that to permit an assumption of the Mortgage Loan would not
materially and adversely affect the interest of the Owners or of the Certificate
Insurer. In such event, the Servicer shall enter into an assumption and
modification agreement with the person to whom such property has been or is
about to be conveyed, pursuant to which such Person becomes liable under the
Note and, unless prohibited by applicable law or the related Mortgage Loan
documents, the Mortgagor remains liable thereon. If the foregoing is not
permitted under applicable law, the Servicer is authorized to enter into a
substitution of liability agreement with such person, pursuant to which the
original Mortgagor is released from liability and such person is substituted as
Mortgagor and becomes liable under the Note; PROVIDED, HOWEVER, that to the
extent any such substitution of liability agreement would be delivered by the
Servicer outside of its usual procedures for mortgage loans held in its own
portfolio the Servicer shall, prior to executing and delivering such agreement,
obtain the prior written consent of the Certificate Insurer. The Mortgage Loan,
as assumed, shall conform in all respects to the requirements, representations
and warranties of this Agreement. The Servicer shall notify the Trustee that
any such assumption or substitution agreement has been completed by forwarding
to the Trustee the original copy of such assumption or substitution agreement,
which copy shall be added by the Trustee to the related File and which shall,
for all purposes, be considered a part of such File to the same extent as all
other documents and instruments constituting a part thereof. The Servicer shall
be responsible for recording any such assumption or substitution agreements. In
connection with any such assumption or substitution agreement, the required
monthly payment on the related Mortgage Loan shall not be changed but shall
remain as in effect immediately prior to the assumption or substitution, the
stated maturity or outstanding principal amount of such Mortgage Loan shall not
be changed nor shall any required monthly payments of principal or interest be
deferred or forgiven. Any fee collected by the Servicer or the Sub-Servicer for
consenting to any such conveyance or entering into an assumption or substitution
agreement shall be retained by or paid to the Servicer as additional servicing
compensation.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.
Section 8.13. REALIZATION UPON DEFAULTED MORTGAGE LOANS. (a) The
Servicer shall foreclose upon or otherwise comparably effect the ownership on
behalf of the Trust of Properties relating to defaulted Mortgage Loans as to
which no satisfactory arrangements can be made for collection of Delinquent
payments and which the Servicer has not purchased pursuant to Section 8.10. In
connection with such foreclosure or other conversion, the Servicer shall
exercise such of the rights and powers vested in it hereunder, and use the same
degree of care and skill in its exercise or use as prudent mortgage lenders
would exercise or use under the circumstances in the conduct of their own
affairs, including, but not limited to, advancing funds for the payment of
taxes, amounts due with respect to Senior Liens and insurance premiums. Any
amounts so advanced shall constitute "Servicing Advances" within the meaning
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of Section 8.9(c) hereof. The Servicer shall sell any REO Property within 23
months of its acquisition by the Trust, unless the Servicer obtains for the
Trustee and the Certificate Insurer an opinion of counsel experienced in federal
income tax matters and reasonably acceptable to the Certificate Insurer,
addressed to the Trustee, the Certificate Insurer and the Servicer, to the
effect that the holding by the Trust of such REO Property for any greater period
will not result in the imposition of taxes on "Prohibited Transactions" of the
Trust as defined in Section 860F of the Code or cause the Trust to fail to
qualify as a REMIC under the REMIC Provisions at any time that any Certificates
are outstanding, in which case the Servicer shall sell any REO Property by the
end of any extended period specified in any such opinion.
Notwithstanding the generality of the foregoing provisions, the
Servicer shall manage, conserve, protect and operate each REO Property for the
Owners solely for the purpose of its prompt disposition and sale in a manner
which does not cause such REO Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code or result in the
receipt by the Trust of any "income from non-permitted assets" within the
meaning of Section 860F(a)(2)(B) of the Code or any "net income from foreclosure
property" which is subject to taxation under the REMIC Provisions. Pursuant to
its efforts to sell such REO Property, the Servicer shall either itself or
through an agent selected by the Servicer protect and conserve such REO Property
in the same manner and to such extent as is customary in the locality where such
REO Property is located and may, incident to its conservation and protection of
the interests of the Owners, rent the same, or any part thereof, as the Servicer
deems to be in the best interest of the Owners for the period prior to the sale
of such REO Property. The Servicer shall take into account the existence of any
hazardous substances, hazardous wastes or solid wastes, as such terms are
defined in the Comprehensive Environmental Response Compensation and Liability
Act, the Resource Conservation and Recovery Act of 1976, or other federal, state
or local environmental legislation, on a Property in determining whether to
foreclose upon or otherwise comparably convert the ownership of such Property.
(b) The Servicer shall determine, with respect to each defaulted
Mortgage Loan, when it has recovered, whether through trustee's sale,
foreclosure sale or otherwise, all amounts it expects to recover from or on
account of such defaulted Mortgage Loan, whereupon such Mortgage Loan shall
become a "Liquidated Loan".
Section 8.14. TRUSTEE TO COOPERATE; RELEASE OF FILES. (a) Upon the
payment in full of any Mortgage Loan (including the repurchase of any Mortgage
Loan or any liquidation of such Mortgage Loan through foreclosure or otherwise)
or the receipt by the Servicer of a notification that payment in full will be
escrowed in a manner customary for such purposes, the Servicer shall deliver to
the Trustee a Request for Release. Upon receipt of such Request for Release,
the Custodian, on behalf of the Trustee, shall promptly release the related
File, in trust to (i) the Servicer, (ii) an escrow agent or (iii) any employee,
agent or attorney of the Trustee, in each case pending its release by the
Servicer, such escrow agent or such employee, agent or attorney of the Trustee,
as the case may be. Upon any such payment in full or the receipt of such
notification that such funds have been placed in escrow, the Servicer is
authorized to give, as attorney-in-fact for the Trustee and the mortgagee under
the Mortgage which secured the Note, an instrument of satisfaction (or
assignment of Mortgage without recourse) regarding the Property relating to such
Mortgage, which instrument of satisfaction or assignment, as the case may be,
shall be delivered to the Person or Persons entitled thereto against receipt
therefor of payment in full, it being understood and agreed that no expense
incurred in connection with such instrument of satisfaction or assignment, as
the case may be, shall be chargeable to the Principal and Interest Account. In
lieu of executing any such satisfaction or assignment, as the case may be, the
Servicer may prepare and submit to the Trustee a satisfaction (or assignment
without recourse, if requested by the Person or Persons entitled thereto) in
form for execution by the Trustee with all requisite
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information completed by the Servicer; in such event, the Trustee shall execute
and acknowledge such satisfaction or assignment, as the case may be, and deliver
the same with the related File, as aforesaid.
(b) From time to time and as appropriate in the servicing of any
Mortgage Loan, including, without limitation, foreclosure or other comparable
conversion of a Mortgage Loan or collection under any applicable Insurance
Policy, the Custodian on behalf of the Trustee shall (except in the case of the
payment or liquidation pursuant to which the related File is released to an
escrow agent or an employee, agent or attorney of the Trustee), upon request of
the Servicer and delivery to the Custodian of a Request for Release, release the
related File to the Servicer and shall execute such documents as shall be
necessary to the prosecution of any such proceedings, including, without
limitation, an assignment without recourse of the related Mortgage to the
Servicer; provided that there shall not be released and unreturned at any one
time more than 10% of the entire number of Files. The Trustee shall complete in
the name of the Trustee any endorsement in blank on any Note prior to releasing
such Note to the Servicer. Such receipt shall obligate the Servicer to return
the File to the Custodian when the need therefor by the Servicer no longer
exists unless the Mortgage Loan shall be liquidated in which case, upon receipt
of the liquidation information, in physical or electronic form, the Request for
Release shall be released by the Trustee to the Servicer.
(c) The Servicer shall have the right to approve applications of
Mortgagors for consent to (i) partial releases of Mortgages, (ii) alterations
and (iii) removal, demolition or division of properties subject to Mortgages.
No application for approval shall be considered by the Servicer unless: (x) the
provisions of the related Note and Mortgage have been complied with; (y) the
Combined Loan-to-Value Ratio (which may, for this purpose, be determined at the
time of any such action in a manner reasonably acceptable to the Certificate
Insurer) after any release does not exceed the Combined Loan-to-Value Ratio as
of the Cut-Off Date or Subsequent Cut-Off Date, as the case may be, and the
Mortgagor's debt-to-income ratio after any release does not exceed the
debt-to-income ratio as of the Cut-Off Date or Subsequent Cut-Off Date, as the
case may be, and in no event exceeds the maximum debt-to-income levels under the
related Originator's underwriting guidelines for a similar credit grade borrower
and (z) the lien priority of the related Mortgage is not adversely affected.
Upon receipt by the Trustee of an Officer's Certificate executed on behalf of
the Servicer setting forth the action proposed to be taken in respect of a
particular Mortgage Loan and certifying that the criteria set forth in the
immediately preceding sentence have been satisfied, the Trustee shall execute
and deliver to the Servicer the consent or partial release so requested by the
Servicer. A proposed form of consent or partial release, as the case may be,
shall accompany any Officer's Certificate delivered by the Servicer pursuant to
this paragraph.
(d) No costs associated with the procedures described in this Section
8.14 shall be an expense of the Trust.
Section 8.15. SERVICING COMPENSATION. As compensation for its
activities hereunder, the Servicer shall be entitled to retain the amount of the
Servicing Fee with respect to each Mortgage Loan. Additional servicing
compensation in the form of prepayment charges, release fees, bad check charges,
assumption fees, late payment charges, prepayment penalties, any other
servicing-related fees, Net Liquidation Proceeds not required to be deposited in
the Principal and Interest Account pursuant to Section 8.8(c)(iv) and similar
items shall, to the extent collected from Mortgagors, be retained by the
Servicer.
Section 8.16. ANNUAL STATEMENT AS TO COMPLIANCE. (a) The Servicer,
at its own expense, will deliver to the Trustee, the Certificate Insurer,
Standard & Poor's and Moody's, on or before the last day of December of each
year, commencing in 1997, an Officer's Certificate stating, as to each signer
thereof, that (i) a review of the activities of the Servicer during such
preceding calendar
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year and of performance under this Agreement has been made under such officers'
supervision and (ii) to the best of such officers' knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement for
such year, or, if there has been a default in the fulfillment of all such
obligations, specifying each such default known to such officers and the nature
and status thereof including the steps being taken by the Servicer to remedy
such defaults.
(b) The Servicer shall deliver to the Trustee, the Certificate
Insurer, the Owners and 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 lapse of time, or both, would become an Event of Servicing
Termination.
Section 8.17. ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS'
REPORTS. On or before the last day of March of each year, commencing in 1997,
the Servicer, at its own expense, shall cause to be delivered to the Trustee,
the Certificate Insurer, Standard & Poor's and Moody's a letter or letters of a
firm of independent, nationally- recognized certified public accountants
reasonably acceptable to the Certificate Insurer stating that such firm has,
with respect to the Servicer's overall servicing operations during the preceding
calendar year, examined such operations in accordance with the requirements of
the Uniform Single Audit Program for Mortgage Bankers, and in either case
stating such firm's conclusions relating thereto.
Section 8.18. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING THE MORTGAGE LOANS. The Servicer shall provide to the Trustee, the
Certificate Insurer, the FDIC and the supervisory agents and examiners of each
of the foregoing access to the documentation regarding the Mortgage Loans
required by applicable state and federal regulations, such access being afforded
without charge but only upon reasonable request and during normal business hours
at the offices of the Servicer designated by it.
Upon any change in the format of the computer tape maintained by the
Servicer in respect of the Mortgage Loans, the Servicer shall deliver a copy of
such computer tape to the Trustee and in addition shall provide a copy of such
computer tape to the Trustee, and the Certificate Insurer at such other times as
the Trustee or the Certificate Insurer may reasonably request.
Section 8.19. ASSIGNMENT OF AGREEMENT. The Servicer may not assign
its obligations under this Agreement, in whole or in part, unless it shall have
first obtained the written consent of the Trustee and the Certificate Insurer,
which such consent shall not be unreasonably withheld; PROVIDED, HOWEVER, that
any assignee must meet the eligibility requirements set forth in Section 8.21(f)
hereof for a successor servicer. Notice of any such assignment shall be given
by the Servicer to the Trustee, the Certificate Insurer and the Rating Agencies.
Section 8.20. EVENTS OF SERVICING TERMINATION. (a) The Trustee or
the Certificate Insurer (or the Owners pursuant to Section 6.11 hereof) may
remove the Servicer (including any successor entity serving as the Servicer)
upon the occurrence of any of the following events:
(i) The Servicer shall fail to deliver to the Trustee any
proceeds or required payment, which failure continues unremedied for five
Business Days following written notice to an Authorized Officer of the
Servicer from the Trustee or from any Owner;
(ii) The Servicer shall (I) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian or similar
entity with respect to itself or its property, (II) admit in writing its
inability to pay its debts generally as they become due, (III) make a
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general assignment for the benefit of creditors, (IV) be adjudicated a
bankrupt or insolvent, (V) commence a voluntary case under the federal
bankruptcy laws of the United States of America or file a voluntary
petition or answer seeking reorganization, an arrangement with creditors or
an order for relief or seeking to take advantage of any insolvency law or
file an answer admitting the material allegations of a petition filed
against it in any bankruptcy, reorganization or insolvency proceeding or
(VI) take corporate action for the purpose of effecting any of the
foregoing;
(iii) If without the application, approval or consent of the
Servicer, a proceeding shall be instituted in any court of competent
jurisdiction, under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking in respect of the Servicer an
order for relief or an adjudication in bankruptcy, reorganization,
dissolution, winding up, liquidation, a composition or arrangement with
creditors, a readjustment of debts, the appointment of a trustee, receiver,
liquidator, custodian or similar entity with respect to the Servicer or of
all or any substantial part of its assets, or other like relief in respect
thereof under any bankruptcy or insolvency law, and, if such proceeding is
being contested by the Servicer in good faith, the same shall (A) result in
the entry of an order for relief or any such adjudication or appointment or
(B) continue undismissed or pending and unstayed for any period of
seventy-five (75) consecutive days;
(iv) The Servicer shall fail to perform any one or more of its
obligations hereunder (other than the obligations set out in (i) above) and
shall continue in default thereof for a period of sixty (60) days after the
earlier of (x) notice by the Trustee or the Certificate Insurer of said
failure or (y) actual knowledge of an officer of the Servicer; PROVIDED,
HOWEVER, that if the Servicer can demonstrate to the reasonable
satisfaction of the Certificate Insurer that it is diligently pursuing
remedial action, then the cure period may be extended with the written
approval of the Certificate Insurer; or
(v) The Servicer shall fail to cure any breach of any of its
representations and warranties set forth in Section 3.2 which materially
and adversely affects the interests of the Owners or Certificate Insurer
for a period of sixty (60) days after the Servicer's discovery or receipt
of notice thereof; PROVIDED, HOWEVER, that if the Servicer can demonstrate
to the reasonable satisfaction of the Certificate Insurer that it is
diligently pursuing remedial action, then the cure period may be extended
with the written approval of the Certificate Insurer.
(b) The Certificate Insurer may remove the Servicer upon the
occurrence of any of the following events:
(i) a Group I Total Available Funds Shortfall or a Group II
Total Available Funds Shortfall; PROVIDED, HOWEVER, that the Certificate
Insurer shall have no right to remove the Servicer under this clause (i) if
the Servicer can demonstrate to the reasonable satisfaction of the
Certificate Insurer that such event was due to circumstances beyond the
control of the Servicer;
(ii) the failure by the Servicer to make any required Servicing
Advance;
(iii) the failure by the Servicer to perform any one or more of
its obligations hereunder, which failure materially and adversely affects
the interests of the Certificate Insurer, and the continuance of such
failure for a period of 30 days or such longer period as agreed to in
writing by the Certificate Insurer.
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(iv) the failure by the Servicer to make any required
Delinquency Advance or to pay any Compensating Interest;
(v) if on any Payment Date the Pool Rolling Three Month
Delinquency Rate exceeds 7.0%;
(vi) if on any Payment Date occurring in December of any year,
commencing in December 1997, the aggregate Pool Cumulative Realized Losses
over the prior twelve month period exceed 2.0% of the average Pool
Principal Balance as of the close of business on the last day of each of
the twelve preceding Remittance Periods; or
(vii) (a) if on any of the first 60 Payment Dates from the
Startup Day the aggregate Pool Cumulative Expected Losses for all prior
Remittance Periods since the Startup Day exceed 5.0% of the Pool Principal
Balance as of the Cut-Off Date and (b) if on any Payment Date thereafter
the aggregate Pool Cumulative Expected Losses for all prior Remittance
Periods from the Startup Day exceed 6.5% of the Pool Principal Balance as
of the Cut-Off Date, PROVIDED, HOWEVER, with respect to clauses (v), (vi)
and (vii), if the Servicer can demonstrate to the reasonable satisfaction
of the Certificate Insurer that any such event was due to circumstances
beyond the control of the Servicer, such event shall not be considered an
event of termination of the Servicer.
Upon the Trustee's determination that a required Delinquency Advance or payment
of Compensating Interest has not been made by the Servicer, the Trustee shall so
notify in writing an Authorized Officer of the Servicer and the Certificate
Insurer as soon as is reasonably practical.
(c) In the case of clauses (i), (ii), (iii), (iv) or (v) of
Subsection (b) the Owners of Certificates evidencing not less than 33 1/3% of
the aggregate Class A Certificate Principal Balance (with the consent of the
Certificate Insurer) by notice then given in writing to the Servicer (and a copy
to the Trustee) may terminate all of the rights and obligations of the Servicer
under this Agreement; PROVIDED, HOWEVER, that the responsibilities and duties of
the initial Servicer with respect to the repurchase of Mortgage Loans pursuant
to Section 3.4 shall not terminate. The Trustee shall mail a copy of any notice
given by it hereunder to the Rating Agencies. On or after the receipt by the
Servicer of such written notice, all authority and power of the Servicer under
this Agreement, whether with respect to the Certificates or the Mortgage Loans
or otherwise, shall without further action pass to and be vested in the Trustee
(for this purpose, the term includes an affiliate thereof) or such successor
Servicer as may be appointed hereunder, and, without limitation, the Trustee is
hereby authorized and empowered (which authority and power are coupled with an
interest and are irrevocable) to execute and deliver, on behalf of the
predecessor 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 or termination, whether to
complete the transfer and endorsement of the Mortgage Loans and related
documents or otherwise. The predecessor Servicer shall cooperate with the
successor Servicer or the Trustee in effecting the termination of the
responsibilities and rights of the predecessor Servicer under this Agreement
including the transfer to the successor Servicer or to the Trustee for
administration by it of all cash accounts that shall at the time be held by the
predecessor Servicer for deposit or shall thereafter be received with respect to
a Mortgage Loan. All reasonable costs and expenses (including attorneys' fees)
incurred in connection with transferring the Files to the successor Servicer and
amending this Agreement to reflect such succession as Servicer pursuant to this
Section 8.20 shall be paid by the predecessor Servicer upon presentation of
reasonable documentation of such costs and expenses.
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(d) If any event described in subsections (a) or (b) above occurs and
is continuing, during the 30 day period following receipt of notice, the Trustee
and the Certificate Insurer shall cooperate with each other to determine if the
occurrence of such event is more likely than not the result of the acts or
omissions of the Servicer or more likely than not the result of events beyond
the control of the Servicer. If the Trustee and the Certificate Insurer
conclude that the event is the result of the latter, the Servicer may not be
terminated, unless and until some other event set forth in subsection (a) or (b)
has occurred and is continuing. If the Trustee and the Certificate Insurer
conclude that the event is the result of the former, the Certificate Insurer may
terminate the Servicer in accordance with this Section, and the Trustee shall
act as successor Servicer.
If the Trustee and the Certificate Insurer cannot agree, and the basis
for such disagreement is not arbitrary or unreasonable, as to the cause of the
event, the decision of the Certificate Insurer shall control; PROVIDED, HOWEVER,
that if the Certificate Insurer decides to terminate the Servicer, the Trustee
shall be relieved of its obligation to assume the servicing or to appoint a
successor, which shall be the exclusive obligation of the Certificate Insurer.
The Certificate Insurer agrees to use its best efforts to inform the
Trustee of any materially adverse information regarding the Servicer's servicing
activities that comes to the attention of the Certificate Insurer from time to
time.
Section 8.21. RESIGNATION OF SERVICER AND APPOINTMENT OF SUCCESSOR.
(a) Upon the Servicer's receipt of notice of termination pursuant to Section
8.20 or the Servicer's resignation in accordance with the terms of this Section
8.21, the predecessor Servicer shall continue to perform its functions as
Servicer under this Agreement, in the case of termination, only until the date
specified in such termination notice or, if no such date is specified in a
notice of termination, until receipt of such notice and, in the case of
resignation, until the earlier of (x) the date 45 days from the delivery to the
Certificate Insurer and the Trustee of written notice of such resignation (or
written confirmation of such notice) in accordance with the terms of this
Agreement and (y) the date upon which the predecessor Servicer shall become
unable to act as Servicer, as specified in the notice of resignation and
accompanying opinion of counsel. All collections then being held by the
predecessor Servicer prior to its removal and any collections received by the
Servicer after removal or resignation shall be endorsed by it to the Trustee and
remitted directly and immediately to the Trustee or the successor Servicer. In
the event of the Servicer's resignation or termination hereunder, the Trustee
shall appoint a successor Servicer and the successor Servicer shall accept its
appointment by a written assumption in form acceptable to the Trustee and the
Certificate Insurer, with copies to the Certificate Insurer and the Rating
Agencies. Pending such appointment, the Trustee shall act as the Servicer
hereunder.
(b) The Servicer shall not resign from the obligations and duties
hereby imposed on it, except (i) upon determination that its duties hereunder
are no longer permissible under applicable law or are in material conflict by
reason of applicable law with any other activities carried on by it, the other
activities of the Servicer so causing such a conflict being of a type and nature
carried on by the Servicer at the date of this Agreement or (ii) upon written
consent of the Certificate Insurer and the Trustee. Any such determination
permitting the resignation of the Servicer shall be evidenced by an opinion of
counsel to such effect which shall be delivered to the Trustee and the
Certificate Insurer.
(c) No removal or resignation of the Servicer shall become effective
until the Trustee or a successor Servicer shall have assumed the Servicer's
responsibilities and obligations in accordance with this Section.
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(d) Upon removal or resignation of the Servicer, the Servicer also
shall promptly deliver or cause to be delivered to a successor Servicer or the
Trustee all the books and records (including, without limitation, records kept
in electronic form) that the Servicer has maintained for the Mortgage Loans,
including all tax bills, assessment notices, insurance premium notices and all
other documents as well as all original documents then in the Servicer's
possession.
(e) Any collections received by the Servicer after removal or
resignation shall be endorsed by it to the Trustee and remitted directly and
immediately to the Trustee, or the successor Servicer.
(f) Upon removal or resignation of the Servicer, the Trustee (x)
shall solicit bids for a successor Servicer as described below and (y) pending
the appointment of a successor Servicer as a result of soliciting such bids,
shall serve as Servicer. The Trustee shall, if it is unable to obtain a
qualifying bid and is prevented by law from acting as Servicer, (I) appoint, or
petition a court of competent jurisdiction to appoint, any housing and home
finance institution, bank or mortgage servicing institution which has been
designated as an approved seller-servicer by FNMA or FHLMC for second mortgage
loans and having equity of not less than $15,000,000 or such lower level as may
be acceptable to the Certificate Insurer as determined in accordance with
generally accepted accounting principles as the successor to the Servicer
hereunder in the assumption of all or any part of the responsibilities, duties
or liabilities of the Servicer hereunder and (II) give notice thereof to the
Certificate Insurer and Rating Agencies. The compensation of any successor
Servicer (including, without limitation, the Trustee) so appointed shall be the
Servicing Fee, together with the other servicing compensation in the form of
assumption fees, late payment charges or otherwise as provided in Sections 8.8
and 8.15; PROVIDED, HOWEVER, that if the Trustee acts as successor Servicer,
then the former Servicer agrees to pay to the Trustee at such time that the
Trustee becomes such successor Servicer a set-up fee of twenty-five dollars
($25.00) for each Mortgage Loan then included in the Trust Estate. The Trustee
shall be obligated to serve as successor Servicer whether or not the fee
described in the preceding sentence is paid by the Company, but shall in any
event be entitled to receive, and to enforce payment of, such fee from the
former Servicer.
(g) In the event the Trustee solicits bids as provided above, the
Trustee shall solicit, by public announcement, bids from housing and home
finance institutions, banks and mortgage servicing institutions meeting the
qualifications set forth above. Such public announcement shall specify that the
successor Servicer shall be entitled to the full amount of the aggregate
Servicing Fees as servicing compensation, together with the other servicing
compensation in the form of assumption fees, late payment charges or otherwise
as provided in Sections 8.8 and 8.15. Within thirty days after any such public
announcement, the Trustee shall negotiate and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest satisfactory bid as to the price they
will pay to obtain such servicing. The Trustee shall deduct from any sum
received by the Trustee from the successor to the Servicer in respect of such
sale, transfer and assignment all costs and expenses of any public announcement
and of any sale, transfer and assignment of the servicing rights and
responsibilities hereunder. After such deductions, the remainder of such sum
shall be paid by the Trustee to the Servicer at the time of such sale.
(h) The Trustee and such successor shall take such action consistent
with this Agreement as shall be necessary to effectuate any such succession,
including the notification to all Mortgagors of the transfer of servicing if
such notification is not done by the Servicer as required by subsection (j)
below. The Servicer agrees to cooperate with the Trustee and any successor
Servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Trustee or
such successor Servicer, as applicable, all documents and records
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reasonably requested by it to enable it to assume the Servicer's functions
hereunder and shall promptly also transfer to the Trustee or such successor
Servicer, as applicable, all amounts which then have been or should have been
deposited in the Principal and Interest Account by the Servicer or which are
thereafter received with respect to the Mortgage Loans. Neither the Trustee nor
any other successor Servicer shall be held liable by reason of any failure to
make, or any delay in making, any distribution hereunder or any portion thereof
caused by (i) the failure of the Servicer to deliver, or any delay in delivery,
cash, documents or records to it or (ii) restrictions imposed by any regulatory
authority having jurisdiction over the Servicer.
(i) The Trustee or any other successor Servicer, upon assuming the
duties of Servicer hereunder, shall immediately make all Delinquency Advances
and pay all Compensating Interest which the Servicer has theretofore failed to
remit with respect to the Mortgage Loans; PROVIDED, HOWEVER, that if the
Trustee is acting as successor Servicer, the Trustee shall only be required to
make Delinquency Advances (including the Delinquency Advances described in this
clause (i)) if, in the Trustee's reasonable good faith judgment, such
Delinquency Advances will ultimately be recoverable from the Mortgage Loans.
(j) The Servicer which is being removed or is resigning shall give
notice to the Mortgagors and to the Rating Agencies of the transfer of the
servicing to the successor Servicer.
(k) Upon appointment, the successor Servicer shall be the successor
in all respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties and liabilities of the predecessor Servicer including,
but not limited to, the maintenance of the hazard insurance policy(ies), the
fidelity bond and an errors and omissions policy pursuant to Section 8.23 and
shall be entitled to the Monthly Servicing Fee and all of the rights granted to
the predecessor Servicer by the terms and provisions of this Agreement. The
appointment of a successor Servicer shall not affect any liability of the
predecessor Servicer which may have arisen under this Agreement prior to its
termination as Servicer (including, without limitation, any deductible under an
insurance policy) nor shall any successor Servicer be liable for any acts or
omissions of the predecessor Servicer or for any breach by such Servicer of any
of its representations or warranties contained herein or in any related document
or agreement.
(l) The Trustee shall give notice to the Certificate Insurer, Moody's
and Standard & Poor's and the Owners of the occurrence of any event specified in
Section 8.20 of which a Responsible Officer of the Trustee has actual knowledge.
Section 8.22. WAIVER OF PAST EVENTS OF SERVICING TERMINATION.
Subject to the rights of the Certificate Insurer pursuant to Section 8.20 to
terminate all of the rights and obligations of the Servicer under this
Agreement, the Owners of at least 51% of the Class A Certificate Principal
Balance may, on behalf of all Owners of Certificates, waive any default by the
Servicer in the performance of its obligations hereunder and its consequences,
except a default in making any required deposits to or payments from the
Principal and Interest Account in accordance with this Agreement. Upon any such
waiver of a past default, such default shall cease to exist, and any Event of
Servicing Termination arising therefrom shall be deemed to have been remedied
for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
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Section 8.23. INSPECTIONS BY CERTIFICATE INSURER; ERRORS AND
OMISSIONS INSURANCE. (a) At any reasonable time and from time to time upon
reasonable notice, the Certificate Insurer, the Trustee, or any agents or
representatives thereof may inspect the Servicer's servicing operations and
discuss the servicing operations of the Servicer with any of its officers or
directors. The costs and expenses incurred by the Servicer or its agents or
representatives in connection with any such examinations or discussions shall be
paid by the Servicer.
(b) The Servicer agrees to maintain errors and omissions coverage and
a fidelity bond, each at least to the extent generally maintained by prudent
mortgage loan servicers having servicing portfolios of a similar size.
Section 8.24. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS OF SERVICER. Any corporation into which the Servicer may be merged or
converted or with which it may be consolidated, or corporation resulting from
any merger, conversion or consolidation to which the Servicer shall be a party
or any corporation succeeding to all or substantially all of the business of the
Servicer shall be the successor of the Servicer hereunder, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto provided that such corporation meets the qualifications set forth in
Section 8.21(f).
Section 8.25. NOTICES OF MATERIAL EVENTS. The Servicer shall give
prompt notice to the Certificate Insurer, the Trustee, Moody's and Standard &
Poor's of the occurrence of any of the following events:
(a) Any default or any fact or event which results, or which with
notice or the passage of time, or both, would result in the occurrence of a
default by the Company, any Originator or the Servicer under any Operative
Document or would constitute a material breach of a representation, warranty or
covenant under any Operative Document;
(b) The submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation against the
Company or the Servicer in any federal, state or local court or before any
governmental body or agency or before any arbitration board or any such
proceedings threatened by any governmental agency, which, if adversely
determined, would have a material adverse effect upon any the Company's or the
Servicer's ability to perform its obligations under any Operative Document;
(c) The commencement of any proceedings by or against the Company or
the Servicer under any applicable bankruptcy, reorganization, liquidation,
insolvency or other similar law now or hereafter in effect or of any proceeding
in which a receiver, liquidator, trustee or other similar official shall have
been, or may be, appointed or requested for the Company or the Servicer; and
(d) The receipt of notice from any agency or governmental body having
authority over the conduct of any of the Company's or the Servicer's business
that the Company or the Servicer is to cease and desist, or to undertake any
practice, program, procedure or policy employed by the Company or the Servicer
in the conduct of the business of any of them, and such cessation or undertaking
will materially and adversely affect the conduct of the Company's or the
Servicer's business or its ability to perform under the Operative Documents or
materially and adversely affect the financial affairs of the Company or the
Servicer.
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Section 8.26. MONTHLY SERVICING REPORT AND SERVICING CERTIFICATE.
(a) The Servicer shall, not later than the related Determination Date, deliver
to the Trustee and the Certificate Insurer a Monthly Servicing Report relating
to the Group I Mortgage Loans and a Monthly Servicing Report relating to the
Group II Mortgage Loans in computer readable format stating the following:
(i) As to the related Due Period, the Interest Remittance Amount
(in both cases specifying the (a) scheduled interest collected;
(b) Delinquency Advances relating to interest; and (c) Compensating
Interest paid) and the Principal Remittance Amount (in both cases
specifying the (1) scheduled principal collected; (2) Delinquency Advance
relating to Mortgage principal; (3) Prepayments; (4) Loan Balance of Loans
repurchased; (5) Substitution Amounts; and (6) Net Liquidation Proceeds
(related to principal));
(ii) With respect to the related Remittance Period, the Servicing
Fee payable to the Servicer;
(iii) With respect to the related Remittance Period, the net
scheduled principal and interest payments remitted by the Servicer to the
Principal and Interest Account;
(iv) The scheduled principal and interest payments on the
Mortgage Loans that were not made by the related Mortgagors as of the last
day of the related Remittance Period;
(v) The number and aggregate Loan Balances (computed in
accordance with the terms of the Mortgage Loans) and the percentage of the
total number of Mortgage Loans and of the Loan Balance which they represent
of Mortgage Loans Delinquent, if any, (i) 30-59 days, (ii) 60-89 days and
(iii) 90 days or more, respectively, as of the last day of the related
Remittance Period;
(vi) The number and aggregate Loan Balances of Mortgage Loans, if
any, in foreclosure and the book value (within the meaning of 12 Code of
Federal Regulations Section 571.13 or any comparable provision) of any real
estate acquired through foreclosure or deed in lieu of foreclosure,
including REO Properties as of the last day of the related Remittance
Period;
(vii) The Loan Balances (immediately prior to being classified as
Liquidated Mortgage Loans) of Liquidated Mortgage Loans as of the last day
of the related Remittance Period;
(viii) Liquidation Proceeds received during the related Remittance
Period;
(ix) The amount of any Liquidation Expenses being deducted from
Liquidation Proceeds or otherwise being charged to the Principal and
Interest Account with respect to such Determination Date;
(x) Liquidation Expenses incurred during the related Remittance
Period which are not being deducted from Liquidation Proceeds or otherwise
being charged to the Principal and Interest Account with respect to such
Determination Date;
(xi) Net Liquidation Proceeds as of the last day of the related
Remittance Period;
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(xii) Insurance payments received from Insurance Policies during
the related Remittance Period;
(xiii) The number of Mortgage Loans and the aggregate scheduled
Loan Balances as of the last day of the Due Period relating to the Payment
Date;
(xiv) The Group I Total Available Funds and the Group II Total
Available Funds for each Remittance Date;
(xv) The number and aggregate Loan Balances and Loan Purchase
Prices of Mortgage Loans required to be repurchased by the Company or
purchased by the Servicer as of the Replacement Cut-Off Date occurring
during the Remittance Period preceding such Date;
(xvi) The number and aggregate Loan Balances of Mortgage Loans (at
the time they became Defaulted Mortgage Loans) which are being carried as
REO Properties;
(xvii) The amount of any Delinquency Advances made by the Servicer
during the related Remittance Period and any unreimbursed Delinquency
Advances as of such Payment Date;
(xviii) The weighted average Coupon Rates of the Group I and Group
II Mortgage Loans, respectively;
(xix) The Monthly Exception Report;
(xx) The amount of any Substitution Amounts delivered by the
Company;
(xxi) The number and aggregate Loan Balances of Mortgage Loans, if
any, in bankruptcy proceedings as of the last day of related Remittance
Period;
(xxii) The amount of unreimbursed Delinquency Advances made by the
Servicer;
(xxiii) The amounts, if any, of the Realized Losses in each
Mortgage Loan Group for the related Remittance Period and the cumulative
amount of Realized Losses in each Mortgage Loan Group since the Startup
Date.
(xxiv) The amount of unreimbursed Servicing Advances made by the
Servicer;
(xxv) Unpaid Servicing Fees;
(xxvi) The amount of Compensating Interest to be paid by the
Servicer during the related Remittance Period;
(xxvii) The weighted average net Coupon Rate of the Mortgage Loans;
(xxviii) For the related Remittance Period and cumulatively
since the Startup Day, the number and aggregate Loan Balance of Mortgage
Loans bought back by the Servicer or the Company pursuant to Section 3.4,
3.6 and 8.10 hereof (identified separately for each such section).
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(xxix) Any other information reasonably requested by the
Certificate Insurer or the Trustee; and
(xxx) The aggregate actual Loan Balance as of the last day of the
Due Period relating to the Payment Date.
(b) On each Payment Date, the Trustee shall provide to the
Certificate Insurer, each of the Underwriters, the Company, Standard & Poor's
and Moody's a written report in substantially the form set forth as Exhibit J
hereto (the "Servicing Certificate") with respect to each Mortgage Loan Group,
as such form may be revised by the Trustee, the Servicer, Moody's and Standard &
Poor's from time to time, but in every case setting forth the information
required under Section 7.8 hereof, based solely on information contained in the
Monthly Servicing Report.
Section 8.27. INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold the Trustee, the Certificate Insurer and each Owner harmless
against any and all claims, losses, penalties, fines, forfeitures, legal fees
and related costs, judgments, and any other costs, fees and expenses that the
Trustee, the Certificate Insurer and any Owner may sustain in any way related to
the failure of the Company to perform its duties under this Agreement. A party
against whom a claim is brought shall immediately notify the other parties and
the Rating Agencies if a claim is made by a third party with respect to this
Agreement, and the Company shall assume (with the consent of the Certificate
Insurer and the Trustee) the defense of any such claim and pay all expenses in
connection therewith, including reasonable counsel fees, and promptly pay,
discharge and satisfy any judgment or decree which may be entered against the
Certificate Insurer, the Servicer, the Company, the Trustee and/or Owner in
respect of such claim.
Section 8.28. INDEMNIFICATION BY THE SERVICER. The Servicer agrees
to indemnify and hold the Trustee, the Certificate Insurer and each Owner
harmless against any and all claims, losses, penalties, fines, forfeitures,
legal fees and related costs, judgments, and any other costs, fees and expenses
that the Trustee, the Certificate Insurer and any Owner may sustain in any way
related to the failure of the Servicer to perform its duties and service the
Mortgage Loans in compliance with the terms of this Agreement. A party against
whom a claim is brought shall immediately notify the other parties and the
Rating Agencies if a claim is made by a third party with respect to this
Agreement, and the Servicer shall assume (with the consent of the Trustee) the
defense of any such claim and pay all expenses in connection therewith,
including reasonable counsel fees, and promptly pay, discharge and satisfy any
judgment or decree which may be entered against the Certificate Insurer, the
Servicer, the Trustee and/or Owner in respect of such claim.
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ARTICLE IX
TERMINATION OF TRUST
Section 9.1. TERMINATION OF TRUST. The Trust created hereunder and
all obligations created by this Agreement will terminate upon the earliest of
(i) the payment to the Owners of all Certificates from amounts other than those
available under the Certificate Insurance Policies of all amounts held by the
Trustee and required to be paid to such Owners pursuant to this Agreement upon
the later to occur of (a) the final payment or other liquidation (or any advance
made with respect thereto) of the last Mortgage Loan in the Trust Estate or (b)
the disposition of all property acquired in respect of any Mortgage Loan
remaining in the Trust Estate, (ii) at any time when a Qualified Liquidation of
both Mortgage Loan Groups included within the Trust is effected as described
below or (iii) as described in Section 9.2, 9.3 and 9.4 hereof ; provided, that
the Trust created hereunder shall not terminate at any time that the Certificate
Principal Balance of any Class of Class A Certificates is greater than zero. To
effect a termination of this Agreement pursuant to clause (ii) above, the Owners
of all Certificates then Outstanding shall (x) unanimously direct the Trustee on
behalf of the Trust to adopt a plan of complete liquidation for both Mortgage
Loan Groups, as contemplated by Section 860F(a)(4) of the Code and (y) provide
to the Trustee an opinion of counsel experienced in federal income tax matters
to the effect that such liquidation constitutes a Qualified Liquidation, and the
Trustee either shall sell the Mortgage Loans and distribute the proceeds of the
liquidation of the Trust Estate, or shall distribute equitably in kind all of
the assets of the Trust Estate to the remaining Owners of the Certificates based
on their interests in the Trust, each in accordance with such plan, so that the
liquidation or distribution of the Trust Estate, the distribution of any
proceeds of the liquidation and the termination of this Agreement occur no later
than the close of the 90th day after the date of adoption of the plan of
liquidation and such liquidation qualifies as a Qualified Liquidation. In no
event, however, will the Trust created by this Agreement continue beyond the
expiration of twenty-one (21) years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the late Ambassador of the United States to
the United Kingdom, living on the date hereof. The Trustee shall give written
notice of termination of the Agreement to each Owner in the manner set forth in
Section 11.5 hereof.
Section 9.2. TERMINATION UPON OPTION OF SERVICER. (a) On any
Remittance Date on or after the Clean-Up Call Date, the Servicer acting directly
or through one or more affiliates may determine to purchase and may cause the
purchase from the Trust of all (but not fewer than all) Mortgage Loans in the
Trust Estate and all property theretofore acquired in respect of any such
Mortgage Loan by foreclosure, deed in lieu of foreclosure, or otherwise then
remaining in the Trust Estate at a price equal to the sum of (w) the greater of
(i) 100% of the aggregate Loan Balances of the related Mortgage Loans as of the
Due Date which immediately follows the last day of the related Remittance Period
immediately preceding the day of purchase minus the amount actually remitted by
the Servicer representing collections of principal on the Mortgage Loans during
the related Remittance Period and Due Period and (ii) the greater of (A) the
fair market value of such Mortgage Loans (disregarding accrued interest) and (B)
the aggregate outstanding Certificate Principal Balance, (x) one month's
interest on the purchase price computed at the weighted average Pass-Through
Rate for the Class A Certificates, (y) the related Reimbursement Amount, if any,
as of such Remittance Date and (z) the aggregate amount of any Delinquency
Advances and Servicing Advances remaining unreimbursed, together with any
accrued and unpaid Servicing Fees, as of such Remittance Date (such amount, the
"Termination Price"). In connection with such purchase, the Servicer shall
remit to the Trustee all amounts then on deposit in the Principal and Interest
Account for deposit to the Certificate Account, which deposit shall be deemed to
have occurred immediately preceding such purchase.
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(b) In connection with any such purchase, the Servicer shall provide
to the Trustee an opinion of counsel experienced in federal income tax matters
and reasonably acceptable to the Certificate Insurer to the effect that such
purchase constitutes a Qualified Liquidation of the Trust Estate.
(c) Promptly following any such purchase, the Trustee will release
the Files to the Servicer, or otherwise upon their order, in a manner similar to
that described in Section 8.14 hereof.
(d) If the Servicer does not exercise its option pursuant to this
Section 9.2 with respect to the Trust Estate, then the Certificate Insurer may
do so on the same terms.
Section 9.3. TERMINATION UPON LOSS OF REMIC STATUS. (a) Following
a final determination by the Internal Revenue Service, or by a court of
competent jurisdiction, in either case from which no appeal is taken within the
permitted time for such appeal, or if any appeal is taken, following a final
determination of such appeal from which no further appeal can be taken, to the
effect that the Trust does not and will no longer qualify as a "REMIC" pursuant
to Section 860D of the Code (the "Final Determination"), at any time on or after
the date which is 30 calendar days following such Final Determination, (i) the
Certificate Insurer or the Owners of a majority in Percentage Interest
represented by the Class A Certificates then Outstanding with the consent of the
Certificate Insurer (which consent shall not be unreasonably withheld) may
direct the Trustee on behalf of the Trust to adopt a plan of complete
liquidation, as contemplated by Section 860F(a)(4) of the Code and (ii) the
Certificate Insurer may notify the Trustee of the Certificate Insurer's
determination to purchase from the Trust all (but not fewer than all) Mortgage
Loans in the Trust Estate and all property theretofore acquired by foreclosure,
deed in lieu of foreclosure, or otherwise in respect of any Mortgage Loan then
remaining in the Trust Estate at a price equal to the Termination Price. In
connection with such purchase, the Servicer shall remit to the Trustee all
amounts then on deposit in the Principal and Interest Account for deposit in the
Certificate Account, which deposit shall be deemed to have occurred immediately
preceding such purchase.
(b) Upon receipt of such direction from the Certificate Insurer, the
Trustee shall notify the holders of the Class R Certificates of such election to
liquidate or such determination to purchase, as the case may be (the
"Termination Notice"). The Owner of a majority of the Percentage Interest of
the Class R Certificates then Outstanding may, on any Remittance Date, within 60
days from the date of receipt of the Termination Notice (the "Purchase Option
Period"), at their option, purchase from the Trust all (but not fewer than all)
Mortgage Loans in the Trust Estate, and all property theretofore acquired by
foreclosure, deed in lieu of foreclosure, or otherwise in respect of any
Mortgage Loan then remaining in the Trust Estate at a purchase price equal to
the Termination Price.
(c) If, during the Purchase Option Period, the Owners of the Class R
Certificates have not exercised the option described in the immediately
preceding paragraph, then upon the expiration of the Purchase Option Period (i)
in the event that the Certificate Insurer or the Owners of the Class A
Certificates, with the consent of the Certificate Insurer have given the Trustee
the direction described in clause (a)(i) above, the Trustee shall sell the
Mortgage Loans and distribute the proceeds of the liquidation of the Trust
Estate, each in accordance with the plan of complete liquidation, such that, if
so directed, the liquidation of the Trust Estate, the distribution of the
proceeds of such liquidation and the termination of this Agreement occur no
later than the close of the 60th day, or such later day as the Certificate
Insurer or the Owners of the Class A Certificates, with the consent of the
Certificate Insurer shall permit or direct in writing, after the expiration of
the Purchase Option Period and (ii) in the event that the Certificate Insurer
has given the Trustee notice of the Certificate Insurer's determination to
purchase the Mortgage Loans in the Trust Estate described in clause (a)(ii)
preceding, the Certificate Insurer shall, on any Remittance Date within 60 days,
purchase all (but not fewer than all) Mortgage
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Loans in the Trust Estate, and all property theretofore acquired by foreclosure,
deed in lieu of foreclosure or otherwise in respect of any Mortgage Loan then
remaining in the Trust Estate. In connection with such purchase, the Servicer
shall remit to the Trustee all amounts then on deposit in the Principal and
Interest Account for deposit to the Certificate Account, which deposit shall be
deemed to have occurred immediately preceding such purchase.
(d) Following a Final Determination, the Owners of a majority of the
Percentage Interest of the Class R Certificates then Outstanding may, at their
option on any Remittance Date and upon delivery to the Owners of the Class A
Certificates and the Certificate Insurer of an opinion of counsel experienced in
federal income tax matters acceptable to the Certificate Insurer selected by the
Owners of such Class R Certificates which opinion shall be reasonably
satisfactory in form and substance to the Certificate Insurer, to the effect
that the effect of the Final Determination is to increase substantially the
probability that the gross income of the Trust will be subject to federal
taxation, purchase from the Trust all (but not fewer than all) Mortgage Loans in
the Trust Estate, and all property theretofore acquired by foreclosure, deed in
lieu of foreclosure, or otherwise in respect of any Mortgage Loan then remaining
in the Trust Estate at a purchase price equal to the Termination Price. In
connection with such purchase, the Servicer shall remit to the Trustee all
amounts then on deposit in the Principal and Interest Account for deposit to the
Certificate Account, which deposit shall be deemed to have occurred immediately
preceding such purchase. The foregoing opinion shall be deemed satisfactory
unless the Certificate Insurer gives the Owners of a majority of the Percentage
Interest of the Class R Certificates notice that such opinion is not
satisfactory within thirty days after receipt of such opinion.
In connection with any such purchase, such Owners shall direct the
Trustee to adopt a plan of complete liquidation as contemplated by Section
860F(a)(4) of the Code and shall provide to the Trustee an opinion of counsel
experienced in federal income tax matters to the effect that such purchase
constitutes a Qualified Liquidation.
Section 9.4. DISPOSITION OF PROCEEDS. The Trustee shall, upon
receipt thereof, deposit the proceeds of any liquidation of the Trust Estate
pursuant to this Article IX to the Certificate Account; PROVIDED, HOWEVER, that
any amounts representing Servicing Fees, unreimbursed Delinquency Advances or
unreimbursed Servicing Advances theretofore funded by the Servicer from the
Servicer's own funds shall be paid by the Trustee to the Servicer from the
proceeds of the Trust Estate.
Section 9.5. NETTING OF AMOUNTS. If any Person paying the
Termination Price would receive a portion of the amount so paid, such Person may
net any such amount against the Termination Price otherwise payable.
ARTICLE X
THE TRUSTEE
Section 10.1. CERTAIN DUTIES AND RESPONSIBILITIES. (a) The Trustee
(i) undertakes to perform such duties and only such duties as are specifically
set forth in this Agreement, and no implied covenants or obligations shall be
read into this Agreement against the Trustee and (ii) in the absence of bad
faith on its part, may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates or opinions
furnished pursuant to and conforming to the requirements of this Agreement; but
in the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, shall be under a duty
to examine the same to determine whether or not they conform to the requirements
of this Agreement.
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(b) Following the termination of the Servicer hereunder and pending
the appointment of any other Person as successor Servicer, the Trustee (for this
purpose, the term includes an affiliate thereof) is hereby obligated to perform
the duties of the Servicer hereunder and shall, for such period, have all of the
rights of the Servicer; it being expressly understood, however, by all parties
hereto, and the Owners, agree, prior to any termination of the Servicer pursuant
to Section 8.21, the Servicer shall perform such duties. Specifically, and not
in limitation of the foregoing, the Trustee shall upon termination or
resignation of the Servicer, and pending the appointment of any other Person as
successor Servicer, have the power and duty during its performance as successor
Servicer:
(i) to collect Mortgage payments;
(ii) to foreclose on defaulted Mortgage Loans;
(iii) to enforce due-on-sale clauses and to enter into assumption and
substitution agreements as permitted by Section 8.12 hereof;
(iv) to deliver instruments of satisfaction pursuant to Section 8.14
hereof;
(v) to make Delinquency Advances and Servicing Advances and to pay
Compensating Interest, and
(vi) to enforce the Mortgage Loans.
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that:
(i) this subsection shall not be construed to limit the effect of
subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by an Authorized Officer, unless it shall be
proved that the Trustee was negligent in ascertaining the
pertinent facts;
(iii) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance
with the direction of the Certificate Insurer or of the Owners
of a majority in Percentage Interest of the Certificates of the
affected Class or Classes and the Certificate Insurer 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 relating
to such Certificates;
(iv) The Trustee shall not be required to expend or risk its own
funds or otherwise incur financial liability for the
performance of any of its duties hereunder or 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, and 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 Servicer under this Agreement except during
such time, if any, as the Trustee
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shall be the successor to, and be vested with the rights,
duties, powers and privileges of, the Servicer in accordance
with the terms of this Agreement;
(v) Subject to the other provisions of this Agreement and without
limiting the generality of this Section 10.1, the Trustee shall
have no duty (A) to see any recording, filing, or depositing of
this Agreement or any agreement referred to herein or any
financing statement or continuation statement evidencing a
security interest, or to see to the maintenance of any such
recording or filing or depositing or to any rerecording,
refiling or redepositing of any thereof, (B) to see to any
insurance (C) to see to the payment or discharge of any tax,
assessment, or other governmental charge or any lien or
encumbrance of any kind owing with respect to, assessed or
levied against, any part of the Trust Estate from funds
available in the Certificate Account, (D) to confirm or verify
the contents of any reports or certificates of the Servicer
delivered to the Trustee pursuant to this Agreement believed by
the Trustee to be genuine and to have been signed or presented
by the proper party or parties;
(vi) The Trustee shall not be accountable for the use or application
of any funds paid to the Company or the Servicer in respect of
the Mortgage Loans or withdrawn from the Principal and Interest
Account or the Certificate Account by the Company or the
Servicer; and
(vii) The Trustee shall not be required to take notice or be deemed
to have notice or knowledge of any default or any of the events
described in Section 8.20 unless a Responsible Officer of the
Trustee shall have received written notice thereof or a
Responsible Officer has actual knowledge thereof. In the
absence of receipt of such notice, the Trustee may conclusively
assume that no default or event described in Section 8.20 has
occurred.
(d) Whether or not therein expressly so provided, every provision of
this Agreement relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
(e) No provision of this Agreement shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(f) The permissive right of the Trustee to take actions enumerated in
this Agreement shall not be construed as a duty and the Trustee shall not be
answerable for other than its own negligence or willful misconduct.
(g) The Trustee shall be under no obligation to institute any suit,
or to take any remedial proceeding under this Agreement, or to take any steps in
the execution of the trusts hereby created or in the enforcement of any rights
and powers hereunder until it shall be indemnified to its satisfaction against
any and all costs and expenses, outlays, counsel fees and other reasonable
disbursements and against all liability, except liability which is adjudicated
to have resulted from its negligence or willful misconduct, in connection with
any action so taken.
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Section 10.2. REMOVAL OF TRUSTEE FOR CAUSE. (a) The Trustee may be
removed pursuant to paragraph (b) hereof upon the occurrence of any of the
following events (whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) the Trustee shall fail to distribute to the Owners entitled thereto on
any Payment Date amounts available for distribution received by the
Trustee in accordance with the terms hereof; or
(2) the Trustee shall fail in the performance of, or breach, any covenant
or agreement of the Trustee in this Agreement, or if any
representation or warranty of the Trustee made in this Agreement or in
any certificate or other writing delivered pursuant hereto or in
connection herewith shall prove to be incorrect in any material
respect as of the time when the same shall have been made, and such
failure or breach shall continue or not be cured for a period of 30
days after there shall have been given, by registered or certified
mail, to the Trustee by the Company, the Certificate Insurer or by the
Owners of at least 25% of the aggregate Percentage Interests
represented by the Class A Certificates then Outstanding, or, if there
are no Class A Certificates then Outstanding, by such Percentage
Interests represented by the Class R Certificates, a written notice
specifying such failure or breach and requiring it to be remedied; or
(3) a decree or order of a court or agency or supervisory authority having
jurisdiction for the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings, or for the winding-up
or liquidation of its affairs, shall have been entered against the
Trustee, and such decree or order shall have remained in force
undischarged or unstayed for a period of 75 days; or
(4) a conservator or receiver or liquidator or sequestrator or custodian
of the property of the Trustee is appointed in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings of or relating to the Trustee or relating to all or
substantially all of its property; or
(5) the Trustee shall become insolvent (however insolvency is evidenced),
generally fail to pay its debts as they come due, file or consent to
the filing of a petition to take advantage of any applicable
insolvency or reorganization statute, make an assignment for the
benefit of its creditors, voluntarily suspend payment of its
obligations or take corporate action for the purpose of any of the
foregoing.
The Company shall give to Moody's and Standard & Poor's notice of the
occurrence of any such event of which the Company is aware.
(b) If any event described in Paragraph (a) occurs and is continuing,
then and in every such case (i) the Certificate Insurer or (ii) with the prior
written consent (which shall not be unreasonably withheld) of the Certificate
Insurer (x) the Company or (y) the Owners of a majority of the Percentage
Interests represented by the Class A Certificates may, whether or not the
Trustee resigns pursuant to Section 10.9 hereof, immediately, concurrently with
the giving of notice to the Trustee, and without delaying the 30 days required
for notice therein, appoint a successor Trustee pursuant to the terms of Section
10.9 hereof.
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Section 10.3. CERTAIN RIGHTS OF THE TRUSTEE. Except as otherwise
provided in Section 10.1 hereof:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, note or other paper or document believed by it to be genuine and to
have been signed or presented by the proper party or parties;
(b) any request or direction of the Company, the Certificate Insurer
or the Owners of any Class of Certificates mentioned herein shall be
sufficiently evidenced in writing;
(c) whenever in the administration of this Agreement the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officer's Certificate;
(d) the Trustee may consult with counsel of its selection, and the
written advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reasonable reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement at the request or direction
of any of the Owners pursuant to this Agreement, unless such Owners shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) 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, direction, consent, order,
bond, note or other paper or document, but the Trustee in its discretion
may make such further inquiry or investigation into such facts or matters
as it may see fit; PROVIDED, HOWEVER, that if the payment within a
reasonable time to the Trustee of the costs, expenses or liabilities likely
to be incurred by it in the making of such investigation is, in the opinion
of the Trustee, not reasonably assured to the Trustee by the security
afforded to it by the terms of this Agreement, the Trustee may require
reasonable indemnity against such cost, expense or liability as a condition
to taking any such action. The reasonable expense of every such
examination shall be paid by the Servicer or, if paid by the Trustee, shall
be repaid by the Servicer upon demand by the Trustee from the Servicer's
own funds;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys, and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed and supervised
with due care by it hereunder;
(h) the Trustee shall not be personally liable for any action it
takes or omits to take in good faith which it reasonably believes to be
authorized by the Authorized Officer of any Person or within its rights or
powers under this Agreement;
(i) 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 willful
misconduct in the performance of such act; and
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(j) the Trustee shall not be required to give any bond or surety in
respect of the execution of the Trust Estate created hereby or the powers
granted hereunder.
Section 10.4. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
CERTIFICATES. The recitals and representations contained herein and in the
Certificates, except any such recitals relating to the Trustee, shall be taken
as the statements of the Company, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representation as to the validity or
sufficiency of this Agreement, of the Certificates, of the Mortgage Loans or any
document relating thereto other than as to validity and sufficiency of its
authentication of the Certificates.
Section 10.5. MAY HOLD CERTIFICATES. The Trustee or any agent of the
Trust, in its individual or any other capacity, may become an Owner or pledgee
of Certificates and may otherwise deal with the Trust with the same rights it
would have if it were not Trustee or such agent.
Section 10.6. MONEY HELD IN TRUST. Money held by the Trustee in
trust hereunder need not be segregated from other trust funds except to the
extent required herein or required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Company and except to the extent of income or other gain on
investments which are deposits in or certificates of deposit of the Trustee in
its commercial capacity and income or other gain actually received by the
Trustee on Eligible Investments.
Section 10.7. NO LIEN FOR FEES. The Trustee shall have no lien on
the Trust Estate for the payment of any fees and expenses.
Section 10.8. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall
at all times be a Trustee hereunder which shall be a corporation or association
organized and doing business under the laws of the United States of America or
of any State authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $100,000,000, subject to
supervision or examination by the United States of America or any such State
having a rating or ratings acceptable to the Certificate Insurer and having a
long-term deposit rating of at least BBB from Standard & Poor's (or such lower
rating as may be acceptable to Standard & Poor's) and at least Baa2 from Moody's
(or such lower rating as may be acceptable to Moody's). If such Trustee
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
or association shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. If at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, it shall, upon the request of the Company with the consent of the
Certificate Insurer (which consent shall not be unreasonably withheld) or of the
Certificate Insurer, resign immediately in the manner and with the effect
hereinafter specified in this Article X.
Section 10.9. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a successor
trustee pursuant to this Article X shall become effective until the acceptance
of appointment by the successor trustee under Section 10.10 hereof.
(b) The Trustee, or any trustee or trustees hereafter appointed, may
resign at any time by giving written notice of resignation to the Company and by
mailing notice of resignation by registered mail, postage prepaid, to the
Certificate Insurer and the Owners at their addresses appearing on the Register.
A copy of such notice shall be sent by the resigning Trustee to Moody's and
Standard & Poor's. Upon receiving notice of resignation, the Company shall
promptly appoint a successor trustee or trustees reasonably acceptable to the
Certificate Insurer evidenced by its written consent by written
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instrument, in duplicate, executed on behalf of the Trust by an Authorized
Officer of the Company, one copy of which instrument shall be delivered to the
Trustee so resigning and one copy to the successor trustee or trustees. If no
successor trustee shall have been appointed by the Company and have accepted
appointment within 30 days after the giving of such notice of resignation, the
Trustee shall give notice to the Certificate Insurer of such failure and the
Certificate Insurer shall have an additional 30 days to appoint a successor
trustee. If after such time no successor has been appointed and accepted then
the resigning trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper, appoint a successor trustee.
(c) If at any time the Trustee shall cease to be eligible under
Section 10.8 hereof and shall fail to resign after written request therefor by
the Company or by the Certificate Insurer, the Certificate Insurer or the
Company with the written consent of the Certificate Insurer may remove the
Trustee and appoint a successor trustee by written instrument, in duplicate,
executed on behalf of the Trust by an Authorized Officer of the Company, one
copy of which instrument shall be delivered to the Trustee so removed and one
copy to the successor trustee.
(d) The Owners of a majority of the Percentage Interests represented
by the Class A Certificates, or, if there are no Class A Certificates then
Outstanding, by such majority of the Percentage Interests represented by the
Class R Certificates, may at any time remove the Trustee and appoint a successor
trustee by delivering to the Trustee to be removed, to the successor trustee so
appointed, to the Company and to the Certificate Insurer, copies of the record
of the act taken by the Owners, as provided for in Section 11.3 hereof.
(e) If the Trustee fails to perform its duties in accordance with the
terms of this Agreement or becomes ineligible to serve as Trustee, the
Certificate Insurer may remove the Trustee and appoint a successor trustee by
written instrument, in triplicate, signed by the Certificate Insurer duly
authorized, one complete set of which instruments shall be delivered to the
Company, one complete set to the Trustee so removed and one complete set to the
successor Trustee so appointed. If no successor is appointed, then the removed
trustee may petition any court of competent jurisdiction for the appointment of
a successor trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and prescribe, appoint a successor trustee.
(f) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of the Trustee for any cause,
the Company shall promptly appoint a successor Trustee. If within one year
after such resignation, removal or incapability or the occurrence of such
vacancy, a successor Trustee shall be appointed by act of the Owners of a
majority of the Percentage Interests represented by the Class A Certificates
then Outstanding or, if there are no Class A Certificates then Outstanding, by
such majority of the Percentage Interest of the Class R Certificates delivered
to the Company and the retiring Trustee, the successor Trustee so appointed
shall forthwith upon its acceptance of such appointment become the successor
Trustee and supersede the successor Trustee appointed by the Company. If no
successor Trustee shall have been so appointed by the Company or the Owners and
shall have accepted appointment in the manner hereinafter provided, any Owner
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the appointment of a successor Trustee. Such
court may thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor Trustee.
(g) The Company shall give notice of any removal of the Trustee by
mailing notice of such event by registered mail, postage prepaid, to the
Certificate Insurer and to the Owners as their
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names and addresses appear in the Register. Each notice shall include the name
of the successor Trustee and the address of its corporate trust office.
Section 10.10. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR TRUSTEE. Every
successor Trustee appointed hereunder shall execute, acknowledge and deliver to
the Company on behalf of the Trust, to the Certificate Insurer and to its
predecessor Trustee an instrument accepting such appointment hereunder and
stating its eligibility to serve as Trustee 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 vested with all the rights, powers, trusts, duties and obligations of its
predecessor hereunder; but, on request of the Company, the Certificate Insurer
or the successor Trustee, such predecessor Trustee shall, upon payment of its
charges then unpaid, execute and deliver an instrument transferring to such
successor Trustee all of the rights, powers and trusts of the Trustee so ceasing
to act, and shall duly assign, transfer and deliver to such successor Trustee
all property and money held by such Trustee so ceasing to act hereunder. Upon
request of any such successor Trustee, the Company on behalf of the Trust shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts.
Upon acceptance of appointment by a successor Trustee as provided in
this Section, the Company shall mail notice thereof by first-class mail, postage
prepaid, to the Owners at their last addresses appearing upon the Register and
to the Certificate Insurer. The Company shall send a copy of such notice to
Moody's and Standard & Poor's. If the Company fails to mail such notice within
ten days after acceptance of appointment by the successor Trustee, the successor
Trustee shall cause such notice to be mailed at the expense of the Trust.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor shall be qualified and eligible under this
Article X.
Section 10.11. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS OF THE TRUSTEE. Any corporation or association into which the Trustee
may be merged or converted or with which it may be consolidated, any corporation
or association resulting from any merger, conversion or consolidation to which
the Trustee shall be a party or any corporation or association succeeding to all
or substantially all of the corporate trust business of the Trustee shall be the
successor of the Trustee hereunder, without the execution or filing of any paper
or any further act on the part of any of the parties hereto; PROVIDED, HOWEVER,
that such corporation or association shall be otherwise qualified and eligible
under this Article X. In case any Certificates have been executed, but not
delivered, by the Trustee then in office, any successor by merger, conversion or
consolidation to such Trustee may adopt such execution and deliver the
Certificates so executed with the same effect as if such successor Trustee had
itself executed such Certificates.
Section 10.12. REPORTING; WITHHOLDING. The Trustee shall timely
provide to the Owners the Internal Revenue Service's Form 1099 and any other
statement required by applicable Treasury regulations as determined by the
Company and shall withhold, as required by applicable law, federal, state or
local taxes, if any, applicable to distributions to the Owners, including but
not limited to backup withholding under Section 3406 of the Code and the
withholding tax on distributions to foreign investors under Sections 1441 and
1442 of the Code.
Section 10.13. LIABILITY OF THE TRUSTEE. The Trustee shall be liable
in accordance herewith only to the extent of the obligations specifically
imposed upon and undertaken by the Trustee herein. Neither the Trustee nor any
of the directors, officers, employees or agents of the Trustee shall be under
any liability on any Certificate or otherwise to any Account, the Company, the
Servicer or any
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Owner for any action taken or for refraining from the taking of any action in
good faith pursuant to this Agreement, or for errors in judgment; PROVIDED,
HOWEVER, that this provision shall not protect the Trustee or any such Person
against any liability which would otherwise be imposed by reason of negligent
action, negligent failure to act or bad faith in the performance of duties or by
reason of reckless disregard of obligations and duties hereunder. Subject to
the foregoing sentence, the Trustee shall not be liable for losses on
investments of amounts in any Account (except for any losses on obligations on
which the bank serving as Trustee is the obligor). In addition, the Company and
Servicer covenant and agree to indemnify the Trustee and the Certificate
Insurer, and when the Trustee is acting as Servicer, the Servicer, from, and
hold it harmless against, any and all losses, liabilities, damages, claims or
expenses (including legal fees and expenses) other than those resulting from the
negligence or bad faith of the Trustee. The Trustee and the Certificate Insurer
and any director, officer, employee or agent thereof may rely and shall be
protected in acting or refraining from acting in good faith on any certificate,
notice or other document of any kind PRIMA FACIE properly executed and submitted
by the Authorized Officer of any Person respecting any matters arising
hereunder. Provisions of this Section 10.13 shall survive the termination of
this Agreement.
Section 10.14. 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 Estate or Property may at the time be located, the Servicer and the
Trustee acting jointly shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Trustee and the
Certificate Insurer to act as co-Trustee or co-Trustees, jointly with the
Trustee, of all or any part of the Trust Estate or separate Trustee or separate
Trustees of any part of the Trust Estate and to vest in such Person or Persons,
in such capacity and for the benefit of the Owners, such title to the Trust
Estate, or any part thereof, and, subject to the other provisions of this
Section 10.14, such powers, duties, obligations, rights and trusts as the
Servicer and the Trustee may consider necessary or desirable. If the Servicer
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 any event indicated in Sections 8.20(a) or
8.20(b) shall have occurred and be continuing, the Trustee alone shall have the
power to make such appointment (with the written consent of the Certificate
Insurer). No co-Trustee or separate Trustee hereunder shall be required to meet
the terms of eligibility as a successor Trustee under Section 10.8 and no notice
to Owner of the appointment of any co-Trustee or separate Trustee shall be
required under Section 10.8.
Every separate Trustee and co-Trustee shall, to the extent permitted,
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 Servicer hereunder), the Trustee shall be incompetent
or unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations (including the holding of title to the Trust
Estate or any portion thereof in any such jurisdiction) shall be exercised
and performed singly by such separate Trustee or co-Trustee, but solely at
the direction of the Trustee;
(ii) No co-Trustee hereunder shall be held personally liable by
reason of any act or omission of any other co-Trustee hereunder; and
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(iii) The Servicer and the Trustee acting jointly may at any time
accept the resignation of or remove any separate Trustee or co-Trustee.
Any notice, request or other writing given to the 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 Section 10.14. 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 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.
The Trustee shall give to Moody's, the Company and the Certificate
Insurer notice of the appointment of any Co-Trustee or separate Trustee.
Section 10.15 APPOINTMENT OF CUSTODIANS.
The Trustee may appoint one or more Custodians to hold all or a
portion of the Trustee's Files as agent for the Trustee, by entering into a
Custodial Agreement acceptable to the Certificate Insurer in the form of Exhibit
M. Subject to this Article X, the Trustee agrees to comply with the terms of
each Custodial Agreement and to enforce the terms and provisions thereof against
the Custodian for the benefit of the Owners of the Certificates and the
Certificate Insurer.
ARTICLE XI
MISCELLANEOUS
Section 11.1. COMPLIANCE CERTIFICATES AND OPINIONS. Upon any
application or request by the Company, the Certificate Insurer or the Owners to
the Trustee to take any action under any provision of this Agreement, the
Company, the Certificate Insurer or the Owners, as the case may be, shall
furnish to the Trustee a certificate stating that all conditions precedent, if
any, provided for in this Agreement relating to the proposed action have been
complied with, except that in the case of any such application or request as to
which the furnishing of any documents is specifically required by any provision
of this Agreement relating to such particular application or request, no
additional certificate need be furnished.
Except as otherwise specifically provided herein, each certificate or
opinion with respect to compliance with a condition or covenant provided for in
this Agreement shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
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(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based; and
(c) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 11.2. FORM OF DOCUMENTS DELIVERED TO THE TRUSTEE. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person or that they be
so certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.
Any certificate of an Authorized Officer of the Trustee may be based,
insofar as it relates to legal matters, upon an opinion of counsel, unless such
Authorized Officer knows, or in the exercise of reasonable care should know,
that the opinion is erroneous. Any such certificate of an Authorized Officer of
the Trustee or any opinion of counsel may be based, insofar as it relates to
factual matter upon a certificate or opinion of, or representations by, one or
more Authorized Officers of the Company or of the Servicer, stating that the
information with respect to such factual matters is in the possession of the
Company or of the Servicer, unless such Authorized Officer or counsel knows, or
in the exercise of reasonable care should know, that the certificate or opinion
or representations with respect to such matters are erroneous. Any opinion of
counsel may also be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an Authorized Officer of the
Trustee, stating that the information with respect to such matters is in the
possession of the Trustee, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous. Any opinion of counsel may be based
on the written opinion of other counsel, in which event such opinion of counsel
shall be accompanied by a copy of such other counsel's opinion and shall include
a statement to the effect that such counsel believes that such counsel and the
Trustee may reasonably rely upon the opinion of such other counsel.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Agreement, they may, but need not, be consolidated and
form one instrument.
Section 11.3. ACTS OF OWNERS. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Agreement to be given or taken by the Owners may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Owners in person or by an agent duly appointed in writing; and, except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee, and, where it is
hereby expressly required, to the Company. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes referred
to as the "act" of the Owners signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Agreement and conclusive in favor of the
Trustee and the Trust, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Whenever
such execution is by
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an officer of a corporation or a member of a partnership on behalf of such
corporation or partnership, such certificate or affidavit shall also constitute
sufficient proof of his authority.
(c) The ownership of Certificates shall be proved by the Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Owner of any Certificate shall bind the Owner of
every Certificate issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof, in respect of anything done, omitted or
suffered to be done by the Trustee or the Trust in reliance thereon, whether or
not notation of such action is made upon such Certificates.
Section 11.4. NOTICES, ETC. TO TRUSTEE. Any request, demand,
authorization, direction, notice, consent, waiver or act of the Owners or other
documents provided or permitted by this Agreement to be made upon, given or
furnished to or filed with the Trustee by any Owner, the Certificate Insurer or
by the Company shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with and received by the Trustee at its
corporate trust office as set forth in Section 2.2 hereof.
Section 11.5. NOTICES AND REPORTS TO OWNERS; WAIVER OF NOTICES.
Where this Agreement provides for notice to Owners of any event or the mailing
of any report to Owners, such notice or report shall be sufficiently given
(unless otherwise herein expressly provided) if mailed, first-class postage
prepaid, to each Owner affected by such event or to whom such report is required
to be mailed, at the address of such Owner as it appears on the Register, not
later than the latest date, and not earlier than the earliest date, prescribed
for the giving of such notice or the mailing of such report. In any case where
a notice or report to Owners is mailed in the manner provided above, neither the
failure to mail such notice or report nor any defect in any notice or report so
mailed to any particular Owner shall affect the sufficiency of such notice or
report with respect to other Owners, and any notice or report which is mailed in
the manner herein provided shall be conclusively presumed to have been duly
given or provided.
Where this Agreement provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Owners shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Owners when such notice is required to be given
pursuant to any provision of this Agreement, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Agreement provides for notice to any rating agency that
rated any Certificates, failure to give such notice shall not affect any other
rights or obligations created hereunder.
Section 11.6. RULES BY TRUSTEE AND THE COMPANY. The Trustee may make
reasonable rules for any meeting of Owners. The Company may make reasonable
rules and set reasonable requirements for its functions.
Section 11.7. SUCCESSORS AND ASSIGNS. All covenants and agreements
in this Agreement by any party hereto shall bind its successors and assigns,
whether so expressed or not.
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Section 11.8. SEVERABILITY. In case any provision in this Agreement
or in the Certificates shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 11.9. BENEFITS OF AGREEMENT. Nothing in this Agreement or in
the Certificates, expressed or implied, shall give to any Person, other than the
Owners, the Certificate Insurer and the parties hereto and their successors
hereunder, any benefit or any legal or equitable right, remedy or claim under
this Agreement.
Section 11.10. LEGAL HOLIDAYS. In any case where the date of any
Remittance Date, any Payment Date, any other date on which any distribution to
any Owner is proposed to be paid or any date on which a notice is required to be
sent to any Person pursuant to the terms of this Agreement shall not be a
Business Day, then (notwithstanding any other provision of the Certificates or
this Agreement) payment or mailing need not be made on such date but may be made
on the next succeeding Business Day with the same force and effect as if made or
mailed on the nominal date of any such Remittance Date, such Payment Date or
such other date for the payment of any distribution to any Owner or the mailing
of such notice, as the case may be, and no interest shall accrue for the period
from and after any such nominal date, provided such payment is made in full on
such next succeeding Business Day.
Section 11.11. GOVERNING LAW. In view of the fact that Owners are
expected to reside in many states and outside the United States and the desire
to establish with certainty that this Agreement will be governed by and
construed and interpreted in accordance with the law of a state having a
well-developed body of commercial and financial law relevant to transactions of
the type contemplated herein, this Agreement and each Certificate shall be
construed in accordance with and governed by the laws of the State of New York
applicable to agreements made and to be performed therein.
Section 11.12. 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 11.13. USURY. The amount of interest payable or paid on any
Certificate under the terms of this Agreement shall be limited to an amount
which shall not exceed the maximum nonusurious rate of interest allowed by the
applicable laws of the State of New York or any applicable law of the United
States permitting a higher maximum nonusurious rate that preempts such
applicable New York laws, which could lawfully be contracted for, charged or
received (the "Highest Lawful Rate"). In the event any payment of interest on
any Certificate exceeds the Highest Lawful Rate, the Trust stipulates that such
excess amount will be deemed to have been paid to the Owner of such Certificate
as a result of an error on the part of the Trustee acting on behalf of the Trust
and the Owner receiving such excess payment shall promptly, upon discovery of
such error or upon notice thereof from the Trustee on behalf of the Trust,
refund the amount of such excess or, at the option of such Owner, apply the
excess to the payment of principal of such Certificate, if any, remaining
unpaid. In addition, all sums paid or agreed to be paid to the Trustee for the
benefit of Owners of Certificates for the use, forbearance or detention of money
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such Certificates.
Section 11.14. AMENDMENT. (a) The Trustee, the Company and the
Servicer, may at any time and from time to time, with the prior approval of the
Certificate Insurer but without the giving of notice to or the receipt of the
consent of the Owners, amend this Agreement for the purposes of (i) removing the
restriction against the transfer of a Class R Certificate to a Disqualified
Organization (as such term is defined in the Code) if accompanied by an opinion
of counsel experienced in federal income
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tax matters addressed to the Certificate Insurer and the Trustee that there is
or will be no adverse effect as a result of such amendment, (ii) complying with
the requirements of the Code including any amendments necessary to maintain
REMIC status of the assets of the Trust treated as a REMIC hereunder, (iii)
curing any ambiguity and (iv) correcting or supplementing any provisions of this
Agreement which are inconsistent with any other provisions of this Agreement; or
(v) for any other purpose, provided that in the case of clause (v), (A) prior to
the effectiveness of such amendment, the Company delivers an opinion of counsel
acceptable to the Trustee and the Certificate Insurer that such amendment will
not adversely affect in any material respect the interest of the Owners and the
Certificate Insurer and (B) delivers a letter from each Rating Agency stating
that such amendment will not result in a withdrawal or reduction of the rating
of the Class A Certificates without regard to the Certificate Insurance Policy.
Notwithstanding anything to the contrary, no such amendment shall (a) change in
any manner the amount of, or delay the timing of, payments which are required to
be distributed to any Owner without the consent of the Owner of such
Certificate, (b) change the percentages of Percentage Interest which are
required to consent to any such amendments, without the consent of the Owners of
all Certificates of the Class or Classes affected then outstanding or (c) which
affects in any manner the terms or provisions of the related Certificate
Insurance Policy.
(b) This Agreement may be amended from time to time by the
Servicer, the Company and the Trustee with the consent of the Certificate
Insurer (which consent shall not be withheld if, in an opinion of counsel
addressed to the Trustee and the Certificate Insurer, failure to amend would
adversely affect the interests of the Owners) and the Owners of 66 2/3% of the
Class A Certificates 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 Owners; provided, however, that no
such amendment shall be made that no such amendment shall reduce in any manner
the amount of, or delay the timing of, payments received on Mortgage Loans which
are required to be distributed on any Certificate without the consent of the
Owner of such Certificate or reduce the percentage for each Class the Owners of
which are required to consent to any such amendment without the consent of the
Owners of 100% of each Class of Certificates affected thereby.
(c) Each proposed amendment to this Agreement shall be accompanied
by an opinion of counsel nationally recognized in federal income tax matters and
reasonably acceptable to the Certificate Insurer addressed to the Trustee and to
the Certificate Insurer to the effect that such amendment would not adversely
affect the status of the Trust (other than the Pre-Funding Account or the
Capitalized Interest Account) as a REMIC.
(d) The Certificate Insurer, the Owners, Moody's and Standard &
Poor's shall be provided with copies of any amendments to this Agreement,
together with copies of any opinions or other documents or instruments executed
in connection therewith.
Section 11.15. REMIC STATUS; TAXES. (a) The Tax Matters Person shall
prepare and file or cause to be filed with the Internal Revenue Service federal
tax or information returns with respect to the Trust and the Certificates
containing such information and at the times and in such manner as may be
required by the Code or applicable Treasury regulations and shall furnish to
Owners such statements or information at the times and in such manner as may be
required thereby. For this purpose, the Tax Matters Person may, but need not,
rely on any proposed regulations of the United States Department of the
Treasury. The Tax Matters Person shall indicate the election to treat the Trust
as a REMIC (which election shall apply to the taxable period ending December 31,
1996 and each calendar year thereafter) in such manner as the Code or applicable
Treasury regulations may prescribe. The Company, as Tax Matters Person
appointed pursuant to Section 11.17 hereof, shall sign all tax information
returns filed pursuant to this Section 11.15. The Tax Matters Person shall
provide information necessary for the
97
<PAGE>
computation of tax imposed on the transfer of a Class R Certificate to a
Disqualified Organization, an agent of a Disqualified Organization or a
pass-through entity in which a Disqualified Organization is the record holder of
an interest. The Tax Matters Person shall provide the Trustee with copies of
any Federal tax or information returns filed, or caused to be filed, by the Tax
Matters Person with respect to the Trust or the Certificates.
(b) The Tax Matters Person shall timely file all reports required to
be filed by the Trust with any federal, state or local governmental authority
having jurisdiction over the Trust, including other reports that must be filed
with the Owners, such as the Internal Revenue Service's Form 1066 and Schedule Q
and the form required under Section 6050K of the Code, if applicable to REMICs.
Furthermore, the Tax Matters Person shall report to Owners, if required, with
respect to the allocation of expenses pursuant to Section 212 of the Code in
accordance with the specific instructions to the Tax Matters Person by the
Company with respect to such allocation of expenses. The Tax Matters Person
shall collect any forms or reports from the Owners determined by the Company to
be required under applicable federal, state and local tax laws.
(c) The Tax Matters Person shall provide to the Internal Revenue
Service and to persons described in Section 860E(e)(3) and (6) of the Code the
information described in Proposed Treasury Regulation Section
1.860D-1(b)(5)(ii), or any successor regulation thereto. Such information will
be provided in the manner described in Proposed Treasury Regulation Section
1.860E(2)(a)(5), or any successor regulation thereto.
(d) The Company covenants and agrees that within ten Business Days
after the Startup Day it shall provide to the Tax Matters Person any information
necessary to enable the Tax Matters Person to meet its obligations under
subsections (b) and (c) above.
(e) The Trustee, the Company and the Servicer each covenants and
agrees for the benefit of the Owners and the Certificate Insurer (i) to take no
action which would result in the termination of "REMIC" status for the Trust
(other than the Pre-Funding Account or the Capitalized Interest Account) (ii)
not to engage in any "prohibited transaction", as such term is defined in
Section 860F(a)(2) of the Code and (iii) not to engage in any other action which
may result in the imposition on the Trust of any other taxes under the Code.
(f) The Trust shall, for federal income tax purposes, maintain books
on a calendar year basis and report income on an accrual basis.
(g) Except as otherwise permitted by Section 7.6(b) hereof, no
Eligible Investment shall be sold prior to its stated maturity (unless sold
pursuant to a plan of liquidation in accordance with Article IX hereof).
(h) Neither the Company nor the Trustee shall enter into any
arrangement by which the Trustee will receive a fee or other compensation for
services rendered pursuant to this Agreement, which fee or other compensation is
paid from the Trust Estate, other than as expressly contemplated by this
Agreement.
(i) Notwithstanding the foregoing clauses (g) and (h), the Trustee or
the Company may engage in any of the transactions prohibited by such clauses,
provided that the Trustee shall have received an opinion of counsel experienced
in federal income tax matters and reasonably acceptable to the Certificate
Insurer, which opinion shall not be at the expense of the Trustee, to the effect
that such
98
<PAGE>
transaction does not result in a tax imposed on the Trustee or cause a
termination of REMIC status for the Trust; PROVIDED, HOWEVER, that such
transaction is otherwise permitted under this Agreement.
Section 11.16. ADDITIONAL LIMITATION ON ACTION AND IMPOSITION OF TAX.
(a) Any provision of this Agreement to the contrary notwithstanding, the
Trustee shall not, without having obtained an opinion of counsel experienced in
federal income tax matters and reasonably acceptable to the Certificate Insurer,
which opinion shall not be at the expense of the Trustee, to the effect that
such transaction does not result in a tax imposed on the Trust or cause a
termination of REMIC status for the Trust, (i) sell any assets in the Trust
Estate, (ii) accept any contribution of assets after the Startup Day or
(iii) agree to any modification of this Agreement.
(b) In the event that any tax is imposed on "prohibited transactions"
of the Trust as defined in Section 860F(a)(2) of the Code, on the "net income
from foreclosure property" as defined in Section 860G(c) of the Code, on any
contribution to the Trust after the Startup Day pursuant to Section 860G(d) of
the Code or any other tax (other than any minimum tax imposed by Sections
23151(a) or 23153(a) of the California Revenue and Taxation Code) is imposed,
such tax shall be paid by (i) the Trustee, if such tax arises out of or results
from a breach by the Trustee of any of its obligations under this Agreement,
(ii) the Servicer, if such tax arises out of or results from a breach by the
Servicer of any of its obligations under this Agreement or (iii) the Owners of
the Class R Certificates in proportion to their Percentage Interests. To the
extent such tax is chargeable against the Owners of the Class R Certificates,
notwithstanding anything to the contrary contained herein, the Trustee is hereby
authorized to retain from amounts otherwise distributable to the Owners of the
Class R Certificates on any Payment Date sufficient funds to reimburse the
Trustee for the payment of such tax (to the extent that the Trustee has not been
previously reimbursed or indemnified therefor). The Trustee agrees to first
seek indemnification for any such tax payment from any indemnifying parties
before reimbursing itself from amounts otherwise distributable to the Owners of
the Class R Certificates.
Section 11.17. APPOINTMENT OF TAX MATTERS PERSON. A Tax Matters
Person will be appointed for the Trust for all purposes of the Code, and such
Tax Matters Person will perform, or cause to be performed through agents, such
duties and take, or cause to be taken, such actions as are required to be
performed or taken by the Tax Matters Person under the Code. The Tax Matters
Person for the Trust shall be the Company as long as it owns a Class R
Certificate or, if the Company does not own a Class R Certificate, may be any
other entity selected by the Company that owns a Class R Certificate.
Section 11.18. THE CERTIFICATE INSURER. The Certificate Insurer is a
third-party beneficiary of this Agreement. Any right conferred to the
Certificate Insurer shall be suspended during any period in which the
Certificate Insurer is in default in its payment obligations under the
Certificate Insurance Policies. During any period of suspension the Certificate
Insurer's rights hereunder shall vest in the Owners of the Class A Certificates
and shall be exercisable by the Owners of at least a majority in Percentage
Interest of the Class A Certificates then Outstanding. At such time as the
Class A Certificates are no longer Outstanding hereunder and the Certificate
Insurer has been reimbursed for all Insured Payments to which it is entitled
hereunder, the Certificate Insurer's rights hereunder shall terminate.
Section 11.19. MAINTENANCE OF RECORDS. Each Owner of a Class R
Certificate shall each continuously keep an original executed counterpart of
this Agreement in its official records.
Section 11.20. NOTICES. All notices hereunder shall be given as
follows, until any superseding instructions are given to all other Persons
listed below:
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<PAGE>
THE TRUSTEE: The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Structured Finance/MBS
Tel: (212) 946-3247
Fax: (212) 946-8191
THE COMPANY: First Alliance Mortgage Company
17305 Von Karman Avenue
Irvine, California 92614-6203
Attention: Director, Secondary Marketing
Tel: (714) 224-8357
Fax: (714) 224-8366
THE SERVICER: First Alliance Mortgage Company
17305 Von Karman Avenue
Irvine, California 92614-6203
Attention: Manager, Investor Reporting
Tel: (714) 224-8357
Fax: (714) 224-8366
THE CERTIFICATE
INSURER : MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Insured Portfolio
Management - SF (First Alliance 96-4)
Tel: (914) 765-3111
Fax: (914) 765-3919
MOODY'S: Moody's Investors Service
99 Church Street
New York, New York 10007
Attention: The Home Equity Monitoring Department
STANDARD & POOR'S: Standard & Poor's, A Division of The McGraw-Hill
Companies
26 Broadway
15th Floor
New York, New York 10004
Attention: Residential Mortgage
Surveillance Dept.
UNDERWRITERS: Prudential Securities Incorporated
One New York Plaza, 15th Floor
New York, New York 10292-2015
Attention: Director, Mortgage Finance Group
Tel: (212) 778-1000
Fax: (212) 778-5099
100
<PAGE>
Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Attention: Director, Asset-Backed Finance
Tel: (212) 526-7000
Fax: (212) 528-6049
101
<PAGE>
IN WITNESS WHEREOF, the Company, the Servicer and the Trustee have
caused this Agreement to be duly executed by their respective officers thereunto
duly authorized, all as of the day and year first above written.
FIRST ALLIANCE MORTGAGE COMPANY
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
FIRST ALLIANCE MORTGAGE COMPANY,
as Servicer
By:
-----------------------------------
Name:
-------------------------------
Title:
-----------------------------------
THE CHASE MANHATTAN BANK,
as Trustee
By:
-----------------------------------
Name:
-------------------------------
Title:
-----------------------------------
<PAGE>
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF CALIFORNIA )
) ss.:
COUNTY OF ORANGE )
On the ___ day of December, 1996, before me, a Notary Public,
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.
WITNESS my hand and official seal.
[NOTARIAL SEAL]
________________________________
Notary Public
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ____ day of December, 1996, before me, a Notary Public,
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 she executed the
same in her authorized capacity, and that by her signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
[NOTARIAL SEAL]
________________________________
Notary Public
<PAGE>
EXHIBIT A-1
FIRST ALLIANCE MORTGAGE LOAN TRUST 1996-4
MORTGAGE LOAN ASSET BACKED CERTIFICATE
CLASS A-1 CERTIFICATE
(6.835% Class A-1 Certificate)
Representing Certain Interests Relating to a Pool of
Mortgage Loans in Group I formed by First Alliance
Mortgage Company, and Serviced by
FIRST ALLIANCE MORTGAGE COMPANY
as Servicer
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to Issuer
("First Alliance Mortgage Loan Trust 1996-4") or its agent for registration of
transfer, exchange, or payment, and any certificate issued is registered in the
name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
This certificate does not represent an interest in, or an obligation
of, nor are the underlying Mortgage Loans insured or guaranteed by, First
Alliance Mortgage Company, any Originator or any of their subsidiaries and
affiliates. This certificate represents a fractional ownership interest in
Group I described herein, moneys in certain Accounts created pursuant to the
Pooling and Servicing Agreement and certain other rights relating thereto and is
payable only from amounts received by the Trustee (i) relating to the Mortgage
Loans in Group I held by the Trust and (ii) pursuant to the Fixed Rate
Certificate Insurance Policy.
No.: A-1-1 December 20, 1996 31846LBG0
----------------- ----------
Date CUSIP
$22,500,000 March 20, 2028
- ---------------------------- -------------------
Certificate Principal Amount Final Scheduled
Payment Date
Cede & Co.
----------------
Registered Owner
A-1-1
<PAGE>
The registered Owner named above is the registered Owner of a fractional
interest in (i) a pool of fixed rate mortgage loans (the "Mortgage Loans")
secured by first or second mortgages or deeds of trust assigned to a particular
mortgage loan group ("Group I") which will be formed by First Alliance Mortgage
Company (the "Company" or, in its capacity as servicer, the "Servicer"), a
California corporation, and sold by the Company to The Chase Manhattan Bank, a
New York banking corporation, as trustee (the "Trustee") on behalf of First
Alliance Mortgage Loan Trust 1996-4 (the "Trust") pursuant to that certain
Pooling and Servicing Agreement dated as of December 1, 1996 (the "Pooling and
Servicing Agreement") by and among the Company, the Servicer and the Trustee,
(ii) such amounts, including Eligible Investments and the proceeds of payments
under the Fixed Rate Certificate Insurance Policy, as from time to time may be
held in the related Accounts (except as otherwise provided in the Pooling and
Servicing Agreement), each created pursuant to the Pooling and Servicing
Agreement, (iii) any Property relating to the Mortgage Loans in Group I, the
ownership of which has been effected in the name of the Servicer on behalf of
the Trust as a result of foreclosure or acceptance by the Servicer of a deed in
lieu of foreclosure and that has not been withdrawn from the Trust Estate, (iv)
any Insurance Policies relating to the Mortgage Loans in Group I and any rights
of the Company in any Insurance Policies relating to the Mortgage Loans in Group
I, (v) Net Liquidation Proceeds relating to the Mortgage Loans in Group I, (vi)
the Fixed Rate Certificate Insurance Policy, and (vii) the proceeds of any of
the above. Such Mortgage Loans in Group I and other amounts and property
enumerated above are hereinafter referred to as "Group I."
The Certificate Principal Amount set forth above is equal to the
product of (i) the Percentage Interest represented by this Certificate and (ii)
the aggregate Original Certificate Principal Balance of the Class A-1
Certificates on December 20, 1996 (the "Startup Date"), which was $22,500,000.
The Owner hereof may receive principal payments on each Payment Date, as
hereinafter described, which will fully amortize such Certificate Principal
Amount over the period from the date of initial delivery hereof to the final
Payment Date of the Class A-1 Certificates. Therefore, the actual outstanding
principal amount of this Class A-1 Certificate, on any date subsequent to
January 20, 1997 (the first Payment Date) will be less than the Certificate
Principal Amount set forth above.
Upon receiving the final distribution hereon, the Owner hereof is
required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement provides that, in any event, upon the making of the final distribution
due on this Certificate, this Certificate shall be deemed cancelled for all
purposes under the Pooling and Servicing Agreement.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN
INTEREST IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G
AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING
COMPLIANCE WITH THE REMIC PROVISIONS OF THE CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT
NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
A-1-2
<PAGE>
This Certificate is one of a Class of duly-authorized Certificates
designated as First Alliance Mortgage Loan Trust 1996-4, Mortgage Loan Asset
Backed Certificates, Class A-1 Certificates (the "Class A-1 Certificates") and
issued under and subject to the terms, provisions and conditions of the Pooling
and Servicing Agreement, to which Pooling and Servicing Agreement the Owner of
this Certificate by virtue of acceptance hereof assents and by which such Owner
is bound. Also issued under the Pooling and Servicing Agreement are Class A-2
Certificates and Class R Certificates; all such Certificates are collectively
referred to herein as the "Certificates."
Terms capitalized herein and not otherwise defined herein shall have
the respective meanings set forth in the Pooling and Servicing Agreement.
On the 20th day of each month, or, if such day is not a Business Day,
then the next succeeding Business Day (each such day being a "Payment Date")
commencing January 20, 1997, the Owners of the Class A-1 Certificates as of the
close of business on the last business day of the calendar month immediately
preceding the calendar month in which such Payment Date occurs (the "Record
Date") will be entitled to receive the Class A-1 Distribution Amount relating to
such Payment Date. Distributions will be made in immediately available funds to
such Owners, by wire transfer or otherwise, to the account of such Owner at a
domestic bank or other entity having appropriate facilities therefor, if such
Owner has so notified the Trustee at least 5 business days prior to the related
record date, or by check mailed to the address of the person entitled thereto as
it appears on the Register.
Each Owner of record of a Class A-1 Certificate will be entitled to
receive such Owner's Percentage Interest in the amounts due on such Payment Date
to the Owners of the Class A-1 Certificates.
Upon receipt of amounts under the Fixed Rate Certificate Insurance
Policy on behalf of the Owners of the Class A-1 Certificates, the Trustee shall
distribute in accordance with the Pooling and Servicing Agreement such amounts
to the Owners of the Class A-1 Certificates.
The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling
and Servicing Agreement. Amounts properly withheld under the Code or applicable
to any Owner shall be considered as having been paid by the Trustee to such
Owner for all purposes of the Pooling and Servicing Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant to the
Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits
the Servicer to enter into Sub-Servicing Agreements with certain institutions
eligible for appointment as Sub-Servicers for the servicing and administration
of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the
Servicer from any of its obligations under the Pooling and Servicing Agreement.
This Certificate does not represent a deposit or other obligation of,
or an interest in, nor are the underlying Mortgage Loans insured or guaranteed
by, First Alliance Mortgage Company, any Originator or any of their subsidiaries
and affiliates and are not insured or guaranteed by the Federal Deposit
Insurance Corporation, the Government National Mortgage Association, or any
other governmental agency. This Certificate is limited in right of payment to
certain collections and recoveries relating to the Mortgage Loans in Group I and
amounts on deposit in the Accounts (except as otherwise provided in the Pooling
and Servicing Agreement) and payments received by the Trustee pursuant to the
Fixed Rate Certificate Insurance Policy, all as more specifically set forth
hereinabove and in the Pooling and Servicing Agreement.
A-1-3
<PAGE>
No Owner shall have any right to institute any proceeding, judicial or
otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms hereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Owner of any Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the Pooling
and Servicing Agreement with respect to such Certificate or to institute suit
for the enforcement of any such distribution, and such right shall not be
impaired without the consent of such Owner.
The Pooling and Servicing Agreement provides that the obligations
created thereby will terminate upon the earlier of (i) the payment to the Owners
of all Certificates from amounts other than those available under the
Certificate Insurance Policies of all amounts held by the Trustee and required
to be paid to such Owners pursuant to the Pooling and Servicing Agreement upon
the later to occur of (a) the final payment or other liquidation (or any advance
made with respect thereto) of the last Mortgage Loan in the Trust Estate or (b)
the disposition of all property acquired in respect of any Mortgage Loan
remaining in the Trust Estate or (ii) at any time when a Qualified Liquidation
of the Trust Estate is effected pursuant to the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement additionally provides that (i) the
Servicer or the Certificate Insurer may, at its option, purchase from the Trust
all (but not fewer than all) remaining Mortgage Loans and other property then
constituting the Trust Estate, and thereby effect early retirement of the Class
A-1 Certificates, on any Remittance Date when the aggregate outstanding Loan
Balances of the Mortgage Loans in the Trust Estate is 10% or less of the Maximum
Collateral Amount and (ii) under certain circumstances relating to the
qualification of the Trust as a REMIC under the Code the Mortgage Loans may be
sold, thereby affecting the early retirement of the Class A-1 Certificates.
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Owner in the manner set forth therein.
The Owners of a majority of the Percentage Interests represented by
the Class A Certificates, upon compliance with the requirements set forth in the
Pooling and Servicing Agreement, have the right, with the consent of the
Certificate Insurer, to exercise any trust or power set forth in the Pooling and
Servicing Agreement with respect to the Certificates or the Trust Estate.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register, and thereupon one or more new Certificates of like
Class, tenor and a like Percentage Interest will be issued to the designated
transferee or transferees.
The Trustee is required to furnish certain information on each Payment
Date to the Owner of this Certificate, as more fully described in the Pooling
and Servicing Agreement.
The Class A-1 Certificates are issuable only as registered
Certificates in denominations of $1,000 certificate principal amount and
integral multiples of $1,000. As provided in the Pooling and Servicing
Agreement and subject to certain limitations therein set forth, Class A-1
Certificates are exchangeable for new Class A-1 Certificates of authorized
denominations evidencing the same aggregate principal amount.
A-1-4
<PAGE>
The Trustee and any agent of the Trustee may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
neither the Trustee or any such agent shall be affected by notice to the
contrary.
A-1-5
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed on behalf of the Trust.
THE CHASE MANHATTAN BANK
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
Trustee Authentication
THE CHASE MANHATTAN BANK, as Trustee
By:
---------------------------
Name:
-------------------------
Title:
-------------------------
A-1-6
<PAGE>
STATEMENT OF INSURANCE
MBIA Insurance Corporation (the "Insurer") has issued a policy
containing the following provisions, such Policy being on file at The Chase
Manhattan Bank, New York, New York, as trustee (the "Trustee").
The Insurer, in consideration of the payment of the premium and
subject to the terms of the Certificate Guaranty Insurance Policy (the
"Policy"), thereby unconditionally and irrevocably guarantees to any Owner (as
defined below) that an amount equal to each full and complete Group I Insured
Payment will be received by the Trustee, or its successor, as trustee for the
Owners on behalf of the Owners from the Insurer, for distribution by the Trustee
to each Owner of each Owner's proportionate share of the Group I Insured
Payment. The Insurer's obligation under the Policy with respect to a particular
Group I Insured Payment shall be discharged to the extent funds equal to the
Group I Insured Payment are received by the Trustee, whether or not such funds
are properly applied by the Trustee. Group I Insured Payments shall be made
only at the time set forth in the Policy, and no accelerated Group I Insured
Payments shall be made regardless of any acceleration of the Obligations, unless
such acceleration is at the sole option of the Insurer. "Obligations" shall
mean:
$22,500,000
First Alliance Mortgage Loan Trust 1996-4
Mortgage Loan Asset Backed Certificates
Class A-1
Notwithstanding the foregoing paragraph, the Policy does not cover
shortfalls, if any, attributable to the liability of the Trust, the REMIC or the
Trustee for withholding taxes, if any (including interest and penalties in
respect of any such liability).
The Insurer will pay any Group I Insured Payment that is a Group I
Preference Amount on the Business Day following receipt on a Business Day by the
Fiscal Agent (as described below) of (i) a certified copy of the order requiring
the return of such Group I Preference Amount, (ii) an opinion of counsel
satisfactory to the Insurer that such order is final and not subject to appeal,
(iii) an assignment in such form as is reasonably required by the Insurer,
irrevocably assigning to the Insurer all rights and claims of the Owner relating
to or arising under the Obligations against the debtor which made such
preference payment or otherwise with respect to such preference payment and (iv)
appropriate instruments to effect the appointment of the Insurer as agent for
such Owner in any legal proceeding related to such preference payment, such
instruments being in a form satisfactory to the Insurer, provided that if such
documents are received after 12:00 noon New York City time on such Business Day,
they will be deemed to be received on the following Business Day. Such payments
shall be disbursed to the receiver or trustee in bankruptcy named in the final
order of the court exercising jurisdiction on behalf of the Owner and not to any
Owner directly unless such Owner has returned principal or interest paid on the
Obligations to such receiver or trustee in bankruptcy, in which case such
payment shall be disbursed to such Owner.
The Insurer will pay any other amount payable under the Policy no
later than 12:00 noon, New York City time, on the later of the Payment Date on
which the related Group I Distribution Amount is due or the Business Day
following receipt in New York, New York on a Business Day by State Street Bank
and Trust Company, N.A. as Fiscal Agent for the Insurer, or any successor fiscal
agent appointed by the Insurer (the "Fiscal Agent") of a Notice (as described
below); provided that, if such Notice is received after 12:00 noon New York City
time on such Business Day, it will be deemed to be received
A-1-7
<PAGE>
on the following Business Day. If any such Notice received by the Fiscal Agent
is not in proper form or is otherwise insufficient for the purpose of making a
claim under the Policy, it shall be deemed not to have been received by the
Fiscal Agent for purposes of this paragraph, and the Insurer or the Fiscal
Agent, as the case may be, shall promptly so advise the Trustee and the Trustee
may submit an amended Notice.
Group I Insured Payments due under the Policy, unless otherwise stated
in the Policy, will be disbursed by the Fiscal Agent to the Trustee on behalf of
the Owners by wire transfer of immediately available funds in the amount of the
Group I Insured Payment less, in respect of Group I Insured Payments related to
Group I Preference Amounts, any amount held by the Trustee for the payment of
such Group I Insured Payment and legally available therefor.
The Fiscal Agent is the agent of the Insurer only, and the Fiscal
Agent shall in no event be liable to the Owners for any acts of the Fiscal Agent
or any failure of the Insurer to deposit, or cause to be deposited, sufficient
funds to make payments due under the Policy.
As used in the Policy, the following terms shall have the following
meanings:
"Agreement" means the Pooling and Servicing Agreement dated as of
December 1, 1996 among First Alliance Mortgage Company, as Company, First
Alliance Mortgage Company, as Servicer and The Chase Manhattan Bank, as Trustee,
without regard to any amendment or supplement thereto unless the Insurer shall
have consented in writing thereto.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which banking institutions in New York City or in the city in which the
corporate trust office of the Trustee under the Agreement is located are
authorized or obligated by law or executive order to close.
"Group I Distribution Amount" means the Class A-1 Distribution Amount.
"Group I Insured Payment," with respect to the Class A-1 Certificates
and as to any Payment Date, will equal the sum of (i) the excess, if any, of (a)
the Class A-1 Current Interest over (b) the Group I Total Available Funds (after
any deduction for the Group I Premium Amount and the Group I Trustee Fee), (ii)
the Group I Subordination Deficit, if any (after applying the cross
collateralization provisions of Section 7.5(d)(ii)(A) and (B) of the Agreement),
and (iii) the Group I Preference Amount.
"Group I Preference Amount" means any amount previously distributed to
an Owner on the Class A-1 Certificates that is recoverable and sought to be
recovered as a voidable preference by a trustee in bankruptcy pursuant to the
United States Bankruptcy Code (11 U.S.C.), as amended from time to time, in
accordance with a final nonappealable order of a court having competent
jurisdiction.
"Notice" means the telephonic or telegraphic notice, promptly
confirmed in writing by telecopy substantially in the form of Exhibit A attached
to the Policy, the original of which is subsequently delivered by registered or
certified mail, from the Trustee specifying the Group I Insured Payment which
shall be due and owing on the applicable Payment Date.
"Owner" means each Owner of a Class A-1 Certificate (as defined in the
Agreement) who, on the applicable Payment Date, is entitled under the terms of
the applicable Class A-1 Certificate to payment thereunder.
A-1-8
<PAGE>
Capitalized terms used herein and not otherwise defined in the Policy
shall have the respective meanings set forth in the Agreement as of the date of
execution of the Policy, without giving effect to any subsequent amendment or
modification to the Agreement unless such amendment or modification has been
approved in writing by the Insurer.
Any notice under the Policy or service of process on the Fiscal Agent
may be made at the address listed below for the Fiscal Agent of the Insurer or
such other address as the Insurer shall specify in writing to the Trustee.
The notice address of the Fiscal Agent is 61 Broadway, 15th Floor, New
York, New York 10006, Attention: Municipal Registrar and Paying Agency or such
other address as the Fiscal Agent shall specify to the Trustee in writing.
The Policy is being issued under and pursuant to, and shall be
construed under, the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
The insurance provided by the Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
The Policy is not cancelable for any reason. The premium on the
Policy is not refundable for any reason, including payment, or provision being
made for payment, prior to the maturity of the Obligations.
MBIA INSURANCE CORPORATION
A-1-9
<PAGE>
EXHIBIT A-2
FIRST ALLIANCE MORTGAGE LOAN TRUST 1996-4
MORTGAGE LOAN ASSET BACKED CERTIFICATE
CLASS A-2 CERTIFICATE
(Variable Rate Class A-2 Certificate)
Representing Certain Interests Relating to a Pool of
Mortgage Loans in Group II formed by First Alliance Mortgage
Company, and Serviced by
FIRST ALLIANCE MORTGAGE COMPANY,
as Servicer
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to Issuer
("First Alliance Mortgage Loan Trust 1996-4") or its agent for registration of
transfer, exchange, or payment, and any certificate issued is registered in the
name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
This certificate does not represent an interest in, or an obligation
of, nor are the underlying Mortgage Loans insured or guaranteed by, First
Alliance Mortgage Company, any Originator or any of their subsidiaries and
affiliates. This certificate represents a fractional ownership interest in
Group II described herein, moneys in certain Accounts created pursuant to the
Pooling and Servicing Agreement and certain other rights relating thereto and is
payable only from amounts received by the Trustee (i) relating to the Mortgage
Loans in Group II held by the Trust and (ii) pursuant to the Variable Rate
Certificate Insurance Policy.
No.: A-2-1 December 20, 1996 31846LBH8
----------------- ---------
Date CUSIP
$47,500,000 December 20, 2026
- ----------------------------- ------------------
Certificate Principal Amount Final Scheduled
Payment Date
Cede & Co.
----------------
Registered Owner
A-2-1
<PAGE>
The registered Owner named above is the registered Owner of a
fractional interest in (i) a pool of variable rate mortgage loans (the "Mortgage
Loans") secured by first mortgages or deeds of trust assigned to a particular
mortgage loan group ("Group II") which will be formed by First Alliance Mortgage
Company (the "Company" or, in its capacity as servicer, the "Servicer"), a
California corporation, and sold by the Company to The Chase Manhattan Bank, a
New York banking corporation, as trustee (the "Trustee") on behalf of First
Alliance Mortgage Loan Trust 1996-4 (the "Trust") pursuant to that certain
Pooling and Servicing Agreement dated as of December 1, 1996 (the "Pooling and
Servicing Agreement") by and among the Company, the Servicer and the Trustee,
(ii) such amounts, including Eligible Investments and the proceeds of payments
under the Variable Rate Certificate Insurance Policy, as from time to time may
be held in the related Accounts (except as otherwise provided in the Pooling and
Servicing Agreement), each created pursuant to the Pooling and Servicing
Agreement, (iii) any Property relating to the Mortgage Loans in Group II, the
ownership of which has been effected in the name of the Servicer on behalf of
the Trust as a result of foreclosure or acceptance by the Servicer of a deed in
lieu of foreclosure and that has not been withdrawn from the Trust Estate, (iv)
any Insurance Policies relating to the Mortgage Loans in Group II and any rights
of the Company in any Insurance Policies relating to the Mortgage Loans in Group
II, (v) Net Liquidation Proceeds relating to the Mortgage Loans in Group II,
(vi) the Variable Rate proceeds of any of the above. Such Mortgage Loans in
Group II and other amounts and property enumerated above are hereinafter
referred to as "Group II."
The Certificate Principal Amount set forth above is equal to the
product of (i) the Percentage Interest represented by this Certificate and (ii)
the aggregate Original Certificate Principal Balance of the Class A-2
Certificates on December 20, 1996 (the "Startup Date"), which was $47,500,000.
The Owner hereof may receive principal payments on each Payment Date, as
hereinafter described, which will fully amortize such Certificate Principal
Amount over the period from the date of initial delivery hereof to the final
Payment Date of the Class A-2 Certificates. Therefore, the actual outstanding
principal amount of this Class A-2 Certificate, on any date subsequent to
January 20, 1997 (the first Payment Date) will be less than the Certificate
Principal Amount set forth above.
Upon receiving the final distribution hereon, the Owner hereof is
required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement provides that, in any event, upon the making of the final distribution
due on this Certificate, this Certificate shall be deemed cancelled for all
purposes under the Pooling and Servicing Agreement.
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN
INTEREST IN A CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G
AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING
COMPLIANCE WITH THE REMIC PROVISIONS OF THE CODE.
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT
NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
A-2-2
<PAGE>
This Certificate is one of a Class of duly-authorized Certificates
designated as First Alliance Mortgage Loan Trust 1996-4, Mortgage Loan Asset
Backed Certificates, Class A-2 Certificates (the "Class A-2 Certificates") and
issued under and subject to the terms, provisions and conditions of the Pooling
and Servicing Agreement, to which Pooling and Servicing Agreement the Owner of
this Certificate by virtue of acceptance hereof assents and by which such Owner
is bound. Also issued under the Pooling and Servicing Agreement are Class A-1
Certificates and Class R Certificates; all such Certificates are collectively
referred to herein as the "Certificates."
Terms capitalized herein and not otherwise defined herein shall have
the respective meanings set forth in the Pooling and Servicing Agreement.
On the 20th day of each month, or, if such day is not a Business Day,
then the next succeeding Business Day (each such day being a "Payment Date")
commencing January 20, 1997, the Owners of the Class A-2 Certificates as of the
close of business on the last business day of the calendar month immediately
preceding the calendar month in which such Payment Date occurs (the "Record
Date") will be entitled to receive the Class A-2 Distribution Amount relating to
such Payment Date. Distributions will be made in immediately available funds to
such Owners, by wire transfer or otherwise, to the account of an Owner at a
domestic bank or other entity having appropriate facilities therefor, if such
Owner has so notified the Trustee at least 5 business days prior to the related
record date, or by check mailed to the address of the person entitled thereto as
it appears on the Register.
Each Owner of record of a Class A-2 Certificate will be entitled to
receive such Owner's Percentage Interest in the amounts due on such Payment Date
to the Owners of the Class A-2 Certificates.
Upon receipt of amounts under the Variable Rate Certificate Insurance
Policy on behalf of the Owner of the Class A-2 Certificate, the Trustee shall
distribute in accordance with the Pooling and Servicing Agreement such amounts
to the Owners of the Class A-2 Certificates.
The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling
and Servicing Agreement. Amounts properly withheld under the Code or applicable
to any Owner shall be considered as having been paid by the Trustee to such
Owner for all purposes of the Pooling and Servicing Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant to the
Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits
the Servicer to enter into Sub-Servicing Agreements with certain institutions
eligible for appointment as Sub-Servicers for the servicing and administration
of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the
Servicer from any of its obligations under the Pooling and Servicing Agreement.
This Certificate does not represent a deposit or other obligation of,
or an interest in, nor are the underlying Mortgage Loans insured or guaranteed
by, First Alliance Mortgage Company, any Originator or any of their subsidiaries
and affiliates and are not insured or guaranteed by the Federal Deposit
Insurance Corporation, the Government National Mortgage Association, or any
other governmental agency. This Certificate is limited in right of payment to
certain collections and recoveries relating to the Mortgage Loans in Group II
and amounts on deposit in the Accounts (except as otherwise provided in the
Pooling and Servicing Agreement) and payments received by the Trustee pursuant
to the Variable Rate Certificate Insurance Policy, all as more specifically set
forth hereinabove and in the Pooling and Servicing Agreement.
A-2-3
<PAGE>
No Owner shall have any right to institute any proceeding, judicial or
otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms hereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Owner of any Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the Pooling
and Servicing Agreement with respect to such Certificate or to institute suit
for the enforcement of any such distribution, and such right shall not be
impaired without the consent of such Owner.
The Pooling and Servicing Agreement provides that the obligations
created thereby will terminate upon the earlier of (i) the payment to the Owners
of all Certificates from amounts other than those available under the
Certificate Insurance Policies of all amounts held by the Trustee and required
to be paid to such Owners pursuant to the Pooling and Servicing Agreement upon
the later to occur of (a) the final payment or other liquidation (or any advance
made with respect thereto) of the last Mortgage Loan in the Trust Estate or (b)
the disposition of all property acquired in respect of any Mortgage Loan
remaining in the Trust Estate or (ii) at any time when a Qualified Liquidation
of the Trust Estate is effected pursuant to the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement additionally provides that (i) the
Servicer or the Certificate Insurer may, at its option, purchase from the Trust
all (but not fewer than all) remaining Mortgage Loans and other property then
constituting the Trust Estate, and thereby effect early retirement of the Class
A-2 Certificates, on any Remittance Date when the aggregate outstanding Loan
Balances of the Mortgage Loans in the Trust Estate is 10% or less of the Maximum
Collateral Amount and (ii) under certain circumstances relating to the
qualification of the Trust as a REMIC under the Code the Mortgage Loans may be
sold, thereby affecting the early retirement of the Class A-2 Certificates.
The Trustee shall give written notice of termination of the Pooling and
Servicing Agreement to each Owner in the manner set forth therein.
The Owners of a majority of the Percentage Interests represented by
the Class A Certificates, upon compliance with the requirements set forth in the
Pooling and Servicing Agreement, have the right, with the consent of the
Certificate Insurer, to exercise any trust or power set forth in the Pooling and
Servicing Agreement with respect to the Certificates or the Trust Estate.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register, and thereupon one or more new Certificates of like
Class, tenor and a like Percentage Interest will be issued to the designated
transferee or transferees.
The Trustee is required to furnish certain information on each Payment
Date to the Owner of this Certificate, as more fully described in the Pooling
and Servicing Agreement.
The Class A-2 Certificates are issuable only as registered
Certificates in denominations of $1,000 certificate principal amount and
integral multiples of $1,000. As provided in the Pooling and Servicing
Agreement and subject to certain limitations therein set forth, Class A-2
Certificates are exchangeable for new Class A-2 Certificates of authorized
denominations evidencing the same aggregate principal amount.
A-2-4
<PAGE>
The Trustee and any agent of the Trustee may treat the Person in whose
name this Certificate is registered as the owner hereof for all purposes, and
neither the Trustee or any such agent shall be affected by notice to the
contrary.
A-2-5
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed on behalf of the Trust.
The Chase Manhattan Bank, as Trustee
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
Trustee Authentication
The Chase Manhattan Bank, as Trustee
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
A-2-6
<PAGE>
STATEMENT OF INSURANCE
MBIA Insurance Corporation (the "Insurer") has issued a policy
containing the following provisions, such policy being on file at The Chase
Manhattan Bank, New York, New York, as trustee (the "Trustee").
The Insurer, in consideration of the payment of the premium and
subject to the terms of the Certificate Guaranty Insurance Policy (the
"Policy"), thereby unconditionally and irrevocably guarantees to any Owner (as
defined below) that an amount equal to each full and complete Group II Insured
Payment will be received by the Trustee or its successor, as trustee for the
Owners, on behalf of the Owners from the Insurer, for distribution by the
Trustee to each Owner of each Owner's proportionate share of the Group II
Insured Payment. The Insurer's obligation under the Policy with respect to a
particular Group II Insured Payment shall be discharged to the extent funds
equal to the Group II Insured Payment are received by the Trustee, whether or
not such funds are properly applied by the Trustee. Group II Insured Payments
shall be made only at the time set forth in the Policy, and no accelerated Group
II Insured Payments shall be made regardless of any acceleration of the
Obligations, unless such acceleration is at the sole option of the Insurer.
"Obligations" shall mean:
$47,500,000
First Alliance Mortgage Loan Trust 1996-4
Mortgage Loan Asset Backed Certificates
Class A-2
Notwithstanding the foregoing paragraph, the Policy does not cover
shortfalls, if any, attributable to the liability of the Trust, the REMIC or the
Trustee for withholding taxes, if any (including interest and penalties in
respect of any such liability).
The Insurer will pay any Group II Insured Payment that is a Group II
Preference Amount on the Business Day following receipt on a Business Day by the
Fiscal Agent (as described below) of (i) a certified copy of the order requiring
the return of such Group II Preference Amount, (ii) an opinion of counsel
satisfactory to the Insurer that such order is final and not subject to appeal,
(iii) an assignment in such form as is reasonably required by the Insurer,
irrevocably assigning to the Insurer all rights and claims of the Owner relating
to or arising under the Obligations against the debtor which made such
preference payment or otherwise with respect to such preference payment and (iv)
appropriate instruments to effect the appointment of the Insurer as agent for
such Owner in any legal proceeding related to such preference payment, such
instruments being in a form satisfactory to the Insurer, provided that if such
documents are received after 12:00 noon New York City time on such Business Day,
they will be deemed to be received on the following Business Day. Such payments
shall be disbursed to the receiver or trustee in bankruptcy named in the final
order of the court exercising jurisdiction on behalf of the Owner and not to any
Owner directly unless such Owner has returned principal or interest paid on the
Obligations to such receiver or trustee in bankruptcy, in which case such
payment shall be disbursed to such Owner.
The Insurer will pay any other amount payable under the Policy no
later than 12:00 noon, New York City time, on the later of the Payment Date on
which the related Group II Distribution Amount is due or the Business Day
following receipt in New York, New York on a Business Day by State Street Bank
and Trust Company, N.A. as Fiscal Agent for the Insurer, or any successor fiscal
agent appointed by the Insurer (the "Fiscal Agent") of a Notice (as described
below); provided that, if such Notice is received after 12:00 noon, New York
City time on such Business Day, it will be deemed to be
A-2-7
<PAGE>
received on the following Business Day. If any such Notice received by the
Fiscal Agent is not in proper form or is otherwise insufficient for the purpose
of making a claim under the Policy, it shall be deemed not to have been received
by the Fiscal Agent for purposes of this paragraph, and the Insurer or the
Fiscal Agent, as the case may be, shall promptly so advise the Trustee and the
Trustee may submit an amended Notice.
Group II Insured Payments due under the Policy, unless otherwise
stated in the Policy, will be disbursed by the Fiscal Agent to the Trustee on
behalf of the Owners by wire transfer of immediately available funds in the
amount of the Group II Insured Payment less, in respect of Group II Insured
Payments related to Group II Preference Amounts, any amount held by the Trustee
for the payment of such Group II Insured Payment and legally available therefor.
The Fiscal Agent is the agent of the Insurer only and the Fiscal Agent
shall in no event be liable to the Owners for any acts of the Fiscal Agent or
any failure of the Insurer to deposit, or cause to be deposited, sufficient
funds to make payments due under the policy.
As used in the Policy, the following terms shall have the following
meanings:
"Agreement" means the Pooling and Servicing Agreement dated as of
December 1, 1996 among First Alliance Mortgage Company, as Company, First
Alliance Mortgage Company, as Servicer and The Chase Manhattan Bank, as Trustee
without regard to any amendment or supplement thereto unless the Insurer shall
have consented in writing thereto.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which banking institutions in New York City or in the city in which the
corporate trust office of the Trustee under the Agreement is located are
authorized or obligated by law or executive order to close.
"Class A-2 Termination Date" means December 20, 2026.
"Group II Distribution Amount" means the Class A-2 Distribution
Amount.
"Group II Insured Payment," with respect to the Class A-2
Certificates, and as to any Payment Date, will equal the sum of (i) the excess,
if any, of (a) the Class A-2 Current Interest over (b) the Group II Total
Available Funds (after any deduction for the Group II Premium Amount and the
Group II Trustee Fee), (ii) the Group II Subordination Deficit, if any (after
applying the cross collateralization provisions of Section 7.5(d)(ii)(A) and (B)
of the Agreement), (iii) the Group II Preference Amount and (iv) as of the Class
A-2 Termination Date, an amount sufficient to reduce the certificate principal
balance of the Class A-2 Certificates to zero.
"Group II Preference Amount" means any amount previously distributed
to an Owner on the Class A-2 Certificates that is recoverable and sought to be
recovered as a voidable preference by a trustee in bankruptcy pursuant to the
United States Bankruptcy Code (11 U.S.C.), as amended from time to time in
accordance with a final nonappealable order of a court having competent
jurisdiction.
"Notice" means the telephonic or telegraphic notice, promptly
confirmed in writing by telecopy substantially in the form of Exhibit A attached
to the Policy, the original of which is subsequently delivered by registered or
certified mail, from the Trustee specifying the Group II Insured Payment which
shall be due and owing on the applicable Payment Date.
A-2-8
<PAGE>
"Owner" means each Owner of a Class A-2 Certificate (as defined in the
Agreement) who, on the applicable Payment Date, is entitled under the terms of
the applicable Class A-2 Certificate to payment thereunder.
Capitalized terms used herein and not otherwise defined in the Policy
shall have the respective meanings set forth in the Agreement as of the date of
execution of the Policy, without giving effect to any subsequent amendment or
modification to the Agreement unless such amendment or modification has been
approved in writing by the Insurer.
Any notice under the Policy or service of process on the Fiscal Agent
may be made at the address listed below for the Fiscal Agent of the Insurer or
such other address as the Insurer shall specify in writing to the Trustee.
The notice address of the Fiscal Agent is 61 Broadway, 15th Floor, New
York, New York 10006 Attention: Municipal Registrar and Paying Agency or such
other address as the Fiscal Agent shall specify to the Trustee in writing.
The Policy is being issued under and pursuant to, and shall be
construed under, the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
The insurance provided by the Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
The Policy is not cancelable for any reason. The premium on the
Policy is not refundable for any reason including payment, or provision being
made for payment, prior to the maturity of the Obligations.
MBIA INSURANCE CORPORATION
A-2-9
<PAGE>
EXHIBIT C
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN
INTEREST IN THE ONLY "RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G and
860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING
COMPLIANCE WITH THE REMIC PROVISIONS OF THE CODE.
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). ANY RESALE OR TRANSFER OF THIS CERTIFICATE WITHOUT
REGISTRATION THEREOF UNDER THE ACT MAY BE MADE ONLY IN A TRANSACTION EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH THE PROVISIONS
OF SECTION 5.8 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
TRANSFER OF THIS CLASS R CERTIFICATE IS RESTRICTED AS SET FORTH IN THE
POOLING AND SERVICING AGREEMENT. NO TRANSFER OF THIS CLASS R CERTIFICATE MAY BE
MADE TO A "DISQUALIFIED ORGANIZATION" AS DEFINED IN SECTION 860E(e)(5) OF THE
CODE. SUCH TERM INCLUDES THE UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION
THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, ANY AGENCY OR
INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN CERTAIN TAXABLE
INSTRUMENTALITIES), ANY COOPERATIVE ORGANIZATION FURNISHING ELECTRIC ENERGY OR
PROVIDING THEREOF SERVICE TO PERSONS IN RURAL AREAS, OR ANY ORGANIZATION (OTHER
THAN A FARMERS' COOPERATIVE) THAT IS EXEMPT FROM FEDERAL INCOME TAX UNLESS SUCH
ORGANIZATION IS SUBJECT TO THE TAX ON UNRELATED BUSINESS INCOME. NO TRANSFER OF
THIS CLASS R CERTIFICATE WILL BE REGISTERED BY THE TRUSTEE UNLESS THE PROPOSED
TRANSFEREE HAS DELIVERED AN AFFIDAVIT AFFIRMING, AMONG OTHER THINGS, THAT THE
PROPOSED TRANSFEREE IS NOT A QUALIFIED ORGANIZATION AND IS NOT ACQUIRING THE
CLASS R CERTIFICATE FOR THE ACCOUNT OF A DISQUALIFIED ORGANIZATION. A COPY OF
THE FORM OF AFFIDAVIT REQUIRED OF EACH PROPOSED TRANSFEREE IS ON FILE AND
AVAILABLE FROM THE TRUSTEE.
A TRANSFER IN VIOLATION OF THE APPLICABLE RESTRICTIONS MAY GIVE RISE
TO A SUBSTANTIAL TAX UPON THE TRANSFEROR OR, IN CERTAIN CASES, UPON AN AGENT
ACTING FOR THE TRANSFEREE. A PASS-THROUGH ENTITY THAT HOLDS THIS CLASS R
CERTIFICATE AND THAT HAS A DISQUALIFIED ORGANIZATION AS A RECORD OWNER IN ANY
TAXABLE YEAR GENERALLY WILL BE SUBJECT TO A TAX FOR EACH SUCH YEAR EQUAL TO THE
PRODUCT OF (A) THE AMOUNT OF EXCESS INCLUSIONS WITH RESPECT TO THE PORTION OF
THIS CERTIFICATE OWNED THROUGH SUCH PASS-THROUGH ENTITY BY SUCH DISQUALIFIED
ORGANIZATION, AND (B) THE HIGHEST MARGINAL FEDERAL TAX RATE ON CORPORATIONS. FOR
PURPOSES OF THE PRECEDING SENTENCE, THE TERM "PASS-THROUGH" ENTITY INCLUDES
REGULATED INVESTMENT COMPANIES, REAL ESTATE INVESTMENT TRUSTS, COMMON TRUST
FUNDS, PARTNERSHIPS, TRUSTS, ESTATES, COOPERATIVES TO WHICH PART I OF SUBCHAPTER
1T OF THE CODE APPLIES AND, EXCEPT AS PROVIDED IN REGULATIONS, NOMINEES.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING HOME EQUITY LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
<PAGE>
FIRST ALLIANCE MORTGAGE LOAN TRUST 1996-4
MORTGAGE LOAN ASSET BACKED CERTIFICATE
CLASS R
Representing Certain Interests Relating to a Pool
of Mortgage Loans Formed by First Alliance Mortgage
Company and Serviced by
FIRST ALLIANCE MORTGAGE COMPANY
This Certificate does not represent an interest in, or an obligation
of, nor are the underlying Mortgage Loans insured or guaranteed by, First
Alliance Mortgage Company, any Originator or any of their subsidiaries and
affiliates. This Certificate represents a fractional residual ownership
interest in the REMIC of the Trust described herein, moneys in certain Accounts
created pursuant to the Pooling and Servicing Agreement and certain other rights
relating thereto and is payable only from amounts received by the Trustee
relating to the Trust Estate.
No: R-1 Date: December 20, 1996
Percentage Interest: 99.99% MARCH 20, 2028
--------------
Final Scheduled
Payment Date
FIRST ALLIANCE RESIDUAL HOLDING COMPANY
-------------------------------------------
Registered Owner
The registered Owner named above is the registered Owner of a
fractional interest in (i) a pool of mortgage loans (the "Mortgage Loans")
formed by First Alliance Mortgage Company (the "Company"), a California
corporation, and sold by the Company to The Chase Manhattan Bank, as trustee
(the "Trustee") on behalf of First Alliance Mortgage Loan Trust 1996-4 (the
"Trust") pursuant to that certain Pooling and Servicing Agreement dated as of
December 1, 1996 (the "Pooling and Servicing Agreement") by and among the
Company, the Company in its capacity as servicer (the "Servicer") and the
Trustee, (ii) such amount, including Eligible Investments, as from time to time
may be held in the Accounts created pursuant to the Pooling and Servicing
Agreement, (iii) any Property relating to the Mortgage Loans, the ownership of
which has been effected in the name of the Servicer on behalf of the Trust as a
result of foreclosure or acceptance by the Servicer of a deed-in-lieu of
foreclosure and that has not been withdrawn from the Trust, (iv) Net Liquidation
Proceeds relating to the Mortgage Loans (v) any Insurance Policies relating to
the Mortgage Loans and any rights of the Company in any Insurance Policies
relating to such Mortgage Loans and (vi) the rights of the Company against any
Originator pursuant to the related Master Transfer Agreement and the proceeds of
any of the above. Such Mortgage Loans and other amounts and property enumerated
above are hereinafter referred to as the "Trust Estate".
C-1
<PAGE>
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
This Certificate is one of a Class of duly authorized Certificates
designated as First Alliance Mortgage Loan Trust 1996-4, Mortgage Loan Asset
Backed Certificates, Class R Certificates (the "Class R Certificates") and
issued under and subject to the terms, provisions and conditions of the Pooling
and Servicing Agreement, to which Pooling and Servicing Agreement the Owner of
this Certificate by virtue of acceptance hereof assents and by which such Owner
is bound.
Terms capitalized herein and not otherwise defined herein shall have
the respective meanings set forth in the Pooling and Servicing Agreement.
On the 20th day of each month or, if such day is not a Business Day,
then the next succeeding Business Day (each such day being a "Payment Date"),
commencing January 20, 1997, to the persons in whose names the Class R
Certificates are registered at the close of business on the last business day of
the calendar month immediately preceding the calendar month in which such
Payment Date occurs (the "Record Date"), the Trustee will distribute to each
Owner of the Class R Certificates such Owner's Percentage Interest multiplied by
any amounts then available to be distributed to the Owners of the Class R
Certificates. Distributions will be made in immediately available funds, by
wire transfer or otherwise, to the account of such Owner at a domestic bank or
other entity having appropriate facilities therefor, if such Owner has so
notified the Trustee at least 5 business days prior to the related record date,
or by check mailed to the address of the person entitled thereto as it appears
on the Register.
The Pooling and Servicing Agreement provides that only certain
miscellaneous amounts will be distributed to the Owners of the Class R
Certificates.
Upon receiving the final distribution hereon, the Owner hereof is
required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement provides that, in any event, upon the making of the final distribution
due on this Certificate, this Certificate shall be deemed cancelled for all
purposes under the Pooling and Servicing Agreement.
The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling
and Servicing Agreement. Amounts properly withheld under the Code or applicable
state or local law by any Person from a distribution to any Owner shall be
considered as having been paid by the Trustee to such Owner for all purposes of
the Pooling and Servicing Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant to the
Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits
the Servicer to enter into Sub-Servicing Agreements with certain institutions
eligible for appointment as Sub-Servicers for the servicing and administration
of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the
Servicer from any of its obligations under the Pooling and Servicing Agreement.
This Certificate does not represent a deposit or other obligation of,
or an interest in, nor are the underlying Mortgage Loans insured or guaranteed
by, the Company, any Originator or any of their subsidiaries and affiliates and
are not insured or guaranteed by the Federal Deposit Insurance Corporation, the
Government National Mortgage Association, or any other governmental agency.
This
C-2
<PAGE>
Certificate is limited in right of payment to certain collections and recoveries
relating to the Mortgage Loans, all as more specifically set forth hereinabove
and in the Pooling and Servicing Agreement.
No Owner shall have the right to institute any proceeding, judicial or
otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Owner of any Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the Pooling
and Servicing Agreement with respect to such Certificate or to institute suit
for the enforcement of any such distribution, and such right shall not be
impaired without the consent of such Owner.
The Pooling and Servicing Agreement provides that the obligations
created thereby will terminate upon the earlier of (i) the payment to the Owners
of all Certificates from amounts other than those available under the
Certificate Insurance Policies of all amounts held by the Trustee and required
to be paid to such Owners pursuant to the Pooling and Servicing Agreement upon
the later to occur of (a) the final payment or other liquidation (or any advance
made with respect thereto) of the last Mortgage Loan in the Trust Estate or
(b) the disposition of all property acquired in respect of any Mortgage Loan
remaining in the Trust Estate or (ii) at any time when a Qualified Liquidation
of a Trust Estate occurs pursuant to the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement additionally provides that (i) the
Servicer or the Certificate Insurer may, at its option, purchase from the Trust
all (but not fewer than all) remaining Mortgage Loans and other property then
constituting the Trust Estate, and thereby effect early retirement of the Class
R Certificates, on any Remittance Date when the aggregate outstanding Loan
Balances of the Mortgage Loans in the Trust Estate is 10% or less of the Maximum
Collateral Amount and (ii) under certain circumstances relating to the
qualification of the Trust as a REMIC under the Code the Mortgage Loans may be
sold, thereby affecting the early retirement of the Class R Certificates.
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Owner in the manner set forth therein.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by, or accompanied by a written
instrument of transfer in the form required by the Pooling and Servicing
Agreement duly executed by, the Owner hereof or his attorney duly authorized in
writing, and thereupon one or more new Certificates of like Class, tenor and a
like aggregate fractional undivided interest in the Trust Estate will be issued
to the designated transferee or transferees.
The Trustee is required to furnish certain information on each Payment
Date to the Owner of this Certificate, as more fully described in the Pooling
and Servicing Agreement.
The Class R Certificates are issuable only as registered Certificates.
As provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth, Class R Certificates
C-3
<PAGE>
are exchangeable for new Class R Certificates evidencing the same Percentage
Interest as the Class R Certificates exchanged.
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 and any agent of the Trustee may treat the Person in whose
name this Certificate is registered as the Owner hereof for all purposes, and
neither the Trustee or any such agent shall be affected by notice to the
contrary, except as may otherwise be specifically provided in the Pooling and
Servicing Agreement with respect to the Certificate Insurer.
C-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed on behalf of the Trust.
THE CHASE MANHATTAN BANK, as Trustee
By:
---------------------------------------------
Name:
---------------------------------------------
Title:
---------------------------------------------
Trustee's Authentication
THE CHASE MANHATTAN BANK, as Trustee
as Trustee
By:
------------------------------
Name:
-------------------------
Title:
-------------------------
C-5
<PAGE>
EXHIBIT C
SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN
INTEREST IN THE ONLY "RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G and
860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING
COMPLIANCE WITH THE REMIC PROVISIONS OF THE CODE.
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). ANY RESALE OR TRANSFER OF THIS CERTIFICATE WITHOUT
REGISTRATION THEREOF UNDER THE ACT MAY BE MADE ONLY IN A TRANSACTION EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH THE PROVISIONS
OF SECTION 5.8 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
TRANSFER OF THIS CLASS R CERTIFICATE IS RESTRICTED AS SET FORTH IN THE
POOLING AND SERVICING AGREEMENT. NO TRANSFER OF THIS CLASS R CERTIFICATE MAY BE
MADE TO A "DISQUALIFIED ORGANIZATION" AS DEFINED IN SECTION 860E(e)(5) OF THE
CODE. SUCH TERM INCLUDES THE UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION
THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, ANY AGENCY OR
INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN CERTAIN TAXABLE
INSTRUMENTALITIES), ANY COOPERATIVE ORGANIZATION FURNISHING ELECTRIC ENERGY OR
PROVIDING THEREOF SERVICE TO PERSONS IN RURAL AREAS, OR ANY ORGANIZATION (OTHER
THAN A FARMERS' COOPERATIVE) THAT IS EXEMPT FROM FEDERAL INCOME TAX UNLESS SUCH
ORGANIZATION IS SUBJECT TO THE TAX ON UNRELATED BUSINESS INCOME. NO TRANSFER OF
THIS CLASS R CERTIFICATE WILL BE REGISTERED BY THE TRUSTEE UNLESS THE PROPOSED
TRANSFEREE HAS DELIVERED AN AFFIDAVIT AFFIRMING, AMONG OTHER THINGS, THAT THE
PROPOSED TRANSFEREE IS NOT A QUALIFIED ORGANIZATION AND IS NOT ACQUIRING THE
CLASS R CERTIFICATE FOR THE ACCOUNT OF A DISQUALIFIED ORGANIZATION. A COPY OF
THE FORM OF AFFIDAVIT REQUIRED OF EACH PROPOSED TRANSFEREE IS ON FILE AND
AVAILABLE FROM THE TRUSTEE.
A TRANSFER IN VIOLATION OF THE APPLICABLE RESTRICTIONS MAY GIVE RISE
TO A SUBSTANTIAL TAX UPON THE TRANSFEROR OR, IN CERTAIN CASES, UPON AN AGENT
ACTING FOR THE TRANSFEREE. A PASS-THROUGH ENTITY THAT HOLDS THIS CLASS R
CERTIFICATE AND THAT HAS A DISQUALIFIED ORGANIZATION AS A RECORD OWNER IN ANY
TAXABLE YEAR GENERALLY WILL BE SUBJECT TO A TAX FOR EACH SUCH YEAR EQUAL TO THE
PRODUCT OF (A) THE AMOUNT OF EXCESS INCLUSIONS WITH RESPECT TO THE PORTION OF
THIS CERTIFICATE OWNED THROUGH SUCH PASS-THROUGH ENTITY BY SUCH DISQUALIFIED
ORGANIZATION, AND (B) THE HIGHEST MARGINAL FEDERAL TAX RATE ON CORPORATIONS. FOR
PURPOSES OF THE PRECEDING SENTENCE, THE TERM "PASS-THROUGH" ENTITY INCLUDES
REGULATED INVESTMENT COMPANIES, REAL ESTATE INVESTMENT TRUSTS, COMMON TRUST
FUNDS, PARTNERSHIPS, TRUSTS, ESTATES, COOPERATIVES TO WHICH PART I OF SUBCHAPTER
1T OF THE CODE APPLIES AND, EXCEPT AS PROVIDED IN REGULATIONS, NOMINEES.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING HOME EQUITY LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.
<PAGE>
FIRST ALLIANCE MORTGAGE LOAN TRUST 1996-4
MORTGAGE LOAN ASSET BACKED CERTIFICATE
CLASS R
Representing Certain Interests Relating to a Pool
of Mortgage Loans Formed by First Alliance Mortgage
Company and Serviced by
FIRST ALLIANCE MORTGAGE COMPANY
This Certificate does not represent an interest in, or an obligation
of, nor are the underlying Mortgage Loans insured or guaranteed by, First
Alliance Mortgage Company, any Originator or any of their subsidiaries and
affiliates. This Certificate represents a fractional residual ownership
interest in the REMIC of the Trust described herein, moneys in certain Accounts
created pursuant to the Pooling and Servicing Agreement and certain other rights
relating thereto and is payable only from amounts received by the Trustee
relating to the Trust Estate.
No: R-2 Date: December 20, 1996
Percentage Interest: 0.01% MARCH 20, 2028
----------------------
Final Scheduled
Payment Date
FIRST ALLIANCE MORTGAGE COMPANY
-----------------------------------
Registered Owner
The registered Owner named above is the registered Owner of a
fractional interest in (i) a pool of mortgage loans (the "Mortgage Loans")
formed by First Alliance Mortgage Company (the "Company"), a California
corporation, and sold by the Company to The Chase Manhattan Bank, as trustee
(the "Trustee") on behalf of First Alliance Mortgage Loan Trust 1996-4 (the
"Trust") pursuant to that certain Pooling and Servicing Agreement dated as of
December 1, 1996 (the "Pooling and Servicing Agreement") by and among the
Company, the Company in its capacity as servicer (the "Servicer") and the
Trustee, (ii) such amount, including Eligible Investments, as from time to time
may be held in the Accounts created pursuant to the Pooling and Servicing
Agreement, (iii) any Property relating to the Mortgage Loans, the ownership of
which has been effected in the name of the Servicer on behalf of the Trust as a
result of foreclosure or acceptance by the Servicer of a deed-in-lieu of
foreclosure and that has not been withdrawn from the Trust, (iv) Net Liquidation
Proceeds relating to the Mortgage Loans (v) any Insurance Policies relating to
the Mortgage Loans and any rights of the Company in any Insurance Policies
relating to such Mortgage Loans and (vi) the rights of the Company against any
Originator pursuant to the related Master Transfer Agreement and the proceeds of
any of the above. Such Mortgage Loans and other amounts and property enumerated
above are hereinafter referred to as the "Trust Estate".
C-1
<PAGE>
THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND,
NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY.
This Certificate is one of a Class of duly authorized Certificates
designated as First Alliance Mortgage Loan Trust 1996-4, Mortgage Loan Asset
Backed Certificates, Class R Certificates (the "Class R Certificates") and
issued under and subject to the terms, provisions and conditions of the Pooling
and Servicing Agreement, to which Pooling and Servicing Agreement the Owner of
this Certificate by virtue of acceptance hereof assents and by which such Owner
is bound.
Terms capitalized herein and not otherwise defined herein shall have
the respective meanings set forth in the Pooling and Servicing Agreement.
On the 20th day of each month or, if such day is not a Business Day,
then the next succeeding Business Day (each such day being a "Payment Date"),
commencing January 20, 1997, to the persons in whose names the Class R
Certificates are registered at the close of business on the last business day of
the calendar month immediately preceding the calendar month in which such
Payment Date occurs (the "Record Date"), the Trustee will distribute to each
Owner of the Class R Certificates such Owner's Percentage Interest multiplied by
any amounts then available to be distributed to the Owners of the Class R
Certificates. Distributions will be made in immediately available funds, by
wire transfer or otherwise, to the account of such Owner at a domestic bank or
other entity having appropriate facilities therefor, if such Owner has so
notified the Trustee at least 5 business days prior to the related record date,
or by check mailed to the address of the person entitled thereto as it appears
on the Register.
The Pooling and Servicing Agreement provides that only certain
miscellaneous amounts will be distributed to the Owners of the Class R
Certificates.
Upon receiving the final distribution hereon, the Owner hereof is
required to send this Certificate to the Trustee. The Pooling and Servicing
Agreement provides that, in any event, upon the making of the final distribution
due on this Certificate, this Certificate shall be deemed cancelled for all
purposes under the Pooling and Servicing Agreement.
The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling
and Servicing Agreement. Amounts properly withheld under the Code or applicable
state or local law by any Person from a distribution to any Owner shall be
considered as having been paid by the Trustee to such Owner for all purposes of
the Pooling and Servicing Agreement.
The Mortgage Loans will be serviced by the Servicer pursuant to the
Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits
the Servicer to enter into Sub-Servicing Agreements with certain institutions
eligible for appointment as Sub-Servicers for the servicing and administration
of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the
Servicer from any of its obligations under the Pooling and Servicing Agreement.
This Certificate does not represent a deposit or other obligation of,
or an interest in, nor are the underlying Mortgage Loans insured or guaranteed
by, the Company, any Originator or any of their subsidiaries and affiliates and
are not insured or guaranteed by the Federal Deposit Insurance Corporation, the
Government National Mortgage Association, or any other governmental agency.
This
C-2
<PAGE>
Certificate is limited in right of payment to certain collections and recoveries
relating to the Mortgage Loans, all as more specifically set forth hereinabove
and in the Pooling and Servicing Agreement.
No Owner shall have the right to institute any proceeding, judicial or
otherwise, with respect to the Pooling and Servicing Agreement, or for the
appointment of a receiver or trustee, or for any other remedy under the Pooling
and Servicing Agreement except in compliance with the terms thereof.
Notwithstanding any other provisions in the Pooling and Servicing
Agreement, the Owner of any Certificate shall have the right which is absolute
and unconditional to receive distributions to the extent provided in the Pooling
and Servicing Agreement with respect to such Certificate or to institute suit
for the enforcement of any such distribution, and such right shall not be
impaired without the consent of such Owner.
The Pooling and Servicing Agreement provides that the obligations
created thereby will terminate upon the earlier of (i) the payment to the Owners
of all Certificates from amounts other than those available under the
Certificate Insurance Policies of all amounts held by the Trustee and required
to be paid to such Owners pursuant to the Pooling and Servicing Agreement upon
the later to occur of (a) the final payment or other liquidation (or any advance
made with respect thereto) of the last Mortgage Loan in the Trust Estate or
(b) the disposition of all property acquired in respect of any Mortgage Loan
remaining in the Trust Estate or (ii) at any time when a Qualified Liquidation
of a Trust Estate occurs pursuant to the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement additionally provides that (i) the
Servicer or the Certificate Insurer may, at its option, purchase from the Trust
all (but not fewer than all) remaining Mortgage Loans and other property then
constituting the Trust Estate, and thereby effect early retirement of the Class
R Certificates, on any Remittance Date when the aggregate outstanding Loan
Balances of the Mortgage Loans in the Trust Estate is 10% or less of the Maximum
Collateral Amount and (ii) under certain circumstances relating to the
qualification of the Trust as a REMIC under the Code the Mortgage Loans may be
sold, thereby affecting the early retirement of the Class R Certificates.
The Trustee shall give written notice of termination of the Pooling
and Servicing Agreement to each Owner in the manner set forth therein.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and referred to on the face hereof, the
transfer of this Certificate is registrable in the Register upon surrender of
this Certificate for registration of transfer at the office designated as the
location of the Register duly endorsed by, or accompanied by a written
instrument of transfer in the form required by the Pooling and Servicing
Agreement duly executed by, the Owner hereof or his attorney duly authorized in
writing, and thereupon one or more new Certificates of like Class, tenor and a
like aggregate fractional undivided interest in the Trust Estate will be issued
to the designated transferee or transferees.
The Trustee is required to furnish certain information on each Payment
Date to the Owner of this Certificate, as more fully described in the Pooling
and Servicing Agreement.
The Class R Certificates are issuable only as registered Certificates.
As provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth, Class R Certificates
C-3
<PAGE>
are exchangeable for new Class R Certificates evidencing the same Percentage
Interest as the Class R Certificates exchanged.
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 and any agent of the Trustee may treat the Person in whose
name this Certificate is registered as the Owner hereof for all purposes, and
neither the Trustee or any such agent shall be affected by notice to the
contrary, except as may otherwise be specifically provided in the Pooling and
Servicing Agreement with respect to the Certificate Insurer.
C-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed on behalf of the Trust.
THE CHASE MANHATTAN BANK, as Trustee
By:
---------------------------------------------
Name:
---------------------------------------------
Title:
-------------------------------------------
Trustee's Authentication
THE CHASE MANHATTAN BANK, as Trustee
as Trustee
By:
------------------------------
Name:
-------------------------
Title:
-------------------------
C-5
<PAGE>
EXHIBIT D
CERTIFICATE RE: PREPAID LOANS
I, ______________, ______________ of First Alliance Mortgage Company,
a California corporation, (the "Company"), hereby certify that between the
"Cut-Off Date" (as defined in the Pooling and Servicing Agreement dated as of
December 1, 1996 among the Company, the Company in its capacity as servicer (the
"Servicer") and The Chase Manhattan Bank, a New York banking corporation, in its
capacity as trustee (the "Trustee")) and the "Closing Date" the following
schedule of "Mortgage Loans" have been prepaid in full.
Dated:
By:
---------------------------
Name:
Title:
D-1
<PAGE>
EXHIBIT E
INITIAL CERTIFICATION
WHEREAS, the undersigned is an Authorized Officer of the Bank of New
York, a New York banking corporation, acting in its capacity as custodian (the
"Custodian") on behalf of The Chase Manhattan Bank, a New York banking
corporation, the trustee (the "Trustee") of a certain pool of mortgage loans
(the "Pool") heretofore conveyed in trust to the Custodian, on behalf of
Trustee, pursuant to that certain Pooling and Servicing Agreement dated as of
December 1, 1996 (the "Pooling and Servicing Agreement") by and among First
Alliance Mortgage Company, a California corporation (the "Company"), the
Company, in its capacity as servicer (the "Servicer") and the Trustee;
WHEREAS, the Custodian, on behalf of the Trustee, is required,
pursuant to Section 3.6 of the Pooling and Servicing Agreement, to review the
Files relating to the Pool on or before the Startup Day; and
WHEREAS, Section 3.6 of the Pooling and Servicing Agreement requires
the Custodian, on behalf of the Trustee, to deliver this Initial Certification
upon the satisfaction of certain conditions set forth therein.
NOW, THEREFORE, the Custodian, on behalf of the Trustee, hereby
certifies with respect to each Mortgage Loan listed in the Schedules of Mortgage
Loans (other than any Mortgage Loan paid in full), which is attached hereto,
that all documents required to be delivered to it pursuant to the Pooling and
Servicing Agreement are in its possession, such documents have been reviewed by
it and appear regular on their face and relate to such Mortgage Loan and based
on its examination and only as to the foregoing documents, the information set
forth on the Schedules of Mortgage Loans as to loan number and address
accurately reflects information set forth in the File, except as attached
thereto.
THE BANK OF NEW YORK, as Custodian
By:
-------------------------
Dated:
[Attached Exception List]
E-1
<PAGE>
EXHIBIT F
FINAL CERTIFICATION
WHEREAS, the undersigned is an Authorized Officer of the Bank of New
York, a New York banking corporation, acting in its capacity as custodian (the
"Custodian") on behalf of The Chase Manhattan Bank, a New York banking
corporation, the trustee (the "Trustee") of a certain pool of mortgage loans
(the "Pool") heretofore conveyed in trust to the Custodian, on behalf of the
Trustee, pursuant to that certain Pooling and Servicing Agreement dated as of
December 1, 1996 (the "Pooling and Servicing Agreement") by and among First
Alliance Mortgage Company, a California corporation (the "Company"), the
Company, in its capacity as servicer (the "Servicer") and the Trustee;
WHEREAS, the Custodian, on behalf of the Trustee, is required,
pursuant to Section 3.6 of the Pooling and Servicing Agreement, to review the
Files relating to the Pool within a specified period following the Startup Day
and to notify the Company promptly of any defects with respect to the Pool, and
the Company is required to remedy such defects or take certain other action, all
as set forth in Section 3.6 of the Pooling and Servicing Agreement; and
WHEREAS, Section 3.6 of the Pooling and Servicing Agreement requires
the Custodian, on behalf of the Trustee, to deliver this Final Certification
upon the satisfaction of certain conditions set forth therein.
NOW, THEREFORE, the Custodian, on behalf of the Trustee, hereby
certifies that it has determined that all required documents (or certified
copies of documents listed in Section 3.5 of the Pooling and Servicing
Agreement) have been executed or received, and that such documents relate to the
Mortgage Loans identified in the Schedule of Mortgage Loans pursuant to Section
3.5(a) of the Pooling and Servicing Agreement or, in the event that such
documents have not been executed and received or do not so relate to such
Mortgage Loans, any remedial action by the Company pursuant to Section 3.6 of
the Pooling and Servicing Agreement has been completed. The Custodian makes no
certification hereby, however, with respect to any intervening assignments or
assumption and modification agreements.
By:
-------------------------
Title:
----------------------
Dated:
F-1
<PAGE>
EXHIBIT G
DELIVERY ORDER
December __, 1996
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: First Alliance Mortgage Loan Trust, Series 1996-4.
Dear Sirs:
Pursuant to Article IV of the Pooling and Servicing Agreement, dated
as of December 1, 1996 (the "Pooling and Servicing Agreement") by and among
First Alliance Mortgage Company, a California corporation (the "Company"), the
Company, in its capacity as servicer (the "Servicer"), and The Chase Manhattan
Bank, a New York banking corporation, in its capacity as trustee (the
"Trustee"), the Company HEREBY CERTIFIES that all conditions precedent to the
issuance of First Alliance Mortgage Loan Trust 1996-4, Class A and Class R (the
"Certificates"), HAVE BEEN SATISFIED and HEREBY REQUESTS YOU TO AUTHENTICATE AND
DELIVER said Certificates, and to RELEASE said Certificates to the Owners
thereof, or otherwise upon their order.
Very truly yours,
FIRST ALLIANCE MORTGAGE COMPANY
By:
----------------------------
Name:
Title:
G-1
<PAGE>
EXHIBIT H
FORM OF CLASS R TAX MATTERS TRANSFER CERTIFICATE
AFFIDAVIT PURSUANT TO SECTION 860E(e) OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED
STATE OF )
) ss:
COUNTY OF )
[NAME OF OFFICER], being first duly sworn, deposes and says:
1. That he is [Title of Officer] of [Name of Investor] (the
"Investor"), a [savings institution] [corporation] duly organized and existing
under the laws of [the State of __________] [the United States], on behalf of
which he makes this affidavit.
2. That (i) the Investor is not a "disqualified organization" and
will not be a "disqualified organization" as of [date of transfer] (For this
purpose, a "disqualified organization" means the United States, any state or
political subdivision thereof, any foreign government, any international
organization, any agency or instrumentality of any of the foregoing (other than
certain taxable instrumentalities), any cooperative organization furnishing
electric energy or providing telephone service to persons in rural areas, or any
organization (other than a farmers' cooperative) that is exempt from federal
income tax unless such organization is subject to the tax on unrelated business
income); (ii) it is not acquiring the Class R Certificates for the account of a
disqualified organization; (iii) it consents to any amendment of the Pooling and
Servicing Agreement that shall be deemed necessary by the Trustee (upon advice
of counsel) to constitute a reasonable arrangement to ensure that the Class R
Certificates will not be owned directly or indirectly by a disqualified
organization; and (iv) it will not transfer any such Class R Certificate unless
(a) it has received from the transferee an affidavit in substantially the same
form as this affidavit containing these same four representations and (b) as of
the time of the transfer, it does not have actual knowledge that such affidavit
is false.
IN WITNESS WHEREOF, the Investor has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by its
[Title of Officer] and its corporate seal to be hereunto attached, attested by
its [Assistant] Secretary, this __ day of __________, ____.
[NAME OF INVESTOR]
By:___________________________
[Name of Officer]
[Title of Officer]
[Corporate Seal]
Attest:
H-1
<PAGE>
- -----------------------------
[Assistant] Secretary
Personally appeared before me the above-named [Name of Officer], known
or proved to be the same person who executed the foregoing instrument and to be
the [Title of Officer] of the Investor, and acknowledged to me that he executed
the same as his free act and deed and the free act and deed of the Investor.
Subscribed and sworn before me this ____ day of _______, ____.
- ---------------------------
NOTARY PUBLIC
COUNTY OF
----------------
STATE OF
-----------------
My commission expires the ____ day of _______________, ____.
H-2
<PAGE>
EXHIBIT I
FORM OF NOTICE
TO CERTIFICATE GUARANTY INSURANCE POLICY
NUMBER:
NOTICE UNDER CERTIFICATE GUARANTY
INSURANCE POLICY NUMBER:
----------------------------------
State Street Bank and Trust Company, N.A.,
as Fiscal Agent For MBIA Insurance Corporation
61 Broadway, 15th Floor
New York, New York 10006
Attention: Municipal Registrar and
Paying Agency
MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
The undersigned, a duly authorized officer of The Chase Manhattan
Bank, as trustee (the "Trustee"), hereby certifies to State Street Bank and
Trust Company, N.A. (the "Fiscal Agent") and MBIA Insurance Corporation (the
"Insurer"), with reference to Certificate Guaranty Insurance Policy Number:
____________ (the "Policy") issued by the Insurer in respect of the $________
First Alliance Mortgage Loan Trust 1996-4, Mortgage Loan Asset Backed
Certificates, Class [A-1] [A-2] (the "Obligations"), that:
(i) the Trustee is the trustee under the Pooling and Servicing
Agreement dated as of December 1, 1996 (the "Agreement") among First
Alliance Mortgage Company, as Company, First Alliance Mortgage Company, as
Servicer and the Trustee, as trustee for the Owners;
(ii) the [Class A-1] [Class A-2] Current Interest for the
Class [A-1][A-2] Payment Date occurring on ________________ (the
"Applicable Payment Date") is $___________;
(iii) the Group [I][II] Subordination Deficit for the Applicable
Payment Date is $______________;
(iv) the sum of Group [I][II] Total Available Funds available under
the Agreement to pay the [Class A-1] [Class A-2] Current Interest and the
Group [I][II] Subordination Deficit minus the Group [I][II] Premium Amount
for the Applicable Payment Date (the "Adjusted Available Distribution
Amount") is $_________;
(v) the amount by which the sum of (ii) and (iii) above exceeds the
Adjusted Available Distribution Amount in (iv) above is $___________ (the
"Group [I][II] Insured Payment");
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(vi) the Trustee is making a claim under and pursuant to the terms of
the Policy for the Insured Payment to be applied to payments of the sum of
(ii) and (iii) above for the Applicable Payment Date in accordance with the
Agreement; and
(vii) the Trustee directs that payment of the Group [I][II] Insured
Payment be made to the following account by bank wire transfer of federal
or other immediately available funds in accordance with the terms of the
Policy: [CERTIFICATE ACCOUNT].
ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE COMPANY OR
OTHER PERSON FILES AN APPLICATION FOR INSURANCE OR STATEMENT OF CLAIM CONTAINING
ANY MATERIALLY FALSE INFORMATION, OR CONCEALS FOR THE PURPOSE OF MISLEADING,
INFORMATION CONCERNING ANY FACT MATERIAL THERETO, COMMITS A FRAUDULENT INSURANCE
ACT, WHICH IS A CRIME, AND SHALL BE SUBJECT TO A CIVIL PENALTY NOT TO EXCEED
FIVE THOUSAND DOLLARS AND THE STATED VALUE OF THE CLAIM FOR EACH SUCH VIOLATION.
Any capitalized term used in this Notice and not otherwise defined
herein shall have the meaning assigned thereto in the Policy.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice
under the Policy as of the ___ day of ____________, ____.
THE CHASE MANHATTAN BANK
By
----------------------------
Title
-------------------------
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EXHIBIT J
Form of
Monthly Report
First Alliance Mortgage Company
Mortgage Loan Asset Backed Certificates
Series 1996-4
J-1
<PAGE>
FORM OF REQUEST FOR RELEASE
To: The Bank of New York
101 Barclay Street
New York, New York 10286
Attn: First Alliance Mortgage Loan Trust, Series 1996-4
Date:
In connection with the administration of the mortgage loans held by
you as Custodian under a certain Pooling and Servicing Agreement dated as of
December 1, 1996 and by and among First Alliance Mortgage Company, the Company
in its capacity as servicer (the "Servicer"), and The Chase Manhattan Bank, in
its capacity as Trustee (the "Agreement"), the Servicer hereby requests a
release of the File held by you as Custodian, on behalf of the Trustee, with
respect to the following described Mortgage Loan for the reason indicated below:
Mortgagor's Name:
Loan No.:
Reason for requesting file:
1. Mortgage Loan paid in full.
- -------
(The Servicer hereby certifies that all amounts
received in connection with the loan have been or will
be credited to the Certificate Account (whichever is
applicable) pursuant to the Agreement.)
2. Mortgage Loan repurchased pursuant to Section 3.3, 3.4, 3.6(b) or
- ------- 8.10(b) of the Agreement.
(The Servicer hereby certifies that the Loan Purchase
Price has been or will be paid to the Certificate
Account pursuant to the Agreement.)
3. Mortgage Loan substituted.
- -------
(The Servicer hereby certifies that a Qualified
Replacement Mortgage has been or will be assigned and
delivered to you along with the related File pursuant
to the Agreement.)
4. The Mortgage Loan is being foreclosed.
- -------
5. Other. (Describe)
- -------
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The undersigned acknowledges that the above File will be held by the
undersigned in accordance with the provisions of the Agreement and will be
returned to you, except if the Mortgage Loan has been paid in full, or
repurchased or substituted for by a Qualified Replacement Mortgage (in which
case the File will be retained by us permanently) and except if the Mortgage
Loan is being foreclosed (in which case the File will be returned when no longer
required by us for such purpose).
Capitalized terms used herein shall have the meanings ascribed to them
in the Agreement.
FIRST ALLIANCE MORTGAGE COMPANY
By
--------------------------
Name:
---------------------
Title:
--------------------
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EXHIBIT M
CUSTODIAL AGREEMENT
THIS CUSTODIAL AGREEMENT (as amended and supplemented from time to time, the
"Agreement"), dated as of December 1, 1996 by and among The Chase Manhattan
Bank, not individually, but solely as Trustee (including its successors under
the Pooling and Servicing Agreement defined below, the "Trustee"), First
Alliance Mortgage Company (the "Company"), First Alliance Mortgage Company (the
"Servicer"), and The Bank of New York (together with any successor in interest
or any successor appointed hereunder, the "Custodian").
W I T N E S S E T H T H A T
WHEREAS, the Company, the Servicer and the Trustee have entered into a Pooling
and Servicing Agreement dated as of December 1, 1996 relating to the issuance of
First Alliance Mortgage Company Mortgage Loan Asset Backed Certificates, Series
1996-4 (as amended and supplemented from time to time, the "Pooling and
Servicing Agreement"); and
WHEREAS, the Custodian has agreed to act as agent for the Trustee for the
purposes of receiving and holding certain documents and other instruments
delivered by the Company and the Servicer under the Pooling and Servicing
Agreement, all upon the terms and conditions and subject to the limitations
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements hereinafter set forth, the Trustee, the Company, the Servicer and the
Custodian hereby agree as follows:
ARTICLE I DEFINITIONS
Capitalized terms used in this Agreement and not defined herein shall have
the meanings assigned in the Pooling and Servicing Agreement, unless otherwise
required by the context herein.
ARTICLE II CUSTODY OF MORTGAGE DOCUMENTS
Section 2.1. CUSTODIAN TO ACT AS AGENT; ACCEPTANCE OF CUSTODIAL FILES.
The Custodian, as the duly appointed agent of the Trustee for these
purposes, acknowledges receipt of the Notes, the Mortgages, the assignments and
other documents relating to the Mortgage Loans identified on the schedule
attached hereto and delivered to it and declares that it holds and will hold
such Notes, Mortgages, assignments and other documents and any similar documents
received by the Custodian subsequent to the date hereof (the "Custodial Files")
as agent for the Trustee, in trust, for the use and benefit of all present and
future Owners of the Certificates and MBIA Insurance Corporation (the
"Certificate Insurer").
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Section 2.2. RECORDATION OF ASSIGNMENTS.
If any Custodial File includes one or more assignments to the Trustee of
Notes and related Mortgages that have not been recorded, each such assignment
shall be delivered by the Custodian to the Company for the purpose of recording
it in the appropriate public office for real property records, and the Company,
at no expense to the Custodian, shall promptly cause to be recorded in the
appropriate public office for real property records each such assignment and,
upon receipt thereof from such public office, shall return each such assignment
to the Custodian.
Section 2.3. REVIEW OF CUSTODIAL FILES.
(a) The Custodian agrees, for the benefit of the Certificate Insurer and
the Owners of the Certificates, to review, in accordance with the provisions of
Section 2.3(b) hereof each Custodial File. If in performing the review required
by this Section 2.3 the Custodian finds any document or documents constituting a
part of a Custodial File to be missing or defective in any material respect, the
Custodian shall promptly so notify the Company, the Servicer, the Trustee and
the Certificate Insurer.
(b) In connection with the transfer and assignment of the Mortgage
Loans, the Company agrees to:
(i) cause to be delivered, on or prior to the Startup Day
(except as otherwise stated below) without recourse to the Custodian, on
behalf of the Trustee, on the Startup Day with respect to each Initial
Mortgage Loan listed on the Schedule of Mortgage Loans or on each
Subsequent Transfer Date with respect to each Subsequent Mortgage Loan:
(a) the original Notes or certified copies thereof,
endorsed without recourse by the related Originator, "Pay to the order
of ______________________________, without recourse" or "Pay to the
order of holder, without recourse." In the event that the Mortgage
Loan was acquired by the related Originator in a merger, the
endorsement must be by the "(related Originator), successor by merger
to (name of predecessor)"; and in the event that the Mortgage Loan was
acquired or originated by the related Originator while doing business
under another name, the endorsement must be by the "(related
Originator), formerly known as (previous name)";
(b) originals of all intervening assignments, showing
a complete chain of assignment from origination to the related
Originator, if any, including warehousing assignments, with evidence
of recording thereon (or, if an original intervening assignment has
not been returned from the recording office, a certified copy thereof,
the original to be delivered to Custodian on behalf of the Trustee
forthwith after return);
(c) originals of all assumption and modification
agreements, if any (or, if an original assumption and/or modification
agreement has not been returned from the recording office, a certified
copy thereof, the original to be delivered to the Custodian on behalf
of the Trustee forthwith after return);
(d) either (A) the original Mortgage with evidence of
recording thereon or a certified copy of the Mortgage as recorded, or
(B) if the original Mortgage has not yet been returned from the
recording office, a certified copy of the Mortgage, together with a
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receipt from the recording office or from a title insurance company or
a certificate of an Authorized Person of the related Originator
indicating that such Mortgage has been delivered for recording;
(e) the original assignment of Mortgage for each
Mortgage Loan conveying the Mortgage to The Chase Manhattan Bank, as
Trustee of the First Alliance Mortgage Loan Trust 1996-4, which
assignment shall be in form and substance acceptable for recording in
the state or other jurisdiction where the mortgaged property is
located and, within 75 Business Days following the Startup Day with
respect to the Initial Mortgage Loans, or within 75 Business Days of
each Subsequent Transfer Date with respect to the Subsequent Mortgage
Loans, a recorded assignment of each such Mortgage; PROVIDED that in
the event that the Mortgage Loan was acquired by the related
Originator in a merger, the assignment of Mortgage must be by the
"(related Originator), successor by merger to (name of predecessor)";
and in the event that the Mortgage Loan was acquired or originated by
the related Originator while doing business under another name, the
assignment of Mortgage must be by the "(related Originator), formerly
known as (previous name)" (subject to the foregoing, and where
permitted under the applicable laws of the jurisdiction where the
mortgaged property is located, the assignments of Mortgage may be made
by blanket assignments for Mortgage Loans covering mortgaged
properties situated within the same county or other permitted
governmental subdivision); and
(f) evidence of title insurance with respect to the
mortgaged property in the form of a binder or commitment.
(ii) except with respect to Mortgage Loans covered by
opinions of counsel delivered in the manner set forth below ("Assignment
Opinions"), cause, as soon as possible but no more than 75 Business Days
following the Startup Day with respect to the Initial Mortgage Loans, or
within 75 Business Days of each Subsequent Transfer Date with respect to
the Subsequent Mortgage Loans, the Originators to deliver to the Custodian,
on behalf of the Trustee, copies of all Mortgage assignments submitted for
recording, together with a list of (x) all Mortgages for which no Mortgage
assignment has yet been submitted for recording by the related Originator
(y) reasons why the related Originator has not yet submitted such Mortgage
assignments for recording; PROVIDED, HOWEVER, that with respect to Mortgage
Loans subject to jurisdiction in the states of California, Colorado, Idaho,
Illinois, Ohio, Oregon, Pennsylvania, Washington, Georgia and Arizona an
Originator shall not be required to record an assignment of a Mortgage if
the Company furnishes to the Trustee and the Certificate Insurer, on or
before the Startup Day with respect to the Initial Mortgage Loans, or on
each Subsequent Transfer Date with respect to the Subsequent Mortgage
Loans, at the Company's expense, the Assignment Opinions which opine that
recording is not necessary to perfect the rights of the Trustee in the
related Mortgage (in form satisfactory to the Certificate Insurer, Moody's
and Standard & Poor's). With respect to any Mortgage assignment set forth
on the aforementioned list which has not been submitted for recording for a
reason other than a lack of original recording information or with respect
to Mortgages not covered by the Assignment Opinions, the Custodian, on
behalf of the Trustee shall make an immediate demand on the Company to
cause such Mortgage assignments to be prepared and shall inform the
Certificate Insurer of the Company's failure to cause such Mortgage
assignments to be prepared. Thereafter, the Custodian and the Trustee
shall cooperate in executing any documents prepared by the Certificate
Insurer and submitted to the Custodian and the Trustee in connection with
this provision. Following the expiration of the 75-
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Business Day period following the Startup Day with respect to the Initial
Mortgage Loans, or within 75 Business Days of each Subsequent Transfer Date
with respect to the Subsequent Mortgage Loans and except with respect to
Mortgages covered by the Assignment Opinions, the Company shall cause to be
prepared a Mortgage assignment for any Mortgage for which original
recording information is subsequently received by the related Originator
and shall promptly deliver a copy of such Mortgage assignment to the
Custodian, on behalf of the Trustee.
Notwithstanding anything to the contrary contained in this Section, in
those instances where the public recording office retains the original Mortgage,
the assignment of a Mortgage or the intervening assignments of the Mortgage
after it has been recorded, the Company shall be deemed to have satisfied its
obligations upon delivery to the Custodian on behalf of the Trustee of a copy of
such Mortgage, such assignment or assignments of such Mortgage certified by the
public recording office to be a true copy of the recorded original thereof.
Copies of all Mortgage assignments received by the Custodian on behalf of
the Trustee shall be kept in the related File.
All recording required pursuant to this Section shall be accomplished at
the expense of the Originators or of the Company.
(c) The Trustee agrees to cause the Custodian to execute and deliver to
the Company, the Servicer and the Certificate Insurer on the Startup Day an
Initial Certification in the form annexed to the Pooling and Servicing Agreement
as Exhibit E to the effect that, as to each Mortgage Loan listed in the
Schedules of Mortgage Loans (other than any Mortgage Loan paid in full or any
Mortgage Loan specifically identified in such certification as not covered by
such certification), (i) all documents required to be delivered to it pursuant
to the Pooling and Servicing Agreement with respect to such Mortgage Loan are in
its possession, (ii) such documents have been reviewed by it and appear regular
on their face and relate to such Mortgage Loan and (iii) based on its
examination and only as to the foregoing documents, the information set forth on
the Schedules of Mortgage Loans as to loan number and address accurately
reflects information set forth in the File. The Trustee and the Custodian shall
not be under any duty or obligation to inspect, review or examine said
documents, instruments, certificates or other papers to determine that the same
are genuine, enforceable or appropriate for the represented purpose or that they
have actually been recorded or that they are other than what they purport to be
on their face. Within 90 days of the Startup Date (or, with respect to any
document delivered after the Startup Day, within 45 days of receipt and with
respect to any Subsequent Mortgage Loan or Qualified Replacement Mortgage,
within 45 days after the assignment thereof) the Trustee shall cause the
Custodian to deliver to the Company, Certificate Insurer and the Servicer a
Final Certification in the form annexed to the Pooling and Servicing Agreement
as Exhibit F evidencing the completeness of the Files, with any applicable
exceptions noted thereon.
Section 2.4. CUSTODIAN TO COOPERATE; RELEASE OF CUSTODIAL FILES.
Upon the payment in full of any Mortgage Loan, or the receipt by the
Servicer of a notification that payment in full will be escrowed in an manner
customary for such purposes, the Servicer shall immediately notify the Custodian
by a certification (which certification shall include a statement to the effect
that all amounts received or to be received in connection with such payment
which are required to be deposited in the Principal and Interest Account
pursuant to Section 8.8 of the
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Pooling and Servicing Agreement have been or will be so deposited) of an officer
of the Servicer and shall request delivery to it of the Custodial File. The
Custodian agrees, upon receipt of such certification and request, promptly to
release the related Custodial File to such Servicer.
From time to time as is appropriate for the servicing or foreclosure of any
Mortgage Loan, the Servicer shall deliver to the Custodian a certificate of an
officer of the Servicer requesting that possession of all or any document
constituting part of the Custodial File be released to the Servicer and
certifying as to the reason for such release and that such release will not
invalidate any insurance coverage provided in respect of the Mortgage Loan.
With such certificate, the Servicer shall deliver to the Custodian a receipt
signed by an officer of the Servicer on behalf of the Servicer, and upon receipt
of the foregoing, the Custodian shall deliver the Custodial File or such
document to the Servicer and the Servicer shall hold the Custodial File or such
document in trust for the benefit of the Certificate Insurer and the Owners of
the Certificates. The Servicer shall cause each Custodial File or any document
therein so released to be returned to the Custodian when the need therefor by
the Servicer no longer exists, unless (i) the Mortgage Loan has been liquidated
and the Liquidation Proceeds relating to the Mortgage Loan have been deposited
in the Principal and Interest Account to the extent required by the Pooling and
Servicing Agreement or (ii) the Custodial File or such document has been
delivered to an attorney, or to a public trustee or other public official as
required by law, for purposes of initiating or pursuing legal action or other
proceedings for the foreclosure of the Property either judicially or
non-judicially, and the Servicer has delivered to the Custodian a certificate of
an officer of the Servicer certifying as to the name and address of the Person
to which such Custodial File or such document were delivered and the purpose or
purposes of such delivery. The Custodian shall deliver such receipt with
respect thereto to the Servicer upon receipt of notice from the Servicer that it
has deposited the related Liquidation Proceeds in the Principal and Interest
Account to the extent required by the Pooling and Servicing Agreement.
Section 2.5. ASSUMPTION AGREEMENTS.
In the event that any assumption agreement or substitution of liability
agreement is entered into with respect to any Mortgage Loan subject to this
Agreement in accordance with the terms and provisions of the Pooling and
Servicing Agreement, the Servicer shall notify the Custodian and the Certificate
Insurer that such assumption or substitution agreement has been completed by
forwarding to the Custodian and the Certificate Insurer the original of such
assumption or substitution agreement, which copy shall be added to the related
Custodial File and, for all purposes, shall be considered a part of such
Custodial File to the same extent as all other documents and instruments
constituting parts thereof.
ARTICLE III CONCERNING THE CUSTODIAN
Section 3.1. CUSTODIAN A BAILEE AND AGENT OF THE TRUSTEE.
With respect to each Note, Mortgage and other documents constituting each
Custodial File which are delivered to the Custodian, the Custodian is
exclusively the bailee and agent of the Trustee, holds such documents for the
benefit of the Owners of the Certificates and the Certificate Insurer and
undertakes to perform such duties and only such duties as are specifically set
forth in this Agreement. Except upon compliance with the provisions of Section
2.4 of this Agreement, no Note, Mortgage or other document constituting a part
of a Custodial File shall be delivered by the Custodian to the Servicer or
otherwise released from the possession of the Custodian.
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Section 3.2. INDEMNIFICATION.
Neither the Custodian nor any of its directors, officers, agents or
employees, shall be liable for any action taken or omitted to be taken by it or
them hereunder or in connection herewith in good faith and believed by it or
them to be within the purview of this Custodial Agreement, except for its or
their own negligence, lack of good faith or willful misconduct. In no event
shall the Custodian or its directors, officers, agents and employees be held
liable for any special, indirect or consequential damages resulting from any
action taken or omitted to be taken by it or them hereunder or in connection
herewith even if advised of the possibility of such damages.
The Company agrees to indemnify and hold the Custodian and its directors,
officers, agents and employees harmless against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever, including reasonable
attorney's fees, that may be imposed on, incurred by or asserted against it or
them in any way relating to or arising out of this Custodial Agreement or any
action taken or not taken by it or them hereunder unless such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements were imposed upon, incurred by or asserted against the
Custodian because of the breach by the Custodian of its obligations hereunder,
which breach was caused by negligence, lack of good faith or willful misconduct
on the part of the Custodian or any of its directors, officers, agents or
employees. The foregoing indemnification shall survive any termination of this
Custodial Agreement.
Section 3.3 RELIANCE OF CUSTODIAN.
In the absence of bad faith on the part of the Custodian, the Custodian may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any request, instructions, certificate, opinion
or other document furnished to the Custodian, reasonably believed by the
Custodian to be genuine and to have been signed or presented by the proper party
or parties and conforming to the requirements of this Agreement; but in the case
of any loan document or other request, instruction, document or certificate
which by any provision hereof is specifically required to be furnished to the
Custodian, the Custodian shall be under a duty to examine the same to determine
whether or not it conforms to the requirements of this Agreement.
Section 3.4. CUSTODIAN MAY OWN CERTIFICATES.
The Custodian in its individual or any other capacity may become the owner
or pledgee of Certificates with the same rights it would have if it were not
Custodian.
Section 3.5. CUSTODIAN'S FEES AND EXPENSES.
The Company covenants and agrees to pay to the Custodian from time to time,
and the Custodian shall be entitled to, reasonable compensation for all services
rendered by it in the exercise and performance of any of the powers and duties
hereunder of the Custodian, and the Company will pay or reimburse the Custodian
upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Custodian in accordance with any of the provisions of
this Agreement (including the reasonable compensation and the expenses and
disbursements of its counsel and of all persons not regularly in its employ),
except any such expense, disbursement or advance as may arise from its
negligence or bad faith.
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Section 3.6. CUSTODIAN MAY RESIGN; TRUSTEE MAY REMOVE CUSTODIAN.
The Custodian may, with the consent of the Certificate Insurer, and such
consent shall not be unreasonably withheld, resign from the obligations and
duties hereby imposed upon it as such obligations and duties relate to its
acting as Custodian of the Mortgage Loans upon giving 60 days written notice to
the Trustee. Upon receiving such notice of resignation, the Trustee shall
either take custody of the Custodial Files itself and give prompt notice thereof
to the Company, the Servicer, the Certificate Insurer and the Custodian or
promptly appoint a successor Custodian acceptable to the Certificate Insurer by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the resigning Custodian and one copy to the successor Custodian.
If the Trustee shall not have taken custody of the Custodial Files and no
successor Custodian shall have been so appointed and have accepted resignation,
the resigning Custodian may petition any court of competent jurisdiction for the
appointment of a successor Custodian.
The Trustee may, with the consent of the Certificate Insurer, or shall at
the direction of the Certificate Insurer, remove the Custodian at any time for
cause, or otherwise the Trustee may remove the Custodian at any time upon giving
60 days written notice. In such event, the Trustee shall appoint, or petition a
court of competent jurisdiction to appoint, a successor Custodian hereunder.
Any successor Custodian shall be a depository institution subject to supervision
or examination by federal or state authority, shall be approved by the
Certificate Insurer and shall be able to satisfy the other requirements
contained in Section 3.8.
Any resignation or removal of the Custodian and appointment of a successor
Custodian pursuant to any of the provisions of this Section 3.6 shall become
effective upon acceptance of appointment by the successor Custodian. The
Trustee shall give prompt notice to the Company, the Servicer, the Certificate
Insurer and the Custodian of the appointment of any successor Custodian. No
successor Custodian shall have been appointed and accepted appointment by the
Trustee without the prior approval of the Company, the Servicer, the Certificate
Insurer and the Custodian.
Section 3.7. MERGER OR CONSOLIDATION OF CUSTODIAN.
Any Person into which the Custodian may be merged or converted or with
which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Custodian shall be a party, or any
Person succeeding to the business of the Custodian, shall be the successor of
the Custodian hereunder, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
Section 3.8. REPRESENTATIONS OF THE CUSTODIAN.
The Custodian hereby represents that it is a depository institution subject
to supervision or examination by a federal or state authority, has a combined
capital and surplus of at least $50,000,000 and is qualified to do business in
the jurisdiction in which it will hold any Custodian File.
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ARTICLE IV MISCELLANEOUS PROVISIONS
Section 4.1. NOTICES.
All notices, requests, consents and demands and other communications
required under this Agreement or pursuant to any other instrument or document
delivered hereunder shall be in writing and shall be deemed given when properly
delivered, at the addresses specified below (unless changed by the particular
party whose address is stated herein by similar notice in writing):
THE TRUSTEE: The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attn: Structured Finance/MBA
Tel: (212) 946-3247
Fax: (212) 946-8191
THE COMPANY: First Alliance Mortgage Company
17305 Von Karman Avenue
Irvine, California 92714-6203
Attention: Director, Secondary Marketing
Tel: (714) 224-8357
Fax: (714) 224-8366
THE SERVICER: First Alliance Mortgage Company
17305 Von Karman Avenue
Irvine, California 92714-6203
Attention: Manager, Investor Reporting
Tel: (714) 224-8357
Fax: (714) 224-8366
THE CERTIFICATE
INSURER: MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attn: Insured Portfolio First Alliance Mortgage Company
Mortgage Loan Trust 1996-4
Tel: (714) 224-8357
Fax: (714) 224-8366
Section 4.2. AMENDMENTS.
No modification or amendment of or supplement to this Agreement shall be
valid or effective unless the same is in writing and signed by the Certificate
Insurer and all parties hereto, and neither the Company, the Servicer nor the
Trustee shall enter into any amendment hereof except as permitted by the Pooling
and Servicing Agreement. The Trustee shall give prompt notice to the Custodian
of any amendment or supplement to the Pooling and Servicing Agreement and
furnish the Custodian with written copies thereof.
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Section 4.3. GOVERNING LAW.
This Agreement shall be deemed a contract made under the laws of the State
of New York and shall be construed and enforced in accordance with and governed
by the laws of the State of New York.
Section 4.4. RECORDATION OF AGREEMENT.
To the extent permitted by applicable law, this Agreement is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Servicer and at its expense on direction by the Trustee, but only upon direction
accompanied by an opinion of counsel to the effect that such recordation
materially and beneficially affects the interests of the Owners of the
Certificates.
For the purpose of facilitating the recordation of this Agreement as herein
provided and for other purposes, this Agreement may be executed simultaneously
in any number of counterparts, each of which counterparts shall be deemed to be
an original, and such counterparts shall constitute but one and the same
instrument.
Section 4.5. SEVERABILITY OF PROVISIONS.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Owners thereof.
M-9
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
THE CHASE MANHATTAN BANK,
as Trustee
By:
-----------------------------------
Name:
---------------------------------
Title:
---------------------------------
FIRST ALLIANCE MORTGAGE COMPANY,
as Company
By:
-----------------------------------
Name:
---------------------------------
Title:
---------------------------------
FIRST ALLIANCE MORTGAGE COMPANY
as Servicer
By:
-----------------------------------
Name:
---------------------------------
Title:
---------------------------------
BANK OF NEW YORK,
as Custodian
By:
-----------------------------------
Name:
---------------------------------
Title:
---------------------------------
<PAGE>
STATE OF )
): ss.:
COUNTY OF )
On the ___ day of December, 1996, before me personally came ______________,
to me known, who, being by me duly sworn did depose and say that he/she resides
at ____________________; that he/she is a ____________________ of The Chase
Manhattan Bank, a New York banking corporation described in and that executed
the above instrument as Trustee; and that he/she signed his/her name thereto by
order of the Board of Directors of said banking corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
NOTARIAL SEAL
----------------------------------------
Notary Public
<PAGE>
STATE OF )
: ss.:
COUNTY OF )
On the ___ day of December, 1996, before me personally came
__________________, to me known, who, being by me duly sworn, did depose and say
that he/she resides at ________________, _____________________________; that
he/she is a ____________________ of First Alliance Mortgage Company, a
California Corporation; and that he/she signed his/her name thereto by order of
the Board of Directors of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
NOTARIAL SEAL
----------------------------------------
Notary Public
<PAGE>
STATE OF )
: ss.:
COUNTY OF )
On the ___ day of December, 1996, before me personally came
__________________, to me known, who, being by me duly sworn, did depose and say
that he/she resides at ________________, _____________________________; that
he/she is a ____________________ of Bank of New York, a New York banking
corporation; and that he/she signed his/her name thereto by order of the Board
of Directors of said New York banking corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
NOTARIAL SEAL
-------------------------------------
Notary Public
<PAGE>
EXHIBIT 4.1
FIRST ALLIANCE MORTGAGE COMPANY
AND
PRUDENTIAL SECURITIES INCORPORATED,
AS REPRESENTATIVE OF THE SEVERAL UNDERWRITERS
UNDERWRITING AGREEMENT
FOR
FIRST ALLIANCE MORTGAGE LOAN TRUST 1996-4
MORTGAGE LOAN ASSET BACKED CERTIFICATES,
6.835% CLASS A-1 FIXED RATE GROUP CERTIFICATES
CLASS A-2 VARIABLE RATE GROUP CERTIFICATES
December 10, 1996
<PAGE>
December 10, 1996
First Alliance Mortgage Company
17305 Von Karman Avenue
Irvine, California 92714
Prudential Securities Inc., as
Representative of the Several Underwriters
One New York Plaza, 15th Floor
New York, New York 10292
First Alliance Mortgage Company (the "Company" or the "Sponsor")
hereby confirms its agreement to sell certain mortgage loan asset backed
certificates to Prudential Securities Incorporated and Lehman Brothers Inc.
(collectively, the "Underwriters") as described herein relating to the First
Alliance Mortgage Loan Trust 1996-4 (the "Trust"). The certificates, together
with certain subordinate certificates to be issued by the Trust, will evidence
in the aggregate the entire beneficial interest in a trust estate (the "Trust
Estate") consisting of two segregated pools (the "Mortgage Pools") of closed-end
mortgage loans (the "Initial Mortgage Loans") and such amounts as may be held by
the Trustee in the Pre-Funding Account ("Pre-Funding Account"), the Capitalized
Interest Account (the "Capitalized Interest Account") and any other accounts
held by the Trustee for the Trust. The Initial Mortgage Loans shall have, as of
the close of business on December 1, 1996 (the "Cut-off Date"), an aggregate
principal balance of $53,121,864.05. The certificates are to be issued under a
pooling and servicing agreement dated as of December 1, 1996 (the "Pooling and
Servicing Agreement"), among the Company, in its individual capacity and in its
capacity as servicer (the "Servicer") and The Chase Manhattan Bank, in its
capacity as trustee (the "Trustee"). On the Closing Date, approximately
$16,878,135.95 will be deposited in the name of the Trustee in the Pre-Funding
Account from the sale of the Certificates. It is intended that additional
Mortgage Loans satisfying the criteria specified in the Pooling and Servicing
Agreement (the "Subsequent Mortgage Loans") will be purchased by the Trust for
inclusion in both Group I and Group II from the Company from time to time on or
before December 31, 1996 from funds on deposit in the Pre-Funding Account at the
time of execution and delivery of each Subsequent Transfer Agreement
("Subsequent Transfer Agreement"). Funds in the Capitalized Interest Account
will be applied by the Trustee to cover shortfalls in interest during the
Funding Period.
On or prior to the date of issuance of the Certificates (as defined
below), the Company will obtain two certificate guaranty insurance policies (the
"Policies") issued by MBIA Insurance Corporation (the "Insurer") which will
unconditionally and irrevocably guarantee to the Trustee for the benefit of the
holders of the Class A-1 Certificates and the Class A-2 Certificates full and
complete payment of all amounts payable on the Class A-1 Certificates and the
Class A-2 Certificates. All capitalized terms used
<PAGE>
but not otherwise defined herein have the respective meanings set forth in the
form of Pooling and Servicing Agreement heretofore delivered to the
Underwriters.
1. SECURITIES. The certificates will be issued in classes as
follows: (i) a senior class with respect to each Mortgage Loan Group consisting
of the Class A-1 Fixed Rate Group Certificates (the "Class A-1 Certificates")
and the Class A-2 Variable Rate Group Certificates (the "Class A-2 Certificates"
and collectively with the Class A-1 Certificates, the "Class A Certificates")
and (ii) a residual class (the "Class R Certificates"). The Class A
Certificates and the Class R Certificates are hereinafter referred to as the
"Certificates."
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and covenants with, the Underwriters that:
A. The Company has filed with the Securities and Exchange Commission
(the "Commission"), a registration statement (No. 33-99604) on Form S-3 for the
registration under the Securities Act of 1933, as amended (the "Act"), of
Mortgage Asset Backed Certificates (issuable in series), which registration
statement, as amended at the date hereof, has become effective. Such
registration statement, as amended to the date of this Agreement, meets the
requirements set forth in Rule 415(a)(1)(vii) under the Act and complies in all
other material respects with such Rule. The Company proposes to file with the
Commission pursuant to Rule 424(b)(5) under the Act a supplement dated December
10, 1996 to the prospectus dated September 10, 1996 relating to the Certificates
and the method of distribution thereof and has previously advised the
Underwriters of all further information (financial and other) with respect to
the Certificates to be set forth therein. Such registration statement,
including the exhibits thereto, as amended at the date hereof, is hereinafter
called the "Registration Statement"; such prospectus dated September 10, 1996,
in the form in which it will be filed with the Commission pursuant to Rule
424(b)(5) under the Act is hereinafter called the "Basic Prospectus"; such
supplement dated December 10, 1996 to the Basic Prospectus, in the form in which
it will be filed with the Commission pursuant to Rule 424(b)(5) of the Act, is
hereinafter called the "Prospectus Supplement"; and the Basic Prospectus and the
Prospectus Supplement together are hereinafter called the "Prospectus." The
Company will file with the Commission (i) promptly after receipt from any
Underwriter of any Computational Material (as defined herein) a Form 8-K
incorporating such Computational Materials and (ii) within fifteen days of the
issuance of the Certificates a report on Form 8-K setting forth specific
information concerning the related Mortgage Loans (the "8-K").
B. As of the date hereof, when the Registration Statement became
effective, when the Prospectus Supplement is first filed pursuant to Rule
424(b)(5) under the Act, and at the Closing Date, (i) the Registration
Statement, as amended as of any such time, and the Prospectus, as amended or
supplemented as of any such time, will comply in all material respects with the
applicable requirements of the Act and the rules thereunder and (ii) the
Registration Statement, as amended as of any such time, did not and will not
contain any untrue statement of a material fact and did not and will not omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading and the Prospectus, as amended or supplemented
as of any such time, did not and will not contain an untrue statement of a
material fact and did not and will not omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that the Company makes
no representations or warranties as to the information contained in or omitted
from the Registration Statement or the Prospectus or any amendment thereof or
supplement thereto in reliance upon and in conformity with the information
furnished in writing to the
2
<PAGE>
Company by or on behalf of any Underwriter specifically for use in connection
with the preparation of the Registration Statement and the Prospectus.
C. The Company is duly organized, validly existing and in good
standing under the laws of the State of California, has full power and authority
(corporate and other) to own its properties and conduct its business as now
conducted by it, and as described in the Prospectus, and is duly qualified to do
business in each jurisdiction in which it owns or leases real property (to the
extent such qualification is required by applicable law) or in which the conduct
of its business requires such qualification except where the failure to be so
qualified does not involve (i) a material risk to, or a material adverse effect
on, the business, properties, financial position, operations or results of
operations of the Company or (ii) any risk whatsoever as to the enforceability
of any Mortgage Loan.
D. There are no actions, proceedings or investigations pending, or,
to the knowledge of the Company, threatened, before any court, governmental
agency or body or other tribunal (i) asserting the invalidity of this Agreement,
the Certificates, the Insurance Agreement, the Indemnification Agreement dated
December 10, 1996 (the "Indemnification Agreement") among the Company, the
Insurer and the Underwriters or of the Pooling and Servicing Agreement, (ii)
seeking to prevent the issuance of the Certificates or the consummation of any
of the transactions contemplated by this Agreement, the Pooling and Servicing
Agreement or any Subsequent Transfer Agreement, (iii) which may, individually or
in the aggregate, materially and adversely affect the performance by the Company
of its obligations under, or the validity or enforceability of, this Agreement,
the Certificates, the Pooling and Servicing Agreement or any Subsequent Transfer
Agreement, or (iv) which may affect adversely the federal income tax attributes
of the Certificates as described in the Prospectus.
E. The execution and delivery by the Company of this Agreement, the
Indemnification Agreement, the Insurance Agreement and the Pooling and Servicing
Agreement, the issuance of the Certificates and the transfer and delivery of the
Mortgage Loans to the Trustee by the Company are within the corporate power of
the Company and have been, or will be, prior to the Closing Date duly authorized
by all necessary corporate action on the part of the Company and the execution
and delivery of such instruments, the consummation of the transactions therein
contemplated and compliance with the provisions thereof will not result in a
breach or violation of any of the terms and provisions of, or constitute a
default under, any statute or any agreement or instrument to which the Company
or any of its affiliates is a party or by which it or any of them is bound or to
which any of the property of the Company or any of its affiliates is subject,
the Company's charter or bylaws, or any order, rule or regulation of any court,
governmental agency or body or other tribunal having jurisdiction over the
Company, any of its affiliates or any of its or their properties; and no
consent, approval, authorization or order of, or filing with, any court or
governmental agency or body or other tribunal is required for the consummation
of the transactions contemplated by this Agreement or the Prospectus in
connection with the issuance and sale of the Certificates by the Company except
pursuant to the Act. Neither the Company nor any of its affiliates is a party
to, bound by or in breach or violation of any indenture or other agreement or
instrument, or subject to or in violation of any statute, order, rule or
regulation of any court, governmental agency or body or other tribunal having
jurisdiction over the Company or any of its affiliates, which materially and
adversely affects, or may in the future materially and adversely affect, (i) the
ability of the Company to perform its obligations under the Pooling and
Servicing Agreement, this Agreement, the Insurance Agreement, the
Indemnification Agreement and any Subsequent Transfer Agreement or (ii) the
business, operations, results of operations, financial position, income,
properties or assets of the Company, taken as a whole.
3
<PAGE>
F. This Agreement and the Indemnification Agreement have been duly
executed and delivered by the Company, and the Pooling and Servicing Agreement,
the Insurance Agreement and any Subsequent Transfer Agreement will be duly
executed and delivered by the Company, and each constitutes and will constitute
the legal, valid and binding obligation of the Company enforceable in accordance
with their respective terms, except as enforceability may be limited by (i)
bankruptcy, insolvency, liquidation, receivership, moratorium, reorganization or
other similar laws affecting the enforcement of the rights of creditors and (ii)
general principles of equity, whether enforcement is sought in a proceeding at
law or in equity.
G. The Certificates will conform in all material respects to the
description thereof to be contained in the Prospectus and will be duly and
validly authorized and, when duly and validly executed, authenticated, issued
and delivered in accordance with the Pooling and Servicing Agreement and sold to
the Underwriters as provided herein, will be validly issued and outstanding and
entitled to the benefits of the Pooling and Servicing Agreement.
H. At the Closing Date, the Initial Mortgage Loans will conform in
all material respects to the description thereof contained in the Prospectus and
the representations and warranties contained in this Agreement will be true and
correct in all material respects. The representations and warranties set out in
the Pooling and Servicing Agreement are hereby made to the Underwriters as
though set out herein, and at the dates specified in the Pooling and Servicing
Agreement, and any Subsequent Transfer Agreement, such representations and
warranties were or will be true and correct in all material respects.
I. The transfer of the Initial Mortgage Loans to the Trust at the
Closing Date will be treated by the Company for financial accounting and
reporting purposes as a sale of assets and not as a pledge of assets to secure
debt.
J. The Company possesses all material licenses, certificates,
permits or other authorizations issued by the appropriate state, federal or
foreign regulatory agencies or bodies necessary to conduct the business now
operated by it and as described in the Prospectus and there are no proceedings,
pending or, to the best knowledge of the Company, threatened, relating to the
revocation or modification of any such license, certificate, permit or other
authorization which singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would materially and adversely affect the business,
operations, results of operations, financial position, income, property or
assets of the Company taken as a whole.
K. Any taxes, fees and other governmental charges in connection with
the execution and delivery of this Agreement, the Insurance Agreement, the
Indemnification Agreement, and the Pooling and Servicing Agreement or the
execution and issuance of the Certificates have been or will be paid at or prior
to the Closing Date.
L. There has not been any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, or in the earnings, business or operations of the
Company or its subsidiaries, taken as a whole, from September 30, 1996 to the
date hereof.
M. This Agreement and the Pooling and Servicing Agreement will
conform in all material respects to the descriptions thereof contained in the
Prospectus.
4
<PAGE>
N. The Company is not aware of (i) any request by the Commission for
any further amendment of the Registration Statement or the Prospectus or for any
additional information, (ii) the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the institution or
threatening of any proceeding for that purpose or (iii) any notification with
respect to the suspension of the qualification of the Certificates for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose.
O. Each assignment of Mortgages required to be prepared pursuant to
the Pooling and Servicing Agreement is based on forms recently utilized by the
Company with respect to mortgaged properties located in the appropriate
jurisdiction and used in the regular course of the Company's business. Based on
the Company's experience with such matters it is reasonable to believe that upon
execution each such assignment will be in recordable form and will be sufficient
to effect the assignment of the Mortgage to which it relates as provided in the
Pooling and Servicing Agreement.
P. The Company is current in all filings under the Securities
Exchange Act and is eligible to use the Registration Statement.
Any certificate signed by any officer of the Company and delivered to
the Representative in connection with the sale of the Certificates hereunder
shall be deemed a representation and warranty as to the matters covered thereby
by the Company to each person to whom the representations and warranties in this
Section 2 are made.
3. AGREEMENTS OF THE REPRESENTATIVE. The Representative agrees with
the Company that upon the execution of this Agreement and authorization by the
Representative of the release of the Class A Certificates, the Underwriters
shall offer the Class A Certificates for sale upon the terms and conditions set
forth in the Prospectus as amended or supplemented.
4. PURCHASE, SALE AND DELIVERY OF THE CERTIFICATES. The Company
hereby agrees, subject to the terms and conditions hereof, to sell the Class A
Certificates to the Underwriters, who, upon the basis of the representations and
warranties herein contained, but subject to the conditions hereinafter stated,
hereby agree to purchase the entire aggregate principal amount of the Class A
Certificates in the amounts specified in Schedule A hereto. At the time of
issuance of the Certificates, the Initial Mortgage Loans will be sold by the
Company to the Trust pursuant to the Pooling and Servicing Agreement. The
Subsequent Mortgage Loans will be purchased by the Trust for inclusion in both
Mortgage Loan Groups, from time to time on or before December 31, 1996. The
Company will be obligated, under the Pooling and Servicing Agreement, to service
the Mortgage Loans either directly or through sub-servicers.
The Class A Certificates to be purchased by the Underwriters will be
delivered by the Company to the Underwriters (which delivery shall be made
through the facilities of The Depository Trust Company ("DTC")) against payment
of the purchase price therefor, equal to $22,500,000 of the aggregate principal
amount of the Class A-1 Certificates and $47,500,000 of the aggregate principal
amount of the Class A-2 Certificates, plus interest accrued at the Class A-1
Asset-backed Rate on the Class A-1 Certificates from December 1, 1996 to, but
not including, the settlement date, by a same day federal funds wire payable to
the order of the Company. No accrued interest will be payable on the Class A-2
Variable Rate Group Certificates, which shall be dated their date of delivery.
The Underwriter's fee shall be 35 basis points of each of the Class A
Certificates.
5
<PAGE>
Settlement shall take place at the offices of Dewey Ballantine, 1301
Avenue of the Americas, New York, New York 10019 at 10:00 a.m. (E.S.T.), on
December 20, 1996, or at such other time thereafter as the Representative and
the Company determine (such time being herein referred to as the "Closing
Date"). The Class A Certificates will be prepared in definitive form and in
such authorized denominations as the Representative may request, registered in
the name of Cede & Co., as nominee of DTC.
The Company agrees to have the Certificates available for inspection
and review by the Representative in New York City not later than 1:00 p.m.
(E.S.T.) on the business day prior to the Closing Date.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees with
the Representative that:
A. The Company will promptly advise the Representative and its
counsel (i) when any amendment to the Registration Statement shall have become
effective, (ii) of any request by the Commission for any amendment to the
Registration Statement or the Prospectus or for any additional information,
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the institution or threatening of
any proceeding for that purpose and (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the Class A
Certificates for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose. The Company will not file any amendment to the
Registration Statement or supplement to the Prospectus after the date hereof and
prior to the Closing Date for the Certificates unless the Company has furnished
the Representative and its counsel copies of such amendment or supplement for
their review prior to filing and will not file any such proposed amendment or
supplement to which the Underwriter reasonably objects, unless such filing is
required by law. The Company will use its best efforts to prevent the issuance
of any stop order suspending the effectiveness of the Registration Statement
and, if issued, to obtain as soon as possible the withdrawal thereof.
B. If, at any time during the period in which the Prospectus is
required by law to be delivered, any event occurs as a result of which the
Prospectus as then amended or supplemented would include any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it shall be necessary to amend or supplement the
Prospectus to comply with the Act or the rules under the Act, the Company will
promptly prepare and file with the Commission, subject to Paragraph A of this
Section 5, an amendment or supplement that will correct such statement or
omission or an amendment that will effect such compliance and, if such amendment
or supplement is required to be contained in a post-effective amendment to the
Registration Statement, will use its best efforts to cause such amendment of the
Registration Statement to be made effective as soon as possible.
C. The Company will furnish to the Representative, without charge,
executed copies of the Registration Statement (including exhibits thereto) and,
so long as delivery of a Prospectus by the Underwriters or a dealer may be
required by the Act, as many copies of the Prospectus, as amended or
supplemented, and any amendments and supplements thereto as the Underwriters may
reasonably request. The Company will pay the expenses of printing (or otherwise
reproducing) all offering documents relating to the offering of the Class A
Certificates.
6
<PAGE>
D. As soon as practicable, but not later than sixteen months after
the date hereof, the Company will cause the Trust to make generally available to
Certificate Owners of the Trust an earnings statement of the Trust covering a
period of at least 12 months beginning after the effective date of the
Registration Statement which will satisfy the provisions of Section 11(a) of the
Act and, at the option of the Company, will satisfy the requirements of Rule 158
under the Act.
E. During a period of 20 calendar days from the date as of which
this Agreement is executed, neither the Company nor any affiliate of the Company
will, without the Representative's prior written consent (which consent shall
not be unreasonably withheld), enter into any agreement to offer or sell
mortgage loan asset-backed certificates backed by mortgage loans, except
pursuant to this Agreement.
F. So long as any of the Class A Certificates are outstanding, the
Company will cause to be delivered to the Representative (i) all documents
required to be distributed to Certificate Owners of the Trust and (ii) from time
to time, any other information concerning the Trust filed with any government or
regulatory authority that is otherwise publicly available.
G. The Company, whether or not the transactions contemplated
hereunder are consummated or this Agreement is terminated, will pay all expenses
in connection with the transactions contemplated herein, including, but not
limited to, the expenses of printing (or otherwise reproducing) all documents
relating to the offering, the reasonable fees and disbursements of its counsel
and expenses of the Representative incurred in connection with (i) the issuance
and delivery of the Certificates, (ii) preparation of all documents specified in
this Agreement, (iii) any fees and expenses of the Trustee, the Insurer and any
other credit support provider (including legal fees), accounting fees and
disbursements, and (iv) any fees charged by investment rating agencies for
rating the Class A Certificates.
H. The Company agrees that, so long as any of the Class A
Certificates shall be outstanding, it will deliver or cause to be delivered to
the Representative (i) the annual statement as to compliance delivered to the
Trustee pursuant to the Pooling and Servicing Agreement, (ii) the annual
statement of a firm of independent public accountants furnished to the Trustee
pursuant to the Pooling and Servicing Agreement as soon as such statement is
furnished to the Company and (iii) any information required to be delivered by
the Company or the Servicer to prepare the report by the Trustee pursuant to
Section 7.8 of the form of Pooling and Servicing Agreement heretofore delivered
to the Representative.
I. The Company will enter into the Pooling and Servicing Agreement,
the Insurance Agreement, and all related agreements on or prior to the Closing
Date.
J. The Company will endeavor to qualify the Class A Certificates for
sale to the extent necessary under any state securities or Blue Sky laws in any
jurisdictions as may be reasonably requested by the Representative, if any, and
will pay all expenses (including fees and disbursements of counsel) in
connection with such qualification and in connection with the determination of
the eligibility of the Class A Certificates for investment under the laws of
such jurisdictions as the Representative may reasonably designate, if any.
6. CONDITIONS OF THE UNDERWRITERS' OBLIGATION. The obligation of the
Underwriters to purchase and pay for the Class A Certificates as provided herein
and on Schedule A hereto shall be subject to the accuracy as of the date hereof
and the Closing Date (as if made at the Closing Date) of the representations and
warranties of the Company contained herein (including those representations and
warranties set forth in the Pooling and Servicing Agreement and incorporated
herein), to the accuracy
7
<PAGE>
of the statements of the Company made in any certificate or other document
delivered pursuant to the provisions hereof, to the performance by the Company
of its obligations hereunder, and to the following additional conditions:
A. The Registration Statement shall have become effective no later
than the date hereof, and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or threatened, and the Prospectus shall have
been filed pursuant to Rule 424(b).
B. The Representative shall have received the Pooling and Servicing
Agreement and the Class A Certificates in form and substance satisfactory to the
Representative, duly executed by all signatories required pursuant to the
respective terms thereof.
C.1. The Underwriters shall have received the favorable opinion of
the Vice President and General Counsel to the Company, with respect to the
following items, dated the Closing Date, to the effect that:
(a) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of
California, and is qualified to do business in each state necessary to
enable it to perform its obligations as Servicer under the Pooling and
Servicing Agreement. The Company has the requisite power and
authority to execute and deliver, engage in the transactions
contemplated by, and perform and observe the conditions of, this
Agreement, the Pooling and Servicing Agreement, any Subsequent
Transfer Agreement, the Insurance Agreement and the Indemnification
Agreement among the Company, the Insurer and the Underwriters.
(b) This Agreement, the Certificates, the Pooling and Servicing
Agreement, the Insurance Agreement and the Indemnification Agreement
have been duly and validly authorized, executed and delivered by the
Company, all requisite corporate action having been taken with respect
thereto, and each (other than the Certificates) constitutes the valid,
legal and binding agreement of the Company enforceable against the
Company in accordance with its respective terms.
(c) Neither the transfer of the Initial Mortgage Loans to the
Trust, the issuance or sale of the Certificates nor the execution,
delivery or performance by the Company of the Pooling and Servicing
Agreement, this Agreement, any Subsequent Transfer Agreement, the
Insurance Agreement or the Indemnification Agreement (A) conflicts or
will conflict with or results or will result in a breach of, or
constitutes or will constitute a default under, (i) any term or
provision of the articles of incorporation or bylaws of the Company;
(ii) any term or provision of any material agreement, contract,
instrument or indenture, to which the Company is a party or is bound;
or (iii) any order, judgment, writ, injunction or decree of any court
or governmental agency or body or other tribunal having jurisdiction
over the Company; or (B) results in, or will result in the creation or
imposition of any lien, charge or encumbrance upon the Trust Estate or
upon the Certificates, except as otherwise contemplated by the Pooling
and Servicing Agreement.
(d) The endorsement and delivery of each Note, and the
preparation, delivery and recording of an Assignment in recordable
form, with respect to each Mortgage (in the
8
<PAGE>
absence of the delivery of the opinions described in Section
3.5(b)(ii)(y) of the Pooling and Servicing Agreement), as and in the
manner contemplated by the Pooling and Servicing Agreement, is
sufficient fully to transfer to the Trustee for the benefit of the
Owners all right, title and interest of the Company in the Note and
Mortgage, as noteholder and mortgagee or assignee thereof, and will be
sufficient to permit the Trustee to avail itself of all protection
available under applicable law against the claims of any present or
future creditors of the Company and to prevent any other sale,
transfer, assignment, pledge or other encumbrance of the Mortgage
Loans by the Company from being enforceable.
(e) No consent, approval, authorization or order of,
registration or filing with, or notice to, courts, governmental agency
or body or other tribunal is required under the laws of the State of
California, for the execution, delivery and performance of the Pooling
and Servicing Agreement, the Insurance Agreement, this Agreement, the
Indemnification Agreement or the offer, issuance, sale or delivery of
the Certificates or the consummation of any other transaction
contemplated thereby by the Company, except such which have been
obtained.
(f) There are no actions, proceedings or investigations pending
or, to such counsel's knowledge, threatened against the Company before
any court, governmental agency or body or other tribunal (i) asserting
the invalidity of the Pooling and Servicing Agreement, the Insurance
Agreement, this Agreement, the Indemnification Agreement or the
Certificates, (ii) seeking to prevent the issuance of the Certificates
or the consummation of any of the transactions contemplated by the
Pooling and Servicing Agreement, the Indemnification Agreement, the
Insurance Agreement or this Agreement or (iii) which would materially
and adversely affect the performance by the Company of obligations
under, or the validity or enforceability of, the Pooling and Servicing
Agreement, the Certificates, the Indemnification Agreement, the
Insurance Agreement or this Agreement.
(g) To the best of such counsel's knowledge, the Registration
Statement, the Prospectus Supplement and the Prospectus do not contain
any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein not misleading with respect to the statements set
forth in the Prospectus under the caption "Certain Legal Aspects of
Mortgage Loans and Related Matters".
2. The Underwriters shall have received the favorable opinion of
Arter & Hadden, special counsel to the Company, dated the Closing Date, to
the effect that:
(a) The Certificates, assuming due execution and authentication
by the Trustee, and delivery and payment therefor pursuant to this
Agreement are validly issued and outstanding and are entitled to the
benefits of the Pooling and Servicing Agreement.
(b) No consent, approval, authorization or order of,
registration or filing with, or notice to, any governmental authority
or court is required under federal laws or the laws of the State of
New York, for the execution, delivery and performance by the Company
of the Pooling and Servicing Agreement, this Agreement, any Subsequent
Transfer Agreement, the Indemnification Agreement, the Insurance
Agreement or the offer, issue, sale or delivery
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of the Certificates or the consummation of any other transaction
contemplated thereby by the Company, except such which have been
obtained.
(c) Neither the transfer of the Initial Mortgage Loans to the
Trustee, the issuance or sale of the Certificates, nor the execution,
delivery or performance by the Company of the Pooling and Servicing
Agreement, the Insurance Agreement, any Subsequent Transfer Agreement,
the Indemnification Agreement or this Agreement will (a) conflict with
or result in a breach of, or constitute a default under any law, rule
or regulation of the State of New York or the federal government, or
(b) to such counsel's knowledge, without independent investigation,
results in, or will result in, the creation or imposition of any lien,
charge or encumbrance upon the Trust Estate or upon the Certificates,
except as otherwise contemplated by the Pooling and Servicing
Agreement.
(d) Each Subsequent Transfer Agreement at the time of its
execution and delivery will be sufficient to convey all of the
Company's right, title and interest in the Subsequent Mortgage Loans
to the Trustee and following the consummation of the transaction
contemplated by each Subsequent Transfer Agreement, the transfer of
the Subsequent Mortgage Loans by the Company to the Trustee will be a
sale thereof.
(e) The Registration Statement, the Prospectus and the
Prospectus Supplement (other than the financial and statistical data
included therein, as to which such counsel need express no opinion),
as of the date on which the Registration Statement was declared
effective and as of the date hereof, comply as to form in all material
respects with the requirements of the Act and the rules and
regulations thereunder, and such counsel does not know of any
amendment to the Registration Statement required to be filed, or of
any contracts, indentures or other documents of a character required
to be filed as an exhibit to the Registration Statement or required to
be described in the Registration Statement, the Prospectus or the
Prospectus Supplement which has not been filed or described as
required.
(f) Neither the qualification of the Pooling and Servicing
Agreement under the Trust Indenture Act of 1939 nor the registration
of the Trust created by such Agreement under the Investment Company
Act of 1940 is presently required.
(g) The statements in the Prospectus set forth under the
captions "DESCRIPTION OF THE SECURITIES" and "THE POOLING AND
SERVICING AGREEMENT" and the statements in the Prospectus Supplement
set forth under the captions "DESCRIPTION OF THE OFFERED CERTIFICATES"
and "THE POOLING AND SERVICING AGREEMENT," to the extent such
statements purport to summarize certain provisions of the Certificates
or of the Pooling and Servicing Agreement, are fair and accurate in
all material respects.
(h) Except as to any financial or statistical data contained in
the Registration Statement, the statements set forth in the Prospectus
under the caption "DESCRIPTION OF CREDIT ENHANCEMENT," and in the
Prospectus Supplement under the caption "THE CERTIFICATE INSURANCE
POLICIES AND THE CERTIFICATE INSURER," and any Computational Materials
as to which no opinion or belief need be expressed, to the best of
such counsel's knowledge, the Registration Statement does not contain
any untrue statement
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<PAGE>
of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein
not misleading.
(i) Upon receipt by the Trustee of the related Notes, endorsed
as described in the Pooling and Servicing Agreement, and the receipt
by the Company of the purchase price for the Certificates and for so
long as the Trustee maintains actual physical possession of such
Notes, (i) the Trustee shall be vested with good and indefeasible
title to, and shall be the sole owner of, and shall obtain all right,
title and interest of the Company in, each Mortgage Loan conveyed by
the Company relating to Properties located in California, (ii) in the
event that the sale of the Mortgage Loans were to be recharacterized
as a financing secured by the Mortgage Loans, the Trustee has a first
perfected security interest in the Mortgage Loans and (iii) the
recordation of the assignments of the Mortgages is not required for
the Trustee to obtain such rights, as against creditors of, and
purported transferees of, the Company.
(j) To the best of the knowledge of such counsel, the Commission
has not issued any stop order suspending the effectiveness of the
Registration Statement or any order directed to any prospectus
relating to the Certificates (including the Prospectus), and has not
initiated or threatened any proceeding for that purpose.
3. The Underwriters shall have received the favorable opinion of
Arter & Hadden, special tax and bankruptcy counsel to the Company, dated the
Closing Date, to the effect that:
(a) Assuming the REMIC election is made in compliance with the
Pooling and Servicing Agreement, (i) the Trust, exclusive of the
Pre-Funding Account and the Capitalized Interest Account (as defined
in the Prospectus Supplement) will qualify as a real estate mortgage
investment conduit ("REMIC") (as defined in the Internal Revenue Code
of 1986, as amended (the "Code")) for Federal income tax purposes and
(ii) each Class of the Offered Certificates (as defined in the
Prospectus Supplement) will be treated as "regular interests" in the
REMIC and the R Class will be treated as the sole "residual interest"
in the REMIC.
(b) To the best of such counsel's knowledge, there are no
actions, proceedings or investigations pending that would adversely
affect the Trust Estate (exclusive of the Pre-Funding Account and the
Capitalized Interest Account) as a real estate mortgage investment
conduit ("REMIC") as such term is defined in the Code.
(c) The statements under the captions "SUMMARY OF PROSPECTUS --
CERTAIN FEDERAL INCOME TAX CONSEQUENCES" and "CERTAIN FEDERAL INCOME
TAX CONSEQUENCES" in the Prospectus and under the captions "SUMMARY --
FEDERAL TAX ASPECTS" and "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" in
the Prospectus Supplement as they relate to federal tax matters are
true and correct in all material respects.
(d) As a consequence of the qualification of the Trust
(exclusive of the Pre-Funding Account and the Capitalized Interest
Account) as a REMIC, the Class A Certificates will be treated as
"qualifying real property loans" under Section 593(d) of the Code,
"regular . . . interest(s) in a REMIC" under Section 7701(a)(19)(C) of
the Code and "real
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<PAGE>
estate assets" under Section 856(c) of the Code in the same proportion
that the assets in the Trust consist of qualifying assets under such
Sections. In addition, as a consequence of the qualification of the
Trust (exclusive of the Pre-Funding Account and the Capitalized
Interest Account) as a REMIC, interest on the Class A Certificates
will be treated as "interest on obligations secured by mortgages on
real property" under Section 856(c) of the Code to the extent that
such Class A Certificates are treated as "real estate assets" under
Section 856(c) of the Code.
(e) The Trust will not be subject to tax upon its income or
assets by the taxing authority of New York State or New York City.
(f) The Trust will not be subject to the California state income
tax. While REMICs are subject to the California state minimum
franchise tax imposed under Article 2, Section 23153 of the California
Revenue and Taxation Code, such counsel does not express an opinion as
to whether the Trust is subject to such tax.
(g) A court would hold that the conveyance by the Sponsor of all
right, title and interest in the Mortgage Loans to the Trustee (except
for the Sponsor's right, title and interest in the principal and
interest due on such Mortgage Loans on or prior to the Cut-Off Date),
constitutes a sale of the Mortgage Loans and not a borrowing by the
Sponsor secured by the pledge of the Mortgage Loans. A court would
find that, following such conveyance, the Mortgage Loans and proceeds
thereof (net of payments of principal and interest due on such
Mortgage Loans on or prior to the Cut-Off Date) are not property of
the estate of the Sponsor within the meaning of Section 541 of the
Bankruptcy Code, and, further that the Trustee's rights with respect
to the Mortgage Loans and the proceeds thereof would not subject it to
the automatic stay provisions of Section 362 of the Bankruptcy Code.
Since the conveyance of the Mortgage Loans (net of payments of
scheduled principal due and interest accrued on or prior to the
Cut-Off Date) constitutes a sale of said Mortgage Loans then the
payments thereunder (net of payments of scheduled principal due on and
interest accrued on or prior to the Cut-Off Date) are not property of
the estate of the Sponsor and the distributions of such payments by
the Trustee to the Owners of the Certificates are not preferential
payments made by, for, or on behalf of the Sponsor under the
provisions of Section 547 of the Bankruptcy Code.
(h) If a court characterized the transfer of the Mortgage Loans
to the Trustee as a pledge of collateral rather than an absolute sale
or assignment, with respect to the Mortgage Loans and other property
included in the Trust on the date hereof, to the extent governed by
the laws of the State of New York, a valid security interest has been
created in favor of the Trustee, which security interest of the
Trustee will be perfected and will constitute a first perfected
security interest, with respect to the Sponsor's right, title and
interest in and to the Notes, upon endorsement and delivery thereof to
the Trustee. With respect to the security interest of the Trustee in
the Notes, New York law would govern.
4. The Underwriters shall have received the favorable opinion of
Dewey Ballantine, special counsel to the Underwriters, dated the Closing
Date, to the effect that:
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<PAGE>
(a) The Certificates, assuming due execution and authentication
by the Trustee, and delivery and payment therefor pursuant to this
Agreement, are validly issued and outstanding and are entitled to the
benefits of the Pooling and Servicing Agreement.
(b) No fact has come to such counsel's attention which causes
them to believe that the Prospectus (other than the financial
statement and other financial and statistical data contained therein,
as to which such counsel need express no opinion), as of the date
thereof, contained any untrue statement of a material fact or omitted
to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) Such other matters as the Underwriters may reasonably
request.
In rendering their opinions, the counsels described in this Paragraph
C may rely, as to matters of fact, on certificates of responsible officers of
the Company, the Trustee and public officials. Such opinions may also assume
the due authorization, execution and delivery of the instruments and documents
referred to therein by the parties thereto other than the Company.
D. The Underwriter shall have received a letter from Deloitte &
Touche, dated on or before the Closing Date, in form and substance satisfactory
to the Underwriters and counsel for the Underwriters, to the effect that they
have performed certain specified procedures requested by the Underwriters with
respect to the information set forth in the Prospectus and certain matters
relating to the Company.
E. The Class A Certificates shall have been rated in the highest
rating category by Moody's Investors Service, Inc., and by Standard & Poor's
Ratings Service, a division of The McGraw-Hill Companies, and such ratings shall
not have been rescinded. The Underwriters and counsel for the Underwriters
shall have received copies of any opinions of counsel supplied to the rating
organizations relating to any matters with respect to the Class A Certificates.
Any such opinions shall be dated the Closing Date and addressed to the
Underwriters or accompanied by reliance letters to the Underwriter or shall
state that the Underwriters may rely upon them.
F. The Underwriters shall have received from the Company a
certificate, signed by the president, a senior vice president or a vice
president of the Company, dated the Closing Date, to the effect that the signer
of such certificate has carefully examined the Registration Statement, the
Pooling and Servicing Agreement and this Agreement and that, to the best of his
or her knowledge based upon reasonable investigation:
1. the representations and warranties of the Company in this
Agreement, and in the Indemnification Agreement, as of the Closing Date, in
the Pooling and Servicing Agreement, in the Insurance Agreement and in all
related agreements, as of the date specified in such agreements, are true
and correct, and the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied at or
prior to the Closing Date;
2. there are no actions, suits or proceedings pending, or to the best
of such officer's knowledge, threatened against or affecting the Company
which if adversely determined, individually or in the aggregate, would be
reasonably likely to adversely affect the Company's obligations under the
Pooling and Servicing Agreement, the Insurance Agreement, this Agreement or
under the
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<PAGE>
Indemnification Agreement in any material way; and no merger, liquidation,
dissolution or bankruptcy of the Company is pending or contemplated;
3. the information contained in the Registration Statement and
Prospectus relating to the Company, the Mortgage Loans or the servicing
procedures of it or its affiliates or the subservicer is true and accurate
in all material respects and nothing has come to his or her attention that
would lead such officer to believe that the Registration Statement and
Prospectus includes any untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein not
misleading;
4. the information set forth in the Schedules of Mortgage Loans
required to be furnished pursuant to the Pooling and Servicing Agreement is
true and correct in all material respects;
5. there has been no amendment or other document filed affecting the
articles of incorporation or bylaws of the Company since August 1, 1996,
and no such amendment has been authorized. No event has occurred since
December 16, 1996, which has affected the good standing of the Company
under the laws of the State of California;
6. there has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
September 30, 1996;
7. on or prior to the Closing Date, there has been no downgrading,
nor has any notice been given of (A) any intended or potential downgrading
or (B) any review or possible changes in rating, the direction of which has
not been indicated, in the rating, if any, accorded the Company or in any
rating accorded any securities of the Company, if any, by any "nationally
recognized statistical rating organization," as such term is defined for
purposes of the Act; and
8. each person who, as an officer or representative of the Company,
signed or signs the Registration Statement, the Pooling and Servicing
Agreement, this Agreement, the Indemnification Agreement, the Insurance
Agreement, or any other document delivered pursuant hereto, on the date of
such execution, or on the Closing Date, as the case may be, in connection
with the transactions described in the Pooling and Servicing Agreement, the
Indemnification Agreement, the Insurance Agreement and this Agreement was,
at the respective times of such signing and delivery, and is now, duly
elected or appointed, qualified and acting as such officer or
representative, and the signatures of such persons appearing on such
documents are their genuine signatures.
The Company shall attach to such certificate a true and correct copy
of its certificate or articles of incorporation, as appropriate, and bylaws
which are in full force and effect on the date of such certificate and a
certified true copy of the resolutions of its Board of Directors with respect to
the transactions contemplated herein.
G. The Underwriters shall have received the favorable opinion of
counsel to the Trustee, dated the Closing Date and in form and substance
satisfactory to the Underwriters, to the effect that:
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<PAGE>
1. the Trustee is a banking corporation duly organized, validly
existing and in good standing under the laws of the State of New York and
has the power and authority to enter into and to take all actions required
of it under the Pooling and Servicing Agreement;
2. the Pooling and Servicing Agreement has been duly authorized,
executed and delivered by the Trustee and the Pooling and Servicing
Agreement constitutes the legal, valid and binding obligation of the
Trustee, enforceable against the Trustee in accordance with its terms,
except as enforceability thereof may be limited by (A) bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement
of creditors' rights generally, as such laws would apply in the event of a
bankruptcy, insolvency or reorganization or similar occurrence affecting
the Trustee, and (B) general principles of equity regardless of whether
such enforcement is sought in a proceeding at law or in equity;
3. no consent, approval, authorization or other action by any
governmental agency or body or other tribunal is required on the part of
the Trustee in connection with its execution and delivery of the Pooling
and Servicing Agreement or the performance of its obligations thereunder;
4. the Certificates have been duly executed, authenticated and
delivered by the Trustee;
5. the execution and delivery of, and performance by the Trustee of
its obligations under, the Pooling and Servicing Agreement do not conflict
with or result in a violation of any statute or regulation applicable to
the Trustee, or the articles or bylaws of the Trustee, or to the best
knowledge of such counsel, any governmental authority having jurisdiction
over the Trustee or the terms of any indenture or other agreement or
instrument to which the Trustee is a party or by which it is bound; and
6. in the event that the Servicer defaults in its obligation to make
advances under the Pooling and Servicing Agreement, the Trustee or any
affiliate of the Trustee, is not prohibited by a provision of its Articles
of Incorporation or Bylaws or by any provision of the banking and trust
laws of the United States of America or the State of New York, as the case
may be (or any rule, regulation, decree or order thereunder), from assuming
its obligation to make such advances.
In rendering such opinion, such counsel may rely, as to matters of
fact, on certificates of responsible officers of the Company, the Trustee and
public officials. Such opinion may also assume the due authorization, execution
and delivery of the instruments and documents referred to therein by the parties
thereto other than the Trustee.
H. The Underwriters shall have received from the Trustee a
certificate, signed by the President, a senior vice president or an assistant
vice president of the Trustee, dated the Closing Date, to the effect that each
person who, as an officer or representative of the Trustee, signed or signs the
Certificates, the Pooling and Servicing Agreement or any other document
delivered pursuant hereto, on the date hereof or on the Closing Date, in
connection with the transactions described in the Pooling and Servicing
Agreement was, at the respective times of such signing and delivery, and is now,
duly elected or appointed, qualified and acting as such officer or
representative, and the signatures of such persons appearing on such documents
are their genuine signatures.
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<PAGE>
I. The Policies relating to the Class A Certificates shall have been
duly executed and issued at or prior to the Closing Date and shall conform in
all material respects to the description thereof in the Prospectus.
J. The Underwriters shall have received a favorable opinion of Kutak
Rock, counsel to the Insurer, dated the Closing Date and in form and substance
satisfactory to counsel for the Underwriters, to the effect that:
1. The Insurer is a stock insurance corporation, duly incorporated
and validly existing under the laws of the State of New York. The Insurer
is validly licensed and authorized to issue the Policies and perform its
obligations under the Policies in accordance with the terms thereof, under
the laws of the State of New York.
2. The execution and delivery by the Insurer of the Policies, the
Insurance Agreement and the Indemnification Agreement are within the
corporate power of the Insurer and have been authorized by all necessary
corporate action on the part of the Insurer; the Policies have been duly
executed and are the valid and binding obligations of the Insurer
enforceable in accordance with their terms except that the enforcement of
the Policies may be limited by laws relating to bankruptcy, insolvency,
reorganization, moratorium, receivership and other similar laws affecting
creditors' rights generally and by general principles of equity.
3. The Insurer is authorized to deliver the Insurance Agreement, and
the Indemnification Agreement, and the Insurance Agreement and the
Indemnification Agreement have been duly executed and are the valid and
binding obligations of the Insurer enforceable in accordance with their
terms except that the enforcement of the Insurance Agreement and the
Indemnification Agreement may be limited by laws relating to bankruptcy,
insolvency, reorganization, moratorium, receivership and other similar laws
affecting creditors' rights generally and by general principles of equity
and by public policy considerations relating to indemnification for
securities law violations.
4. No consent, approval, authorization or order of any state or
federal court or governmental agency or body is required on the part of the
Insurer, the lack of which would adversely affect the validity or
enforceability of the Policies; to the extent required by applicable legal
requirements that would adversely affect validity or enforceability of the
Policies, the form of each Policy has been filed with, and approved by, all
governmental authorities having jurisdiction over the Insurer in connection
with such Policy.
5. To the extent the Policies constitute securities within the
meaning of Section 2(1) of the Act, they are securities that are exempt
from the registration requirements of the Act.
6. The information set forth under the caption "THE CERTIFICATE
INSURANCE POLICIES AND THE CERTIFICATE INSURER" in the Prospectus forming a
part of the Registration Statement Form S-3 (No. 33-99604) filed by the
Company with the Securities and Exchange Commission and declared effective
on June 7, 1996, insofar as such statements constitute a description of the
Policies, accurately summarizes the Policies.
In rendering this opinion, such counsel may rely, as to matters of
fact, on certificates of responsible officers of the Company, the Trustee, the
Insurer and public officials. Such opinion may
16
<PAGE>
assume the due authorization, execution and delivery of the instruments and
documents referred to therein by the parties thereto other than the Insurer.
K. On or prior to the Closing Date, there has been no downgrading,
nor has any notice been given of (A) any intended or potential downgrading or
(B) any review or possible changes in rating, the direction of which has not
been indicated, in the rating, if any, accorded the Company or in any rating
accorded any securities of the Company, if any, by any "nationally recognized
statistical rating organization," as such term is defined for purposes of the
Act.
L. On or prior to the Closing Date there shall not have occurred any
downgrading, nor shall any notice have been given of (A) any intended or
potential downgrading or (B) any review or possible change in rating the
direction of which has not been indicated, in the rating accorded the Insurer's
claims paying ability by any "nationally recognized statistical rating
organization," as such term is defined for purposes of the Act.
M. There has not occurred any change, or any development involving a
prospective change, in the condition, financial or otherwise, or in the
earnings, business or operations, since September 30, 1996, of (A) the Company,
its subsidiaries and affiliates or (B) the Insurer, that is in the Underwriters'
judgment material and adverse and that makes it in the Underwriter's judgment
impracticable to market the Class A Certificates on the terms and in the manner
contemplated in the Prospectus.
N. The Underwriters shall have received from the Insurer a
certificate, signed by the President, a senior vice president or a vice
president of the Insurer, dated the Closing Date, to the effect that the signer
of such certificate has carefully examined the Policies, the Insurance
Agreement, the Indemnification Agreement and the related documents and that, to
the best of his or her knowledge based on reasonable investigation:
1. each person who as an officer or representative of the Insurer,
signed or signs the Policies, the Insurance Agreement, the Indemnification
Agreement or any other document delivered pursuant hereto, on the date
thereof, or on the Closing Date, in connection with the transactions
described in this Agreement was, at the respective times of such signing
and delivery, and is now a duly authorized representative of the Insurer
and is authorized to execute and deliver this certificate.
2. The financial data presented in the table set forth under the
heading "THE CERTIFICATE INSURANCE POLICIES AND THE CERTIFICATE INSURER" in
the Prospectus Supplement presents fairly the financial position of the
Insurer as of December 31, 1995 and September 30, 1996, respectively, and
to the best of the Insurer's knowledge since such date, no material and
adverse change has occurred in the financial position of the Insurer other
than as set forth in the Prospectus Supplement.
3. The audited financial statements dated as of December 31, 1995
and the unaudited financial statements dated as of September 30, 1996
incorporated by reference into the Prospectus Supplement are true and
accurate.
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<PAGE>
4. The information which relates to the Insurer or the Policies
under the caption titled "THE CERTIFICATE INSURANCE POLICIES AND THE
CERTIFICATE INSURER" in the Prospectus Supplement is true and correct in
all material respects.
5. There are no actions, suits, proceedings or investigations
pending or, to the best of the Insurer's knowledge, threatened against it
at law or in equity or before or by any court, governmental agency, board
or commission or any arbitrator which, if decided adversely, would
materially and adversely affect its condition (financial or otherwise) or
operations or which would materially and adversely affect its ability to
perform its obligations under the Policies or the Insurance Agreement dated
as of December 1, 1996 (the "Insurance Agreement") among the Insurer, First
Alliance Mortgage Company, as Company, First Alliance Mortgage Company, as
Servicer, and The Chase Manhattan Bank, as Trustee.
6. The execution and delivery of the Insurance Agreement and the
Policies and the compliance with the terms and provisions thereof will not
conflict with, result in a breach of, or constitute a default under any of
the terms, provisions or conditions of the Restated Charter or By-Laws of
the Insurer or of any agreement, indenture or instrument to which the
Insurer is a party.
7. The issuance of the Policies and the execution, delivery and
performance of the Insurance Agreement have been duly authorized by all
necessary corporate proceedings. No further approvals or filings of any
kind, including, without limitation, any further approvals or further
filing with any governmental agency or other governmental authority, or any
approval of the Insurer's board of directors or stockholders, are necessary
for the Policies and the Insurance Agreement to constitute the legal, valid
and binding obligations of the Insurer.
The officer of the Insurer certifying to items 2 and 3 shall be an
officer in charge of a principal financial function.
The Insurer shall attach to such certificate a true and correct copy
of its certificate or articles of incorporation, as appropriate, and its bylaws,
all of which are in full force and effect on the date of such certificate.
O. The Underwriters shall have received from Dewey Ballantine,
special counsel to the Underwriters, such opinion or opinions, dated the Closing
Date, with respect to the issuance and sale of the Certificates, the Prospectus
and such other related matters as the Underwriters shall reasonably require.
P. The Underwriters and counsel for the Underwriters shall have
received copies of any opinions of counsel to the Company or the Insurer
supplied to the Trustee relating to matters with respect to the Certificates or
the Policies. Any such opinions shall be dated the Closing Date and addressed
to the Underwriter or accompanied by reliance letters to the Underwriters or
shall state that the Underwriters may rely thereon.
Q. The Underwriters shall have received such further information,
certificates and documents as the Underwriters may reasonably have requested not
fewer than three (3) full business days prior to the Closing Date.
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<PAGE>
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all respects when and as provided in this Agreement, if the
Company is in breach of any covenants or agreements contained herein or if any
of the opinions and certificates mentioned above or elsewhere in this Agreement
shall not be in all material respects reasonably satisfactory in form and
substance to the Underwriters and counsel to the Underwriters, this Agreement
and all obligations of the Underwriters hereunder, may be canceled on, or at any
time prior to, the Closing Date by the Underwriters. Notice of such
cancellation shall be given to the Company in writing, or by telephone or
telegraph confirmed in writing.
7. EXPENSES. If the sale of the Class A Certificates provided for
herein is not consummated by reason of a default by the Company in its
obligations hereunder, then the Company will reimburse the Underwriters, upon
demand, for all reasonable out-of-pocket expenses (including, but not limited
to, the reasonable fees and expenses of Dewey Ballantine) that shall have been
incurred by each of them in connection with their investigation with regard to
the Company and the Class A Certificates and the proposed purchase and sale of
the Class A Certificates.
8. INDEMNIFICATION AND CONTRIBUTION. A. Regardless of whether any
Class A Certificates are sold, the Company will indemnify and hold harmless each
Underwriter, each of its respective officers and directors and each person who
controls such Underwriter within the meaning of the Act or the Securities
Exchange Act of 1934 (the "1934 Act"), against any and all losses, claims,
damages, or liabilities (including the cost of any investigation, legal and
other expenses incurred in connection with any amounts paid in settlement of any
action, suit, proceeding or claim asserted), joint or several, to which they may
become subject, under the Act, the 1934 Act or other federal or state law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained (i) in
the Registration Statement, or any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact necessary to make the statements therein, not misleading or (ii)
in the Basic Prospectus or the Prospectus Supplement or any amendment thereto or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and will reimburse each such indemnified party for any legal or
other expenses reasonably incurred by it in connection with investigating or
defending against such loss, claim, damage, liability or action; PROVIDED,
HOWEVER, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Company by or on behalf of an Underwriter specifically for use
in connection with the preparation thereof.
B. Regardless of whether any Class A Certificates are sold, each
Underwriter severally agrees to indemnify and hold harmless the Company, each of
its officers and directors and each person, if any, who controls the Company
within the meaning of the Act or the 1934 Act against any losses, claims,
damages or liabilities to which they or any of them become subject under the
Act, the 1934 Act or other federal or state law or regulation, at common law or
otherwise, to the same extent as the foregoing indemnity, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in (i) the Registration Statement, or any amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact necessary to make the
statements therein not misleading or in (ii) the Basic Prospectus or the
Prospectus Supplement or any
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amendment thereto or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Underwriter
specifically for use in the preparation thereof and so acknowledged in writing,
and will reimburse the Company for any legal or other expenses reasonably
incurred by the Company in connection with investigating or defending against
such loss, claim, damage, liability or action.
C. In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Paragraphs A and B above such person (hereinafter called the
indemnified party) shall promptly notify the person against whom such indemnity
may be sought (hereinafter called the indemnifying party) in writing thereof;
but the omission to notify the indemnifying party shall not relieve such
indemnifying party from any liability which it may have to any indemnified party
otherwise than under such Paragraph. The indemnifying party, upon request of
the indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding any indemnified party shall have the right to retain its own counsel,
but the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the indemnifying party and the indemnified party
shall have mutually agreed to the retention of such counsel, or (ii) the named
parties to any such proceeding (including any impleaded parties) include both
the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
for all such indemnified parties, and that all such fees and expenses shall be
reimbursed as they are incurred. Such firm shall be designated in writing by
the Underwriters in the case of parties indemnified pursuant to Paragraph A and
by the Company in the case of parties indemnified pursuant to Paragraph B. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there is a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
above, the indemnifying party agrees that it shall be liable for any settlement
of any proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
D. If the indemnification provided for in this Section 8 is
unavailable to an indemnified party in respect of any losses, claims, damages or
liabilities referred to herein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as
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is appropriate to reflect the relative benefits received by the Company and the
related Underwriters from the sale of the Certificates or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only relative benefits referred to
in clause (i) above but also the relative fault of the Company and of the
related Underwriters in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations.
The relative benefits received by the Company and the related
Underwriters shall be deemed to be in such proportion so that the related
Underwriter is responsible for that portion determined by multiplying the total
amount of such losses, claims, damages and liabilities, including legal and
other expenses, by a fraction, the numerator of which is (x) the excess of the
Aggregate Resale Price of the Class A Certificates purchased by such Underwriter
over the aggregate purchase price of the Class A Certificates specified in
Section 4 of this Agreement and the denominator of which is (y) the Aggregate
Resale Price of the Class A Certificates purchased by such Underwriter and the
Company is responsible for the balance, provided, however, that no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of the immediately preceding
sentence, the "Aggregate Resale Price" of the Class A Certificates at the time
of any determination shall be the weighted average of the purchase prices (in
each case expressed as a percentage of the aggregate principal amount of the
Class A Certificates so purchased), determined on the basis of such principal
amounts, paid to the related Underwriter by all subsequent purchasers that
purchased the Class A Certificates on or prior to such date of determination.
The relative fault of the Company and the related Underwriter shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the related
Underwriter and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
E. The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 8 were determined by PRO
RATA allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in Paragraph D. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in Paragraph D shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, the
Underwriters shall not be required to contribute any amount in excess of the
amount by which the Aggregate Resale Price exceeds the amount of any damages
that the Underwriters have otherwise been required to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission.
F. Each Underwriter agrees to provide the Company no later than two
Business Days prior to the day on which such materials are required to be filed
with a copy of any Computational Materials (as defined below) produced by such
Underwriter for filing with the Commission on Form 8-K.
G. Each Underwriter severally agrees, assuming all information
provided to it by the Company is accurate and complete in all material respects,
to indemnify and hold harmless the Company, each of the Company's officers and
directors and each person who controls the Company within the meaning of Section
15 of the Securities Act against any and all losses, claims, damages or
liabilities,joint or several, to which they may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
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untrue statement of a material fact contained in the Computational Materials
provided by such Underwriter and agrees to reimburse each such indemnified party
for any legal or other expenses reasonably incurred by him, her or it in
connection with investigating or defending or preparing to defend any such loss,
claim, damage, liability or action as such expenses are incurred. The
obligations of an Underwriter under this Section 8(G) shall be in addition to
any liability which such Underwriter may otherwise have.
H. The Company and each Underwriter each expressly waive, and agree
not to assert, any defense to their respective indemnification and contribution
obligations under this Section 8 which they might otherwise assert based upon
any claim that such obligations are unenforceable under federal or state
securities laws or by reasons of public policy.
I. The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls each
Underwriter within the meaning of the Act or the 1934 Act; and the obligations
of each Underwriter under this Section 8 shall be in addition to any liability
that such Underwriter may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Company and to each person, if any, who
controls the Company within the meaning of the Act or the 1934 Act; provided,
however, that in no event shall the Company or any Underwriter be liable for
double indemnification.
9. INFORMATION SUPPLIED BY THE UNDERWRITERS. The statements set
forth in the last paragraph on the front cover page of the Prospectus regarding
market-making and under the heading "Underwriting" in the Supplement (to the
extent such statements relate to the Underwriters), together with the
Computational Materials, constitute the only information furnished by the
Underwriter to the Company for the purposes of Sections 2(B) and 8(A) hereof.
The Underwriters confirm that such statements (to such extent) are correct.
The Company will cause any Computational Materials (as defined below)
with respect to the Class A Certificates which are delivered by any Underwriter
to the Company to be filed with the Commission on a Current Report on Form 8-K
(the "Form 8-K -- Computational Materials") not later than the date on which
such materials are required to be filed pursuant to the Kidder/PSA Letters (as
defined below), provided, however, that the Company shall have no obligation to
file any materials which, in the reasonable determination of the Company after
consultation with such Underwriter, (i) are not required to be filed pursuant to
the Kidder/PSA Letters or (ii) contain any erroneous information or untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading; it
being understood, however, that the Company shall have no obligation to review
or pass upon the accuracy or adequacy of, or to correct, any Computational
Materials provided by any Underwriter to the Depositor as aforesaid. For
purposes hereof, as to each Underwriter, the term "Computational Materials"
shall mean those materials delivered by an Underwriter to the Company within the
meaning of the no-action letter dated May 20, 1994 issued by the Division of
Corporation Finance of the Commission to Kidder, Peabody Acceptance Corporation
I and certain affiliates, the no-action letter dated May 27, 1994 issued by the
Division of Corporation Finance of the Commission to the Public Securities
Association and the no-action letter of February 17, 1995 issued by the
Commission to the Public Securities Association (together, the "Kidder/PSA
Letters") for which the filing of such material is a condition of the relief
granted in such letters.
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10. NOTICES. All communications hereunder shall be in writing and,
if sent to the Representative, shall be mailed or delivered or telecopied and
confirmed in writing to the Representative at Prudential Securities
Incorporated, One New York Plaza, New York, New York 10292, Attention: Shankar
Lall; and, if sent to the Company, shall be mailed, delivered or telegraphed and
confirmed in writing to the Company at the address set forth above, Attention:
Executive Vice President.
11. SURVIVAL. All representations, warranties, covenants and
agreements of the Company contained herein or in agreements or certificates
delivered pursuant hereto, the agreements of the Underwriters and the Company
contained in Section 8 hereof, and the representations, warranties and
agreements of the Underwriters contained in Section 3 hereof, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of the Underwriters or any controlling persons, or any subsequent
purchaser or the Company or any of its officers, directors or any controlling
persons, and shall survive delivery of and payment for the Certificates. The
provisions of Sections 5, 7 and 8 hereof shall survive the termination or
cancellation of this Agreement.
12. TERMINATION. The Underwriters shall have the right to terminate
this Agreement by giving notice as hereinafter specified at any time at or prior
to the Closing Date if (a) trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange, the National Association of Securities
Dealers, Inc., the Chicago Board Options Exchange, the Chicago Mercantile
Exchange or the Chicago Board of Trade, (b) trading of any securities of the
Company shall have been suspended on any exchange or in any over-the-counter
market, (c) a general moratorium on commercial banking activities shall have
been declared by either federal or New York State authorities, (d) there shall
have occurred any outbreak or escalation of hostilities or any change in
financial markets or any calamity or crisis which, in the Representative's
reasonable judgment, is material and adverse, and, in the case of any of the
events specified in clauses (a) through (d), such event singly or together with
any other such event makes it in the Representative's reasonable judgment
impractical to market the Class A Certificates. Any such termination shall be
without liability of any other party except that the provisions of Paragraph G
of Section 5 (except with respect to expenses of the Underwriters) and Sections
7 and 8 hereof shall at all times be effective. If the Underwriters elect to
terminate this Agreement as provided in this Section 12, the Company shall be
notified promptly by the Underwriters by telephone, telegram or facsimile
transmission, in any case, confirmed by letter.
13. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns
(which successors and assigns do not include any person purchasing a Certificate
from the Underwriters), and the officers and directors and controlling persons
referred to in Section 8 hereof and their respective successors and assigns, and
no other persons will have any right or obligations hereunder.
14. APPLICABLE LAW; VENUE. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York. Any
action or proceeding brought to enforce or arising out of any provision of this
Agreement shall be brought only in a state or federal court located in the
Borough of Manhattan, New York City, New York, and the parties hereto expressly
consent to the jurisdiction of such courts and agree to waive any defense or
claim of FORUM NON CONVENIENS they may have with respect to any such action or
proceeding brought.
15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall together constitute but one and the same
instrument.
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16. AMENDMENTS AND WAIVERS. This Agreement may be amended, modified,
altered or terminated, and any of its provisions waived, only in a writing
signed on behalf of the parties hereto.
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IN WITNESS WHEREOF, the parties hereto hereby execute this Underwriting
Agreement, as of the day and year first above written.
FIRST ALLIANCE MORTGAGE COMPANY
By:
------------------------------------
Name:
Title:
PRUDENTIAL SECURITIES INCORPORATED, as
Representative of the Several Underwriters
By:
------------------------------------
Name:
Title:
{UNDERWRITING AGREEMENT SIGNATURE PAGE}
<PAGE>
Schedule A
CLASS A-1 CERTIFICATES
Underwriters Principal Purchase Price
Prudential Securities Inc. $13,500,000
Lehman Brothers Inc. $ 9,000,000
Total
CLASS A-2 CERTIFICATES
Underwriters Principal Purchase Price
Prudential Securities Inc. $28,500,000
Lehman Brothers Inc. $19,000,000
Total
