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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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):
September 14, 1998
Morgan Stanley ABS Capital I Inc.,
as Depositor in connection with
Life Bank Asset-Backed Certificates, Series 1998-1
(Exact Name of Registrant as Specified in its Charter)
Delaware 333-19779 13-3939229
(State of Incorporation) (Commission (I.R.S. Employer
File Number) Identification No.)
1585 Broadway, 2nd Floor, New York, New York 10036
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 761-4000
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The sole purpose of this Current Report on Form 8-K is to file (i) certain
opinions and the consent of Andrews & Kurth L.L.P., counsel to Morgan Stanley
ABS Capital I Inc., the Depositor in connection with the proposed offering of
Life Bank Asset-Backed Certificates, Series 1998-1, and (ii) the consent of
PricewaterhouseCoopers LLP, independent accountants to MBIA Insurance
Corporation, which will act as the Certificate Insurer in connection with the
proposed offering of the Life Bank Asset-Backed Certificates, Series 1998-1.
Item 7. Financial Statements; Pro Forma Financial Information and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
4.1 Pooling and Servicing Agreement dated as of August 31, 1998 by
and among Morgan Stanley ABS Capital I, Inc., as Depositor, Life
Investment Holdings, Inc., as Transferor, Life Bank, individually
and as Servicer and Norwest Bank Minnesota, National Association,
as Trustee
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
MORGAN STANLEY ABS CAPITAL I INC.
By: /s/ Paul Scialabba
---------------------------------
Name: Paul Scialabba
Title: Vice President
Date: September 22, 1998
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
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<S> <C>
4.1 Pooling and Servicing Agreement dated as of August 31, 1998 by and
among Morgan Stanley ABS Capital I, Inc., as Depositor, Life
Investment Holdings, Inc., as Transferor, Life Bank, individually
and as Servicer and Norwest Bank Minnesota, National Association,
as Trustee
</TABLE>
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This Pooling and Servicing Agreement is entered into effective as of
August 31, 1998, among MORGAN STANLEY ABS CAPITAL I INC., a Delaware
corporation, as depositor (the "Depositor"), LIFE BANK, a federal savings bank,
in its individual capacity ("Life"), and as servicer (the "Servicer"), LIFE
INVESTMENT HOLDINGS, INC., a Delaware corporation, as transferor (the
"Transferor"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national
banking association, as trustee on behalf of the Certificateholders and the
Certificate Insurer (the "Trustee").
PRELIMINARY STATEMENT
WHEREAS, the Depositor desires to purchase a pool of Mortgage Loans
which were originated or purchased by Life in its ordinary course of business
and subsequently conveyed by Life to the Transferor; and
WHEREAS, the Servicer is willing to service such Mortgage Loans in
accordance with the terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
meanings specified in this Article I. Unless otherwise specified, all
calculations of interest described herein shall be made on the basis of a
360-day year consisting of twelve 30-day months.
"Accepted Servicing Procedures": Servicing procedures that meet at
least the same standards the Servicer would follow in servicing first and second
lien residential mortgage loans such as the Mortgage Loans held for its own
account, and consistent with standards of practice of prudent mortgage lenders
and loan servicers that originate and service mortgage loans comparable to the
Mortgage Loans and giving consideration to the reliance placed by the
Certificate Insurer and the Certificateholders on the Servicer for the servicing
of the Mortgage Loans, but without regard to:
(i) any relationship that the Servicer, any Subservicer or any
affiliate of the Servicer or any Subservicer may have with the related
Mortgagor;
(ii) the ownership of any Certificates by the Servicer or any affiliate
of the Servicer;
(iii) the Servicer's obligation to make Periodic Advances or Servicing
Advances; or
(iv) the Servicer's or any Subservicer's right to receive compensation
for its services hereunder with respect to any particular transaction.
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"Addition Notice": For any date during a Pre-Funding Period, a notice
(which shall be in writing) given to the Rating Agencies, the Certificate
Insurer and the Trustee pursuant to Section 2.7.
"Adjustable Rate Collection Account": The Collection Account
established with respect to the Adjustable Rate Mortgage Loans in accordance
with Section 6.1(a) hereof and maintained by the Servicer.
"Adjustable Rate Mortgage Loan": Each Mortgage Loan identified on the
Mortgage Loan Schedule, including any Qualified Substitute Mortgage Loan
substituted therefor, as having an adjustable Mortgage Loan Interest Rate.
"Adjustable Rate Pool": The pool of Adjustable Rate Mortgage Loans
identified on Exhibit B-2 as amended from time to time.
"Adjustable Rate Pool Principal Balance": The sum of the aggregate
Principal Balances of the Adjustable Rate Mortgage Loans and the Group II
Pre-Funding Amount as of any date of determination.
"Adverse REMIC Event": Any act or failure to act that will result in:
(i) a taxable event to the Certificateholders of the Trust, (ii) endangerment of
the REMIC status of REMIC I or REMIC II or (iii) the imposition on REMIC I or
REMIC II of a tax on Prohibited Transactions.
"Agreement": This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
"Appraised Value": The appraised value of any Mortgaged Property, based
upon the appraisal made at the time the related Mortgage Loan is originated or
in case of a Mortgage Loan that is a purchase money mortgage loan, the sales
price of the Mortgaged Property, if such sales price is less than such appraisal
value.
"Assignment of Mortgage": With respect to each Mortgage Loan, an
assignment, notice of transfer, or equivalent instrument sufficient under the
laws of the jurisdiction wherein the related Mortgaged Property is located to
reflect or record the sale of the related Mortgage to the Trustee for the
benefit of the Certificate Insurer and the Certificateholders which assignment,
notice of transfer, or equivalent instrument may be in the form of one or more
blanket assignments covering Mortgages secured by Mortgaged Properties located
in the same county or city, if permitted by law.
"Authorized Denominations": With respect to each class of Class A
Certificates, $100,000 and integral multiples of $1,000 in excess thereof;
provided that one Certificate for each Class of Class A Certificates may be
issued in a lesser amount. With respect to the Class IO Certificates a minimum
Percentage Interest of 20.00% and integral multiples of 0.01% in excess thereof.
With respect to the Residual Interest Certificates, a minimum Percentage
Interest of 10.00% and integral multiples of 0.01% in excess thereof.
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"Available Collection Amount": With respect to any Distribution Date,
the Fixed Rate Pool and the Group I Certificates, the Group I Available
Collection Amount. With respect to any Distribution Date, the Adjustable Rate
Pool and the Group II Certificates, the Group II Available Collection Amount.
"Available Distribution Amount": With respect to any Distribution Date,
the Fixed Rate Pool and the Group I Certificates, the Group I Available
Distribution Amount. With respect to any Distribution Date, the Adjustable Rate
Pool and the Group II Certificates, the Group II Available Distribution Amount.
"Balloon Loan": A Mortgage Loan with a final Monthly Payment that is
greater than five (5) times any other Monthly Payment.
"Business Day": Any day other than (i) a Saturday or Sunday, (ii) a day
on which the Certificate Insurer is closed or (iii) a day on which banking
institutions in New York, in California or in the city in which the corporate
trust office of the Trustee is located are authorized or obligated by law or
executive order to be closed.
"Call Option Date": The first Distribution Date on which the Residual
Interest Certificateholders, the Servicer or the Certificate Insurer are able to
terminate the Trust and purchase the Mortgage Loans pursuant to Section 13.2.
"Capitalized Interest Account": The Group I Capitalized Interest
Account or the Group II Capitalized Interest Account, as applicable.
"Capitalized Interest Coverage Amount": With respect to the Group I
Certificates and the Group II Certificates, the amount to be paid from proceeds
of the sale of the Certificates by the Depositor to the Trustee for deposit into
the related Capitalized Interest Account pursuant to Section 6.12(a) on the
Closing Date.
"Capitalized Interest Requirement": The Group I Capitalized Interest
Requirement or the Group II Capitalized Interest Requirement, as applicable.
"Certificate": Any Class A Certificate, Class IO Certificate or
Residual Interest Certificate executed by the Trustee on behalf of the Trust and
authenticated by the Depositor.
"Certificate Account": The Group I Certificate Account or the Group II
Certificate Account, as applicable.
"Certificate Insurance Policies": The Certificate Guaranty Insurance
Policy, No. 27591, dated the Closing Date, issued by the Certificate Insurer for
the benefit of the Group I Certificates and the Certificate Guaranty Insurance
Policy, No. 27592 dated the Closing Date, issued by the Certificate Insurer for
the benefit of the Group II Certificates (each a "Certificate Insurance
Policy.")
"Certificate Insurance Payments Account": As defined in Section 6.4(c).
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"Certificate Insurance Premium": With respect to any Distribution Date,
the product of the "Premium Percentage" as defined in the Insurance Agreement
and the aggregate Certificate Principal Balance of the Group I Certificates or
the Group II Certificates, as applicable, on such Distribution Date (after
giving effect to distributions of principal to be made on such related Class A
Certificates on such Distribution Date).
"Certificate Insurer": MBIA Insurance Corporation.
"Certificate Principal Balance": With respect to each Class of Class A
Certificates as determined separately, as of any date of determination, the
related Original Certificate Principal Balance less any amounts distributed in
reduction of the Certificate Principal Balance thereof pursuant to Section
6.6(b) on all prior Distribution Dates. The Class A-IO, Class F-IO and Residual
Interest Certificates do not have a Certificate Principal Balance.
"Certificate Register": As described in Section 4.2(a).
"Certificate Transferee": Any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.
"Certificate Transferor": Any Person who is disposing by Transfer any
Ownership Interest in a Certificate.
"Certificateholder or Holder": The Person in whose name a Certificate
is registered in the Certificate Register, except that neither a Disqualified
Organization nor a Non-United States Person shall be a Holder of a Residual
Interest Certificate for any purposes hereof and, solely for the purposes of
giving any consent (except any consent required to be obtained pursuant to
Section 15.2), waiver, request or demand pursuant to this Agreement, any
Certificate registered in the name of the Transferor or the Servicer or any
affiliate thereof shall be deemed not to be outstanding and the rights to which
it is entitled shall not be taken into account in determining whether the
requisite percentage of rights necessary to effect any such consent has been
obtained, except as otherwise provided in Section 15.2. The Trustee shall be
entitled to rely upon a certification of the Transferor or the Servicer in
determining if any Certificates are registered in the name of a respective
affiliate. Any Certificates on which payments are made under a Certificate
Insurance Policy shall be deemed to be outstanding and held by the Certificate
Insurer to the extent of such payment.
"Certificateholders' Interest Carry-Forward Amount": With respect to
any Distribution Date and a particular Class of Certificates (other than the
Residual Interest Certificates), the excess of (A) the applicable
Certificateholders' Monthly Interest Distributable Amount for the preceding
Distribution Date and any outstanding applicable Certificateholders' Interest
Carry-Forward Amount for such preceding Distribution Date, over (B) the amount
in respect of interest that is actually distributed on such Certificates on such
preceding Distribution Date.
"Certificateholders' Interest Distributable Amount": With respect to
any Distribution Date and a particular Class of Certificates (other than the
Residual Interest Certificates), the sum of the
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applicable Certificateholders' Monthly Interest Distributable Amount for such
Distribution Date and the Certificateholders' Interest Carry-Forward Amount for
such Distribution Date.
"Certificateholders' Monthly Interest Distributable Amount": With
respect to each Distribution Date and each Class of Certificates (other than the
Residual Interest Certificates), the aggregate amount of accrued interest for
the related Interest Period calculated at the applicable Group I Pass-Through
Rate or Group II Pass-Through Rate, as the case may be, on the sum of (i) the
applicable aggregate Certificate Principal Balance of, or Notional Amount with
respect to, such Class immediately preceding such Distribution Date and (ii) any
Certificateholders' Interest Carry-Forward Amount for such Class remaining
outstanding for such Distribution Date. Certificateholders' Monthly Interest
Distributable Amount with respect to each Distribution Date shall be reduced by
an amount equal to a pro rata portion of the sum of (a) the aggregate Prepayment
Interest Shortfall, if any, for such Distribution Date (net of any Compensating
Interest) and (b) the aggregate amount of any Relief Act Shortfall for such
Distribution Date.
"Class": With respect to the Certificates, all Certificates bearing the
same class designation.
"Class A Certificate": Each of the Class A-l, Class A-2, Class A-3,
Class A-4, Class A-5, Class A-6, Class A-7 and Class A-8 Certificates.
"Class A Certificateholder": A Holder of a Class A Certificate.
"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, and
authenticated by the Trustee in accordance with the procedures set forth herein
and representing an interest designated as a "regular interest" in REMIC II for
the purposes of the REMIC Provisions and primarily evidencing an interest in the
Fixed Rate Pool.
"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, and
authenticated by the Trustee in accordance with the procedures set forth herein
and representing an interest designated as a "regular interest" in REMIC II for
the purposes of the REMIC Provisions and primarily evidencing an interest in the
Fixed Rate Pool.
"Class A-3 Certificate": Any Certificate designated as a Class A-3
Certificate on the face thereof, in the form of Exhibit A-3 hereto, and
authenticated by the Trustee in accordance with the procedures set forth herein
and representing an interest designated as a "regular interest" in REMIC II for
the purposes of the REMIC Provisions and primarily evidencing an interest in the
Fixed Rate Pool.
"Class A-4 Certificate": Any Certificate designated as a Class A-4
Certificate on the face thereof, in the form of Exhibit A-4 hereto, and
authenticated by the Trustee in accordance with the procedures set forth herein
and representing an interest designated as a "regular interest" in REMIC II for
the purposes of the REMIC Provisions and primarily evidencing an interest in the
Fixed Rate Pool.
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"Class A-5 Certificate": Any Certificate designated as a Class A-5
Certificate on the face thereof, in the form of Exhibit A-5 hereto, and
authenticated by the Trustee in accordance with the procedures set forth herein
and representing an interest designated as a "regular interest" in REMIC II for
the purposes of the REMIC Provisions and primarily evidencing an interest in the
Fixed Rate Pool.
"Class A-6 Certificate": Any Certificate designated as a Class A-6
Certificate on the face thereof, in the form of Exhibit A-6 hereto, and
authenticated by the Trustee in accordance with the procedures set forth herein
and representing an interest designated as a "regular interest" in REMIC II for
the purposes of the REMIC Provisions and primarily evidencing an interest in the
Fixed Rate Pool.
"Class A-6 Lockout Distribution": With respect to any Distribution
Date, an amount equal to the lesser of (i) the product of the applicable Class
A-6 Lockout Percentage and the Class A-6 Pro Rata Distribution Amount for such
Distribution Date and (ii) the Group I Principal Distribution Amount for such
Distribution Date.
"Class A-6 Lockout Percentage": With respect to any Distribution Date
is as follows:
<TABLE>
<CAPTION>
Class A-6
Distribution Date Occurring In Lockout Percentage
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<S> <C>
October 1998 - September 2001 0%
October 2001 - September 2003 45%
October 2003 - September 2004 80%
October 2004 - September 2005 100%
October 2005 and thereafter 300%
</TABLE>
"Class A-6 Pro Rata Distribution Amount": With respect to any
Distribution Date, an amount equal to the product of (i) a fraction, the
numerator of which is the Certificate Principal Balance of the Class A-6
Certificates and the denominator of which is the aggregate of the Certificate
Principal Balances of the Group I Certificates that are Class A Certificates
immediately prior to such Distribution Date and (ii) the Group I Principal
Distribution Amount for such Distribution Date.
"Class A-7 Available Funds Cap Carry-Forward Amount": With respect to
any Distribution Date, an amount equal to the excess of (x) the excess, if any,
of (a) the aggregate amount of interest due on the Class A-7 Certificates on
each prior Distribution Date, calculated at the Class A-7 Formula Pass-Through
Rate applicable to each such prior Distribution Date over (b) the aggregate
amount of interest due on the Class A-7 Certificates on such Distribution Dates,
calculated at the Class A-7 Pass-Through Rate applicable to each such
Distribution Date, over (y) the aggregate of all amounts distributed to the
Class A-7 Certificateholders on all prior Distribution Dates pursuant to Section
6.5(c) hereof.
"Class A-7 Available Funds Pass-Through Rate": With respect to any
Distribution Date, a rate equal to a per annum rate equal to the result
determined by dividing (i)(a) the sum of (1) all payments of interest due on the
Adjustable Rate Mortgage Loans during the related Due
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Period, (2) any prepayment penalties collected during the related Due Period
with respect to the Adjustable Rate Mortgage Loans and (3) amounts deposited
from the Group II Capitalized Interest Account in respect of interest for the
related Due Period, reduced by (b) the sum of (1) all interest accrued on the
Class A-IO Certificates during the related Interest Period, (2) the sum of the
Trustee Fee and the Servicing Fee for such Distribution Date, (3) the
Certificate Insurance Premium for such Distribution Date and (4) in the case of
each Distribution Date occurring after the Distribution Date in March 1999, an
amount equal to one-twelfth of 0.50% (50 basis points) multiplied by the
Adjustable Rate Pool Principal Balance (as defined below) as of the first day of
such Interest Period, by (ii) the product of (a) the Adjustable Rate Pool
Principal Balance as of the first day of the related Due Period and (b) the
actual number of days elapsed during such Interest Period divided by 360.
"Class A-7 Certificate": Any Certificate designated as a Class A-7
Certificate on the face thereof, in the form of Exhibit A-7 hereto, and
authenticated by the Trustee in accordance with the procedures set forth herein
and representing an interest designated as a "regular interest" in REMIC II for
the purposes of the REMIC Provisions, and primarily evidencing an ownership
interest in the Adjustable Rate Pool.
"Class A-7 Formula Pass-Through Rate": With respect to any Distribution
Date is the rate determined by clause (i) of the related definition of Group II
Pass-Through Rate with respect to the Class A-7 Certificates on such
Distribution Date.
"Class A-8 Certificate": Any Certificate designated as a Class A-8
Certificate on the face thereof, in the form of Exhibit A-8 hereto, and
authenticated by the Trustee in accordance with the procedures set forth herein
and representing an interest designated as a "regular interest" in REMIC II for
the purposes of the REMIC Provisions and primarily evidencing an interest in the
Adjustable Rate Pool.
"Class A-8 Lockout Distribution": With respect to each Distribution
Date, an amount equal to the lesser of (i) the product of the applicable Class
A-8 Lockout Percentage and the Class A-8 Pro Rata Distribution Amount for such
Distribution Date and (ii) the Group II Principal Distribution Amount for such
Distribution Date.
"Class A-8 Lockout Percentage": With respect to each Distribution Date
as follows:
<TABLE>
<CAPTION>
Class A-8
Distribution Date Occurring In Lockout Percentage
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<S> <C>
October 1998 - June 2000 0%
July 2000 - September 2003 500%
October 2003 and thereafter 100%
</TABLE>
"Class A-8 Net WAC Cap": With respect to any Distribution Date, a rate
equal to the weighted average of the Net Mortgage Loan Interest Rates of the
Adjustable Rate Mortgage Loans as of the first day of the related Due Period,
less, for the first twenty-five (25) Distribution Dates, the (i) product of (a)
the Pass-Through Rate for the Class A-IO Certificates during the related
Interest Period and (b) the Notional Amount of the Class A-IO Certificates
divided by (ii) the
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aggregate of the Principal Balances of the Adjustable Rate Mortgage Loans as of
the first day of the related Due Period.
"Class A-8 Pro Rata Distribution Amount": For each Distribution Date
occurring prior to October 2003, an amount equal to the product of (i) a
fraction, the numerator of which is the Certificate Principal Balance of the
Class A-8 Certificates and the denominator of which is the aggregate of the
Certificate Principal Balances of the Group II Certificates that are Class A
Certificates immediately prior to such Distribution Date, and (ii) the Group II
Principal Distribution Amount. For each Distribution Date occurring after
September 2003, an amount equal to the Group II Principal Distribution Amount.
"Class A-IO Certificate": Any Certificate designated as a Class A-IO
Certificate on the face thereof, in the form of Exhibit A-9 hereto, and
authenticated by the Trustee in accordance with the procedures set forth herein
and representing an interest designated as a "regular interest" in REMIC II for
the purposes fo the REMIC Provisions and primarily evidencing an interest in the
Adjustable Rate Pool.
"Class F-IO Certificate": Any Certificate designated as a Class F-IO
Certificate on the face thereof, in the form of Exhibit A-10 hereto, and
authenticated by the Trustee in accordance with the procedures set forth herein
and representing an interest designated a "regular interest" in REMIC II for the
purposes of the REMIC Provisions and primarily evidencing an interest in the
Fixed Rate Pool.
"Class IO Certificate": Any one of the Class A-IO Certificates or the
Class F-IO Certificates.
"Closing Date": September 24, 1998.
"Code": The Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
"Collection Account": The Fixed Rate Collection Account or the
Adjustable Rate Collection Account as applicable, each established and
maintained by the Servicer in accordance with Section 6.1.
"Commission": The Securities and Exchange Commission.
"Compensating Interest": With respect to any Distribution Date and the
Fixed Rate Pool or the Adjustable Rate Pool, as applicable, an amount equal to
the lesser of (i) the aggregate Group I Prepayment Interest Shortfalls or Group
II Prepayment Interest Shortfalls, as applicable and (ii) the aggregate
Servicing Fee received with respect to Mortgage Loans in the related Pool for
the related Due Period.
"Cram Down Loss": With respect to any Mortgage Loan, any reduction to
the related Principal Balance and/or the amount by which the installment of
interest due on the related Due Date under the terms of such Mortgage Loan has
been reduced as a result of a reduction in the
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related Mortgage Loan Interest Rate, in each case resulting from a final,
nonappealable order issued by a court of appropriate jurisdiction in an
insolvency proceeding. A Cram Down Loss shall be deemed to have occurred on the
date of issuance of such order.
"Cumulative Net Realized Losses": With respect to any Distribution
Date, the aggregate of the amount of losses with respect to each Mortgage Loan
which became a Liquidated Mortgage Loan prior to the end of the Due Period
immediately preceding such Distribution Date, equal to the excess, if any, (i)
the sum of (a) the unpaid principal balance of each such Liquidated Mortgage
Loan, (b) accrued interest thereon in accordance with the amortization schedule
at the time applicable thereto at the applicable Mortgage Loan Interest Rate
from the Due Date as to which interest was last paid with respect thereto
through the last day of the month in which such Mortgage Loan became a
Liquidated Mortgage Loan and (c) the amount of any Cram Down Loss with respect
thereto, over (ii) Net Liquidation Proceeds with respect to such Liquidated
Mortgage Loan.
"Custodial Agreement": The custodial agreement dated as of August 31,
1998 by and among the Depositor, the Servicer, Transferor, the Trustee, and
Norwest Bank Minnesota, National Association, a national banking association, as
the Custodian providing for the retention of the Trustee's Mortgage Loan Files
by the Custodian on behalf of the Trustee.
"Custodian": Any custodian appointed by the Trustee pursuant to the
Custodial Agreement, which shall not be affiliated with the Servicer, the
Transferor, any Subservicer, or the Depositor. Norwest Bank Minnesota, National
Association shall be the initial Custodian pursuant to the terms of the
Custodial Agreement.
"Cut-Off Date": With respect to the Initial Mortgage Loans owned by
Life as of August 31, 1998, the close of business on August 31, 1998. With
respect to the Initial Mortgage Loans originated or acquired by Life after
August 31, 1998, the close of business or the date or origination (or
acquisition by Life) of the related Initial Mortgage Loan. With respect to any
Subsequent Mortgage Loan, the close of business on the date designated as such
in the related Subsequent Transfer Agreement.
"Defaulted Mortgage Loan": With respect to any date of determination,
any Mortgage Loan, including any Liquidated Mortgage Loan, incident to
foreclosure, default or imminent default.
"Defective Mortgage Loan": As defined in Section 3.5(a) hereof.
"Deficiency Amount": With respect to the Group I Certificates or the
Group II Certificates, as applicable and any Distribution Date, the sum of (i)
the excess if any, of (a) the Certificateholders' Interest Distributable Amount
for the related Certificates over (b) the sum of (x) the related Available
Distribution Amount (net of the related Trustee Fee and the related Certificate
Insurance Premium) and (y) the Group I Cross-Over Amount (with respect to the
Group II Certificates) or the Group II Cross-Over Amount (with respect to the
Group I Certificates) and (ii) the related Subordination Deficit with respect to
the Group I Certificates or
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the Group II Certificates, as applicable (after giving effect to all
distributions in reduction of principal on such Distribution Date).
"Deleted Loan": As defined in Section 3.5(a) hereof.
"Delinquency Amount": With respect to the Fixed Rate Pool or the
Adjustable Rate Pool, the product of (i) the Delinquency Percentage with respect
to the Fixed Rate Pool or the Adjustable Rate Pool, as applicable and (ii) the
Fixed Rate Pool Principal Balance or the Adjustable Rate Pool Principal Balance,
as applicable, as of the end of the related Due Period.
"Delinquency Percentage": With respect to the Fixed Rate Pool or the
Adjustable Rate Pool, the rolling three month average of the percentage
equivalent of a fraction the numerator of which is the related 90-Day
Delinquency Amount and the denominator of which is the Fixed Rate Pool Principal
Balance or the Adjustable Rate Pool Principal Balance, as applicable, as of the
end of the related Due Period.
"Delinquent": A Mortgage Loan is "Delinquent" if any Monthly Payment
due thereon is not made by the close of business on the day such Monthly Payment
is scheduled to be paid. A Mortgage Loan is "30 days Delinquent" if such Monthly
Payment has not been received by the close of business on the corresponding day
of the month immediately succeeding the month in which such Monthly Payment was
due, or, if there is no such corresponding day (e.g., as when a 30-day month
follows a 31-day month in which a payment was due on the 31st day of such month)
then on the last day of such immediately succeeding month. The determination of
whether a Mortgage Loan is "60 days Delinquent," "90 days Delinquent", etc.,
shall be done in like manner.
"Delivery": When used with respect to any Trust Account Property:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
"instruments" within the meaning of Section 9-105(l)(i) of the UCC and are
susceptible of physical delivery, transfer thereof by physical delivery to the
Trustee endorsed to, or registered in the name of, the Trustee or its nominee or
endorsed in blank, and, with respect to a certificated security (as defined in
Section 8-102 of the UCC) transfer thereof by delivery of such certificated
security to the Trustee in accordance with the provisions of Section 8-301(a) of
the UCC, and such additional or alternative procedures as may hereafter become
appropriate to effect the complete transfer or ownership of or a security
interest in any such Eligible Investment to the Trustee, consistent with changes
in applicable law or regulations or the interpretation thereof;
(b) with respect to any security issued by the U.S. Treasury,
the Federal Home Loan Mortgage Corporation or the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to federal book-entry regulations, the following procedures, all
in accordance with applicable law, including applicable federal regulations and
Articles 8 and 9 of the UCC; the crediting of such Eligible Investment to a
securities account maintained with a Federal Reserve Bank by a securities
intermediary; the indication by such securities intermediary that such Eligible
Investment has been credited to the
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Trustee's securities account at the securities intermediary; and such additional
or alternative procedures as may hereafter become appropriate to effect complete
transfer of ownership of or a security interest in any such Eligible Investment
to the Trustee, consistent with changes in applicable law or regulations or the
interpretation thereof; and
(c) with respect to any Eligible Investment that is an
uncertificated security under Article 8 of the UCC and that is not governed by
clause (b) above, registration on the books and records of the issuer thereof in
the name of the Trustee or another Person (other than a "securities
intermediary" (as defined in Section 8-102(a)(4) of the UCC)) acting on behalf
of the Trustee.
"Depositor": Morgan Stanley ABS Capital I Inc., a Delaware corporation,
and any successor thereto.
"Determination Date": With respect to any Distribution Date, the
eighteenth day of the month in which such Distribution Date occurs (or if such
day is not a Business Day, the immediately succeeding Business Day).
"Disqualified Organization": Any of (i) the United States, any State or
political subdivision thereof, or any agency or instrumentality of any of the
foregoing (other than an instrumentality which is a corporation if all of its
activities are subject to tax and, except for the FHLMC, a majority of its board
of directors is not selected by such governmental unit), (ii) any foreign
government, any international organization, or any agency or instrumentality of
any of the foregoing, (iii) any organization (other than certain farmers'
cooperatives described in Section 521 of the Code) which is exempt from the tax
imposed by Chapter 1 of the Code (unless such organization is subject to the tax
imposed by Section 511 of the Code on unrelated business taxable income), or
cooperatives engaged in furnishing electric energy, or providing telephone
service, to persons in rural areas as described in Section 1381(a)(2)(C) of the
Code and (iv) any other Person so designated by the Trustee based upon an
Opinion of Counsel provided to the Trustee that the holding of an ownership
interest in a Residual Interest Certificate by such Person may cause REMIC I or
REMIC II or any Person having an ownership interest in any Class of Certificates
(other than such Person) to incur liability for any federal tax imposed under
the Code that would not otherwise be imposed but for the transfer of an
ownership interest in the Residual Interest Certificate to such Person. The
terms "United States", "State" and "international organization" shall have the
meanings set forth in Section 7701 of the Code.
"Distribution Date": The 25th day of any month or if such 25th day is
not a Business Day, the first Business Day immediately following such day,
commencing October 26, 1998.
"Distribution Statement": As defined in Section 6.8.
"DTC": The Depository Trust Company.
"Due Date": The day of the month on which the Monthly Payment is due
from the Mortgagor on a Mortgage Loan.
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"Due Period": With respect to the initial Determination Date or initial
Distribution Date, the period beginning on the close of business on August 31,
1998 and ending on the close of business on October 1, 1998. With respect to any
other Determination Date or Distribution Date as the case may be, the period
beginning on the second day of the calendar month immediately preceding the
month in which such Determination Date or Distribution Date occurs and ending on
the first day of the calendar month in which such Determination Date or
Distribution Date occurs.
"Eligible Account": At any time, an account which is any of the
following: (i) a segregated account maintained with a depository institution (A)
the long-term debt obligations of which are at such time rated by each Rating
Agency in one of their two highest long-term rating categories, and (B) the
short-term debt obligations of which are then rated by each Rating Agency in
their highest short-term rating category and which is (a) a federal savings and
loan association duly organized, validly existing and in good standing under the
federal banking laws, (b) an institution (including the Trustee) duly organized,
validly existing and in good standing under the applicable banking laws of any
state, (c) a national banking association duly organized, validly existing and
in good standing under the federal banking laws, (d) a principal subsidiary of a
bank holding company, or (e) approved in writing by the Certificate Insurer and
the Rating Agencies and whose deposits are fully insured by either the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC; (ii) a
trust account (which shall be a "segregated trust account") maintained with the
corporate trust department of a federal or state chartered depository
institution or trust company with trust powers and acting in its fiduciary
capacity for the benefit of the Trustee, which depository institution or trust
company shall have capital and surplus of not less than $50,000,000; or (iii) an
account that will not cause any Rating Agency to downgrade or withdraw its
then-current rating(s) assigned to the Certificates (without regard to the
Certificate Insurance Policies), as evidenced in writing by such Rating Agency.
Neither Life nor any of its affiliates shall hold any Eligible Account
hereunder. (Each reference in this definition of "Eligible Account" to the
Rating Agency shall be construed as a reference to Moody's and S&P.)
"Eligible Servicer": A Person who is qualified to act as servicer of
the Mortgage Loans under applicable federal and state laws and regulations.
"Event of Default": As described in Section 12.1.
"Excess Spread": With respect to Group I, the Group I Excess Spread;
with respect to Group II, the Group II Excess Spread and, as the context
requires, either or both.
"FDIC": The Federal Deposit Insurance Corporation and any successor
thereto.
"FHLMC": The Federal Home Loan Mortgage Corporation and any successor
thereto.
"FICO Score": The credit evaluation scoring methodology developed by
Fair, Isaac and Company.
"Fidelity Bond": As described in Section 5.3.
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"Final Scheduled Distribution Date": With respect to the Class A-1
Certificates, the Distribution Date occurring in May 2013 with respect to the
Class A-2 certificates, the Distribution Date occurring in October 2013. With
respect to the Class A-3 Certificates, the Distribution Date occurring in June
2020. With respect to the Class A-4 Certificates, the Distribution Date
occurring in March 2026. With respect to the Class A-5 Certificates, the
Distribution Date occurring in October 2028. With respect to the Class A-6
Certificates the Distribution Date occurring in August 2028. With respect to the
Class F-IO Certificates, the Distribution Date occurring in September 2001. With
respect to the Class A-7 Certificates the Distribution Date occurring in October
2028. With respect to the Class A-8 Certificates, the Distribution Date
occurring in September 2016. With respect tot the Class A-IO Certificates, the
Distribution Date occurring in October 2000.
"Fixed Rate Collection Account": The Collection Account established
with respect to the Fixed Rate Mortgage Loans in accordance with Section 6.1(a)
hereof and maintained by the Servicer.
"Fixed Rate Mortgage Loan": Each Mortgage Loan identified on the
Mortgage Loan Schedule, including any Qualified Substitute Mortgage Loan
substituted therefor, as bearing a fixed Mortgage Loan Interest Rate.
"Fixed Rate Net WAC Cap": With respect to any Distribution Date, a rate
equal to the weighted average of the Net Mortgage Loan Interest Rates of the
Fixed Rate Mortgage Loans as of the first day of the related Due Period, less,
for the first thirty-six (36) Distribution Dates, the (i) product of (a) 6.00%
and (b) the Notional Amount on the Class F-IO Certificates divided by (ii) the
aggregate of the Principal Balances of the Fixed Rate Mortgage Loans as of the
first day of the related Due Period.
"Fixed Rate Pool": The pool of Fixed Rate Mortgage Loans identified on
Exhibit B-1 as amended from time to time.
"Fixed Rate Pool Principal Balance": The sum of the aggregate Principal
Balances of the Fixed Rate Mortgage Loans and the Group I Pre-Funding Amount as
of any date of determination.
"FNMA": The Federal National Mortgage Association and any successor
thereto.
"Foreclosure Profits": As to any Determination Date or any Distribution
Date, the excess, if any, of (i) Net Liquidation Proceeds in respect of each
Mortgage Loan that became a Liquidated Mortgage Loan during the Due Period
immediately preceding such Distribution Date over (ii) the sum of the unpaid
principal balance of each such Liquidated Mortgage Loan plus accrued and unpaid
interest at the applicable Mortgage Loan Interest Rate on the unpaid principal
balance thereof from the Due Date on which interest was last paid by the
Mortgagor (or, in the case of Foreclosure Property, from the Due Date to which
interest was last deemed to have been paid) to the end of the Due Period in
which such Mortgage Loan became a Liquidated Mortgage Loan.
"Foreclosure Property": Any real property securing a Mortgage Loan that
has been acquired by the Servicer in the name of the Trustee or behalf of the
related Certificateholders and
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the Certificate Insurer through foreclosure, deed in lieu of foreclosure or
similar proceedings in respect of the related Mortgage Loan.
"Gross Margin": As to each Adjustable Rate Mortgage Loan, the fixed
percentage set forth in the related Mortgage Note and indicated in the Mortgage
Loan Schedule as the "Gross Margin," which percentage is added to the Index on
each Interest Adjustment Date to determine (subject to rounding, any applicable
statutory maximum interest rate, the Periodic Rate Caps, the Lifetime Floor and
the Lifetime Cap) the Mortgage Loan Interest Rate on such Mortgage Loan until
the next Interest Adjustment Date.
"Group I Available Collection Amount": With respect to any Distribution
Date, an amount equal to the sum of the Interest Remittance Amount and the
Principal Remittance Amount for the Fixed Rate Pool.
"Group II Available Collection Amount": With respect to any
Distribution Date, an amount equal to the sum of the Interest Remittance Amount
and the Principal Remittance Amount for the Adjustable Rate Pool.
"Group I Available Distribution Amount": With respect to any
Distribution Date, (i) the Group I Available Collection Amount plus (ii) any
Group I Capitalized Interest Requirement and any amount transferred from the
Group I Pre-Funding Account to the Group I Certificate Account for such
Distribution Date plus (ii) with respect to the final Distribution Date or an
early payment or termination of the Certificates pursuant to Section 13.2, the
Termination Price as it relates to the Fixed Rate Pool.
"Group II Available Distribution Amount": With respect to any
Distribution Date, (i) the Group II Available Collection Amount plus (ii) any
Group II Capitalized Interest Requirement and any amount transferred from the
Group II Pre-Funding Account to the Group II Certificate Account for such
Distribution Date plus (ii) with respect to the final Distribution Date or an
early payment or termination of the Certificates pursuant to Section 13.2, the
Termination Price as it relates to the Adjustable Rate Pool.
"Group I Capitalized Interest Account": The account designated as such,
established and maintained pursuant to Section 6.12(a).
"Group II Capitalized Interest Account": The account designated as
such, established and maintained pursuant to Section 6.12(a).
"Group I Capitalized Interest Requirement": With respect to the
Distribution Date in October 1998, (A) the product of (a) a fraction, the
numerator of which is the Group I Pre-Funding Amount on the Closing Date and the
denominator of which is the Original Fixed Rate Pool Principal Balance and (b)
the sum of (i) the aggregate amount of interest accrued on each Class of Group I
Certificates for the related Interest Period (ii) the Certificate Insurance
Premium with respect to the Group I Certificates for such Distribution Date and
(iii) the Trustee Fee with respect to Group I Certificates for such Distribution
Date minus (B) any Group I Pre-Funding Earnings for the related Due Period and
minus (C) in the case of any Subsequent Mortgage Loan
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that is a Fixed Rate Mortgage Loan transferred to the Trust during the related
Due Period, the amount of any interest collected after the Cut-Off Date
applicable to such Subsequent Mortgage Loan and during such related Due Period.
With respect to the Distribution Date in November 1998, (A) the product
of (a) a fraction, the numerator of which is the Group I Pre-Funding Amount on
the first day of the related Due Period and the denominator of which is the
Fixed Rate Pool Principal Balance on the first day of the related Due Period and
(b) the sum of (i) the aggregate amount of interest accrued on each Class of
Group I Certificates for the related Interest Period (ii) the Certificate
Insurance Premium with respect to the Group I Certificates for such Distribution
Date and (iii) the Trustee Fee with respect to Group I Certificates for such
Distribution Date minus (B) any Group I Pre-Funding Earnings for the related Due
Period and minus (C) in the case of any Subsequent Mortgage Loan that is a Fixed
Rate Mortgage Loan transferred to the Trust during the related Due Period, the
amount of any interest collected after the Cut-Off Date applicable to such
Subsequent Mortgage Loan and during such related Due Period.
With respect to the Distribution Date in December 1998, (A) the product
of (a) a fraction, the numerator of which is the Group I Pre-Funding Amount on
the first day of the related Due Period and the denominator of which is the
Fixed Rate Pool Principal Balance on the first day of the related Due Period and
(b) the sum of (i) the aggregate amount of interest accrued on each Class of
Group I Certificates for the related Interest Period (ii) the Certificate
Insurance Premium with respect to the Group I Certificates for such Distribution
Date and (iii) the Trustee Fee with respect to Group I Certificates for such
Distribution Date minus (B) any Group I Pre-Funding Earnings for the related Due
Period and minus (C) in the case of any Subsequent Mortgage Loan that is a Fixed
Rate Mortgage Loan transferred to the Trust during the related Due Period, the
amount of any interest collected after the Cut-Off Date applicable to such
Subsequent Mortgage Loan and during such related Due Period.
"Group II Capitalized Interest Requirement": With respect to the
Distribution Date in October 1998, (A) the product of (a) a fraction, the
numerator of which is the Group II Pre-Funding Amount on the Closing Date and
the denominator of which is the Original Adjustable Rate Pool Principal Balance
and (b) the sum of (i) the aggregate amount of interest accrued on each Class of
Group II Certificates for the related Interest Period (ii) the Certificate
Insurance Premium with respect to the Group II Certificates for such
Distribution Date and (iii) the Trustee Fee with respect to the Group II
Certificates for such Distribution Date minus (B) any Group II Pre-Funding
Earnings for the related Due Period and minus (C) in the case of any Subsequent
Mortgage Loan that is a Adjustable Rate Mortgage Loan transferred to the Trust
during the related Due Period, the amount of any interest collected after the
Cut-Off Date applicable to such Subsequent Mortgage Loan and during such related
Due Period.
With respect to the Distribution Date in November 1998, (A) the product
of (a) a fraction, the numerator of which is the Group II Pre-Funding Amount on
the first day of the related Due Period and the denominator of which the
Adjustable Rate Pool Principal Balance on the first day of the related Due
Period and (b) the sum of (i) the aggregate amount of interest accrued on each
Class of Group II Certificates for the related Interest Period (ii) the
Certificate Insurance Premium with respect to the Group II Certificates for such
Distribution Date and (iii) the Trustee Fee with
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respect to the Group II Certificates for such Distribution Date minus (B) any
Group II Pre-Funding Earnings for the related Due Period and minus (C) in the
case of any Subsequent Mortgage Loan that is a Adjustable Rate Mortgage Loan
transferred to the Trust during the related Due Period, the amount of any
interest collected after the Cut-Off Date applicable to such Subsequent Mortgage
Loan and during such related Due Period.
With respect to the Distribution Date in December 1998, (A) the product
of (a) a fraction, the numerator of which is the Group II Pre-Funding Amount on
the first day of the related Due Period and the denominator of which the
Adjustable Rate Pool Principal Balance on the first day of the related Due
Period and (b) the sum of (i) the aggregate amount of interest accrued on each
Class of Group II Certificates for the related Interest Period (ii) the
Certificate Insurance Premium with respect to the Group II Certificates for such
Distribution Date and (iii) the Trustee Fee with respect to the Group II
Certificates for such Distribution Date minus (B) any Group II Pre-Funding
Earnings for the related Due Period and minus (C) in the case of any Subsequent
Mortgage Loan that is a Adjustable Rate Mortgage Loan transferred to the Trust
during the related Due Period, the amount of any interest collected after the
Cut-Off Date applicable to such Subsequent Mortgage Loan and during such related
Due Period.
"Group I Certificate Account": The Certificate Account established with
respect to the Group I Certificates in accordance with Section 6.1(b) hereof and
maintained by the Trustee.
"Group II Certificate Account": The Certificate Account established
with respect to the Group II Certificates in accordance with Section 6.1(b)
hereof and maintained by the Trustee.
"Group I Certificates": The Class A-l, Class A-2, Class A-3, Class A-4,
Class A-5, Class A-6 and Class F-IO Certificates.
"Group II Certificates": The Class A-7, Class A-8 and Class A-IO
Certificates.
"Group I Cross-Over Amount": With respect to any Distribution Date, the
excess, if any, of (i) the sum of the amounts payable in clauses (i) through (v)
of Section 6.5(c) of this Agreement over (ii) the Group II Available
Distribution Amount.
"Group II Cross-Over Amount": With respect to any Distribution Date,
the excess, if any, of (i) the sum of the amounts payable in clauses (i) through
(v) of Section 6.5(b) of this Agreement over (ii) the Group I Available
Distribution Amount.
"Group I Excess Spread": With respect to any Distribution Date, the
excess of (a) the Group I Available Distribution Amount over (b) the amounts
required to be distributed pursuant to clauses (i) through (vi) set forth in
Section 6.5(b) hereof.
"Group II Excess Spread": With respect to any Distribution Date, the
excess of (a) the Group II Available Distribution Amount over (b) the amounts
required to be distributed pursuant to clauses (i) through (vi) set forth in
Section 6.5(c) hereof.
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"Group I Pass-Through Rate": With respect to the Class A-1
Certificates, 6.45%. With respect to the Class A-2 Certificates, 6.22%. With
respect to the Class A-3 Certificates, the lesser of (i) 6.27% and (ii) the
Fixed Rate Net WAC Cap. With respect to the Class A-4 Certificates, the lesser
of (i) 6.30% and (ii) the Fixed Rate Net WAC Cap. With respect to the Class A-5
Certificates, the lesser of (i) 6.70% until the Interest Period in which the
Call Option Date occurs, and 7.45% thereafter and (ii) the Fixed Rate Net Wac
Cap. With respect to the Class A-6 Certificates, the lesser of (i) 6.20% until
the Interest Period in which the Call Option Date occurs, and 6.95% thereafter
and (ii) the Fixed Rate Net WAC Cap. With respect to the Class F-IO
Certificates, 6.00% for the first thirty-six (36) Distribution Dates, and 0.00%
thereafter.
"Group II Pass-Through Rate": With respect to the Class A-7
Certificates and each Distribution Date, the lesser of (i) One-Month LIBOR plus
the Pass-Through Margin and (ii) the related Class A-7 Available Funds
Pass-Through Rate. With respect to the Class A-8 Certificates, the lesser of (i)
6.08% and (ii) the Class A-8 Net WAC Cap. With respect to the Class A-IO
Certificates, 6.00% for the first nine (9) Interest Periods, 4.00% for the tenth
(10th) through the fifteenth (15th) Interest Periods, 3.00% for the sixteenth
(16th) through the twenty-fifth (25th) Interest Periods, and 0.00% thereafter.
"Group I Pre-Funding Account": The account established and maintained
pursuant to Section 6.11(a) as defined therein.
"Group II Pre-Funding Account": The account established and maintained
pursuant to Section 6.11(a) as defined therein.
"Group I Pre-Funding Amount": With respect to any date, the amount on
deposit in the Group I Pre-Funding Account (net of any Group I Pre-Funding
Earnings).
"Group II Pre-Funding Amount": With respect to any date, the amount on
deposit in the Group II Pre-Funding Account (net of any Group II Pre-Funding
Earnings).
"Group I Pre-Funding Earnings": With respect to any Distribution Date
the actual investment earnings earned on amounts on deposit in the Group I
Pre-Funding Account from the second preceding Determination Date (or, in the
case of the initial Distribution Date, the Closing Date) to the Determination
Date immediately preceding such Distribution Date.
"Group II Pre-Funding Earnings": With respect to any Distribution Date
the actual investment earnings earned on amounts on deposit in the Group II
Pre-Funding Account from the second preceding Determination Date (or, in the
case of the initial Distribution Date, the Closing Date) to the Determination
Date immediately preceding such Distribution Date.
"Group I Pre-Funding Period": The period commencing on the Closing Date
and ending on the earliest to occur of (i) the date on which the amount on
deposit in the Group I Pre-Funding Account (exclusive of any Group I Pre-Funding
Earnings) is less than $100,000, (ii) the date on which any Event of Default
relating to the Servicer occurs and (iii) November 30, 1998.
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"Group II Pre-Funding Period": The period commencing on the Closing
Date and ending on the earliest to occur of (i) the date on which the amount on
deposit in the Group II Pre-Funding Account (exclusive of any Group II
Pre-Funding Earnings) is less than $100,000, (ii) the date on which any Event of
Default relating to the Servicer occurs and (iii) November 30, 1998.
"Group I Prepayment Interest Shortfall": With respect to any
Distribution Date, for each Fixed Rate Mortgage Loan that was the subject during
the related Due Period of a Principal Prepayment in full or in part, an amount
equal to the excess, if any, of (a) 30 days' interest on the amount of the
Principal Balance of such Fixed Rate Mortgage Loan at a per annum rate equal to
the Mortgage Loan Interest Rate (or at such lower rate as may be in effect for
such Mortgage Loan because of application of the Relief Act) minus the rate at
which the Servicing Fee is calculated over (b) the amount of interest actually
remitted by the Mortgagor in connection with such Principal Prepayment less the
Servicing Fee for such Mortgage Loan in such month.
"Group II Prepayment Interest Shortfall": With respect to any
Distribution Date, for each Adjustable Rate Mortgage Loan that was the subject
during the related Due Period of a Principal Prepayment in full or in part, an
amount equal to the excess, if any, of (a) 30 days' interest on the amount of
the Principal Balance of such Adjustable Rate Mortgage Loan at a per annum rate
equal to the Mortgage Loan Interest Rate (or at such lower rate as may be in
effect for such Mortgage Loan because of application of the Relief Act) minus
the rate at which the Servicing Fee is calculated over (b) the amount of
interest actually remitted by the Mortgagor in connection with such Principal
Prepayment less the Servicing Fee for such Mortgage Loan in such month.
"Group I Principal Distribution Amount": With respect to any
Distribution Date, the lesser of (i) the excess, if any, of the Group I
Available Distribution Amount plus any Insured Payment for the Group I
Certificates over the sum of the related Trustee Fee, the related Certificate
Insurance Premium, aggregate Certificateholders' Interest Distributable Amount
for the Group I Certificates and any related Reimbursement Amount and (ii) the
sum, without duplication, of (a) the Principal Remittance Amount for the Fixed
Rate Pool plus the excess of the Principal Balance of any Fixed Rate Mortgage
Loan that became a Liquidated Mortgage Loan during the related Due Period over
any related Net Liquidation Proceeds applied in reduction of the Principal
Balance of the related Mortgage Loan; (b) any amounts transferred to the Group I
Certificate Account from the Group I Pre-Funding Account following the end of
the Group I Pre- Funding Period; (c) the Subordination Deficit for the Group I
Certificates; (d) the Overcollateralization Increase Amount for the Group I
Certificates, and (e) with respect to the termination of the Trust, the
Termination Price to the extent such amount relates to principal of the Fixed
Rate Mortgage Loans.
"Group II Principal Distribution Amount": With respect to any
Distribution Date, the lesser of (i) the excess, if any, of the Group II
Available Distribution Amount plus any Insured Payment for the Group II
Certificates over the sum of the related Trustee Fee, the related Certificate
Insurance Premium, aggregate Certificateholders' Interest Distributable Amount
for the Group II Certificates and any related Reimbursement Amount and (ii) the
sum, without duplication, of (a) the Principal Remittance Amount for the
Adjustable Rate Pool plus the excess of the Principal Balance of any Adjustable
Rate Mortgage Loan that became a Liquidated Mortgage Loan during the related Due
Period over any related Net Liquidation Proceeds applied
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in reduction of the Principal Balance of the related Mortgage Loan; (b) any
amounts transferred to the Group II Certificate Account from the Group II
Pre-Funding Account following the end of the Group II Pre-Funding Period; (c)
the Subordination Deficit for the Group II Certificates; (d) the
Overcollateralization Increase Amount for the Group II Certificates, and (e)
with respect to the termination of the Trust, the Termination Price to the
extent such amount relates to principal of the Adjustable Rate Mortgage Loans.
"Group I Relief Act Shortfall": The aggregate of the shortfalls, with
respect to each Fixed Rate Mortgage Loan, resulting from the reduction in the
amount of interest owed by the related Mortgagor as a result of the application
of the Relief Act.
"Group II Relief Act Shortfall": The aggregate of the shortfalls, with
respect to each Adjustable Rate Mortgage Loan, resulting from the reduction in
the amount of interest owed by the related Mortgagor as a result of the
application of the Relief Act.
"HUD": The United States Department of Housing and Urban Development
and any successor thereto.
"Independent": When used with respect to any specified Person, such
Person that (i) is in fact independent of Life, the Servicer, the Transferor,
the Depositor or any of their respective affiliates, (ii) does not have any
direct financial interest in or any material indirect financial interest in any
of Life, the Servicer, the Transferor, the Depositor or any of their respective
affiliates and (iii) is not connected with any of Life, the Servicer, the
Transferor, the Depositor or any of their respective affiliates, as an officer,
employee, promoter, underwriter, trustee, partner, director or Person performing
similar functions; provided, however, that a Person shall not fail to be
Independent of Life, the Servicer, the Transferor, the Depositor or any of their
respective affiliates merely because such Person is the beneficial owner of 1%
or less of any class of securities issued by Life, the Servicer, the Transferor,
the Depositor or any of their respective affiliates, as the case may be.
"Independent Accountants": A firm of nationally recognized certified
public accountants which is Independent.
"Index": For Adjustable Rate Mortgage Loans with a LIBOR based index,
the London Interbank Offered Rate for six month U.S. dollar deposits either as
announced by the Federal National Mortgage Association and available as of the
date 45 days before the related Interest Adjustment Date or as published in The
Wall Street Journal generally on a day of the month preceding the month of the
Interest Adjustment Date. For Adjustable Rate Mortgage Loans with a Constant
Maturity Treasury Index, the Constant Maturity Treasury Index as published by
the Federal Reserve Board in the most recent edition of Federal Reserve Board
Statistical Release No. H.15 (519) that is available 45 days before the related
Interest Adjustment Date. For Adjustable Rate Mortgage Loans with an 11th
District Cost of Funds Index, the 11th District Cost of Funds Index as published
by the Federal Home Loan Bank in the most recent Publication Number that is
available 45 days before the related Interest Adjustment Date.
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"Initial Fixed Rate Mortgage Loan": A Fixed Rate Mortgage Loan assigned
and transferred to the Trustee on the Closing Date, as listed on the Mortgage
Loan Schedule attached hereto as Exhibit B-1.
"Initial Adjustable Rate Mortgage Loan": An Adjustable Rate Mortgage
Loan assigned and transferred to the Trustee on the Closing Date, as listed on
the Mortgage Loan Schedule attached hereto as Exhibit B-2.
"Initial Mortgage Loan": Any Initial Fixed Rate Mortgage Loan or
Initial Adjustable Rate Mortgage Loan.
"Insurance Agreement": The Insurance Agreement dated as of August 31,
1998 among the Certificate Insurer, the Depositor, the Transferor, Life, the
Servicer and the Trustee as such agreement may be amended or supplemented in
accordance with the provisions therein.
"Insurance Proceeds": With respect to any Mortgage Loan, the proceeds
paid to the Servicer by any insurer pursuant to any insurance policy covering a
Mortgage Loan, Mortgaged Property or Foreclosure Property or any other insurance
policy that relates to a Mortgage Loan, net of any expenses that are incurred by
the Servicer in connection with the collection of such proceeds and not
otherwise reimbursed to the Servicer, other than proceeds of any insurance
policy that are to be applied to the restoration or repair of the Mortgaged
Property or released to the Mortgagor in accordance with customary mortgage loan
servicing procedures.
"Insured Payment": With respect to the Group I Certificates or the
Group II Certificates, as applicable (i) as of any Distribution Date, any
Deficiency Amount and (ii) any Preference Amount.
"Interest Adjustment Date": With respect to any Adjustable Rate
Mortgage Loan, the date on which the Mortgage Loan Interest Rate is or may be
adjusted with respect to such Mortgage Loan.
"Interest Determination Date": With respect to any Interest Period, the
second London Business Day preceding the commencement of such Interest Period.
"Interest Period": With respect to each Class of Certificates other
than the Class A-7 Certificates for a given Distribution Date, the calendar
month preceding the month of such Distribution Date. With respect to the Class
A-7 Certificates for a given Distribution Date, the period from the Closing Date
(with respect to the initial Distribution Date) or the immediately preceding
Distribution Date (with respect to any other Distribution Date) to but excluding
such Distribution Date.
"Interest Remittance Amount": With respect to each Pool and as to each
Distribution Date, the sum of the following: (i) all interest due and received
during the related Due Period on the related Mortgage Loans (less the related
Servicing Fees), (ii) all unscheduled recoveries on the related Mortgage Loans
that became Liquidated Mortgage Loans in a prior Due Period received by the
Servicer during the related Due Period (including all Post Liquidation
Proceeds),
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(iii) any amounts paid by the Servicer on the immediately preceding
Determination Date to cover Prepayment Interest Shortfalls with respect to the
related Mortgage Loans, (iv) any amounts in respect of interest delivered by the
Transferor, the Servicer or Life on the Determination Date in connection with a
substitution or repurchase of a related Mortgage Loan pursuant to Section 3.5 or
Section 5.2, (v) the Net Liquidation Proceeds collected by the Servicer on the
related Mortgage Loans during the related Due Period (to the extent such Net
Liquidation Proceeds are related to interest), (vi) any Pre-Funding Earnings for
such Distribution Date and (vii) any Periodic Advances (to the extent such
Periodic Advances relate to interest).
"Late Payment Rate": As defined in the Insurance Agreement.
"Lien": A security interest, lien, charge, pledge, equity, or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to the respective Mortgaged Property by operation of law as a result
of any act or omission by the related Mortgagor.
"Lifetime Cap": As to any Adjustable Rate Mortgage Loan, the maximum
Mortgage Loan Interest Rate set forth in the related Mortgage Note and indicated
in the Mortgage Loan Schedule, which rate may be applicable to such Mortgage
Loan at any time during the life of such Mortgage Loan.
"Lifetime Floor": As to any Adjustable Rate Mortgage Loan the minimum
Mortgage Loan Interest Rate set forth in the related Mortgage Note and indicated
in the Mortgage Loan Schedule, which rate may be applicable to such Mortgage
Loan at any time during the life of such Mortgage Loan.
"Liquidated Loan Loss": With respect to any Distribution Date, the
aggregate of the amount of losses with respect to each Mortgage Loan which
became a Liquidated Mortgage Loan prior to or during the Due Period preceding
such Distribution Date, equal to the excess, if any, (i) the unpaid principal
balance of each such Liquidated Mortgage Loan, plus accrued interest thereon in
accordance with the amortization schedule at the time applicable thereto at the
applicable Mortgage Loan Interest Rate from the Due Date as to which interest
was last paid with respect thereto through the last day of the month in which
such Mortgage Loan became a Liquidated Mortgage Loan, over (ii) Net Liquidation
Proceeds with respect to such Liquidated Mortgage Loan.
"Liquidated Mortgage Loan": A defaulted Mortgage Loan with respect to
which the Servicer determines that all amounts which it expects to recover from
such defaulted Mortgage Loan have been recovered.
"Liquidation Expenses": Out-of-pocket expenses incurred by the Servicer
or any Subservicer in connection with the liquidation of any defaulted Mortgage
Loan or property acquired in respect thereof (including legal fees and expenses,
committee or referee fees, and, if applicable, brokerage commissions and
conveyance taxes), any unreimbursed amount expended by the Servicer pursuant to
Section 5.4 respecting the related Mortgage Loan and any unreimbursed
expenditures for real property taxes or for property restoration or preservation
of the related Mortgaged Property. Liquidation Expenses shall not include any
previously incurred
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expenses in respect of an REO Mortgage Loan which have been netted against
related REO Proceeds. In no event may Liquidation Expenses with respect to a
Liquidated Mortgage Loan exceed the related Liquidation Proceeds.
"Liquidation Proceeds": With respect to a Liquidated Mortgage Loan, any
cash amounts received in connection with the liquidation of such Liquidated
Mortgage Loan, whether through trustee's sale, foreclosure sale or other
disposition, and any other amounts required to be deposited in the related
Collection Account pursuant to Section 5.2 or Section 5.4, in each case other
than Insurance Proceeds and Released Mortgaged Property Proceeds.
"Liquidation Report": A report in the form set forth hereto as
Exhibit C.
"Loan-to-Value Ratio" or "LTV": With respect to any Mortgage Loan, the
fraction, expressed as a percentage, the numerator of which is the sum of the
outstanding principal balance (at origination of such Mortgage Loan) of each
mortgage loan, if any, senior to such Mortgage Loan and the original principal
balance of such Mortgage Loan and the denominator or which is the Appraised
Value (or, if the Mortgage Loan was obtained in connection with the purchase of
the related Mortgage Property, the purchase price, if less) of the related
Mortgage Property determined by the originator at the time of origination of
such Mortgage Loan.
"London Business Day": Any day on which banks in the City of London,
England are open and conducting transactions in United States dollars.
"Majority Certificateholders": The holder or holders of in excess of
50% of the Certificate Principal Balance of all Classes of Class A Certificates.
"Mandatory Redemption Date": With respect to the Group I Certificates
or the Group II Certificates, as applicable, the Distribution Date immediately
following the end of the related Pre-Funding Period.
"Maximum Collateral Amount": With respect to the Fixed Rate Pool, the
sum of the Principal Balance as of the initial Cut-Off Date of the Initial
Mortgage Loans that are Fixed Rate Mortgage Loans and the Principal Balance as
of the applicable Cut-Off Date of each Subsequent Mortgage Loan that is a Fixed
Rate Mortgage Loan that is transferred to the Trust. With respect to Adjustable
Rate Pool, the sum of the Principal Balance as of the initial Cut-Off Date of
the Initial Mortgage Loans that are Adjustable Rate Mortgage Loans and the
Principal Balance as of the applicable Cut-Off Date of each Subsequent Mortgage
Loan that is a Adjustable Rate Mortgage Loan that is transferred to the Trust.
"Monthly Payment": With respect to each Mortgage Loan, the scheduled
monthly payment of principal and/or interest required to be made by a Mortgagor
on the related Mortgage Loan, as set forth in the related Mortgage Note. With
respect to each REO Mortgage Loan, the payment of principal and interest due
thereon as specified for such Due Date in the related amortization schedule at
the time applicable thereto.
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"Moody's": Moody's Investors' Service, Inc. or any successor thereto
and if such corporation no longer for any reason performs the services of a
securities rating agency, "Moody's" shall be deemed to refer to any other
nationally recognized rating agency designated by the Certificate Insurer.
"Mortgage": The mortgage, deed of trust or other security instrument
creating a first or second lien in accordance with applicable law on a Mortgaged
Property to secure the Mortgage Note.
"Mortgage Loan": Any mortgage loan identified as sold to the Trust by
virtue of its inclusion on the Mortgage Loan Schedule. As applicable, a Mortgage
Loan shall be deemed to refer to the related Mortgage Note, Mortgage and any
related Foreclosure Property. The term "Mortgage Loan" includes any Subsequent
Mortgage Loan on and after the date it becomes a Subsequent Mortgage Loan and
any Qualified Substitute Mortgage Loan on or after the date it becomes a
Qualified Substitute Mortgage Loan.
"Mortgage Loan Interest Rate": With respect to each Fixed Rate Mortgage
Loan, the fixed annual rate of interest borne by a Mortgage Note, as shown on
the related Mortgage Loan Schedule as the same may be modified by the Servicer
in accordance with Section 5.1(c). With respect to each Adjustable Rate Mortgage
Loan, subject to applicable Periodic Rate Cap, the Lifetime Cap and the Lifetime
Floor, the related Index plus the applicable Gross Margin, as shown by the
related Mortgage Loan Schedule as the same may be modified by the Servicer in
accordance with Section 5.1(c).
"Mortgage Loan Pool": The pool of Mortgage Loans.
"Mortgage Loan Schedule": The schedule of Mortgage Loans attached
hereto as Exhibit B-1 and Exhibit B-2 and provided to the Trustee in computer
readable form in a format acceptable to the Trustee, as amended or supplemented
from time to time including any schedule of any Subsequent Mortgage Loans, such
schedule identifying each Mortgage Loan by address (including the related state
and Zip code) of the related Mortgaged Property, if any, and the name(s) of each
Mortgagor and setting forth as to each Mortgage Loan the following information:
(i) the Principal Balance as of the Cut-Off Date, (ii) the account number, (iii)
the original principal amount, (iv) the Due Date, (v) whether such Mortgage Loan
is a Fixed Rate Mortgage Loan or an Adjustable Rate Mortgage Loan, (vi) for each
Fixed Rate Mortgage Loan, the Mortgage Loan Interest Rate and for each
Adjustable Rate Mortgage Loan, the Gross Margin, the Lifetime Cap, the Lifetime
Floor, the Periodic Rate Cap and the first interest Adjustment Date after the
Cut-off Date, (vii) the first date on which a Monthly Payment is due under the
related Mortgage Note, (viii) the Monthly Payment, (ix) the maturity date of the
related Mortgage Note, and (x) the remaining number of months to maturity as of
the Cut-Off Date.
"Mortgage Note": The original executed note or other evidence of
indebtedness evidencing the indebtedness of an Mortgagor under a Mortgage Loan.
"Mortgaged Property": The real property encumbered by the Mortgage
which secures the Mortgage Note.
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"Mortgaged Property States": Each state in which any Mortgaged Property
securing a Mortgage Loan is located as set forth in the Mortgage Loan Schedule.
"Mortgagor": The obligor on a Mortgage Note.
"Net Delinquency Calculation Amount": With respect to the Fixed Rate
Pool and any Distribution Date, the product of 70.0% and the Delinquency Amount
for the Fixed Rate Mortgage Loans. With respect to the Adjustable Rate Pool and
any Distribution Date, the product of 85.0% and the Delinquency Amount for the
Adjustable Rate Mortgage Loans.
"Net Foreclosure Profits": As to any Distribution Date, an amount equal
to the excess, if any, of (i) the aggregate Foreclosure Profits with respect to
such Distribution Date over (ii) Liquidated Loan Losses with respect to such
Distribution Date.
"Net Liquidation Proceeds": As to any Liquidated Mortgage Loan,
Liquidation Proceeds net of Liquidation Expenses and net of any unreimbursed
Servicing Advances made by the Servicer. For all purposes of this Agreement, Net
Liquidation Proceeds shall be allocated first to accrued and unpaid interest on
the related Mortgage Loan and then to the unpaid principal balance thereof.
"Net Mortgage Loan Interest Rate": As to each Mortgage Loan, the
Mortgage Loan Interest Rate reduced by (i) the per annum rate at which the
Servicing Fee is calculated, (ii) the per annum rate at which the Trustee Fee is
calculated and (iii) the per annum rate at which the Certificate Insurance
Premium is calculated.
"Net Realized Loss": With respect to any Liquidate Mortgage Loan, the
excess, if any, (i) the sum of (a) the unpaid principal balance of such
Liquidated Mortgage Loan, (b) accrued interest thereon in accordance with the
amortization schedule at the time applicable thereto at the applicable Mortgage
Loan Interest Rate from the Due Date as to which interest was last paid with
respect thereto through the last day of the month in which such Mortgage Loan
became a Liquidate Mortgage Loan and (c) the amount of any Cram Down Loss with
respect thereto, over (ii) Net Liquidation Proceeds with respect to such
Liquidated Mortgage Loan.
"Net REO Proceeds": As to any REO Mortgage Loan, REO Proceeds net of
any related expenses of the Servicer or any Subservicer.
"Nondisqualification Opinion": An Opinion of Counsel that the
contemplated act or failure to act will not result in an Adverse REMIC Event.
"90-Day Delinquency Amount": For any Due Period, the aggregate of the
Principal Balances of all Mortgage Loans in the related Pool (without
duplication) that are (i) 90 or more days Delinquent, (ii) in bankruptcy and 90
or more days Delinquent, (iii) in foreclosure or (iv) related to Foreclosure
Property as of the end of such Due Period.
"Nondisqualification Opinion": An Opinion of Counsel that a
contemplated action will not cause the REMIC I to fail to qualify as a REMIC at
any time that the Certificates are
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outstanding or cause a "prohibited transaction" or "prohibited contribution" tax
(as defined in the REMIC Provisions) to be imposed on such REMIC.
"Nonrecoverable Advance": (A) Any Periodic Advance previously made and
not reimbursed from late collections, Liquidation Proceeds, Insurance Proceeds,
Post Liquidation Proceeds or the Released Mortgaged Property Proceeds, or (B) a
Periodic Advance proposed to be made in respect of a Mortgage Loan or
Foreclosure Property either of which, in the good faith business judgment of the
Servicer, as evidenced by an Officer's Certificate delivered to the Trustee and
the Certificate Insurer no later than the Business Day following such
determination would not be ultimately recoverable.
"Non-United States Person": Any Person other than a United States
Person.
"Notional Amount": The Notional Amount of the Class A-IO Certificate as
of any Distribution Date is equal to the Certificate Principal Balance of the
Class A-8 Certificates immediately prior to such date. The Notional Amount of
the Class F-IO Certificate as of any Distribution Date is equal to Certificate
Principal Balance of the Class A-6 Certificates immediately prior to such date.
"Officer's Certificate": A certificate delivered to the Certificate
Insurer and the Trustee or the Depositor signed by the President or a Vice
President or an Assistant Vice President of the Depositor, the Servicer or the
Transferor, in each case, as required by this Agreement.
"One-Month LIBOR": With respect to any Interest Period, 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 United States
dollar deposits, as such rates appear on the Telerate Screen Page 3750 as of
11:00 A.M., London, England time, on the Interest Determination Date. If such
rate does not appear on such page (or such other page as may replace that page
on that service, or if such service is no longer offered, such other service for
displaying One-Month LIBOR or comparable rates as may be reasonably selected by
the Trustee), the rate will be the Reference Bank Rate. If no such quotations
can be obtained and no Reference Bank Rate is available, One-Month LIBOR will be
One-Month LIBOR applicable to the preceding Distribution Date.
"Opinion of Counsel": A written opinion of counsel acceptable, in form
and substance, to the Trustee and the Certificate Insurer and delivered to the
Trustee and the Certificate Insurer.
"Original Adjustable Rate Pool Principal Balance": The sum of the
aggregate Principal Balances of the Adjustable Rate Mortgage Loans as of the
Initial Cut-Off Date and the Original Pre-Funding Amount with respect to the
Adjustable Rate Pool, which is $165,230,000.
"Original Certificate Principal Balance": As of the Startup Day and as
to the Class A-1 Certificates, $76,000,000, as to the Class A-2 Certificates,
$35,000,000, as to the Class A-3 Certificates, $34,000,000, as to the Class A-4
Certificates, $44,000,000, as to the Class A-5 Certificates, $22,293,000, as to
the Class A-6 Certificates, $ 23,477,000, as to the Class A-7 Certificates,
$123,922,000, and as to the Class A-8 Certificates, $41,308,000. The Residual
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Interest Certificates, Class A-IO Certificates and Class F-IO Certificates do
not have an Original Certificate Principal Balance.
"Original Fixed Rate Pool Principal Balance": The sum of the aggregate
Principal Balances of the Fixed Rate Mortgage Loans as of the Initial Cut-Off
Date and the Original Pre-Funding Amount with respect to the Fixed Rate Pool,
which is $234,770,000.00
"Original Pre-Funding Amount": With respect to the Fixed Rate Pool and
the Adjustable Rate Pool, the amount deposited in the Pre-Funding Account on the
Closing Date, which amount is $44,334,498 for the Fixed Rate Pool and
$34,813,420 for the Adjustable Rate Pool.
"Overcollateralization Amount": With respect to each Pool and as of any
Distribution Date, the excess, if any, of (i) the Fixed Rate Pool Principal
Balance or Adjustable Rate Pool Principal Balance, as applicable, as of the
close of business on the last day of the related Due Period over (ii) the
aggregate Certificate Principal Balance of the Group I Certificates or Group II
Certificates, as applicable, as of such Distribution Date (after taking into
account the related Principal Distribution Amount, other than the
Overcollateralization Increase Amount, on such Distribution Date).
"Overcollateralization Deficiency Amount": With respect to each Pool
and any date of determination, the excess, if any, of the related
Overcollateralization Target Amount over the related Overcollateralization
Amount.
"Overcollateralization Increase Amount": With respect to the Fixed Rate
Pool and Adjustable Rate Pool, as applicable, and as of any Distribution Date
the lesser of (i) the Group I Excess Spread and the Group II Excess Spread,
respectively, and (ii) the related Overcollateralization Deficiency Amount.
"Overcollateralization Target Amount": With respect to the Group I
Certificates (i) and any Distribution Date occurring prior to the Stepdown Date,
an amount equal to the greater of (a) 2.75% of the Original Fixed Rate Pool
Principal Balance and (b) the Net Delinquency Calculation Amount for the Fixed
Rate Pool and (ii) with respect to any Distribution Date on and after the
Stepdown Date, an amount equal to the greatest of (a) 5.50% of the Fixed Rate
Pool Principal Balance as of the end of the related Due Period, (b) the Net
Delinquency Calculation Amount for the Fixed Rate Pool, (c) 0.50% of the
Original Fixed Rate Pool Principal Balance and (d) the aggregate Principal
Balances of the three Fixed Rate Mortgage Loans having the largest Principal
Balances; provided, however, that for any Distribution Date occurring on and
after the Stepdown Date when the Delinquency Percentage for the Fixed Rate Pool
exceeds 6.00%, the Overcollateralization Target Amount for the Group I
Certificates shall be no less than the Overcollateralization Target Amount for
the Group I Certificates as of the immediately preceding Distribution Date.
With respect to the Group II Certificates (i) and any Distribution
Date occurring prior to the Stepdown Date, an amount equal to the greater of (a)
4.25% of the Original Adjustable Rate Pool Principal Balance and (b) the Net
Delinquency Calculation Amount for the Adjustable Rate Pool and (ii) with
respect to any Distribution Date on and after the Stepdown Date, an amount
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equal to the greatest of (a) 8.50% of the Adjustable Rate Pool Principal Balance
as of the end of the related Due Period, (b) the Net Delinquency Calculation
Amount for the Adjustable Rate Pool, (c) 0.50% of the Original Adjustable Rate
Pool Principal Balance and (d) the aggregate Principal Balances of the three
Adjustable Rate Mortgage Loans having the largest Principal Balances; provided,
however, that for any Distribution Date occurring on or after the Stepdown Date
when the Delinquency Percentage for the Adjustable Rate Pool exceeds 8.00%, the
Overcollateralization Target Amount for the Group II Certificates shall be no
less than the Overcollateralization Target Amount for the Group II Certificates
as of the immediately preceding Distribution Date.
Notwithstanding the above, after the end of the related Pre-Funding Period, the
Certificate Insurer may modify the definition of the related
Overcollateralization Target Amount, including the definitions contained
therein. Further, the Certificate Insurer may, in its sole discretion modify
clause (i)(b) or (ii)(b) in each of the above paragraphs for the purpose of
reducing or eliminating, in whole or in part, the application of such clauses.
The Trustee and the Rating Agencies shall be notified in writing of such
modification prior to the related Distribution Date and such modification shall
not result in a downgrading of the then-current ratings of the Group I
Certificates and Group II Certificates, as applicable, without regard to the
Certificate Insurance Policies.
"Ownership Interest": As to any Certificate, any ownership or security
interest in such Certificate, including any interest in such Certificate as the
holder thereof and any other interest therein, whether direct or indirect, legal
or beneficial, as owner or as pledgee.
"Pass-Through Margin": With respect to the Class A-7 Certificates (i)
0.30%, with respect to any Distribution Date which occurs on or prior to the
Call Option Date and (ii) with respect to any Distribution Date thereafter,
0.60%.
"Pass-Through Rate": A Group I Pass-Through Rate or a Group II
Pass-Through Rate.
"Percentage Interest": With respect to a Class A Certificate and any
date of determination, the portion evidenced by such Certificate, expressed as a
percentage rounded to four decimal places, equal to a fraction the numerator of
which is the initial Certificate Principal Balance represented by such
Certificate and the denominator of which is the Original Certificate Principal
Balance of the Class which includes such Certificate. With respect to a Class
A-IO, Class F-IO or Residual Interest Certificate the percentage interest set
forth on the face thereof.
"Periodic Advance": For each Pool, the aggregate of the advances
required to be made by the Servicer on any Distribution Date pursuant to Section
5.14 hereof, the amount of any such advances being equal to the sum of:
(a) Monthly Payments on each related Mortgage Loan due by the
related Due Date but not received by the Servicer as of the close of business on
the Business Day immediately preceding such Distribution Date, net of the
related Servicing Fee; and
(b) with respect to each related Foreclosure Property which
was acquired during or prior to the related Due Period and as to which an REO
Disposition did not occur during the
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related Due Period, an amount equal to the excess, if any, of (i) interest on
the Principal Balance of such REO Mortgage Loan at the related Mortgage Loan
Interest Rate, net of the related Servicing Fee, for the most recently ended Due
Period over (ii) the net income from the related Foreclosure Property
transferred to the related Certificate Account for such Distribution Date;
provided however, that in each such case such advance has not been determined by
the Servicer to be a Nonrecoverable Advance.
"Periodic Rate Cap": With respect to any Adjustable Rate Mortgage Loan
the periodic rate cap set forth in the Mortgage Note related thereto.
"Permitted Investments": Each of the following:
(a) direct general obligations of, or fully and
unconditionally guaranteed as to the timely payment of principal and interest
by, the United States or any agency or instrumentality thereof when such
obligations are backed by the full faith and credit of the United States;
(b) a repurchase agreement that satisfies the following
criteria: (1) must be between the Trustee and either (a) primary dealers on the
Federal Reserve reporting dealer list which are rated in one of the two highest
categories for long-term unsecured debt obligations by the Rating Agencies, or
(b) banks rated in one of the two highest categories for long-term unsecured
debt obligations by the Rating Agencies; and (2) the written repurchase
agreement must include the following: (a) securities that are acceptable for
transfer and are either (i) direct U.S. government obligations, or (ii)
obligations of a federal agency that are backed by the full faith and credit of
the U.S. government, or FNMA or FHLMC; (b) a term no greater than 30 days for
any repurchase transaction; (c) the collateral must be delivered to the Trustee
or a third party custodian acting as agent for the Trustee by appropriate book
entries and confirmation statements, and must have been delivered before or
simultaneous with payment (i.e., perfection by possession of certificated
securities); and (d) the securities sold thereunder must be valued weekly,
marked-to-market at current market price plus accrued interest and the value of
the collateral must be equal to at least 104% of the amount of cash transferred
by the Trustee under the repurchase agreement and if the value of the securities
held as collateral declines to an amount below 104% of the cash transferred by
the Trustee plus accrued interest (i.e., a margin call), then additional cash
and/or acceptable securities must be transferred to the Trustee to satisfy such
margin call; provided, however, that if the securities used as collateral are
obligations of FNMA or FHLMC, then the value of the securities held as
collateral must equal at least 105% of the cash transferred by the Trustee under
such repurchase agreement;
(c) certificates of deposit, time deposits and bankers
acceptances with a maximum term of one year of any United States depository
institution or trust company incorporated under the laws of the United States or
any state, including the Trustee; provided that the debt obligations of such
depository institution or trust company at the date of the acquisition thereof
have been rated by the Rating Agencies in one of its two highest long-term
rating categories; provided that any such certificates of deposit must be
secured at all times by collateral described in clause (a) or (b) above, such
collateral must be held by a third party and the Trustee must have a perfected
first priority security interest in such collateral.
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(d) deposits, including deposits with the Trustee, that are
fully insured by the Bank Insurance Fund or the Savings Association Insurance
Fund of the FDIC, as the case may be;
(e) commercial paper of any corporation incorporated under the
laws of the United States or any state thereof, including corporate affiliates
of the Trustee, which at the date of acquisition is rated Prime-1 by Moody's and
A-1 or better by S&P and which has an original maturity of not more than 365
days;
(f) any money market fund rated AAAm or AAAm-6 by S&P and Aaa
by Moody's which funds are registered under the Investment Company Act of 1940
and whose shares are registered under the Securities Act, including any such
fund that is managed by the Trustee or any affiliate of the Trustee or for which
the Trustee or any of its affiliates acts as an adviser; and
(g) any other demand, money market or time deposit obligation,
security or investment as may be acceptable to each Rating Agency and the
Certificate Insurer at the time at which the investment is made; provided,
however, that no instrument described in the foregoing subparagraphs shall
evidence either the right to receive (a) only interest with respect to the
obligations underlying such instrument or (b) both principal and interest
payments derived from obligations underlying such instrument where the interest
and principal payments with respect to such instrument provide 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 in
the foregoing subparagraphs may be purchased at a price greater than par if such
instrument may be prepaid or called at a price less than its purchase price
prior to stated maturity. Any loans repurchased after the end of a Due Period
and prior to the following Determination Date shall be deemed to have been
repurchased during such Due Period.
Notwithstanding the above, the Pre-Funding Accounts and the Capitalized
Interest Accounts must be invested in obligations (i) described in paragraph (a)
above or (ii) that have been rated (or of an obligor that has been rated) in one
of the three highest generic rating categories by the Rating Agencies.
Any Permitted Investment must mature no later than the Business Day
prior to the next Determination Date with respect to amounts in the Collection
Accounts, Pre-Funding Accounts and Capitalized Interest Accounts and prior to
the next Distribution Date with respect to the Certificate Accounts.
Each reference in this definition of "Permitted Investments" to the
Rating Agency shall be construed, in the case of each subparagraph above
referring to each Rating Agency, as a reference to each of Moody's and S&P.
"Permitted Transferee": Any transferee of a Residual Interest
Certificate other than (i) a Non-United States Person, (ii) a Disqualified
Organization, or (iii) a "pass-through entity" (within the meaning of Section
860E(e)(6)(B) of the Code in which either a Non-United States Person or a
Disqualified Organization holds an interest.
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"Person": Any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust, national
banking association, unincorporated organization or government or any agency or
political subdivision thereof.
"Pool": The Fixed Rate Pool or Adjustable Rate Pool. References herein
to the related "Pool" when used with respect to any Certificate or REMIC I
Regular Interest shall mean (i) Fixed Rate Pool, in the case of the Group I
Certificates and (ii) Adjustable Rate Pool, in the case of the Group II
Certificates.
"Pool Principal Balance": The sum of the Fixed Rate Pool Principal
Balance and the Adjustable Rate Pool Principal Balance as of any date of
determination.
"Post Liquidation Proceeds": As defined in Section 5.2(b).
"Preference Amount": Any amount previously distributed to an Holder on
the Group I Certificates or the Group II 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.
"Preference Claim": As defined in Section 6.4(f).
"Pre-Funding Account": The Group I Pre-Funding Account or the Group II
Pre-Funding Account, as applicable.
"Pre-Funding Amount": The Group I Pre-Funding Amount or the Group II
Pre-Funding Amount, as applicable.
"Pre-Funding Earnings": The Group I Pre-Funding Earnings or the Group
II Pre-Funding Earnings, as applicable.
"Pre-Funding Period": The Group I Pre-Funding Period or the Group II
Pre-Funding Period, as applicable.
"Prepayment Assumption": With respect to (i) the Group I Certificates,
a 115% Prepayment Assumption (i.e., a 100% Prepayment Assumption multiplied by
115) and with respect to the Group II Certificates, a constant prepayment rate
of 30%, used solely for determining the accrual of original issue discount,
market discount and premium, if any, on the related Certificates for federal
income tax purposes. A 100% Prepayment Assumption assumes a constant prepayment
rate of 3% per annum for the first month, increasing each month by an additional
approximate 1.545% (precisely 17/11) (expressed as a percentage per annum) until
such rate reaches 20.00% (on the twelfth month) and remaining level at 20.00%
thereafter.
"Prepayment Interest Shortfall": With respect to any Distribution Date,
for each Mortgage Loan that was the subject during the related Due Period of a
Principal Prepayment in full or in part, an amount equal to the excess, if any,
of (a) 30 days' interest on the amount of the Principal
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Balance of such Mortgage Loan at a per annum rate equal to the Mortgage Loan
Interest Rate (or at such lower rate as may be in effect for such Mortgage Loan
because of the application of the Relief Act) minus the rate at which the
Servicing Fee is calculated over (b) the amount of interest actually remitted by
the Mortgagor in connection with such Principal Prepayment less the Servicing
Fee for such Mortgage Loan in such month.
"Principal Balance": With respect to any Mortgage Loan or related
Foreclosure Property, (i) at the Cut-Off Date, the outstanding unpaid principal
balance of the Mortgage Loan as of the Cut-Off Date and (ii) with respect to any
date of determination, the outstanding unpaid principal balance of the Mortgage
Loan as of the last day of the preceding Due Period (after giving effect to all
payments received, Net Liquidation Proceeds (to the extent related to principal)
collected and Cram Down Losses allocated for such Mortgage Loan that relate to
such Due Period), without giving effect to payments received, Liquidation
Proceeds collected or Cram Down Losses allocated in respect of such Mortgage
Loan or related Foreclosure Property after such Due Period; provided, however,
that with respect to any Distribution Date, any Mortgage Loan that is a
Liquidated Mortgage Loan as of the end of the preceding Due Period and any
Mortgage Loan repurchased or for which another Mortgage Loan has been
substituted as of the related Determination Date shall have a Principal Balance
of zero; provided, further, that for purposes of calculating the Purchase Price
of a Liquidated Mortgage Loan, the Principal Balance shall be calculated based
upon the unpaid Principal Balance of such Liquidated Mortgage Loan immediately
prior to becoming a Liquidated Mortgage Loan.
"Principal Distribution Amount": As to any Distribution Date, with
respect to the Group I Certificates, the Group I Principal Distribution Amount
and with respect to the Group II Certificates, the Group II Principal
Distribution Amount.
"Principal Remittance Amount": With respect to each Pool and as to any
Distribution Date, the sum, without duplication, of: (i) all scheduled
installments of principal in respect of the related Mortgage Loans received
during the related Due Period, together with all unscheduled payments of
principal in respect of the related Mortgage Loans received by the Servicer
during related Due Period (including all Insurance Proceeds and Release Mortgage
Property Proceeds); (ii) the Principal Balance of each related Mortgage Loan
that was repurchased by the Transferor, Life or the Servicer; (iii) any
Substitution Adjustments delivered by the Transferor on the related
Determination Date in connection with a substitution of a related Mortgage Loan;
(iv) the Net Liquidation Proceeds collected by the Servicer of all related
Mortgage Loans during the related Due Period (to the extent such Net Liquidation
Proceeds relate to principal) and (v) any Periodic Advances (to the Extent such
Periodic Advances relate to principal).
"Principal Prepayment": With respect to any Mortgage Loan and any Due
Period, any principal amount received on a Mortgage Loan in excess of the
principal portion of the Monthly Payment due in such Due Period.
"Prohibited Transactions": As defined in Section 860F(a)(2)(B) of the
Code.
"Prospectus Supplement": The Prospectus Supplement dated September 14,
1998 relating to the Certificates and filed with the Commission in connection
with the Registration Statement
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heretofore filed or to be filed with the Commission pursuant to Rule 424(b)(2)
or 424(b)(5) of the Securities Act.
"Purchase Agreement": That certain Mortgage Loan Purchase Agreement by
and between Life, as seller and the Transferor, as purchaser dated as of
September 1, 1998 pursuant to which the Mortgage Loans are sold by Life to the
Transferor.
"Purchase Price": As defined in Section 3.5.
"Qualified Mortgage": Qualified Mortgage shall have the meaning set
forth from time to time in the definition thereof at Section 860G(a)(3) of the
Code (or any successor statute thereto).
"Qualified Substitute Mortgage Loan": A mortgage loan or mortgage loans
substituted for a deleted Mortgage Loan pursuant to Section 2.6 or 3.5 hereof,
which (a)(i) with respect to a Adjustable Rate Mortgage Loan, has or have the
same interest rate index, a gross margin over such index and a maximum interest
rate at least equal to those applicable to the deleted Mortgage Loan and (ii)
with respect to a Fixed Rate Mortgage Loan, has the same or greater interest
rate, (b) relates or relate to a detached one-family residence or to the same
type of Mortgage Property as the deleted Mortgage Loan and in each case has or
have the same or a better lien priority as the deleted Mortgage Loan and has the
same occupancy status, (c) matures or mature no later than (and not more than
one year earlier than) the deleted Mortgage Loan, (d) has or have a Loan-to-
Value Ratio or Loan-to-Value Ratios at the time of such substitution no higher
than the Loan-to- Value Ratio of the deleted Mortgage Loan, (e) has or have a
principal balance or principal balances (after application of all payments
received on or prior to the date of substitution) not substantially less and not
more than the Principal Balance of the deleted Mortgage Loan as of such date,
(f) satisfies or satisfy the criteria set forth from time to time in the
definition of "qualified replacement mortgage" at Section 860G(a)(4) of the Code
(or any successor statute thereto) and (g) complies or comply as of the date of
substitution with each representation and warranty set forth in Section 3.4 of
this Agreement.
"Ratings": The ratings initially assigned to the Certificates by the
Rating Agencies, as evidenced by letters from the Rating Agencies.
"Rating Agencies": Moody's and S&P.
"Record Date": With respect to each Distribution Date (other than the
first Distribution Date), the close of business on the last Business Day of the
month immediately preceding the month in which such Distribution Date occurs
and, with respect to the first Distribution Date, the Closing Date.
"Reference Bank Rate": With respect to any Interest Period as follows:
the arithmetic mean (rounded upwards, if necessary, to the nearest one-sixteenth
of a percent) of the offered rates for United States dollar deposits for one
month that are offered by the Reference Banks as of 11:00 a.m. London, England
time, on the Interest Determination Date to prime banks in the London interbank
market for a period of one month amounts approximately equal to the aggregate
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outstanding Certificate Principal Balance of the Class A-7 Certificates;
provided that at least two such Reference Banks provide such rate.
"Reference Banks": Bankers Trust Company, Barclay's Bank PLC and
National Westminster Bank PLC.
"Reimbursement Amount": With respect to Group I Certificates and Group
II Certificates, as applicable, the sum of (x) the amount of all related Insured
Payments and other payments made by the Certificate Insurer pursuant to the
related Certificate Insurance Policy which have not been previously repaid, (y)
any other amounts owed to the Certificate Insurer pursuant to the Insurance
Agreement, and (z) interest accrued on such amounts calculated at the Late
Payment Rate (as defined in the Insurance Agreement).
"Released Mortgaged Property Proceeds": With respect to any Mortgage
Loan, proceeds received by the Servicer in connection with (i) a taking of an
entire Mortgaged Property by exercise of the power of eminent domain or
condemnation or (ii) any release of part of the Mortgaged Property from the lien
of the related Mortgage, whether by partial condemnation, sale or otherwise;
which in either case are not released to the Mortgagor in accordance with
applicable law, Accepted Servicing Procedures and this Agreement.
"Relief Act": The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.
"Relief Act Shortfall: Each of the Group I Relief Act Shortfall and the
Group II Relief Act Shortfall.
"REMIC": A "real estate mortgage investment conduit" within the meaning
of Section 860D of the Code.
"REMIC I": The segregated pool of assets subject hereto, constituting a
portion of the trust created hereby and to be administered hereunder, which
assets consist of: (i) such Mortgage Loans as from time to time are subject to
this Agreement as listed in the Mortgage Loan Schedule, as the same may be
amended or supplemented from time to time including the addition of Subsequent
Mortgage Loans, the removal of Deleted Loans and the addition of Qualified
Substitute Mortgage Loans, together with the Trustee's Mortgage Loan Files and
the Servicer's Mortgage Loan Files relating thereto and all proceeds thereof,
(ii) all payments of prepayment penalties and principal received in respect of
the Mortgage Loans after the related Cut-Off Date, all payments of interest and
principal due in respect of the Mortgage Loans (including prepaid monthly
payments) from and after the Cut-Off Date, irrespective of when received, and
all interest paid or received on the Mortgage Loans prior to the Cut-Off Date
but relating to any period after the Cut-Off Date, (iii) such assets as from
time to time are identified as Foreclosure Property, (iv) such assets and funds
as are from time to time are deposited in the Collection Accounts, the
Certificate Accounts and the Certificate Insurance Payment Accounts including
amounts on deposit in such accounts which are invested in Permitted Investments,
(v) the Depositor's rights under all insurance policies with respect to the
Mortgage Loans and any Insurance Proceeds, (vi) Net Liquidation Proceeds, Post
Liquidation Proceeds and Released Mortgaged Property Proceeds, (vii) all right,
title and interest (but none of the obligations) of the Servicer and the
Transferor in and
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to the rights and obligations of any Subservicer, pursuant to any Subservicing
Agreement, (viii) all rights, title and interest (but none of the obligations)
of the Depositor in and to the obligations of the Transferor under the Sale
Agreement in which the Depositor acquired the Mortgage Loans from the
Transferor, (ix) all rights, title and interest (but none of the obligations) of
the Transferor in and to the obligation of Life under the Purchase Agreement,
(x) the rights and remedies of the Trustee with respect to or in connection with
such Mortgage Loans, (xi) any other security for such Mortgage Loans, (xii) all
rights under the Custodial Agreement, and (xiii) any and all income, proceeds
and payments with respect to the foregoing. Amounts on deposit in the
Capitalized Interest Accounts and the Pre-Funding Accounts will not be assets of
REMIC I.
"REMIC II": The segregated pool of assets consisting of all of the
REMIC I Regular Interests conveyed in trust to the Trustee for the benefit of
the Certificateholders and the Certificate Insurer pursuant to Section 2.8, and
all amounts deposited therein, with respect to which a separate REMIC election
is to be made.
"REMIC I Regular Interest": The separate non-certificated beneficial
ownership interest in REMIC I issued hereunder and identified in Section 2.10.
"REMIC I Residual Interest": The separate non-certificated beneficial
ownership interest in REMIC I issued hereunder and designated as the sole class
of residual interest in REMIC I. The REMIC I Residual Interest shall be
subordinate to the REMIC I Regular Interests in right of payment to the extent
set forth herein.
"REMIC II Residual Interest": The separate non-certificated beneficial
ownership interest in REMIC II issued hereunder and designated as the sole class
of residual interest in REMIC II. The REMIC II Residual Interest shall be
subordinate to the Class A Certificates and the Class IO Certificates in right
of payment to the extent set forth herein.
"REMIC Provisions": Provisions of the federal income tax law relating
to real estate mortgage investment conduits, which appear at Sections 860A
through 860G of Subchapter M of Chapter I of the Code, and related provisions,
and temporary and final regulations promulgated thereunder and published
rulings, notices and announcements, as the foregoing may be in effect from time
to time.
"REO Mortgage Loan": Any Mortgage Loan that is not a Liquidated
Mortgage Loan and as to which the indebtedness evidenced by the related Mortgage
Note is discharged and the related Mortgaged Property is held as part of the
Trust estate.
"REO Proceeds": Proceeds received in respect of any REO Mortgage Loan
(including proceeds from the rental of the related Mortgaged Property).
"Representation Letter":
"Repurchased Mortgage Loan": Any Mortgage Loan that has been
repurchased pursuant to clause (ii) of the fourth sentence of Section 3.5(a).
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"Residual Interest Certificate": Each of the Residual Interest
Certificates executed by the Trustee and authenticated by the Depositor
substantially in the form annexed hereto as Exhibit A-11 and representing the
rights assigned to and carrying with them (severally) the obligations associated
with the REMIC I Residual Interest and the REMIC II Residual Interest.
"Responsible Officer": When used with respect to the Trustee, any
officer within the corporate trust office of the Trustee, including any Vice
President, Assistant Vice President, Secretary, Assistant Secretary or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject. When
used with respect to the Depositor, the Transferor, the Servicer, or the
Custodian, the President or any Vice President, Assistant Vice President, or any
Secretary or Assistant Secretary.
"S&P": Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. or any successor thereto.
"Sale Agreement": That certain Mortgage Loan Sale Agreement by and
between the Transferor as Seller and the Depositor, as purchaser, dated as of
September 1, 1998 pursuant to which the Initial Mortgage Loans are sold by the
Transferor to the Depositor.
"Securities Act": The Securities Act of 1933, as amended from time to
time.
"Series or Series 1998-1": Life Financial Corporation, Mortgage Loan
Asset-Backed Certificates, Series 1998-1.
"Servicer": Life Bank, in its capacity as the servicer hereunder, or
any successor appointed as herein provided.
"Servicer's Fiscal Year": January 1st through December 31st of each
year.
"Servicer's Mortgage Loan Files": In respect of each Mortgage Loan, all
documents customarily included in the servicer's loan file for the related type
of Mortgage Loan in accordance with the servicing standard set forth in Section
5.1.
"Servicer's Monthly Remittance Report": The monthly report described in
Section 7.1(a).
"Servicing Advances": Subject to Section 5.1(b), all reasonable,
customary and necessary "out of pocket" costs and expenses advanced or paid by
the Servicer with respect to the Mortgage Loans in accordance with the
performance by the Servicer of its servicing obligations hereunder, relating to
the enforcement of the Trust's rights under the related Mortgage Loan including,
but not limited to, the costs and expenses for (i) the preservation, restoration
and protection of the Mortgaged Property, including advances in respect of real
estate taxes and assessments, (ii) any collection, enforcement or judicial
proceedings, including foreclosures, collections and liquidations pursuant to
Section 5.2 and (iii) the conservation, management and sale or other disposition
of a Foreclosure Property pursuant to Section 5.4; provided, however, that such
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Servicing Advances are reimbursable to the Servicer on account of late
collections and recoveries on the related Mortgage Loan.
"Servicing Compensation": The Servicing Fee and other amounts to which
the Servicer is entitled pursuant to Section 8.1 and Section 8.3.
"Servicing Fee": As to each Mortgage Loan (including any REO Mortgage
Loan, but excluding any Liquidated Mortgage Loan), the fee payable monthly to
the Servicer on each Distribution Date, which shall be the product of .50% (50
basis points) and the Principal Balance of such Mortgage Loan as of the
beginning of the immediately preceding Due Period, divided by 12. The Servicing
Fee includes any servicing fees owed or payable to any Subservicer which fees
shall be paid from the Servicing Fee.
"Servicing Officer": Any officer of the Servicer or Subservicer
involved in, or responsible for, the administration and servicing of the
Mortgage Loans whose name and specimen signature appears on a list of servicing
officers annexed to an Officer's Certificate furnished by the Servicer or the
Subservicer, respectively, to the Depositor, the Certificate Insurer and the
Trustee, on behalf of the Certificateholders, as such list may from time to time
be amended.
"Startup Day": September 24, 1998.
"Stepdown Date": With respect to the Fixed Rate Pool or the Adjustable
Rate Pool, as applicable, the first Distribution Date occurring after March 2001
as to which the related aggregate Certificate Principal Balance of the Group I
Certificates or the Group II Certificates, as applicable, has been reduced by an
amount equal to at least 50% of the Original Fixed Rate Pool Principal Balance
or Original Adjustable Rate Pool Principal Balance, as applicable.
"Subordination Deficit": For the Fixed Rate Pool and the Adjustable
Rate Pool and any Distribution Date, as applicable, the excess, if any, of (a)
the aggregate of the Certificate Principal Balances of the Group I Certificates
or Group II Certificates, as applicable, on such Distribution Date, after taking
into account the payment of the related Principal Distribution Amount on such
Distribution Date (except for amounts payable under the related Certificate
Insurance Policy) over (b) the Fixed Rate Pool Principal Balance or the
Adjustable Rate Pool Balance, as applicable, as of the end of the related Due
Period.
"Subsequent Cut-Off Date Deposit": With respect to any Subsequent
Transfer Date and any Subsequent Mortgage Loan transferred to the Trust during
any month which does not have a Monthly Payment due until the second Due Period
following such month, an amount equal to the product of (a) the Principal
Balance of such Subsequent Mortgage Loan on the related Cut-Off Date and (b)
one-twelfth of the Mortgage Loan Interest Rate on such Subsequent Mortgage Loan.
"Subsequent Mortgage Loans": The Mortgage Loans sold to the Trust
pursuant to Section 2.7 and the related Subsequent Transfer Agreement, which
shall be listed on the loan schedule attached to such Subsequent Transfer
Agreement.
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"Subsequent Transfer Agreement": Each Subsequent Transfer Agreement
executed by the Trustee and the Transferor substantially in the form in Exhibit
D hereto, by which Subsequent Mortgage Loans are sold and assigned to the Trust.
"Subsequent Transfer Date": With respect to any Subsequent Mortgage
Loan, the date specified as such in the related Subsequent Transfer Agreement.
"Subservicer": Any Person with whom the Servicer has entered into a
Subservicing Agreement and who is an Eligible Servicer and who satisfies any
requirements set forth in Section 5.6(a) in respect of the qualifications of a
Subservicer.
"Subservicing Account": An account established by a Subservicer
pursuant to a Subservicing Agreement, which account must be an Eligible Account.
"Subservicing Agreement": Any agreement between the Servicer and any
Subservicer relating to subservicing and/or administration of any or all
Mortgage Loans as provided in Section 5.6(a), copies of which shall be made
available, along with any modifications thereto, to the Depositor, the
Certificate Insurer and the Trustee.
"Substitution Adjustment": As to any date on which a substitution
occurs pursuant to Section 2.6 or Section 3.5, the amount, if any, by which (a)
the sum of the aggregate Principal Balance (after application of principal
payments received on or before the date of substitution) of any Qualified
Substitute Mortgage Loans as of the date of substitution is less than (b) the
sum of the aggregate of the Principal Balances, together with accrued and unpaid
interest thereon to the date of substitution, of the related Defective Mortgage
Loans.
"Tax Matters Person": The Person or Persons appointed pursuant to
Section 14.1(b) from time to time to act as the "tax matters person" (within the
meaning of the REMIC Provisions) of the Trust Fund.
"Tax Return": The federal income tax return on Internal Revenue Service
Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return,
including Schedule Q thereto, Quarterly Notice to Residual Interest
Certificateholders of REMIC Taxable Income or Net Loss Allocation, or any
successor forms, to be filed on behalf of REMIC I or REMIC II due to its
classification as a REMIC under the REMIC Provisions, together with any and all
other information, reports or returns that may be required to be furnished to
the Certificateholders or filed with the Internal Revenue Service or any other
governmental taxing authority under any applicable provisions of federal, state
or local tax laws.
"Termination Price": As of any date of determination, an amount,
without duplication, equal to the sum of (i) the then outstanding Principal
Balances of the Mortgage Loans and each Foreclosure Property, (ii) the greater
of (a) all accrued and unpaid interest on the Mortgage Loans through end of the
related Due Period and (b) 30 days' accrued interest on each Mortgage Loan
computed at a rate equal to the related Mortgage Loan Interest Rate, (iii) any
Trustee Fees, Servicing Fees and Certificate Insurance Premium due and unpaid on
such date, (iv) any related unreimbursed Periodic Advances, Servicing Advances
or Nonrecoverable Advances, (v) any
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Reimbursement Amounts and (vi) any accrued and unpaid Class A-7 Available Funds
Cap CarryForward Amount.
"Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation or other form of assignment of any Ownership Interest in a
Certificate.
"Transfer Affidavit and Agreement": As defined in Section 4.2(j)(ii).
"Transferor": Life Investments Holdings, Inc., in its capacity as the
transferor hereunder.
"Trust": Life Financial Mortgage Loan Trust Series 1998-1, as created
hereunder.
"Trust Account Property": The Trust Accounts, all amounts and
investments held from time to time in any Trust Account and all proceeds of the
foregoing.
"Trust Accounts": The Certificate Accounts, the Collection Accounts,
the Certificate Insurance Payment Accounts, the Pre-Funding Accounts and the
Capitalized Interest Accounts.
"Trust Fund": The assets subject to this Agreement and assigned to the
Trust, which assets consist of: (i) such Mortgage Loans as from time to time are
subject to this Agreement as listed in the Mortgage Loan Schedule, as the same
may be amended or supplemented from time to time including the addition of
Subsequent Mortgage Loans, the removal of Deleted Loans and the addition of
Qualified Substitute Mortgage Loans, together with the Trustee's Mortgage Loan
Files and the Servicer's Mortgage Loan Files relating thereto and all proceeds
thereof, (ii) all payments of prepayment penalties and principal received in
respect of the Mortgage Loans after the related Cut-Off Date, all payments of
interest and principal due in respect of the Mortgage Loans (including prepaid
monthly payments) from and after the Cut-Off Date, irrespective of when
received, and all interest paid or received on the Mortgage Loans prior to the
Cut-Off Date but relating to any period after the Cut-Off Date, (iii) such
assets as from time to time are identified as Foreclosure Property, (iv) such
assets and funds as are from time to time are deposited in the Collection
Accounts, the Certificate Accounts, the Certificate Insurance Payment Accounts,
the Capitalized Interest Accounts and the Pre-Funding Accounts, including
amounts on deposit in such accounts which are invested in Permitted Investments,
(v) the Depositor's rights under all insurance policies with respect to the
Mortgage Loans and any Insurance Proceeds, (vi) Net Liquidation Proceeds, Post
Liquidation Proceeds and Released Mortgaged Property Proceeds, (vii) all right,
title and interest (but none of the obligations) of the Servicer and the
Transferor in and to the rights and obligations of any Subservicer, pursuant to
any Subservicing Agreement, (viii) all rights, title and interest(but none of
the obligations) of the Depositor in and to the obligations of the Transferor
under the Sale Agreement in which the Depositor acquired the Mortgage Loans from
the Transferor, (ix) all rights, title and interest (but none of the
obligations) of the Transferor in and to the obligation of Life under the
Purchase Agreement, (x) the rights and remedies of the Trustee with respect to
or in connection with such Mortgage Loans, (xi) any other security for such
Mortgage Loans, (xii) all rights under the Custodial Agreement and (xiii) any
and all income, proceeds and payments with respect to the foregoing.
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"Trust Fees and Expenses": As of each Distribution Date, an amount
equal to the Servicing Compensation and the Trustee Fee.
"Trustee": Norwest Bank Minnesota, National Association, a national
banking association, as Trustee under this Agreement acting on behalf of the
Certificateholders and the Certificate Insurer, or any successor Trustee under
this Agreement.
"Trustee Fee": The annual fee payable to the Trustee, calculated and
payable monthly on each Distribution Date pursuant to Section 6.5(b)(i), equal
to one-twelfth of the product of the per annum percentage of .02% percent (two
basis points) and the Certificate Principal Balance of the Group I Certificates
and the Group II Certificates, as applicable.
"Trustee's Mortgage Loan File": As defined in Section 2.5(a).
"Underwriters": Morgan Stanley & Co. Incorporated and PaineWebber, Inc.
"Underwriting Guidelines": The underwriting guidelines of Life a copy
of which is attached as an exhibit to the Purchase Agreement.
"Uninsured Cause": Any cause of damage to a Mortgaged Property such
that the complete restoration of such property is not fully reimbursable by the
hazard insurance policies required to be maintained pursuant to this Agreement.
"United States Person": (i) A citizen or resident of the United States,
(ii) a corporation or partnership including any other entity treated as a
partnership or corporation for purpose of the Code created or organized in, or
under the laws of, the United States or any of the fifty states thereof or the
District of Columbia, (iii) an estate whose income is subject to United States
federal income tax regardless of its source, or (iv) a trust if a court within
the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust.
Section 1.2 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(b) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
given to them under generally accepted accounting principles ("GAAP"). To the
extent that the definitions of accounting terms in this Agreement or in any such
certificate or other document are inconsistent with the meanings of such terms
under generally accepted accounting principles, the definitions contained in
this Agreement or in any such certificate or other document shall control.
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(c) The words "hereof," "herein," "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; Article, Section,
Schedule and Exhibit references contained in this Agreement are references to
Articles, Sections, Schedules and Exhibits in or to this Agreement unless
otherwise specified; and the term "including" shall mean "including without
limitation."
(d) The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred
to herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
ARTICLE II
CONVEYANCE OF THE LOANS
Section 2.1 Conveyance of the Mortgage Loans.
(a) As of the Closing Date, in consideration of the Trustee's
delivery upon the order of the Depositor, of the Certificates to the Depositor
or its designee, the Depositor concurrently with the execution and delivery
hereof, does hereby sell, transfer, assign, set over and otherwise convey to the
Trustee for the benefit of the Certificateholders and the Certificate Insurer,
without recourse, but subject to the other terms and provisions of this
Agreement, all of the right, title and interest of the Depositor in and to the
Trust Fund. The foregoing sale, transfer, assignment, set over and conveyance
does not and is not intended to result in a creation or an assumption by the
Trustee of any obligation of the Depositor, the Transferor, Life or the Servicer
or any other Person in connection with the Trust Fund or under any agreement or
instrument relating thereto except as specifically set forth herein.
(b) As of the Closing Date, the Trustee acknowledges the
conveyance to it of the Trust Fund, including all right, title and interest of
the Depositor in and to the Trust Fund, receipt of which is hereby acknowledged
by the Trustee. Concurrently with such delivery and in exchange therefor, the
Trustee, pursuant to the instructions of the Depositor, has executed,
authenticated and delivered the Certificates to or upon the order of the
Depositor.
Section 2.2 Intended Characterization; Grant of Security Interest.
(a) It is the intention of the parties hereto that the
transfers and assignments contemplated by this Agreement shall constitute a sale
of the Mortgage Loans and the other property specified in Section 2.1(a) from
the Depositor to the Trustee and such property shall not be property of the
Depositor. If the assignment and transfer of the Mortgage Loans and the other
property specified in Section 2.1(a) to the Trustee pursuant to this Agreement
or the conveyance
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of the Mortgage Loans or any of such other property to the Trustee is held or
deemed not to be a sale or is held or deemed to be a pledge of security for a
loan, the Depositor intends that the rights and obligations of the parties shall
be established pursuant to the terms of this Agreement and that, in such event,
(i) the Depositor shall be deemed to have granted and does hereby grant to the
Trustee a first priority security interest in the entire right, title and
interest of the Depositor in and to the Mortgage Loans and all other property
conveyed to the Trustee pursuant to Section 2.1(a) to secure a loan in an amount
equal to the aggregate Certificate Principal Balance of the Class A
Certificates, and (ii) this Agreement shall constitute a security agreement
under applicable law. Within five (5) days after the Closing Date, the Depositor
shall cause to be filed UCC-1 financing statements naming the Trustee as
"secured party" and describing the Mortgage Loans and such other assets being
sold by the Depositor to the Trustee with the office of the Secretary of State
of the state in which the principal place of business of the Depositor is
located. It is the intention of the parties hereto that the conveyance by the
Depositor of the Trust Fund to the Trustee shall constitute a purchase and sale
of such Trust Fund and not a loan.
(b) The Depositor, the Transferor, Life and the Servicer shall
take no action inconsistent with the Trustee's ownership of the Trust Fund and
each shall indicate or shall cause to be indicated in its records and records
held on its behalf that ownership of each Mortgage Loan and the assets in the
Trust Fund are held by the Trustee. In addition, the Depositor, the Transferor,
Life and the Servicer shall each respond to any inquiries from third parties
with respect to ownership of a Mortgage Loan or any other asset in the Trust
Fund by stating that it is not the owner of such asset and that ownership of
such Mortgage Loan or other Trust Fund asset is held by the Trustee on behalf of
the Trust.
Section 2.3 Ownership and Possession of Trustee's Mortgage Loan Files.
Upon the issuance of the Certificates, ownership of each
Mortgage Note, the related Mortgage and the contents of the related Servicer's
Mortgage Loan File and the Trustee's Mortgage Loan File shall be vested in the
Trustee for the benefit of the Certificateholders and the Certificate Insurer.
The Servicer shall take possession of the Servicer's Mortgage Loan Files (other
than items required to be maintained in the Trustee's Mortgage Loan Files) on
behalf of and for the benefit of the Certificateholders and the Certificate
Insurer. The Custodian shall take possession of the Trustee's Mortgage Loan
Files as further contemplated in Section 2.6.
Section 2.4 Books and Records.
The sale of each Mortgage Loan shall be reflected on the Depositor's,
Life's and the Transferor's, as the case may be, balance sheets and other
financial statements as a sale of assets by the Depositor, Life and the
Transferor, as the case may be, under GAAP. The Servicer shall be responsible
for maintaining, and shall maintain, a complete set of books and records for
each Mortgage Loan which shall be clearly marked to reflect the ownership of
each Mortgage Loan by the Trustee for the benefit of the Certificateholders and
the Certificate Insurer. The Custodian, pursuant to the terms of the Custodial
Agreement, shall hold the Trustee's Mortgage Loan Files and maintain books and
records for the Mortgage Loans which shall be clearly marked to reflect the
ownership of each Mortgage Loan by the Trustee for the benefit of the
Certificateholders and the Certificate Insurer.
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Section 2.5 Delivery of Mortgage Loan Documents.
(a) With respect to each Initial Mortgage Loan, on the Closing
Date the Transferor has delivered or caused to be delivered (and with respect to
the Subsequent Mortgage Loans, shall cause to be delivered) to the Custodian as
the designated agent of the Trustee each of the following documents
(collectively, the "Trustee's Mortgage Loan Files"):
(i) The original Mortgage Note, endorsed without
recourse by Life in blank with all prior and intervening endorsements showing a
complete chain of endorsement from originator of the Mortgage Loan to Life;
(ii) The related original Mortgage with evidence of
recording thereon (or, if the original Mortgage has not been returned from the
applicable public recording office, a copy of the Mortgage certified by the
applicable recording office to be a true and complete copy of the original
Mortgage submitted for recording) and, if the Mortgage was executed pursuant to
a power of attorney, the original power of attorney with evidence of recording
thereon (or, if the original power of attorney has not been returned from the
applicable public recording office or is not otherwise available, a copy of the
power of attorney certified by the applicable recording office to be a true and
complete copy of the original power of attorney submitted for recording);
(iii) The original executed Assignment of Mortgage,
acceptable for recording except with respect to any currently unavailable
recording information, from Life to the Trustee in blank;
(iv) The original initial assignment of Mortgage and
any original intervening assignments of Mortgage, with evidence of recording
thereon, showing a complete chain of assignment from originator of the Mortgage
Loan to Life (or if any such assignment of Mortgage has not been returned from
the applicable public recording office, a copy of such assignment of Mortgage
certified by the applicable recording office to be a true and complete copy of
the original Assignment of Mortgage submitted for recording);
(v) the original, or a copy certified by the
Transferor to be a true and correct copy of the original, of each assumption,
modification, written assurance or substitution agreement, if any; and (vi)
evidence of title insurance (which may consist of (A) a copy of the title
insurance policy or (B) a binder thereof or copy of such binder) together with a
certificate from Life that the original Mortgage has been delivered to the title
insurance company that issued such binder for recordation.
(b) With respect to any Mortgage referred to in Section
2.5(a)(ii) as to which the original Mortgage is not available as of the Closing
Date or the Subsequent Transfer Date, as the case may be, and with respect to
any assignment of Mortgage referred to in Section 2.5(a)(iii) or Section
2.5(a)(iv) as to which the original assignment of Mortgage is not available as
of the Closing Date or the Subsequent Transfer Date, as the case may be, the
Transferor shall deliver, prior to the Closing Date or the Subsequent Transfer
Date, as the case may be, a copy of such Mortgage or such assignment of
Mortgage, as the case may be, certified by the Transferor to be a true and
correct copy, to the Trustee and shall also deliver the original Mortgage, or
where the
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original Mortgage is unavailable a copy thereof certified by the applicable
public recording office, and the original assignment of Mortgage, or where the
original assignment of Mortgage is unavailable a copy thereof certified by the
applicable public recording office, to the Trustee within five (5) Business Days
of receipt thereof by the Transferor but in no event later than 120 days
following the date of origination of the related Mortgage Loan or the date of
such assignment of Mortgage to Life. The failure of the Transferor to deliver to
the Trustee (x) any original Mortgage under Section 2.5(a)(ii) (or where the
original is unavailable a copy thereof certified by the applicable public
recording office), or (y) any original assignment of Mortgage under Section
2.5(a)(iii) and (iv) (or where the original is unavailable a copy thereof
certified by the applicable public recording office), shall not be deemed a
breach of this Agreement for any purpose whatsoever until the expiration of such
120 day period.
The Transferor shall promptly (and in no event later than
thirty-five (35) Business Days following the Closing Date and each Subsequent
Transfer Date) submit for recording, at the Transferor's and Life's expense, in
the appropriate public office for real property records, each original
Assignment of Mortgage referred to in Section 2.5(a)(iii), as well as each
original assignment of Mortgage referred to in Section 2.5(a)(iv) that was not
previously submitted for recording; provided, however, that Assignments of
Mortgage shall not be required to be submitted for recording with respect to any
Mortgage Loan if the Trustee, the Certificate Insurer and each of the Rating
Agencies shall have received an Opinion of Counsel reasonably satisfactory to
the Trustee, the Certificate Insurer and each of the Rating Agencies, stating
that, in such counsel's opinion, recording of such Assignments of Mortgage is
not necessary to protect the interest of Trustee in the Mortgages; provided,
further, however, notwithstanding the delivery of any Opinions of Counsel, each
Assignment of Mortgage shall be recorded upon the earliest to occur of (i)
direction by the Certificate Insurer, (ii) the occurrence of an Event of Default
or (iii) the insolvency of, or the institution of insolvency proceedings with
respect to, the related Mortgagor. With respect to any original Assignment of
Mortgage referred to in Section 2.5(a)(iii) as to which the related recording
information is unavailable within five (5) Business Days following the Closing
Date or Subsequent Transfer Date, as the case may be, such original Assignment
of Mortgage shall be submitted for recording within five (5) Business Days after
receipt of such information (or any longer period as approved by the Trustee and
the Certificate Insurer in writing with respect to specific Mortgage Loans upon
the request of the Servicer on behalf of the Transferor pursuant to an Officer's
Certificate in accordance with Accepted Servicing Procedures stating the amount
of time generally required by the applicable recording office to record and
return such documents submitted for recordation) after the Closing Date or
Subsequent Transfer Date. The Transferor shall deliver each recorded Assignment
of Mortgage referred to in Section 2.5(a)(iii) or, where the original is
unavailable, a copy thereof certified by the applicable public recording office
to be a true and correct copy of the original, to the Trustee no later than the
earlier of (i) five (5) Business Days after receipt thereof and (ii) within 120
days of the Closing Date or Subsequent Transfer Date. The failure of the
Transferor to deliver to the Trustee any original assignment of Mortgage under
Section 2.5(a)(iii) and (iv) (or where the original is unavailable a copy
thereof certified by the applicable public recording office), shall not be
deemed a breach of this Agreement for any purpose whatsoever until the
expiration of such 120 day period. In the event that any such assignment of
Mortgage is lost or returned unrecorded because of a defect therein, the
Transferor shall promptly prepare a substitute Assignment of Mortgage or
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cure such defect, as the case may be, and thereafter cause each such
Assignment of Mortgage to be duly recorded.
The Servicer shall promptly upon receipt thereof (and in no
event later than the earlier of (i) five (5) Business Days following such
receipt and (ii) 120 days after the Closing Date or Subsequent Transfer Date, as
the case may be), deliver to the Trustee (a) the original recorded Mortgage in
those instances where a certified copy thereof was delivered to the Trustee; (b)
the original recorded assignment of Mortgage showing a complete chain of
assignment from origination of a Mortgage Loan to Life in those instances where
certified copies thereof were delivered to the Trustee; (c) the original policy
of title insurance or title report, as applicable, or a copy certified by the
Transferor to be a true and correct copy in those instances where a commitment
(binder) (including any marked additions thereto or deletions therefrom) to
issue such policy was delivered to the Trustee; and (d) any other original
documents constituting a part of a Trustee's Mortgage Loan File received with
respect to any Mortgage Loan, including, but not limited to, any original
documents evidencing an assumption or modification of any Mortgage Loan.
All original documents relating to the Mortgage Loans that are
not delivered to the Trustee are and shall be held by the Transferor or the
Servicer, as the case may be, in trust for the benefit of the Trustee on behalf
of the Certificateholders and the Certificate Insurer. In the event that any
such original document is required pursuant to the terms of this Section 2.5 to
be a part of a Trustee's Mortgage Loan File, such document shall be delivered
promptly to the Trustee. Any original document that is not required pursuant to
the terms of this Section 2.5 to be a part of a Trustee's Mortgage Loan File
delivered to or held by the Trustee shall be delivered promptly to the Servicer.
In connection with the delivery of documentation provided by
this Section 2.5, the Life hereby appoints the Trustee its attorney with full
power and authority to act in its stead for the purpose of executing and
certifying assignments and endorsing and certifying promissory notes which form
a part of each Trustee's Mortgage Loan File to cure any deficiencies in such
documentation; provided, however, that the Trustee has no obligation to exercise
any such power unless it has received from the Transferor (i) written
instructions to do so, (ii) reimbursement for any associated expenses, and (iii)
indemnification satisfactory to the Trustee in connection therewith.
If the Transferor has not delivered all required documentation
with respect to any Mortgage Loan within the time periods, if any, specified in
this Agreement, the Transferor shall be required to take action with respect to
such Mortgage Loan as and to the extent provided in Section 2.6.
(c) All recordings required pursuant to this Section 2.5 shall
be accomplished by and at the expense of the Transferor and Life.
Section 2.6 Acceptance by Trustee of the Mortgage Loans; Certain
Substitutions; Initial Certification by Trustee or
Custodian.
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(a) The Trustee agrees to execute and deliver on the Closing
Date an acknowledgment of receipt of the original Mortgage Note for each
Mortgage Loan and receipt of the Trustee's Mortgage Loan File for each Mortgage
Loan received by the Trustee on the Closing Date, and to note any exceptions
from Trustee's Mortgage Loan Files received and the Mortgage Loans listed on the
related Mortgage Loan Schedule and the Trustee agrees to execute and deliver on
any Subsequent Transfer Date an acknowledgment of receipt of the Trustee's
Mortgage Loan File for each Subsequent Mortgage Loan received by the Trustee on
such Subsequent Transfer Date, and to note any exceptions from Trustee's
Mortgage Loan Files received and the Mortgage Loans listed on the related
Mortgage Loan Schedule; such acknowledgments of receipts shall be substantially
in the form of Exhibit E. In addition, the Trustee agrees to acknowledge the
assignment to it of all other assets included in the definition of "Trust Fund"
and the Trust Accounts and declares that it holds and will hold such documents
and the other documents delivered to it constituting the Trustee's Mortgage Loan
Files, and that it holds or will hold all such assets and such other assets
included in the definition of "Trust Fund" that are delivered to it, in trust
for the exclusive use and benefit of all present and future Certificateholders
and the Certificate Insurer.
(b) Within forty-five (45) days following delivery of the
Trustee's Mortgage Files to the Trustee, the Trustee will review each Mortgage
File to ascertain that all required documents set forth in Section 2.5(a) have
been executed and received, and that such documents relate to the Mortgage Loans
identified on the related Mortgage Loan Schedule, and in so doing the trustee
may rely on the purported due execution and genuineness of any signature
thereon. If within such 30-day period (or, with respect to any Qualified
Replacement Mortgage, within forty-five (45) days after the assignment thereof)
the Trustee or the Certificate Insurer finds any document constituting a part of
a Trustee's Mortgage Loan File not to have been executed or received or to be
unrelated to the Mortgage Loans identified in the related Mortgage Loan
Schedule, the Trustee or the Certificate Insurer, as applicable, shall promptly
notify the Trustee, the Seller, the Servicer and the Certificate Insurer in
writing with the details thereof. The Seller shall have a period of sixty (60)
days after such notice within which to correct or cure any such defect. Each
original recorded assignment of a Mortgage shall be delivered to the Trustee
within ten (10) days following the date on which it is returned to the Seller by
the office with which such assignment was filed for recording and within ten
(10) days following receipt by the Trustee of the recorded assignment or the
assignment in recordable form, as the case may be, the Trustee shall review such
assignment to confirm the information specified above in the first sentence of
this Section 2.5(b) with respect to the documents constituting the Mortgage
File. Upon receipt by the Trustee of the recorded assignment or the assignment
in recordable form, as the case may be, such recorded assignment or assignment
in recordable form shall become part of the Trustee's Mortgage Loan File. The
Trustee shall notify the Seller of any defect the Trustee identifies in such
assignment based on such review. The Seller shall have a period of sixty (60)
days following such notice to correct or cure such defect. In the event that the
Seller fails to record an assignment of a Mortgage as herein provided the
Trustee shall, at the Seller's expense, use reasonable efforts to prepare and,
if required hereunder, file such assignments for recordation in the appropriate
real property or other records and the Seller hereby appoints the Trustee as its
attorney-in-fact with full power and authority acting in its stead for the
purpose of such preparation, execution and filing.
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Within forty-five (45) Business Days of the Closing Date or
Subsequent Transfer Date, as applicable, the Trustee shall deliver to the
Transferor, the Depositor, the Certificate Insurer and the Servicer a
certification in the form annexed hereto as Exhibit F, with any applicable
exceptions noted thereon. The Trustee shall not be under any duty or obligation
(i) to inspect, review or examine any such documents, instruments, certificates
or other papers to determine that they are genuine, enforceable, or appropriate
for the represented purpose or that they are other than what they purport to be
on their face or (ii) to determine if any Trustee's Mortgage Loan File should
include any document specified in Section 2.5(a)(v).
After the delivery of the certification, the Trustee shall
provide to the Servicer, the Transferor, the Certificate Insurer and the
Depositor, and the Transferor shall in turn provide to the Trustee, no less
frequently than quarterly, updated certifications, a form of which is attached
hereto as Exhibit G, indicating the then current status of exceptions until all
such exceptions have been eliminated.
If in the process of reviewing the Trustee's Mortgage Loan
Files and making or preparing the certifications referred to above the Trustee
or the Certificate Insurer finds any document or documents constituting a part
of a Trustee's Mortgage Loan File to be missing, has not been received, is not
executed or does not conform to the requirements of Section 2.5 hereof or the
description thereof as set forth in the related Mortgage Loan Schedule, or at
the end of any 360-day period referenced above finds that all recorded
Assignments of Mortgage and all original Mortgages or certified copies thereof
have not been delivered to it, the Trustee or the Certificate Insurer, as
applicable, shall promptly so notify the Transferor, the Depositor, the
Certificate Insurer and the Servicer. In performing any such review, the Trustee
may conclusively rely on the Transferor as to the purported genuineness of any
such document and any signature thereon. It is understood that the scope of the
Trustee's review of the items delivered to the Trustee pursuant to Section 2.5,
unless otherwise expressly stated, shall be limited solely to confirming that
the documents listed in Section 2.5 have been executed and received, relate to
the Mortgage Loans in the Mortgage Loan Schedule and conform as to the loan
number and address and description thereof in the Mortgage Loan Schedule. The
Trustee shall not have any responsibility for determining whether any document
is valid and binding, whether the text of any of any assignment or endorsement
is in proper or recordable form or whether a blanket assignment is permitted in
any applicable jurisdiction. In addition, upon the discovery by the Transferor,
the Depositor, the Servicer, the Certificate Insurer or the Trustee of a breach
of any of the representations and warranties made by the Transferor herein in
respect of any Mortgage Loan which materially and adversely affects the value of
such Mortgage Loan or the interests of the Certificateholders or the Certificate
Insurer in such Mortgage Loan, the Person discovering such breach shall give
prompt written notice to the other Persons set forth in this sentence.
At such time as any Mortgage Loan becomes ninety (90) days
Delinquent, the Servicer shall make, or cause to be made, a reasonable
investigation to determine whether such Mortgage Loan satisfied the
representations and warranties of the Transferor set forth in Section 3.4 as of
the Closing Date; provided, however, that only one such investigation shall be
required for any Mortgage Loan.
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If the Transferor has not delivered all required documentation
with respect to any Mortgage Loan within the time periods specified in this
Agreement (as such may have been extended pursuant to Section 2.5(b)) or if a
material defect exists with respect to any documentation delivered by the
Transferor, the Transferor and Life shall be required to either substitute a
Qualified Substitute Mortgage Loan for such Mortgage Loan or purchase such
Mortgage Loan at the Purchase Price provided in Section 3.5.
(c) The Servicer's Mortgage Loan File shall be held in the
custody of the Servicer for the benefit of, and as agent for and bailee of, the
Certificateholders, the Certificate Insurer and the Trustee as the owner
thereof. It is intended that by the Servicer's agreement pursuant to this
Section 2.6(b) the Trustee shall be deemed to have possession of the Servicer's
Mortgage Loan Files for purposes of Section 9-305 of the Uniform Commercial Code
of the state in which such documents or instruments are located. The Servicer
shall promptly report to the Trustee any failure by it to hold the Servicer's
Mortgage Loan File as herein provided and shall promptly take appropriate action
to remedy any such failure. In acting as custodian of such documents and
instruments, the Servicer agrees not to assert any legal or beneficial ownership
interest in the Mortgage Loans or such documents or instruments. The Servicer
agrees to indemnify the Certificateholders, the Certificate Insurer and the
Trustee for any and all liabilities, obligations, losses, damages, payments,
costs, or expenses of any kind whatsoever which may be imposed on, incurred by
or asserted against the Certificateholders, the Certificate Insurer or the
Trustee as the result of any act or omission by the Servicer relating to the
maintenance and custody of such documents or instruments which have been
delivered to the Servicer; provided, however, that the Servicer will not be
liable for any portion of any such amount resulting from the negligence or
misconduct of any Certificateholder or the gross negligence or misconduct of the
Trustee and provided, further, that the Servicer will not be liable for any
portion of any such amount resulting from the Servicer's compliance with any
instructions or directions consistent with this agreement issued to the Servicer
by the Trustee except to the extent caused by, or related to, the Servicer's
negligence, misconduct or reckless disregard. The Trustee shall have no duty to
monitor or otherwise oversee the Servicer's performance as custodian hereunder.
Section 2.7 Subsequent Transfers.
(a) Subject to the satisfaction of the conditions set forth in
this Article II and pursuant to the terms of the related Subsequent Transfer
Agreement, in consideration of the Trustee's delivery on each Subsequent
Transfer Date to or upon the order of the Transferor of all or a portion of the
balance of funds in the related Pre-Funding Account, the Transferor shall on
such Subsequent Transfer Date sell, transfer, assign, set over and otherwise
convey without recourse to the Trustee, all of its right, title and interest in
and to each Subsequent Mortgage Loan listed on the related Mortgage Loan
Schedule delivered by the Transferor on such Subsequent Transfer Date and all
other assets included or to be included in the Trust Fund in connection with
each Subsequent Mortgage Loan for the benefit of the Certificateholders and the
Certificate Insurer, including (i) all payments of prepayment penalties and
principal received in respect of the Mortgage Loans after the related Cut-Off
Date, all payments of interest and principal due in respect of the Mortgage
Loans (including prepaid monthly payments) from and after the Cut-Off Date,
irrespective of when received, and all interest paid or received on the Mortgage
Loans prior to the Cut-Off Date but relating to any period after the Cut-Off
Date; (ii) any real property that
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secured such Subsequent Mortgage Loan and that has been acquired by foreclosure
or deed in lieu of foreclosure; (iii) all of its interest in any insurance
policies in respect of such Subsequent Mortgage Loan; (iv) the Trustee's
Mortgage Loan File and the Servicer's Mortgage Loan File with respect to such
Subsequent Mortgage Loans; (v) the Transferor's rights, title and interest (but
none of the obligations) under the Purchase Agreement; and (vi) all proceeds of
the foregoing. The transfer by the Transferor to the Trustee of the Subsequent
Mortgage Loans set forth in the related Subsequent Transfer Agreement shall be
absolute and shall be intended by all parties hereto to be treated as a sale by
the Transferor to the Trustee in consideration of the funds released from the
related Pre-Funding Account. If the assignment and transfer of the Subsequent
Mortgage Loans and the other property specified in this Section 2.7(a) from the
Transferor to the Trustee pursuant to this Agreement is held or deemed not to be
a sale or is held or deemed to be a pledge of security for a loan, the
Transferor intends that the rights and obligations of the parties shall be
established pursuant to the terms of this Agreement and that, in such event, (i)
the Transferor shall be deemed to have granted and does hereby grant to the
Trustee as of each Subsequent Transfer Date a perfected, first priority security
interest in the entire right, title and interest of the Transferor in and to the
related Subsequent Mortgage Loans and all other property conveyed to the Trustee
pursuant to this Section 2.7(a) and all proceeds thereof to secure a loan in the
amount of the purchase price of such Subsequent Mortgage Loan, and (ii) this
Agreement shall constitute a security agreement under applicable law. The amount
released to the Transferor from the related Pre-Funding Account shall be one
hundred percent (100%) of the aggregate of the Principal Balances of the
Subsequent Mortgage Loans so transferred. The parties hereto intend that the
Subsequent Mortgage Loans be purchased pursuant to a "fixed price contract" in
effect on the Startup Day in compliance with Section 860G(a)(3)(A)(ii) of the
Code.
(b) The Trustee shall release from the related Pre-Funding
Account funds in an amount equal to one hundred percent (100%) of the aggregate
Principal Balances as of the related Cut-Off Date or Dates of the Subsequent
Mortgage Loans so transferred as described in paragraph (a) above only upon the
satisfaction of each of the following conditions on or prior to the related
Subsequent Transfer Dates:
(i) the Transferor shall have provided the Trustee,
the Certificate Insurer and the Rating Agencies with an Addition Notice, which
notice shall be given not less than four (4) Business Days prior to the related
Subsequent Transfer Date, shall designate the Subsequent Mortgage Loans to be
sold to the Trustee and the aggregate Principal Balances of such Mortgage Loans
as of the related Cut-Off Date or Dates, shall include a Mortgage Loan Schedule
listing the Subsequent Mortgage Loans and shall have provided any other
information reasonably requested by the Certificate Insurer, the Trustee or the
Rating Agencies;
(ii) the Transferor shall have deposited in the
Collection Account all payments of prepayment penalties and principal received
in respect of the Subsequent Mortgage Loans after the related Cut-Off Date, all
payments of interest and principal due in respect of the Subsequent Mortgage
Loans (including prepaid monthly payments) from and after the Cut-Off Date,
irrespective of when received, and all interest paid or received on the
Subsequent Mortgage Loans prior to the Cut-Off Date but relating to any period
after the Cut-Off Date, together with an amount equal to one month's interest at
the related Mortgage Loan Interest Rate on the Principal Balance of such
Subsequent Mortgage Loan unless such Subsequent Mortgage Loan has
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its next payment due prior to the end of the Due Period in which the related
Subsequent Transfer Date occurs;
(iii) the Transferor shall have delivered an
Officer's Certificate to the Trustee and the Certificate Insurer confirming that
as of each Subsequent Transfer Date, the Transferor was not insolvent, nor will
it be made insolvent by such transfer, nor is it aware of any pending
insolvency;
(iv) the related Pre-Funding Period shall not have
ended;
(v) the Transferor shall have delivered to the
Trustee an Officer's Certificate confirming the satisfaction of each condition
precedent specified in this paragraph (b) and in the related Subsequent Transfer
Agreement;
(vi) the Transferor shall have delivered an Officer's
Certificate to the Trustee and the Certificate Insurer confirming that the
representations and warranties of the Transferor pursuant to Section 3.4 (other
than to the extent representations and warranties relate to statistical
information as to the characteristics of the Initial Mortgage Loans in the
aggregate) and pursuant to Section 3.2 are true and correct with respect to the
Transferor and the Subsequent Mortgage Loans, as applicable, as of the
Subsequent Transfer Date;
(vii) the Transferor shall have provided the Trustee
and the Certificate Insurer with Opinions of Counsel relating to the sale of the
Subsequent Mortgage Loans to the Trustee substantially in the form of the
Opinions of Counsel delivered to the Trustee and the Certificate Insurer on the
Closing Date (bankruptcy, corporate and tax opinions);
(viii) the Transferor shall have delivered an
Officer's Certificate to the Trustee, the Certificate Insurer and the Depositor
indicating (a) the Certificate Insurer has consented to the purchase of the
Subsequent Mortgage Loans and (b) the Subsequent Mortgage Loans conform to the
requirements in Section 2.7(d);
(ix) in connection with the transfer and assignment
of the Subsequent Mortgage Loans, the Transferor shall satisfy the document
delivery requirements set forth in Section 2.5.
(c) In connection with each Subsequent Transfer Date and on
the related Distribution Date, the Trustee shall determine (i) the amount and
correct dispositions of the Capitalized Interest Requirements and Pre-Funding
Account Earnings for such Distribution Date in accordance with the provisions of
this Agreement and (ii) any other necessary matters in connection with the
administration of the Pre-Funding Accounts and of the Capitalized Interest
Accounts. In the event that any amounts are released as a result of calculation
error by the Trustee from the Pre-Funding Accounts or from the Capitalized
Interest Accounts, the Trustee shall not be liable therefor, and the Transferor
shall immediately repay such amounts to the Trustee.
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(d) The Obligation of the Trust to purchase the Subsequent
Mortgage Loans on a Subsequent Transfer Date is subject to the following
requirements, the satisfaction of which shall be the responsibility of Life and
the Transferor: (i) such Subsequent Mortgage Loan shall not be 30 or more days
delinquent as of the related Cut-Off Date, (ii) the weighted average combined
LTV of the Subsequent Mortgage Loans shall not exceed 77.22% with respect to
Fixed Rate Pool and 78.76% with respect to the Adjustable Rate Pool, (iii) the
weighted average Mortgage Loan Interest Rate of the Subsequent Mortgage Loans
shall not be less than 9.72% with respect to the Fixed Rate Pool and 9.32% with
respect to the Adjustable Rate Pool, (iv) the weighted average Gross Margin of
the Subsequent Mortgage Loans that are Adjustable Rate Mortgage Loans shall not
be less than 5.64%, (v) the percentage of the Subsequent Mortgage Loans that are
"AX" classified loans (according to the Underwriting Guidelines) shall not be
less than 66.22% with respect to the Fixed Rate Pool and 64.92% with respect to
the Adjustable Rate Pool, (vi) the percentage of Subsequent Mortgage Loans that
are "A-" classified loans (according to the Underwriting Guidelines) shall not
be less than 12.06% with respect to the Fixed Rate Pool and 14.85% with respect
to the Adjustable Rate Pool, (vii) the percentage of Subsequent Mortgage Loans
that are "B" classified loans (according to the Underwriting Guidelines) shall
not be greater than 12.94% with respect to the Fixed Rate Pool and 14.19% with
respect to the Adjustable Rate Pool, (viii) the percentage of Subsequent
Mortgage Loans that are "C" or "CX" classified loans (according to the
Underwriting Guidelines) shall not be greater than 5.80% with respect to the
Fixed Rate Pool and 5.84% with respect to the Adjustable Rate Pool, (ix)
Subsequent Mortgage Loans which are secured by primary residences shall not be
less than 92.92% with respect to the Fixed Rate Pool and 93.68% with respect to
the Adjustable Rate Pool, (x) Subsequent Mortgage Loans which are secured by
single family detach properties shall not be less than 88.18% with respect to
the Fixed Rate Pool and 84.26% with respect to the Adjustable Rate Pool, (xi)
such Subsequent Mortgage Loan shall be a first lien Mortgage, (xii) no
Subsequent Mortgage Loan shall mature later than months after the latest
maturing Initial Mortgage Loan and (xiii) each Subsequent Mortgage Loan that is
a Fixed Rate Mortgage Loan shall be included in the Fixed Rate Pool and each
Subsequent Mortgage Loan that is an Adjustable Rate Mortgage Loan shall be
included in the Adjustable Rate Pool.
Section 2.8. Conveyance of REMIC I Regular Interests; Acceptance of
REMIC II by the Trustee. The Depositor, concurrently with the execution and
delivery hereof, does hereby transfer, assign, set over and otherwise convey to
the Trustee without recourse all the right, title and interest of the Depositor
in and to the REMIC I Regular Interests for the benefit of the
Certificateholders and the Certificate Insurer. The Trustee acknowledges receipt
of the REMIC I Regular Interests and declares that it holds and will hold the
same in trust for the exclusive use and benefit of the Certificate Insurer and
all present and future Certificateholders. The rights of the Certificateholders
to receive distributions from the proceeds of REMIC II and all ownership
interests evidenced or constituted by the Certificates shall be as set forth in
this Agreement.
Section 2.9. Acceptance of REMIC I Regular Interests. The Trustee
acknowledges the assignment to it of the REMIC I Regular Interests and,
concurrently therewith and in exchange therefor, pursuant to the written request
of the Depositor executed by an officer of the Depositor, the Trustee has
executed, authenticated and delivered to or upon the order of the Depositor, the
Class A Certificates, Class IO Certificates and the Residual Interest
Certificates in authorized denominations.
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Section 2.10. Designations Under REMIC Provisions. Principal of and
interest on the REMIC I Regular Interests shall derive from receipts on the
Mortgage Loans and be allocated to the classes of Certificates in the manner set
forth in the following table. The REMIC I Residual Interest constituting a part
of the Residual Interest Certificate shall be paid on each Distribution Date any
amounts in the Certificate Accounts not payable on the REMIC I Regular
Interests. The REMIC I Regular Interests are hereby designated as the "regular
interests," and the REMIC I Residual Interest is hereby designated as the single
class of "residual interests" in REMIC I for the purpose of the REMIC
Provisions. The Class A Certificates and the Class IO Certificates are hereby
designated as the "regular interests" and the REMIC II Residual Interest is
hereby designated as the single class of "residual interests" in REMIC II for
the purpose of the REMIC Provisions. The Closing Date will be the "startup day"
of each of REMIC I and REMIC II within the meaning of Section 860G(a)(9) of the
Code.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
REMIC I
INITIAL REGULAR
REMIC I INTEREST
REGULAR PASS
MORTGAGE CORRESPONDING CLASS OF REMIC I INTEREST THROUGH CORRESPONDING CLASS
LOANS REGULAR INTEREST (3) BALANCE RATE OF CERTIFICATES
- -------------------------------------------------------------------------------------------------------------------------
INTEREST PRINCIPAL INTEREST PRINCIPAL
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fixed Rate REMIC I Regular REMIC I Regular $23,477,000 (1) (4) (4)
Pool Interest 1F Interest 1F
REMIC I Regular REMIC I Regular $211,293,000 (1)
Interest 2F Interest 2F
- -------------------------------------------------------------------------------------------------------------------------
Adjustable REMIC I Regular REMIC I Regular $28,915,600 (2) (4) (4)
Rate Pool Interest 1A Interest 1A
REMIC I Regular REMIC I Regular $12,392,400 (2)
Interest 2A Interest 2A
REMIC I Regular REMIC I Regular $123,922,000 (2)
Interest 3A Interest 3A
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The weighted average Net Mortgage Loan Interest Rate of the Fixed Rate
Mortgage Loans as of the first day of the related Due Period.
(2) The weighted average Net Mortgage Loan Interest Rate of the Adjustable Rate
Mortgage Loans as of the first day of the related Due Period.
(3) Principal is distributed on REMIC I Regular Interest 1F in the same amount
and at the same time as principal is paid on the Class A-6 Certificates.
Principal is distributed (and losses allocated) on REMIC I Regular Interest 2F
in the same amount and at the same time as principal is paid (and losses are
incurred) on the Fixed Rate Pool, other than principal applied to the
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REMIC I Regular Interest 1F, so that the principal balance of the Fixed Rate
Pool remains the same as the principal balance of the REMIC I Regular Interests
1F and 2F.
Principal is distributed on REMIC I Regular Interest 2A in the same
amount and at the same time as principal is paid on the Class A-8 Certificate
until the principal balance of the REMIC I Regular Interest 2A is reduced and
then principal is distributed on REMIC I Regular Interest 1A in the same amount
and at the same time as principal is paid on the Class A-8 Certificate.
Principal is distributed (and losses allocated) on REMIC I Regular Interest 3A
in the same amount and at the same time as principal is paid (and losses are
incurred) on the Adjustable Rate Pool, other than principal applied to the REMIC
I Regular Interest 1A and the REMIC I Regular Interest 2A, so that the principal
balance of the Adjustable Rate Pool remains the same as the principal balance of
the REMIC I Regular Interests 1A, 2A and 3A.
(4) There shall be 10 REMIC II regular interests that represent the Certificates
other than the Residual Interest Certificates. Interest on the Class F-IO
Certificates shall equal interest for 36 Distribution Dates on the REMIC Regular
Interest 1F at a rate of the excess of the interest on the REMIC Regular
Interest 1F over the interest that would accrue on the REMIC Regular Interest 1F
if its Pass-Through Rate was reduced by 6% per annum and after such 36
Distribution Dates shall equal zero.
Interest on the Class A-IO Certificate shall equal the sum of (i)
interest for 9 Distribution Dates on the REMIC Regular Interest 2A at a rate of
the excess of the interest on the REMIC Regular Interest 2A over the interest
that would accrue on the REMIC Regular Interest 2A if its Pass-Through Rate was
reduced by 6% per annum and then interest for the next 6 Distribution Dates on
the REMIC Regular Interest 2A at a rate of the excess of the interest on the
REMIC Regular Interest 2A over the interest that would accrue on the REMIC
Regular Interest 2A if its Pass-Through Rate was reduced by 4% per annum and
thereafter zero plus (ii) interest for 9 Distribution Dates on the REMIC Regular
Interest 1A at rate of the excess of the interest on the REMIC Regular Interest
1A over the interest that would accrue on the REMIC Regular Interest 1A if its
Pass-Through Rate was reduced by 6% per annum, then interest for the next 6
Distribution Dates on the REMIC Regular Interest 1A at a rate of the excess of
the interest on the REMIC Regular Interest 1A over the interest that would
accrue on the REMIC Regular Interest 1A if its Pass Through was reduced by 4%
per annum, then interest for the next 10 Distribution Dates on the REMIC Regular
Interest 1A at a rate of the excess of the interest on the REMIC Regular
Interest 1A over the interest that would accrue on the REMIC Regular Interest 1A
fits Pass Through was reduced by 3% per annum and thereafter zero.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of the Depositor.
The Depositor hereby represents and warrants to the Transferor, Life,
the Trustee, the Certificate Insurer and the Certificateholders that as of the
Closing Date:
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(a) The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, has the
requisite power and authority to own its assets and to transact the business in
which it is currently engaged, and has all licenses necessary to carry on its
business as now being conducted and is licensed, qualified and in good standing
in each state where a Mortgaged Property is located if the laws of such state
require licensing or qualification in order for the Depositor to conduct such
business and to perform its obligations as the Depositor hereunder, and in any
event the Depositor is in compliance with the laws of any such state to the
extent necessary to ensure the enforceability of the related Mortgage Loan, and
had at all relevant times, full power to own its property, to carry on its
business as presently conducted, to enter into and perform its obligations under
this Agreement;
(b) The execution and delivery of this Agreement by the
Depositor and its performance of and compliance with the terms of this Agreement
will not violate the Depositor's certificate of incorporation or by-laws or
constitute a default (or an event that, with notice or lapse of time, or both,
would constitute a default) under, or result in the breach or acceleration of,
any material contract, agreement or other instrument to which the Depositor is a
party or which may be applicable to the Depositor or any of its assets or
results in the creation or imposition of any lien, charge or encumbrance which
would have a material adverse effect upon the Mortgage Loans or any documents or
instruments evidencing or securing the Mortgage Loans;
(c) The Depositor has the full power and authority to enter
into and consummate the transactions contemplated by this Agreement, has duly
and validly authorized the execution, delivery and performance of this
Agreement, and has duly executed and delivered this Agreement. This Agreement,
assuming due authorization, execution and delivery by the Trustee, the
Transferor and Life, constitutes a valid, legal and binding obligation of the
Depositor, enforceable against it in accordance with the terms hereof, except as
such enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or other similar laws relating to or affecting the
rights of creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at law);
(d) The Depositor is not in violation of, and the execution
and delivery of this Agreement by the Depositor and its performance and
compliance with the terms of this Agreement will not constitute a violation with
respect to, any order or decree of any court or any order or regulation of any
federal, state, municipal or governmental agency having jurisdiction, which
violation would materially and adversely affect the condition (financial or
otherwise) or operations of the Depositor or its properties or materially and
adversely affect the performance of its duties hereunder or constitute a
material breach of, or result in the creation or imposition of any liens,
charges or encumbrances upon any of its properties pursuant to any mortgage,
indenture, contract or other agreement to which it is a party or may be bound;
(e) There is no action, suit, proceeding or investigation
pending or, to the knowledge of the Depositor, threatened, before any court,
administrative agency or governmental tribunal against the Depositor or any of
its properties which, either in any one instance or in the aggregate, may result
in any material adverse change in the business, operations, financial condition,
properties or assets of the Depositor, or in any material impairment of the
right or ability of the Depositor to carry on its business substantially as now
conducted, or in any material
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liability on the part of the Depositor, or which would draw into question the
validity of this Agreement, the Mortgage Loans, or of any action taken or to be
taken in connection with the obligations of the Depositor contemplated herein,
or which would impair materially the ability of the Depositor to perform under
the terms of this Agreement or that might prohibit its entering into this
Agreement or the consummation of any of the transactions contemplated hereby;
(f) No consent, approval, authorization, license or order of
any person or any court or governmental agency or body is required for the
execution, delivery and performance by the Depositor of, or compliance by the
Depositor with, this Agreement or the Certificates, or for the consummation of
the transactions contemplated by this Agreement, except for such consents,
approvals, authorizations, licenses and orders, if any, that have been obtained
or filed prior to the Closing Date;
(g) The Depositor has filed or will file the Prospectus and
Prospectus Supplement with the Commission in accordance with Rule 424(b) under
the Securities Act;
(h) The Depositor is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business and its
obligations hereunder; it will not be rendered insolvent by the execution and
delivery of this Agreement or its obligations hereunder; no petition of
bankruptcy (or similar insolvency proceeding) has been filed by or against the
Depositor prior to the date hereof;
(i) The Depositor did not sell the Mortgage Loans to the
Trustee with any intent to hinder, delay or defraud any of its creditors; the
Depositor will not be rendered insolvent as a result of the sale of the Mortgage
Loans to the Trustee;
(j) As of the Closing Date, the Depositor had good title to,
and was the sole owner of, each Mortgage Loan free and clear of any Lien other
than any such Lien released simultaneously with the sale contemplated herein,
and, immediately upon each transfer and assignment herein contemplated, the
Depositor will have taken all steps necessary so that the Trustee will have good
title to, and will be the sole owner of, each Mortgage Loan free and clear of
any lien;
(k) The Depositor acquired title to each of the Mortgage Loans
in good faith, without notice of any adverse claim and immediately prior to the
sale and assignment of the Mortgage Loans, had good and marketable title to each
Mortgage Loan, subject to no prior lien, claim, mortgage or other encumbrance or
other interest of any nature;
(l) No Officers' Certificate, statement, report or other
document prepared by the Depositor and furnished or to be furnished by it
pursuant to this Agreement or in connection with the transactions contemplated
hereby contains any untrue statement of material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading;
(m) The Depositor is not required to be registered as an
"investment company" under the Investment Company Act of 1940, as amended;
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(n) The transfer, assignment and conveyance of the Mortgage
Notes and the Mortgages by the Depositor pursuant to this Agreement are not
subject to the bulk transfer laws or any similar statutory provisions in effect
in any applicable jurisdiction; and
(o) The transactions contemplated hereby are in the ordinary
course of business of the Depositor.
Section 3.2 Representations and Warranties of the Transferor.
The Transferor hereby represents and warrants to the Trustee, the
Certificateholders, the Certificate Insurer, Life and the Depositor that as of
the Closing Date or the Subsequent Transfer Date, as the case may be (except as
otherwise specifically provided herein):
(a) The Transferor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, has the
requisite power and authority to own its assets and to transact the business in
which it is currently engaged and has all licenses necessary to carry on its
business as now being conducted and is licensed, qualified and in good standing
in each state where a Mortgaged Property is located if the laws of such state
require licensing or qualification in order for the Transferor to conduct such
business and to perform its obligations as the Transferor hereunder, and in any
event the Transferor is in compliance with the laws of any such state to the
extent necessary to ensure the enforceability of the related Mortgage Loans, and
had at all relevant times, full corporate power to originate or purchase the
Mortgage Loans, to own its property, to carry on its business as presently
conducted and to enter into and perform its obligations under this Agreement;
(b) The execution and delivery of this Agreement by the
Transferor and its performance of and compliance with the terms of this
Agreement will not violate the Transferor's certificate of incorporation or
by-laws or constitute a default (or an event that, with notice or lapse of time,
or both, would constitute a default) under, or result in the breach or
acceleration of, any material contract, agreement or other instrument to which
the Transferor is a party or which may be applicable to the Transferor or any of
its assets;
(c) The Transferor has the full power and authority to enter
into and consummate all transactions contemplated by this Agreement to be
consummated by it, has duly authorized the execution, delivery and performance
of this Agreement, and has duly executed and delivered this Agreement. This
Agreement, assuming due authorization, execution and delivery by the Servicer,
the Trustee and the Depositor, constitutes a valid, legal and binding obligation
of the Transferor, enforceable against it in accordance with the terms hereof,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws relating to or
affecting the rights of creditors generally, and by general equity principles
(regardless of whether such enforcement is considered in a proceeding in equity
or at law);
(d) The Transferor is not in violation of, and the execution
and delivery of this Agreement by the Transferor and its performance and
compliance with the terms of this Agreement will not constitute a violation with
respect to, any order or decree of any court or any
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order or regulation of any federal, state, municipal or governmental agency
having jurisdiction, which violation would materially and adversely affect the
condition (financial or otherwise) or operations of the Transferor or its
properties or materially and adversely affect the performance of its duties
hereunder, or constitute a material breach of, or result in the creation or
imposition of any lien, charge or encumbrance upon any of its properties
pursuant to any mortgage, indenture, contract or other agreement to which it is
a party or may be bound.
(e) There is no action, suit, proceeding or investigation
pending or, to the knowledge of the Transferor, threatened, before any court,
administrative agency or governmental tribunal against the Transferor or any of
its properties which, either in any one instance or in the aggregate, may result
in any material adverse change in the business, operations, financial condition,
properties or assets of the Transferor, or in any material impairment of the
right or ability of the Transferor to carry on its business substantially as now
conducted, or in any material liability on the part of the Transferor, or which
would draw into question the validity of this Agreement, the Mortgage Loans, or
of any action taken or to be taken in connection with the obligations of the
Transferor contemplated herein, or which would impair materially the ability of
the Transferor to perform under the terms of this Agreement or that might
prohibit its entering into this Agreement or the consummation of any of the
transactions contemplated hereby;
(f) No consent, approval, authorization or order of any person
or any court or governmental agency or body is required for the execution,
delivery and performance by the Transferor of, or compliance by the Transferor
with, this Agreement or the Certificates, or for the consummation of the
transactions contemplated by this Agreement, except for such consents,
approvals, authorizations, licenses and orders, if any, that have been obtained
or filed prior to the Closing Date;
(g) The Transferor acquired title to the Mortgage Loans in
good faith, without notice of any adverse claim;
(h) The collection practices, if any, used by the Transferor
with respect to the Mortgage Loans have been, in all material respects, legal,
proper, prudent and customary in the non-conforming mortgage servicing business;
(i) No Officers' Certificate, statement, report or other
document prepared by the Transferor and furnished or to be furnished by it
pursuant to this Agreement or in connection with the transactions contemplated
hereby contains any untrue statement of material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading;
(j) The Transferor is duly licensed where required as a
"licensee" or is otherwise qualified in each state in which it transacts
business and is not in default of such state's applicable laws, rules and
regulations, except where the failure to so qualify or such default would not
have a material adverse effect on the ability of the Transferor to conduct its
business or perform its obligations hereunder;
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(k) The Transferor does not believe, nor does it have any
reason or cause to believe, that it cannot perform each and every covenant
contained in this Agreement. The Transferor is solvent and the sale of the
Mortgage Loans by the Transferor pursuant to the terms of this Agreement will
not cause the Transferor to become insolvent and the Transferor is not aware of
any pending insolvency of it. The sale of the Mortgage Loans by the Transferor
pursuant to the terms of this Agreement was not undertaken with the intent to
hinder, delay or defraud any of the Transferor's creditors;
(l) Neither this Agreement nor the information contained in
the Prospectus Supplement under the captions "Summary--The Mortgage Loans,"
"Risk Factors," "Underwriting Guidelines" and "Life Bank" contains an untrue
statement of a material fact or omits to state any material fact necessary to
make the statements contained herein or therein, in light of the circumstances
under which they were made, not misleading;
(m) The Transferor is not required to be registered as an
"investment company" under the Investment Company Act of 1940, as amended;
(n) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Transferor, and the
transfer, assignment and conveyance of the Mortgage Notes and the Mortgages by
the Transferor pursuant to this Agreement are not subject to the bulk transfer
or any similar statutory provisions in effect in any applicable jurisdiction;
(o) The Mortgage Loans are not intentionally selected in a
manner so as to affect adversely the interests of the Certificate Insurer, the
Depositor or any transferee of the Depositor (including the Trustee);
(p) The Transferor has determined that it will treat the
disposition of the Mortgage Loans pursuant to this Agreement as a sale for
accounting and tax purposes;
(q) The Transferor has not dealt with any broker or agent or
anyone else that may be entitled to any commission or compensation in connection
with the sale of the Mortgage Loans to the Depositor other than to the Depositor
or an affiliate thereof; and
(r) The consideration received by the Transferor upon the sale
of the Mortgage Loans under this Agreement constitutes fair consideration and
reasonably equivalent value for the Mortgage Loans.
It is understood and agreed that the representations and
warranties set forth in this Section 3.2 shall survive delivery of the
respective Trustee's Mortgage Loan Files to the Custodian (as the agent of the
Trustee) and shall inure to the benefit of the Certificateholders, the
Certificate Insurer, the Depositor, the Servicer and the Trustee. Upon discovery
by any of the Transferor, the Depositor, the Servicer, the Certificate Insurer
or the Trustee of a breach of any of the foregoing representations and
warranties that materially and adversely affects the value of any Mortgage Loan
or the interests of the Certificateholders or the Certificate Insurer therein,
the person discovering such breach shall give prompt written notice (but in no
event later than two
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(2) Business Days following such discovery) to the others of such Persons. The
obligations of the Transferor and Life set forth in Section 3.5 to cure any
breach or to substitute for or repurchase an affected Mortgage Loan shall
constitute the sole remedies available to the Certificateholders, the Depositor,
the Life and the Trustee respecting a breach of the representations and
warranties contained in this Section 3.2.
Section 3.3 Representations, Warranties and Covenants of the Servicer.
The Servicer hereby represents and warrants to and covenants with the
Trustee, the Certificateholders, the Certificate Insurer, the Depositor and the
Transferor that as of the Closing Date or as of such date specifically provided
herein:
(a) The Servicer is a federal savings bank duly organized,
validly existing and in good standing under the laws of the United States of
America or has the requisite power and authority to own its assets and to
transact the business in which it is currently engaged and has all licenses
necessary to carry on its business as now being conducted and is licensed,
qualified and in good standing in each state where a Mortgaged Property is
located if the laws of such state require licensing or qualification in order
for the Servicer to conduct such business and to perform its obligations as the
Servicer hereunder and is in any event in compliance with the laws of each state
in which the failure so to qualify would have a material adverse effect on (a)
its business, properties, assets, or conditions (financial or other), (b) its
performance of its obligations under this Agreement, (c) the value or
marketability of the Mortgage Loans and (d) the ability to foreclose on the
related Mortgage Properties.
(b) The execution and delivery of this Agreement by the
Servicer and its performance of and compliance with the terms of this Agreement
will not violate the Servicer's charter or bylaws or constitute a default (or an
event that, with notice or lapse of time, or both, would constitute a default)
under, or result in the breach or acceleration of, any material contract,
agreement or other instrument to which the Servicer is a party or which may be
applicable to the Servicer or any of its assets;
(c) The Servicer has the full power and authority to enter
into and consummate all transactions contemplated by this Agreement, has duly
authorized the execution, delivery and performance of this Agreement, and has
duly executed and delivered this Agreement. This Agreement, assuming due
authorization, execution and delivery by the Depositor, the Transferor and the
Trustee, constitutes a valid, legal and binding obligation of the Servicer,
enforceable against it in accordance with the terms hereof, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or other similar laws relating to or affecting the
rights of creditors generally and those of creditors of a federal savings bank,
and by general equity principles (regardless of whether such enforcement is
considered in a proceeding in equity or at law);
(d) The Servicer is not in violation of, and the execution and
delivery of this Agreement by the Servicer and its performance and compliance
with the terms of this Agreement will not constitute a violation with respect
to, any order or decree of any court or any order or regulation of any federal,
state, municipal or governmental agency having jurisdiction, which
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violation would materially and adversely affect the condition (financial or
otherwise) or operations of the Servicer, materially and adversely affect the
performance of its duties hereunder or impair the ability of the Trustee (or the
Servicer as agent of the Trustee) to realize on the Mortgage Loans or impair the
value of the Mortgage Loans;
(e) There is no action, suit, proceeding or investigation
pending or, to the knowledge of the Servicer, threatened, before any court,
administrative agency or government tribunal against the Servicer that, either
in any one instance or in the aggregate, may result in any material adverse
change in the business, operations, financial condition, properties or assets of
the Servicer, or in any material impairment of the right or ability of the
Servicer to carry on its business substantially as now conducted, or in any
material liability on the part of the Servicer, or which would draw into
question the validity of this Agreement, the Mortgage Loans, or of any action
taken or to be taken in connection with the obligations of the Servicer
contemplated herein, or which would impair materially the ability of the
Servicer to perform under the terms of this Agreement or that might prohibit its
entering into this Agreement or the consummation of any of the transactions
contemplated hereby;
(f) The Servicer will examine each Subservicing Agreement and
will be familiar with the terms thereof. Each designated Subservicer and the
terms of each Subservicing Agreement will be required to comply with the
provisions of Section 5.7. The terms of any Subservicing Agreement will not be
inconsistent with any of the provisions of this Agreement;
(g) No consent, approval, authorization or order of any person
or any court or governmental agency or body is required for the execution,
delivery and performance by the Servicer of, or compliance by the Servicer with,
this Agreement or the Certificates, or for the consummation of the transactions
contemplated by this Agreement, except for such consents, approvals,
authorizations and orders, if any, that have been obtained prior to the Closing
Date;
(h) The collection practices used by the Servicer with respect
to the Mortgage Loans have been, in all material respects, legal, proper,
prudent and customary in the nonconforming mortgage servicing business;
(i) The transactions contemplated by this Agreement are in the
ordinary course of business of the Servicer;
(j) The Servicer is duly licensed where required as a
"licensee" or is otherwise qualified in each state in which it transacts
business and is not in default of such state's applicable laws, rules and
regulations, except where the failure to so qualify or such default would not
have a material adverse effect on the ability of the Servicer to conduct its
business or perform its obligations hereunder;
(k) The Servicer is an Eligible Servicer and services mortgage
loans in accordance with Accepted Servicing Procedures;
(l) Neither this Agreement nor the information contained in
the Prospectus Supplement under the captions "Risk Factors - Underwriting
Guidelines" and "Life Bank"
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contains any untrue statement or alleged untrue statement of a material fact or
omits to state any material fact necessary to make the statements contained
herein or therein, in light of the circumstances under which they will be made,
not misleading;
(m) No Officers' Certificate, statement, report or other
document prepared by the Servicer and furnished or to be furnished by it
pursuant to this Agreement or in connection with the transactions contemplated
hereby contains any untrue statement of material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading;
(n) The Servicer is solvent and will not be rendered insolvent
as a result of the performance of its obligations pursuant to this Agreement and
is not aware of any pending insolvency;
(o) The Servicer has not waived any default, breach, violation
or event of acceleration under any Mortgage Note or the related Mortgage;
(p) The Servicer is not required to be registered as an
"investment company" under the Investment Company Act of 1940, as amended.
(q) This Agreement, the Purchase Agreement and the Custodial
Agreement were each approved by the board of directors or loan committee of
Life, which approval is reflected in the minutes of said board or committee, and
will be continuously maintained from the time of its execution as an official
record of Life.
The Servicer agrees to (1) conduct a detailed inventory and assessment
of all of its computer hardware and software systems and imbedded chip
technology ("Information Systems") and of its business and operations that could
be adversely affected by its failure to be Year 2000 compliant on a timely
basis; (2) develop, fund and implement a project plan to make its Information
Systems Year 2000 Compliant, and complete implementation of the plan and the
remediation and testing of its Information Systems no later than March 31, 1999;
and (3) initiate a process to determine whether its material suppliers, vendors
and customers have taken meaningful steps to become Year 2000 Compliant on a
timely basis, and develop and implement a feasible contingency plan to ensure
the uninterrupted and unimpaired operation of its business in the event of the
failure of the systems of such third parties or of its own Information Systems
no later than March 31, 1999. For purposes of this covenant, "Year 2000
Compliant" means that the Servicer's Information Systems that are material to
its operations and financial condition will be able to properly process date
sensitive functions before, on and after December 31, 1999.
The Servicer will also provide to the Trustee and the Certificate
Insurer, promptly upon receipt, copies of any reports or management letters
relating to its Year 2000 compliance project and contingency plans, either
internally prepared or prepared by outside consultants or its accountants, and
will provide such other information relating to its Year 2000 compliance project
and contingency plans, either internally prepared or prepared by outside
consultants or its accountants, and will provide such other information relating
to its Year 2000 compliance efforts,
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and deliver such certifications by its officers relating thereto as the bank in
its discretion may deem appropriate.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.3 shall survive delivery of the respective
Trustee's Mortgage Loan Files to the Trustee and shall inure to the benefit of
the Depositor, the Certificate Insurer, the Certificateholders and the Trustee.
Upon discovery by any of the Transferor, the Depositor, the Servicer, the
Certificate Insurer or the Trustee of a breach of any of the foregoing
representations, warranties and covenants that materially and adversely affects
the value of any Mortgage Loan or the interests of the Certificateholders
therein, the Person discovering such breach shall give prompt written notice
(but in no event later than two (2) Business Days following such discovery) to
the others of such Persons. The obligations of the Servicer set forth in (x)
Section 3.5 to cure any breach or to purchase an affected Mortgage Loan and (y)
Section 10.1(a) to indemnify and hold harmless the Depositor, the Transferor,
the Trustee, the Certificate Insurer and the Certificateholders shall constitute
the sole remedies available to the Transferor, the Certificateholders, the
Certificate Insurer, the Depositor, or the Trustee respecting a breach of the
representations, warranties and covenants contained in this Section 3.3.
Section 3.4 Representations and Warranties regarding Individual
Mortgage Loans.
Each of Life and the Transferor hereby represents and warrants to the
Depositor, the Trustee, the Certificate Insurer and the Certificateholders, with
respect to each Mortgage Loan, as of the Closing Date and, with respect to each
Subsequent Mortgage Loan, as of the related Subsequent Transfer Date (except as
otherwise expressly stated):
(a) The information set forth in each Mortgage Loan Schedule
is complete, true and correct;
(b) The information to be provided by Life or the Transferor
to the Depositor, the Trustee or the Certificate Insurer in connection with a
Subsequent Mortgage Loan will be true and correct in all material respects at
the date or dates respecting which such information is furnished;
(c) Each Mortgage is a valid first or second lien on a fee
simple (or its equivalent under applicable state law) estate in the real
property securing the amount owed by the Mortgagor under the Mortgage Note
subject only to (i) the lien of current real property taxes and assessments
which are not delinquent, (ii) any related first mortgage loan, (iii) covenants,
conditions and restrictions, rights of way, easements and other matters of
public record as of the date of recording of such Mortgage, such exceptions
appearing of record being acceptable to mortgage lending institutions generally
in the area wherein the related Mortgaged Property is located and specifically
referred to in the title insurance policy delivered to the originator of the
Mortgage Loan and referred to or otherwise considered in the appraisal obtained
in connection with the origination of the related Mortgage Loan and (iv) other
matters to which like properties are commonly subject which do not materially
interfere with the benefits of the security intended to be provided by such
Mortgage or the use, enjoyment, value or marketability of the related Mortgaged
Property;
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(d) Immediately prior to the sale of the Mortgage Loans to the
Transferor (i) Life was the sole owner and holder of each Mortgage Loan, (ii)
each Mortgage Loan was not otherwise assigned or pledged, (iii) Life had good,
indefeasible and marketable title thereto, (iv) Life had full right to transfer
and sell the Mortgage Loan therein to the Transferor under the Purchase
Agreement free and clear of any encumbrance, equity interest, participation
interest, lien, pledge, charge, claim or security interest, and (v) Life had
full right and authority subject to no interest or participation of, or
agreement with, any other party, to sell and assign each Mortgage Loans to the
Transferor under the Purchase Agreement and following the sale of each Mortgage
Loan by the Transferor to Depositor and from the Depositor, the Trustee will own
each such Mortgage Loan free and clear of any encumbrance, equity interest,
participation interest, lien, pledge, charge, claim or security interest (other
than the lien created by this Agreement); immediately prior to the sale of the
Mortgage Loan to the Depositor (i) the Transferor was the sole owner and holder
of each Mortgage Loan, (ii) each Mortgage Loan was not otherwise assigned or
pledged, (iii) the Transferor had good, indefeasible and marketable title
thereto, (iv) the Transferor had full right to transfer and sell the Mortgage
Loan therein to the Depositor hereunder free and clear of any encumbrance,
equity interest, participation interest, lien, pledge, charge, claim or security
interest, and (v) the Transferor had full right and authority subject to no
interest or participation of, or agreement with, any other party, to sell and
assign each Mortgage Loan to the Depositor hereunder and following the sale of
each Mortgage Loan by the Depositor, the Trustee will own such Mortgage Loan
free and clear of any encumbrance, equity interest, participation interest,
lien, pledge, charge, claim or security interest (other than the lien created by
this Agreement);
(e) As of the Initial Cut-Off Date, no Mortgage Loan will have
a payment of principal or interest 60 or more days past due and no more than
1.93%of the Mortgage Loans had a payment of principal or interest that remained
unpaid for 30 or more days past the date the same was due in accordance with the
related Mortgage Note without regard to applicable grace periods;
(f) No Fixed Rate Mortgage Loan has a Mortgage Loan Interest
Rate less than 6.400% per annum and the weighted average interest rate of the
Fixed Rate Pool as of September 13, 1998 was 9.718%; and no Adjustable Rate
Mortgage Loan has a Lifetime Floor less than 2.750%per annum and the weighted
average interest rate of the Adjustable Rate Mortgage Loans as of September 13,
1998 was 9.026%;
(g) At origination, no Mortgage Loan had an original term to
maturity of greater than 360 months;
(h) As of September 13, 1998, the weighted average remaining
term to maturity of the Fixed Rate Mortgage Loans was 265.3 months and the
weighted average remaining term to maturity of the Adjustable Rate Mortgage
Loans was 354 months;
(i) There is no mechanics' or similar lien or claim for work,
labor, or material (and no rights are outstanding that under law could give rise
to such lien) affecting the Mortgaged Property; the related Mortgaged Property
is not subject to any lien or claim which is or may be a lien prior to, or equal
or coordinate with, the lien of such Mortgage, except those which are insured
against by the title insurance policy referred to in (ff) below;
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(j) There is no delinquent tax or assessment lien against any
Mortgaged Property;
(k) Such Mortgage Loan, the Mortgage, and the Mortgage Note,
including the obligation of the Mortgagor to pay the unpaid principal of and
interest on the Mortgage Note, are each not subject to any right of rescission
(or any such rescission right has expired in accordance with applicable law),
set-off, counterclaim, or defense, including the defense of usury, nor will the
operation of any of the terms of the Mortgage Note or the Mortgage, or the
exercise of any right thereunder, render either the Mortgage Note or the
Mortgage unenforceable, in whole or in part, or subject to any right of
rescission, set-off, counterclaim, or defense, including the defense of usury,
and no such right of rescission, set-off, counterclaim, or defense has been
asserted with respect thereto;
(l) The Mortgaged Property is free of material damage and is
in good repair, and there is no pending or threatened proceeding for the total
or partial condemnation of the Mortgaged Property;
(m) The Transferor and Life have not received a notice of
default of any first mortgage loan secured by the Mortgaged Property which has
not been cured by a party other than the Transferor or Life;
(n) Each Mortgage Note and Mortgage are in substantially the
forms previously provided to the Trustee and the Certificate Insurer;
(o) No Mortgage Loan had, at the date of origination, a
combined Loan-to-Value Ratio in excess of 100%, and the weighted average
combined Loan-to-Value ratio of the Initial Fixed Rate Mortgage Loans as of the
Initial Cut-Off Date was 77.22% and the weighted average combined Loan-to-Value
ratio of the Initial Adjustable Rate Mortgage Loans as of the Initial Cut-Off
Date was 78.76%;
(p) The Mortgage Loan was not originated in a program in which
the amount of documentation in the underwriting process was limited in
comparison to the originator's normal documentation requirements for similar
type loans;
(q) No more than the following percentages of the Fixed Rate
Pool and the Adjustable Rate Pool by Principal Balance as of September 13, 1998
were secured by Mortgaged Properties located in the following states
<TABLE>
<CAPTION>
Percent of Percent of
Principal Balance Principal Balance
of Fixed Rate Pool of Adjustable Rate Pool
State
-----
<S> <C> <C>
California 25% 18%
North Carolina 5% 3%
Utah 6% 18%
Florida 6% 4%
Michigan 4% 16%
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
Texas 7% --
Colorado -- 7%
</TABLE>
(r) The Mortgage Loans were not selected by Life for sale to
the Transferor and by the Transferor for sale to the Depositor on any basis
adverse to the Depositor or the Certificate Insurer relative to the portfolio of
similar mortgage loans of Life and the Transferor;
(s) None of the Mortgage Loans constitutes a lien on leasehold
interests;
(t) Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof adequate
for the realization against the related Mortgaged Property of the benefits of
the security including (A) in the case of a Mortgage designated as a deed of
trust, by trustee's sale and (B) otherwise by judicial foreclosure. To the best
of the Transferor's knowledge, there is no homestead or other exemption
available to the related Mortgagor which would materially interfere with the
right to sell the related Mortgaged Property at a trustee's sale or the right to
foreclose the related Mortgage. The Mortgage contains customary and enforceable
provisions for the acceleration of the payment of the Principal Balance of such
Mortgage Loan in the event all or any part of the related Mortgaged Property is
sold or otherwise transferred without the prior written consent of the holder
thereof;
(u) Each Mortgage Loan has been closed and the proceeds of
such Mortgage Loan have been fully disbursed, including reserves set aside by
the Transferor, there is no requirement for, and Life and the Transferor shall
not make any, future advances thereunder. Any future advances made prior to the
Cut-Off Date have been consolidated with the principal balance secured by the
Mortgage, and such principal balance, as consolidated, bears a single interest
rate and single repayment term reflected on the applicable Mortgage Loan
Schedule. The Principal Balance as of the Cut-Off Date does not exceed the
original principal amount of such Mortgage Loan. Any and all requirements as to
completion of any on-site or off site improvements and as to disbursements of
any escrow funds therefor have been complied with. All costs, fees, and expenses
incurred in making, or recording such Mortgage Loan have been paid and the
related Mortgagor is not entitled to any refund of any amounts paid or due under
the related Mortgage Note or Mortgage;
(v) All Mortgage Loans were originated in compliance with
Life's Underwriting Guidelines, and conform in all material respects to the
description thereof set forth in the Prospectus Supplement;
(w) The terms of the Mortgage and Mortgage Note have not been
impaired, waived, altered, or modified in any respect, except by a written
instrument which has been recorded, if necessary, to protect the interest of the
Trustee and the Certificate Insurer and which has been delivered to the Trustee.
The substance of any such alteration or modification is or as to Subsequent
Mortgage Loans will be reflected on the applicable Mortgage Loan Schedule and,
to the extent necessary, has been or will be approved by (i) the insurer under
the applicable mortgage title insurance policy, and (ii) the insurer under any
other insurance policy required hereunder for such Mortgage Loan where such
insurance policy requires approval and the failure to procure approval would
impair coverage under such policy;
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(x) No instrument of release, satisfaction, subordination,
rescission, waiver, alteration, or modification has been executed in connection
with such Mortgage Loan, no Mortgage Loan has been satisfied, canceled,
subordinated or rescinded, in whole or in part, and no Mortgage Loan has been
released, in whole or in part, except in connection with an assumption agreement
which has been approved by the insurer under any insurance policy required
hereunder for such Mortgage Loan where such policy requires approval and the
failure to procure approval would impair coverage under such policy, and which
is part of the Trustee's Mortgage Loan File and has been delivered to the
Trustee, and the terms of which are reflected in the applicable Mortgage Loan
Schedule;
(y) There is no default, breach, violation, or event of
acceleration existing under the Mortgage or the Mortgage Note and no event
which, with the passage of time or with notice and the expiration of any grace
or cure period, would constitute such a default, breach, violation or event of
acceleration, and the Transferor has not waived any such default, breach,
violation or event of acceleration. All taxes, governmental assessments
(including assessments payable in future installments), insurance premiums,
water, sewer, and municipal charges, leaseholder payments, or ground rents which
previously became due and owing in respect of or affecting the related Mortgaged
Property have been paid. The Transferor has not advanced funds, or induced,
solicited, or knowingly received any advance of funds by a party other than the
Mortgagor, directly or indirectly, for the payment of any amount required by the
Mortgage or the Mortgage Note;
(z) All of the improvements which were included for the
purposes of determining the Appraised Value of the Mortgaged Property were
completed at the time that such Mortgage Loan was originated and lie wholly
within the boundaries and building restriction lines of such Mortgaged Property.
No improvements on adjoining properties encroach upon the Mortgaged Property. No
improvement located on or being part of the Mortgaged Property is in violation
of any applicable zoning law or regulation. All inspections, licenses, and
certificates required to be made or issued with respect to all occupied portions
of the Mortgaged Property (including all such improvements which were included
for the purpose of determining such Appraised Value) and, with respect to the
use and occupancy of the same, including but not limited to certificates of
occupancy and fire underwriters certificates, have been made or obtained from
the appropriate authorities and the Mortgaged Property is lawfully occupied
under applicable law;
(aa) There do not exist any circumstances or conditions with
respect to the Mortgage, the Mortgaged Property, the Mortgagor, or the
Mortgagor's credit standing that can be reasonably expected to cause such
Mortgage Loan to become delinquent or adversely affect the value or
marketability of such Mortgage Loan, other than any such circumstances or
conditions permitted under Life's Underwriting Guidelines;
(bb) All parties which have had any interest in the Mortgage,
whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period
in which they held and disposed of such interest, were) (i) in compliance with
any and all applicable licensing requirements of the laws of the state wherein
the Mortgaged Property is located and (ii) (A) organized under the laws of such
state, (B) qualified to do business in such state, (C) federal
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savings associations or national banks, (D) not doing business in such state, or
(E) not required to qualify to do business in such state;
(cc) The Mortgage Note, the Mortgage and every other
agreement, if any, executed by the applicable Mortgagor in connection with such
Mortgage Loan, are genuine, and each is the legal, valid and binding obligation
of the maker thereof, enforceable in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or other similar laws affecting the enforcement of creditors' rights
generally and except that the equitable remedy of specific performance and other
equitable remedies are subject to the discretion of the courts. All parties to
the Mortgage Note, the Mortgage and every other such agreement had legal
capacity to execute the Mortgage Note, the Mortgage and every other such
agreement and convey the estate therein purported to be conveyed, and the
Mortgage Note, the Mortgage and every other such agreement have been duly and
properly executed by such parties or pursuant to a valid power-of-attorney that
has been recorded with the Mortgage;
(dd) The transfer of the Mortgage Note and the Mortgage as and
in the manner contemplated by this Agreement is sufficient either (i) fully to
transfer to the Depositor all right, title, and interest of the Transferor
thereto as note holder and mortgagee or (ii) to grant to the Depositor the
security interest referred to in Section 2.2. The Mortgage has been duly
assigned and the Mortgage Note has been duly endorsed. The assignment of
Mortgage delivered to the Trustee pursuant to Section 2.5(a) is in recordable
form and is acceptable for recording under the laws of the applicable
jurisdiction. The endorsement of the Mortgage Note, the delivery to the Trustee
of the endorsed Mortgage Note, and such Assignment of Mortgage, and the delivery
of such Assignment of Mortgage for recording to, and the due recording of such
assignment of Mortgage in, the appropriate public recording office in the
jurisdiction in which the Mortgaged Property is located are 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 Transferor, and are
sufficient to prevent any other sale, transfer, assignment, pledge, or
hypothecation of the Mortgage Note and Mortgage by the Transferor from being
enforceable;
(ee) Any and all requirements of any federal, state, or local
law including usury, truth-in-lending, real estate settlement procedures,
consumer credit protection, equal credit opportunity, or disclosure laws
applicable to such Mortgage Loan have been complied with, and the Servicer shall
maintain in its possession, available for the Trustee's inspection, and shall
deliver to the Trustee or its designee upon demand, evidence of compliance with
all such requirements. The consummation of the transactions contemplated by this
Agreement will not cause the violation of any such laws;
(ff) Such Mortgage Loan is covered by an ALTA mortgage title
insurance policy or such other generally used and acceptable form of policy and
such Mortgage Loan issued by and the valid and binding obligation of a title
insurer qualified to do business in the jurisdiction where the Mortgaged
Property is located, insuring Life and the Transferor, and its successors and
assigns, as to the first or second, as applicable, priority lien, of the
Mortgage in the original principal amount of such Mortgage Loan. The assignment
to the Trustee of Life's and the Transferor's interest in such mortgage title
insurance policy does not require the consent of or
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notification to the insurer. Such mortgage title insurance policy is in full
force and effect and will be in full force and effect and inure to the benefit
of the Trustee upon the consummation of the transactions contemplated by this
Agreement. No claims have been made under such mortgage title insurance policy
and none of Life, the Transferor or any prior holder of the Mortgage has done,
by act or omission, anything which would impair the coverage of such mortgage
title insurance policy;
(gg) All improvements upon the Mortgaged Property are insured
against loss by fire, hazards of extended coverage, and such other hazards as
are customary in the area where the Mortgaged Property is located pursuant to
insurance policies conforming to the requirements of 5.8. If the Mortgaged
Property at origination was located in an area identified on a flood hazard
boundary map or flood insurance rate map issued by the Federal Emergency
Management Agency as having special flood hazards (and such flood insurance has
been made available), such Mortgaged Property was covered by flood insurance at
origination. Each individual insurance policy is the valid and binding
obligation of the insurer, is in full force and effect, and will be in full
force and effect and inure to the benefit of the Trustee upon the consummation
of the transactions contemplated by this Agreement, and contain a standard
mortgagee clause naming the originator of such Mortgage Loan, and its successors
and assigns, as mortgagee and loss payee. All premiums thereon have been paid.
The Mortgage obligates the Mortgagor to maintain all such insurance at the
Mortgagor's cost and expense, and upon the Mortgagor's failure to do so,
authorizes the holder of the Mortgage to obtain and maintain such insurance at
the Mortgagor's cost and expense and to seek reimbursement therefor from the
Mortgagor, and none of Life, the Transferor or any prior holder of the Mortgage
has acted or failed to act so as to impair the coverage of any such insurance
policy or the validity, binding effect, and enforceability thereof;
(hh) If the Mortgage constitutes a deed of trust, a trustee,
authorized and duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in such Mortgage, and
no fees or expenses are or will become payable by the Trustee or the
Certificateholders to the trustee under the deed of trust, except in connection
with a trustee's sale after default by the Mortgagor;
(ii) The Mortgaged Property consists of one or more parcels of
real property separately assessed for tax purposes. Each Mortgaged Property is
improved by a one-to-four-family residential dwelling, which does not include
(i) a unit in a cooperative apartment, (ii) a property constituting part of a
syndication, (iii) a time share unit, (iv) a property held in trust, (v) a
mobile home, (vi) a manufactured dwelling, (vii) a log-constructed home, or
(viii) a recreational vehicle, and each such Mortgaged Property does not
constitute other than real property under applicable state law;
(jj) There exist no material deficiencies with respect to
escrow deposits and payments, if such are required, for which customary
arrangements for repayment thereof have not been made or which the Transferor
expects not to be cured, and no escrow deposits or payments of other charges or
payments due the Transferor have been capitalized under the Mortgage or the
Mortgage Note;
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(kk) Such Mortgage Loan was not originated at a below market
interest rate. Such Mortgage Loan does not have a shared appreciation feature,
or other contingent interest feature;
(ll) The origination and collection practices used by Life and
the Transferor with respect to such Mortgage Loan have been in all respects
legal, proper, prudent, and customary in the mortgage origination and servicing
business;
(mm) The Mortgagor has, to the extent required by applicable
law, executed a statement to the effect that the Mortgagor has received all
disclosure materials, if any, required by applicable law with respect to the
making of fixed-rate mortgage loans. The Servicer shall maintain or cause to be
maintained such statement in the Servicer's Mortgage Loan File;
(nn) All amounts received by the Transferor with respect to
such Mortgage Loan after the Cut-Off Date (other than interest due prior to such
Cut-Off Date) and required to be deposited in the related Certificate Account or
related Collection Account have been so deposited in the related Certificate
Account or related Collection Account and are, as of the Closing Date, or will
be as of the Subsequent Transfer Date, as applicable, in the related Certificate
Account or related Collection Account;
(oo) Any appraisal report with respect to a Mortgaged Property
contained in the Mortgage File was signed prior to the approval of the
application for such Mortgage Loan by a qualified appraiser, duly appointed by
the originator of such Mortgage Loan, who had no interest, direct or indirect,
in the Mortgaged Property or in any loan made on the security thereof and whose
compensation is not affected by the approval or disapproval of such application;
(pp) When measured by the Principal Balances as of September
13, 1998, the Mortgagors with respect to at least 92.92% of the Initial Fixed
Rate Mortgage Loans and 93.68% of the Initial Adjustable Rate Mortgage Loans
represented at the time of origination that the Mortgagor would occupy the
Mortgaged Property as the Mortgagor's primary residence;
(qq) The Mortgage Loan Interest Rate and Monthly Payment with
respect to the Adjustable Rate Mortgage Loans are adjusted in accordance with
the terms of the related Mortgage Note. All required notices of interest rate
and payment amount adjustments have been sent to the Mortgagor on a timely basis
and the computations of such adjustments were properly calculated. Installments
of interest on the Adjustable Rate Mortgage Loans are subject to change due to
the adjustments to the Mortgage Loan Interest Rate on each Interest Adjustment
Date, with interest calculated and payable in arrears, sufficient to amortize
the Mortgage Loan fully by the stated maturity date over the original term of
the Mortgage Loan. All Mortgage Loan Interest Rate adjustments have been made in
strict compliance with state and federal law and the terms of the related
Mortgage Note. Any interest required to be paid pursuant to state and local law
has been properly paid and credited. As of the Initial Cut-Off Date, for each
Adjustable Rate Mortgage Loan, the Lifetime Cap is not lower than approximately
10% per annum, the Lifetime Floor is not lower than approximately 2% per annum,
the Gross Margin is not less than approximately 1.00%, the related Mortgage Note
does not provide for negative amortization, limits in the amount of monthly
payments or a conversion feature, the Mortgage Loan Interest Rate is subject
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to adjustment on each Interest Adjustment Date to equal the sum of the Index
plus the applicable Gross Margin, subject to rounding, the Periodic Rate Cap,
the applicable Lifetime Floor and the applicable Lifetime Cap on each Interest
Adjustment Date;
(rr) To the best of Life's and the Transferor's knowledge,
there exists no violation of any local, state, or federal environmental law,
rule or regulation in respect of the Mortgaged Property which violation has or
could have a material adverse effect on the market value of such Mortgaged
Property. The Transferor and Life have no knowledge of any pending action or
proceeding directly involving the related Mortgaged Property in which compliance
with any environmental law, rule or regulation is in issue; and, to the best of
Life's and the Transferor's knowledge, nothing further remains to be done to
satisfy in full all requirements of each such law, rule or regulation
constituting a prerequisite to the use and employment of such Mortgaged
Property;
(ss) Each Mortgage Loan conforms, and all such Mortgage Loans
in the aggregate conform, to the individual and aggregate descriptions thereof
in the Prospectus Supplement;
(tt) The Transferor and Life further represent and warrant
to the Trustee, the Certificate Insurer and the Certificateholders that as of
the applicable Cut-Off Date all representations and warranties set forth in
clauses (a) through (ss) above and clause (uu) through (ddd) below are correct
in all material respects as to each Subsequent Mortgage Loan, and (i) each
Subsequent Mortgage Loan is not 30 or more days contractually delinquent as
of the its Cut-Off Date; (ii) the original term to maturity of each Subsequent
Mortgage Loan does not exceed 360 months; (iii) the purchase of the Subsequent
Mortgage Loans is consented to by the Certificate Insurer and will not cause the
Rating Agencies to lower the ratings assigned to the Class A Certificates
and the Class IO Certificates (without regard to the Certificate Insurance
Policies); (iv) none of the Subsequent Mortgage Loans are second liens; (v)
the weighted average CLTV for the Subsequent Mortgage Loans is not greater
than 77.22% for the Fixed Rate Pool and 78.76% for the Adjustable Rate Pool;
(vi) the weighted average coupon rate for the Subsequent Mortgage Loans is
no less than 9.72% for the Fixed Rate Pool and 9.32% for the Adjustable Rate
Pool; (vii) the adjustable rate prefunded portfolio should have a weighted
average margin of no less than 5.64%; (viii) the percentage of "AX" classified
Subsequent Mortgage Loans (according to Life's current underwriting guidelines)
shall be no less than 66.22% for the Fixed Rate Pool and 64.92% for the
Adjustable Rate Pool; (ix) the percentage of "A-" classified Subsequent Mortgage
Loans (according to Life's current underwriting guidelines) shall be no less
than 12.06% for the Fixed Rate Pool and 14.85% for the Adjustable Rate Pool;
(x) the percentage of "B" classified Subsequent Mortgage Loans (according to
Life's current underwriting guidelines) shall be no less than 12.94% for the
Fixed Rate Pool and 14.19% for the Adjustable Rate Pool; (xi) the percentage
of "C" or "CX" classified Subsequent Mortgage Loans (according to Life's current
underwriting guidelines) shall be no less than 5.80% for the Fixed Rate Pool and
5.84% for the Adjustable Rate Pool; (xii) Subsequent Mortgage Loans which are
secured by primary residences shall be no less than 92.92% of the Fixed Rate
Pool and 93.68% of the Adjustable Rate Pool; (xiii) Subsequent Mortgage Loans
which are secured by single family detached properties shall be no less than
88.18% of the Fixed Rate Pool and 84.26% of the Adjustable Rate Pool; and
(xiv) the Subsequent Mortgage Loans comply with the requirements of Section
2.7(d);
(uu) To the best of Life's and the Transferor's knowledge, no
error, omission, misrepresentation, negligence, fraud or similar occurrence with
respect to a Mortgage Loan has taken place on the part of any person, including
the Mortgagor, any appraiser, a builder or
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developer, or any other party involved in the origination of the Mortgage Loan
or in the application of any insurance in relation to such Mortgage Loan;
(vv) Each Mortgage Note held by the Trustee is the sole
original Mortgage Note and no copies exist which are not stamped duplicate;
(ww) Each Mortgage was recorded, and all subsequent
assignments of the original Mortgage have been recorded in the appropriate
jurisdictions wherein such recordation is necessary to perfect the lien thereof
as against creditors of Life and the Transferor;
(xx) No more than 0.79% of the Fixed Rate Pool, and 1.02% of
the Adjustable Rate Pool are secured by properties sharing a single ZIP code;
(yy) Except with respect to the Mortgage Loans which are
Balloon Loans, with respect to each Mortgage Loan, the payments required of the
related Mortgagor are and will be such that the Mortgage Loan will fully
amortize over its term;
(zz) No Mortgage Loan contains any provisions pursuant to
which payments are paid or partially paid with funds deposited in any separate
account established by Life, the Transferor, the Mortgagor or anyone else on
behalf of the Mortgagor, or paid by any source other than the Mortgagor. No
Mortgage Loan contains any other similar provision which may constitute a
"buydown" provision. No Mortgage Loan is a graduated payment mortgage loan. No
Mortgage Loan has a shared appreciation or other contingent interest feature;
(aaa) The Mortgage Loans are not being transferred with any
intent to hinder, delay or defraud any creditor;
(bbb) No Mortgagor has or will have a claim or defense under
any express or implied warranty or otherwise with respect to goods or services
provided under such Mortgage Loan;
(ccc) The Mortgage and the Mortgage Note contain the entire
agreement of the parties and all obligations of the seller or subcontractor
under the related Mortgage Loan, and no other agreement defines, modifies, or
expands the obligations of the seller or subcontractor under the Mortgage Loan;
(ddd) With respect to the second lien Mortgage Loans:
(i) the Transferor and Life have no knowledge that the
Mortgagor has received notice from the holder of the prior mortgage that such
prior mortgage is in default;
(ii) no consent from the holder of the prior mortgage is
needed for the creation of the second lien Mortgage or, if required, has been
obtained and is in the related Trustee's Mortgage Loan File;
(iii) if the prior mortgage has a negative amortization,
the combined Loan-to-Value Ratio was determined using the maximum loan amount of
such prior mortgage;
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(iv) the related first mortgage loan encumbering the
related Mortgaged Property does not have a mandatory future advance provision;
(v) the related prior loan requires equal monthly
payments; and
(vi) the maturity date of the Mortgage Loan is prior
to the maturity date of the related prior lien if such provides for a balloon
payment;
(eee) Each Mortgage Loan provides for, and each Subsequent
Mortgage Loan and Qualified Substitute Mortgage Loan will provide for, total
non-contingent principal payments that at least equal the issue price of such
Mortgage Loan, Subsequent Mortgage Loan or Qualified Substitute Mortgage Loan;
and
(fff) Each Mortgage Loan is a "qualified mortgage" as defined
in Section 860G(a)(3) of the Code (or any successor statute thereto).
Section 3.5 Purchase and Substitution.
(a) It is understood and agreed that the representations and
warranties set forth in Article III shall survive the conveyance of the Mortgage
Loans to the Trustee and the delivery of the Certificates to the
Certificateholders. Upon discovery by the Depositor, the Servicer, the
Transferor, the Custodian, the Trustee, the Certificate Insurer, or any
Certificateholder of (i) a breach of any of such representations and warranties
which materially and adversely affects the value of the Mortgage Loans or the
interest of the Certificate Insurer or the Certificateholders, or which
materially and adversely affects the interests of the Certificateholders or the
Certificate Insurer in the related Mortgage Loan in the case of a representation
and warranty relating to a particular Mortgage Loan (notwithstanding that such
representation and warranty was made to the Transferor's or the Servicer's best
knowledge), or (ii) a breach of the representation and warranty in Section
3.4(eee), the Person discovering such breach shall give prompt written notice to
the others or such Person. The Transferor or Life shall within 60 days of the
earlier of its discovery or its receipt of notice of any breach of a
representation or warranty, promptly cure such breach in all material respects.
If, however, within 60 days after the earlier of the Transferor's or Life's
discovery of such breach or the Transferor's or Life's receiving notice thereof
such breach has not been remedied by either the Transferor or Life and, solely
in the case of clause (i) above, such breach materially and adversely affects
the interests of the Certificate Insurer or the Certificateholders in, or the
value of, the related Mortgage Loan (the "Defective Mortgage Loan"), the
Transferor or Life shall on or before the Determination Date next succeeding the
end of such 60-day period either (i) remove such Defective Mortgage Loan from
the Trust Fund (in which case it shall become a "Deleted Loan") and substitute
one or more Qualified Substitute Mortgage Loans in the manner and subject to the
conditions set forth in this Section 3.5 or (ii) purchase such Defective
Mortgage Loan at a purchase price equal to the Purchase Price (as defined below)
by depositing such Purchase Price in the Collection Account, provided, that,
such substitution is effected not later than the date which is two (2) years
after the Closing Date or at such later date, if the Trustee and the Certificate
Insurer receive a Nondisqualification Opinion. In addition, pursuant to the
Purchase Agreement, Life shall be obligated to indemnify the Trustee, the Trust,
the Certificateholders and the Certificate Insurer for any claims or damages
arising out
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of a breach by Life of representations or warranties regarding the Mortgage
Loans. The Transferor or Life shall provide the Servicer (if the certificate is
to come from the Transferor), the Trustee, the Certificate Insurer and the
Depositor with a certification of a Responsible Officer on the Determination
Date next succeeding the end of such 60-day period indicating whether the
Transferor is purchasing the Defective Mortgage Loan or substituting in lieu of
such Defective Mortgage Loan a Qualified Substitute Mortgage Loan or Loans. With
respect to the purchase of a Defective Mortgage Loan pursuant to this Section
3.5, the "Purchase Price" shall be equal to the Principal Balance of such
Defective Mortgage Loan as of the date of purchase, plus the greater of (x) all
accrued and unpaid interest on the Principal Balance of such Defective Mortgage
Loan up until such Determination Date computed at the applicable Mortgage Loan
Interest Rate and (y) 30 days' interest thereon, computed at the Mortgage Loan
Interest Rate plus the amount of any unreimbursed Periodic Advances and
Servicing Advances and Nonrecoverable Advances made by the Servicer with respect
to such Defective Mortgage Loan, which Purchase Price shall be deposited in the
related Collection Account (after deducting therefrom any amounts received in
respect of such repurchased Defective Mortgage Loan and being held in the
related Collection Account for future distribution to the extent such amounts
represent recoveries of principal not yet applied to reduce the related
Principal Balance or interest (net of the Servicing Fee) for the period from and
after the Due Date in the Due Period most recently ended prior to such
Determination Date).
Any substitution of Mortgage Loans pursuant to this Section 3.5(a) and
Section 2.6(a) shall be accompanied by payment by the Transferor or Life of the
Substitution Adjustment, if any, to be deposited in the related Collection
Account. For purposes of calculating the Available Collection Amount for any
Distribution Date, amounts paid by the Transferor or Life pursuant to this
Section 3.5 in connection with the repurchase or substitution of any Defective
Mortgage Loan that are on deposit in the Collection Account as of the
Determination Date for such Distribution Date shall be deemed to have been paid
during the related Due Period and shall be transferred to the related
Certificate Account as part of the related Available Distribution Amount.
As to any Deleted Mortgage Loan for which the Transferor or
Life substitutes a Qualified Substitute Mortgage Loan or Loans, the Transferor
or Life shall effect such substitution by delivering (i) to the Trustee and the
Certificate Insurer a certification executed by a Responsible Officer of the
Transferor to the effect that (A) the Substitution Adjustment has been credited
to the related Collection Account; (B) that no default by Life shall have
occurred and be continuing; and (C) that all conditions precedent to such
substitution have been satisfied and (ii) to the Trustee (or the Custodian on
behalf of the Trustee, as applicable) the documents constituting the Trustee's
Mortgage Loan File for such Qualified Substitute Mortgage Loan or Loans.
(b) Life shall deposit in the related Collection Account all
payments received in connection with such Qualified Substitute Mortgage Loan or
Loans after the date of such substitution. Monthly Payments received with
respect to Qualified Substitute Mortgage Loans on or before the date of
substitution will be retained by the Transferor (or Life, if substituted by
Life). The Trustee will be entitled to all payments received on the Deleted Loan
on or before the date of substitution, and the Transferor or Life, as the case
may be, shall thereafter be entitled to retain all amounts subsequently received
in respect of such Deleted Loan. The Transferor or Life shall give written
notice to the Depositor, the Servicer, the Certificate Insurer and the Trustee
that
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such substitution has taken place, and the Servicer shall amend the Mortgage
Loan Schedule to reflect (i) the removal of such Defective Mortgage Loan from
the terms of this Agreement and (ii) the substitution of the Qualified
Substitute Mortgage Loan or Loans. The Transferor or Life shall promptly deliver
to the Depositor, the Servicer and the Trustee, a copy of the amended Mortgage
Loan Schedule. Upon such substitution, such Qualified Substitute Mortgage Loan
or Loans shall be subject to the terms of this Agreement in all respects, and
Life and the Transferor shall be deemed to have made with respect to such
Qualified Substitute Mortgage Loan or Loans, as of the date of substitution, the
covenants, representations and warranties set forth in Section 3.4. On the date
of such substitution, the Transferor or Life, as the case may be, will deposit
into the related Collection Account an amount equal to the related Substitution
Adjustment, if any.
(c) It is understood and agreed that, except as otherwise
provided in the Insurance Agreement or the Purchase Agreement, the obligations
of the Transferor and Life set forth in this Section 3.5 to cure, purchase or
substitute for a Defective Mortgage Loan constitute the sole remedies of the
Depositor, the Trustee, the Certificate Insurer and the Certificateholders
hereunder respecting a breach of the representations and warranties contained in
Section 3.4. Any cause of action against the Transferor or Life relating to or
arising out of a defect in a Trustee's Mortgage Loan File as contemplated by
Section 2.6 or against Life or the Transferor relating to or arising out of a
breach of any representations and warranties made in Section 3.4 shall accrue as
to any Mortgage Loan upon (i) discovery of such defect or breach by any Person
and notice thereof to the Transferor or Life or notice thereof by the Transferor
or Life to the Trustee, (ii) failure by the Transferor or Life to cure such
defect or breach or to purchase or substitute such Mortgage Loan as specified
above, and (iii) demand upon the Transferor by the Trustee, the Certificate
Insurer or the Majority Certificateholders, as applicable, for all amounts
payable in respect of such Mortgage Loan.
(d) Neither the Depositor nor the Trustee shall have any 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 3.5 or the
eligibility of any Mortgage Loan for purposes of this Agreement.
(e) With respect to all Defective Mortgage Loans or other
Mortgage Loans repurchased by the Transferor or Life pursuant to this Agreement,
upon the deposit of the Purchase Price therefor in the related Collection
Account, the Trustee shall assign to the Transferor or Life, as the case may be,
without recourse, representation or warranty, all the Trustee's right, title and
interest in and to such Defective Mortgage Loan or Loans, which right, title and
interest were conveyed to the Trustee pursuant to Section 2.1.
(f) In connection with any Mortgage Loan that Life is required
to purchase or replace, Life shall deliver to the Trustee and the Certificate
Insurer, a Nondisqualification Opinion to the effect that such purchase or
substitution will not cause (x) any federal tax to be imposed on the Trust,
including any Federal tax imposed on "prohibited transactions" under Section
860F(a)(1) of the Code or on "contributions after the start-up day" under
Section 860G(d)(1) of the Code or (y) any portion of the Trust to fail to
qualify as a REMIC at any time that any Certificate is outstanding. In the event
that such opinion indicates that a repurchase or substitution will result in the
imposition of a prohibited transaction tax, give rise to net taxable income or
be
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deemed a contribution to the REMIC after the "start-up day," Life shall not be
required to repurchase or replace any such Mortgage Loan unless and until the
Servicer, the Trustee or the Certificate Insurer has determined there is an
actual or reasonably foreseeable default with respect thereto; and
(g) Life shall give prompt written notice to the Certificate
Insurer and the Rating Agencies of any repurchase or substitution made pursuant
to this Section 3.5 or Section 2.6 hereof.
ARTICLE IV
THE CERTIFICATES
Section 4.1 The Certificates.
The Certificates shall be substantially in the forms annexed hereto as
Exhibit A-l through Exhibit A-11. All Certificates shall be executed by manual
or facsimile signature on behalf of the Trustee by an authorized officer and
authenticated by the manual or facsimile signature of an authorized officer.
Certificates bearing the signatures of individuals who were at the time of the
execution thereof the authorized officers of the Trustee shall bind the Trustee,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the delivery of such Certificates or did not hold such offices
at the date of such Certificates. All Certificates issued hereunder shall be
dated the date of their authentication.
Section 4.2 Registration of Transfer and Exchange of Certificates.
(a) The Trustee, as registrar, shall cause to be kept for the
Trust a register (the "Certificate Register") in which, subject to such
reasonable regulations as it may prescribe, the Trustee shall provide for the
registration of related Certificates and the registration of a Transfer or
exchange of related Certificates. The Trustee is hereby appointed registrar for
the purpose of registering and transferring of Certificates as herein provided.
The Certificate Insurer shall be entitled to inspect and copy the Certificate
Register and the records of the Trustee relating to the Certificates during
normal business hours upon reasonable notice.
(b) All Certificates issued upon any registration of Transfer
or exchange of Certificates with the Trustee 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.
(c) 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 Certificateholder thereof or his attorney duly authorized in
writing.
(d) No service charge shall be made to a Certificateholder for
any registration of Transfer or exchange of Certificates, but the Trustee may
require payment of a sum sufficient
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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.
(e) It is intended that the Class A Certificates and Class IO
Certificates be registered so as to participate in a global book-entry system
with the DTC, as set forth herein. Each Class of Class A Certificates and Class
IO Certificates shall, except as otherwise provided in the next paragraph, be
initially issued in the form of a single fully registered Certificate with a
denomination equal to the related Original Certificate Principal Balance or
original Notional Amount, as applicable. Upon initial issuance, the ownership of
each such Certificate shall be registered in the related Certificate Register in
the name of Cede & Co., or any successor thereto, as nominee for DTC. The
Depositor and the Trustee are hereby authorized to execute and deliver the
Representation Letter with the DTC. With respect to Certificates registered in
the related Certificate Register in the name of Cede & Co., as nominee of the
DTC, the Depositor, Life, the Servicer, the Transferor, the Certificate Insurer
and the Trustee shall have no responsibility or obligation to Direct or Indirect
Participants (as defined in the Representation Letter) or beneficial owners for
which the DTC holds Certificates from time to time as a depository. Without
limiting the immediately preceding sentence, the Depositor, Life, the Servicer,
the Transferor and the Trustee shall have no responsibility or obligation with
respect to (i) the accuracy of the records of the DTC, Cede & Co., or any Direct
or Indirect Participant with respect to any Ownership Interest, (ii) the
delivery to any Direct or Indirect Participant or any other Person, other than a
Certificateholder, of any notice with respect to the Certificates or (iii) the
payment to any Direct or Indirect Participant or any other Person, other than a
Certificateholder, of any amount with respect to any distribution of principal
or interest on the Certificates. No Person other than a Certificateholder shall
receive a certificate evidencing such Certificate. Upon delivery by the DTC to
the Trustee of written notice to the effect that the DTC 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 Certificateholders appearing as Certificateholders at the close of
business on a Record Date, the name "Cede & Co." in this Agreement shall refer
to such new nominee of the DTC.
(f) In the event that (i) the DTC or the Servicer advises the
Trustee and the Certificate Insurer in writing that the DTC is no longer willing
or able to discharge properly its responsibilities as nominee and depository
with respect to the Certificates and the Servicer or the DTC is unable to locate
a qualified successor or (ii) the Trustee at its sole option, after notice to
the Certificate Insurer, elects to terminate the book-entry system through the
DTC, the Certificates shall no longer be restricted to being registered in the
Certificate Register in the name of Cede & Co. (or a successor nominee) as
nominee of the DTC. At that time, the Servicer may determine that the Class A
Certificate or the Class IO 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 Servicer, or such depository's agent or designee but,
if the Servicer does not select such alternative global book-entry system, then
the Certificates may be registered in whatever name or names Certificateholders
transferring Certificates shall designate, in accordance with the provisions
hereof; provided, however, that any such reregistration shall be at the expense
of the Servicer.
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(g) Notwithstanding any other provision of this Agreement to
the contrary, so long as any Certificate is registered in the name of Cede &
Co., as nominee of DTC, all distributions of principal or interest on such
Certificates as the case may be and all notices with respect to such
Certificates as the case may be shall be made and given, respectively, in the
manner provided in the Representation Letter.
(h) Subject to the restrictions set forth in this Agreement,
upon surrender for registration of Transfer of any Certificate at the office or
agency of the Trustee located in Minneapolis, Minnesota, the Trustee shall
execute, authenticate and deliver in the name of the designated transferee or
transferees, a new Certificate of the same Class and Percentage Interest and
dated the date of authentication by the Trustee. At the option of the
Certificateholders, Certificates may be exchanged for other Certificates of
Authorized Denominations of a like aggregate Percentage Interest, upon surrender
of the Certificates to be exchanged at such office. Whenever any Certificates
are so surrendered for exchange, the Trustee shall execute, authenticate and
deliver the Certificates which the Certificateholder making the exchange is
entitled to receive. No service charge shall be made for any Transfer or
exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any Transfer or exchange of Certificates. All Certificates
surrendered for Transfer and exchange shall be canceled and destroyed by the
Trustee in accordance with the Trustee's standard procedures.
(i) No transfer, sale, pledge or other disposition of any
Residual Interest Certificate shall be made unless such disposition is made
pursuant to an effective registration statement under the Securities Act, and
effective registration or qualification under applicable state securities laws
or "Blue Sky" laws, or is made in a transaction that does not require such
registration or qualification. None of the Servicer, the Depositor, Life, the
Transferor or the Trustee is obligated under this Agreement to register the
Residual Interest Certificates under the Securities Act, or any other securities
law or to take any action not otherwise required under this Agreement to permit
the transfer of the Residual Interest Certificates without such registration or
qualification. Any such Certificateholder desiring to effect such transfer
shall, and does hereby agree to, indemnify the Trustee, the Depositor, Life, the
Transferor, the Servicer and the Certificate Insurer against any liability that
may result if the transfer is not exempt or is not made in accordance with such
applicable federal and state laws. Promptly after receipt by an indemnified
party under this paragraph of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this paragraph, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party otherwise than under this paragraph. In case any such
action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to appoint counsel reasonably satisfactory to such indemnified party to
represent the indemnified party in such action; provided, however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are in conflict with or contrary to the interests of the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to defend such action on behalf of such indemnified
party or
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parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to appoint counsel to defend such action and approval
by the indemnified party of such counsel, the indemnifying party will not be
liable to such indemnified party under this paragraph for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof unless (i) the indemnified party shall have employed separate
counsel in accordance with the proviso of the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for the
expenses of more than one separate counsel for any indemnified party), (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party. Under no circumstances shall the indemnified party enter
into a settlement agreement with respect to any lawsuit, claim or other
proceeding without the prior written consent of the indemnifying party.
(j) Each Person who has or who acquires any Ownership Interest
in a Residual Interest Certificate shall be deemed by the acceptance or
acquisition of such Ownership Interest to have agreed to be bound by the
following provisions and to have irrevocably appointed the Servicer or its
designee as its attorney-in-fact to negotiate the terms of any mandatory sale
under subclause (viii) below and to execute all instruments of transfer and to
do all other things necessary in connection with any such sale, and the rights
of each Person acquiring any Ownership Interest in a Residual Interest
Certificate are expressly subject to the following provisions:
(i) Each Person holding or acquiring any Ownership Interest
in a Residual Interest Certificate shall be a Permitted
Transferee and shall promptly notify the Trustee of any
change or impending change in its status as a Permitted
Transferee.
(ii) In connection with any proposed Transfer of any
Ownership Interest in a Residual Interest Certificate,
the Trustee shall require delivery to it, and shall not
register the Transfer of any Residual Interest
Certificate until its receipt of, an affidavit and
agreement (a "Transfer Affidavit and Agreement")
attached hereto as Exhibit H from the proposed
Transferee, representing and warranting, among other
things, that such Transferee is a Permitted Transferee,
that it is not acquiring its Ownership Interest in the
Residual Interest Certificate that is the subject of
the proposed Transfer as a nominee, trustee or agent
for any Person that is not a Permitted Transferee, that
for so long as it retains its Ownership Interest in a
Residual Interest Certificate, it will endeavor to
remain a Permitted Transferee, and that it has reviewed
the provisions of this Section 4.2(j) and agrees to be
bound by them.
(iii) Notwithstanding the delivery of a Transfer Affidavit
and Agreement by a proposed Transferee under clause
(ii) above, if the Trustee has actual knowledge that
the proposed Transferee is not a Permitted
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Transferee, no Transfer of an Ownership Interest in a
Residual Interest Certificate to such proposed
Transferee shall be effected.
(iv) Each Person holding or acquiring any Ownership Interest
in a Residual Interest Certificate shall agree (x) to
require a Transfer Affidavit and Agreement from any
other Person to whom such Person attempts to transfer
its Ownership Interest in a Residual Interest
Certificate and (y) not to transfer its Ownership
Interest unless it provides a certificate (attached
hereto as Exhibit I) to the Trustee stating that, among
other things, it has no actual knowledge that such
other Person is not a Permitted Transferee.
(v) Each Person holding or acquiring an Ownership Interest
in a Residual Interest Certificate, by purchasing an
Ownership Interest in such Certificate, agrees to give
the Trustee written notice that it is a "pass-through
entity" within the meaning of Section 860E(e)(6)(B) of
the Code in which a Person other than a Non- United
States Person or Disqualified Organization holds an
interest immediately upon acquiring an Ownership
Interest in a Residual Interest Certificate, if it is,
or is holding an Ownership Interest in a Residual
Interest Certificate on behalf of, a "pass-through
entity."
(vi) The Trustee will register the Transfer of any Residual
Interest Certificate only if it shall have received the
Transfer Affidavit and Agreement. In addition, no
Transfer of a Residual Interest Certificate shall be
made unless the Trustee shall have received a
representation letter, the form of which is attached
hereto as Exhibit J from the Transferee of such
Certificate to the effect that such Transferee is a
United States Person and is not a "Disqualified
Organization."
(vii) Any attempted or purported transfer of any Ownership
Interest in a Residual Interest Certificate in
violation of the provisions of this Section 4.2 shall
be absolutely null and void and shall vest no rights in
the purported transferee. If any purported transferee
shall become a Certificateholder or holder of a
Residual Interest Certificate in violation of the
provisions of this Section 4.2, then the last preceding
Permitted Transferee shall be restored to all rights as
Holder thereof retroactive to the date of registration
of transfer of such Residual Interest Certificate. The
Trustee shall notify the Servicer and the Certificate
Insurer upon receipt of written notice or discovery by
a Responsible Officer that the registration of transfer
of a Residual Interest Certificate was not in fact
permitted by this Section 4.2. Knowledge shall not be
imputed to the Trustee with respect to an impermissible
transfer in the absence of such a written notice or
discovery by a Responsible Officer. The Trustee
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shall not be liable to any Person for any registration
of transfer of a Residual Interest Certificate that is
in fact not permitted by this Section 4.2 or for the
making of any payments due on such Certificate to the
Holder thereof or the taking of any other action with
respect to such Holder under the provisions of this
Agreement so long as the transfer was registered after
receipt of the related Transfer Affidavit and Agreement
in the form attached hereto as Exhibit H and
Transferor's Certificate in the form attached hereto as
Exhibit I. The Trustee shall be entitled, but not
obligated to recover from any Holder of a Residual
Interest Certificate that was in fact not a Permitted
Transferee at the time it became a Holder or, at such
subsequent time as it became other than a Permitted
Transferee, all payments made on such Residual Interest
Certificate recovered by the Trustee shall be paid and
delivered by the Trustee to the last preceding Holder
of such Certificate.
(viii) If any purported transferee shall become a Holder of
a Residual Interest Certificate in violation of the
restrictions in this Section 4.2, then the Servicer or
its designee shall have the right, without notice to
the Holder or any prior Holder of such Residual
Interest Certificate, to sell such Residual Interest
Certificate to a purchaser selected by the Servicer or
its designee on such reasonable terms as the Servicer
or its designee may choose. Such purchaser may be the
Servicer itself or any affiliate of the Servicer. The
proceeds of such sale, net of commissions, expenses and
taxes due, if any, will be remitted by the Servicer to
the last preceding purported transferee of such
Residual Interest Certificate, except that in the event
that the Servicer determines that the Holder or any
prior Holder of such Residual Interest Certificate may
be liable for any amount due under this Section 4.2 or
any other provision of this Agreement, the Servicer may
withhold a corresponding amount from such remittance as
security for such claim. The terms and conditions of
any sale under this subclause (viii) shall be
determined in the sole discretion of the Servicer or
its designee, and it shall not be liable to any Person
having an Ownership Interest in a Residual Interest
Certificate as a result of its exercise of such
discretion.
(ix) The provisions of Section 4.2(j) may be modified, added
to or eliminated, provided that there shall have been
delivered to the Trustee and the Certificate Insurer an
Opinion of Counsel to the effect that such modification
of, addition to or elimination of such provisions will
not cause REMIC I or REMIC II to cease to qualify as a
REMIC and will not cause (x) REMIC I or REMIC II to be
subject to an entity-level tax caused by the Transfer
of any Ownership Interest in a Residual Interest
Certificate to a Person that is not a Permitted
Transferee or (y) a Person other than the
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prospective transferee to be subject to a REMIC-related
tax caused by the transfer of an Ownership Interest in
a Residual Interest Certificate to a Person that is not
a Permitted Transferee.
(x) No transfer of a Residual Interest Certificate or any
interest therein shall be made to any employee benefit
plan or other retirement arrangement, including
individual retirement accounts and annuities, Keogh
plans and collective investment funds and separate
accounts in which such plans, accounts or arrangements
are invested, that is subject to the Employee
Retirement Income Security Act of 1974, as amended
("ERISA"), or the Code (each, a "Plan"), unless the
prospective transferee of such Residual Interest
Certificate provides the Servicer, the Certificate
Insurer and the Trustee with a certification of facts
and, at the prospective transferee's expense, an
Opinion of Counsel which establish to the satisfaction
of the Servicer, the Certificate Insurer and the
Trustee that such transfer will not result in a
violation of Section 406 of ERISA or Section 4975 of
the Code or cause the Servicer or the Trustee to be
deemed a fiduciary of such Plan or result in the
imposition of an excise tax under sentence, the Trustee
and the Servicer shall require the prospective
transferee of any Residual Interest Certificate to
certify (in the form of Exhibit K hereto) that (A) it
is neither (i) a Plan nor (ii) a Person who is directly
or indirectly purchasing a Residual Interest
Certificate on behalf of, as named fiduciary of, as
trustee of, or with assets, of a Plan and (B) all funds
used by such transferee to purchase such Certificates
will be funds held by it in its general account which
it reasonably believes do not constitute "plan assets"
of any Plan.
(k) No transfer of a Class A Certificate or Class IO
Certificate shall be made to Life or the Transferor or to the actual knowledge
of any Responsible Officer of the Trustee, to any of Life's or the Transferor's
affiliates, or successors or assigns.
Section 4.3 Mutilated, Destroyed, Lost or Stolen Certificates.
If (a) any mutilated Certificate is surrendered to the
Trustee, or the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Certificate, and (b) there is delivered to the
Servicer, the Certificate Insurer and the Trustee such security or indemnity as
may reasonably be required by each of them to save each of them harmless from
liability, then, in the absence of notice to the Servicer and 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
tenor and Percentage Interest in the same Trust, but bearing a number not
contemporaneously outstanding. Upon the issuance of any new Certificate under
this Section 4.3, the Servicer and the Trustee may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and their fees and expenses connected therewith. Any duplicate
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Certificate issued pursuant to this Section 4.3 shall constitute complete and
indefeasible evidence of ownership in the Trust, as if originally issued,
whether or not the mutilated, destroyed, lost or stolen Certificate shall be
found at any time.
Section 4.4 Persons Deemed Owners.
Prior to due presentation of a Certificate for registration of
transfer and subject to the provisions of Section 4.2, the Servicer, the
Depositor, Life, the Transferor, the Certificate Insurer and the Trustee shall
treat the Person in whose name any Certificate is registered as the owner of
such Certificate for the purpose of receiving distributions pursuant to Section
6.6 and for all other purposes whatsoever, and the Servicer, the Depositor,
Life, the Transferor, the Certificate Insurer and the Trustee shall not be
affected by notice to the contrary.
ARTICLE V
ADMINISTRATION AND SERVICING OF THE LOANS
Section 5.1 Duties of the Servicer.
(a) The Servicer, as an independent contractor, shall service
and administer the Mortgage Loans in accordance with the Accepted Servicing
Practices and shall have full power and authority, acting alone, to do any and
all things in connection with such servicing and administration which the
Servicer may deem necessary or desirable and consistent with the terms of this
Agreement, it being understood, however, that the Servicer shall at all times
remain responsible to the Trustee, the Certificate Insurer and
Certificateholders for the performance of its duties herein. Notwithstanding
anything to the contrary contained herein, the Servicer, in servicing and
administering the Mortgage Loans, shall employ or cause to be employed
procedures (including collection, foreclosure, liquidation and Foreclosure
Property management and liquidation procedures) and exercise the same care that
it customarily employs and exercises in servicing and administering loans of the
same type as the Mortgage Loans for its own account, all in accordance with
Accepted Servicing Procedures of prudent lending institutions and servicers of
loans of the same type as the Mortgage Loans and giving due consideration to the
Certificate Insurer's and the Certificateholders' reliance on the Servicer. The
Servicer has and shall maintain the facilities, procedures and experienced
personnel necessary to comply with the servicing standard set forth in this
subsection (a) and the duties of the Servicer set forth in this Agreement
relating to the servicing and administration of the Mortgage Loans.
(b) In accordance with the preceding general servicing
standard, the Servicer, or any Subservicer on behalf of the Servicer, shall make
all Servicing Advances in connection with the servicing of each Mortgage Loan
hereunder. No costs incurred by the Servicer or any Subservicer in respect of
Servicing Advances shall, for the purposes of distributions to
Certificateholders, be added to the amount owing under the related Mortgage
Loan. Notwithstanding any obligation by the Servicer to make a Servicing Advance
hereunder with respect to a Mortgage Loan, before making any Servicing Advance
that is material in relation to the outstanding Principal Balance thereof, the
Servicer shall assess the reasonable likelihood of (i) recovering such Servicing
Advance and any prior Servicing Advances for such Mortgage Loan,
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and (ii) recovering any amounts attributable to outstanding interest and
principal owing on such Mortgage Loan for the benefit of the Certificateholders
and the Certificate Insurer in excess of the costs, expenses and other
deductions to obtain such recovery, including any Servicing Advances therefor.
The Servicer shall only make a Servicing Advance with respect to a Mortgage Loan
to the extent that the Servicer determines in its reasonable, good faith
judgment that such Servicing Advance would likely be recovered as aforesaid.
(c) The Servicer shall make reasonably diligent efforts to
collect all payments called for under the terms and provisions of the Mortgage
Loans, and shall, to the extent such procedures shall be consistent with this
Agreement, follow Accepted Servicing Procedures. The Servicer may in its
discretion waive or permit to be waived any penalty interest or any other fee or
charge which the Servicer would be entitled to retain hereunder as servicing
compensation. The Servicer shall notify the Trustee of any such waiver, release,
discharge, modification, indulgence or other such matter by delivering to the
Trustee an Officer's Certificate certifying that such agreement is in compliance
with this Section 5.1 together with the original copy of any written agreement
or other document executed in connection therewith, all of which written
agreements or documents shall, for all purposes, be considered a part of the
related Trustee's Mortgage Loan File to the same extent as all other documents
and instruments constituting a part thereof. Notwithstanding anything in this
Agreement to the contrary, the Servicer shall not permit any modification with
respect to any Mortgage Loan that would change the Mortgage Loan Interest Rate,
reduce or increase the principal balance, change the lien priority, or change
the final maturity date on or of such Mortgage Loan unless (i) the Mortgagor is
in default with respect to the Mortgage Loan or such default is, in the judgment
of the Servicer, imminent and such modification would not be considered a
Prohibited Transaction and (ii) the Certificate Insurer consents to such
modifications in writing; provided, however, that the Servicer shall be
permitted to extend the final maturity date on a Mortgage Loan by 180 days or
less without the consent of the Certificate Insurer so long as the final
maturity date is not extended beyond the latest Final Scheduled Distribution
Date of the Certificates relating to the Pool related to such Mortgage Loan;
provided further, that no modification of any Mortgage Loan shall be permitted
unless a Nondisqualification Opinion is delivered.
(d) Without limiting the generality of Section 5.1(c), the
Servicer, in its own name or in the name of a Subservicer, is hereby authorized
and empowered when the Servicer believes it appropriate in its best judgment and
subject to the requirements of this Agreement or Acceptable Servicing Procedures
to execute and deliver, on behalf of the Certificateholders and the Trustee or
any of them, and upon notice to the Trustee and the Certificate Insurer, 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 the Mortgaged Properties and to institute foreclosure proceedings or
obtain a deed-in-lieu of foreclosure so as to convert the ownership of such
properties, and to hold or cause to be held title to such properties, on behalf
of the Trustee and Certificateholders. The Servicer shall service and administer
the Mortgage Loans in accordance with applicable state and federal law and shall
provide to the Mortgagors any reports required to be provided to them thereby.
The Trustee shall execute, at the written direction of the Servicer, any limited
or special powers of attorney and other documents reasonably acceptable to the
Trustee to enable the Servicer or any Subservicer to carry out their servicing
and administrative duties hereunder, including limited or special powers of
attorney with
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respect to any Foreclosure Property, and the Trustee shall not be accountable
for the actions of the Servicer or any Subservicers under such powers of
attorney and shall be indemnified by such parties with respect to such actions.
The Servicer shall not alter its servicing and collection
procedures relating to the Mortgage Loans in any material respect without the
prior written consent of the Certificate Insurer and the Trustee.
The Servicer shall make any Mortgage Loan Interest Rate
adjustments on each Interest Adjustment Date in compliance with applicable
regulatory adjustable mortgage loan requirements and the Mortgage Notes. The
Servicer shall establish procedures to monitor the Interest Adjustment Dates in
order to assure that it uses a published interest rate in determining an
interest rate change, and it will comply with those procedures. In the event a
published interest rate is no longer available, the Servicer shall choose a new
comparable published interest rate in accordance with the provisions hereof, of
the applicable Mortgage Note and of Accepted Servicing Practices, and shall
provide the Mortgagor, the Trustee and the Certificate Insurer with notice of
the new published interest rate sufficient under law and the Mortgage Note. The
Servicer shall execute and deliver all appropriate notices required by the
applicable adjustable mortgage loan laws and regulations and the Mortgage Loan
documents regarding such Mortgage Loan Interest Rate adjustments.
If the Servicer fails to make a timely Mortgage Loan Interest
Rate adjustment in accordance with the terms of the related Mortgage Notes, the
Servicer shall use its own funds to satisfy any shortage in the Mortgagor's
remittance so long as such shortage shall continue; any such amount paid by the
Servicer shall be reimbursable to it from any subsequent amounts collected on
account of the related Mortgage Loan with respect to such adjustments.
(e) It is intended that the REMIC I and REMIC II shall each
constitute, and that the affairs of the Trust shall be conducted so as to
qualify each as, a "real estate mortgage investment conduit" ("REMIC") as
defined in and in accordance with the REMIC Provisions. In furtherance of such
intentions, the Servicer covenants and agrees that it shall not cause an Adverse
REMIC Event to the extent reasonably within the Servicer's control and the scope
of its duties more specifically set forth herein. The Servicer shall not take
any action or fail to take any action (whether or not authorized hereunder) as
to which the Trustee has advised it in writing that the Trustee has not received
a Nondisqualification Opinion and the Servicer shall have no liability hereunder
for any action taken by it in accordance with the written instruments of the
Trustee. In addition, prior to taking any action with respect to the REMIC I or
REMIC II that is not expressly permitted under the terms of this Agreement, the
Servicer will consult with the Trustee or its designee and the Certificate
Insurer, in writing, with respect to whether such action could cause an Adverse
REMIC Event to occur. The Trustee may consult with counsel to make such written
advice, and the cost of same shall be borne by the party seeking to take the
action not permitted by this Agreement. At all times as may be required by the
Code, the Servicer shall use its best efforts to ensure that substantially all
of the assets of the REMIC I or REMIC II will consist of "qualified mortgages"
as defined in Section 860G(a)(3) of the Code and "permitted investments" as
defined in Section 860G(a)(5) of the Code. In the event any specified time
period or other requirement set forth in this Agreement in respect of compliance
with the REMIC
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Provisions becomes inconsistent with the REMIC Provisions as the same may be
amended, such specified time period or other requirement shall also be deemed
amended to comply with the requirements of this Section 5.1, unless such amended
time period or other requirements shall be less protective of the interests of
the Certificateholders of the Trust and the Certificate Insurer, in which case,
to the extent consistent with the REMIC Provisions, the former time period or
requirement shall continue in force. The Servicer may agree to changes in the
terms of a Mortgage Loan that would not cause REMIC I or REMIC II to fail to
qualify as a REMIC, as evidenced by a Nondisqualification Opinion delivered by
the Servicer to the Trustee and the Certificate Insurer prior to the effective
date of any such change, provided, however, that such changes (i) do not
adversely affect the interests of Certificateholders or the Certificate Insurer,
(ii) are consistent with prudent business practice, as evidenced by an Officer's
Certificate, delivered by the Servicer to the Trustee prior to such effective
date, (iii) do not extend the maturity date of such Mortgage Loan in excess of
one year, so long as the final maturity date is not extended beyond the latest
Final Scheduled Distribution Date of the Certificates relating to the Pool
related to such Mortgage Loan, and (iv) do not result in any change of the
Mortgage Loan Interest Rate of such Mortgage Loan.
Section 5.2 Liquidation of Mortgage Loans; Defaulted Mortgage Loans.
(a) In the event that any payment due under any Mortgage Loan
and not postponed pursuant to Section 5.1(c) is not paid when the same becomes
due and payable, or in the event the Mortgagor fails to perform any other
covenant or obligation under the Mortgage Loan and such failure continues beyond
any applicable grace period, the Servicer shall, in accordance with the standard
of care specified in Section 5.1(a), take such action as it shall deem to be in
the best interest of the Certificateholders and the Certificate Insurer to
collect or liquidate such Defaulted Mortgage Loan in a manner that in the
reasonable judgment of the Servicer will be likely to maximize the net proceeds
realizable therefrom under the circumstances. The Servicer shall give the
Trustee and the Certificate Insurer notice of the election of remedies made
pursuant to this Section 5.2. In connection with any collection or liquidation
activities, the Servicer shall exercise collection or liquidation procedures
with the same degree of care and skill as it would exercise or use under the
circumstances in the conduct of its own affairs.
(b) During any Due Period occurring after a Mortgage Loan
becomes a Liquidated Mortgage Loan, the Servicer shall deposit into the related
Collection Account any proceeds received by it with respect to such Liquidated
Mortgage Loan or the related Foreclosure Property ("Post Liquidation Proceeds").
(c) After a Mortgage Loan has become a Liquidated Mortgage
Loan, the Servicer shall promptly prepare and forward to the Depositor, the
Trustee and the Certificate Insurer, and, upon request of any Certificateholder,
to such Certificateholder a Liquidation Report detailing the following: (i) the
Net Liquidation Proceeds, Insurance Proceeds or Released Mortgaged Property
Proceeds received in respect of such Liquidated Mortgage Loan; (ii) expenses
incurred with respect thereto; (iii) any Net Mortgage Loan Losses incurred in
connection therewith; and (iv) any Post Liquidation Proceeds.
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(d) The Servicer may at its option purchase from the Trustee
any Mortgage Loan that is 90 days or more Delinquent and (i) which the Servicer
determines in good faith would otherwise become subject to foreclosure
proceedings at a price equal to the Purchase Price and (ii) as to which default
is imminent; provided, however, that the aggregate Principal Balance of all
Mortgage Loans that may be so purchased by the Servicer shall not exceed an
amount equal to 10% of the Original Pool Principal Balance. The Purchase Price
for any Mortgage Loan purchased hereunder shall be deposited into the related
Collection Account and the Trustee, upon (i) receipt of an Officer's Certificate
of the Servicer as to the making of such deposit and (ii) confirmation that such
deposit has been made, shall release or cause to be released to the Servicer the
related Trustee's Mortgage Loan File and shall execute and deliver such
instruments of transfer or assignment as are furnished by the Transferor or the
Servicer, as the case may be, in each case without recourse, as shall be
necessary to vest in the Transferor or the Servicer, as the case may be, title
to any Mortgage Loan released pursuant hereto, and the Trustee shall have no
further responsibility or liability (except as to its own acts) with regard to
such Mortgage Loan.
Section 5.3 Fidelity Bond; Errors and Omission Insurance.
The Servicer shall keep in force during the term of this Agreement a
policy or policies of insurance covering errors and omissions for failure in the
performance of the Servicer's obligations under this Agreement, which policy or
policies shall be in such form and amount that would meet the requirements of
FNMA or FHLMC if it were the purchaser of the Mortgage Loans. The Servicer shall
also maintain a fidelity bond (the "Fidelity Bond") in the form and amount that
would meet the requirements of FNMA or FHLMC if it were the purchaser of the
Mortgage Loans. The Servicer shall be deemed to have complied with this
provision if an affiliate of the Servicer has such errors and omissions and
fidelity bond coverage and, by the terms of such insurance policy or fidelity
bond, the coverage afforded thereunder extends to the Servicer. Any such errors
and omissions policy and fidelity bond shall not be canceled without thirty (30)
days' prior written notice to the Trustee and the Certificate Insurer. Upon the
request of the Trustee, the Certificate Insurer or any Certificateholder, the
Servicer shall furnish to the requesting party copies of all binders and
policies or certificates evidencing that such bonds and insurance policies are
in full force and effect. No provision of this Section 5.3 requiring such
fidelity of errors and omissions insurance shall diminish or relieve the
Servicer from its duties and obligations as set forth in this Agreement. The
Servicer shall also cause each Subservicer to maintain a policy of insurance
covering errors and omissions and a fidelity bond which would meet the
requirements set forth above.
Section 5.4 Title, Management and Disposition of Foreclosure Property.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure (a "Foreclosure Property"), the
deed or certificate of sale shall be taken in the name of the Trustee for the
benefit of the Certificateholders and the Certificate Insurer.
The Servicer shall manage, conserve, protect and operate each
Foreclosure Property for the Trustee, the Certificate Insurer and the
Certificateholders solely for the purpose of its prudent and prompt disposition
and sale. The Servicer shall, either itself or through an agent selected by the
Servicer, manage, conserve, protect and operate the Foreclosure Property in the
same manner
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that it manages, conserves, protects and operates other foreclosure property for
its own account. The Servicer shall attempt to sell the same (and may
temporarily lease the same) on such terms and conditions as the Servicer deems
to be in the best interest of the Certificate Insurer and the
Certificateholders.
The Servicer shall, consistent with the servicing standards set forth
herein, foreclose upon or otherwise comparably convert the ownership of
properties securing such of the Mortgage Loans as come into and continue in
default and as to which no satisfactory arrangements can be made for collection
of delinquent payments. In connection with realization upon defaulted Mortgage
Loans, the Servicer shall follow such practices and procedures as it shall deem
necessary or advisable, as shall be normal and usual in accordance with Accepted
Servicing Procedures and the requirements of insurers under any insurance policy
required to be maintained hereunder with respect to the related Mortgage Loan.
The Servicer shall be responsible for all costs and expenses incurred by it in
any such proceedings; provided, however, that such costs and expenses will be
recoverable as Servicing Advances by the Servicer as contemplated herein.
The Servicer shall not be required to make any Servicing Advance, to
foreclose upon any Mortgaged Property, or otherwise expend its own funds toward
the restoration of any Mortgaged Property that shall have suffered damage from
an Uninsured Cause, unless it shall determine in its reasonable judgment, as
evidenced by a certificate of a Servicing Officer delivered to the Trustee and
the Certificate Insurer, that such foreclosure or restoration, as the case may
be, will increase the proceeds of liquidation of the related Mortgage Loan after
reimbursement to itself for Servicing Advances. Any Servicing Advances made with
respect to a Mortgage Loan shall be recoverable by the Servicer only from
recoveries on such Mortgage Loan.
The disposition of Foreclosure Property shall be carried out by the
Servicer at such price, and upon such terms and conditions, as the Servicer
deems to be in the best interest of the Trustee, the Certificate Insurer and the
Certificateholders and, as soon as practicable thereafter, the expenses of such
sale shall be paid. The Net Liquidation Proceeds or Post Liquidation Proceeds,
as applicable, from the conservation, disposition and sale of the Foreclosure
Property shall be promptly deposited by the Servicer in the related Collection
Account in accordance with and Section 6.1.
Prior to acquiring any Foreclosure Property, the Servicer shall cause a
review to be performed, in accordance with Accepted Servicing Procedures, on the
related Mortgaged Property by a company such as Equifax, Inc. or Toxicheck, and
the scope of such review shall be limited to the review of public records and
documents for indications that such Mortgaged Property has on it, under it or is
near, hazardous or toxic material or waste. If such review reveals that the
Mortgaged Property has on it, under it or is near hazardous or toxic material or
waste or reveals any other environmental problem, the Servicer shall provide a
copy to the Trustee and the Certificate Insurer of the related report with an
attached certification of a Responsible Officer that based on an analysis of all
available information (including potential clean up costs and liability claims)
at the time it is the best judgment of such Responsible Officer that such
foreclosure shall increase Net Liquidation Proceeds to the Trustee, and the
Servicer shall not foreclose or accept a deed-in-lieu of foreclosure of such
Mortgaged Property without the prior written consent of the Certificate Insurer.
The Trustee shall promptly forward such report and certification to the
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Certificateholders. If the Servicer has actual knowledge or reasonably believes
that any Mortgaged Property is affected by hazardous or toxic wastes or
substances and that the acquisition of such Mortgaged Property would not be
commercially reasonable, then the Servicer will not cause the Trust to acquire
title to such Mortgaged Property in a foreclosure or similar proceleding.
The Servicer may contract with any independent contractor for the
operation and management of any Foreclosure Property, provided that:
(i) the terms and conditions of any such contract
shall not be inconsistent with this Agreement;
(ii) any such contract shall require, or shall be
administered to require, that the independent contractor pay all costs and
expenses incurred in connection with the operation and management of such
Foreclosure Property and remit all related revenues (net of such costs and
expenses) to the Servicer as soon as practicable, but in no event later than two
days following the receipt thereof by such independent contractor;
(iii) none of the provisions of this Section 5.4
relating to any such contract or to actions taken through any such independent
contractor shall be deemed to relieve the Servicer of any of its duties and
obligations hereunder with respect to the operation and management of any such
Foreclosure Property; and
(iv) the Servicer shall be obligated with respect
thereto to the same extent as if it alone were performing all duties and
obligations in connection with the operation and management of such Foreclosure
Property.
The Servicer shall be entitled to enter into any agreement with any independent
contractor performing services for it related to its duties and obligations
hereunder for indemnification of the Servicer by such independent contractor,
and nothing in this Agreement shall be deemed to limit or modify such
indemnification. The Servicer shall be liable for all fees owed by it to any
such independent contractor, provided that any amounts so expended shall be
deemed Servicing Advances. Each liquidation of a Foreclosure Property shall be
carried out by the Servicer at such price and upon such terms and conditions as
the Servicer shall deem necessary or advisable, as shall be normal and usual in
accordance with Accepted Servicing Procedures, and the resulting Liquidation
Proceeds shall be distributed in accordance with the Section 6.5 and Section
6.6.
In the event that Trust acquires any Mortgaged Property as aforesaid or
otherwise in connection with a default or imminent default on a Mortgage Loan,
such Mortgaged Property shall be disposed of by or on behalf of such Trust
within two years after its acquisition thereby unless (a) the Servicer shall
have provided to the Trustee and the Certificate Insurer a Nondisqualification
Opinion to the effect that the holding by such Trust of such Mortgaged Property
subsequent to two years after its acquisition (and specifying the period beyond
such two-year period for which the Mortgaged Property may be held) will not
cause such Trust to be subject to the tax on prohibited transactions imposed by
Code Section 860F(a)(1), otherwise subject such Trust or the related Trust Fund
to tax or cause REMIC I or REMIC II to fail to qualify as a REMIC at any time
that any REMIC I Regular Interests or Certificates are outstanding, or (b) the
Servicer or the Trustee
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(at the Servicer's expense) shall have applied for, at least 60 days prior to
the expiration of such two-year period, an extension of such two-year period in
the manner contemplated by Code Section 856(e)(3), in which case the two-year
period shall be extended by the applicable period. The Servicer shall further
ensure that the Mortgaged Property is administered so that it constitutes
"foreclosure property" within the meaning of Code Section 860G(a)(8) at all
times, that the sale of such property does not result in the receipt by REMIC I
or REMIC II of any income from non- permitted assets as described in Code
Section 860F(a)(2)(B), and that such REMIC does not derive any "net income from
foreclosure property" within the meaning of Code Section 860G(c)(2) with respect
to such property.
Section 5.5 Access to Certain Documentation and Information Regarding
the Mortgage Loans.
(a) The Servicer shall provide to the Depositor, the Trustee,
the Certificate Insurer and the Certificateholders 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.
(b) The Servicer shall supply information to the Trustee in
such form as the Trustee shall reasonably request, on or before the start of the
fifth (5th) Business Day preceding the related Distribution Date, as is required
in the Trustee's reasonable judgment to enable the Trustee to make required
distributions and to furnish the required reports to Certificateholders.
Section 5.6 Subservicing.
(a) The Servicer may enter into Subservicing Agreements for
any servicing and administration of Mortgage Loans with any institution which is
in compliance with the laws of each state necessary to enable it to perform its
obligations under such Subservicing Agreement and is an Eligible Servicer;
provided, however, that the Certificate Insurer has provided its prior written
consent. The Servicer shall give prior written notice to the Depositor, the
Certificate Insurer and the Trustee of the appointment of any Subservicer. The
Servicer shall be entitled to terminate any Subservicing Agreement in accordance
with the terms and conditions of such Subservicing Agreement and to either
directly service the related Mortgage Loans or enter into a Subservicing
Agreement with a successor subservicer which qualifies hereunder.
In the event of termination of any Subservicer, and unless a successor
Subservicer has otherwise been appointed, all servicing obligations of such
Subservicer shall be assumed simultaneously by the Servicer without any
additional act or deed on the part of such Subservicer or the Servicer, and the
Servicer shall service directly the related Mortgage Loans.
Each Subservicing Agreement shall include the provision that such
agreement may be immediately terminated by the Trustee (with the prior written
consent of the Certificate Insurer) or the Certificate Insurer in the event that
the Servicer shall, for any reason, no longer be the Servicer. In no event shall
any Subservicing Agreement require the Trustee, as successor
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Servicer, for any reason whatsoever to pay compensation to a Subservicer in
order to terminate such Subservicer.
(b) Notwithstanding any Subservicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and a Subservicer or reference to actions taken through a Subservicer
or otherwise, the Servicer shall remain obligated and primarily liable to the
Depositor, the Trustee, the Certificate Insurer and Certificateholders for the
servicing and administering of the Mortgage Loans in accordance with the
provisions of this Agreement without diminution of such obligation or liability
by virtue of such Subservicing Agreements or arrangements or by virtue of
indemnification from the Subservicer and to the same extent and under the same
terms and conditions as if the Servicer alone were servicing and administering
the Mortgage Loans. For purposes of this Agreement, the Servicer shall be deemed
to have received payments on Mortgage Loans when the Subservicer has actually
received such payments and, unless the context otherwise requires, references in
this Agreement to actions taken or to be taken by the Servicer in servicing the
Mortgage Loans include actions taken or to be taken by a Subservicer on behalf
of the Servicer. The Servicer shall be entitled to enter into any agreement with
a Subservicer for indemnification of the Servicer by such Subservicer, and
nothing contained in this Agreement shall be deemed to limit or modify such
indemnification.
(c) In the event the Servicer shall for any reason no longer
be the Servicer (including by reason of an Event of Default), the successor
Servicer, on behalf of the Depositor, the Trustee, the Certificate Insurer and
the Certificateholders pursuant to Section 5.7, shall thereupon assume all of
the rights and obligations of the Servicer under each Subservicing Agreement
that the Servicer may have entered into, unless the successor Servicer elects to
terminate any Subservicing Agreement in accordance with its terms. The successor
Servicer shall be deemed to have assumed all of the Servicer's interest therein
and to have replaced the Servicer as a party to each Subservicing Agreement to
the same extent as if the Subservicing Agreements had been assigned to the
assuming party, except that the predecessor Servicer shall not thereby be
relieved of any liability or obligations under the Subservicing Agreements which
accrued prior to the transfer of servicing to the successor Servicer. The
predecessor Servicer at its expense and without right of reimbursement therefor,
shall, upon request of the successor Servicer, deliver to the assuming party all
documents and records relating to each Subservicing Agreement and the Mortgage
Loans then being serviced and an accounting of amounts collected and held by it
and otherwise use its best efforts to effect the orderly and efficient transfer
of the Subservicing Agreements to the assuming party.
(d) As part of its servicing activities hereunder, the
Servicer, for the benefit of the Depositor, the Trustee, the Certificate Insurer
and the Certificateholders, shall enforce the obligations of each Subservicer
under the related Subservicing Agreement. Such enforcement, including the legal
prosecution of claims and the pursuit of other appropriate remedies, shall be in
such form and carried out to such an extent and at such time as the Servicer, in
its good faith business judgment, would require were it the owner of the related
Mortgage Loans. The Servicer shall pay the costs of such enforcement at its own
expense, and shall be reimbursed therefor only (i) from a general recovery
resulting from such enforcement to the extent, if any, that such recovery
exceeds all amounts due in respect of the related Mortgage Loan or (ii) from a
specific
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recovery of costs, expenses or attorneys fees against the party against whom
such enforcement is directed.
(e) Any Subservicing Agreement that may be entered into and
any other transactions or services relating to the Mortgage Loans involving a
Subservicer in its capacity as such and not as an originator shall be deemed to
be between the Subservicer and the Servicer alone and none of the Depositor, the
Trustee, the Certificate Insurer or the Certificateholders shall be deemed
parties thereto or shall have any claims, rights, obligations, duties or
liabilities with respect to the Subservicer in its capacity as such except as
set forth in Section 5.6(c).
(f) In those cases where a Subservicer is servicing a Mortgage
Loan pursuant to a Subservicing Agreement, the Subservicer will be required to
establish and maintain one or more segregated accounts (collectively, the
"Subservicing Account"). The Subservicing Account shall be an Eligible Account.
The Subservicer will be required to deposit into the Subservicing Account no
later than the first Business Day after receipt all proceeds of Mortgage Loans
received by the Subservicer and remit such proceeds to the Servicer for deposit
in the Collection Account not later than the Business Day following receipt
thereof by the Subservicer. Notwithstanding anything in this clause (f) to the
contrary, the Subservicer shall only be able to withdraw funds from the
Subservicing Account for the purpose of remitting such funds to the Servicer for
deposit into the Collection Account. The Servicer shall require the Subservicer
to cause any collection agent of the Subservicer to send a copy to the Servicer
of each statement of monthly payments collected by or on behalf of the
Subservicer within five Business Days after the end of every month, and the
Servicer shall compare the information provided in such reports with the
deposits made by the Subservicer into the Collection Account for the same
period. The Servicer shall be deemed to have received payments on the Mortgage
Loans on the date on which the Subservicer has received such payments.
Section 5.7 Successor Servicers.
In the event that the Servicer is terminated pursuant to Section 12.1,
or resigns pursuant to Section 10.4 or otherwise becomes unable to perform its
obligations under this Agreement, the Trustee will become the successor Servicer
unless the Certificate Insurer shall appoint another successor Servicer or the
Trustee, with the prior written consent of the Certificate Insurer, or the
Certificate Insurer will appoint a successor Servicer in accordance with the
provisions of Section 12.2; provided that any successor Servicer, including the
Trustee, shall satisfy the requirements of an Eligible Servicer and shall be
approved by the Certificate Insurer.
Section 5.8 Maintenance of Hazard Insurance; Property Protection
Expenses.
The Servicer shall cause to be maintained for each Mortgage Loan fire
and hazard insurance naming the Servicer as loss payee thereunder providing
extended coverage in an amount which is at least equal to the least of (i) the
maximum insurable value of the improvements securing such Mortgage Loan from
time to time, (ii) the combined principal balance owing on such Mortgage Loan
and any mortgage loan senior to such Mortgage Loan accrued interest and related
Liquidation Expense and (iii) the minimum amount required to compensate for
damage or loss on a replacement cost basis. The Servicer shall also maintain on
property acquired upon
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foreclosure, or by deed in lieu of foreclosure, fire and hazard insurance with
extended coverage in an amount which is at least equal to the least of (i) the
maximum insurable value from time to time of the improvements which are a part
of such property, (ii) the combined principal balance owing on such Mortgage
Loan and any mortgage loan senior to such Mortgage Loan accrued interest and
related Liquidation Expense and (iii) the minimum amount required to compensate
for damage or loss on a replacement cost basis at the time of such foreclosure,
fire and or deed in lieu of foreclosure.
Any amounts to be collected by the Servicer under any such policies
(other than amounts to be applied to the restoration or repair of the property
subject to the related Mortgage or amounts to be released to the Mortgagor in
accordance with Accepted Servicing Procedures, subject to the terms and
conditions of the related Mortgage and Mortgage Note) shall be deposited in the
related Collection Account, subject to withdrawal as set forth herein.
Any cost incurred by the Servicer in maintaining any such insurance
shall not, for the purpose of calculating distributions to Certificateholders,
be added to the Principal Balance of the related Mortgage Loan, notwithstanding
that the terms of such Mortgage Loan so permit. It is understood and agreed that
no earthquake or other additional insurance is to be required of any Mortgagor
other than pursuant to such applicable laws and regulations as shall at any time
be in force and as shall require such additional insurance or as set forth in
this Section 5.8. If the Mortgaged Property or Foreclosure Property is located
at the time of origination of the Mortgage Loan in a federally designated
special flood hazard area (and if the flood insurance policy referenced herein
has been made available), the Servicer will cause to be maintained flood
insurance in respect thereof. Such flood insurance shall be in an amount equal
to the least of (i) the sum of the Principal Balance of the related Mortgage
Loan and any senior lien, (ii) the maximum insurable value of the related
Mortgaged Property or Foreclosure Property, and (iii) the maximum amount of such
insurance available for the related Mortgaged Property or Foreclosure Property
under the national flood insurance program (assuming that the area in which such
Mortgaged Property or Foreclosure Property is located is participating in such
program).
Section 5.9 Maintenance of Mortgage Impairment Insurance Policy.
In the event that the Servicer shall obtain and maintain a blanket
policy with an insurer acceptable to the Certificate Insurer and the Rating
Agencies having a general policy rating of A:VIII or better in Best's Key Rating
Guide, insuring against fire 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 Section 5.8, the Servicer shall be deemed conclusively to
have satisfied its obligations with respect to fire and hazard insurance
coverage under Section 5.8, it being understood and agreed that such blanket
policy may contain a deductible clause that is in form and substance consistent
with standard industry practice for servicers of mortgage loans comparable to
the Mortgage Loans, in which case the Servicer shall, in the event that there
shall not have been maintained on the related Mortgaged Property a policy
complying with Section 5.8, and there shall have been a loss which would have
been covered by such policy, deposit in the related Collection Account the
difference, if any, between the amount that would have been payable under a
policy complying with Section 5.8 and
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the amount paid under such blanket policy. Upon the request of the Trustee, the
Certificate Insurer or any Certificateholder, the Servicer shall cause to be
delivered to the Trustee, the Certificate Insurer or such Certificateholder, as
the case may be, a certified true copy of such policy. In connection with its
activities as administrator and servicer of the Mortgage Loans, the Servicer
agrees to prepare and present, on behalf of itself, the Trustee, the Certificate
Insurer and Certificateholders, claims under any such policy in a timely fashion
in accordance with the terms of such policy.
Section 5.10 Reports to the Securities and Exchange Commission.
The Trustee shall file with the Securities and Exchange Commission all
reports on Forms 8-K and 10-K required to be filed under the provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Securities and Exchange Commission thereunder. Upon the request of the
Trustee, each of the Servicer, the Depositor and the Transferor shall cooperate
with the Trustee in the preparation of any such report and shall provide to the
Trustee in a timely manner all such information or documentation as the Trustee
may reasonably request in connection with the performance of its duties and
obligations under this Section 5.10. Fees and expenses incurred by the Trustee
in connection with the foregoing shall not be paid by the Trust.
Section 5.11 Payment of Taxes, Insurance and Other Charges.
The Servicer may and, if required by the Servicer, the Subservicers
shall, establish and maintain one or more accounts (the "Servicing Accounts"),
into which any collections from the Mortgagors (or related advances from
Subservicers) for the payment of taxes, assessments, hazard insurance premiums,
and comparable items for the account of the Mortgagors shall be deposited and
retained. Servicing Accounts shall be Eligible Accounts. Withdrawals of amounts
so collected from a Servicing Account may be made only to (i) effect timely
payment of taxes, assessments, hazard insurance premiums, and comparable items;
(ii) reimburse the Servicer (or a Subservicer to the extent provided in the
related Subservicing Agreement) out of related collections for any advances with
respect to taxes, assessments and insurance premiums and with respect to hazard
insurance; (iii) refund to Mortgagors any sums as may be determined to be
overages; (iv) pay interest, if required and as described below, to Mortgagors
on balances in the Servicing Account; or (v) clear and terminate the Servicing
Account at the termination of this Agreement in accordance with Section 13.1. As
part of its servicing duties, the Servicer or Subservicers shall pay to the
Mortgagors interest on funds in Servicing Accounts, to the extent required by
law and, to the extent that interest earned on funds in the Servicing Accounts
is insufficient, to pay such interest from its or their own funds, without any
reimbursement from the Trustee, the Depositor, the Certificate Insurer, or any
Certificateholder therefor. Upon request of the Trustee, the Transferor the
Certificate Insurer, or the Servicer shall cause the bank, savings association
or other depository for each Servicing Account to forward to the Trustee and the
Certificate Insurer copies of such statements or reports as the Trustee, the
Depositor, the Certificate Insurer, or any Certificateholder shall reasonably
request.
Section 5.12 Filing of Continuation Statements.
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On or before the fifth anniversary of the filing of any financing
statements by Life, the Transferor or the Depositor, respectively, with respect
to the assets conveyed to the Trustee, Life, the Transferor and the Depositor as
the case may be shall prepare, have executed by the necessary parties and file
in the proper jurisdictions all financing and continuation statements necessary
to maintain the liens, security interests, and priorities of such liens and
security interests that have been granted by Life, the Transferor or the
Depositor, as the case may be, and Life Bank, Life Investments Holdings, Inc. or
Morgan Stanley ABS Capital I Inc., as the case may be shall continue to file on
or before each fifth anniversary of the filing of any financing and continuation
statements such additional financing and continuation statements until the Trust
has been terminated pursuant to Section 13.1 of the this Agreement. The Trustee
agrees to cooperate with Life, the Transferor and the Depositor in preparing,
executing and filing such statements. The Trustee agrees to notify Life, the
Transferor and the Depositor, with a copy to the Certificate Insurer, on the
third Distribution Date prior to each such fifth anniversary of the requirement
to file such financing and continuation statements. The filing of any such
statement with respect to Life, the Transferor and the Depositor shall not be
construed as any indication of an intent of any party contrary to the expressed
intent set forth in (i) Section 2.2 , (ii) the Purchase Agreement or (iii) the
Sale Agreement. If Life, the Transferor or the Depositor has ceased to do
business whenever any such financing and continuation statements must be filed
or Life, the Transferor or the Depositor fails to file any such financing
statements or continuation statements at least one month prior to the expiration
thereof and the Trustee is notified of such failure or has actual knowledge
thereof, the Trustee shall perform the services required under this Section
5.12.
Section 5.13 Adjustment of Servicing Compensation in Respect of Prepaid
Mortgage Loans.
The aggregate amount of the Servicing Fees that the Servicer shall be
entitled to receive with respect to all of the related Mortgage Loans and each
Distribution Date shall be reduced on such Distribution Date by an amount equal
to the aggregate Prepayment Interest Shortfall with respect to all related
Mortgage Loans which were subjects of Principal Prepayments during the month
preceding the month of such Distribution Date. The amount of such reduction of
the aggregate Servicing Fee with respect to any Distribution Date under this
Section 5.13 shall be limited to the aggregate amount of the Servicing Fees
otherwise payable to the Servicer (without adjustment on account of Prepayment
Interest Shortfalls) with respect to (i) scheduled payments having the Due Date
occurring in the Due Period preceding such Distribution Date received by the
Servicer prior to the Determination Date, and (ii) Principal Prepayments and
Liquidation Proceeds received in the Due Period related to such Distribution
Date, and the rights of the Certificateholders to reduce the Servicing Fee shall
not be cumulative.
Section 5.14 Periodic Advances: Special Advance.
(a) If, on any Determination Date the Servicer determines that
any Monthly Payments due on the Due Date immediately preceding such
Determination Date have not been received as of the close of business on the
Business Day preceding such Determination Date the Servicer shall determine the
amount of any Periodic Advance required to be made with respect to the related
Distribution Date. The Servicer shall, on such Determination Date, deliver a
report to the Trustee and the Certificate Insurer indicating the payment status
of each Mortgage Loan as
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of such Determination Date. The Servicer shall include in the amount to be
deposited in the related Certificate Account on such Determination Date an
amount equal to the Periodic Advance, if any, which deposit may be made in whole
or in part from funds in the related Collection Account being held for future
distribution or withdrawal on or in connection with Distribution Dates in
subsequent months. Any funds being held for future distribution to
Certificateholders and so used shall be replaced by the Servicer from its own
funds by deposit in the related Collection Account on or before the Business Day
preceding any such future Determination Date to the extent that funds in the
related Collection Account on such Determination Date shall be less than
payments to Certificateholders required to be made on such date.
The Servicer shall designate on its records the specific
Mortgage Loans and related installments (or portions thereof) as to which such
Periodic Advance shall be deemed to have been made, such determination being
conclusive for purposes of withdrawals from the related Collection Account
pursuant to Section 6.2.
ARTICLE VI
DISTRIBUTIONS AND PAYMENTS
Section 6.1 Establishment of Collection and Certificate Accounts;
Deposits to the Collection and Certificate Accounts.
(a) The Servicer shall establish and maintain two separate
Collection Accounts which shall be Eligible Accounts and shall be titled "Fixed
Rate Collection Account, Norwest Bank Minnesota, National Association, as
trustee for registered holder of Life Bank Asset-Backed Certificates, Series
1998-1" and "Adjustable Rate Collection Account, Norwest Bank Minnesota,
National Association, as trustee for registered holder of Life Bank Asset-Backed
Certificates, Series 1998-1."
The Servicer shall deposit or cause to be deposited (without
duplication) within two (2) Business Days, of receipt thereof in the related
Collection Account and retain therein in trust for the benefit of the related
Certificateholders and the Certificate Insurer: (i) all payments of prepayment
penalties and principal received in respect of the Mortgage Loans after the
related Cut-Off Date, all payments of interest and principal due in respect of
the Mortgage Loans (including prepaid monthly payments) from and after the
Cut-Off Date, irrespective of when received, and all interest paid or received
on the Mortgage Loans prior to the Cut-Off Date but relating to any period after
the Cut-Off Date; (ii) all Net Liquidation Proceeds and Post Liquidation
Proceeds pursuant to Section 5.2 or Section 5.4; (iii) all Insurance Proceeds;
(iv) all Released Mortgaged Property Proceeds; (v) any amounts payable in
connection with the repurchase of any Mortgage Loan and the amount of any
Substitution Adjustment pursuant to Section 2.6 and Section 3.5; (vi) any amount
required to be deposited in the related Collection Account pursuant to the
receipt of proceeds from any insurance policies under Section 5.3 or the deposit
of the Termination Price under Section 13.2; (vii) any Periodic Advances payable
by the Servicer, and (viii) any Compensating Interest paid by the Servicer.
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The Servicer shall be entitled to retain and not deposit into
the related Collection Account any amounts (such as assumption fees,
modification fees, and other administrative fees, insufficient funds charges,
late payment charges and investment income) on earnings on the Trust Accounts
received with respect to a Mortgage Loan that constitute additional Servicing
Compensation pursuant to Section 8.3, and such amounts retained by the Servicer
during a Due Period shall be excluded from the calculation of the Servicing
Compensation that is distributable to the Servicer from the related Collection
Account on the next Distribution Date following such Due Period.
(b) The Trustee shall establish and maintain two separate
Certificate Accounts which shall be Eligible Accounts and shall be titled "Group
I Certificate Account, Norwest Bank Minnesota, National Association, as trustee
for the registered holders of Life Bank Asset-Backed Certificates, Series
1998-1" and "Group II Certificate Account, Norwest Bank Minnesota, National
Association, as trustee for the registered holders of Life Bank Asset-Backed
Certificates, Series 1998-1."
(c) For each period ending on the Business Day prior to each
Determination Date, the Servicer may invest the funds in the Collection Accounts
only in Permitted Investments which shall mature no later than the Business Day
immediately preceding the Determination Date next following the date of such
investment and shall not be disposed of prior to its maturity. For each period
beginning on each Determination Date and ending on the Distribution Date, the
Trustee may in writing to invest the funds in the Certificate Accounts only in
Permitted Investments. No Permitted Investment shall be sold or disposed of at a
gain prior to maturity unless the Servicer, the Certificate Insurer and Trustee,
has received a Nondisqualification Opinion (at the Servicer's expense) that such
sale or disposition will not cause the Trust Fund to be subject to the tax on
income from prohibited transactions imposed by Section 860F(a)(1) of the Code,
otherwise subject REMIC I or REMIC II to tax or cause REMIC I or REMIC II to
fail to qualify as a REMIC. All net income (other than any gain from a sale or
disposition of the type referred to in the preceding sentence) realized from any
such Permitted Investment shall be for the benefit of the Servicer, as
additional compensation. The amount of any losses incurred in respect of any
such Permitted Investments held in the Collection Accounts and in the
Certificate Accounts which is in excess of the income and gain thereon shall be
deposited in the related Certificate Account by the Servicer out of its own
funds immediately as realized.
(d) On each Determination Date, the Servicer shall cause to be
deposited in the Group I and Group II Certificate Account, from funds on deposit
in the Collection Account, an amount equal to the related Available Collection
Amount with respect to the Fixed Rate Pool and the Adjustable Rate Pool,
respectively.
Section 6.2 Permitted Withdrawals From the Collection Accounts and
the Certificate Accounts.
(a) On each Determination Date the Servicer shall withdraw
from each Collection Account the related Available Collection Amount and remit
such Available Collection Amount into the related Certificate Account held by
the Trustee to be distributed on the related Distribution Date. In addition, on
each Determination Date during each Pre-Funding Period and
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for the Distribution Date following the end of the Pre-Funding Period, the
Trustee shall withdraw from the related Pre-Funding Account the amounts of any
Pre-Funding Earnings for the related Due Period together with any amounts
remaining on deposit in the Pre-Funding Account at the close of the Pre-Funding
Period and deposit such amounts into the related Certificate Account. On each
Determination Date, the Servicer shall make the following withdrawals from the
Collection Accounts, in no particular order of priority: (i) to withdraw any
amount not required to be deposited in a Collection Account or deposited therein
in error; (ii) on each Determination Date, to pay to the Servicer any accrued
and unpaid Servicing Fees and any additional Servicing Compensation pursuant to
Section 8.3 not withheld pursuant to Section 6.1; (iii) on each Determination
Date, to pay to the Servicer any unreimbursed Servicing Advances, without
interest, provided, however, that the Servicer's right to reimbursement for
unreimbursed Servicing Advances shall be limited to late collections (excluding
the scheduled monthly payments) on the related Mortgage Loans, including late
collections constituting Liquidation Proceeds, Released Mortgaged Property
Proceeds, Insurance Proceeds, Post Liquidation Proceeds and such other amounts
as may be collected by the Servicer from the related Mortgagor or otherwise
relating to the Mortgage Loan in respect of which such unreimbursed amounts are
owed; and (iv) on each Determination Date, to reimburse the Servicer for any
Periodic Advances determined by the Servicer in good faith to have become
Nonrecoverable Advances.
(b) The Trustee shall withdraw or cause to be withdrawn funds
from the Certificate Accounts for the following purposes: (i) to effect the
distributions described in Section 6.5 and Section 6.6; (ii) to pay to the
Seller with respect to each Mortgage Loan or property acquired in respect
thereof that has been repurchased or replaced pursuant to Section 2.6 or Section
3.5 or to pay to the Servicer with respect to each Mortgage Loan or property
acquired in respect thereof that has been purchased all amounts received thereon
and not required to be distributed as of the date on which the related
repurchase or purchase price or Principal Balance was determined; (iii) on each
Distribution Date, to pay the Servicer any net interest earned on or net
investment income earned with respect to funds in the Certificate Accounts up to
the Business Day immediately prior to such Distribution Date; (iv) on each
Distribution Date, to pay itself any interest earned on or investment income
earned with respect to funds in the Certificate Accounts from the Business Day
immediately prior to such Distribution Date to such Distribution Date; (v) to
return to the related Collection Account any amount deposited in a Certificate
Account that was not required to be deposited therein; and (vii) to clear and
terminate the Certificate Accounts upon termination of the Trust pursuant to
Article XIII.
The Trustee shall keep and maintain a separate accounting for
withdrawals from the Certificate Accounts pursuant to each of subclauses (i)
through (vii) listed above.
Section 6.3 Collection of Money. Except as otherwise expressly provided
herein, the Trustee may demand payment or delivery from the Servicer or any
Subservicer of all money and other property payable to or receivable by the
Trustee pursuant to this Agreement, including 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
Subservicer. The Trustee shall hold all such money and property received by it,
as part of the Trust Fund and shall apply it as provided in this Agreement.
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Section 6.4 The Certificate Insurance Policy.
(a) On the third Business Day prior to each Distribution Date,
the Trustee shall determine with respect to the such Distribution Date the
amount to be on deposit in the Certificate Accounts on such Distribution Date
constituting the Available Distribution Amount.
(b) No later than the third Business Day prior to each
Distribution Date, the Trustee will determine whether a Deficiency Amount exists
under either Certificate Insurance Policy. If the Trustee determines that a
Deficiency Amount exists, the Trustee shall complete a Notice in the form of
Exhibit A to the related Certificate Insurance Policy and submit such notice to
the Certificate Insurer no later than 12:00 noon New York City time on the third
Business Day preceding such Distribution Date as a claim for an Insured Payment
in an amount equal to such excess.
(c) The Trustee shall establish two separate Eligible Accounts
for the benefit of Holders of the Group I Certificates and the Group II
Certificates, as applicable, and the Certificate Insurer referred to herein as
the "Certificate Insurance Payments Accounts" over which the Trustee shall have
exclusive control and sole right of withdrawal. The Trustee shall deposit upon
receipt any amount paid under the related Certificate Insurance Policy in the
related Certificate Insurance Payments Account and distribute such amount only
for purposes of payment to Certificateholders of Group I Certificates or Group
II Certificates for which a claim was made and such amount may not be applied to
satisfy any costs, expenses or liabilities of the Servicer, the Depositor, the
Transferor, the Trustee, or the Trust Fund. Amounts paid under the applicable
Certificate Insurance Policy, shall be transferred by the Trustee from the
related Certificate Insurance Payments Account to the related Certificateholders
in accordance with Section 6.6. It shall not be necessary for payments made
under the Certificate Insurance Policies to be made by checks or wire transfers
separate from other amounts distributed pursuant to Section 6.6. However, the
amount of any payment of principal or of interest on the Certificates to be paid
from funds transferred from the Certificate Insurance Payments Accounts shall be
noted as provided in paragraph (d) below. Funds held in the Certificate
Insurance Payments Accounts shall not be invested. Any funds remaining in the
Certificate Insurance Payments Accounts on the first Business Day following a
Distribution Date shall be returned to the Certificate Insurer pursuant to the
written instructions of the Certificate Insurer by the end of such Business Day.
(d) The Distribution Statement shall indicate the amount of
interest and principal paid in respect of the Class A Certificates and the Class
IO Certificates from moneys received under the Certificate Insurance Policies.
(e) The Trustee shall, as necessary, make a claim on the
related Certificate Insurance Policy in respect of Preference Amounts in
accordance with the terms of the related Certificate Insurance Policy. The
Trustee shall furnish to the Certificate Insurer or its fiscal agent, if any,
its records evidencing the payments which have been made by the Trustee and
subsequently recovered from Certificateholders, and dates on which such payments
were made.
(f) The Trustee shall promptly notify the Certificate Insurer
of any proceeding or the institution of any action, of which a Responsible
Officer of the Trustee has actual
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knowledge, seeking the avoidance as a preferential transfer under applicable
bankruptcy, insolvency, receivership or similar law (a "Preference Claim") of
any distribution made with respect to the Certificates. Each Certificateholder,
by its purchase of Certificates, the Servicer and the Trustee agree that, the
Certificate Insurer may at any time during the continuation of any proceeding
relating to a Preference Claim direct all matters relating to such Preference
Claim, including (i) the direction of any appeal of any order relating to such
Preference Claim and (ii) the posting of any surety, supersedeas or performance
bond pending any such appeal. In addition and without limitation of the
foregoing, the Certificate Insurer shall be subrogated to, and each
Certificateholder, the Servicer and the Trustee hereby delegate and assign to
the Certificate Insurer, to the fullest extent permitted by law, the rights of
the Servicer, the Trustee and each Certificateholder in the conduct of any such
Preference Claim, including all rights of any party to any adversary proceeding
or action with respect to any court order issued in connection with any such
Preference Claim.
(g) The Trustee shall (i) receive as attorney-in-fact of each
Group I Certificate and each Group II Certificate any Insured Payment from the
Certificate Insurer and (ii) distribute such Insured Payment as set forth in
subsection (c) above.
Section 6.5 Distributions in Connection with Certificates.
(a) No later than 12:00 noon Minneapolis time on each
Determination Date, the Servicer shall deliver to the Trustee and the
Certificate Insurer a report in computer-readable form (including electronic
transmission, provided that a portion of such report relating to certain
delinquency information may be delivered in hard copy form rather than
computer-readable form) containing such information as to each Mortgage Loan as
of such date and such other information as the Trustee or the Certificate
Insurer shall reasonably require.
(b) With respect to funds deposited in the Group I Certificate
Account together with any Insured Payment with respect to the Group I
Certificates and any amounts on deposit in the Group II Certificate Account (to
the extent of the Group II Cross-Over Amount), the Trustee shall make the
following distributions in the following order of priority (provided, however,
that Insured Payments shall be distributed pursuant to Section 6.5(b)(iii) and
(iv) only):
(i) to the Trustee, an amount equal to the Trustee Fee then
due with respect to the Group I Certificates;
(ii) to the Certificate Insurer, the Certificate Insurance
Premium then due with respect to the Group I Certificates;
(iii) concurrently to the holders of the Group I Certificates,
the related Certificateholders' Interest Distributable Amount for the
related Interest Period calculated at the related Pass-Through Rate,
pro rata, based on the amount of interest distributable in respect of
each such Class on such Distribution Date;
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(iv) to the extent of the Group I Principal Distribution
Amount net of any Overcollateralization Increase Amount with respect to
the Group I Certificates, first, to the holders of the Class A-6
Certificates, in reduction of the Certificate Principal Balance of the
Class A-6 Certificates, an amount equal to the Class A-6 Lockout
Distribution, if any, for such Distribution Date; and second, in
sequential order, to the holders of the Class A-1, Class A-2, Class
A-3, Class A-4, Class A-5 and Class A-6 Certificates in reduction of
the related Certificate Principal Balance of each such Class, in each
case until the Certificate Principal Balance thereof is reduced to
zero;
(v) to the Certificate Insurer, amounts necessary to reimburse
the Certificate Insurer for Reimbursement Amounts owed to it with
respect to the Group I Certificates;
(vi) to the holders of the Group II Certificates, or the
Trustee or Certificate Insurer, as applicable, the Group I Cross-Over
Amount;
(vii) to the holders of the Group I Certificates then entitled
to receive distributions of principal (as set forth in clause (iv)
above), an amount equal to any Overcollateralization Increase Amount
with respect to the Group I Certificates for such Distribution Date;
(viii) to the holders of the Group II Certificates then
entitled to receive distributions of principal (as set forth in clause
(iv) of subsection (c) below) an amount equal to any
Overcollateralization Deficiency Amount remaining with respect to the
Group II Certificates after application of the Group II Available
Distribution Amount on such Distribution Date;
(ix) to the holders of the Class A-7 Certificates, any Class
A-7 Available Funds Cap Carry-Forward Amount for such Distribution
Date;
(x) to the Servicer and/or the Trustee, reimbursement for
certain permitted reimbursable amounts; and
(xi) to the holders of the Residual Certificates, pro rata,
the Group I Available Distribution Amount remaining on such
Distribution Date, if any.
(c) With respect to funds deposited in the Group II
Certificate Account together with any Insured Payment with respect to the Group
II Certificates and any amounts on deposit in the Group I Certificate Account
(to the extent of the Group I Cross-Over Amount), the Trustee shall make the
following distributions in the following order of priority (provided, however,
that Insured Payments shall be distributed pursuant to Section 6.5(c)(iii) and
(iv) only):
(i) to the Trustee, an amount equal to the Trustee Fee then
due with respect to the Group II Certificates;
(ii) to the Certificate Insurer, the Certificate Insurance
Premium then due with respect to the Group II Certificates;
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(iii) concurrently to the holders of the Group II
Certificates, the related Certificateholders' Interest Distributable
Amount for the related Interest Period calculated at the related
Pass-Through Rate, pro rata, based on the amount of interest
distributable in respect of each such Class on such Distribution Date;
(iv) to the extent of the Group II Principal Distribution
Amount net of any Overcollateralization Increase Amount with respect to
the Group II Certificates, first, to the holders of the Class A-8
Certificates, in reduction of the Certificate Principal Balance of the
Class A-8 Certificates, an amount equal to the Class A-8 Lockout
Distribution, if any, for such Distribution Date; and second, in
sequential order, to the holders of the Class A-7 and Class A-8
Certificates in reduction of the related Certificate Principal Balance
of each such Class, in each case until the Certificate Principal
Balance thereof is reduced to zero;
(v) to the Certificate Insurer, amounts necessary to reimburse
the Certificate Insurer for Reimbursement Amounts owed to it with
respect to the Group II Certificates;
(vi) to the holders of the Group I Certificates, or the
Trustee or Certificate Insurer, as applicable, the Group II Cross-Over
Amount;
(vii) to the holders of the Group II Certificates then
entitled to receive distributions of principal (as set forth in clause
(iv) above), an amount equal to any Overcollateralization Increase
Amount with respect to the Group II Certificates for such Distribution
Date;
(viii) to the holders of the Group I Certificates then
entitled to receive distributions of principal (as set forth in clause
(iv) of subsection (b) above) an amount equal to any
Overcollateralization Deficiency Amount remaining with respect to the
Group I Certificates after application of the Group I Available
Distribution Amount on such Distribution Date;
(ix) to the holders of the Class A-7 Certificates, an amount
equal to the Class A-7 Available Funds Cap Carry-Forward Amount for
such Distribution Date;
(x) to the Servicer and/or the Trustee, reimbursement for
certain permitted reimbursable amounts; and
(xi) to the holders of the Residual Certificates, pro rata,
the Group II Available Distribution Amount remaining on such
Distribution Date, if any.
Section 6.6 Reserved.
Section 6.7 Investment of Accounts.
(a) So long as no Event of Default shall have occurred and be
continuing, and consistent with any requirements of the Code, all or a portion
of any Trust Account (other than
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the Certificate Insurance Payments Account) shall be invested and reinvested by
the Servicer with respect to the Collection Accounts, the Pre-Funding Accounts
and the Capitalized Interest Accounts and by the Trustee with respect to the
Certificate Accounts in one or more Permitted Investments bearing interest or
purchased at a discount. If an Event of Default shall have occurred and be
continuing or if the Servicer does not provide investment directions, the
Trustee shall invest all Trust Accounts (other than the Certificate Insurance
Payments Account) in Permitted Investments described in paragraph (d) of the
definition of Permitted Investments. No such investment in any Trust Account
(other than the Collection Accounts) shall mature later than the Business Day
immediately preceding the next Distribution Date except that if such Permitted
Investment is an obligation of the Trustee, then such Permitted Investment shall
mature not later than such Distribution Date and the investments in the
Collection Accounts shall mature no later than the Business Day prior to
Determination Date. No Permitted Investment shall be said or disposed of at
again prior to maturity unless the Servicer has obtained and delivered to the
Trustee and the Certificate Insurer an Opinion Counsel (at the Servicer's
expense) that such sale or disposition will not cause the REMIC I and REMIC II
to be subject to tax on income from prohibited transactions imposed by Code
Section 860F(a)(1), otherwise subject the REMIC I and REMIC II to tax or cause
the Trust to fail to qualify as a REMIC.
(b) If any amounts are needed for disbursement from any Trust
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 Trust Account.
The Trustee shall not be liable for any investment loss or other charge
resulting therefrom unless the Trustee's failure to perform in accordance with
this Section 6.7 is the cause of such loss or charge.
(c) Subject to Section 6.7 hereof, the Trustee shall not in
any way be held liable by reason of any insufficiency in any Trust Account held
by the Trustee resulting from any investment loss on any Permitted Investments
included therein other than with respect to the investment of funds in the
Certificate Accounts from the Business Day prior to each Distribution Date to
such Distribution Date, and except to the extent that the Trustee is the obligor
and has defaulted thereon or as provided in subsection (b) of this Section 6.7.
(d) So long as no Event of Default shall have occurred and be
continuing, all net income and gain realized from investment of, and all
earnings on, funds deposited in any Trust Account (excluding the Pre-Funding
Accounts and the Capitalized Interest Accounts) shall be for the benefit of the
Servicer as compensation (in addition to the Servicing Fee) and the benefit of
the Trustee as compensation (in addition to the Trustee Fee). The Servicer and
the Trustee shall deposit in each Account, the amount of any loss incurred in
respect of any Permitted Investment held therein which is in excess of the
income and gain thereon immediately upon realization of such loss, without any
right to reimbursement therefor; provided, however, that the Servicer shall only
be responsible for the reimbursement of losses in the Certificate Accounts up
until the Business Day prior to each Distribution Date, and the Trustee shall
only be responsible for the reimbursement of losses from the Business Day prior
to each Distribution Date to such Distribution Date.
Section 6.8 Reports by Trustee.
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(a) On each Distribution Date the Trustee shall provide to
each Holder, to the Certificate Insurer, to the Servicer, to the Underwriters,
to the Transferor and to the Rating Agencies a written report (the "Distribution
Statement"), based solely on information provided by the Servicer and containing
the following information separated for each Pool:
(i) the amount of the distribution with respect to
each Class of Certificates separately identifying any portion thereof consisting
of an Insured Payment;
(ii) the amount of such distributions allocable to
principal, separately identifying the aggregate amount of any Principal
Prepayments or other unscheduled recoveries of principal included therein;
(iii) the amount of such distributions allocable to
interest and the calculation thereof;
(iv) the Certificate Principal Balance or related
Notional Amount of each Class of the Certificates as of such Distribution Date,
(based on a Certificate in an original principal amount of $1,000) in each case
after giving effect to any payment of principal on such Distribution Date;
(v) the related Overcollateralization Target Amount
and the related Overcollateralization Amount as of such Distribution Date;
(vi) the total of any Substitution Adjustments and
any Purchase Price amounts included in such distribution;
(vii) the amounts, if any, of any Liquidation Loan
Losses for the related Due Period and the cumulative amount of Liquidated Loan
Losses from the Closing Date;
(viii) the number of Mortgage Loans and the aggregate
Principal Balance of Mortgage Loans purchased or substituted for pursuant to
Sections 2.6, 3.5 and 5.2 for the related Distribution Date and, since the
closing date, the cumulative number and Principal Balance of Mortgage Loans
purchased or substituted for pursuant to Sections 2.6, 3.5 and 5.2;
(ix) each applicable Pass-Through Rate for such
distribution;
(x) the amount on deposit in the Pre-Funding Accounts
and the Capitalized Interest Accounts;
(xi) for the Distribution Date occurring in December
1998 the balances of the Pre-Funding Amounts that have not been used to purchase
Subsequent Mortgage Loans and that are being distributed to the
Certificateholders as a mandatory prepayment of principal, if any, on such
Distribution Date; and
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(xii) the amount, if any, of the Capitalized Interest
Requirement included in such distribution for each Group of related
Certificates, and of any Class A-7 Available Funds Cap Carry-Forward Amount.
Items (i), (ii) and (iii) above shall, with respect to the 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
Holder of record if so requested in writing 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.
(b) All distributions made to the Certificateholders of a
Class on each Distribution Date will be made on a pro rata basis among the
Certificateholders of such Class on the next preceding Record Date based on the
Percentage Interest represented by their respective Certificates, and shall be
made by wire transfer of immediately available funds to the account of such
Certificateholder at a bank or other entity having appropriate facilities
therefor, if, in the case of a Certificateholder, such Certificateholder shall
own of record Certificates of the same Class which have denominations
aggregating at least $5,000,000 (or, with respect to the Class A-IO
Certificates, Class F-IO Certificates or Residual Interest Certificates, a
Percentage Interest in excess of 20.00%) appearing in the Certificate Register
and shall have provided complete wiring instructions by the Record Date, and
otherwise by check mailed to the address of such Certificateholder appearing in
the Certificate Register.
(c) In addition, on each Distribution Date the Trustee will
distribute to each Holder, to the Underwriters, to the Servicer, to the
Transferor, to the Certificate Insurer and to the Rating Agencies, together with
the information described in subsection (a) preceding, the following information
with respect to the Fixed Rate Pool and Adjustable Rate Pool as of the close of
business on the last Business Day of the prior calendar month, which is hereby
required to be prepared by the Servicer and furnished to the Trustee for such
purpose on or prior to the related Determination Date (such information to be
provided for the Fixed Rate Pool and Adjustable Rate Pool separately):
(i) the total number of Mortgage Loans and the
aggregate Principal Balances thereof, together with the number and aggregate
principal balances of such Mortgage Loans and the percentage (based on the
aggregate Principal Balances of the Mortgage Loans) of the aggregate Principal
Balances of such Mortgage Loans to the aggregate Principal Balance of all
Mortgage Loans (A) 30-59 days Delinquent, (B) 60-89 days Delinquent and (C) 90
or more days Delinquent (such information to be provided for the Fixed Rate Pool
and Adjustable Rate Pool separately);
(ii) the number and aggregate Principal Balances of
all Mortgage Loans and percentage (based on the aggregate Principal Balances of
the Mortgage Loans) of the aggregate Principal Balances of such Mortgage Loans
to the aggregate Principal Balance of all Mortgage Loans in foreclosure
proceedings and the number and aggregate Principal Balances of all Mortgage
Loans and percentage (based on the aggregate Principal Balances of the Mortgage
Loans) of any such Mortgage Loans which are also included in any of the
statistics described in
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the foregoing clauses (i)(A), (i)(B) and (i)(C) (such information to be provided
for the Fixed Rate Pool and Adjustable Rate Pool separately);
(iii) the number and aggregate Principal Balances of
all Mortgage Loans and percentage (based on the aggregate Principal Balances of
the Mortgage Loans) of the aggregate Principal Balances of such Mortgage Loans
to the aggregate Principal Balance of all Mortgage Loans relating to Mortgagors
in bankruptcy proceedings and the number and aggregate Principal Balances of all
Mortgage Loans and percentage (based on the aggregate Principal Balances of the
Mortgage Loans) of any such Mortgage Loans which are also included in any of the
statistics described in the foregoing clauses (i)(A), (i)(B) and (i)(C) (such
information to be provided for the Fixed Rate Pool and Adjustable Rate Pool
separately);
(iv) the number and aggregate Principal Balances of
all Mortgage Loans and percentage (based on the aggregate Principal Balances of
the Mortgage Loans) of the aggregate Principal Balances of such Mortgage Loans
to the aggregate Principal Balance of all Mortgage Loans relating to Foreclosure
Properties and the number and aggregate Principal Balances of all Mortgage Loans
and percentage (based on the aggregate Principal Balances of the Mortgage Loans)
of any such Mortgage Loans which are also included in any of the statistics
described in the foregoing clause (i)(A), (i)(B) and (i)(C) (such information to
be provided for the Fixed Rate Pool and Adjustable Rate Pool separately);
(v) the Net Delinquency Calculation Amount and
Delinquency Percentage for such Distribution Date;
(vi) the weighted average Mortgage Loan Interest Rate
as of the Due Date occurring in the Due Period related to such Distribution
Date;
(vii) the weighted average remaining term to stated
maturity of all Mortgage Loans;
(viii) the book value of any Foreclosure Property;
and
(ix) the number and aggregate Principal Balance of
all Subsequent Mortgage Loans added during the preceding Due Period.
Section 6.9 Additional Reports by Trustee.
(a) The Trustee shall report to the Transferor, the
Certificate Insurer and the Servicer 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
Transferor, the Certificate Insurer or the Servicer may from time to time
request in writing.
(b) On each Distribution Date, the Trustee shall provide
Bloomberg Financial Markets, L.P. ("Bloomberg") the information reported in
Section 6.8 (a)(iv) for each class of
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Certificates as of such Distribution Date, using a format and media mutually
acceptable to the Trustee and Bloomberg.
(c) From time to time, at the request of the Certificate
Insurer, the Trustee shall report to the Certificate Insurer with respect to its
actual knowledge, without independent investigation, of any breach of any of the
representations or warranties relating to individual Mortgage Loans set forth in
any Purchase Agreement or in Section 3.1, 3.2 or 3.4 hereof. The Trustee shall
also provide the Certificate Insurer such other information as may be reasonably
requested by it.
Section 6.10 Compensating Interest.
Not later than the close of business on the Determination Date prior to
the Distribution Date, the Servicer and any Subservicer shall remit to the
Trustee (without right or reimbursement therefor) for deposit into the related
Certificate Account an amount equal to the lesser of (a) the aggregate of the
Prepayment Interest Shortfalls for the related Distribution Date resulting from
Principal Prepayments during the related Due Period and (b) its aggregate
Servicing Fees payable in the related Due Period and shall not have the right to
reimbursement therefor (the "Compensating Interest").
Section 6.11 Pre-Funding Accounts.
(a) No later than the Closing Date, the Trustee shall
establish and maintain with itself one or more segregated trust accounts that
are Eligible Accounts, which shall be titled "Group I Pre-Funding Account,
Norwest Bank Minnesota, National Association, as trustee for the registered
holders of Life Bank Asset-Backed Certificates, Series 1998-1" (the "Group I
Pre-Funding Account") and one or more segregated trust accounts that are
Eligible Accounts, which shall be titled "Group II Pre-Funding Account, Norwest
Bank Minnesota, National Association, as trustee for the registered holders of
Life Bank Asset-Backed Certificates, Series 1998-1" (the "Group II Pre-Funding
Account"). Such Pre-Funding Accounts shall not be an asset of either REMIC I or
REMIC II. The Trustee shall, promptly upon receipt, deposit (a) in the Group I
Pre-Funding Account and retain therein the Original Pre-Funding Amount with
respect to the Fixed Rate Pool remitted on the Closing Date to the Trustee from
the sale of the Certificates and (b) in the Group II Pre-Funding Account and
retain therein the Original Pre-Funding Amount with respect to the Adjustable
Rate Pool remitted on the Closing Date to the Trustee from the sale of the
Certificates. Funds deposited in the Group I Pre-Funding Account shall be held
in trust by the Trustee for the Holders of the Group I Certificates and the
Certificate Insurer for the uses and purposes set forth herein. Funds deposited
in the Group II Pre-Funding Account shall be held in trust by the Trustee for
the Holders of the Group II Certificates and the Certificate Insurer for the
uses and purposes set forth herein. If the Trustee shall not have received an
investment direction from the Servicer, the Trustee will invest funds deposited
in the Pre-Funding Accounts in Permitted Investments of the kind described in
clause (d) of the definition of Permitted Investments with a maturity date no
later than the second Business Day preceding each Determination Date. For
federal income tax purposes, the Transferor shall be the owner of the
Pre-Funding Accounts and shall report all items of income, deduction, gain or
loss arising therefrom. The Transferor shall deposit in the related Pre-Funding
Account the amount of any
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net loss incurred in respect of any such Permitted Investment immediately upon
realization of such loss without any right of reimbursement therefor.
(b) Amounts on deposit in the Group I Pre-Funding Account
shall be withdrawn by the Trustee as follows:
(i) On any Subsequent Transfer Date, the Trustee
shall withdraw from the Group I Pre-Funding Account an amount equal to one
hundred percent (100%) of the Principal Balances of the Subsequent Mortgage
Loans transferred and assigned to the Trustee for the Fixed Rate Pool on such
Subsequent Transfer Date and pay such amount to or upon the order of the
Transferor upon satisfaction of the conditions set forth in Section 2.7(b) with
respect to such transfer and assignment;
(ii) On each Determination Date, to deposit the
investment earnings thereon into the Group I Certificate Account; and
(iii) If the Group I Pre-Funding Amount has not been
reduced to zero during the Funding Period, on the Determination Date immediately
following the end of the Group I Pre-Funding Period, the Trustee shall deposit
into the Group I Certificate Account any amounts remaining in the Group I
Pre-Funding Account.
(c) Amounts on deposit in the Group II Pre-Funding Account
shall be withdrawn by the Trustee as follows:
(i) On any Subsequent Transfer Date, the Trustee
shall withdraw from the Group II Pre-Funding Account an amount equal to one
hundred percent (100%) of the Principal Balances of the Subsequent Mortgage
Loans transferred and assigned to the Trustee for the Adjustable Rate Pool on
such Subsequent Transfer Date and pay such amount to or upon the order of the
Transferor upon satisfaction of the conditions set forth in Section 2.7(b) with
respect to such transfer and assignment;
(ii) On each Determination Date, to deposit the
investment earnings thereon into the Group II Certificate Account; and
(iii) If the Group II Pre-Funding Amount has not been
reduced to zero during the Funding Period, on the Determination Date immediately
following the end of the Group II Pre-Funding Period, the Trustee shall deposit
into the Group II Certificate Account any amounts remaining in the Group II
Pre-Funding Account.
Section 6.12 Capitalized Interest Accounts.
(a) No later than the Closing Date, the Trustee shall
establish and maintain with itself two separate, segregated trust accounts,
which shall be Eligible Accounts, titled "Group I Capitalized Interest Account,
Norwest Bank Minnesota, National Association, as trustee for the registered
holders of Life Bank Asset-Backed Certificates, Series 1998-1" (the "Group I
Capitalized Interest Account") and "Group II Capitalized Interest Account,
Norwest Bank
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Minnesota, National Association, as trustee for the registered holders of Life
Bank Asset-Backed Certificates, Series 1998-1" (the "Group II Capitalized
Interest Account"). Such Capitalized Interest Accounts shall not be an asset of
either REMIC I or REMIC II. The Trustee shall, promptly upon receipt, deposit
(a) in the Group I Capitalized Interest Account and retain therein the Group I
Interest Coverage Amount remitted on the Closing Date to the Trustee from the
sale of the Certificates and (b) in the Group II Capitalized Interest Account
and retain therein the Group II Interest Coverage Amount remitted on the Closing
Date to the Trustee from the sale of the Certificates. In addition, the Trustee
shall deposit into the Group I Certificate Account all income and gain on
investments in the Group I Pre-Funding Account and shall deposit into the Group
II Certificate Account all income and gain on investments in the Group II
Pre-Funding Account pursuant to Section 6.12. Funds deposited in the Group I
Capitalized Interest Account shall be held in trust by the Trustee for the
Holders of the Group I Certificates and the Certificate Insurer for the uses and
purposes set forth herein. Funds deposited in the Group II Capitalized Interest
Account shall be held in trust by the Trustee for the Holders of the Group II
Certificates and the Certificate Insurer for the uses and purposes set forth
herein. For federal income tax purposes, the Transferor shall be the owner of
the Capitalized Interest Accounts and shall report all items of income,
deduction, gain or loss arising therefrom. The Transferor shall deposit in the
related Capitalized Interest Account the amount of any net loss incurred in
respect of any such Permitted Investment immediately upon realization of such
loss without any right of reimbursement therefor.
(b) On each Determination Date during the related Pre-Funding
Period, the Trustee shall (a) withdraw from the Group I Capitalized Interest
Account and deposit in the Group I Certificate Account the related Capitalized
Interest Requirement and (b) withdraw from the Group II Capitalized Interest
Account and deposit in the Group II Certificate Account the related Capitalized
Interest Requirement.
(c) On the first Business Day following the first Distribution
Date following the end of the Group I Pre-Funding Period any amount remaining on
deposit in the Group I Capitalized Interest Account after distributions pursuant
to Section 6.12(b) above shall be withdrawn by the Trustee and paid to the
Servicer.
(d) On the first Business Day following the first Distribution
Date following the end of the Group II Pre-Funding Period, any amount remaining
on deposit in the Group II Capitalized Interest Account after distributions
pursuant to Section 6.12(b) above shall be withdrawn by the Trustee and paid to
the Servicer.
Section 6.13 Effect of Payments by the Certificate Insurer;
Subrogation.
Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on the Class A Certificates or the Class IO
Certificates which is made with moneys received pursuant to the terms of either
Certificate Insurance Policy shall not be considered payment of the Certificates
from the Trust Fund. The Depositor, the Servicer and the Trustee acknowledge,
and each Holder by its acceptance of a Certificate agrees, that without the need
for any further action on the part of the Certificate Insurer, the Depositor,
the Servicer or the Trustee (a) to the extent the Certificate Insurer makes
payments, directly or indirectly, on account of principal of or interest on the
Class A Certificates or the Class IO Certificates to the Holders of such
Certificates, the
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Certificate Insurer will be fully subrogated to, and each Certificateholder, the
Servicer and the Trustee hereby delegate and assign to the Certificate Insurer,
to the fullest extent permitted by law, the rights of such Holders to receive
such principal and interest from the Trust Fund, including any amounts due to
the Certificateholders in respect of securities law violations arising from the
offer and sale of the Class A Certificates and the Class IO Certificates, and
(b) the Certificate Insurer shall be paid such amounts but only from the sources
and in the manner provided herein for the payment of such amounts and as
provided in the Insurance Agreement. The Trustee and the Servicer shall
cooperate in all respects with any reasonable request by the Certificate Insurer
for action to preserve or enforce the Certificate Insurer's rights or interests
under this Agreement without limiting the rights or affecting the interests of
the Certificateholders as otherwise set forth herein.
ARTICLE VII
STATEMENTS AND REPORTS
Section 7.1 Statements.
(a) No later than each Determination Date, the Servicer shall
deliver to the Trustee and the Certificate Insurer (i) a printed report setting
forth the payments and collections received with respect to the Mortgage Loans
during the Due Period for the month immediately preceding the month in which
such Determination Date occurs (each such tape, a "Servicer Monthly Remittance
Report") and (ii),if not included in the Servicer Monthly Remittance Report, a
printed report and an electromagnetic tape in computer readable format, setting
forth the information described in clauses (A) - (I) of Section 6.8 for the
month immediately preceding the month in which such Determination Date occurs
(such report, a "Delinquency Report"). Furthermore, no later than each
Determination Date, the Servicer shall deliver to the Trustee and the
Certificate Insurer a magnetic tape or computer disk providing such information
regarding the Servicer's activities in servicing the Mortgage Loans during the
related Due Period as the Trustee or the Certificate Insurer may reasonably
require.
(b) Upon reasonable advance notice in writing, the Servicer
will provide to each Certificateholder which is a savings and loan association,
bank or insurance company access to information and documentation regarding the
Mortgage Loans sufficient to permit such Certificateholder to comply with
applicable regulations of the FDIC or other regulatory authorities with respect
to investment in such Certificates.
ARTICLE VIII
GENERAL SERVICING PROCEDURE
Section 8.1 Assumption Agreements.
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Except as otherwise provided in the next sentence, the Servicer will,
to the extent it has knowledge of any conveyance or prospective conveyance of
any Mortgaged Property by any Mortgagor (whether by absolute conveyance or by
contract of sale, and whether or not the Mortgagor remains or is to remain
liable under the Mortgage Note and/or the Mortgage), exercise its rights to
accelerate the maturity of such Mortgage Loan under the "due-on-sale" clause, if
any, applicable thereto. The Servicer may, with the prior written consent of the
Certificate Insurer and in accordance with Accepted Servicing Procedures, enter
into an assumption and modification agreement from or with the person to whom
such property has been conveyed or is proposed to be conveyed, pursuant to which
such person becomes liable under the Mortgage Note and, to the extent permitted
by applicable state law, the Mortgagor remains liable thereon. The Servicer,
with the prior written consent of the Certificate Insurer, is also 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 the Mortgagor and becomes liable under the Mortgage Note. In
connection with any assumption or substitution, the Servicer shall apply
Accepted Servicing Procedures. Any fee collected by the Servicer in respect of
an assumption or substitution of liability agreement will be retained by the
Servicer as additional servicing compensation. In connection with any such
assumption, no material term of the Mortgage Note (including, but not limited
to, the related Mortgage Loan Interest Rate and the amount of the Monthly
Payment) may be amended or modified, except as otherwise required pursuant to
the terms thereof. The Servicer shall promptly notify the Trustee and the
Certificate Insurer that any such substitution or assumption agreement has been
completed by forwarding to the Trustee and the Certificate Insurer an Officer's
Certificate certifying that such agreement is in compliance with this Section
8.1 together with the original copy of such substitution or assumption
agreement, which copy shall be added to the related Trustee's Mortgage Loan File
and shall, for all purposes, be considered a part of such Trustee's Mortgage
Loan File to the same extent as all other documents and instruments constituting
a part thereof. In connection with any such agreement, the then current Mortgage
Interest Rate thereon shall not be increased or decreased. Any fee collected by
the Servicer for entering into any such agreement will be retained by the
Servicer as additional servicing compensation. At its sole election, the
Servicer may purchase from the Trust any Mortgage Loan that has been assumed in
accordance with this Section within one month after the date of such assumption
at a price equal to the greater of (i) the fair market value of such Mortgage
Loan (as determined by the Servicer in its good faith judgment) and (ii) the
Purchase Price. Such amount, if any shall be deposited in the related Collection
Account in the Due Period in which such repurchase is made. Notwithstanding the
foregoing, the Servicer shall not enter into an assumption, modification or
substitution of liability agreement unless it has received a Nondisqualification
Opinion that such assumption, modification or substitution of liability will not
constitute a Prohibited Transaction, with respect to REMIC I or REMIC II.
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 by the terms of the Mortgage Note or any
assumption which the Servicer believes in good faith that it may be restricted
by law from preventing, for any reason whatever. For purposes of this Section
8.1, the term "assumption" is deemed to also include a sale (of the Mortgaged
Property) subject to the Mortgage that is not accompanied by an assumption or
substitution of liability agreement.
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Section 8.2 Satisfaction of Mortgages and Release of Trustee's Mortgage
Loan Files.
Upon the payment in full of the Principal Balance of any Mortgage Loan,
the Servicer will notify the Trustee by an appropriate certification of a
Servicing Officer in the form of Exhibit L and shall request delivery to it of
the Trustee's Mortgage Loan File. Upon receipt of such certification and
request, the Trustee shall promptly release the related Trustee's Mortgage Loan
File to the Servicer. The Servicer shall provide for preparation of the
appropriate instrument of satisfaction covering any Mortgage Loan that pays in
full and, on behalf of the Trustee the Servicer shall execute or, to the extent
that the Servicer cannot so execute on behalf of the Trustee, the Trustee shall
cooperate in the execution and return of such instrument to provide for its
delivery or recording as may be required. No expenses incurred in connection
with any instrument of satisfaction or deed of reconveyance shall be chargeable
to any Trust Account or shall be otherwise chargeable to the Depositor, the
Trustee, the Certificate Insurer or the Certificateholders.
From time to time and as appropriate for the servicing or foreclosure
of any Mortgage Loan, the Trustee shall, upon request of the Servicer and
delivery to the Trustee of a Request for Release of Trustee's Mortgage Loan File
in the form of Exhibit L, release the related Trustee's Mortgage Loan File to
the Servicer, and the Trustee shall, at the direction of the Servicer, execute
such documents as shall be necessary to the prosecution of any such proceedings.
Such Request for Release shall obligate the Servicer to return each and every
Trustee's Mortgage Loan File previously requested from the Trustee's Mortgage
Loan File to the Trustee when the need therefor by the Servicer no longer
exists, unless the Mortgage Loan has been liquidated and the Net Liquidation
Proceeds relating to the Trustee's Mortgage Loan File have been deposited in the
Collection Account or the Trustee's Mortgage Loan File or such document has been
delivered to an attorney, or to a public trustee or other public official as
required by law, for purposes of initiating or pursuing legal action or other
proceedings for the foreclosure of the Mortgaged Property either judicially or
non-judicially, and the Servicer has delivered to the Trustee a certificate of a
Servicing Officer certifying as to the name and address of the Person to which
such Trustee's Mortgage Loan File was delivered and the purpose or purposes of
such delivery. Upon receipt of a certificate of a Servicing Officer stating that
such Mortgage Loan was liquidated and that all amounts received or to be
received in connection with such liquidation which are required to be deposited
into the Collection Account have been so deposited, a copy of the Request for
Release shall be released by the Trustee to the Servicer.
On behalf of the Trustee, the Servicer shall execute or, to the extent
that the Servicer cannot so execute on behalf of the Trustee, upon written
certification of a Servicing Officer, the Trustee shall execute and deliver to
the Servicer, any court pleadings, requests for trustee's sale or other
documents necessary to the foreclosure or trustee's sale in respect of a
Mortgaged Property or to any legal action brought to obtain judgment against any
Mortgagor on the Mortgage Note or Mortgage or to obtain a deficiency judgment,
or to enforce any other remedies or rights provided by the Mortgage Note or
Mortgage or otherwise available at law or in equity. Each such certification
shall include a request that such pleadings or documents be executed by the
Trustee and a statement as to the reason such documents or pleadings are
required and that the execution and delivery thereof by the Trustee will not
invalidate or otherwise affect the lien of the Mortgage, except for the
termination of such a lien upon completion of the foreclosure or trustee's sale.
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The Trustee shall execute and deliver to the Servicer any court
pleadings, requests for trustee's sale or other documents necessary to the
foreclosure or trustee's sale in respect of a Mortgaged Property or to any legal
action brought to obtain judgment against any Mortgagor on the Mortgage Note or
Mortgage or to obtain a deficiency judgment, or to enforce any other remedies or
rights provided by the Mortgage Note or Mortgage or otherwise available at law
or in equity. Together with such documents or pleadings, the Servicer shall
deliver to the Trustee a certificate of a Servicing Officer requesting that such
pleadings or documents be executed by the Trustee and certifying as to the
reason such documents or pleadings are required and that the execution and
delivery thereof by the Trustee will not invalidate or otherwise affect the lien
of the Mortgage, except for the termination of such a lien upon completion of
the foreclosure or trustee's sale. The Trustee shall, upon receipt of a written
request from a Servicing Officer, execute any document provided to the Trustee
by the Servicer or take any other action requested in such request that is, in
the opinion of the Servicer as evidenced by such request, required by any state
or other jurisdiction to discharge the lien of a Mortgage upon the satisfaction
thereof and the Trustee will sign and post, but will not guarantee receipt of,
any such documents to the Servicer, or such other party as the Servicer may
direct, within five Business Days, or more promptly if needed, of the Trustee's
receipt of such certificate or documents. Such certificate or documents shall
establish to the Trustee's satisfaction that the related Mortgage Loan has been
paid in full by or on behalf of the Mortgagor and that such payment has been
deposited in the Collection Account.
Section 8.3 Servicing Compensation.
As compensation for its services hereunder, the Servicer shall be
entitled to retain from amounts otherwise required to be deposited into the
Collection Accounts, the Servicing Fee out of which the Servicer shall pay any
servicing fees owed or payable to any Subservicer. Additional servicing
compensation in the form of assumption fees, modification fees, and other
administrative fees, insufficient funds charges, amounts remitted pursuant to
Section 8.1, late payment charges and investment income on earnings on the Trust
Accounts shall be part of the Servicing Compensation payable to the Servicer
hereunder and shall be paid either by the Servicer retaining such additional
servicing compensation prior to deposit in the Collection Account pursuant to
Section 6.1 or if deposited into the Collection Accounts as part of the
Servicing Compensation withdrawn from the Collection Accounts pursuant to
Section 6.1.
The Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder and shall not be entitled to
reimbursement therefor except as specifically provided for herein. The Servicer
also agrees to pay all annual Rating Agency monitoring fees.
Section 8.4 Statement as to Compliance and Financial Statements.
The Servicer will deliver to the Trustee, the Certificate Insurer, the
Depositor and the Transferor not later than 90 days following the end of each
Servicer's Fiscal Year (beginning with 1999 which will cover activities during
the fiscal year 1998), an Officers' Certificate stating, as to each signatory
thereof, that (i) a review of the activities of the Servicer during the
preceding year and of performance under this Agreement has been made under such
officer's supervision
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and (ii) to the best of such officer's knowledge, based on such review, the
Servicer has fulfilled all of its obligations under this Agreement throughout
such year, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officers and the nature
and status thereof.
Contemporaneously with the submission of the Officers' Certificate
required by the preceding paragraph, the Servicer shall deliver to the Trustee
and the Certificate Insurer a copy of its annual audited financial statements
prepared in accordance with generally accepted accounting principals. The
Servicer shall, upon the request of the Depositor or the Certificate Insurer,
deliver to such party any unaudited quarterly financial statements of the
Servicer.
The Servicer agrees to make available on a reasonable basis to the
Depositor and the Certificate Insurer a knowledgeable officer of the Servicer
for the purpose of answering reasonable questions respecting recent developments
affecting the Servicer or the financial statements of the Servicer and to permit
the Depositor and the Certificate Insurer or the Underwriters on reasonable
notice to inspect the Servicer's servicing facilities during normal business
hours for the purpose of satisfying the Depositor and the Certificate Insurer or
the Underwriters that the Servicer has the ability to service the Mortgage Loans
in accordance with this Agreement.
The Servicer shall also furnish and certify to the requesting party
such other information as to (i) its organization, activities and personnel
relating to the performance of the obligations of the Servicer hereunder, (ii)
its financial condition, (iii) the Mortgage Loans and (iv) the performance of
the obligations of any Subservicer under the related Subservicing Agreement, in
each case as the Trustee, the Certificate Insurer or the Depositor may
reasonably request from time to time.
Section 8.5 Independent Public Accountants' Servicing Report.
Not later than 90 days following the end of each Servicer's Fiscal Year
(beginning with 1999 which will cover activities during the fiscal year 1998),
the Servicer at its expense shall cause any of Arthur Andersen & Co., Price
Waterhouse Coopers, Deloitte & Touche, Ernst & Young, KPMG Peat Marwick or such
other nationally recognized firm of Independent Certified Public Accountants
(which may also render other services to the Servicer) to furnish a statement to
the Trustee, the Certificate Insurer, the Transferor and the Depositor to the
effect that such firm has examined certain documents and records relating to the
servicing of the Mortgage Loans under this Agreement or of mortgage loans under
pooling and servicing agreements (including the Mortgage Loans and this
Agreement) substantially similar to one another (such statement to have attached
thereto a schedule setting forth the pooling and servicing agreements covered
thereby) and that, on the basis of such examination conducted substantially in
compliance with the Uniform Single Attestation Program for Mortgage Bankers,
such firm confirms that such servicing has been conducted in compliance with
such pooling and servicing agreements except for such significant exceptions or
errors in records that, in the opinion of such firm, the Uniform Single
Attestation Program for Mortgage Bankers requires it to report, each of which
errors and omissions shall be specified in such statement. In rendering such
statement, such firm may rely, as to matters relating to direct servicing of
mortgage loans by Subservicers, upon comparable statements for examinations
conducted substantially in compliance with the Uniform Single Attestation
Program
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for Mortgage Bankers (rendered within one year of such statement) of independent
public accountants with respect to the related Subservicer.
Section 8.6 Right to Examine Servicer Records.
The Certificate Insurer, the Trustee, the Depositor and each of their
respective agents shall have the right upon reasonable prior notice, during
normal business hours and as often as reasonably required, (i) to examine,
audit, copy, at the expense of the Person making such examination, any and all
of the books, records or other information of the Servicer (including any
Subservicer to the extent provided in the related Subservicing Agreement)
whether held by the Servicer or by another on behalf of the Servicer, which may
be relevant to the performance or observance by the Servicer of the terms,
covenants or conditions of this Agreement, the Insurance Agreement or any other
related document; (ii) to visit the offices and properties of the Servicer and
of the Seller for the purpose of examining such materials and to discuss matters
relating to the Mortgage Loans and the Servicer's and the Seller's performance
under this Agreement with any of the officers or employees of the Servicer and
the Seller having knowledge thereof and with the independent public accountants
of the Servicer (and by this provision the Servicer and the Seller each
authorize their respective accountants to discuss their respective finances and
affairs), all at such reasonable times, as often as may be reasonably requested
and without charge to such Certificateholder, the Certificate Insurer or the
Trustee. The Certificate Insurer, each Certificateholder, the Trustee and the
Depositor agree that any information obtained pursuant to the terms of this
Agreement shall be held confidential (unless readily available from public
sources), except as may be otherwise required by regulation, law or court order
or requested by appropriate governmental authorities or as necessary to preserve
its rights or security under or to enforce this Agreement, the Purchase
Agreement, the Sale Agreement, the Insurance Agreement, the Custodial Agreement
or an other related document, provided that the foregoing shall not limit the
right of the Certificate Insurer to make such information available to its
regulators, securities rating agencies, reinsurers, credit and liquidity
providers, counsel and accountants.
Section 8.7 Reports to the Trustee; Collection Account Statements.
If the Collection Accounts are not maintained with the Trustee, then
not later than 25 days after each Record Date, the Servicer shall forward to the
Trustee a statement, certified by a Servicing Officer, setting forth the status
of the Collection Accounts as of the close of business on the preceding Record
Date and showing, for the period covered by such statement, the aggregate of
deposits into the related Collection Account for each category of deposit
specified in Section 6.1, the aggregate of withdrawals from the related
Collection Account for each category of withdrawal specified in Section 6.1 for
the related Due Period.
ARTICLE IX
REPORTS TO BE PROVIDED BY SERVICER
Section 9.1 Financial Statements.
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The Servicer understands that, in connection with the transfer of the
Certificates, Certificateholders may request that the Servicer make available to
the Certificateholders and to prospective Certificateholders annual audited
financial statements of the Servicer for one or more of the most recently
completed five fiscal years for which such statements are available, which
request shall not be unreasonably denied.
The Servicer also agrees to make available on a reasonable basis to the
Certificate Insurer and the Certificateholders or any prospective
Certificateholder a knowledgeable financial or accounting officer for the
purpose of answering reasonable questions respecting recent developments
affecting the Servicer or the financial statements of the Servicer and to permit
the Certificate Insurer and the Certificateholders and any prospective
Certificateholder to inspect the Servicer's servicing facilities during normal
business hours for the purpose of satisfying the Certificate Insurer and the
Certificateholders and such prospective Certificateholder that the Servicer has
the ability to service the Mortgage Loans in accordance with this Agreement.
ARTICLE X
THE SERVICER
Section 10.1 Indemnification; Third Party Claims.
(a) The Servicer shall indemnify the Transferor, the
Certificate Insurer, the Depositor and the Trustee (each an "Indemnified Party")
and hold harmless each of them against any and all claims, losses, damages,
penalties, fines, forfeitures, reasonable legal fees and related costs,
judgments, and other costs and expenses resulting from any claim, demand,
defense or assertion based on or grounded upon, or resulting from, a breach of
any of the Servicer's representations and warranties and covenants contained in
this Agreement or in any way relating to the failure of the Servicer to perform
its duties and service the Mortgage Loans in compliance with the terms of this
Agreement; provided, however that if the Servicer is not liable pursuant to the
provisions of Section 10.1 (d) for its failure to perform its duties and service
the Mortgage Loans in compliance with the terms of this Agreement, then the
provisions of this Section 10.1 shall have no force and effect with respect to
such failure.
(b) The Transferor, the Certificate Insurer, the Depositor or
the Trustee, as the case may be, and the Servicer shall promptly notify the
other Indemnified Parties if a claim is made by a third party with respect to a
breach of any of the Servicer's representations and warranties and covenants
contained in this Agreement or in any way relating to the failure of the
Servicer to perform its duties and service the Mortgage Loans in compliance with
the terms of this Agreement. The Servicer shall promptly notify the Trustee, the
Certificate Insurer, and the Depositor of any claim of which it has been
notified pursuant to this Section 10.1 by a Person other than the Depositor,
and, in any event, shall promptly notify the Depositor and the Certificate
Insurer of its intended course of action with respect to any claim.
(c) The Servicer shall be entitled to participate in and, upon
notice to the Indemnified Party, assume the defense of any such action or claim
in reasonable cooperation with, and with the reasonable cooperation of, the
Indemnified Party. The Indemnified Party will have
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the right to employ its own counsel in any such action in addition to the
counsel of the Servicer, but the fees and expenses of such counsel will be at
the expense of such Indemnified Party, unless (a) the employment of counsel by
the Indemnified Party at its expense has been authorized in writing by the
Servicer, (b) the Servicer has not in fact employed counsel to assume the
defense of such action within a reasonable time after receiving notice of the
commencement of the action, or (c) the named parties to any such action or
proceeding (including any impleaded parties) include both the Servicer and one
or more Indemnified Parties, and the Indemnified Parties shall have been advised
by counsel that there may be one or more legal defenses available to them which
are different from or additional to those available to the Servicer. The
Servicer shall not be liable for any settlement of any such claim or action
unless the Servicer shall have consented thereto or be in default on its
obligations hereunder. Any failure by an Indemnified Party to comply with the
provisions of this Section 10.1 shall relieve the Servicer of liability only if
such failure is materially prejudicial to the position of the Servicer and then
only to the extent of such prejudice.
(d) None of the Transferor, the Depositor or the Servicer or
any of the directors, officers, employees or agents of the Transferor, the
Depositor or the Servicer, or members or affiliates of the Depositor shall be
under any liability to the Trustee or the Certificateholders for any action
taken or for refraining from the taking of any action in good faith pursuant to
this Agreement, or for errors in judgment; provided, however that this provision
shall not protect the Transferor, the Depositor, the Servicer or any such person
against the remedies provided herein for the breach of any warranties,
representations or covenants made herein, or against any specific liability
imposed on the Transferor, the Depositor or the Servicer herein, or against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or negligence in the performance of the duties of the Servicer, the
Depositor or the Transferor, as the case may be, or by reason of reckless
disregard of the obligations and duties of the Servicer, the Depositor or the
Transferor, as the case may be, hereunder. The Transferor, the Depositor, the
Servicer and any director, officer, employee or agent of the Transferor, the
Depositor or the Servicer, or any member or affiliate of the Depositor may rely
in good faith on any document of any kind which, prima facie, is properly
executed and submitted by any Person respecting any matters arising hereunder.
(e) The Servicer, the Transferor and the Depositor and any
director, officer, employee or agent of the Servicer, the Transferor or the
Depositor shall be indemnified by the Trust Fund and held harmless against any
loss, liability or expense incurred in connection with any audit, controversy or
judicial proceeding relating to a governmental taxing authority or any legal
action relating to this Agreement or the Certificates, other than any loss,
liability or expense related to any specific Mortgage Loan or Mortgage Loans
(except as any such loss, liability or expense shall be otherwise reimbursable
pursuant to this Agreement) and any loss, liability or expense incurred by
reason of willful misfeasance, bad faith or negligence in the performance of
duties hereunder or by reason of reckless disregard of obligations and duties
hereunder. Except as otherwise provided herein, none of the Transferor, the
Depositor or the Servicer shall be under any obligation to appear in, prosecute
or defend any legal action that is not related to its respective duties under
this Agreement; provided, however, that, except as otherwise provided herein,
any of the Transferor, the Depositor or the Servicer may, with the prior consent
of the Trustee, in its discretion undertake any such action which it may deem
necessary or desirable with respect to this Agreement and the rights and duties
of the parties hereto and the interests of the Certificateholders
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hereunder. In such event, the legal expenses and costs of such action and any
liability resulting therefrom shall be expenses, costs and liabilities of the
Trustee, and the Transferor, the Depositor and the Servicer shall be entitled to
be reimbursed therefor out of the Collection Accounts.
Section 10.2 Merger or Consolidation of the Servicer.
The Servicer shall keep in full effect its existence, rights and
franchises as a federal savings bank, and will obtain and preserve its
qualification to do business as a foreign corporation and maintain such other
licenses and permits, in each jurisdiction necessary to protect the validity and
enforceability of this Agreement or any of the Mortgage Loans and to perform its
duties under this Agreement and will otherwise operate its business so as to
cause the representations and warranties under Section 3.3 to be true and
correct at all times under this Agreement.
Any Person into which the Servicer may be merged or consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Servicer shall be a party, or any Person succeeding to the business of the
Servicer, shall be an Eligible Servicer, shall have a net worth of at least
$15,000,000 and, with the prior written consent of the Certificate Insurer,
shall be the successor of the Servicer, as applicable 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. The Servicer
shall send notice of any such merger, conversion, consolidation or succession to
the Trustee, the Certificate Insurer and the Depositor.
Section 10.3 Limitation on Liability of the Servicer and Others.
Subject to the terms of Section 10.1, the Servicer shall have no
obligation to appear with respect to, prosecute or defend any legal action which
is not incidental to the Servicer's duty to service the Mortgage Loans in
accordance with this Agreement.
Section 10.4 Servicer Not to Resign; Assignment.
The Servicer shall not resign from the obligations and duties hereby
imposed on it except (a) by the consent of the Trustee and the Certificate
Insurer or (b) upon determination that its duties hereunder are no longer
permissible under applicable law and that such incapacity cannot be cured by the
Servicer without incurring, in the reasonable judgment of the Servicer,
unreasonable expense. Any such determination pursuant to clause (b) of the
preceding sentence permitting the resignation of the Servicer shall be evidenced
by an Independent Opinion of Counsel to such effect delivered (at the expense of
the Servicer) to the Trustee and the Certificate Insurer. No resignation of the
Servicer shall become effective until the Trustee or a successor Servicer,
appointed pursuant to the provisions of Section 12.2 and satisfying the
requirements of Section 5.7 with respect to the qualifications of a successor
Servicer, shall have assumed the Servicer's responsibilities, duties,
liabilities (other than those liabilities arising prior to the appointment of
such successor) and obligations under this Agreement. The Servicer shall provide
the Trustee and the Certificate Insurer with 30 days prior written notice of its
intention to resign pursuant to this Section 10.4.
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Except as expressly provided herein, the Servicer shall not assign or
transfer any of its rights, benefits or privileges hereunder to any other
Person, or delegate to or subcontract with, or authorize or appoint any other
Person to perform any of the duties, covenants or obligations to be performed by
the Servicer hereunder, without the prior written consent of the Certificate
Insurer and the Trustee, and absent such written consent any agreement,
instrument or act purporting to effect any such assignment, transfer, delegation
or appointment shall be void.
Section 10.5 Relationship of Servicer to Depositor and the Trustee.
The relationship of the Servicer (and of any successor to the Servicer
as servicer under this Agreement) to the Depositor and the Trustee under this
Agreement is intended by the parties hereto to be that of an independent
contractor and not of a joint venturer, agent or partner of the Depositor or the
Trustee.
Section 10.6 Servicer May Own Certificates.
Each of the Servicer and any affiliate of the Servicer may in its
individual or any other capacity become the owner or pledgee of Certificates
with the same rights as it would have if it were not the Servicer or an
affiliate thereof except as otherwise specifically provided herein. Certificates
so owned by or pledged to the Servicer or such affiliate shall have an equal and
proportionate benefit under the provisions of this Agreement, without
preference, priority, or distinction as among all of the Certificates; provided,
however, that any Certificates owned by the Servicer or any affiliate thereof,
during the time such Certificates are owned by any of them, shall be without
voting rights for any purpose set forth in this Agreement. The Servicer shall
notify the Trustee and the Certificate Insurer promptly after it or any of its
affiliates becomes the owner or pledgee of a Certificate.
The Trustee shall at no time have any responsibility or liability for
or with respect to the legality, validity and enforceability of any Mortgage or
any Mortgage Loan, the perfection and priority of any mortgage (except as to
those files examined pursuant to Section 2.5(b)) or the maintenance of any such
perfection and priority (except as to those Mortgage Loans as to which
Assignments of Mortgage have been filed pursuant to Section 2.5) or for or with
respect to the sufficiency of the Trust or its ability to generate the payments
to be distributed to Certificateholders under this Agreement, including: the
existence and enforceability of any hazard insurance thereon (other than if the
Trustee shall assume the duties of the Servicer pursuant to Section 12.2 and
thereupon only for the acts or omissions of the successor Servicer); the
validity of the assignment of any Mortgage Loan to the Trustee or of any
intervening assignment; the completeness of any Mortgage Loan; the performance
or enforcement of any Mortgage Loan (other than if the Trustee shall assume the
duties of the Servicer pursuant to Section 12.2 and thereupon only for the acts
or omissions of the Trustee as successor Servicer); the compliance by the
Depositor or the Servicer with any warranty or representation made under this
Agreement or in any related document or the accuracy of any such warranty or
representation; any investment or monies by or at the direction of the Servicer
or any loss resulting, except that the Trustee shall remain responsible for any
Trust property that it may hold in its individual capacity; the acts or
omissions of any of the Depositor, the Servicer (other than if the Trustee shall
assume the duties of the Servicer pursuant to Section 12.2 and thereupon only
for the acts or omissions of the
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Trustee as successor Servicer), any subservicer or any Mortgagor; any action of
the Servicer (other than if the Trustee shall assume the duties of the Servicer
pursuant to Section 12.2 and thereupon only for the acts or omissions of the
Trustee as successor Servicer); provided, however, that the foregoing shall not
relieve the Trustee of its obligation to perform its duties under this
Agreement, including the Trustee's review of the Trustee's Mortgage Loan Files
pursuant to Section 2.6. The Trustee shall have no responsibility for filing any
financing or continuation statement in any public office at any time (unless the
Trustee shall have become the successor Servicer).
ARTICLE XI
THE TRUSTEE
Section 11.1 Duties of Trustee.
(a) The Trustee, prior to the occurrence of an Event of
Default and after the curing of all Events of Default which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in this Agreement. If an Event of Default has occurred and has not been
cured or waived, the Trustee shall exercise such of the rights and powers vested
in it by this Agreement, and use the same degree of care and skill in its
exercise as a prudent person would exercise or use under the circumstances in
the conduct of such person's own affairs.
(b) The Trustee, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Trustee which are specifically required to be
furnished pursuant to any provision of this Agreement, shall examine them to
determine whether they conform on their face to the requirements of this
Agreement; provided, however, that the Trustee shall not be responsible for the
accuracy or content of any resolution, certificate, statement, opinion, report,
document, order or other instrument furnished by the Servicer, the Transferor or
the Depositor hereunder. If any such instrument is found not to conform on its
fact the requirements of this Agreement, the Trustee shall take action as it
deems appropriate to have the instrument corrected and, if the instrument is not
corrected to the Trustee's satisfaction, the Trustee will, at the expense of the
Servicer notify the Certificate Insurer and request written instructions as to
the action it deems appropriate to have the instrument corrected, and if the
instrument is not so corrected, the Trustee will provide notice thereof to the
Certificate Insurer who shall then direct the Trustee as to the action, if any,
to be taken.
(c) No provision of this Agreement shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct; provided, however, that:
(i) Prior to the occurrence of an Event of
Default, and after the curing of all such
Events of Default which may have occurred,
the duties and obligations of the Trustee
shall be determined solely by the express
provisions of this Agreement, the Trustee
shall not be liable except for the
performance of such duties and obligations
as are
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specifically set forth in this Agreement, no
implied covenants or obligations shall be
read into this Agreement against the Trustee
and, in the absence of bad faith on the part
of the Trustee, the Trustee may conclusively
rely, as to the truth of the statements and
the correctness of the opinions expressed
therein, upon any certificates or opinions
furnished to the Trustee and conforming to
the requirements of this Agreement;
(ii) The Trustee shall not be personally liable
for an error of judgment made in good faith
by a Responsible Officer or other officers
of the Trustee, unless it shall be proved
that the Trustee was negligent in
ascertaining the pertinent facts;
(iii) The Trustee shall not be personally liable
with respect to any action taken, suffered
or omitted to be taken by it in good faith
in accordance with the direction of the
Certificate Insurer or the Majority
Certificateholders with the consent of 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;
(iv) The Trustee, in its capacity as trustee,
shall not be required to take notice or be
deemed to have notice or knowledge of any
default or Event of Default (except an Event
of Default with respect to nonpayment of any
amount described in Section 12.1(a)(i)),
unless a Responsible Officer of the Trustee
shall have received written notice thereof
or otherwise has actual knowledge thereof.
In the absence of receipt of such notice or
having actual knowledge, the Trustee, in its
capacity as trustee, may conclusively assume
that there is no default or Event of Default
(except an Event of Default with respect to
nonpayment of any amount described in
Section 12.1(a)(i));
(v) 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 shall be the successor to,
and be vested with the rights, duties,
powers and privileged of, the Servicer in
accordance with the terms of this Agreement;
and
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(vi) Subject to the other provisions of this
Agreement (and except in its capacity as
successor Servicer) and without limiting the
generality of this Section, the Trustee
shall have no duty (A) to cause or see to
any recording, filing, or depositing of this
Agreement, any agreement referred to herein,
any Mortgage or assignment of Mortgage or
any financing statement or continuation
statement evidencing a security interest, or
to cause or see to the maintenance of any
such recording or filing or depositing or to
any rerecording, refiling or redepositing of
any thereof, (B) to cause or see to any
insurance, (C) to cause or see to the
payment or discharge 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, the Certificateholders or the
Mortgage Loans, or (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.
Section 11.2 Certain Matters Affecting the Trustee.
Except as otherwise provided in Section 11.1:
(i) the Trustee may rely and shall be protected
in acting or refraining from acting upon any
resolution, Officers' Certificate, Opinion
of Counsel, certificate or auditors or any
other certificate, statement, instrument,
opinion, report, notice, request, consent,
order, appraisal, bond or other paper or
document believed by it to be genuine and to
have been signed or presented by the proper
party or parties and the manner of obtaining
consents and of evidencing the execution
thereof by Certificateholders shall be
subject to such reasonable regulations as
the Trustee may prescribe;
(ii) the Trustee may consult with counsel chosen
by it with due care and any written advice
of counsel (a copy of which is received by
the Certificate Insurer) or Opinion of
Counsel shall be full and complete
authorization and protection in respect of
any action taken or suffered or omitted by
it hereunder in good faith and in accordance
with such Opinion of Counsel;
(iii) the Trustee shall be under no obligation to
exercise any of the trust or power vested in
it by this Agreement or to institute,
conduct or defend by litigation hereunder or
in relation hereto at the request, order or
direction of the Certificate Insurer or any
of the Certificateholders, pursuant to the
provisions of this Agreement, unless the
Certificate Insurer or such
Certificateholders shall have offered to the
Trustee reasonable security or indemnity
against the
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costs, expenses and liabilities which may be
incurred therein by the Trustee or thereby;
nothing contained herein shall, however,
relieve the Trustee of the obligation, upon
the occurrence of any Event of Default of
which the Trustee has notice or knowledge
pursuant to Section 11.1(c)(iv) (which has
not been cured), to exercise such of the
rights and powers vested in it by this
Agreement, and to use the same degree of
care and skill in its exercise as a prudent
person would exercise or use under the
circumstances in the conduct of such
person's own affairs;
(iv) the Trustee shall not be personally liable
for any action taken, suffered or omitted by
it in good faith and believed by it to be
authorized or within the discretion or
rights or powers conferred upon it by this
Agreement;
(v) prior to the Trustee having notice or
knowledge pursuant to Section 11.1(c)(iv) of
an Event of Default hereunder and after the
curing of all Events of Default which may
have occurred, the Trustee shall not be
bound to make any investigation into the
facts or matters stated in any resolution,
certificate, statement, instrument, opinion,
report, notice, request, consent, order,
approval, bond or other paper or document,
unless requested in writing to do so by the
Certificate Insurer or the Majority
Certificateholders with the consent of the
Certificate Insurer; provided, however, that
if the payment within a reasonable time to
the Trustee of the costs, expenses or
liabilities likely to be incurred by it in
the making of such investigation is, in the
opinion of the Trustee, not reasonably
assured to the Trustee by the security
afforded to it by the terms of this
Agreement, the Trustee may require
reasonable indemnity against such expense or
liability as a condition to taking any such
action;
(vi) 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;
(vii) the Trustee shall not be required to give
any bond or surety in respect of the
execution of the Trust created hereby or the
powers granted hereunder; and
(viii) 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 negligence or
willful misconduct on the part of any such
agent or attorney appointed by the Trustee
with due care.
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Section 11.3 Trustee Not Liable for Certificates or Mortgage Loans.
The statements contained herein and in the Certificates (other than the
certificate of authentication on the Certificates) shall be taken as the
statements of the Depositor, the Transferor or the Servicer as the case may be,
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representations as to the validity or sufficiency of this Agreement,
the Certificates or of any Mortgage Loan or related document. The Trustee shall
not be accountable for the use or application of the following: (i) any
Certificates delivered to the Depositor, (ii) any proceeds from such
Certificates or (iii) any funds paid to the Servicer in respect of the Mortgage
Loans or deposited in or withdrawn from a Collection Account by the Servicer.
The Trustee shall not be responsible for the legality or validity of the
Agreement or the validity, priority, perfection or sufficiency of the security
of the Certificates issued or intended to be issued hereunder.
Section 11.4 Trustee May Own Certificates.
(a) The Trustee in its individual or any other capacity may
become the owner or pledgee of Certificates with the same rights as it would
have if it were not Trustee and may transact any banking and/or trust business
with the Depositor, the Seller, the Servicer or its affiliates.
(b) The Trust Fund, the Trustee and any director, officer,
employee or agent of the Trustee shall be indemnified by the Servicer, the
Seller and the Transferor and held harmless against any loss, liability, claim,
damage or expense arising out of, or imposed upon the Trust or the Trustee in
connection with this Agreement, other than any loss, liability or expense
incurred by the Trustee by reason of willful malfeasance, bad faith or
negligence of the Trustee in the performance of its duties hereunder or by
reason of the Trustee's reckless disregard of its obligations and duties
hereunder. The obligations of the Servicer under this Section 11.4(b) arising
prior to any resignation or termination of the Servicer hereunder shall survive
termination of the Servicer and payment of the Certificates, and shall extend to
any co-trustee appointed pursuant to this Article XI.
Section 11.5 Trustee's Fees and Expenses.
The Trustee acknowledges that in consideration of the performance of
its duties hereunder it is entitled to receive the Trustee's Fee (which shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust) in accordance with the provision of Section 6.5(a).
Additionally, the Trustee hereby covenants, for the benefit of the Depositor,
that the Trustee has arranged separately with the Servicer for the payment to
the Trustee of all the Trustee's expenses in the connection only with the
negotiation and initial execution of this Agreement. For the avoidance of doubt,
the parties hereto acknowledge that it is the intent of the parties that the
Depositor and the Certificate Insurer shall not pay any of the Trustee's fees
and expenses in connection with this transaction. The Trustee shall not be
entitled to compensation for any expense, disbursement or advance as may arise
from its negligence or bad faith, and the Trustee shall have no lien on a Trust
Fund for the payment of its fees and expenses.
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Section 11.6 Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a banking association (a)
organized and doing business under the laws of any state or the United States of
America subject to supervision or examination by federal or state authority, (b)
authorized under such laws to exercise corporate trust powers, (c) having a
combined capital and surplus of at least $50,000,000, (d) whose long-term
deposits, if any, shall be rated at least "BBB" by S&P and Baa2 by Moody's
(except as provided herein), and (e) reasonably acceptable to the Certificate
Insurer as evidenced in writing. If such banking entity 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
determining an entity's combined capital and surplus for clause (c) of this
Section, the amount set forth in its most recent report of condition so
published shall be deemed to be its combined capital and surplus. In case at any
time the Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Trustee shall resign immediately in the manner and with the
effect specified in Section 11.6.
Section 11.7 Resignation and Removal of the Trustee.
(a) The Trustee may at any time resign and be discharged from
the trusts hereby created by giving written notice thereof to the Servicer, the
Certificate Insurer and all Certificateholders. Upon receiving such notice of
resignation, the Servicer at the direction of, or with the consent of the
Certificate Insurer, shall promptly appoint a successor Trustee by written
instrument, in duplicate, which instrument shall be delivered to the resigning
Trustee and to the successor Trustee. A copy of such instrument shall be
delivered to the Depositor, the Certificate Insurer, the Certificateholders and
the Transferor by the Servicer. Unless a successor Trustee shall have been so
appointed and shall have accepted appointment within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor acceptable to the
Certificate Insurer.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 11.5 and shall fail to resign after
written request therefor by the Servicer or the Certificate Insurer, or if at
any time the Trustee shall become incapable of acting, or shall be adjudged
bankrupt or insolvent, or a receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose or rehabilitation, conservation or
liquidation, then the Servicer (with the prior written consent of the
Certificate Insurer) or the Certificate Insurer may remove the Trustee and the
Servicer shall, within 30 days after such removal, appoint at the direction of,
or with the consent of the Certificate Insurer, a successor Trustee by written
instrument, in duplicate, which instrument shall be delivered to the Trustee so
removed and to the successor Trustee. A copy of such instrument shall be
delivered to the Depositor, the Certificateholders, the Certificate Insurer and
the Transferor by the Servicer.
(c) If the Trustee fails to perform in accordance with the
terms of this Agreement, the Certificate Insurer or the Majority
Certificateholders with the consent of the Certificate Insurer may remove the
Trustee and appoint a successor Trustee by written instrument or instruments, in
triplicate, signed by the Certificate Insurer or such Holders or their
attorneys-in-
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fact and the Certificate Insurer, duly authorized one complete set of which
instruments shall be delivered to the Servicer, one complete set to the Trustee
so removed and one complete set to the successor Trustee so appointed.
(d) Any resignation or removal of the Trustee and appointment
of a successor Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor trustee as
provided in Section 11.8.
Section 11.8 Successor Trustee.
Any successor Trustee appointed as provided in Section 9.7 shall
execute, acknowledge and deliver to the Depositor, the Certificate Insurer, the
Seller, the Servicer, the Transferor and to its predecessor Trustee an
instrument accepting such appointments hereunder, and thereupon the resignation
or removal of the predecessor Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become fully vested
with all the rights, powers, duties and obligations of its predecessor
hereunder, with the like effect as if originally named as Trustee herein. The
predecessor Trustee shall deliver to the successor Trustee all Trustee's
Mortgage Loan Files and related documents and statements held by it hereunder,
and the Servicer and the predecessor Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for more
fully and certainly vesting and confirming in the successor Trustee all such
rights, powers, duties and obligations. No successor Trustee shall accept
appointment as provided in this Section unless at the time of such acceptance
such successor Trustee shall be eligible under the provisions of Section 11.5.
Upon acceptance of appointment by a successor Trustee as provided in this
Section, the Servicer shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates at their addresses as shown in the
Certificate Register and to the Rating Agencies. If the Servicer fails to mail
such notice within 10 days after acceptance of appointment by the successor
Trustee, the successor Trustee shall cause such notice to be mailed at the
expense of the Servicer.
Section 11.9 Merger or Consolidation of Trustee.
Any Person into which the Trustee may be merged or converted or with
which it may be consolidated or any corporation or national banking association
resulting from any merger, conversion or consolidation to which the Trustee
shall be a party, or any corporation or national banking association succeeding
to the business of the trustee, shall be the successor of the Trustee hereunder,
provided such corporation or national banking association shall be eligible
under the provisions of Section 11.5 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 11.10 Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions hereof, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Fund or property securing the same may at the time be
located, the Servicer and the Trustee acting jointly shall have the power and
shall execute and deliver all instruments to appoint one or more Persons
approved by the Trustee to act as co-trustee or co-trustees, jointly with the
Trustee, or separate
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trustee or separate trustees, of all or any part of such Trust Fund, and to vest
in such Person or Persons, in such capacity, such title to such Trust Fund, or
any party thereof, and, subject to the other provisions of this Section 11.10
and the consent of the Certificate Insurer, 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 case an Event of
Default shall have occurred and be continuing, the Trustee alone, with the prior
written consent of the Certificate Insurer, shall have the power to make such
appointment. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor trustee under Section 11.6
hereunder and no notice to the Certificate Insurer or to Holders of Certificates
of the appointment of co-trustee(s) or separate trustee(s) shall be required
under Section 11.9 hereof.
(b) In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 11.10, all rights, powers, duties and
obligations conferred or imposed upon the Trustee shall be conferred or imposed
upon and exercised or performed by the Trustee and such separate trustee or
co-trustee jointly, except to the extent that under any law of any jurisdiction
in which any particular act or acts are to be performed (whether as Trustee
hereunder or as successor to the Servicer hereunder), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the
Trust Fund or any portion thereof in any such jurisdiction) shall be exercised
and performed by such separate trustee or co-trustee at the direction of the
Trustee.
(c) Any notice, request or other writing given to the trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article XI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates of
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee.
(d) Any separates 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. The Trustee shall not
be responsible for any action or inaction of any such separate trustee or
co-trustee, provided that the Trustee appointed such separate trustee or
co-trustee with due care. If any separate trustee or co-trustee shall die,
become incapable of acting, resign or removed, all of its estates, properties,
rights, remedies and trusts shall vest in and be exercised by the Trustee, to
the extent permitted by law, without the appointment of a new or successor
trustee.
Section 11.11 Tax Returns.
The Servicer and the Depositor, as applicable, upon request, will
promptly furnish the Trustee with all such information as may be reasonably
required in connection with the Trustee's preparation of all Tax Returns of the
Trust or for the purpose of the Trustee responding to
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reasonable requests for information made by Certificateholders in connection
with tax matters and, upon request within five (5) business Days after its
receipt thereof, the Servicer shall (a) sign on behalf of the Trust any Tax
Return that the Servicer is required to sign pursuant to applicable federal,
state, or local tax laws, and (b) cause such Tax Return to be returned to the
Trustee for filing and for distribution to Certificateholders if required.
Section 11.12 Trustee May Enforce Claims Without Possession of
Certificates.
All rights of action and claims under this Agreement or the
Certificates of the Trust may be prosecuted and enforced by the Trustee without
the possession of any of the Certificates or the production thereof in any
proceeding relating thereto. Any such proceeding instituted by the Trustee shall
be brought in its own name or in its capacity as Trustee. Any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the related Certificateholders and the Certificate
Insurer in respect of which such judgment has been recovered.
Section 11.13 Retirement of Certificates.
The Trustee shall, upon the retirement of the Certificates pursuant
hereto or otherwise, furnish to the Certificate Insurer a notice of such
retirement, and, upon retirement of the Certificates and expiration of the term
of the Certificate Insurance Policies, shall surrender the Certificate Insurance
Policies to the Certificate Insurer for cancellation.
Section 11.14 Limitation of Liability.
The Certificates are executed by the Trustee, not in its individual
capacity but solely as Trustee of the Trust, in the exercise of the powers and
authority conferred and vested in it by this Agreement. Each of the undertakings
and agreements on the part of the Trustee in the Certificates is made and
intended not as a personal undertaking or agreement by the Trustee but is made
and intended for the purpose of binding only the Trust.
Section 11.15 Trustee May Enforce Claims Without Possession of
Certificates.
All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and such preceding instituted by the Trustee shall
be brought in its own name or in its capacity as Trustee. Any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursement and advances of the Trustee, its agents and counsel, be
for the ratable benefit or the Certificateholders and the Certificate Insurer in
respect of which such judgment has been recovered.
Section 11.16 Suits for Enforcement.
In case an Event of Default or other default by the Servicer or the
Depositor hereunder shall occur and be continuing, the Trustee, its discretion,
with the prior written consent of the
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Certificate Insurer, may proceed to protect and enforce its rights and the
rights of the Holders of Certificates under this Agreement by a suit, action or
proceeding in equity or at law or otherwise, whether for the specific
performance of any covenant or agreement contained in this Agreement or in aid
of the execution of any power granted in this Agreement or for the enforcement
of any other legal, equitable or other remedy, as the Trustee, being advised by
counsel, shall deem most effectual to protect and enforce any of the rights of
the Trustee, the Certificate Insurer and the Certificateholders.
Section 11.17 Waiver of Bond Requirements.
The Trustee shall be relieved of, and each Certificateholder hereby
waives, any requirement of any jurisdiction in which the Trust, or any part
thereof, may be located that the Trustee post a bond or other surety with any
court, agency or body whatsoever.
Section 11.18 Waiver of Inventory, Accounting and Appraisal
Requirement.
The Trustee shall be relieved of, and each Certificateholder hereby
waives, any requirement of any jurisdiction in which the Trust, or any part
thereof, may be located that the Trustee file any inventory, accounting or
appraisal of the Trust with any court, agency or body at any time or in any
manner whatsoever.
ARTICLE XII
DEFAULT
Section 12.1 Events of Default.
(a) In case one or more of the following Events of Default by
the Servicer shall occur and be continuing, that is to say:
(i) any failure by the Servicer or any Subservicer to
deposit in the related Collection Account in accordance with Section 6.1 any
payments in respect of the Mortgage Loans received by the Servicer or any
Subservicer no later than the second Business Day following the day on which
such payments were received or any failure of the Servicer or any Subservicer to
remit to the Trustee any payment (including Periodic Advances) required to be
made by the Servicer under the terms of this Agreement; or
(ii) the failure by the Servicer to make any required
Servicing Advance which failure continues unremedied for a period of one (1)
Business Day after the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Servicer by the Trustee or
to the Servicer and the Trustee by any Certificateholder or the Certificate
Insurer;
(iii) failure by the Servicer or the Subservicer of
its duty to observe or perform, in any material respect, any other covenants,
obligations or agreements of the Servicer
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as set forth in this Agreement, or the breach of any representation and warranty
made pursuant to Section 3.3 or the Insurance Agreement which failure continues
unremedied for a period of 30 days after the date on which written notice of
such failure, requiring the same to be remedied, shall have been given (a) to
the Servicer by the Trustee, the Certificate Insurer or the Depositor, or (b) to
the Servicer, the Trustee, the Certificate Insurer and the Depositor by any
Majority Certificateholder; or
(iv) 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, marshaling of
assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Servicer and
such decree or order shall have remained in force, undischarged or unstayed for
a period of 60 days;
(v) the Servicer shall consent to the appointment of
a conservator or receiver or liquidator in, or otherwise voluntarily consent to,
any insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings of or relating to the Servicer or of or relating to all or
substantially all of the Servicer's property; or
(vi) the Servicer shall admit in writing its
inability to pay its debts as they become due, file a petition to take advantage
of any applicable insolvency or reorganization statute, make an assignment for
the benefit of its creditors, or voluntarily suspend payment of its obligations;
(vii) the Cumulative Net Realized Losses equal or
exceed the following percentage of Maximum Collateral Amount for the related
pool during the periods set forth below,
<TABLE>
<CAPTION>
Period Fixed Rate Pool Adjustable Rate Pool
- ----------------------------------- -------------------------- -------------------------------
<S> <C> <C>
October 2, 1998 - October 1, 1999 0.55% 0.75%
October 2, 1999 - October 1, 2000 1.10% 1.50%
October 2, 2000 - October 1, 2001 1.65% 2.25%
October 2, 2001 - October 1, 2002 2.20% 3.00%
October 2, 2002 - October 1, 2003 2.75% 3.75%
</TABLE>
(viii) Net Realized Losses over any one twelve-month
period exceed 0.75% for the Fixed Rate Pool or 1.25% for the Adjustable Rate
Pool of the Maximum Collateral Amount of the Fixed Rate Pool or Adjustable Rate
Pool, respectively; or
(ix) the Delinquency Percentage exceeds 6.00% for the
Fixed Rate Pool or 8.00% for the Adjustable Rate Pool.
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(b) then, and in each and every such case, so long as an Event
of Default shall not have been remedied, (x) with respect solely to clause (i)
above, if such payment is in respect of Periodic Advances of Compensating
Interest owing by the Servicer and such payment is not made by 12:00 noon New
York time on the third Business Day prior to the applicable Distribution Date,
the Trustee, upon receipt of written notice or discovery by a Responsible
Officer of such failure, shall give immediate telephonic notice of such failure
to a Servicing Officer of the Servicer and to the Certificate Insurer and the
Trustee shall, with the consent of the Certificate Insurer, terminate all of the
rights and obligations of the Servicer under this Agreement and the Trustee, or
a successor servicer appointed in accordance with Section 12.2, shall
immediately make such Periodic Advance or payment of Compensating Interest and
assume, pursuant to Section 12.2 hereof, the duties of a successor Servicer; and
(y) with respect to that portion of clause (i) above not referred to in the
preceding clause (x) and clauses (ii), (iii), (iv), (v), (vi), (vii), (viii) and
(ix) above, the Certificate Insurer (acting alone) or the Majority
Certificateholders, the Trustee or the Depositor (in each case with the prior
written consent of the Certificate Insurer) by notice in writing to the Servicer
may, in addition to whatever rights such Person may have at law or in equity to
damages, including injunctive relief and specific performance, may terminate all
the rights and obligations of the Servicer under this Agreement and in and to
the Mortgage Loans and the proceeds thereof, as servicer under this Agreement.
Upon receipt by the Servicer of such written notice, all authority and power of
the Servicer under this Agreement, whether with respect to the Mortgage Loans or
otherwise, shall, subject to Section 12.2, pass to and be vested in the Trustee
unless another successor Servicer is appointed by the Certificate Insurer, and
the successor Servicer, or Trustee, as applicable, is hereby authorized and
empowered to execute and deliver, on behalf of the Servicer, as attorney-in-fact
or otherwise, at the expense of such removed Servicer any and all documents and
other instruments and do or cause to be done all other acts or things necessary
or appropriate to effect the purposes of such notice of termination, including,
but not limited to, the transfer and endorsement or assignment of the Mortgage
Loans and related documents. The predecessor Servicer agrees to cooperate (and
pay any related costs and expenses) with Trustee or the successor Servicer, as
applicable, in effecting the termination of the Servicer's responsibilities and
rights hereunder, including the transfer to the Trustee or the successor
servicer, as applicable, for administration by it of all amounts which shall at
the time be credited by the Servicer to each Collection Account or thereafter
received with respect to the Mortgage Loans. Upon actual knowledge, the Trustee
shall promptly notify the Certificate Insurer and the Rating Agencies of the
occurrence of an Event of Default.
Section 12.2 Trustee to Act; Appointment of Successor.
On and after the date the Servicer receives a notice of termination
pursuant to Section 12.1, or the Trustee receives the resignation of the
Servicer evidenced by an Opinion of Counsel or accompanied by the consents
required by Section 10.4, or the Servicer is removed as Servicer pursuant to
this Article XII, then, subject to Section 5.7, the Trustee shall be the
successor Servicer unless the Certificate Insurer or the Trustee (with the
consent of the Certificate Insurer) shall appoint a successor Servicer to be the
successor in all respects to the Servicer in its capacity as Servicer under this
Agreement and the transactions set forth or provided for herein and shall
be subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof; provided, however,
that the successor Servicer shall not be liable for any actions of any servicer
prior to it; provided further, however, that if a successor
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servicer cannot be retained in a timely manner, the Trustee shall act as
successor Servicer. In the event the Trustee assumes the responsibilities of the
Servicer pursuant to this Section 12.2, the Trustee will make reasonable efforts
consistent with applicable law to become licensed, qualified and in good
standing in each Mortgaged Property State the laws of which require licensing or
qualification, in order to perform its obligations as Servicer hereunder or,
alternatively, shall retain an agent who is so licensed, qualified and in good
standing in any such Mortgaged Property State. The Trustee, as successor
servicer, and any other successor servicer shall be obligated to pay
Compensating Interest, and to make advances unless, but only to the extent the
Trustee or the other successor Servicer, as applicable, determines reasonably
and in good faith that such advances would be recoverable, any determination to
the contrary to be evidenced by a certification of a Responsible Officer of the
Trustee or the other successor Servicer, as applicable, delivered to the
Certificate Insurer.
In the case that the Trustee serves as successor servicer, the Trustee
in such capacity shall not be liable for any servicing of the Mortgage Loans
prior to its date of appointment. The successor Servicer shall be obligated to
make Servicing Advances hereunder. As compensation therefor, the successor
Servicer appointed pursuant to this Section, shall be entitled to all funds
relating to the Mortgage Loans which the Servicer would have been entitled to
receive from the Collection Accounts pursuant to Section 6.1 as if the Servicer
had continued to act as servicer hereunder, together with other servicing
compensation in the form of assumption fees, late payment charges or otherwise
as provided in Section 8.3.
Any collections received by the Servicer after removal or resignation
shall be endorsed by it to the Trustee and remitted directly to the Trustee or,
at the direction of the Trustee, to the successor Servicer. The compensation of
any successor servicer (including the Trustee) so appointed shall be the
Servicing Fees, together with other Servicing Compensation provided for herein.
In the event the Trustee is required to solicit bids to appoint a successor
Servicer, the Trustee shall solicit, by public announcement, bids from housing
and home finance institutions, banks and mortgage servicing institutions that:
(i) have a net worth of not less than $25,000,000, (ii) have a blanket fidelity
bond and errors and omissions insurance coverage satisfying the requirements set
forth in Section 5.3 and (iii) would not cause any rating of any Class of the
Certificates in effect immediately prior to such assignment to be qualified,
downgraded or withdrawn (without regard to the Certificate Insurance Policies),
as evidenced by a letter from each Rating Agency to such effect. Such public
announcement shall specify that the successor Servicer shall be entitled to the
full amount of the Servicing Fee and Servicing Compensation provided for herein.
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
qualifying bid so long as such party is acceptable to the Certificate Insurer.
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 and the amount of any unpaid
Servicing Fees and unreimbursed Servicing Advances made by the Trustee. After
such deductions, the remainder of such sum shall be paid by the Trustee to the
Servicer at the time of such sale, transfer and assignment to the Servicer's
successor. The Trustee, the Depositor, any Custodian, the Servicer and any
such successor Servicer shall take such action, consistent with this Agreement,
as shall
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be necessary to effectuate any such succession. 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, at the Servicer's
cost and expense, all documents and records 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 any Trust Account maintained 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 delivering, cash, documents or records to it, or (ii)
restrictions imposed by any regulatory authority having jurisdiction over the
Servicer hereunder. No appointment of a successor to the Servicer hereunder
shall be effective until the Trustee and the Certificate Insurer shall have
consented thereto, and written notice of such proposed appointment shall have
been provided by the Trustee to the Depositor and the Certificateholders.
Pending appointment of a successor to the Servicer hereunder, the
Trustee shall act as servicer hereunder as hereinabove provided. In connection
with such appointment and assumption, the Trustee may make such arrangements for
the compensation of such successor servicer out of payments on the Mortgage
Loans as it and such successor servicer shall agree; provided, however, that no
such compensation shall be in excess of that permitted the Servicer pursuant to
Section 8.3, together with other Servicing Compensation. The Trustee shall not
resign as servicer until a successor servicer reasonably acceptable to the
Certificate Insurer has been appointed. The Certificate Insurer shall have the
right to remove the Trustee as successor servicer under this Section 12.2
without cause, and the Trustee shall appoint such other successor servicer as
directed by the Certificate Insurer.
In connection with any transfer of servicing responsibilities pursuant
to this Section 12.2, the replaced Servicer shall be responsible for all costs
and expenses in connection with such transfer.
Section 12.3 Waiver of Defaults.
The Certificate Insurer or the Majority Certificateholders with the
consent of the Certificate Insurer may waive any events permitting removal of
the Servicer as servicer pursuant to this Article XII provided, however, that
neither the Certificate Insurer nor the Majority Certificateholders may waive a
default in making a required distribution on a Certificate without the consent
of the related Certificateholder. Upon any waiver of a past default, such
default shall cease to exist, and any Event of Default 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 thereto except to the extent expressly so waived. Notice of any such
waiver shall be given by the Trustee to the Rating Agencies and the Certificate
Insurer.
Section 12.4 Accounting Upon Termination of Servicer.
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(a) Upon termination of the Servicer under this Article XII,
the Servicer shall, at its own expense:
(i) deliver to its successor or, if none shall yet
have been appointed, to the Trustee the funds in any Trust Account maintained by
the Servicer;
(ii) deliver to its successor or, if none shall yet
have been appointed, to the Trustee all Trustee's Mortgage Loan Files and
Servicer Mortgage Loan Files and related documents and statements held by it
hereunder and a Mortgage Loan portfolio computer tape;
(iii) deliver to its successor or, if none shall yet
have been appointed, to the Trustee, the Depositor, the Certificate Insurer and
the Certificateholders a full accounting of all funds, including a statement
showing the Monthly Payments collected by it and a statement of monies held in
trust by it for payments or charges with respect to the Mortgage Loans; and
(iv) execute and deliver such instruments and perform
all acts reasonably requested in order to effect the orderly and efficient
transfer of servicing of the Mortgage Loans to its successor and to more fully
and definitively vest in such successor all rights, powers, duties,
responsibilities, obligations and liabilities of the Servicer under this
Agreement.
Section 12.5 Trustee To Act Solely with Consent of the
Certificate Insurer.
Unless a Certificate Insurer Default exists, the Trustee shall
not, without the Certificate Insurer's consent or unless directed by the
Certificate Insurer:
(a) terminate the rights and obligations of the Servicer as
Servicer pursuant to Section 12.1 hereof;
(b) agree to any amendment pursuant to Section 15.2 hereof; or
(c) undertake any litigation.
The Certificate Insurer may, in writing and in its sole
discretion renounce all or any of its rights under Section 12.5 any requirement
for the Certificate Insurer's consent for any period of time.
Section 12.6 Mortgage Loans, Trust Fund and Accounts Held for Benefit
of the Certificate Insurer.
(a) The Trustee shall hold each Trust Fund and the Trustee's
Mortgage Loan Files for the benefit of the related Certificateholders and the
Certificate Insurer and all references in this Agreement and in the Certificates
to the benefit of Holders of the Certificates or the benefit of the
Certificateholders shall be deemed to include the Certificate Insurer. The
Trustee shall
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cooperate in all reasonable respects with any reasonable request by the
Certificate Insurer for action to preserve or enforce the Certificate Insurer's
rights or interests under this Agreement and the Certificates unless, as stated
in an Opinion of Counsel addressed to the Trustee and the Certificate Insurer,
such action is contrary to the terms of the Agreement.
(b) The Servicer hereby acknowledges and agrees that it shall
service the Mortgage Loans for the benefit of the related Certificateholders and
for the benefit of the Certificate Insurer, and all references in this Agreement
to the benefit of or actions on behalf of the Certificateholders or Holders of
the Certificates shall be deemed to include the Certificate Insurer.
ARTICLE XIII
TERMINATION
Section 13.1 Termination.
This Agreement shall terminate upon notice to the Trustee and the
Certificate Insurer of either: (a) the later of (i) the distribution to
Certificateholders of the final payment or collection with respect to the last
Mortgage Loan (or Periodic Advances of same by the Servicer), or (ii) the
disposition of all funds with respect to the last Mortgage Loan and the
remittance of all funds due hereunder and the payment of all amounts due and
payable to the Trustee, and the Certificate Insurer, and the Custodian; or (iii)
the payment of all amounts due and payable to the Certificate Insurer and the
Trustee, or (b) the mutual consent of the Servicer, the Depositor, the
Transferor, the Certificate Insurer and all Certificateholders in writing.
Section 13.2 Optional Termination.
The Residual Interest Certificateholders may, at their option, (or if
the Residual Interest Certificateholders fail to exercise such option the
Certificate Insurer may, at its option) effect an early termination of REMIC I
and REMIC II on or after any Distribution Date on which the aggregate Pool
Principal Balance for Fixed Rate Mortgage Loans and Adjustable Rate Mortgage
Loans declines to 10% or less of the Original Pool Principal Balance. The
Residual Interest Certificateholders shall effect such early termination by
providing notice thereof to the Trustee and the Certificate Insurer and by
purchasing all of the related Mortgage Loans at a price not less than the
Termination Price.
Any such early termination by the Residual Interest Certificateholders
shall be accomplished by depositing into the related Collection Account on the
Determination Date immediately preceding the Distribution Date on which the
purchase is to occur the amount of the Termination Price to be paid. The
Termination Price and any amounts then on deposit in the related Collection
Account (other than any amounts not required to have been deposited therein
pursuant to Section 6.1 and any amounts withdrawable therefrom by the Trustee
pursuant to Section 6.1) shall be transferred to the related Certificate Account
for distribution to related Certificateholders on the succeeding Distribution
Date; and any amounts received with respect to
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the Mortgage Loans and Foreclosure Properties subsequent to the Due Period
immediately preceding such final Distribution Date shall belong to the purchaser
thereof. For purposes of calculating the related Available Distribution Amount
for such final Distribution Date, amounts transferred to the related Certificate
Account immediately preceding such final Distribution Date shall in all cases be
deemed to have been received during the related Due Period.
Any such early termination shall be conducted so as to constitute a
qualified liquidation under the REMIC Provisions.
Section 13.3 Notice of Termination.
Notice of termination of this Agreement or of early redemption and
termination of the Trust shall be sent by the Trustee to the Certificate Insurer
and the Certificateholders.
ARTICLE XIV
REMIC PROVISIONS
Section 14.1 REMIC Administration.
(a) The Trustee shall make an election to treat each of REMIC
I and REMIC II (exclusive of the Capitalized Interest Accounts and the
Pre-Funding Accounts) as a REMIC under the Code, and if necessary, under
applicable state law. Such election will be made on Form 1066 or other
appropriate federal tax or information return or any appropriate state return
for the taxable year ending on the last day of the calendar year in which the
Certificates are issued. For purposes of the REMIC election, (i) the Class A and
Class IO Certificates shall be designated as the "regular interests" in REMIC
II, (ii) the REMIC I Regular Interests shall be designated as the "regular
interests" in REMIC I and (iii) and the REMIC I Residual Interests and the REMIC
II Residual Interests shall be designated as the sole class of "residual
interests" in REMIC I and REMIC II, respectively. The Trustee shall not permit
the creation of any "regular interests" (within the meaning of Section 860G of
the Code) or "residual interests" (within the meaning of Section 860G of the
Code) in the Trust, other than the interests represented by the Class A and
Class IO Certificates, the REMIC I Regular Interests, the REMIC I Residual
Interests and the REMIC II Residual Interests.
(b) The Trustee shall pay out of its own funds, without any
right of reimbursement, any and all expenses relating to any tax audit of the
Trust (including, but not limited to, any professional fees or any
administrative or judicial proceedings with respect thereto that involved the
Internal Revenue Service or state taxing authorities), other than the expense of
obtaining any tax-related Opinion of Counsel not obtained in connection with
such an audit and other than taxes, in either case except as specified herein;
provided, however, that if such audit resulted from the negligence of the
Servicer or the Transferor, then the Transferor or the Servicer, as the case may
be, shall pay such expenses. The Trustee, as agent for the Tax Matters Person,
shall (i) act on behalf of the Trust in relation to any tax matter or
controversy involving the Trust Fund and (ii) represent the Trust in any
administrative or judicial proceeding relating to an
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examination or audit by any governmental taxing authority with respect thereto.
The Holder of the largest Percentage Interest in the Residual Interest
Certificates from time to time is hereby designated as Tax Matters Person with
respect to the each of REMIC I and REMIC II and hereby irrevocably appoints and
authorizes the Trustee to act its agent to perform the duties of the Tax Matters
Person with respect to REMIC I and REMIC II. To the extent authorized under the
Code and the regulations promulgated thereunder, each Holder of a Residual
Interest Certificate hereby irrevocably appoints and authorizes the Trustee to
be its attorney-in-fact for purposes of signing any Tax Returns required to be
filed on behalf of the Trust Fund.
(c) The Trustee shall prepare or cause to be prepared, sign
and file all of the Tax Returns that it determines are required with respect to
either REMIC created hereunder, other than Tax Returns required to be filed by
the Servicer pursuant to Section 11.11. The expenses of preparing and filing
such returns shall be borne by the Trustee without any right of reimbursement
therefor.
(d) The Trustee shall perform on behalf of the Trust all
reporting and other tax compliance duties that are the responsibility of the
Trust under the Code, REMIC Provisions or other compliance guidance issued by
the Internal Revenue Service or any state or local taxing authority. Among its
other duties, as required by the Code, the REMIC Provisions or other such
compliance guidance, the Trustee, upon reasonable compensation, shall provide
(i) to any person liable for any tax imposed by Section 860E(e) of the Code such
information as is necessary for the application of any tax relating to the
transfer of a Residual Interest Certificate to any Person who is not a Permitted
Transferee, (ii) to Certificateholders such information or reports as are
required by the Code or the REMIC Provisions including reports relating to
interest, original issue discount and market discount or premium (using the
Prepayment Assumption) and (iii) to the Internal Revenue Service the name,
title, address and telephone number of the person who will serve as the
representative of each of REMIC I and REMIC II. In addition, the Depositor shall
provide or cause to be provided to the Trustee, within ten (10) days after the
Closing Date, all information or data that the Trustee reasonably determines to
be relevant for tax purposes as to the valuations and issue prices of the
Certificates, including the price, yield, Prepayment Assumption and projected
cash flow of the Certificates.
(e) The Trustee shall take such action and shall cause each of
REMIC I and REMIC II created hereunder to take such action as shall be necessary
to create or maintain the status thereof as a REMIC under the REMIC Provisions
(and the Servicer shall assist Trustee, to the extent reasonably requested by
Trustee). The Trustee shall not take any action, cause the Trust to take any
action, or fail to take (or fail to cause to be taken) any action that, under
the REMIC Provisions, if taken or not taken, as the case may be, could (i)
endanger the REMIC status of either REMIC or (ii) result in the imposition of a
tax upon the Trust Fund (including but not limited to the tax on prohibited
transactions as defined in Section 860F(a)(2) of the Code and the tax on
contributions to a REMIC set forth in Section 860G(d) of the Code) (either such
event, an "Adverse REMIC Event") unless the Trustee and the Certificate Insurer
received an Opinion of Counsel (at the expense of the party seeking to take such
action but in no event shall such Opinion of Counsel be an expense of the
Trustee) to the effect that the contemplated action will not, with respect to
the Trust hereunder, endanger such status or result in the imposition of such a
tax. The Servicer shall not take or fail to take any action (whether or not
authorized hereunder)
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as to which the Trustee has advised it in writing that it has received an
Opinion of Counsel (which such Opinion of Counsel shall not be an expense of the
Trustee) to the effect that an Adverse REMIC Event could occur with respect to
such action. In addition, prior to taking any action with respect to the Trust
Fund or its assets, or causing the Trust Fund to take any action which is not
expressly permitted under the terms of this Agreement, the Servicer will consult
with the Trustee or its designee, in writing, with respect to whether such
action could cause an Adverse REMIC Event to occur with respect to the Trust,
and the Servicer shall not take any such action or cause the Trust to take any
such action as to which the Trustee has advised it in writing that an Adverse
REMIC Event could occur. The Trustee may consult with counsel to make such
written advice, and the cost of same shall be borne by the party seeking to take
the action not permitted by this Agreement (but in no event shall such cost be
an expense of the Trustee). At all times as may be required by the Code, the
Trustee will, to the extent reasonably within the control of the Trustee and
reasonably within the scope of the Trustee's duties hereunder, ensure that
substantially all of the assets of the Trust will consist of "qualified
mortgages" as defined in Section 860G(a)(3) of the Code and "permitted
investments" as defined in Section 860G(a)(5) of the Code.
(f) In the event that any tax is imposed on Prohibited
Transactions of any REMIC created hereunder or "net income from foreclosure
property" of a REMIC as defined in Section 860G(c) of the Code, or any
contributions to either REMIC after the Startup Day therefor pursuant to Section
860G(d) of the Code, or any other tax is imposed by the Code or any applicable
provisions of state or local tax laws, such tax shall be charged (i) to the
Trustee pursuant to Section 14.4(a), if such tax arises out of or results from a
breach by the Trustee of any of its obligations under this Article XIV, (ii) to
the Servicer pursuant to Section 14.4(b), if such tax arises out of or results
from a breach by the Servicer of any of its obligations under Article V, Article
VIII, or this Article XIV, or otherwise (iii) against amounts on deposit in the
related Certificate Account and shall be paid by withdrawal therefrom.
(g) On or before April 15 of each calendar year, commencing
April 15, 1999, the Trustee shall deliver to the Servicer and each Rating Agency
a Certificate from a Responsible Officer of the Trustee stating the Trustee's
compliance with this Article XIV.
(h) The Servicer and the Trustee shall, for federal income tax
purposes, maintain books and records with respect to each REMIC on a calendar
year and on an accrual basis.
(i) The Trustee shall not accept any contributions of assets
to either REMIC other than acceptance of conveyance of any Subsequent Mortgage
Loan pursuant to Section 2.7 or any funds from either the Pre-Funding Accounts
or the Capitalized Interest Accounts pursuant to Sections 6.11(c) and 6.12(b),
respectively, unless it shall have received an Opinion of Counsel (which such
Opinion of Counsel shall not be an expense of the Trustee) to the effect that
the inclusion of such assets in either REMIC will not cause either REMIC to fail
to qualify as a REMIC at any time that any Certificates are outstanding or
subject, either REMIC to any tax under the REMIC Provisions or other applicable
provisions of federal, state or local laws or ordinances.
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(j) Neither the Trustee nor the Servicer shall enter into any
arrangement by which REMIC I or REMIC II will receive a fee or other
compensation for services or permit either such REMIC to receive any income from
assets other than "qualified mortgages" as defined in Section 860G(a)(3) of the
Code or "permitted investments" as defined in Section 860G(a)(5) of the Code,
unless otherwise permitted under the REMIC provisions.
(k) Solely for purposes of satisfying Section
1.860G-1(a)(4)(iii) of the Treasury Regulations, the "latest possible maturity
date" by which the principal balances of each class of REMIC I Regular
Interests would be reduced to zero is November 1, 2029, which is the
Distribution Date thirteen months following the latest scheduled maturity
of any Mortgage Loan.
(l) Solely for purposes of satisfying Section
1.860G-l(a)(4)(iii) of the Treasury Regulations, the "latest possible maturity
date" by which the Certificate Principal Balances of each Class of Certificates
representing a regular interest in REMIC II would be reduced to zero is November
1, 2029, which is the Distribution Date thirteen months following the latest
scheduled maturity of any Mortgage Loan.
(m) Upon filing with the Internal Revenue Service, the Trustee
shall furnish to the Holders of the Residual Interest Certificates the Form 1066
and each Form 1066Q and shall respond promptly to written requests made not more
frequently than quarterly by any Holder of Residual Interest Certificates with
respect to the following matters:
(i) the original projected principal and interest
cash flows on the Closing Date on the regular and residual interests created
hereunder and on the Mortgage Loans, based on the Prepayment Assumption;
(ii) the projected remaining principal and interest
cash flows as of the end of any calendar quarter with respect to the regular and
residual interests created hereunder and the Mortgage Loans, based on the
Prepayment Assumption;
(iii) the Prepayment Assumption and any interest rate
assumptions used in determining the projected principal and interest cash flows
described above;
(iv) the original issue discount (or, in the case of
the Mortgage Loans, market discount) or premium accrued or amortized through the
end of such calendar quarter with respect to the regular or residual interests
created hereunder and with respect to the Mortgage Loans, together with each
constant yield to maturity used in computing the same;
(v) the treatment of losses realized with respect to
the Mortgage Loans or the regular interests created hereunder, including the
timing and amount of any cancellation of indebtedness income of the REMIC with
respect to such regular interests or bad debt deductions claimed with respect to
the Mortgage Loans;
(vi) the amount and timing of any non-interest
expenses of the REMIC; and
(vii) any taxes (including penalties and interest)
imposed on the REMIC, including taxes on "prohibited transactions,"
"contributions," or "net income from foreclosure property" or state or local
income or franchise taxes.
Section 14.2. Prohibited Transactions and Activities.
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None of the Transferor, the Depositor, the Servicer or the Trustee
shall (a) sell, dispose of or substitute for any Mortgage Loan, except in
connection with (i) the foreclosure of a Mortgage Loan, including but not
limited to, the acquisition or sale of a Foreclosed Property, (ii) the
bankruptcy of REMIC I or REMIC II, (iii) the termination of REMIC I and REMIC
II, pursuant to Article XIII of this Agreement, or (iv) a purchase of Mortgage
Loans pursuant to Article II or III of this Agreement or Section 6.11 or 6.12,
(b) acquire any assets for REMIC I or REMIC II, (c) sell or dispose of any
investments in the Certificate Accounts for gain, (d) accept any contributions
to REMIC I or REMIC II after the Closing Date or (e) modify any Mortgage Loan,
except pursuant to Article V, unless it has received an Opinion of Counsel (at
the expense of the party seeking to cause such sale, disposition, substitution,
or acquisition, but in no event shall such Opinion of Counsel be an expense of
the Trustee or the Certificate Insurer) that such sale, disposition,
substitution or acquisition will not (x) affect adversely the REMIC status of
REMIC I or REMIC II or (y) cause REMIC I or REMIC II to be subject to a tax on
"prohibited transactions" or "contributions" pursuant to the REMIC Provisions.
Section 14.4 Trustee and Servicer Indemnification.
(a) The Trustee agrees to indemnify the Trust, the Transferor,
the Depositor and the Servicer for any taxes and costs including any reasonable
attorneys' fees imposed on or incurred by the Trust, the Transferor, the
Certificate Insurer, the Depositor, or the Servicer as a result of a breach of
the Trustee's covenants set forth in this Article XIV.
(b) The Servicer agrees to indemnify the Trust, Transferor,
the Certificate Insurer, the Depositor and the Trustee for any taxes and costs
(including any reasonable attorneys' fees) imposed on or incurred by the Trust,
the Transferor, the Certificate Insurer, the Depositor or the Trustee, as a
result of a breach of the Servicer's covenants set forth in Article V, Article
VI, Article VIII, or this Article XIV with respect to compliance with the REMIC
Provisions, including any penalties arising from the Trustee's execution of Tax
Returns prepared by the Servicer pursuant to Section 11.11 that contain errors
or omissions.
Section 14.5 Intent of the Parties.
It is the intent of the Depositor and the Certificateholders that, for
federal income taxes, state and local income or franchise taxes and other taxes
imposed on or measured by income, the Certificates will be treated as evidencing
beneficial ownership interests in a REMIC. The parties to this Agreement and the
holder of each Certificate by acceptance of its Certificate, and each beneficial
owner thereof, agree to treat, and to take no action inconsistent with the
treatment of, the Certificates in accordance with the preceding sentence for
purposes of federal income taxes, state and local income and franchise taxes and
other taxes imposed on or measured by income.
ARTICLE XV
MISCELLANEOUS PROVISIONS
Section 15.1 Acts of Certificateholders.
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Except as otherwise specifically provided herein, whenever
Certificateholder action, consent or approval is required under this Agreement,
such action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Certificateholders if the Majority
Certificateholders agree to take such action or give such consent or approval.
(a) The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heir to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the
Trust Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
(b) No Certificateholder shall have any right to vote (except
as expressly provided for herein) or in any manner otherwise control the
operation and management of the related Trust Fund, or the obligations of the
parties hereto, nor shall anything herein set forth, or contained in the terms
of the Certificates, be construed so as to constitute the Certificateholders
from time to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
(c) No Certificateholder shall have any right by virtue or by
availing itself of any provisions of this Agreement to institute any suit,
action or proceeding in equity or at law upon or under or with respect to this
Agreement, unless such Holder previously shall have given to the Trustee and the
Certificate Insurer a written notice of default and of the continuance thereof
as herein before provided, and unless also the Holders of Certificates
evidencing Percentage Interests in the Trust aggregating not less than 51% shall
have made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee, for 60 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding and unless
the Certificate Insurer has consented in writing thereto; it being understood
and intended, and being expressly covenanted by each Certificateholder with
every other Certificateholder, the Trustee and the Certificate Insurer, that no
one or more Holders of Certificates shall have any right in any manner whatever
by virtue or by availing itself or themselves of any provisions of this
Agreement to affect, disturb or prejudice the rights of the Holders of any other
of the Certificates, or to obtain or seek to obtain priority over or preference
to any other such Holder, or to enforce any right under this Agreement, except
in the manner herein provided and for the equal, ratable and common benefit of
all Certificateholders. For the protection and enforcement of the provisions of
this Section 15.1(c), each and every Certificateholder, the Certificate Insurer
and the Trustee shall be entitled to such relief as can be given either at law
or in equity.
Section 15.2 Amendment.
(a) This Agreement may be amended from time to time by the
Depositor, the Servicer, the Transferor and the Trustee with the prior written
consent of the Certificate Insurer by written agreement with notice thereof to
the Certificateholders, without the consent of any of
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the Certificateholders, to cure any error or ambiguity, to correct or supplement
any provisions hereof which may be defective or inconsistent with any other
provisions hereof or to add any other provisions with respect to matters or
questions arising under this Agreement; provided, however, that such action will
not adversely affect in any material respect the interests of the
Certificateholders. An amendment described above shall be deemed not to
adversely affect in any material respect the interests of the Certificateholders
if either (i) an Opinion of Counsel is obtained to such effect and delivered to
the Trustee and the Certificate Insurer, and (ii) the party requesting the
amendment obtains a letter from each of the Rating Agencies confirming that the
amendment, if made, would not result in the downgrading or withdrawal of the
rating then assigned by the respective Rating Agency to any Class of
Certificates then outstanding, without regard to the Certificate Insurance
Policies.
(b) This Agreement may also be amended from time to time by
the Depositor, the Servicer, the Transferor and the Trustee with the consent of
the Certificate Insurer by written agreement, with the prior written consent of
the Majority Certificateholders, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement,
or of modifying in any manner the rights of the Certificateholders; provided,
however, that no such amendment shall (i) reduce in any manner the amount of, or
delay the timing of, collections of payments on Mortgage Loans or distributions
which are required to be made on any Certificate, without the consent of the
holders of 100% of each Class of Certificates affected thereby, (ii) adversely
affect in any material respect the interests of the holders of any Class of
Certificates in any manner other than as described in (i), without the consent
of the holders of 100% of such Class of Certificates, or (iii) reduce the
percentage of any Class of Certificates, the holders of which are required to
consent to any such amendment, without the consent of the holders of 100% of
such Class of Certificates.
(c) It shall not be necessary for the consent of
Certificateholders under this Section 15.2 to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall approve the
substance thereof.
Prior to the execution of any amendment to this Agreement, the Trustee
and the Certificate Insurer shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement and that such change will not adversely affect the
status of REMIC I or REMIC II as a REMIC or cause a tax to be imposed on the
Trust Fund. The Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's own rights, duties or immunities under
this Agreement.
Section 15.3 Recordation of Agreement.
To the extent permitted by applicable law, this Agreement, or a
memorandum thereof if permitted under applicable law, is subject to recordation
in all appropriate public offices for real property records in all of the
counties or other comparable jurisdictions in which any or all of the Mortgaged
Properties are situated, and in any other appropriate public recording office or
elsewhere, such recordation to be effected by the Servicer at the
Certificateholders' expense on direction of the Majority Certificateholders or
the Certificate Insurer but only when accompanied by an Opinion of Counsel to
the effect that such recordation materially and beneficially affects the
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interests of the Certificateholders or the Certificate Insurer or is necessary
for the administration or servicing of the Mortgage Loans.
Section 15.4 Duration of Agreement.
This Agreement shall continue in existence and effect until terminated
as herein provided.
Section 15.5 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Section 15.6 Notices.
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if telecopied, personally delivered
at or mailed by overnight mail, certified mail or registered mail, postage
prepaid, to: (i) in the case of the Depositor, Morgan Stanley ABS Capital I Inc.
1585 Broadway, New York, NY 10036, or such other addresses as may hereafter be
furnished to the Certificateholders and the other parties hereto in writing by
the Depositor, (ii) in the case of the Transferor and the Servicer, care of Life
Bank, 10540 Magnolia Ave., Ste. B, Riverside, California 92505, Attention:
Daniel Perl, or such other address as may hereafter be furnished to the
Certificateholders and the other parties hereto in writing by the Servicer or
the Transferor, (iii) in the case of the Trustee, Norwest Bank Minnesota,
National Association, Sixth and Marquette Streets, Minneapolis, Minnesota 55479,
Attention: Structured Finance/Life Financial Mortgage Loan Asset Backed Trust,
Series 1998-1, with a copy to 11000 Broken Land Parkway, Columbia MD 81099,
Attention: Life Bank Asset-Backed Certificates, Series 1998-1 (iv) in the case
of the Certificate Insurer, MBIA Insurance Corporation, 113 King Street, Armonk,
New York 10504, Attention: Insured Portfolio Management-Structured Finance
(IPM-SF) (Life Bank Asset-Backed Certificates, Series 1998-1), Telecopy (914)
765-3810, and (v) in the case of the Certificateholders, as set forth in the
applicable Certificate Register. Any such notices shall be deemed to be
effective with respect to any Person hereto upon the receipt of such notice by
such Person, except that notices to the Certificateholders shall be effective
upon mailing or personal delivery.
Section 15.7 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
Section 15.8 No Partnership.
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Nothing herein contained shall be deemed or construed to create any
partnership or joint venture between the parties hereto and the services of the
Servicer shall be rendered as an independent contractor.
Section 15.9 Counterparts.
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same Agreement.
Section 15.10 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
Servicer, the Transferor, the Depositor, the Certificate Insurer and the
Certificateholders and their respective successors and permitted assigns.
Section 15.11 Headings.
The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of
this Agreement.
Section 15.12 Actions of Certificateholders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Agreement to be given or taken
by Certificateholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Certificateholders in
person or by 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 Depositor, the Servicer, the Certificate
Insurer or the Trustee. Proof of execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any purpose of this
Agreement and conclusive in favor of the Depositor, the Servicer and the Trustee
if made in the manner provided in this Section 15.12.
(b) The fact and date of the execution by any
Certificateholder of any such instrument or writing may be proved in any
reasonable manner which the Depositor, the Certificate Insurer, the Servicer or
the Trustee deems sufficient.
(c) Any request, demand, authorization, direction, notice,
consent, waiver or other act by a Certificateholder shall bind every holder of
every Certificate issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof, in respect of anything done, or omitted to
be done, by the Depositor, the Servicer, the Certificate Insurer or the Trustee
in reliance thereon, whether or not notation of such action is made upon such
Certificate.
(d) The Depositor, the Servicer, the Certificate Insurer or
the Trustee may require additional proof of any matter referred to in this
Section 15.12 as it shall deem necessary.
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Section 15.13 Reports to Rating Agencies.
(a) The Servicer shall provide or cause the Trustee to provide
or cause to be provided to each Rating Agency and the Certificate Insurer copies
of statements, reports and notices, to the extent received or prepared in
connection herewith, as follows:
(i) copies of amendments to this Agreement;
(ii) notice of any substitution or repurchase of
any Mortgage Loans;
(iii) notice of any termination, replacement,
succession, merger or consolidation of either the Servicer, any Custodian or
the Trustee;
(iv) notice of final payment on the Certificates;
(v) notice of any Event of Default;
(vi) copies of the annual independent auditor's
report delivered pursuant to Section 8.5, and copies of any compliance reports
delivered by the Servicer hereunder including Section 8.4;
(vii) copies of any Distribution Statement
pursuant to Section 6.8; and
(viii) With respect to the requirement of the
Trustee to provide statements, reports and notices to the Rating Agencies such
statements, reports and notices shall be delivered to the Rating Agencies at the
following addresses: (i) if to Moody's, 99 Church Street, New York, New York
10007, Attention: Roger Huang, (ii) and if to S&P, 25 Broadway, 12th Floor,
New York, NY 10004, Attention: Carl Neff.
Section 15.14 The Certificate Insurer Default.
Except for rights under Section 15.2, any right conferred to the
Certificate Insurer shall be suspended during any period in which the
Certificate Insurer fails to make an Insured Payment that is due and unpaid
under a Certificate Insurance Policy. Such rights of the Certificate Insurer
shall ve immediately restored upon the cure of such failure. At such time as the
Certificates, other than the Residual Certificates, are no longer outstanding
hereunder, no amounts owed to the Certificate Insurer hereunder or under the
Insurance Agreement remain unpaid, the Certificate Insurer is no longer subject
to claims under the Certificate Insurance Policies (including claims for
preference amounts) and the original Certificate Insurance Policies have been
surrendered to the Certificate Insurer the Certificate Insurer's rights
hereunder shall terminate.
Section 15.15 Third Party Beneficiary.
The parties agree that the Certificate Insurer is intended and shall
have all rights of a third-party beneficiary of this Agreement.
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IN WITNESS WHEREOF, the Servicer, the Transferor, the Trustee and the
Depositor have caused their names to be signed by their respective officers
thereunto duly authorized, as of the day and year first above written, to this
Pooling and Servicing Agreement.
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MORGAN STANLEY ABS CAPITAL I
INC., AS DEPOSITOR
BY: _____________________________
NAME:
TITLE:
LIFE BANK, IN ITS INDIVIDUAL
CAPACITY AND AS SERVICER
BY: _____________________________
NAME:
TITLE:
LIFE INVESTMENT HOLDINGS, INC.,
AS TRANSFEROR
BY: _____________________________
NAME:
TITLE:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, AS
TRUSTEE
BY: _____________________________
NAME:
TITLE:
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STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
On ________,1998, before me, ______________________ a Notary
Public in and for said County and State, 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.
----------------------------------
Notary Public
146
<PAGE>
<PAGE>
STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
On ________,1998, before me, ______________________ a Notary
Public in and for said County and State, 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.
----------------------------------
Notary Public
147
<PAGE>
<PAGE>
STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
On ________,1998, before me, ______________________ a Notary
Public in and for said County and State, 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.
----------------------------------
Notary Public
148
<PAGE>
<PAGE>
STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
On ________,1998, before me, ______________________ a Notary
Public in and for said County and State, personally appeared Patrick Bassett,
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.
----------------------------------
Notary Public
149
<PAGE>
<PAGE>
EXHIBIT A-1
FORM OF CERTIFICATE A-1
150
<PAGE>
<PAGE>
EXHIBIT A-2
FORM OF CERTIFICATE A-2
151
<PAGE>
<PAGE>
EXHIBIT A-3
FORM OF CERTIFICATE A-3
152
<PAGE>
<PAGE>
EXHIBIT A-4
FORM OF CERTIFICATE A-4
153
<PAGE>
<PAGE>
EXHIBIT A-5
FORM OF CERTIFICATE A-5
154
<PAGE>
<PAGE>
EXHIBIT A-6
FORM OF CERTIFICATE A-6
155
<PAGE>
<PAGE>
EXHIBIT A-7
FORM OF CERTIFICATE A-7
156
<PAGE>
<PAGE>
EXHIBIT A-8
FORM OF EXHIBIT A-8
157
<PAGE>
<PAGE>
EXHIBIT A-9
FORM OF CERTIFICATE A-IO
158
<PAGE>
<PAGE>
EXHIBIT A-10
FORM OF CERTIFICATE F-IO
159
<PAGE>
<PAGE>
EXHIBIT A-11
FORM OF RESIDUAL CERTIFICATE
160
<PAGE>
<PAGE>
EXHIBIT B-1
SCHEDULE OF FIXED MORTGAGE LOAN
161
<PAGE>
<PAGE>
EXHIBIT B-2
SCHEDULE OF ADJUSTABLE MORTGAGE LOANS
162
<PAGE>
<PAGE>
EXHIBIT C
FORM OF LIQUIDATION REPORT
163
<PAGE>
<PAGE>
EXHIBIT D
FORM OF SUBSEQUENT TRANSFER AGREEMENT
164
<PAGE>
<PAGE>
EXHIBIT E
FORM OF TRUSTEE'S ACKNOWLEDGMENT OF RECEIPT
165
<PAGE>
<PAGE>
EXHIBIT F
FORM OF TRUSTEE'S CERTIFICATION
166
<PAGE>
<PAGE>
EXHIBIT G
FORM OF TRUSTEE'S EXCEPTION REPORT
167
<PAGE>
<PAGE>
EXHIBIT H
FORM OF TRANSFER AFFIDAVIT AND AGREEMENT
168
<PAGE>
<PAGE>
EXHIBIT I
FORM OF TRANSFEROR'S CERTIFICATE
169
<PAGE>
<PAGE>
EXHIBIT J
FORM OF TRANSFEREE'S REPRESENTATION LETTER
170
<PAGE>
<PAGE>
EXHIBIT K
FORM OF ERISA INVESTMENT REPRESENTATION LETTER
171
<PAGE>
<PAGE>
EXHIBIT L
FORM OF REQUEST FOR RELEASE OF TRUSTEE'S LOAN FILE
172
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I DEFINITIONS............................................................................1
Section 1.1 Definitions...................................................................1
Section 1.2 Other Definitional Provisions................................................35
ARTICLE II CONVEYANCE OF THE LOANS...............................................................35
Section 2.1 Conveyance of the Mortgage Loans.............................................35
Section 2.2 Intended Characterization; Grant of Security Interest........................36
Section 2.3 Ownership and Possession of Trustee's Mortgage Loan Files....................36
Section 2.4 Books and Records............................................................37
Section 2.5 Delivery of Mortgage Loan Documents..........................................37
Section 2.6 Acceptance by Trustee of the Mortgage Loans; Certain
Substitutions; Initial Certification by Trustee or Custodian.................40
Section 2.7 Subsequent Transfers.........................................................42
Section 2.8 Designations under REMIC Provisions..........................................44
ARTICLE III REPRESENTATIONS AND WARRANTIES........................................................44
Section 3.1 Representations and Warranties of the Depositor..............................44
Section 3.2 Representations and Warranties of the Transferor.............................46
Section 3.3 Representations, Warranties and Covenants of the Servicer....................49
Section 3.4 Representations and Warranties regarding Individual
Mortgage Loans...............................................................52
Section 3.5 Purchase and Substitution....................................................61
ARTICLE IV THE CERTIFICATES......................................................................63
Section 4.1 The Certificates.............................................................63
Section 4.2 Registration of Transfer and Exchange of Certificates........................63
Section 4.3 Mutilated, Destroyed, Lost or Stolen Certificates............................69
Section 4.4 Persons Deemed Owners........................................................70
ARTICLE V ADMINISTRATION AND SERVICING OF THE LOANS.............................................70
Section 5.1 Duties of the Servicer.......................................................70
Section 5.2 Liquidation of Mortgage Loans; Defaulted Mortgage Loans......................72
Section 5.3 Fidelity Bond; Errors and Omission Insurance.................................73
Section 5.4 Title, Management and Disposition of Foreclosure Property....................74
Section 5.5 Access to Certain Documentation and Information Regarding the
Mortgage Loans...............................................................76
Section 5.6 Subservicing.................................................................76
Section 5.7 Successor Servicers..........................................................78
Section 5.8 Maintenance of Hazard Insurance; Property Protection Expenses................78
Section 5.9 Maintenance of Mortgage Impairment Insurance Policy..........................79
Section 5.10 Reports to the Securities and Exchange Commission............................80
Section 5.11 Payment of Taxes, Insurance and Other Charges................................80
</TABLE>
i
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 5.12 Filing of Continuation Statements............................................81
ARTICLE VI DISTRIBUTIONS AND PAYMENTS............................................................81
Section 6.1 Establishment of Collection and Certificate Accounts;
Deposits to the Collection and Certificate Accounts..........................81
Section 6.2 Permitted Withdrawals From the Collection Accounts and
the Certificate Accounts.....................................................83
Section 6.3 Collection of Money..........................................................84
Section 6.4 Distributions................................................................84
Section 6.5 Investment of Accounts.......................................................86
Section 6.6 Reports by Trustee...........................................................87
Section 6.7 Additional Reports by Trustee................................................90
Section 6.8 Compensating Interest........................................................90
Section 6.9 Allocation of Liquidated Mortgage Loan Losses................................90
Section 6.10 Pre-Funding Accounts.........................................................91
Section 6.11 Capitalized Interest Accounts................................................92
ARTICLE VII STATEMENTS AND REPORTS................................................................93
Section 7.1 Statements...................................................................93
ARTICLE VIII GENERAL SERVICING PROCEDURE...........................................................93
Section 8.1 Assumption Agreements........................................................93
Section 8.2 Satisfaction of Mortgages and Release of Trustee's
Mortgage Loan Files..........................................................94
Section 8.3 Servicing Compensation.......................................................96
Section 8.4 Statement as to Compliance and Financial Statements..........................96
Section 8.5 Independent Public Accountants' Servicing Report.............................97
Section 8.6 Right to Examine Servicer Records............................................97
Section 8.7 Reports to the Trustee; Collection Account Statements........................97
ARTICLE IX REPORTS TO BE PROVIDED BY SERVICER....................................................98
Section 9.1 Financial Statements.........................................................98
ARTICLE X THE SERVICER..........................................................................98
Section 10.1 Indemnification; Third Party Claims..........................................98
Section 10.2 Merger or Consolidation of the Servicer.....................................100
Section 10.3 Limitation on Liability of the Servicer and Others..........................100
Section 10.4 Servicer Not to Resign; Assignment..........................................100
Section 10.5 Relationship of Servicer to Depositor and the Trustee.......................101
Section 10.6 Servicer May Own Certificates...............................................101
ARTICLE XI THE TRUSTEE..........................................................................101
Section 11.1 Duties of Trustee...........................................................101
Section 11.2 Certain Matters Affecting the Trustee.......................................103
Section 11.3 Trustee Not Liable for Certificates or Mortgage Loans.......................105
Section 11.4 Trustee's Fees and Expenses.................................................105
</TABLE>
ii
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 11.5 Eligibility Requirements for Trustee........................................106
Section 11.6 Resignation and Removal of the Trustee......................................106
Section 11.7 Merger or Consolidation of Trustee..........................................107
Section 11.8 Appointment of Co-Trustee or Separate Trustee...............................107
Section 11.9 Tax Returns.................................................................108
Section 11.10 Trustee May Enforce Claims Without Possession of
Certificates................................................................108
ARTICLE XII DEFAULT..............................................................................108
Section 12.1 Events of Default...........................................................108
Section 12.2 Trustee to Act; Appointment of Successor....................................110
Section 12.3 Waiver of Defaults..........................................................111
Section 12.4 Accounting Upon Termination of Servicer.....................................112
ARTICLE XIII TERMINATION..........................................................................112
Section 13.1 Termination.................................................................112
Section 13.2 Optional Termination........................................................112
Section 13.3 Notice of Termination.......................................................113
ARTICLE XIV REMIC PROVISIONS.....................................................................113
Section 14.1 REMIC Administration........................................................113
Section 14.2 Prohibited Transactions and Activities......................................116
Section 14.3 Servicer and Trustee Indemnification........................................117
ARTICLE XV MISCELLANEOUS PROVISIONS............................................................117
Section 15.1 Acts of Certificateholders..................................................117
Section 15.2 Amendment...................................................................117
Section 15.3 Recordation of Agreement....................................................118
Section 15.4 Duration of Agreement.......................................................118
Section 15.5 Governing Law...............................................................118
Section 15.6 Notices.....................................................................119
Section 15.7 Severability of Provisions..................................................119
Section 15.8 No Partnership..............................................................119
Section 15.9 Counterparts................................................................119
Section 15.10 Successors and Assigns......................................................119
Section 15.11 Headings....................................................................120
Section 15.12 Actions of Certificateholders...............................................120
Section 15.13 Reports to Rating Agencies..................................................120
</TABLE>
EXHIBITS
A-1 FORM OF CERTIFICATE
A-11 RESIDUAL INTEREST CERTIFICATE
C-1 FIXED RATE MORTGAGE LOANS
C-2 ADJUSTABLE RATE MORTGAGE LOANS
E SUBSEQUENT TRANSFER AGREEMENT
iii
<PAGE>
<PAGE>
P LIQUIDATION REPORT
I TRANSFER AFFIDAVIT AND AGREEMENT
J CERTIFICATE OF TRANSFEROR
N REPRESENTATION LETTER OF TRANSFEREE
iv
