================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 27, 1997
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
(AS DEPOSITOR UNDER THE POOLING AND SERVICING AGREEMENT,
DATED AS OF FEBRUARY 1, 1997, PROVIDING FOR THE ISSUANCE OF
ASSET-BACKED FLOATING RATE CERTIFICATES, SERIES 1997-NC1)
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 333-14225 13-3439681
- ---------------------------- ----------- ----------------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification Number)
Seven World Trade Center
New York, New York 10048
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 783-5659
--------------
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<PAGE>
-2-
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
Description of the Certificates and the Mortgage Pools
On February 27, 1997, a single series of certificates,
entitled Salomon Brothers Mortgage Securities VII, Inc., Asset-Backed Floating
Rate Certificates, Series 1997-NC1 (the "Certificates"), were issued pursuant to
a pooling and servicing agreement, dated as of February 1, 1997 (the
"Agreement"), attached hereto as Exhibit 4.1, among Salomon Brothers Mortgage
Securities VII, Inc. as depositor (the "Depositor"), New Century Mortgage
Corporation ("New Century") as master servicer (in such capacity, the "Master
Servicer") and First Trust National Association as trustee (the "Trustee"). The
Certificates consist of four classes of certificates (collectively, the
"Certificates"), designated as the "Class A Certificates" the "Class CE
Certificates", the "Class R-I Certificates" and the "Class R-II Certificates."
The Certificates evidence in the aggregate the entire beneficial ownership
interest in a trust fund (the "Trust Fund"), consisting primarily of a
segregated pool (the "Mortgage Pool") of conventional, oneto four- family,
adjustable rate, first lien mortgage loans having original terms to maturity up
to 30 years (the "Mortgage Loans"). The Mortgage Pool consists of Mortgage Loans
having an aggregate principal balance of $99,119,536 as of February 1, 1997 (the
"Cut-off Date"). The Mortgage Loans were purchased pursuant to the Mortgage Loan
Purchase Agreement, dated February 25, 1997 (the "Mortgage Loan Purchase
Agreement") between the Depositor and New Century. The Certificates were sold by
the Depositor to Salomon Brothers Inc ("Salomon"), an affiliate of the
Depositor, pursuant to an underwriting agreement, dated February 25, 1997
between the Depositor and Salomon.
The Certificates have the following initial Certificate
Balances and Pass-Through Rates:
Initial Certificate
Class Principal Balance Pass-through Rate
----- ----------------- -----------------
A $96,126,000.00 Variable
CE $ 2,973,335.80 Variable
R-I $ 100.00 Variable
R-II $ 100.00 Variable
The Certificates, other than the Class CE Certificates, and
the Mortgage Loans are more particularly described in the Prospectus, dated
February 25, 1997, and the Prospectus Supplement, dated February 25, 1997, as
previously filed with the Securities and Exchange Commission pursuant to Rule
424(b). The Class CE Certificates have not been and will not be publicly offered
by the Depositor. Capitalized terms used but not otherwise defined herein shall
have the meanings assigned to them in the Prospectus Supplement.
<PAGE>
-3-
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not applicable
(b) Not applicable
(c) Exhibits
Exhibit No. Description
----------- -----------
4.1 Pooling and Servicing Agreement,
dated as of February 1, 1997, by and
among Salomon Brothers Mortgage
Securities VII, Inc. as Depositor,
New Century Mortgage Corporation as
Master Servicer and First Trust
National Association as Trustee,
relating to the Series 1997-NC1
Certificates.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Dated: February 27, 1997
SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
By: /s/ Vincent J. Varca
----------------------------
Name: Vincent J. Varca
Title: Assistant Vice President
<PAGE>
INDEX TO EXHIBITS
Sequentially
Exhibit No. Description Numbered Page
- ----------- ----------- -------------
4.1 Pooling and Servicing Agreement, dated as of 7
February 1, 1997, by and among Salomon
Brothers Mortgage Securities VII, Inc. as
Depositor, New Century Mortgage
Corporation as Master Servicer and First Trust
National Association as Trustee, relating to the
Series 1997-NC1 Certificates.
Exhibit 4.1
<PAGE>
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
Depositor
NEW CENTURY MORTGAGE CORPORATION
Master Servicer
and
FIRST TRUST NATIONAL ASSOCIATION
Trustee
-----------------------------------------
POOLING AND SERVICING AGREEMENT
Dated as of February 1, 1997
-----------------------------------------
New Century Asset-Backed Floating Rate Certificates
Series 1997-NC1
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
SECTION PAGE
------- ----
ARTICLE I
DEFINITIONS
<S> <C> <C>
1.01. Defined Terms................................................................................ 3
Accepted Servicing Practices................................................................. 3
Accrual Rate................................................................................. 3
Accrued Certificate Interest................................................................. 3
Adjusted Uncertificated Balance.............................................................. 3
Adjustment Date.............................................................................. 3
Affiliate.................................................................................... 4
Agreement.................................................................................... 4
Annualized Monthly Loss Percentage........................................................... 4
Assignment................................................................................... 4
Available Distribution Amount................................................................ 4
Available Funds Pass-Through Rate............................................................ 5
Bankruptcy Amount............................................................................ 5
Bankruptcy Code.............................................................................. 5
Bankruptcy Loss.............................................................................. 5
Basis Risk Shortfall......................................................................... 5
Book-Entry Certificate....................................................................... 5
Book-Entry Custodian......................................................................... 5
Business Day................................................................................. 6
Cash-Out Refinancing......................................................................... 6
Certificate.................................................................................. 6
Certificate Factor........................................................................... 6
Certificate Insurer.......................................................................... 6
Certificate Insurer Default.................................................................. 6
Certificate Insurer Premium.................................................................. 7
Certificate Insurer Premium Rate............................................................. 7
Certificateholder or Holder.................................................................. 7
Certificate Owner............................................................................ 7
Certificate Principal Balance................................................................ 7
Certificate Register......................................................................... 7
Class ..................................................................................... 8
Class A Certificate.......................................................................... 8
Class A Principal Distribution Amount........................................................ 8
Class CE Certificate......................................................................... 9
Class R-I Certificate........................................................................ 9
Class R-II Certificate....................................................................... 9
Closing Date................................................................................. 9
Code ..................................................................................... 9
Collection Account........................................................................... 9
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
Corporate Trust Office....................................................................... 9
Cumulative Insurance Payments................................................................ 10
Cumulative Loss Percentage................................................................... 10
Cut-off Date................................................................................. 10
Debt Service Reduction....................................................................... 10
Deficiency Amount............................................................................ 10
Deficiency Event............................................................................. 10
Deficient Valuation.......................................................................... 11
Definitive Certificates...................................................................... 11
Deleted Mortgage Loan........................................................................ 11
Delinquency Percentage....................................................................... 11
Delinquent................................................................................... 11
Depositor.................................................................................... 11
Depository................................................................................... 11
Depository Institution....................................................................... 11
Depository Participant....................................................................... 12
Determination Date........................................................................... 12
Directly Operate............................................................................. 12
Disqualified Organization.................................................................... 12
Distribution Account......................................................................... 12
Distribution Date............................................................................ 13
Due Date..................................................................................... 13
Due Period................................................................................... 13
Eligible Account............................................................................. 13
ERISA ..................................................................................... 13
Estate in Real Property...................................................................... 13
Excess Bankruptcy Loss....................................................................... 13
Excess Fraud Loss............................................................................ 13
Excess Special Hazard Loss................................................................... 13
Excess Subordinated Amount................................................................... 13
Expense Account.............................................................................. 13
Expense Adjusted Mortgage Rate............................................................... 13
Expense Adjusted Maximum Mortgage Rate....................................................... 13
Extraordinary Loss........................................................................... 14
FDIC ..................................................................................... 14
FHLMC ..................................................................................... 14
Final Recovery Determination................................................................. 14
FNMA ..................................................................................... 14
Fraud Loss................................................................................... 14
Fraud Loss Amount............................................................................ 15
Gross Margin................................................................................. 15
Guaranteed Distribution...................................................................... 15
Independent.................................................................................. 15
Independent Contractor....................................................................... 15
Index ..................................................................................... 16
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
Initial Deposit.............................................................................. 16
Insurance Agreement.......................................................................... 16
Insurance Payment............................................................................ 16
Insurance Proceeds........................................................................... 16
Interest Accrual Period...................................................................... 16
Interest Determination Date.................................................................. 17
Interest Distribution Amount................................................................. 17
Late Collections............................................................................. 17
Liquidation Event............................................................................ 17
Liquidation Proceeds......................................................................... 17
Loan-to-Value Ratio.......................................................................... 17
London Business Day.......................................................................... 17
Majority Class CE Certificateholder.......................................................... 17
Master Servicer.............................................................................. 17
Master Servicer Event of Default............................................................. 18
Master Servicer Remittance Date.............................................................. 18
Maximum Class A Pass-Through Rate............................................................ 18
Maximum LT3 Uncertificated Interest Deferral Amount.......................................... 18
Maximum Mortgage Rate........................................................................ 18
Minimum Mortgage Rate........................................................................ 18
Minimum Spread............................................................................... 18
Monthly Payment.............................................................................. 18
Moody's ..................................................................................... 18
Mortgage..................................................................................... 19
Mortgage File................................................................................ 19
Mortgage Loan................................................................................ 19
Mortgage Loan Purchase Agreement............................................................. 19
Mortgage Loan Schedule....................................................................... 19
Mortgage Note................................................................................ 21
Mortgage Pool................................................................................ 21
Mortgage Rate................................................................................ 21
Mortgaged Property........................................................................... 22
Mortgagor.................................................................................... 22
Net Monthly Excess Cashflow.................................................................. 22
Net Monthly Excess Spread.................................................................... 22
Net Mortgage Rate............................................................................ 22
New Lease.................................................................................... 22
Nonrecoverable P&I Advance................................................................... 22
Nonrecoverable Servicing Advance............................................................. 22
Non-United States Person..................................................................... 23
Notional Amount.............................................................................. 23
Officers' Certificate........................................................................ 23
One-Month LIBOR.............................................................................. 23
One-Month LIBOR Pass-Through Rate............................................................ 23
Opinion of Counsel........................................................................... 23
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
Original Mortgage Loan....................................................................... 23
Ownership Interest........................................................................... 24
Pass-Through Rate............................................................................ 24
Percentage Interest.......................................................................... 24
Periodic Rate Cap............................................................................ 24
Permitted Investments........................................................................ 24
Permitted Transferee......................................................................... 25
Person ..................................................................................... 25
P&I Advance.................................................................................. 26
Plan ..................................................................................... 26
Policy ..................................................................................... 26
Policy Payments Account...................................................................... 26
Prepayment Assumption........................................................................ 26
Prepayment Interest Shortfall................................................................ 26
Prepayment Period............................................................................ 26
Prepayment Premium........................................................................... 26
Principal Prepayment......................................................................... 26
Purchase Price............................................................................... 26
Qualified Substitute Mortgage Loan........................................................... 27
Rate/Term Refinancing........................................................................ 28
Rating Agency or Rating Agencies............................................................. 28
Realized Loss................................................................................ 28
Record Date.................................................................................. 29
Reference Banks.............................................................................. 29
Refinanced Mortgage Loan..................................................................... 29
Regular Certificate.......................................................................... 29
Regular Interest............................................................................. 30
Relief Act................................................................................... 30
Relief Act Interest Shortfall................................................................ 30
REMIC ..................................................................................... 30
REMIC Provisions............................................................................. 30
REMIC I ..................................................................................... 30
REMIC I Basis Risk Shortfall................................................................. 30
REMIC I Interest Loss Allocation Amount...................................................... 30
REMIC I Principal Loss Allocation Amount..................................................... 31
REMIC I Regular Interest..................................................................... 31
REMIC I Regular Interest LT1................................................................. 31
REMIC I Regular Interest LT2................................................................. 31
REMIC I Regular Interest LT2 Accrual Rate.................................................... 31
REMIC I Regular Interest LT2 Adjusted Uncertificated Balance................................. 32
REMIC I Regular Interest LT2 Available Funds Pass-Through Rate............................... 32
REMIC I Regular Interest LT3................................................................. 32
REMIC I Regular Interest LT3 Adjusted Uncertificated Balance................................. 32
REMIC I Remittance Rate...................................................................... 32
REMIC I Required Subordinated Amount......................................................... 33
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
REMIC I Subordinated Amount.................................................................. 33
REMIC II..................................................................................... 33
REMIC II Certificate......................................................................... 33
REMIC II Percentage.......................................................................... 33
REMIC II Reserve Fund........................................................................ 33
Remittance Report............................................................................ 33
Rents from Real Property..................................................................... 33
REO Account.................................................................................. 33
REO Disposition.............................................................................. 33
REO Imputed Interest......................................................................... 34
REO Principal Amortization................................................................... 34
REO Property................................................................................. 34
Request for Release.......................................................................... 34
Required Subordinated Amount................................................................. 34
Reserve Interest Rate........................................................................ 34
Residential Dwelling......................................................................... 35
Residual Certificate......................................................................... 35
Residual Interest............................................................................ 35
Responsible Officer.......................................................................... 35
Rolling Delinquency Percentage............................................................... 35
Scheduled Principal Balance.................................................................. 35
Seller ..................................................................................... 36
Servicing Account............................................................................ 36
Servicing Advances........................................................................... 36
Servicing Fee................................................................................ 36
Servicing Fee Rate........................................................................... 37
Servicing Officer............................................................................ 37
Single Certificate........................................................................... 37
Special Hazard Amount........................................................................ 37
Special Hazard Loss.......................................................................... 37
Spread Squeeze Condition..................................................................... 38
Spread Squeeze Percentage.................................................................... 38
Spread Squeeze Subordination Increase Amount................................................. 38
S&P ..................................................................................... 38
Startup Day.................................................................................. 38
Stated Principal Balance..................................................................... 38
Stayed Funds................................................................................. 39
Step Down Cumulative Loss Test............................................................... 39
Step Down Rolling Delinquency Test........................................................... 39
Step Down Rolling Loss Test.................................................................. 39
Step Down Trigger............................................................................ 40
Stepped Down Required Subordinated Percentage................................................ 40
Step Up Cumulative Loss Test................................................................. 40
Step Up Rolling Delinquency Test............................................................. 40
Step Up Rolling Loss Test.................................................................... 40
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
Step Up Spread Squeeze Test.................................................................. 41
Step Up Trigger.............................................................................. 41
Subordinated Amount.......................................................................... 41
Subordination Deficiency Amount.............................................................. 41
Subordination Increase Amount................................................................ 41
Subordination Reduction Amount............................................................... 41
Sub-Servicer................................................................................. 41
Sub-Servicing Account........................................................................ 42
Sub-Servicing Agreement...................................................................... 42
Substitution Shortfall Amount................................................................ 42
Tax Returns.................................................................................. 42
Termination Price............................................................................ 42
Terminator................................................................................... 42
Transfer..................................................................................... 42
Transferee................................................................................... 42
Transferor................................................................................... 42
Trust Fund................................................................................... 42
Trustee ..................................................................................... 42
Trustee's Fee................................................................................ 42
Trustee's Fee Rate........................................................................... 42
Uncertificated Balance....................................................................... 43
Uncertificated Interest...................................................................... 43
Uninsured Cause.............................................................................. 43
United States Person......................................................................... 43
Unpaid Basis Risk Shortfalls................................................................. 43
Value ..................................................................................... 44
Voting Rights................................................................................ 44
1.02. Allocation of Certain Interest Shortfalls.................................................... 44
</TABLE>
<TABLE>
<CAPTION>
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
<S> <C> <C>
2.01. Conveyance of the Initial Deposit and the Mortgage Loans..................................... 46
2.02. Acceptance of REMIC I by Trustee............................................................. 48
2.03. Repurchase or Substitution of Mortgage Loans by the Seller or the
Depositor.................................................................................... 49
2.04. Representations and Warranties of the Depositor.............................................. 52
2.05. Representations, Warranties and Covenants of the Master Servicer............................. 54
2.06. Issuance of the Class R-I Certificates....................................................... 56
2.07. Conveyance of the REMIC I Regular Interests; Acceptance of REMIC II
by the Trustee............................................................................... 57
2.08. Issuance of the REMIC II Certificates........................................................ 57
</TABLE>
vi
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
<S> <C> <C>
3.01. Master Servicer to Act as Master Servicer.................................................... 58
3.02. Sub-Servicing Agreements Between Master Servicer and Sub-Servicers........................... 59
3.03. Successor Sub-Servicers...................................................................... 61
3.04. Liability of the Master Servicer............................................................. 61
3.05. No Contractual Relationship Between Sub-Servicers and Trustee or
Certificateholders........................................................................... 61
3.06. Assumption or Termination of Sub-Servicing Agreements by Trustee............................. 62
3.07. Collection of Certain Mortgage Loan Payments................................................. 62
3.08. Sub-Servicing Accounts....................................................................... 62
3.09. Collection of Taxes, Assessments and Similar Items; Servicing
Accounts..................................................................................... 63
3.10. Collection Account and Distribution Account.................................................. 64
3.11. Withdrawals from the Collection Account and Distribution Account............................. 66
3.12. Investment of Funds in the Collection Account, the Expense Account and
the Distribution Account..................................................................... 68
3.13. [intentionally omitted]...................................................................... 69
3.14. Maintenance of Hazard Insurance and Errors and Omissions and Fidelity
Coverage..................................................................................... 69
3.15. Enforcement of Due-On-Sale Clauses; Assumption Agreements.................................... 71
3.16. Realization Upon Defaulted Mortgage Loans.................................................... 72
3.17. Trustee to Cooperate; Release of Mortgage Files.............................................. 74
3.18. Servicing Compensation....................................................................... 75
3.19. Reports to the Trustee; Collection Account Statements........................................ 76
3.20. Statement as to Compliance................................................................... 76
3.21. Independent Public Accountants' Servicing Report............................................. 76
3.22. Access to Certain Documentation.............................................................. 77
3.23. Title, Management and Disposition of REO Property............................................ 77
3.24. Obligations of the Master Servicer in Respect of Prepayment Interest
Shortfall.................................................................................... 80
3.25. Expense Account.............................................................................. 81
3.26. Obligations of the Master Servicer in Respect of Mortgage Rates and
Monthly Payments............................................................................. 81
</TABLE>
vii
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
<S> <C> <C>
4.01. Distributions................................................................................ 82
4.02. Statements to Certificateholders............................................................. 87
4.03. Remittance Reports; P&I Advances............................................................. 91
4.04. Allocation of Realized Losses................................................................ 93
4.05. Compliance with Withholding Requirements..................................................... 94
4.06. REMIC II Reserve Fund........................................................................ 94
</TABLE>
<TABLE>
<CAPTION>
ARTICLE V
THE CERTIFICATES
<S> <C> <C>
5.01. The Certificates............................................................................. 96
5.02. Registration of Transfer and Exchange of Certificates........................................ 98
5.03. Mutilated, Destroyed, Lost or Stolen Certificates............................................102
5.04. Persons Deemed Owners........................................................................103
5.05. Certain Available Information................................................................103
</TABLE>
<TABLE>
<CAPTION>
ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
<S> <C> <C>
6.01. Liability of the Depositor and the Master Servicer...........................................104
6.02. Merger or Consolidation of the Depositor or the Master Servicer..............................104
6.03. Limitation on Liability of the Depositor, the Master Servicer and
Others.......................................................................................104
6.04. Limitation on Resignation of the Master Servicer.............................................105
6.05. Rights of the Depositor in Respect of the Master Servicer....................................106
</TABLE>
<TABLE>
<CAPTION>
ARTICLE VII
DEFAULT
<S> <C> <C>
7.01. Master Servicer Events of Default............................................................107
7.02. Trustee to Act; Appointment of Successor.....................................................109
7.03. Notification to Certificateholders...........................................................111
7.04. Waiver of Master Servicer Events of Default..................................................111
</TABLE>
viii
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
ARTICLE VIII
CONCERNING THE TRUSTEE
<S> <C> <C>
8.01. Duties of Trustee............................................................................112
8.02. Certain Matters Affecting the Trustee........................................................113
8.03. Trustee Not Liable for Certificates or Mortgage Loans........................................114
8.04. Trustee May Own Certificates.................................................................114
8.05. Trustee's Fees and Expenses..................................................................115
8.06. Eligibility Requirements for Trustee.........................................................115
8.07. Resignation and Removal of the Trustee.......................................................115
8.08. Successor Trustee............................................................................116
8.09. Merger or Consolidation of Trustee...........................................................117
8.10. Appointment of Co-Trustee or Separate Trustee................................................117
8.11. Appointment of Office or Agency..............................................................118
8.12. Representations and Warranties of the Trustee................................................118
</TABLE>
<TABLE>
<CAPTION>
ARTICLE IX
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
<S> <C> <C>
9.01. Rights of the Certificate Insurer To Exercise Rights of Class A
Certificateholders...........................................................................120
9.02. Trustee To Act Solely with Consent of the Certificate Insurer................................120
9.03. Trust Fund and Accounts Held for Benefit of the Certificate Insurer..........................121
9.04. Claims Upon the Policy; Policy Payments Account..............................................121
9.05 Effect of Payments by the Certificate Insurer; Subrogation...................................123
9.06. Notices to the Certificate Insurer...........................................................123
9.07. Third-Party Beneficiary......................................................................123
9.08. Trustee to Hold the Policy...................................................................124
</TABLE>
<TABLE>
<CAPTION>
ARTICLE X
TERMINATION
<S> <C> <C>
10.01 Termination Upon Repurchase or Liquidation of All Mortgage Loans.............................125
10.02 Additional Termination Requirements..........................................................127
</TABLE>
ix
<PAGE>
<TABLE>
<CAPTION>
ARTICLE XI
REMIC PROVISIONS
<S> <C> <C>
11.01. REMIC Administration.........................................................................129
11.02. Prohibited Transactions and Activities.......................................................132
11.03. Master Servicer and Trustee Indemnification..................................................132
</TABLE>
<TABLE>
<CAPTION>
ARTICLE XII
MISCELLANEOUS PROVISIONS
<S> <C> <C>
12.01. Amendment....................................................................................133
12.02. Recordation of Agreement; Counterparts.......................................................134
12.03. Limitation on Rights of Certificateholders...................................................134
12.04. Governing Law................................................................................135
12.05. Notices......................................................................................135
12.06. Severability of Provisions...................................................................136
12.07. Notice to Rating Agencies and Certificate Insurer............................................136
12.08. Article and Section References...............................................................137
</TABLE>
EXHIBITS
Exhibit A-1 Form of Class A Certificate
Exhibit A-2 Form of Class CE Certificate
Exhibit A-3 Form of Class R-I Certificate
Exhibit A-4 Form of Class R-II Certificate
Exhibit B Form of Financial Guaranty Insurance Policy
Exhibit C-1 Form of Trustee's Initial Certification
Exhibit C-2 Form of Trustee's Final Certification
Exhibit D Form of Mortgage Loan Purchase Agreement
Exhibit E-1 Request for Release
Exhibit E-2 Request for Release Mortgage Loans paid in full
Exhibit F-1 Form of Transferor Representation Letter and Form of Transferee
Representation Letter in Connection with Transfer of the Class CE
Certificates Pursuant to Rule 144A Under the 1933 Act
Exhibit F-2 Form of Transfer Affidavit and Agreement and Form of Transferor
Affidavit in Connection with Transfer of Residual Certificates
Exhibit G Form of Certification with respect to ERISA and the Code
Schedule 1 Mortgage Loan Schedule
x
<PAGE>
This Pooling and Servicing Agreement, is dated and effective
as of February 1, 1997, among SALOMON BROTHERS MORTGAGE SECURITIES VII, INC. as
Depositor, NEW CENTURY MORTGAGE CORPORATION as Master Servicer and FIRST TRUST
NATIONAL ASSOCIATION as Trustee.
PRELIMINARY STATEMENT:
The Depositor intends to sell pass-through certificates to be
issued hereunder in multiple classes, which in the aggregate will evidence the
entire beneficial ownership interest in the Trust Fund created hereunder.
As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the Mortgage Loans and certain other
related assets subject to this Agreement as a REMIC (as defined herein) for
federal income tax purposes, and such segregated pool of assets will be
designated as "REMIC I." The Class R-I Certificates will be the sole class of
"residual interests" in REMIC I for purposes of the REMIC Provisions and will
have an initial Certificate Principal Balance of $100 and a Pass-Through Rate as
described herein. The following table irrevocably sets forth the designation,
the REMIC I Remittance Rate, the initial Uncertificated Balance and, solely for
purposes of satisfying Treasury regulation Section 1.860G-1(a)(4)(iii), the
"latest possible maturity date" for each of the REMIC I Regular Interests. None
of the REMIC I Regular Interests will be certificated.
<TABLE>
<CAPTION>
REMIC I Initial Latest Possible
Designation Remittance Rate Uncertificated Balance Maturity Date(1)
----------- --------------- ---------------------- ----------------
<S> <C> <C> <C>
LT1 Variable(2) $99,099,435.80 March 25, 2027
LT2 Variable(2) $ 9,699.96 March 25, 2027
LT3 Variable(2) $ 10,300.04 March 25, 2027
</TABLE>
- -----------------------------
(1) Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
regulations, the Distribution Date immediately following the maturity date
for the Mortgage Loan with the latest maturity date has been designated as
the "latest possible maturity date" for each REMIC I Regular Interest.
(2) Calculated in accordance with the definition of "REMIC I Remittance Rate"
herein.
As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the REMIC I Regular Interests as a REMIC
for federal income tax purposes, and such segregated pool of assets will be
designated as "REMIC II." The Class R-II Certificates will evidence the sole
class of "residual interests" in REMIC II for purposes of the REMIC Provisions
under federal income tax law. The following table irrevocably sets forth the
designations, Pass-Through Rate, initial aggregate Certificate Principal Balance
and, solely for purposes of satisfying Treasury regulation Section
1.860G-1(a)(4)(iii), the "latest possible maturity date" for the indicated
Classes of Certificates.
<PAGE>
-2-
<TABLE>
<CAPTION>
Initial Aggregate
Uncertificated Balance or Latest Possible
Designation Pass-Through Rate Certificate Principal Balance Maturity Date(1)
- ----------- ----------------- ----------------------------- ----------------
<S> <C> <C> <C>
Class A Variable(2) $96,126,000.00 March 25, 2027
Class CE Variable(2) $ 2,973,335.80(4) March 25, 2027
Class R-II Variable(2) (3) $ 100.00 N/A
</TABLE>
- -----------------------------
(1) Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
regulations, the Distribution Date immediately following the maturity date
for the Mortgage Loans with the latest maturity date has been designated
as the "latest possible maturity date" for each Class of Certificates.
(2) Calculated in accordance with the definition of "Pass-Through Rate" herein.
(3) The Class R-II Certificate will only receive interest on the Distribution
Date in March 1997.
(4) The Class CE Certificates will accrue interest at their variable
Pass-Through Rate on the Notional Amount of the Class CE Certificates
outstanding from time to time which shall equal the Uncertificated Balance
of the REMIC I Regular Interest LT1. The Class CE Certificates will not
accrue interest on their Certificate Principal Balance.
As of the Cut-off Date, the Original Mortgage Loans had an
aggregate Scheduled Principal Balance equal to $99,119,535.80.
In consideration of the mutual agreements herein contained,
the Depositor, the Master Servicer and the Trustee agree as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms.
Whenever used in this Agreement, including, without
limitation, in the Preliminary Statement hereto, the following words and
phrases, unless the context otherwise requires, shall have the meanings
specified in this Article. Unless otherwise specified, all calculations
described herein shall be made on the basis of a 360-day year consisting of
twelve 30-day months.
"Accepted Servicing Practices": The servicing standards set
forth in Section 3.01.
"Accrual Rate": With respect to the Class A Certificates and
any Distribution Date, the lesser of (i) the One-Month LIBOR Pass-Through Rate
for the applicable Interest Accrual Period and (ii) the Maximum Class A
Pass-Through Rate for such Interest Accrual Period.
"Accrued Certificate Interest": With respect to each
Distribution Date, as to any Class A Certificate, Class CE Certificate or
Residual Certificate, interest accrued during the related Interest Accrual
Period at the Pass-Through Rate for such Certificate for such Distribution Date
on the Certificate Principal Balance in the case of the Class A Certificates and
the Residual Certificates, or on the Notional Amount in the case of the Class CE
Certificate, of such Certificate immediately prior to such Distribution Date.
All distributions of interest on the Class A Certificates and Residual
Certificates will be calculated on the basis of a 360-day year and the actual
number of days in the applicable Interest Accrual Period. Accrued Certificate
Interest with respect to each Distribution Date, as to any Class A Certificate
or Class CE Certificate, shall be reduced by an amount equal to the portion
allocable to such Certificate pursuant to Section 1.02 hereof of the sum of (a)
the aggregate Prepayment Interest Shortfall, if any, for such Distribution Date
to the extent not covered by payments pursuant to Section 3.24 and (b) the
aggregate amount of any Relief Act Shortfall, if any, for such Distribution
Date. In addition, Accrued Certificate Interest with respect to each
Distribution Date, as to any Class CE Certificate, shall be reduced by an amount
equal to the portion allocable to such Class CE Certificate pursuant to Section
1.02 hereof of Realized Losses, if any, allocated pursuant to Section 4.04.
"Adjusted Uncertificated Balance": Either the REMIC I Regular
Interest LT2 Adjusted Uncertificated Balance or the REMIC I Regular Interest LT3
Adjusted Uncertificated Balance.
"Adjustment Date": With respect to each Mortgage Loan, the
first day of the month in which the Mortgage Rate of a Mortgage Loan changes
pursuant to the related Mortgage Note. The first Adjustment Date following the
Cut-off Date as to each Mortgage Loan is set forth in the Mortgage Loan
Schedule.
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"Affiliate": With respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement": This Pooling and Servicing Agreement and all
amendments hereof and supplements hereto.
"Annualized Monthly Loss Percentage": As of any Distribution
Date, the percentage equal to 100% minus the percentage equivalent of a
fraction, the numerator of which is the aggregate amount of Realized Losses
incurred during the related Prepayment Period, and the denominator of which is
the aggregate Stated Principal Balance of the Mortgage Loans as of the related
Prepayment Period, subtracted from one, and raised to the twelfth power. The
formula for this definition is: 1 - (1 - fraction)12, where
fraction = Realized Losses In Prepayment Period
-------------------------------------------
Mortgage Pool balance for Prepayment Period
"Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form, which is sufficient under the laws of
the jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage, which assignment, notice of transfer or
equivalent instrument may be in the form of one or more blanket assignments
covering Mortgages secured by Mortgaged Properties located in the same county,
if permitted by law.
"Available Distribution Amount": With respect to any
Distribution Date, an amount equal to (1) the sum of (a) the aggregate of the
amounts on deposit in the Collection Account and Distribution Account as of the
close of business on the related Determination Date, (b) the aggregate of any
amounts received in respect of an REO Property withdrawn from any REO Account
and deposited in the Distribution Account for such Distribution Date pursuant to
Section 3.23, (c) the aggregate of any amounts deposited in the Distribution
Account by the Master Servicer in respect of Prepayment Interest Shortfalls for
such Distribution Date pursuant to Section 3.24, (d) the aggregate of any P&I
Advances made by the Master Servicer for such Distribution Date pursuant to
Section 4.03, (e) the aggregate of any advances made by the Trustee for such
Distribution Date pursuant to Section 7.02(b), (f) the aggregate of any amounts
withdrawn from the REMIC II Reserve Fund and deposited in the Distribution
Account pursuant to Section 4.06, and (g) with respect to the initial
Distribution Date, the Initial Deposit, reduced (to not less than zero) by (2)
the sum of (x) the portion of the amount described in clause (1)(a) above that
represents (i) Monthly Payments on the Mortgage Loans received from a Mortgagor
on or prior to the Determination Date but due during any Due Period subsequent
to the related Due Period, (ii) Principal Prepayments on the Mortgage Loans
received after the related Prepayment Period (together with any interest
payments received with such Principal Prepayments to the extent they represent
the payment of interest accrued on the Mortgage Loans
<PAGE>
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during a period subsequent to the related Prepayment Period), (iii) Liquidation
Proceeds and Insurance Proceeds received in respect of the Mortgage Loans after
the related Prepayment Period, (iv) amounts reimbursable or payable to the
Depositor, the Master Servicer, the Trustee, the Seller or any Sub-Servicer
pursuant to Section 3.11 or Section 3.12 or otherwise payable in respect of
extraordinary Trust Fund expenses, (v) Stayed Funds, (vi) the amount of the
Certificate Insurer Premium payable from the Distribution Account to the Expense
Account pursuant to Section 3.25(b) for payment to the Certificate Insurer, and
the Trustee Fee payable from the Distribution Account pursuant to Section 8.05
and (vii) amounts deposited in the Collection Account or the Distribution
Account in error, and (y) amounts reimbursable to the Trustee for an advance
made pursuant to Section 7.02(b) which advance the Trustee has determined to be
nonrecoverable from the Stayed Funds in respect of which it was made.
"Available Funds Pass-Through Rate": With respect to any
Distribution Date, a per annum rate equal to the fraction, expressed as a
percentage, the numerator of which is (i) an amount equal to (A) 1/12 of the
aggregate Uncertificated Balance of the REMIC I Regular Interest LT1 times the
weighted average of the Expense Adjusted Mortgage Rates on the then outstanding
Mortgage Loans and REO Properties minus (B) the amount of the Certificate
Insurer Premium payable to the Certificate Insurer with respect to the Policy
for such Distribution Date, and the denominator of which is (ii) an amount equal
to (A) the then outstanding aggregate Certificate Principal Balance of the Class
A Certificates and the Residual Certificates, multiplied by (B) the actual
number of days elapsed in the related Interest Accrual Period divided by 360.
"Bankruptcy Amount": As of any date of determination,
$100,000 minus the aggregate amount of Bankruptcy Losses on the Mortgage Loans,
if any, previously allocated to the Class CE Certificates in accordance with
Section 4.04.
"Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title
11 of the United States Code), as amended.
"Bankruptcy Loss": With respect to any Mortgage Loan, a
Realized Loss resulting from a Deficient Valuation or Debt Service Reduction.
"Basis Risk Shortfall": With respect to the Class A
Certificates and any Distribution Date on which the Pass-Through Rate thereon is
calculated pursuant to the definition thereof using the Available Funds
Pass-Through Rate, an amount equal to interest accrued during the related
Interest Accrual Period on the Certificate Principal Balance of the Class A
Certificates immediately prior to such Distribution Date at a rate equal to the
excess of (a) the Accrual Rate for such Distribution Date over (b) the Available
Funds Pass-Through Rate for such Distribution Date.
"Book-Entry Certificate": The Class A Certificates for so
long as the Certificates of such Class shall be registered in the name of the
Depository or its nominee.
"Book-Entry Custodian": The Custodian appointed pursuant to
Section 5.01.
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"Business Day": Any day other than a Saturday, a Sunday or a
day on which banking or savings and loan institutions in the State of
California, the State of New York 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.
"Cash-Out Refinancing": A Refinanced Mortgage Loan the
proceeds of which are more than a nominal amount in excess of the principal
balance of any existing first mortgage or subordinate mortgage on the related
Mortgaged Property and related closing costs.
"Certificate": Any one of the Depositor's New Century
Asset-Backed Floating Rate Certificates, Series 1997-NC1, Class A, Class CE,
Class R-I or Class R-II, issued under this Agreement.
"Certificate Factor": With respect to any Class of Regular
Certificates as of any Distribution Date, a fraction, expressed as a decimal
carried to six places, the numerator of which is the aggregate Certificate
Principal Balance (or the Notional Amount, in the case of the Class CE
Certificates) of such Class of Certificates on such Distribution Date (after
giving effect to any distributions of principal and allocations of Realized
Losses in reduction of the Certificate Principal Balance (or the Notional
Amount, in the case of the Class CE Certificates) of such Class of Certificates
to be made on such Distribution Date), and the denominator of which is the
initial aggregate Certificate Principal Balance (or the Notional Amount, in the
case of the Class CE Certificates) of such Class of Certificates as of the
Closing Date.
"Certificate Insurer": Financial Security Assurance Inc., a
stock insurance company organized and created under the laws of the State of New
York, and any successors thereto.
"Certificate Insurer Default": The existence and continuance
of any of the following:
(a) The Certificate Insurer fails to make a
payment required under the Policy in accordance with its terms; or
(b)(i) the Certificate Insurer (A) files any petition
or commences any case or proceeding under any provision or
chapter of the Bankruptcy Code or any other similar federal or
state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization, (B) makes a general assignment
for the benefit of its creditors, or (C) has an order for
relief entered against it under the Bankruptcy Code or any
other similar federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization
which is final and nonappealable; or
(ii) a court of competent jurisdiction, the New York
Department of Insurance or other competent regulatory
authority enters a final and nonappealable order, judgment or
decree (A) appointing a custodian, trustee, agent or receiver
<PAGE>
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for the Certificate Insurer or for all or any material portion
of its property or (B) authorizing the taking of possession by
a custodian, trustee, agent or receiver of the Certificate
Insurer (or the taking of possession of all or any material
portion of the property of the Certificate Insurer).
"Certificate Insurer Premium": The Policy premium payable
pursuant to Section 3.25(b) hereof.
"Certificate Insurer Premium Rate": 0.23% per annum.
"Certificateholder" or "Holder": The Person in whose name a
Certificate is registered in the Certificate Register, and the Certificate
Insurer to the extent of Cumulative Insurance Payments, except that a
Disqualified Organization or a Non-United States Person shall not be a Holder of
a Residual Certificate for any purposes hereof and, solely for the purposes of
giving any consent pursuant to this Agreement, any Certificate registered in the
name of the Depositor or the Master Servicer or any Affiliate thereof shall be
deemed not to be outstanding and the Voting Rights to which it is entitled shall
not be taken into account in determining whether the requisite percentage of
Voting Rights necessary to effect any such consent has been obtained, except as
otherwise provided in Section 12.01. The Trustee may conclusively rely upon a
certificate of the Depositor or the Master Servicer in determining whether a
Certificate is held by an Affiliate thereof. All references herein to "Holders"
or "Certificateholders" shall reflect the rights of Certificate Owners as they
may indirectly exercise such rights through the Depository and participating
members thereof, except as otherwise specified herein; provided, however, that
the Trustee shall be required to recognize as a "Holder" or "Certificateholder"
only the Person in whose name a Certificate is registered in the Certificate
Register.
"Certificate Owner": With respect to a Book-Entry Certificate,
the Person who is the beneficial owner of such Certificate as reflected on the
books of the Depository or on the books of a Depository Participant or on the
books of an indirect participating brokerage firm for which a Depository
Participant acts as agent.
"Certificate Principal Balance": With respect to each Class A
Certificate or Residual Certificate as of any date of determination, the
Certificate Principal Balance of such Certificate on the Distribution Date
immediately prior to such date of determination, minus all distributions
allocable to principal made thereon and Realized Losses allocated thereto on
such immediately prior Distribution Date (or, in the case of any date of
determination up to and including the first Distribution Date, the initial
Certificate Principal Balance of such Class A Certificate or Residual
Certificate, as stated on the face thereof). With respect to each Class CE
Certificate as of any date of determination, an amount equal to the Percentage
Interest evidenced by such Certificate times the excess, if any, of (A) the then
aggregate Uncertificated Balance of the REMIC I Regular Interest LT1 over (B)
the then aggregate Certificate Principal Balance of all Class A Certificates and
Class R-II Certificates then outstanding.
"Certificate Register": The register maintained pursuant to
Section 5.02.
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"Class": Collectively, all of the Certificates bearing the
same class designation.
"Class A Certificate": Any one of the Class A Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-1 and evidencing a Regular Interest in REMIC II for
purposes of the REMIC Provisions.
"Class A Principal Distribution Amount": With respect to any
Distribution Date, the lesser of:
(a) the excess of the Available Distribution Amount over
the sum of (i) the amount payable on the Class A
Certificates pursuant to Section 4.01(a)(2)(i), and
(ii) the amounts payable on such Distribution Date to
the REMIC I Regular Interest LT2 and the REMIC I
Regular Interest LT3; and
(b) the sum of
(i) the REMIC II Percentage of:
(A) the principal portion of each Monthly
Payment due during the related Due Period,
to the extent received or advanced, on each
Mortgage Loan;
(B) the Stated Principal Balance of any Mortgage
Loan that was purchased during the related
Prepayment Period pursuant to or as
contemplated by Section 2.03, Section
3.16(c) or Section 10.01 and the amount of
any Substitution Shortfall Amount deposited
in the Collection Account in connection with
the substitution of a Deleted Mortgage Loan
pursuant to Section 2.03 during the related
Prepayment Period;
(C) the principal portion of all other
unscheduled collections (including, without
limitation, Principal Prepayments, Insurance
Proceeds, Liquidation Proceeds and REO
Principal Amortization) received during the
related Prepayment Period, net of any
portion thereof that represents a recovery
of principal for which an advance was made
by the Master Servicer pursuant to Section
4.03 in respect of a preceding Distribution
Date; and
(D) the principal portion of any Realized Losses
incurred (or deemed to have been incurred)
on the Mortgage Loans in the calendar month
preceding such Distribution Date and the
principal portion of any Realized Losses
allocated to the Class A Certificates on
previous Distribution Dates but not paid
under the Policy due to a Certificate
Insurer Default and not previously paid
pursuant to
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Section 4.01(a)(2)(iii)(B), in each case to
the extent covered by amounts on deposit in
the REMIC II Reserve Fund (including amounts
to be deposited on such Distribution Date)
or from Accrued Certificate Interest on the
Class CE Certificates for such Distribution
Date; and
(ii) the amount of any Subordination Increase
Amount for the Class A Certificates for such
Distribution Date;
MINUS:
(iii) the amount of any Subordination Reduction
Amount for the Class A Certificates for such
Distribution Date.
"Class CE Certificate": Any one of the Class CE Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-2 and evidencing a Regular Interest in REMIC II for
purposes of the REMIC Provisions.
"Class R-I Certificate": Any one of the Class R-I Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-3 and evidencing the Residual Interest in REMIC I
for purposes of the REMIC Provisions.
"Class R-II Certificate": Any one of the Class R-II
Certificates executed, authenticated and delivered by the Trustee, substantially
in the form annexed hereto as Exhibit A-4 and evidencing the Residual Interest
in REMIC II for purposes of the REMIC Provisions.
"Closing Date": February 27, 1997
"Code": The Internal Revenue Code of 1986.
"Collection Account": The account or accounts created and
maintained, or caused to be created and maintained, by the Master Servicer
pursuant to Section 3.10(a), which shall be entitled "New Century Mortgage
Corporation, as Master Servicer for First Trust National Association, as
Trustee, in trust for (A) registered holders of Salomon Brothers Mortgage
Securities VII, Inc., New Century Asset-Backed Floating Rate Certificates,
Series 1997-NC1, and (B) Financial Security Assurance Inc." The Collection
Account must be an Eligible Account.
"Corporate Trust Office": The principal corporate trust office
of the Trustee at which at any particular time its corporate trust business in
connection with this Agreement shall be administered, which office at the date
of the execution of this instrument is located at 180 East Fifth Street, St.
Paul, Minnesota 55101, or at such other address as the Trustee may designate
from time to time by notice to the Certificateholders, the Depositor, the Master
Servicer and the Certificate Insurer.
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"Cumulative Insurance Payments": As of any time of
determination, the aggregate of all Insurance Payments previously made by the
Certificate Insurer under the Policy plus interest thereon from the date such
amount became due until paid in full, at a rate of interest calculated as
provided in the Insurance Agreement minus the sum of (i) all payments previously
made to the Certificate Insurer pursuant to Section 4.01 hereof as reimbursement
for such amounts and (ii) any payments made by the Certificate Insurer
attributable to Excess Bankruptcy Losses, Excess Fraud Losses, Excess Special
Hazard Losses and Extraordinary Losses.
"Cumulative Loss Percentage": For any Distribution Date, the
percentage equivalent of a fraction, the numerator of which is the aggregate
amount of Realized Losses incurred from and including the first Due Period to
and including the most recently ended Due Period, and the denominator of which
is the aggregate Stated Principal Balance of the Mortgage Loans as of the
Cut-off Date.
"Cut-off Date": With respect to each Original Mortgage Loan,
February 1, 1997. With respect to all Qualified Substitute Mortgage Loans, their
respective dates of substitution. References herein to the "Cut-off Date," when
used with respect to more than one Mortgage Loan, shall be to the respective
Cut-off Dates for such Mortgage Loans.
"Debt Service Reduction": With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction resulting from a Deficient Valuation.
"Deficiency Amount": With respect to the Class A Certificates
as of any Distribution Date and the Residual Certificates on the first
Distribution Date, the sum of (i) any shortfall in the amounts available in the
Distribution Account to pay the Interest Distribution Amount on such
Certificates for the related Interest Accrual Period, net of any Prepayment
Interest Shortfall (to the extent not covered by payments by the Master Servicer
pursuant to Section 3.24) and Relief Act Interest Shortfalls allocated to such
Class, (ii) the principal portion of any Realized Losses allocated to the Class
A Certificates, and, without duplication, the excess, if any, of (a) the
aggregate Certificate Principal Balance of the Class A Certificates then
outstanding over (b) the REMIC II Percentage of the aggregate Stated Principal
Balances of the Mortgage Loans then outstanding, and (iii) without duplication
of the amount specified in clause (ii), the aggregate Certificate Principal
Balance of the Class A Certificates to the extent unpaid on the final
Distribution Date or earlier termination of the Trust Fund pursuant to the terms
of this Agreement.
"Deficiency Event": The inability of the Trustee to make the
Guaranteed Distribution on any Distribution Date due to a shortage of funds for
such purpose then held in the Distribution Account and the failure of the
Certificate Insurer to pay in full a claim made in accordance with the Policy
with respect to such Distribution Date.
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"Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then outstanding principal balance of the Mortgage
Loan, which valuation results from a proceeding initiated under the Bankruptcy
Code.
"Definitive Certificates": As defined in Section 5.01(b).
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be
replaced by a Qualified Substitute Mortgage Loan.
"Delinquency Percentage": As of the last day of any Due
Period, the percentage equivalent of a fraction, the numerator of which equals
the aggregate Stated Principal Balances of all Mortgage Loans that are 60 or
more days Delinquent, in foreclosure or converted to REO Properties (provided
that an REO Disposition has not yet occurred) as of such last day of such Due
Period, and the denominator of which is the aggregate Stated Principal Balance
of the Mortgage Loans as of the last day of such Due Period.
"Delinquent": A Mortgage Loan is Delinquent if any Monthly
Payment due thereon is not made by the close of business on the Determination
Date of the month succeeding the month in which such Monthly Payment was due. A
Mortgage Loan is 60 days Delinquent if such Monthly Payment has not been
received by the close of business on the Determination Date of the second month
succeeding the month in which such Monthly Payment was due. A Mortgage Loan is
90 days Delinquent if such Monthly Payment has not been received by the close of
business on the Determination Date of the third month succeeding the month in
which such Monthly Payment was due.
"Depositor": Salomon Brothers Mortgage Securities VII, Inc.,
a Delaware corporation, or its successor in interest.
"Depository": The Depository Trust Company, or any successor
Depository hereafter named. The nominee of the initial Depository, for purposes
of registering those Certificates that are to be Book-Entry Certificates, is
CEDE & Co. The Depository shall at all times be a "clearing corporation" as
defined in Section 8-102(3) of the Uniform Commercial Code of the State of New
York and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended.
"Depository Institution": Any depository institution or trust
company, including the Trustee, that (a) is incorporated under the laws of the
United States of America or any State thereof, (b) is subject to supervision and
examination by federal or state banking authorities and (c) has outstanding
unsecured commercial paper or other short-term unsecured debt obligations (or,
in the case of a depository institution that is the principal subsidiary of a
holding company, such holding company has unsecured commercial paper or other
short-term unsecured debt obligations) that are rated P-1 by Moody's and A-1 by
S&P (or comparable ratings if Moody's and S&P are not the Rating Agencies).
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"Depository Participant": A broker, dealer, bank or other
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
"Determination Date": With respect to each Distribution Date,
the 15th day of the calendar month in which such Distribution Date occurs or, if
such 15th day is not a Business Day, the Business Day immediately preceding such
15th day.
"Directly Operate": With respect to any REO Property, the
furnishing or rendering of services to the tenants thereof, the management or
operation of such REO Property, the holding of such REO Property primarily for
sale to customers, the performance of any construction work thereon or any use
of such REO Property in a trade or business conducted by REMIC I other than
through an Independent Contractor; provided, however, that the Trustee (or the
Master Servicer on behalf of the Trustee) shall not be considered to Directly
Operate an REO Property solely because the Trustee (or the Master Servicer on
behalf of the Trustee) establishes rental terms, chooses tenants, enters into or
renews leases, deals with taxes and insurance, or makes decisions as to repairs
or capital expenditures with respect to such REO Property.
"Disqualified Organization": Any of the following: (i) the
United States, any State or political subdivision thereof, any possession of the
United States, or any agency or instrumentality of any of the foregoing (other
than an instrumentality which is a corporation if all of its activities are
subject to tax and, except for the FHLMC, a majority of its board of directors
is not selected by such governmental unit), (ii) 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 (including the tax imposed by Section 511 of the Code on
unrelated business taxable income), (iv) rural electric and telephone
cooperatives described in Section 1381(a)(2)(C) of the Code and (v) any other
Person so designated by the Trustee based upon an Opinion of Counsel that the
holding of an Ownership Interest in a Residual Certificate by such Person may
cause either REMIC I or REMIC II or any Person having an Ownership Interest in
any Class of Certificates (other than such Person) to incur a liability for any
federal tax imposed under the Code that would not otherwise be imposed but for
the Transfer of an Ownership Interest in a Residual Certificate to such Person.
The terms "United States," "State" and "international organization" shall have
the meanings set forth in Section 7701 of the Code or successor provisions.
"Distribution Account": The trust account or accounts created
and maintained by the Trustee pursuant to Section 3.10(b), which shall be
entitled "First Trust National Association, as Trustee, in trust for (A)
registered holders of Salomon Brothers Mortgage Securities VII, Inc., New
Century Asset-Backed Floating Rate Certificates, Series 1997-NC1, and (B)
Financial Security Assurance Inc." The Distribution Account must be an Eligible
Account.
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"Distribution Date": The 25th day of any month, or if such
25th day is not a Business Day, the Business Day immediately following such 25th
day, commencing in March 1997.
"Due Date": With respect to each Distribution Date, the first
day of the calendar month in which such Distribution Date occurs, which is the
day of the month on which the Monthly Payment is due on a Mortgage Loan,
exclusive of any days of grace.
"Due Period": With respect to any Distribution Date, the
period commencing on the second day of the month immediately preceding the month
in which such Distribution Date occurs and ending on the related Due Date.
"Eligible Account": Any of (i) an account or accounts
maintained with a Depository Institution, (ii) an account or accounts the
deposits in which are fully insured by the FDIC or (iii) a trust account or
accounts maintained with the trust department of a federal or state chartered
depository institution or trust company acting in its fiduciary capacity.
Eligible Accounts may bear interest.
"ERISA": The Employee Retirement Income Security Act of 1974,
as amended.
"Estate in Real Property": A fee simple estate in a parcel of
land.
"Excess Bankruptcy Loss": Any Bankruptcy Loss, or portion
thereof, which exceeds the then applicable Bankruptcy Amount.
"Excess Fraud Loss": Any Fraud Loss, or portion thereof, which
exceeds the then applicable Fraud Loss Amount.
"Excess Special Hazard Loss": Any Special Hazard Loss, or
portion thereof, that exceeds the then applicable Special Hazard Amount.
"Excess Subordinated Amount": With respect to the Class A
Certificates and any Distribution Date, the excess, if any, of (i) the
Subordinated Amount for such Distribution Date over (ii) the Required
Subordinated Amount for such Distribution Date.
"Expense Account": The account established and maintained
pursuant to Section 3.25.
"Expense Adjusted Mortgage Rate": With respect to any Mortgage
Loan or REO Property, the then applicable Mortgage Rate thereon minus the sum of
(i) the Minimum Spread, (ii) the Trustee's Fee Rate and (iii) the Servicing Fee
Rate.
"Expense Adjusted Maximum Mortgage Rate": With respect to any
Mortgage Loan or REO Property, the Maximum Mortgage Rate thereon minus the sum
of (i) the Minimum Spread, (ii) the Trustee's Fee Rate and (iii) the Servicing
Fee Rate.
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"Extraordinary Loss": Any Realized Loss or portion thereof
caused by or resulting from:
(i) nuclear or chemical reaction or nuclear radiation or
radioactive or chemical contamination, all whether
controlled or uncontrolled and whether such loss be
direct or indirect, proximate or remote or be in
whole or in part caused by, contributed to or
aggravated by a peril covered by the definition of
the term "Special Hazard Loss";
(ii) hostile or warlike action in time of peace or war,
including action in hindering, combating or defending
against an actual, impending or expected attack by
any government or sovereign power, DE JURE or DE
FACTO, or by any authority maintaining or using
military, naval or air forces, or by military, naval
or air forces, or by an agent of any such government,
power, authority or forces;
(iii) any weapon of war employing atomic fission or
radioactive forces whether in time of peace or war;
and
(iv) insurrection, rebellion, revolution, civil war,
usurped power or action taken by governmental
authority in hindering, combating or defending
against such an occurrence, seizure or destruction
under quarantine or customs regulations, confiscation
by order of any government or public authority, or
risks of contraband or illegal transactions or trade.
"FDIC": Federal Deposit Insurance Corporation or any successor
thereto.
"FHLMC": Federal Home Loan Mortgage Corporation or any
successor thereto.
"Final Recovery Determination": With respect to any defaulted
Mortgage Loan or any REO Property (other than a Mortgage Loan or REO Property
purchased by the Seller, the Depositor, the Majority Class CE Certificateholder,
the Master Servicer or the Certificate Insurer pursuant to or as contemplated by
Section 2.03, Section 3.16(c) or Section 10.01), a determination made by the
Master Servicer that all Insurance Proceeds, Liquidation Proceeds and other
payments or recoveries which the Master Servicer, in its reasonable good faith
judgment, expects to be finally recoverable in respect thereof have been so
recovered. The Master Servicer shall maintain records, prepared by a Servicing
Officer, of each Final Recovery Determination made thereby.
"FNMA": Federal National Mortgage Association or any successor
thereto.
"Fraud Loss": Any Realized Loss or portion thereof sustained
by reason of a default arising from intentional fraud, dishonesty or
misrepresentation in connection with the related Mortgage Loan.
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"Fraud Loss Amount": As of any date of determination after the
Cut-off Date, an amount equal to: (X) prior to the first anniversary of the
Cut-off Date, $2,973,587 minus the aggregate amount of Fraud Losses on the
Mortgage Loans allocated solely to the Class CE Certificates in accordance with
Section 4.04 since the Cut-off Date up to such date of determination, (Y) from
the first to the second anniversary of the Cut-off Date, an amount equal to (1)
the lesser of (a) the Fraud Loss Amount as of the first anniversary of the
Cut-off Date and (b) 2.00% of the aggregate outstanding principal balance of all
of the Mortgage Loans as of the first anniversary of the Cut-off Date minus (2)
the Fraud Losses allocated solely to the Class CE Certificates in accordance
with Section 4.04 since the first anniversary of the Cut-off Date up to such
date of determination and (Z) from the second to the fifth anniversary of the
Cut-off Date, an amount equal to (1) the lesser of (a) the Fraud Loss Amount as
of the most recent anniversary of the Cut-off Date and (b) 1.00% of the
aggregate outstanding principal balance of all of the Mortgage Loans as of the
most recent anniversary of the Cut-off Date minus (2) the Fraud Losses on the
Mortgage Loans allocated solely to the Class CE Certificates in accordance with
Section 4.04 since the most recent anniversary of the Cut-off Date up to such
date of determination. On and after the fifth anniversary of the Cut-off Date
the Fraud Loss Amount shall be zero.
"Gross Margin": With respect to each Mortgage Loan, the fixed
percentage set forth in the related Mortgage Note that is added to the Index on
each Adjustment Date in accordance with the terms of the related Mortgage Note
used to determine the Mortgage Rate for such Mortgage Loan.
"Guaranteed Distribution": As defined in the Policy.
"Independent": When used with respect to any specified Person,
any such Person who (a) is in fact independent of the Depositor, the Master
Servicer and their respective Affiliates, (b) does not have any direct financial
interest in or any material indirect financial interest in the Depositor or the
Master Servicer or any Affiliate thereof, and (c) is not connected with the
Depositor or the Master Servicer or any Affiliate thereof 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 the Depositor or the Master Servicer or any Affiliate thereof
merely because such Person is the beneficial owner of 1% or less of any class of
securities issued by the Depositor or the Master Servicer or any Affiliate
thereof, as the case may be.
"Independent Contractor": Either (i) any Person (other than
the Master Servicer) that would be an "independent contractor" with respect to
REMIC I within the meaning of Section 856(d)(3) of the Code if REMIC I were a
real estate investment trust (except that the ownership tests set forth in that
section shall be considered to be met by any Person that owns, directly or
indirectly, 35 percent or more of any Class of Certificates), so long as REMIC I
does not receive or derive any income from such Person and provided that the
relationship between such Person and REMIC I is at arm's length, all within the
meaning of Treasury Regulation Section 1.856-4(b)(5), or (ii) any other Person
(including the Master Servicer) if the Trustee has received an Opinion of
Counsel to the effect that the taking of any action in respect of any REO
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Property by such Person, subject to any conditions therein specified, that is
otherwise herein contemplated to be taken by an Independent Contractor will not
cause such REO Property to cease to qualify as "foreclosure property" within the
meaning of Section 860G(a)(8) of the Code (determined without regard to the
exception applicable for purposes of Section 860D(a) of the Code), or cause any
income realized in respect of such REO Property to fail to qualify as Rents from
Real Property.
"Index": With respect to each Mortgage Loan and each related
Adjustment Date the average of the interbank offered rates for six-month United
States dollar deposits in the London market as published in THE WALL STREET
JOURNAL and as most recently available either (i) as of the first business day
45 days prior to such Adjustment Date or (ii) as of the first business day of
the month preceding the month of such Adjustment Date, as specified in the
related Mortgage Note.
"Initial Deposit": $89,193.16 in cash to be deposited by the
Depositor with the Trustee on or before the Closing Date, which represents with
respect to each Mortgage Loan having a first Monthly Payment due in April 1997,
interest accrued at the Net Mortgage Rate for each such Mortgage Loan for the
initial Interest Accrual Period.
"Insurance Agreement": The Insurance and Indemnity Agreement,
dated as of February 27, 1997, among the Depositor, the Master Servicer and the
Certificate Insurer, as amended or supplemented in accordance with the
provisions thereof.
"Insurance Payment": Any payment made by the Certificate
Insurer under the Policy with respect to the Class A Certificates, the Class R-I
Certificates and the Class R-II Certificates.
"Insurance Proceeds": Proceeds of any title policy, hazard
policy or other insurance policy covering a Mortgage Loan, to the extent such
proceeds are not to be applied to the restoration of the related Mortgaged
Property or released to the Mortgagor in accordance with the procedures that the
Master Servicer would follow in servicing mortgage loans held for its own
account, subject to the terms and conditions of the related Mortgage Note and
Mortgage.
"Interest Accrual Period": With respect to any Distribution
Date after the first Distribution Date and the Class A Certificates and the
REMIC I Regular Interest LT2, the period commencing on the Distribution Date of
the month immediately preceding the month in which such Distribution Date occurs
and ending on the day preceding such Distribution Date. With respect to the
first Distribution Date and the Class A Certificates, the Residual Certificates
and the REMIC I Regular Interest LT2, the period commencing on the Closing Date
and ending on the day preceding such Distribution Date. With respect to any
Distribution Date and the Class CE Certificates, the REMIC I Regular Interest
LT1 and the REMIC I Regular Interest LT3, the one-month period ending on the
last day of the calendar month preceding the month in which such Distribution
Date occurs.
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"Interest Determination Date": With respect to the Class A
Certificates and the REMIC I Regular Interest LT2 and any Interest Accrual
Period therefor, the second London Business Day preceding the commencement of
such Interest Accrual Period.
"Interest Distribution Amount": With respect to any
Distribution Date and any Class of Certificates, the aggregate Accrued
Certificate Interest on the Certificates of such Class for such Distribution
Date.
"Late Collections": With respect to any Mortgage Loan and any
Due Period, all amounts received subsequent to the Determination Date
immediately following such Due Period, whether as late payments of Monthly
Payments or as Insurance Proceeds, Liquidation Proceeds or otherwise, which
represent late payments or collections of principal and/or interest due (without
regard to any acceleration of payments under the related Mortgage and Mortgage
Note) but Delinquent for such Due Period and not previously recovered.
"Liquidation Event": With respect to any Mortgage Loan, any of
the following events: (i) such Mortgage Loan is paid in full; (ii) a Final
Recovery Determination is made as to such Mortgage Loan; or (iii) such Mortgage
Loan is removed from REMIC I by reason of its being purchased, sold or replaced
pursuant to or as contemplated by Section 2.03, Section 3.16(c) or Section
10.01. With respect to any REO Property, either of the following events: (i) a
Final Recovery Determination is made as to such REO Property; or (ii) such REO
Property is removed from REMIC I by reason of its being purchased pursuant to
Section 10.01.
"Liquidation Proceeds": The amount (other than Insurance
Proceeds or amounts received in respect of the rental of any REO Property prior
to REO Disposition) received by the Master Servicer in connection with (i) the
taking of all or a part of a Mortgaged Property by exercise of the power of
eminent domain or condemnation, (ii) the liquidation of a defaulted Mortgage
Loan through a trustee's sale, foreclosure sale or otherwise, or (iii) the
repurchase, substitution or sale of a Mortgage Loan or an REO Property pursuant
to or as contemplated by Section 2.03, Section 3.16(c), Section 3.23 or Section
10.01.
"Loan-to-Value Ratio": As of any date of determination, the
fraction, expressed as a percentage, the numerator of which is the principal
balance of the related Mortgage Loan at such date and the denominator of which
is the Value of the related Mortgaged Property.
"London Business Day": Any day on which banks in the City of
London are open and conducting transactions in United States dollars.
"Majority Class CE Certificateholder": Any single Holder or
group of Holders of Class CE Certificates representing a greater than 50%
Percentage Interest in such Class.
"Master Servicer": New Century Mortgage Corporation or any
successor master servicer appointed as herein provided, in its capacity as
Master Servicer hereunder.
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"Master Servicer Event of Default": One or more of the events
described in Section 7.01.
"Master Servicer Remittance Date": With respect to any
Distribution Date, 3:00 p.m. New York time on the 18th day of the calendar month
in which such Distribution Date occurs or, if such 18th day is not a Business
Day, the Business Day immediately succeeding such 18th day.
"Maximum Class A Pass-Through Rate": With respect to the Class
A Certificates and each Distribution Date, a per annum rate equal to the
fraction, expressed as a percentage, the numerator of which is (i) an amount
equal to (A) 1/12 of the Uncertificated Balance of the REMIC I Regular Interest
LT1 times the weighted average of the Expense Adjusted Maximum Mortgage Rates on
the then outstanding Mortgage Loans and REO Properties minus (B) the amount of
the Certificate Insurer Premium payable to the Certificate Insurer with respect
to the Policy for such Distribution Date, and the denominator of which is (ii)
an amount equal to (A) the then outstanding aggregate Certificate Principal
Balance of the Class A Certificates multiplied by (B) the actual number of days
elapsed in the related Interest Accrual Period divided by 360.
"Maximum LT3 Uncertificated Interest Deferral Amount": With
respect to any Distribution Date, the excess of (i) accrued interest at the
REMIC I Remittance Rate applicable to the REMIC I Regular Interest LT3 for such
Distribution Date on a balance equal to the Uncertificated Balance of the REMIC
I Regular Interest LT3 minus the REMIC I Subordinated Amount, in each case for
such Distribution Date, over (ii) Uncertificated Interest on the REMIC I Regular
Interest LT2 for such Distribution Date.
"Maximum Mortgage Rate": With respect to each Mortgage Loan,
the percentage set forth in the related Mortgage Note as the maximum Mortgage
Rate thereunder.
"Minimum Mortgage Rate": With respect to each Mortgage Loan,
the percentage set forth in the related Mortgage Note as the minimum Mortgage
Rate thereunder.
"Minimum Spread": 0.50% per annum.
"Monthly Payment": With respect to any Mortgage Loan, the
scheduled monthly payment of principal and interest on such Mortgage Loan which
is payable by the related Mortgagor from time to time under the related Mortgage
Note, determined: (a) after giving effect to (i) any Deficient Valuation and/or
Debt Service Reduction with respect to such Mortgage Loan and (ii) any reduction
in the amount of interest collectible from the related Mortgagor pursuant to the
Relief Act; (b) without giving effect to any extension granted or agreed to by
the Master Servicer pursuant to Section 3.07; and (c) on the assumption that all
other amounts, if any, due under such Mortgage Loan are paid when due.
"Moody's": Moody's Investors Service, Inc. or its successor in
interest.
<PAGE>
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"Mortgage": The mortgage, deed of trust or other instrument
creating a first lien on, or first priority security interest in, a Mortgaged
Property securing a Mortgage Note.
"Mortgage File": The mortgage documents listed in Section 2.01
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.
"Mortgage Loan": Each mortgage loan transferred and assigned
to the Trustee pursuant to Section 2.01 or Section 2.03(d) as from time to time
held as a part of the Trust Fund, the Mortgage Loans so held being identified in
the Mortgage Loan Schedule.
"Mortgage Loan Purchase Agreement": The agreement between the
Depositor and the Seller, regarding the transfer of the Mortgage Loans by the
Seller to the Depositor, substantially in the form of Exhibit D annexed hereto.
"Mortgage Loan Schedule": As of any date, the list of Mortgage
Loans included in REMIC I on such date, attached hereto as Schedule 1. The
Mortgage Loan Schedule shall set forth the following information with respect to
each Mortgage Loan:
(i) the Mortgage Loan identifying number;
(ii) the Mortgagor's name;
(iii) the street address of the Mortgaged Property including the
state and zip code;
(iv) a code indicating whether the Mortgaged Property is
owner-occupied;
(v) the type of Residential Dwelling constituting the Mortgaged
Property;
(vi) the original months to maturity;
(vii) the stated remaining months to maturity from the Cut-off Date
based on the original amortization schedule;
(viii) the Loan-to-Value Ratio at origination;
(ix) the Mortgage Rate in effect immediately following the Cut-off
Date;
(x) (A) the date on which the first Monthly Payment was due on the
Mortgage Loan and, (B) if such date is not consistent with the
Due Date currently in effect, such Due Date;
(xi) the stated maturity date;
(xii) the amount of the Monthly Payment at origination;
<PAGE>
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(xiii) the amount of the Monthly Payment due on the first Due Date
after the Cut-off Date;
(xiv) the last Due Date on which a Monthly Payment was actually
applied to the unpaid Stated Principal Balance;
(xv) the original principal amount of the Mortgage Loan;
(xvi) the Scheduled Principal Balance of the Mortgage Loan as of the
close of business on the Cut-off Date;
(xvii) the Adjustment Dates;
(xviii) the Gross Margin;
(xix) a code indicating the purpose of the Mortgage Loan (I.E.,
purchase financing, Rate/Term Refinancing, Cash-Out
Refinancing);
(xx) the Maximum Mortgage Rate;
(xxi) the Minimum Mortgage Rate;
(xxii) the Mortgage Rate at origination;
(xxiii) the Periodic Rate Cap and the maximum first Adjustment Date
Mortgage Rate adjustment;
(xxiv) a code indicating the documentation program (I.E., Full
Documentation, Limited Documentation, Stated Income
Documentation);
(xxv) [intentionally omitted];
(xxvi) the first Adjustment Date immediately following the Cut-off
Date;
(xxvii) the risk grade;
(xxviii) [intentionally omitted];
(xxix) [intentionally omitted];
(xxx) [intentionally omitted];
(xxxi) the Value of the Mortgaged Property;
(xxxii) the sale price of the Mortgaged Property, if applicable;
<PAGE>
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(xxxiii) the actual unpaid principal balance of the Mortgage Loan as of
the Cut-off Date;
(xxxiv) the prepayment penalty term;
(xxxv) [intentionally omitted];
(xxxvi) [intentionally omitted];
(xxxvii) the rounding code (I.E., nearest 0.125%, next highest 0.125%);
(xxxviii)[intentionally omitted];
(xxxix) [intentionally omitted];
(xl) the program code.
The Mortgage Loan Schedule shall set forth the following
information, as of the Cut-off Date with respect to the Mortgage Loans in the
aggregate: (1) the number of Mortgage Loans; (2) the current principal balance
of the Mortgage Loans; (3) the weighted average Mortgage Rate of the Mortgage
Loans; and (4) the weighted average maturity of the Mortgage Loans. The Mortgage
Loan Schedule shall be amended from time to time by the Depositor in accordance
with the provisions of this Agreement. With respect to any Qualified Substitute
Mortgage Loan, Cut-off Date shall refer to the related Cut-off Date for such
Mortgage Loan, determined in accordance with the definition of Cut-off Date
herein.
"Mortgage Note": The original executed note or other evidence
of the indebtedness of a Mortgagor under a Mortgage Loan.
"Mortgage Pool": The pool of Mortgage Loans, identified on
Schedule 1 from time to time, and any REO Properties acquired in respect
thereof.
"Mortgage Rate": With respect to each Mortgage Loan, the
annual rate at which interest accrues on such Mortgage Loan from time to time in
accordance with the provisions of the related Mortgage Note, which rate (A) as
of any date of determination until the first Adjustment Date following the
Cut-off Date shall be the rate set forth in the Mortgage Loan Schedule as the
Mortgage Rate in effect immediately following the Cut-off Date and (B) as of any
date of determination thereafter shall be the rate as adjusted on the most
recent Adjustment Date to equal the sum, rounded to the nearest 0.125% as
provided in the Mortgage Note, of the Index, as most recently available as of a
date prior to the Adjustment Date as set forth in the related Mortgage Note,
plus the related Gross Margin; provided that the Mortgage Rate on such Mortgage
Loan on any Adjustment Date shall never be more than the lesser of (i) the sum
of the Mortgage Rate in effect immediately prior to the Adjustment Date plus the
related Periodic Rate Cap, if any, and (ii) the related Maximum Mortgage Rate,
and shall never be less than the greater of (i) the Mortgage Rate in effect
immediately prior to the Adjustment Date less the Periodic Rate Cap, if any, and
(ii) the related Minimum Mortgage Rate. With respect to each
<PAGE>
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Mortgage Loan that becomes an REO Property, as of any date of determination, the
annual rate determined in accordance with the immediately preceding sentence as
of the date such Mortgage Loan became an REO Property.
"Mortgaged Property": The underlying property securing a
Mortgage Loan, including any REO Property, consisting of an Estate in Real
Property improved by a Residential Dwelling.
"Mortgagor": The obligor on a Mortgage Note.
"Net Monthly Excess Cashflow": With respect to any
Distribution Date, the excess of (x) the REMIC II Percentage of the Available
Distribution Amount for such Distribution Date over (y) the sum for such
Distribution Date of (A) the Interest Distribution Amount payable to the holders
of the Class A Certificates and the Residual Certificates and (B)(i) the sum of
the amounts described in clauses (b)(i)(A) through (C) of the definition of
Class A Principal Distribution Amount minus (ii) the amount of any Subordination
Reduction Amount for such Distribution Date.
"Net Monthly Excess Spread": With respect to any Distribution
Date, the excess of (x) the REMIC II Percentage of the Available Distribution
Amount for such Distribution Date over (y) the sum for such Distribution Date of
(A) the Interest Distribution Amount payable to the holders of the Class A
Certificates and the Residual Certificates and (B) the sum of the amounts
described in clauses (b)(i)(A) through (C) of the definition of Class A
Principal Distribution Amount.
"Net Mortgage Rate": With respect to any Mortgage Loan (or the
related REO Property) as of any date of determination, a per annum rate of
interest equal to the then applicable Mortgage Rate for such Mortgage Loan minus
the Servicing Fee Rate.
"New Lease": Any lease of REO Property entered into on behalf
of REMIC I, including any lease renewed or extended on behalf of REMIC I, if
REMIC I has the right to renegotiate the terms of such lease.
"Nonrecoverable P&I Advance": Any P&I Advance previously made
or proposed to be made in respect of a Mortgage Loan or REO Property that, in
the good faith business judgment of the Master Servicer, will not or, in the
case of a proposed P&I Advance, would not be ultimately recoverable from related
Late Collections, Insurance Proceeds or Liquidation Proceeds on such Mortgage
Loan or REO Property as provided herein.
"Nonrecoverable Servicing Advance": Any Servicing Advance
previously made or proposed to be made in respect of a Mortgage Loan or REO
Property that, in the good faith business judgment of the Master Servicer, will
not or, in the case of a proposed Servicing Advance, would not be ultimately
recoverable from related Late Collections, Insurance Proceeds or Liquidation
Proceeds on such Mortgage Loan or REO Property as provided herein.
<PAGE>
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"Non-United States Person": Any Person other than a United
States Person.
"Notional Amount": With respect to the Class CE Certificates
and any Distribution Date, the Uncertificated Balance of the REMIC I Regular
Interest LT1 for such Distribution Date.
"Officers' Certificate": A certificate signed by the Chairman
of the Board, the Vice Chairman of the Board, the President or a vice president
(however denominated), and by the Treasurer, the Secretary, or one of the
assistant treasurers or assistant secretaries of the Master Servicer, the Seller
or the Depositor, as applicable.
"One-Month LIBOR": With respect to the Class A Certificates
and the Residual Certificates and the REMIC I Regular Interest LT2 and any
Interest Accrual Period therefor, the rate determined by the Trustee on the
related Interest Determination Date on the basis of the offered rates of the
Reference Banks for one-month U.S. dollar deposits, as such rates appear on the
Reuters Screen LIBO Page, as of 11:00 a.m. (London time) on such Interest
Determination Date. On each Interest Determination Date, One-Month LIBOR for the
related Interest Accrual Period will be established by the Trustee as follows:
(i) If on such Interest Determination Date two or more Reference
Banks provide such offered quotations, One-Month LIBOR for the
related Interest Accrual Period shall be the arithmetic mean
of such offered quotations (rounded upwards if necessary to
the nearest whole multiple of 1/16%).
(ii) If on such Interest Determination Date fewer than two
Reference Banks provide such offered quotations, One-Month
LIBOR for the related Interest Accrual Period shall be the
higher of (i) LIBOR as determined on the previous Interest
Determination Date and (ii) the Reserve Interest Rate.
"One-Month LIBOR Pass-Through Rate": With respect to the Class
A Certificates and the REMIC I Regular Interest LT2 and any Distribution Date, a
per annum rate equal to One-Month LIBOR plus 0.21%, in the case of each
Distribution Date through and including the Distribution Date on which the
aggregate Stated Principal Balance of the Mortgage Loans is reduced to less than
10% of the aggregate Stated Principal Balance of the Mortgage Loans as of the
Cut-off Date, or One-Month LIBOR plus 0.71%, in the case of any Distribution
Date thereafter.
"Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be salaried counsel for the Depositor or the Master Servicer
acceptable to the Trustee and the Certificate Insurer, except that any opinion
of counsel relating to (a) the qualification of either REMIC I or REMIC II as a
REMIC or (b) compliance with the REMIC Provisions must be an opinion of
Independent counsel.
"Original Mortgage Loan": Any of the Mortgage Loans included
in REMIC I as of the Closing Date.
<PAGE>
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"Ownership Interest": As to any Certificate, any ownership or
security interest in such Certificate, including any interest in such
Certificate as the Holder thereof and any other interest therein, whether direct
or indirect, legal or beneficial, as owner or as pledgee.
"Pass-Through Rate": With respect to the Residual Certificates
and the first Distribution Date and with respect to the Class A Certificates and
any Distribution Date, a rate per annum equal to the lesser of (i) the One-Month
LIBOR Pass-Through Rate for such Distribution Date and (ii) the Available Funds
Pass-Through Rate for such Distribution Date. With respect to the Class CE
Certificates and any Distribution Date, a rate per annum equal to the REMIC I
Remittance Rate for the REMIC I Regular Interest LT1 minus two times the
weighted average of the REMIC I Remittance Rates for the REMIC I Regular
Interest LT2 and the REMIC I Regular Interest LT3, with the rate on the REMIC I
Regular Interest LT3 equal to zero for purposes of this calculation.
"Percentage Interest": With respect to the Class A
Certificates and the Class CE Certificates, the undivided percentage ownership
in such Class evidenced by such Certificate, expressed as a percentage, the
numerator of which is the initial Certificate Principal Balance represented by
such Certificate and the denominator of which is the aggregate initial
Certificate Principal Balance of all of the Certificates of such Class. The
Class A Certificates are issuable only in minimum Percentage Interests
corresponding to minimum initial Certificate Principal Balances of $10,000 and
integral multiples of $1.00 in excess thereof. The Class CE Certificates are
issuable only in minimum Percentage Interests corresponding to minimum initial
Certificate Principal Balances of $10,000 and integral multiples of $1.00 in
excess thereof; provided, however, that a single Certificate of such Class of
Certificates may be issued having a Percentage Interest corresponding to the
remainder of the aggregate initial Certificate Principal Balance of such Class
or to an otherwise authorized denomination for such Class plus such remainder.
With respect to any Residual Certificate, the undivided percentage ownership in
such Class evidenced by such Certificate, is as set forth on the face of such
Residual Certificate. The Class R-I Certificates and the Class R-II Certificates
are issuable only in Percentage Interests corresponding to initial Certificate
Principal Balances of $20 and integral multiples thereof.
"Periodic Rate Cap": With respect to each Mortgage Loan and
any Adjustment Date therefor, the fixed percentage set forth in the related
Mortgage Note, which is the maximum amount by which the Mortgage Rate for such
Mortgage Loan may increase or decrease (without regard to the Maximum Mortgage
Rate or the Minimum Mortgage Rate) on such Adjustment Date from the Mortgage
Rate in effect immediately prior to such Adjustment Date.
"Permitted Investments": Any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
regardless of whether issued by the Depositor, the Master Servicer, the Trustee
or any of their respective Affiliates:
(i) direct obligations of, or obligations fully
guaranteed as to timely payment of principal and interest by, the
United States or any agency or instrumentality thereof, provided such
obligations are backed by the full faith and credit of the United
<PAGE>
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States, provided, however, that any obligation of, or guaranteed by,
FHLMC or FNMA, other than a senior debt or a mortgage participation or
pass-through certificate guaranteed by FHLMC or FNMA shall be a
Permitted Investment only if, at the time of investment, such
investment is acceptable to the Certificate Insurer.
(ii) demand and time deposits in, certificates of
deposit of, or bankers' acceptances issued by, any Depository
Institution;
(iii) repurchase obligations with respect to any
security described in clause (i) above entered into with a Depository
Institution (acting as principal);
(iv) securities bearing interest or sold at a
discount that are issued by any corporation incorporated under the laws
of the United States of America or any state thereof and that are rated
by each Rating Agency in its highest long-term unsecured rating
categories at the time of such investment or contractual commitment
providing for such investment;
(v) commercial paper (including both
non-interest-bearing discount obligations and interest-bearing
obligations payable on demand or on a specified date not more than 30
days after the date of acquisition thereof) that is rated by each
Rating Agency in its highest short-term unsecured debt rating available
at the time of such investment;
(vi) units of money market funds that have been
rated "P-1" by Moody's and "AAAm" by S&P; and
(viii) if previously confirmed in writing to the
Trustee, any other demand, money market or time deposit, or any other
obligation, security or investment, as may be acceptable to the Rating
Agencies and the Certificate Insurer as a permitted investment of funds
backing securities having ratings equivalent to its highest initial
rating of the Class A Certificates;
provided that no instrument described hereunder 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 and 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.
"Permitted Transferee": Any Transferee of a Residual
Certificate other than a Disqualified Organization or Non-United States Person.
"Person": Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
<PAGE>
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"P&I Advance": As to any Mortgage Loan or REO Property, any
advance made by the Master Servicer in respect of any Distribution Date pursuant
to Section 4.03.
"Plan": Any employee benefit plan or certain other retirement
plans and arrangements, including individual retirement accounts and annuities,
Keogh plans and bank collective investment funds and insurance company general
or separate accounts in which such plans, accounts or arrangements are invested,
that are subject to ERISA and Section 4975 of the Code.
"Policy": The Financial Guaranty Insurance Policy (No.
50563-N) issued by the Certificate Insurer relating to the Class A Certificates
and the Residual Certificates, including any endorsements thereto, attached
hereto as Exhibit B.
"Policy Payments Account": The account established pursuant to
Section 9.04 hereof.
"Prepayment Assumption": A prepayment rate for the Mortgage
Loans of 20% CPR. The Prepayment Assumption is used solely for determining the
accrual of original issue discount on the Certificates for federal income tax
purposes. A CPR (or Constant Prepayment Rate) represents an annualized constant
assumed rate of prepayment each month of a pool of mortgage loans relative to
its outstanding principal balance for the life of such pool.
"Prepayment Interest Shortfall": With respect to any
Distribution Date, for each Mortgage Loan that was during the related Prepayment
Period the subject of a Principal Prepayment in full or in part that was applied
by the Master Servicer to reduce the outstanding principal balance of such loan
on a date preceding the Due Date in the succeeding Prepayment Period, an amount
equal to interest at the applicable Net Mortgage Rate on the amount of such
Principal Prepayment for the number of days commencing on the date on which the
prepayment is applied and ending on the last day of the related Prepayment
Period. The obligations of the Master Servicer in respect of any Prepayment
Interest Shortfall are set forth in Section 3.24.
"Prepayment Period": With respect to any Distribution Date,
the calendar month preceding the calendar month in which such Distribution Date
occurs.
"Prepayment Premium": With respect to any Prepayment Period,
any prepayment premium, penalty or charge collected by the Master Servicer from
a Mortgagor in connection with any Principal Prepayment pursuant to the terms of
the related Mortgage Note.
"Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date and which is not accompanied by an amount of interest representing the full
amount of scheduled interest due on any Due Date in any month or months
subsequent to the month of prepayment.
"Purchase Price": With respect to any Mortgage Loan or REO
Property to be purchased pursuant to or as contemplated by Section 2.03, 3.16(c)
or 10.01, and as confirmed
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by an Officers' Certificate from the Master Servicer to the Trustee, an amount
equal to the sum of (i) 100% of the Stated Principal Balance thereof as of the
date of purchase (or such other price as provided in Section 10.01), (ii) in the
case of (x) a Mortgage Loan, accrued interest on such Stated Principal Balance
at the applicable Net Mortgage Rate in effect from time to time from the Due
Date as to which interest was last covered by a payment by the Mortgagor or an
advance by the Master Servicer, which payment or advance had as of the date of
purchase been distributed pursuant to Section 4.01, through the end of the
calendar month in which the purchase is to be effected, and (y) an REO Property,
the sum of (1) accrued interest on such Stated Principal Balance at the
applicable Net Mortgage Rate in effect from time to time from the Due Date as to
which interest was last covered by a payment by the Mortgagor or an advance by
the Master Servicer through the end of the calendar month immediately preceding
the calendar month in which such REO Property was acquired, plus (2) REO Imputed
Interest for such REO Property for each calendar month commencing with the
calendar month in which such REO Property was acquired and ending with the
calendar month in which such purchase is to be effected, net of the total of all
net rental income, Insurance Proceeds, Liquidation Proceeds and P&I Advances
that as of the date of purchase had been distributed as or to cover REO Imputed
Interest pursuant to Section 4.01, (iii) any unreimbursed Servicing Advances and
P&I Advances (including Nonrecoverable P&I Advances and Nonrecoverable Servicing
Advances) and any unpaid Servicing Fees allocable to such Mortgage Loan or REO
Property, (iv) any amounts previously withdrawn from the Collection Account in
respect of such Mortgage Loan or REO Property pursuant to Sections 3.11(ix) and
3.16(b), and (v) in the case of a Mortgage Loan required to be purchased
pursuant to Section 2.03, expenses reasonably incurred or to be incurred by the
Master Servicer or the Trustee in respect of the breach or defect giving rise to
the purchase obligation.
"Qualified Substitute Mortgage Loan": A mortgage loan
substituted for a Deleted Mortgage Loan pursuant to the terms of this Agreement
which must, on the date of such substitution, (i) have an outstanding principal
balance, after application of all scheduled payments of principal and interest
due during or prior to the month of substitution, not in excess of the Scheduled
Principal Balance of the Deleted Mortgage Loan as of the Due Date in the
calendar month during which the substitution occurs, (ii) have a Mortgage Rate
not less than (and not more than one percentage point in excess of) the Mortgage
Rate of the Deleted Mortgage Loan, (iii) have a Maximum Mortgage Rate not less
than the Maximum Mortgage Rate on the Deleted Mortgage Loan, (iv) have a Minimum
Mortgage Rate not less than the Minimum Mortgage Rate of the Deleted Mortgage
Loan, (v) have a Gross Margin equal to the Gross Margin of the Deleted Mortgage
Loan, (vi) have a next Adjustment Date not more than two months later than the
next Adjustment Date on the Deleted Mortgage Loan, (vii) have a remaining term
to maturity not greater than (and not more than one year less than) that of the
Deleted Mortgage Loan, (viii) have the same Due Date as the Due Date on the
Deleted Mortgage Loan, (ix) have a Loan-to-Value Ratio as of the date of
substitution equal to or lower than the Loan-to-Value Ratio of the Deleted
Mortgage Loan as of such date, (x) have a risk grading determined by the Seller
at least equal to the risk grading assigned on the Deleted Mortgage Loan and
(xi) conform to each representation and warranty set forth in Section 6 of the
Mortgage Loan Purchase Agreement applicable to the Deleted Mortgage Loan. In the
event that one or more mortgage loans are substituted for one or more Deleted
Mortgage Loans, the amounts described in clause
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(i) hereof shall be determined on the basis of aggregate principal balances, the
Mortgage Rates described in clause (ii) hereof shall be determined on the basis
of weighted average Mortgage Rates, the risk gradings described in clause (x)
hereof shall be satisfied as to each such mortgage loan, the terms described in
clause (vii) hereof shall be determined on the basis of weighted average
remaining term to maturity, the Loan-to-Value Ratios described in clause (ix)
hereof shall be satisfied as to each such mortgage loan and, except to the
extent otherwise provided in this sentence, the representations and warranties
described in clause (xi) hereof must be satisfied as to each Qualified
Substitute Mortgage Loan or in the aggregate, as the case may be.
"Rate/Term Refinancing": A Refinanced Mortgage Loan, the
proceeds of which are not more than a nominal amount in excess of the existing
first mortgage loan and any subordinate mortgage loan on the related Mortgaged
Property and related closing costs, and were used exclusively (except for such
nominal amount) to satisfy the then existing first mortgage loan and any
subordinate mortgage loan of the Mortgagor on the related Mortgaged Property and
to pay related closing costs.
"Rating Agency or Rating Agencies": Moody's and S&P or their
successors. If such agencies or their successors are no longer in existence,
"Rating Agencies" shall be such nationally recognized statistical rating
agencies, or other comparable Persons, designated by the Depositor and the
Certificate Insurer, notice of which designation shall be given to the Trustee
and Master Servicer.
"Realized Loss": With respect to each Mortgage Loan as to
which a Final Recovery Determination has been made an amount (not less than
zero) equal to (i) the unpaid principal balance of such Mortgage Loan as of the
commencement of the calendar month in which the Final Recovery Determination was
made, plus (ii) accrued interest from the Due Date as to which interest was last
paid by the Mortgagor through the end of the calendar month in which such Final
Recovery Determination was made, calculated in the case of each calendar month
during such period (A) at an annual rate equal to the annual rate at which
interest was then accruing on such Mortgage Loan and (B) on a principal amount
equal to the Stated Principal Balance of such Mortgage Loan as of the close of
business on the Distribution Date during such calendar month, plus (iii) any
amounts previously withdrawn from the Collection Account in respect of such
Mortgage Loan pursuant to Sections 3.11(ix) and 3.16(b), minus (iv) the
proceeds, if any, received in respect of such Mortgage Loan during the calendar
month in which such Final Recovery Determination was made, net of amounts that
are payable therefrom to the Master Servicer with respect to such Mortgage Loan
pursuant Section 3.11(iii).
With respect to any REO Property as to which a Final Recovery
Determination has been made an amount (not less than zero) equal to (i) the
unpaid principal balance of the related Mortgage Loan as of the date of
acquisition of such REO Property on behalf of REMIC I, plus (ii) accrued
interest from the Due Date as to which interest was last paid by the Mortgagor
in respect of the related Mortgage Loan through the end of the calendar month
immediately preceding the calendar month in which such REO Property was
acquired, calculated in the case of each calendar month during such period (A)
at an annual rate equal to the annual rate at which interest was then accruing
on the related Mortgage Loan and (B) on a principal
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amount equal to the Stated Principal Balance of the related Mortgage Loan as of
the close of business on the Distribution Date during such calendar month, plus
(iii) REO Imputed Interest for such REO Property for each calendar month
commencing with the calendar month in which such REO Property was acquired and
ending with the calendar month in which such Final Recovery Determination was
made, plus (iv) any amounts previously withdrawn from the Collection Account in
respect of the related Mortgage Loan pursuant to Sections 3.11(ix) and 3.16(b),
minus (v) the aggregate of all P&I Advances and Servicing Advances (in the case
of Servicing Advances, without duplication of amounts netted out of the rental
income, Insurance Proceeds and Liquidation Proceeds described in clause (vi)
below) made by the Master Servicer in respect of such REO Property or the
related Mortgage Loan for which the Master Servicer has been or, in connection
with such Final Recovery Determination, will be reimbursed pursuant to Section
3.23 out of rental income, Insurance Proceeds and Liquidation Proceeds received
in respect of such REO Property, minus (vi) the total of all net rental income,
Insurance Proceeds and Liquidation Proceeds received in respect of such REO
Property that has been, or in connection with such Final Recovery Determination,
will be transferred to the Distribution Account pursuant to Section 3.23.
With respect to each Mortgage Loan which has become the
subject of a Deficient Valuation, the difference between the principal balance
of the Mortgage Loan outstanding immediately prior to such Deficient Valuation
and the principal balance of the Mortgage Loan as reduced by the Deficient
Valuation.
With respect to each Mortgage Loan which has become the
subject of a Debt Service Reduction, the portion, if any, of the reduction in
each affected Monthly Payment attributable to a reduction in the Mortgage Rate
imposed by a court of competent jurisdiction. Each such Realized Loss shall be
deemed to have been incurred on the Due Date for each affected Monthly Payment.
"Record Date": With respect to each Distribution Date, the
last Business Day of the month immediately preceding the month in which such
Distribution Date occurs.
"Reference Banks": Bankers Trust Company, Barclay's Bank PLC,
The Tokyo Mitsubishi Bank and National Westminster Bank PLC and their successors
in interest; provided that if any of the foregoing banks are not suitable to
serve as a Reference Bank, then any leading banks selected by the Trustee which
are engaged in transactions in Eurodollar deposits in the international
Eurocurrency market (i) with an established place of business in London, (ii)
not controlling, under the control of or under common control with the Depositor
or any Affiliate thereof, (iii) whose quotations appear on the Reuters Screen
LIBO Page on the relevant Interest Determination Date and (iv) which have been
designated as such by the Trustee.
"Refinanced Mortgage Loan": A Mortgage Loan the proceeds of
which were not used to purchase the related Mortgaged Property.
"Regular Certificate": Any Class A Certificate or Class CE
Certificate.
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"Regular Interest": A "regular interest" in a REMIC within the
meaning of Section 860G(a)(1) of the Code.
"Relief Act": The Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
"Relief Act Interest Shortfall": With respect to any
Distribution Date and any Mortgage Loan, any reduction in the amount of interest
collectible on such Mortgage Loan for the most recently ended calendar month as
a result of the application of the Relief Act.
"REMIC": A "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code.
"REMIC Provisions": Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Section
860A through 860G of the Code, and related provisions, and proposed, temporary
and final regulations and published rulings, notices and announcements
promulgated thereunder, as the foregoing may be in effect from time to time.
"REMIC I": The segregated pool of assets subject hereto,
constituting the primary trust created hereby and to be administered hereunder,
with respect to which a REMIC election is to be made, consisting of: (i) such
Mortgage Loans as from time to time are subject to this Agreement, together with
the Mortgage Files relating thereto, and together with all collections thereon
and proceeds thereof; (ii) any REO Property, together with all collections
thereon and proceeds thereof; (iii) the Trustee's rights with respect to the
Mortgage Loans under all insurance policies required to be maintained pursuant
to this Agreement and any proceeds thereof; (iv) the Depositor's rights under
the Mortgage Loan Purchase Agreement (including any security interest created
thereby); (v) the Initial Deposit; and (vi) the Collection Account, the
Distribution Account, the Expense Account and any REO Account, and such assets
that are deposited therein from time to time and any investments thereof,
together with any and all income, proceeds and payments with respect thereto.
Notwithstanding the foregoing, however, REMIC I specifically excludes the Policy
and all payments and other collections of principal and interest due on the
Mortgage Loans on or before the Cut-off Date.
"REMIC I Basis Risk Shortfall": With respect to any
Distribution Date, (i) any REMIC I Basis Risk Shortfalls outstanding after the
previous Distribution Date, plus (ii) the excess, if any, of (a) interest on the
REMIC I Regular Interest LT2 Adjusted Uncertificated Balance at the REMIC I
Regular Interest LT2 Accrual Rate over (b) interest on the Uncertificated
Balance of the REMIC I Regular Interest LT2 at the REMIC I Remittance Rate
applicable thereto, minus (iii) the excess, if any, of (a) interest on the
Uncertificated Balance of the REMIC I Regular Interest LT2 at the REMIC I
Remittance Rate applicable thereto over (b) interest on the REMIC I Regular
Interest LT2 Adjusted Uncertificated Balance at the REMIC I Regular Interest LT2
Accrual Rate.
"REMIC I Interest Loss Allocation Amount": With respect to any
Distribution Date, an amount equal to (a) the product of (i) the aggregate
Stated Principal Balance of the
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Mortgage Loans and REO Properties then outstanding and (ii) the REMIC I
Remittance Rate for the REMIC I Regular Interest LT1 minus two times the
weighted average of the REMIC I Remittance Rates for the REMIC I Regular
Interest LT2 and the REMIC I Regular Interest LT3, with the rate on REMIC I
Regular Interest LT3 equal to zero for purposes of this calculation, (b) divided
by 12.
"REMIC I Principal Loss Allocation Amount": With respect to
any Distribution Date, an amount equal to the product of (i) the aggregate
Stated Principal Balance of the Mortgage Loans and REO Properties then
outstanding and (ii) 1 minus a fraction, the numerator of which is two times the
Uncertificated Balance of the REMIC I Regular Interest LT2 and the denominator
of which is the sum of the Uncertificated Balances of the REMIC I Regular
Interest LT2 and the REMIC I Regular Interest LT3.
"REMIC I Regular Interest": Any of the three separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a "regular interest" in REMIC I. Each REMIC I Regular Interest
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto. The
designations for the respective REMIC I Regular Interests are set forth in the
Preliminary Statement hereto.
"REMIC I Regular Interest LT1": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. The REMIC I Regular Interest LT1
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC I Regular Interest LT2": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. The REMIC I Regular Interest LT2
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC I Regular Interest LT2 Accrual Rate": The lesser of (i)
the One-Month LIBOR Pass-Through Rate (determined on the basis of a 360 day year
and the actual number of days elapsed in the related Interest Accrual Period)
and (ii) a per annum rate equal to the fraction, expressed as a percentage, the
numerator of which is (A) 1/12 of 0.50 times the Uncertificated Balances of the
REMIC I Regular Interest LT2 and the REMIC I Regular Interest LT3 times the
weighted average of the Expense Adjusted Maximum Mortgage Rates on the then
outstanding Mortgage Loans and REO Properties, and the denominator of which is
(B) an amount equal to the then outstanding Uncertificated Balance of the REMIC
I Regular Interest LT2 multiplied by the actual number of days elapsed in the
related Interest Accrual Period divided by 360.
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"REMIC I Regular Interest LT2 Adjusted Uncertificated
Balance": As of any date of determination, the Uncertificated Balance of the
REMIC I Regular Interest LT2 plus the amount of any outstanding REMIC I Basis
Risk Shortfalls, in each case, as of such date of determination.
"REMIC I Regular Interest LT2 Available Funds Pass-Through
Rate": With respect to the REMIC I Regular Interest LT2 and each Distribution
Date, a per annum rate equal to the fraction, expressed as a percentage, the
numerator of which is (i) an amount equal to the product of (A) 1/12 and (B)
one-half of the sum of the Uncertificated Balances of the REMIC I Regular
Interest LT2 and the REMIC I Regular Interest LT3 times the weighted average of
the Expense Adjusted Mortgage Rates on the then outstanding Mortgage Loans and
REO Properties minus an amount equal to the Certificate Insurer Premium Rate
times the Uncertificated Balance of the REMIC I Regular Interest LT2, and the
denominator of which is (ii) an amount equal to (A) the then outstanding
Uncertificated Balance of the REMIC I Regular Interest LT2 multiplied by (B) the
actual number of days elapsed in the related Interest Accrual Period divided by
360.
"REMIC I Regular Interest LT3": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. The REMIC I Regular Interest LT3
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC I Regular Interest LT3 Adjusted Uncertificated
Balance": As of any date of determination, the Uncertificated Balance of the
REMIC I Regular Interest LT3 minus the amount of any outstanding REMIC I Basis
Risk Shortfalls, in each case, as of such date of determination, but in no event
less than zero.
"REMIC I Remittance Rate": With respect to the REMIC I Regular
Interest LT1 and the REMIC I Regular Interest LT3, the weighted average of the
Expense Adjusted Mortgage Rates on the then outstanding Mortgage Loans and REO
Properties plus the Minimum Spread minus, with respect to the REMIC I Regular
Interest LT1, the product of (A) two times the Uncertificated Balance of the
REMIC I Regular Interest LT2 divided by the sum of the Uncertificated Balances
of the REMIC I Regular Interest LT2 and the REMIC I Regular Interest LT3 and (B)
the Certificate Insurer Premium Rate. With respect to the REMIC I Regular
Interest LT2, (A) the lesser of (i) the One-Month LIBOR Pass-Through Rate
(determined on an actual/360 basis) and (ii) the REMIC I Regular Interest LT2
Available Funds Pass-Through Rate plus (B) a fraction, the numerator of which is
0.5 times the quantity of one minus the REMIC II Percentage times the amount
allocated to the Class A Certificates pursuant to Section 4.01(a)(2)(vii) and
(viii) divided by the REMIC II Percentage and the denominator of which is the
Uncertificated Balance of the REMIC I Regular Interest LT2 multiplied by the
actual number of days elapsed in the related Interest Accrual Period divided by
360. To the extent that amounts payable as Uncertificated Interest in respect of
the REMIC I Regular Interest LT2 exceed the amounts available therefor on any
Distribution Date, the shortfall in amounts
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available to pay interest on such Distribution Date in respect of the REMIC I
Regular Interest LT2 shall be payable from the Servicing Fees for such
Distribution Date.
"REMIC I Required Subordinated Amount": With respect to any
Distribution Date, an amount equal to the product of (a) the product of (i) 0.50
and (ii) the sum of the Uncertificated Balances of the REMIC I Regular Interest
LT2 and the REMIC I Regular Interest LT3 divided by the aggregate Stated
Principal Balance of the Mortgage Loans and REO Properties then outstanding and
(b) the Required Subordinated Amount.
"REMIC I Subordinated Amount": As of any date of
determination, (i) 0.50 times the sum of the Uncertificated Balances of the
REMIC I Regular Interest LT2 and the REMIC I Regular Interest LT3 minus (ii) the
Uncertificated Balance of the REMIC Regular Interest LT2, in each case as of
such date of determination.
"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 REMIC II Certificateholders and the Certificate Insurer pursuant to
Section 2.07 and the REMIC II Reserve Fund, and all amounts deposited therein,
with respect to which a separate REMIC election is to be made.
"REMIC II Certificate": Any Regular Certificate or Class R-II
Certificate.
"REMIC II Percentage": A fraction, expressed as a percentage,
the numerator of which is the sum of the initial Uncertificated Balance of the
REMIC I Regular Interest LT1 set forth in the Preliminary Statement hereto and
the initial Certificate Principal Balance of the Class R-I Certificates, and the
denominator of which is the aggregate of the Scheduled Principal Balance of each
of the Mortgage Loans as of the Closing Date.
"REMIC II Reserve Fund": The account established and
maintained pursuant to Section 4.06.
"Remittance Report": A report in form and substance acceptable
to the Trustee on a magnetic disk or tape prepared by the Master Servicer
pursuant to Section 4.03 with such additions, deletions and modifications as
agreed to by the Trustee and the Master Servicer.
"Rents from Real Property": With respect to any REO Property,
gross income of the character described in Section 856(d) of the Code as being
included in the term "rents from real property."
"REO Account": The account or accounts maintained, or caused
to be maintained, by the Master Servicer in respect of an REO Property pursuant
to Section 3.23.
"REO Disposition": The sale or other disposition of an REO
Property on behalf of REMIC I.
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"REO Imputed Interest": As to any REO Property, for any
calendar month during which such REO Property was at any time part of REMIC I,
one month's interest at the applicable Net Mortgage Rate on the Stated Principal
Balance of such REO Property (or, in the case of the first such calendar month,
of the related Mortgage Loan if appropriate) as of the close of business on the
Distribution Date in such calendar month.
"REO Principal Amortization": With respect to any REO
Property, for any calendar month, the excess, if any, of (a) the aggregate of
all amounts received in respect of such REO Property during such calendar month,
whether in the form of rental income, sale proceeds (including, without
limitation, that portion of the Termination Price paid in connection with a
purchase of all of the Mortgage Loans and REO Properties pursuant to Section
10.01 that is allocable to such REO Property) or otherwise, net of any portion
of such amounts (i) payable pursuant to Section 3.23(c) in respect of the proper
operation, management and maintenance of such REO Property or (ii) payable or
reimbursable to the Master Servicer pursuant to Section 3.23(d) for unpaid
Servicing Fees in respect of the related Mortgage Loan and unreimbursed
Servicing Advances and P&I Advances in respect of such REO Property or the
related Mortgage Loan, over (b) the REO Imputed Interest in respect of such REO
Property for such calendar month.
"REO Property": A Mortgaged Property acquired by the Master
Servicer on behalf of the Trust Fund through foreclosure or deed-in-lieu of
foreclosure, as described in Section 3.23.
"Request for Release": A release signed by a Servicing
Officer, in the form of Exhibit E-1 or Exhibit E-2 attached hereto.
"Required Subordinated Amount": With respect to any
Distribution Date, an amount equal to $2,973,335.80 subject to the following:
(i) if the Step Up Trigger has occurred, the Required Subordinated Amount for
such Distribution Date will be an amount equal to the REMIC II Percentage of the
entire aggregate Stated Principal Balance of the Mortgage Loans as of such
Distribution Date; (ii) if the Step Up Trigger has not occurred but the Step Up
Spread Squeeze Test is met, the Required Subordinated Amount for such
Distribution Date will be an amount equal to the sum of (A) the Required
Subordinated Amount for such Distribution Date determined as though the Step Up
Spread Squeeze Test were not met plus (B) the Spread Squeeze Subordination
Increase Amount; or (iii) if neither the Step Up Trigger has occurred nor the
Step Up Spread Squeeze Test is met but the Step Down Trigger has occurred, the
Required Subordinated Amount for such Distribution Date will be an amount equal
to the greater of (A) 0.50% of the REMIC II Percentage of the aggregate Stated
Principal Balance of the Mortgage Loans as of the Cut-off Date and (B) the
lesser of (x) $2,973,335.80 and (y) the Stepped Down Required Subordinated
Percentage of the REMIC II Percentage of the aggregate Stated Principal Balance
of the Mortgage Loans as of such Distribution Date.
"Reserve Interest Rate": With respect to any Interest
Determination Date, the rate per annum that the Trustee determines to be either
(i) the arithmetic mean (rounded upwards if necessary to the nearest whole
multiple of 1/16%) of the one-month U.S. dollar lending rates
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which New York City banks selected by the Trustee are quoting on the relevant
Interest Determination Date to the principal London offices of leading banks in
the London interbank market or (ii) in the event that the Trustee can determine
no such arithmetic mean, the lowest one-month U.S. dollar lending rate which New
York City banks selected by the Trustee are quoting on such Interest
Determination Date to leading European banks.
"Residential Dwelling": Any one of the following: (i) a
detached one-family dwelling, (ii) a detached two- to four-family dwelling,
(iii) a one-family dwelling unit in a FNMA eligible condominium project, or (iv)
a detached one-family dwelling in a planned unit development, none of which is a
co-operative, mobile or manufactured home (as defined in 42 United States Code,
Section 5402(6)).
"Residual Certificate": Any one of the Class R-I Certificates
or the Class R-II Certificates.
"Residual Interest": The sole class of "residual interests" in
a REMIC within the meaning of Section 860G(a)(2) of the Code.
"Responsible Officer": When used with respect to the Trustee,
the Chairman or Vice Chairman of the Board of Directors or Trustees, the
Chairman or Vice Chairman of the Executive or Standing Committee of the Board of
Directors or Trustees, the President, the Chairman of the Committee on Trust
Matters, any vice president, any assistant vice president, the Secretary, any
assistant secretary, the Treasurer, any assistant treasurer, the Cashier, any
assistant cashier, any trust officer or assistant trust officer, the Controller
and any assistant controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and, with respect to a particular matter, to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
"Rolling Delinquency Percentage": For any Distribution Date,
the average of the Delinquency Percentages as of the last day of each of the
three (or one or two, in the case of the first and second Distribution Dates)
most recently ended Due Periods.
"Scheduled Principal Balance": With respect to any Mortgage
Loan: (a) as of the Cut-off Date, the outstanding principal balance of such
Mortgage Loan as of such date, net of the principal portion of all unpaid
Monthly Payments, if any, due on or before such date; (b) as of any Due Date
subsequent to the Cut-off Date up to and including the Due Date in the calendar
month in which a Liquidation Event occurs with respect to such Mortgage Loan,
the Scheduled Principal Balance of such Mortgage Loan as of the Cut-off Date,
minus the sum of (i) the principal portion of each Monthly Payment due on or
before such Due Date but subsequent to the Cut-off Date, whether or not
received, (ii) all Principal Prepayments received before such Due Date but after
the Cut-off Date, (iii) the principal portion of all Liquidation Proceeds and
Insurance Proceeds received before such Due Date but after the Cut-off Date, net
of any portion thereof that represents principal due (without regard to any
acceleration of payments under the related Mortgage and Mortgage Note) on a Due
Date occurring on or before
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the date on which such proceeds were received and (iv) any Realized Loss
incurred with respect thereto as a result of a Deficient Valuation occurring
before such Due Date, but only to the extent such Realized Loss represents a
reduction in the portion of principal of such Mortgage Loan not yet due (without
regard to any acceleration of payments under the related Mortgage and Mortgage
Note) as of the date of such Deficient Valuation; and (c) as of any Due Date
subsequent to the occurrence of a Liquidation Event with respect to such
Mortgage Loan, zero. With respect to any REO Property: (a) as of any Due Date
subsequent to the date of its acquisition on behalf of the Trust Fund up to and
including the Due Date in the calendar month in which a Liquidation Event occurs
with respect to such REO Property, an amount (not less than zero) equal to the
Scheduled Principal Balance of the related Mortgage Loan as of the Due Date in
the calendar month in which such REO Property was acquired, minus the aggregate
amount of REO Principal Amortization, if any, in respect of such REO Property
for all previously ended calendar months; and (b) as of any Due Date subsequent
to the occurrence of a Liquidation Event with respect to such REO Property,
zero.
"Seller": New Century Mortgage Corporation, in its capacity as
seller under the Mortgage Loan Purchase Agreement.
"Servicing Account": The account or accounts created and
maintained pursuant to Section 3.09.
"Servicing Advances": The reasonable "out-of-pocket" costs and
expenses incurred by the Master Servicer in connection with a default,
delinquency or other unanticipated event by the Master Servicer in the
performance of its servicing obligations, including, but not limited to, the
cost of (i) the preservation, restoration and protection of a Mortgaged
Property, (ii) any enforcement or judicial proceedings, including foreclosures,
in respect of a particular Mortgage Loan, (iii) the management (including
reasonable fees in connection therewith) and liquidation of any REO Property,
and (iv) the performance of its obligations under Sections 3.01, 3.09, 3.14,
3.16 and 3.23. The Master Servicer shall not be required to make any Servicing
Advance in respect of a Mortgage Loan or REO Property that, in the good faith
business judgment of the Master Servicer, would not be ultimately recoverable
from related Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan or
REO Property as provided herein.
"Servicing Fee": With respect to each Mortgage Loan and for
any calendar month, an amount equal to one month's interest (or in the event of
any payment of interest which accompanies a Principal Prepayment in full or in
part made by the Mortgagor during such calendar month, interest for the number
of days covered by such payment of interest) at the applicable Servicing Fee
Rate on the same principal amount on which interest on such Mortgage Loan
accrues for such calendar month. A portion of such Servicing Fee may be retained
by any Sub-Servicer as its servicing compensation. The Servicing Fee payable in
respect of any Distribution Date shall be reduced by the amount of any payment
to (i) the REMIC I Regular Interest LT2 from the Servicing Fee pursuant to the
definition of "REMIC I Remittance Rate" and (ii) the REMIC I Regular Interest
LT3 in respect of REMIC I Basis Risk Shortfalls pursuant to Section
4.01(a)(1)(iii).
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"Servicing Fee Rate": 0.50% per annum.
"Servicing Officer": Any officer of the Master Servicer
involved in, or responsible for, the administration and servicing of Mortgage
Loans, whose name and specimen signature appear on a list of servicing officers
furnished by the Master Servicer to the Trustee, the Certificate Insurer and the
Depositor on the Closing Date, as such list may from time to time be amended.
"Single Certificate": With respect to any Class of
Certificates (other than the Residual Certificates), a hypothetical Certificate
of such Class evidencing a Percentage Interest for such Class corresponding to
an initial Certificate Principal Balance of $1,000. With respect to the Residual
Certificates, a hypothetical Certificate of such Class evidencing a 100%
Percentage Interest in such Class.
"Special Hazard Amount": As of any Distribution Date, an
amount equal to $1,540,000, minus the sum of (i) the aggregate amount of Special
Hazard Losses on the Mortgage Loans allocated solely to the Class CE
Certificates in accordance with Section 4.04 and (ii) the Adjustment Amount (as
defined below) as most recently calculated. For each anniversary of the Cut-off
Date, the Adjustment Amount shall be equal to the amount, if any, by which the
amount calculated in accordance with the preceding sentence (without giving
effect to the deduction of the Adjustment Amount for such anniversary) exceeds
the greatest of (i) twice the outstanding principal balance of the Mortgage Loan
which has the largest outstanding principal balance on the Distribution Date
immediately preceding such anniversary, (ii) the product of 1.00% multiplied by
the outstanding principal balance of all Mortgage Loans on the Distribution Date
immediately preceding such anniversary and (iii) the aggregate outstanding
principal balance (as of the immediately preceding Distribution Date) of the
Mortgage Loans in any five-digit California zip code area with the largest
amount of Mortgage Loans by aggregate principal balance as of such anniversary.
"Special Hazard Loss": Any Realized Loss or portion thereof
not in excess of the lesser of the cost of repair or replacement of a Mortgaged
Property suffered by such Mortgaged Property by reason of damage caused by
certain hazards (including earthquakes, mudflows, and, to a limited extent,
floods) not insured against under the hazard insurance policies or fire or flood
insurance policies required to be maintained in respect of such Mortgaged
Property pursuant to Section 3.14, or by reason of the application of any
co-insurance provision. Special Hazard Losses shall not include any
Extraordinary Loss or any of the following:
(i) wear and tear, deterioration, rust or corrosion,
mold, wet or dry rot; inherent vice or latent defect;
animals, birds, vermin, insects;
(ii) smog, smoke, vapor, liquid or dust discharge from
agricultural or industrial operations; pollution;
contamination;
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(iii) settling, subsidence, cracking, shrinkage, bulging or
expansion of pavements, foundations, walls, floors,
roofs or ceilings; and
(iv) errors in design, faulty workmanship or faulty
materials, unless the collapse of the property or a
part thereof ensues and then only for the ensuing
loss.
"Spread Squeeze Condition": The Spread Squeeze Condition will
be met with respect to a Distribution Date if the Spread Squeeze Percentage for
such Distribution Date is less than 3.00%.
"Spread Squeeze Percentage": With respect to any Distribution
Date after the twelfth Distribution Date, the percentage equivalent of a
fraction, the numerator of which is the product of 12 and the Net Monthly Excess
Spread for such Distribution Date, and the denominator of which is the REMIC II
Percentage of the aggregate Stated Principal Balance of the Mortgage Loans as of
such Distribution Date.
"Spread Squeeze Subordination Increase Amount": For any
Distribution Date on which the Step Up Spread Squeeze Test is met, an amount
determined as follows:
if the Spread Squeeze Condition is met for such Distribution Date, the Spread
Squeeze Subordination Increase Amount for such Distribution Date shall be equal
to the product obtained by multiplying (i) three, (ii) the excess, if any, of
3.00% over the Spread Squeeze Percentage for such Distribution Date and (iii)
the REMIC II Percentage of the aggregate Stated Principal Balance of the
Mortgage Loans as of the Cut-off Date;
if the Spread Squeeze Condition is not met for such Distribution Date, the
Spread Squeeze Subordination Increase Amount for such Distribution Date shall be
equal to (A) the Spread Squeeze Subordination Increase Amount for the most
recent Distribution Date for which the Spread Squeeze Condition was met minus
(B) the product obtained by multiplying (i) one sixth of the amount determined
under clause (A) above and (ii) the number of consecutive Distribution Dates
through and including the current Distribution Date for which the Spread Squeeze
Percentage was greater than or equal to 3.00%.
"S&P": Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc., or its successor in interest.
"Startup Day": With respect to each of REMIC I and REMIC II,
the day designated as such pursuant to Section 11.01(b) hereof.
"Stated Principal Balance": With respect to any Mortgage Loan:
(a) as of any date of determination up to but not including the Distribution
Date on which the proceeds, if any, of a Liquidation Event with respect to such
Mortgage Loan would be distributed, the Scheduled Principal Balance of such
Mortgage Loan as of the Cut-off Date, as shown in the Mortgage Loan Schedule,
minus the sum of (i) the principal portion of each Monthly Payment
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due on a Due Date subsequent to the Cut-off Date, to the extent received from
the Mortgagor or advanced by the Master Servicer and distributed pursuant to
Section 4.01 on or before such date of determination, (ii) all Principal
Prepayments received after the Cut-off Date, to the extent distributed pursuant
to Section 4.01 on or before such date of determination, (iii) all Liquidation
Proceeds and Insurance Proceeds applied by the Master Servicer as recoveries of
principal in accordance with the provisions of Section 3.16, to the extent
distributed pursuant to Section 4.01 on or before such date of determination,
and (iv) any Realized Loss incurred with respect thereto as a result of a
Deficient Valuation made during or prior to the Prepayment Period for the most
recent Distribution Date coinciding with or preceding such date of
determination; and (b) as of any date of determination coinciding with or
subsequent to the Distribution Date on which the proceeds, if any, of a
Liquidation Event with respect to such Mortgage Loan would be distributed, zero.
With respect to any REO Property: (a) as of any date of determination up to but
not including the Distribution Date on which the proceeds, if any, of a
Liquidation Event with respect to such REO Property would be distributed, an
amount (not less than zero) equal to the Stated Principal Balance of the related
Mortgage Loan as of the date on which such REO Property was acquired on behalf
of REMIC I, minus the sum of (i) if such REO Property was acquired before the
Distribution Date in any calendar month, the principal portion of the Monthly
Payment due on the Due Date in the calendar month of acquisition, to the extent
advanced by the Master Servicer and distributed pursuant to Section 4.01 on or
before such date of determination, and (ii) the aggregate amount of REO
Principal Amortization in respect of such REO Property for all previously ended
calendar months, to the extent distributed pursuant to Section 4.01 on or before
such date of determination; and (b) as of any date of determination coinciding
with or subsequent to the Distribution Date on which the proceeds, if any, of a
Liquidation Event with respect to such REO Property would be distributed, zero.
"Stayed Funds": As defined in Section 7.02(b).
"Step Down Cumulative Loss Test": The Step Down Cumulative
Loss Test will be met with respect to a Distribution Date as follows: (i) for
the 30th through the 42nd Distribution Dates, if the Cumulative Loss Percentage
for such Distribution Date is 1.70% or less; (ii) for the 43rd through the 54th
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is 2.20% or less; (iii) for the 55th through the 66th Distribution Dates, if the
Cumulative Loss Percentage for such Distribution Date is 2.60% or less; (iv) for
any Distribution Date after the 67th Distribution Date, if the Cumulative Loss
Percentage for such Distribution Date is 2.95% or less.
"Step Down Rolling Delinquency Test": The Step Down Rolling
Delinquency Test will be met with respect to a Distribution Date if the Rolling
Delinquency Percentage for such Distribution Date is 9.0% or less.
"Step Down Rolling Loss Test": The Step Down Rolling Loss Test
will be met with respect to a Distribution Date as follows: (i) for the 1st
through the 12th Distribution Dates, if the weighted average of the Annualized
Monthly Loss Percentage for the six months preceding such Distribution Date is
less than 0.50%; (ii) for the 13th through the 24th Distribution Dates, if the
weighted average of the Annualized Monthly Loss Percentage for the six months
preceding
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such Distribution Date is less than 0.90%; (iii) for the 25th through the 36th
Distribution Dates, if the weighted average of the Annualized Monthly Loss
Percentage for the six months preceding such Distribution Date is less than
1.50%; (iv) for the 37th through the 48th Distribution Dates, if the weighted
average of the Annualized Monthly Loss Percentage for the six months preceding
such Distribution Date is less than 1.50%; and (v) for 49th Distribution Date
and any Distribution Date thereafter, if the weighted average of the Annualized
Monthly Loss Percentage for the six months preceding such Distribution Date is
less than 1.00%.
"Step Down Trigger": For any Distribution Date after the 30th
Distribution Date, the Step Down Trigger will have occurred if each of the Step
Down Cumulative Loss Test, the Step Down Rolling Delinquency Test and the Step
Down Rolling Loss Test is met. In no event will the Step Down Trigger be deemed
to have occurred for the 30th Distribution Date or any preceding Distribution
Date.
"Stepped Down Required Subordinated Percentage": For any
Distribution Date for which the Step Down Trigger has occurred, a percentage
equal to (i) the percentage equivalent of a fraction, the numerator of which is
$2,973,335.80 and the denominator of which is the REMIC II Percentage of the
aggregate Stated Principal Balance of the Mortgage Loans as of such Distribution
Date, minus (ii) the percentage equivalent of a fraction, the numerator of which
is the product of (A) the percentage calculated under clause (i) above minus
6.00%, multiplied by (B) the number of consecutive Distribution Dates through
and including the Distribution Date for which the Stepped Down Required
Subordinated Percentage is being calculated, up to a maximum of twelve, for
which the Step Down Trigger has occurred, and the denominator of which is
twelve.
"Step Up Cumulative Loss Test": The Step Up Cumulative Loss
Test will be met with respect to a Distribution Date as follows: (i) for the 1st
through the 12th Distribution Dates, if the Cumulative Loss Percentage for such
Distribution Date is more than 0.75%; (ii) for the 13th through the 24th
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is more than 1.25%; (iii) for the 25th through the 36th Distribution Dates, if
the Cumulative Loss Percentage for such Distribution Date is more than 2.00%;
(iv) for the 37th through the 48th Distribution Dates, if the Cumulative Loss
Percentage for such Distribution Date is more than 2.50%; and (v) for the 49th
Distribution Date and any Distribution Date thereafter, if the Cumulative Loss
Percentage for such Distribution Date is more than 3.10%.
"Step Up Rolling Delinquency Test": The Step Up Rolling
Delinquency Test will be met with respect to a Distribution Date if the Rolling
Delinquency Percentage for such Distribution Date is more than 11.0%.
"Step Up Rolling Loss Test": The Step Up Rolling Loss Test
will be met with respect to a Distribution Date as follows: (i) for the 1st
through the 12th Distribution Dates, if the weighted average of the Annualized
Monthly Loss Percentage for the six months preceding for such Distribution Date
is equal to or more than 1.00%; (ii) for the 13th through the 24th Distribution
Dates, if the weighted average of the Annualized Monthly Loss Percentage for the
six months preceding for such Distribution Date is equal to or more than 1.40%;
(iii) for the
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25th through the 36th Distribution Dates, if the weighted average of the
Annualized Monthly Loss Percentage for the six months preceding such
Distribution Date is equal to or more than 1.65%; (iv) for the 37th through the
48th Distribution Dates, if the weighted average of the Annualized Monthly Loss
Percentage for the six months preceding for such Distribution Date is equal to
or more than 1.65%; and (v) for 49th Distribution Date and any Distribution Date
thereafter, if the weighted average of the Annualized Monthly Loss Percentage
for the six months preceding for such Distribution Date is equal to or more than
1.40%.
"Step Up Spread Squeeze Test": The Step Up Spread Squeeze Test
will be met with respect to a Distribution Date if the Spread Squeeze Condition
is met for such Distribution Date or was met for any of the five preceding
Distribution Dates.
"Step Up Trigger": For any Distribution Date, the Step Up
Trigger will have occurred if any one of the Step Up Cumulative Loss Test, the
Step Up Rolling Delinquency Test or the Step Up Rolling Loss Test is met.
"Subordinated Amount": With respect to any Distribution Date,
the excess, if any, of (a) the REMIC II Percentage of the aggregate Stated
Principal Balances of the Mortgage Loans immediately following such Distribution
Date over (b) the aggregate Certificate Principal Balance of the Class A
Certificates as of such Distribution Date (after taking into account the payment
of the amounts described in clauses (b)(i)(A) through (C) and (b)(ii) of the
definition of Class A Principal Distribution Amount on such Distribution Date).
"Subordination Deficiency Amount": With respect to any
Distribution Date, the excess, if any, of (a) the Required Subordinated Amount
applicable to such Distribution Date over (b) the Subordinated Amount applicable
to such Distribution Date prior to taking into account the payment of any
Subordination Increase Amount on such Distribution Date.
"Subordination Increase Amount": With respect to any
Distribution Date, the lesser of (a) the Subordination Deficiency Amount as of
such Distribution Date (after taking into account the payment of the Class A
Principal Distribution Amount on such Distribution Date, exclusive of the
payment of any Subordination Increase Amount) and (b) the amount of Accrued
Certificate Interest payable on the Class CE Certificates on such Distribution
Date as reduced by any Cumulative Insurance Payments or Realized Losses
allocated thereto with respect to such Distribution Date pursuant to Section
4.04.
"Subordination Reduction Amount": With respect to any
Distribution Date, an amount equal to the lesser of (a) the Excess Subordinated
Amount and (b) the sum of the amounts available for distribution specified in
clauses (b)(i)(A) through (C) of the definition of Class A Principal
Distribution Amount.
"Sub-Servicer": Any Person with which the Master Servicer has
entered into a Sub-Servicing Agreement and which meets the qualifications of a
Sub-Servicer pursuant to Section 3.02.
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"Sub-Servicing Account": An account established by a
Sub-Servicer which meets the requirements set forth in Section 3.08 and is
otherwise acceptable to the Master Servicer.
"Sub-Servicing Agreement": The written contract between the
Master Servicer and a Sub-Servicer relating to servicing and administration of
certain Mortgage Loans as provided in Section 3.02.
"Substitution Shortfall Amount": As defined in Section
2.03(d).
"Tax Returns": The federal income tax return on Internal
Revenue Service Form 1066, U.S. Real Estate Mortgage Investment Conduit Income
Tax Return, including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms,
to be filed on behalf of the Trust Fund due to its classification as a REMIC
under the REMIC Provisions, together with any and all other information reports
or returns that may be required to be furnished to the Certificateholders or
filed with the Internal Revenue Service or any other governmental taxing
authority under any applicable provisions of federal, state or local tax laws.
"Termination Price": As defined in Section 10.01.
"Terminator": As defined in Section 10.01.
"Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation, or other form of assignment of any Ownership Interest in a
Certificate.
"Transferee": Any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.
"Transferor": Any Person who is disposing by Transfer of any
Ownership Interest in a Certificate.
"Trust Fund": Collectively, all of the assets of REMIC I and
REMIC II.
"Trustee": First Trust National Association, a national
banking association, or its successor in interest, or any successor trustee
appointed as herein provided.
"Trustee's Fee": The amount payable to the Trustee on each
Distribution Date pursuant to Section 8.05 as compensation for all services
rendered by it in the execution of the trust hereby created and in the exercise
and performance of any of the powers and duties of the Trustee hereunder, which
amount shall equal one twelfth of the product of (i) the Trustee's Fee Rate,
multiplied by (ii) the aggregate Scheduled Principal Balance of the Mortgage
Loans and any REO Properties as of the second preceding Due Date (or, in the
case of the initial Distribution Date, as of the Cut-off Date).
"Trustee's Fee Rate": 0.0185% per annum.
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"Uncertificated Balance": The amount of any REMIC I Regular
Interest outstanding as of any date of determination. As of the Closing Date,
the Uncertificated Balance of each REMIC I Regular Interest shall equal the
amount set forth in the Preliminary Statement hereto as its initial
uncertificated balance. On each Distribution Date, the Uncertificated Balance of
each REMIC I Regular Interest shall be reduced by all distributions of principal
made on such REMIC I Regular Interest on such Distribution Date pursuant to
Section 4.01 and, if and to the extent necessary and appropriate, shall be
further reduced on such Distribution Date by Realized Losses as provided in
Section 4.04 and the Uncertificated Balance of the REMIC I Regular Interest LT3
shall be increased by interest deferrals as provided in Section
4.01(a)(1)(i)(I). The Uncertificated Balance of each REMIC I Regular Interest
shall never be less than zero.
"Uncertificated Interest": With respect to any REMIC I Regular
Interest for any Distribution Date, one month's interest at the REMIC I
Remittance Rate applicable to such REMIC I Regular Interest for such
Distribution Date, accrued on the Uncertificated Balance, in the case of the
REMIC I Regular Interest LT1 or the REMIC I Regular Interest LT2, or on the
REMIC I Regular Interest LT3 Adjusted Uncertificated Balance, in the case of the
REMIC I Regular Interest LT3, of such REMIC I Regular Interest outstanding
immediately prior to such Distribution Date. Uncertificated Interest in respect
of any REMIC I Regular Interest LT1 and REMIC I Regular Interest LT3 shall
accrue on the basis of a 360-day year consisting of twelve 30-day months;
Uncertificated Interest in respect of the REMIC I Regular Interest LT2 shall
accrue on the basis of a 360-day year and the actual number of days in the
applicable Interest Accrual Period. Uncertificated Interest with respect to each
Distribution Date, as to any REMIC I Regular Interest, shall be reduced by an
amount equal to a pro rata portion of the sum of (a) the aggregate Prepayment
Interest Shortfall (to the extent not covered by payments by the Master Servicer
pursuant to Section 3.24), if any, for such Distribution Date and (b) the
aggregate amount of any Relief Act Interest Shortfall, if any, for such
Distribution Date. In addition, Uncertificated Interest with respect to each
Distribution Date, as to any REMIC I Regular Interest, shall be reduced by an
amount equal to any REMIC I Interest Loss Allocation Amount, if any, allocated
to such REMIC I Regular Interest pursuant to Section 4.04 .
"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 Section
3.14.
"United States Person": A citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States or any political subdivision thereof, or an
estate whose income is subject to United States federal income tax regardless of
its source, or 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 fiduciaries have the authority to control all substantial decisions of
the trust. The term "United States" shall have the meaning set forth in Section
7701 of the Code.
"Unpaid Basis Risk Shortfalls": With respect to the Class A
Certificates and any Distribution Date, the aggregate of all Basis Risk
Shortfalls for any previous Distribution Dates plus interest accrued for each
Interest Accrual Period on such Basis Risk Shortfalls at the
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Accrual Rate, less all payments made in respect of such Basis Risk Shortfalls on
or prior to such Distribution Date pursuant to Section 4.01(a)(2).
"Value": With respect to any Mortgaged Property, the lesser of
(i) the lesser of (a) the value thereof as determined by an appraisal made for
the originator of the Mortgage Loan at the time of origination of the Mortgage
Loan by an appraiser who met the minimum requirements of FNMA and FHLMC, and (b)
the value thereof as determined by a review appraisal conducted by the Seller in
accordance with the Seller's underwriting guidelines, and (ii) the purchase
price paid for the related Mortgaged Property by the Mortgagor with the proceeds
of the Mortgage Loan; provided, however, (A) in the case of a Refinanced
Mortgage Loan, such value of the Mortgaged Property is based solely upon the
lesser of (1) the value determined by an appraisal made for the originator of
such Refinanced Mortgage Loan at the time of origination of such Refinanced
Mortgage Loan by an appraiser who met the minimum requirements of FNMA and
FHLMC, and (2) the value thereof as determined by a review appraisal conducted
by the Seller in accordance with the Seller's underwriting guidelines, and (B)
in the case of a Mortgage Loan originated in connection with a "lease-option
purchase," such value of the Mortgaged Property is based on the lower of the
value determined by an appraisal made for the originator of such Mortgage Loan
at the time of origination or the sale price of such Mortgaged Property if the
"lease option purchase price" was set less than 12 months prior to origination,
and is based on the value determined by an appraisal made for the originator of
such Mortgage Loan at the time of origination if the "lease option purchase
price" was set 12 months or more prior to origination.
"Voting Rights": The portion of the voting rights of all of
the Certificates which is allocated to any Certificate. With respect to any date
of determination, the percentage of all the Voting Rights allocated among
Holders of each Class of Certificates shall be the fraction, expressed as a
percentage, the numerator of which is the aggregate Certificate Principal
Balance of all the Certificates of such Class then outstanding and the
denominator of which is the aggregate Stated Principal Balance of the Mortgage
Loans then outstanding. The Voting Rights allocated to each Class of Certificate
shall be allocated among Holders of each such Class in accordance with their
respective Percentage Interests as of the most recent Record Date.
SECTION 1.02. Allocation of Certain Interest Shortfalls.
For purposes of calculating the amount of Accrued Certificate
Interest and the amount of the Interest Distribution Amount for the Class A
Certificates and the Class CE Certificates for any Distribution Date, (1) the
aggregate amount of any Prepayment Interest Shortfall (to the extent not covered
by payments by the Master Servicer pursuant to Section 3.24) and any Relief Act
Interest Shortfalls incurred in respect of the Mortgage Loans for any
Distribution Date shall be allocated first, among the Class CE Certificates on a
PRO RATA basis based on, and to the extent of, one month's interest at the then
applicable respective PassThrough Rate on the respective Notional Amount of each
such Certificate and, thereafter, among the Class A Certificates on a PRO RATA
basis based on, and to the extent of, one month's interest at the then
applicable respective Pass-Through Rate on the respective Certificate Principal
Balance of each such Certificate and (2) the aggregate amount of any Realized
Losses and Basis
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Risk Shortfall incurred for any Distribution Date shall be allocated among the
Class CE Certificates on a PRO RATA basis based on, and to the extent of, one
month's interest at the then applicable respective Pass-Through Rate on the
respective Notional Amount of each such Certificate.
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ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.01. Conveyance of the Initial Deposit and the
Mortgage Loans.
The Trustee hereby acknowledges the receipt by it from the
Depositor of the Initial Deposit. The Trustee shall deposit and hold such amount
uninvested in a non-interest bearing Eligible Account until the initial
Distribution Date. On the initial Distribution Date, the Trustee shall transfer
the Initial Deposit to the Distribution Account, and such amount shall
constitute part of the Available Distribution Amount for such Distribution Date.
The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee without recourse for the benefit of the Certificateholders and the
Certificate Insurer all the right, title and interest of the Depositor,
including any security interest therein for the benefit of the Depositor, in and
to the Mortgage Loans identified on the Mortgage Loan Schedule, the rights of
the Depositor under the Mortgage Loan Purchase Agreement, and all other assets
included or to be included in REMIC I (as provided in such definition). Such
assignment includes all interest and principal received by the Depositor or the
Master Servicer on or with respect to the Mortgage Loans (other than payments of
principal and interest due on such Mortgage Loans on or before the Cutoff Date).
In connection with such transfer and assignment, the Depositor
does hereby deliver to, and deposit with, the Trustee the following documents or
instruments with respect to each Mortgage Loan (a "Mortgage File") so
transferred and assigned:
(i) the original Mortgage Note, endorsed in the
following form: "Pay to the order of First Trust National
Association, as Trustee for the registered holders of Salomon
Brothers Mortgage Securities VII, Inc., New Century
AssetBacked Floating Rate Certificates, Series 1997-NC1,
without recourse," with all prior and intervening endorsements
showing a complete chain of endorsement from the originator to
the Person so endorsing to the Trustee;
(ii) the original Mortgage with evidence of recording
thereon, and the original recorded power of attorney, if the
Mortgage was executed pursuant to a power of attorney, with
evidence of recording thereon;
(iii) an original Assignment of the Mortgage executed in
the following form: "First Trust National Association, as
Trustee for the registered holders of Salomon Brothers
Mortgage Securities VII, Inc., New Century Asset-Backed
Floating Rate Certificates, Series 1997-NC1";
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(iv) the original recorded Assignment or Assignments of
the Mortgage showing a complete chain of assignment from the
originator to the Person assigning the Mortgage to the Trustee
as contemplated by the immediately preceding clause (iii);
(v) the original or copies of each assumption,
modification, written assurance or substitution agreement, if
any; and
(vi) the original lender's title insurance policy,
together with all endorsements or riders that were issued with
or subsequent to the issuance of such policy, insuring the
priority of the Mortgage as a first lien on the Mortgaged
Property represented therein as a fee interest vested in the
Mortgagor, or in the event such original title policy is
unavailable, a written commitment or uniform binder or
preliminary report of title issued by the title insurance or
escrow company.
The Master Servicer shall promptly (within five Business Days
following the Closing Date or as soon as practicable) submit or cause to be
submitted for recording, at no expense to REMIC I, the Trustee, the Depositor or
the Certificate Insurer, in the appropriate public office for real property
records, each Assignment referred to in Sections 2.01(iii) and (iv) above. In
the event that any such Assignment is lost or returned unrecorded because of a
defect therein, the Master Servicer shall promptly prepare or cause to be
prepared a substitute Assignment or cure or cause to be cured such defect, as
the case may be, and thereafter cause each such Assignment to be duly recorded.
If any of the documents referred to in Sections 2.01(ii),
(iii) or (iv) above has as of the Closing Date been submitted for recording but
either (x) has not been returned from the applicable public recording office or
(y) has been lost or such public recording office has retained the original of
such document, the obligations of the Depositor to deliver such documents shall
be deemed to be satisfied upon (1) delivery to the Trustee of a copy of each
such document certified by the Seller in the case of (x) above or the applicable
public recording office in the case of (y) above to be a true and complete copy
of the original that was submitted for recording and (2) if such copy is
certified by the Seller, delivery to the Trustee promptly upon receipt thereof
of either the original or a copy of such document certified by the applicable
public recording office to be a true and complete copy of the original. Notice
shall be provided to the Trustee, the Certificate Insurer and the Rating
Agencies by the Seller if delivery pursuant to clause (2) above will be made
more than 180 days after the Closing Date. If the original lender's title
insurance policy was not delivered pursuant to Section 2.01(vi) above, the
Depositor shall deliver or cause to be delivered to the Trustee, promptly after
receipt thereof, the original lender's title insurance policy. The Depositor
shall deliver or cause to be delivered to the Trustee promptly upon receipt
thereof any other original documents constituting a part of a Mortgage 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.
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All original documents relating to the Mortgage Loans that are
not delivered to the Trustee are and shall be held by or on behalf of the
Seller, the Depositor or the Master 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 to be a part of a Mortgage File, such
document shall be delivered promptly to the Trustee. Any such original document
delivered to or held by the Depositor that is not required pursuant to the terms
of this Section to be a part of a Mortgage File, shall be delivered promptly to
the Master Servicer.
The Depositor herewith delivers to the Trustee an executed
copy of the Mortgage Loan Purchase Agreement.
In addition to the foregoing, the Depositor shall cause the
Certificate Insurer to deliver the Policy to the Trustee for the benefit of the
Certificateholders.
SECTION 2.02. Acceptance of REMIC I by Trustee.
The Trustee acknowledges receipt of the Policy and, subject to
the provisions of Section 2.01 and subject to any exceptions noted on the
exception report described in the next paragraph below, the documents referred
to in Section 2.01 (other than such documents described in Section 2.01(v))
above and all other assets included in the definition of "REMIC I" under clauses
(i), (iii), (iv) and (v) (to the extent of amounts deposited into the
Distribution Account) and declares that it holds and will hold such documents
and the other documents delivered to it constituting a Mortgage File, and that
it holds or will hold all such assets and such other assets included in the
definition of "REMIC I" in trust for the exclusive use and benefit of all
present and future Certificateholders and the Certificate Insurer.
The Trustee agrees, for the benefit of the Certificateholders
and the Certificate Insurer, to review each Mortgage File on or before the
Closing Date and to certify in substantially the form attached hereto as Exhibit
C-1 that, as to each Mortgage Loan listed in the Mortgage Loan Schedule (other
than any Mortgage Loan paid in full or any Mortgage Loan specifically identified
in the exception report annexed thereto as not being covered by such
certification), (i) all documents constituting part of such Mortgage File (other
than such documents described in Section 2.01(v)) required to be delivered to it
pursuant to this Agreement are in its possession, (ii) such documents have been
reviewed by it and appear regular on their face and relate to such Mortgage
Loan, (iii) based on its examination and only as to the foregoing, the
information set forth in the Mortgage Loan Schedule that corresponds to items
(i) through (iii), (vi), (x)(A), (xi), (xii), (xv), (xvii), (xviii), (xx)
through (xxiii) and (xxv) of the definition of "Mortgage Loan Schedule"
accurately reflects information set forth in the Mortgage File. It is herein
acknowledged that, in conducting such review, the Trustee was under no duty or
obligation (i) to inspect, review or examine any such documents, instruments,
certificates or other papers to determine whether they are genuine, enforceable,
or appropriate for the represented purpose or whether they have actually been
recorded or that they are other than what they purport to be on their face, or
(ii) to determine whether any Mortgage File should include any of the documents
specified in clause (v) of Section 2.01.
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Prior to the first anniversary date of this Agreement the
Trustee shall deliver to the Depositor, the Master Servicer and the Certificate
Insurer a final certification in the form annexed hereto as Exhibit C-2
evidencing the completeness of the Mortgage Files, with any applicable
exceptions noted thereon, and the Master Servicer shall forward a copy thereof
to any Sub-Servicer.
If in the process of reviewing the Mortgage Files and making
or preparing, as the case may be, the certifications referred to above, the
Trustee finds any document or documents constituting a part of a Mortgage File
to be missing or defective in any material respect, at the conclusion of its
review the Trustee shall so notify the Depositor, the Master Servicer and the
Certificate Insurer. In addition, upon the discovery by the Depositor, the
Master Servicer or the Trustee of a breach of any of the representations and
warranties made by the Seller in the Mortgage Loan Purchase Agreement in respect
of any Mortgage Loan which materially adversely affects such Mortgage Loan or
the interests of the related Certificateholders in such Mortgage Loan, the party
discovering such breach shall give prompt written notice to the other parties
and the Certificate Insurer.
The Trustee shall, at the written request and expense of any
Certificateholder, provide a written report to such Certificateholder of all
Mortgage Files released to the Master Servicer for servicing purposes.
SECTION 2.03. Repurchase or Substitution of Mortgage Loans
by the Seller or the Depositor.
(a) Upon discovery or receipt of notice of any materially
defective document in, or that a document is missing from, a Mortgage File or of
the breach by the Seller of any representation, warranty or covenant under the
Mortgage Loan Purchase Agreement in respect of any Mortgage Loan that materially
adversely affects the value of such Mortgage Loan or the interest therein of the
Certificateholders, the Trustee shall promptly notify the Seller, the Master
Servicer and the Certificate Insurer of such defect, missing document or breach
and request that the Seller deliver such missing document or cure such defect or
breach within 60 days from the date the Seller was notified of such missing
document, defect or breach, and if the Seller does not deliver such missing
document or cure such defect or breach in all material respects during such
period, the Trustee, in accordance with Section 3.02(b), shall enforce the
obligations of the Seller under the Mortgage Loan Purchase Agreement to
repurchase such Mortgage Loan from REMIC I at the Purchase Price within 90 days
after the date on which the Seller was notified (subject to Section 2.03(e)) of
such missing document, defect or breach, if and to the extent that the Seller is
obligated to do so under the Mortgage Loan Purchase Agreement. The Purchase
Price for the repurchased Mortgage Loan shall be deposited in the Collection
Account and the Trustee, upon receipt of written certification from the Master
Servicer of such deposit, shall release to the Seller the related Mortgage File
and shall execute and deliver such instruments of transfer or assignment, in
each case without recourse, as the Seller shall furnish to it and as shall be
necessary to vest in the Seller any Mortgage Loan released pursuant hereto and
the Trustee shall have no further responsibility with regard to such Mortgage
File. In lieu of repurchasing any such Mortgage Loan as provided above, if so
provided in the Mortgage Loan Purchase
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Agreement, the Seller may cause such Mortgage Loan to be removed from REMIC I
(in which case it shall become a Deleted Mortgage Loan) and substitute one or
more Qualified Substitute Mortgage Loans in the manner and subject to the
limitations set forth in Section 2.03(d). It is understood and agreed that the
obligation of the Seller to cure or to repurchase (or to substitute for) any
Mortgage Loan as to which a document is missing, a material defect in a
constituent document exists or as to which such a breach has occurred and is
continuing shall constitute the sole remedy respecting such omission, defect or
breach available to the Trustee on behalf of the Certificateholders and the
Certificate Insurer.
(b) Subject to Section 2.03(e), within 90 days of the earlier
of discovery by the Depositor or receipt of notice by the Depositor of the
breach of any representation or warranty of the Depositor set forth in Section
2.04 with respect to any Mortgage Loan, which materially adversely affects the
value of such Mortgage Loan or the interest therein of the Certificateholders,
the Depositor shall (i) cure such breach in all material respects, (ii)
repurchase the Mortgage Loan from REMIC I at the Purchase Price or (iii) remove
such Mortgage Loan from REMIC I (in which case it shall become a Deleted
Mortgage Loan) and substitute one or more Qualified Substitute Mortgage Loans in
the manner and subject to the limitations set forth in Section 2.03(d). If any
such breach is a breach of any of the representations and warranties included in
Section 2.04(a)(iv), and the Depositor is unable to cure such breach, the
Depositor shall repurchase or substitute the smallest number of Mortgage Loans
as shall be required to make such representation or warranty true and correct.
The Purchase Price for any repurchased Mortgage Loan shall be delivered to the
Master Servicer for deposit in the Collection Account, and the Trustee, upon
receipt of written certification from the Master Servicer of such deposit, shall
at the Depositor's direction release to the Depositor the related Mortgage File
and shall execute and deliver such instruments of transfer or assignment
furnished by the Depositor, in each case without recourse, as the Depositor
shall furnish to it and as shall be necessary to vest in the Depositor any
Mortgage Loan released pursuant hereto.
(c) Within 90 days of the earlier of discovery by the Master
Servicer or receipt of notice by the Master Servicer of the breach of any
representation, warranty or covenant of the Master Servicer set forth in Section
2.05 which materially and adversely affects the interests of the
Certificateholders in any Mortgage Loan, the Master Servicer shall cure such
breach in all material respects.
(d) Any substitution of Qualified Substitute Mortgage Loans
for Deleted Mortgage Loans made pursuant to Section 2.03(a), in the case of the
Seller, or Section 2.03(b), in the case of the Depositor, must be effected prior
to the date which is two years after the Startup Day for REMIC I.
As to any Deleted Mortgage Loan for which the Seller or the
Depositor substitutes a Qualified Substitute Mortgage Loan or Loans, such
substitution shall be effected by the Seller or the Depositor, as the case may
be, delivering to the Trustee, for such Qualified Substitute Mortgage Loan or
Loans, the Mortgage Note, the Mortgage, the Assignment to the Trustee, and such
other documents and agreements, with all necessary endorsements thereon, as are
required by Section 2.01, together with an Officers' Certificate providing that
each such Qualified
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Substitute Mortgage Loan satisfies the definition thereof and specifying the
Substitution Shortfall Amount (as described below), if any, in connection with
such substitution. The Trustee shall acknowledge receipt for such Qualified
Substitute Mortgage Loan or Loans and, within ten Business Days thereafter,
review such documents as specified in Section 2.02 and deliver to the Depositor,
the Master Servicer and the Certificate Insurer, with respect to such Qualified
Substitute Mortgage Loan or Loans, a certification substantially in the form
attached hereto as Exhibit C-1, with any applicable exceptions noted thereon.
Within one year of the date of substitution, the Trustee shall deliver to the
Depositor, the Master Servicer and the Certificate Insurer a certification
substantially in the form of Exhibit C-2 hereto with respect to such Qualified
Substitute Mortgage Loan or Loans, with any applicable exceptions noted thereon.
Monthly Payments due with respect to Qualified Substitute Mortgage Loans in the
month of substitution are not part of REMIC I and will be retained by the
Depositor or the Seller, as the case may be. For the month of substitution,
distributions to Certificateholders will reflect the Monthly Payment due on such
Deleted Mortgage Loan on or before the Due Date in the month of substitution,
and the Depositor or the Seller, as the case may be, shall thereafter be
entitled to retain all amounts subsequently received in respect of such Deleted
Mortgage Loan. The Depositor shall give or cause to be given written notice to
the Certificateholders that such substitution has taken place, shall amend the
Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage Loan from
the terms of this Agreement and the substitution of the Qualified Substitute
Mortgage Loan or Loans and shall deliver a copy of such amended Mortgage Loan
Schedule to the Trustee. Upon such substitution, such Qualified Substitute
Mortgage Loan or Loans shall constitute part of the Mortgage Pool and shall be
subject in all respects to the terms of this Agreement and, in the case of a
substitution effected by the Seller, the Mortgage Loan Purchase Agreement,
including, in the case of a substitution effected by the Seller, all applicable
representations and warranties thereof included in the Mortgage Loan Purchase
Agreement, and in the case of a substitution effected by the Depositor, all
applicable representations and warranties thereof set forth in Section 2.04, in
each case as of the date of substitution.
For any month in which the Depositor or the Seller substitutes
one or more Qualified Substitute Mortgage Loans for one or more Deleted Mortgage
Loans, the Master Servicer will determine the amount (the "Substitution
Shortfall Amount"), if any, by which the aggregate Purchase Price of all such
Deleted Mortgage Loans exceeds the aggregate of, as to each such Qualified
Substitute Mortgage Loan, the Scheduled Principal Balance thereof as of the date
of substitution, together with one month's interest on such Scheduled Principal
Balance at the applicable Net Mortgage Rate, plus all outstanding P&I Advances
and Servicing Advances (including Nonrecoverable P&I Advances and Nonrecoverable
Servicing Advances) related thereto. On the date of such substitution, the
Depositor or the Seller, as the case may be, will deliver or cause to be
delivered to the Master Servicer for deposit in the Collection Account an amount
equal to the Substitution Shortfall Amount, if any, and the Trustee, upon
receipt of the related Qualified Substitute Mortgage Loan or Loans and
certification by the Master Servicer of such deposit, shall release to the
Depositor or the Seller, as the case may be, the related Mortgage File or Files
and shall execute and deliver such instruments of transfer or assignment, in
each case without recourse, as the Depositor or the Seller, as the case may be,
shall deliver
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to it and as shall be necessary to vest therein any Deleted Mortgage Loan
released pursuant hereto.
In addition, the Depositor or the Seller, as the case may be,
shall obtain at its own expense and deliver to the Trustee and the Certificate
Insurer an Opinion of Counsel to the effect that such substitution will not
cause (a) any federal tax to be imposed on either REMIC I or REMIC II, including
without limitation, any federal tax imposed on "prohibited transactions" under
Section 860F(a)(1) of the Code or on "contributions after the startup date"
under Section 860G(d)(1) of the Code, or (b) either REMIC I or REMIC II to fail
to qualify as a REMIC at any time that any Certificate is outstanding.
(e) Upon discovery by the Depositor, the Seller, the Master
Servicer, the Trustee or the Certificate Insurer that any Mortgage Loan does not
constitute a "qualified mortgage" within the meaning of Section 860G(a)(3) of
the Code, the party discovering such fact shall within two Business Days give
written notice thereof to the other parties and the Certificate Insurer. In
connection therewith, the Seller or the Depositor shall repurchase or, subject
to the limitations set forth in Section 2.03(d), substitute one or more
Qualified Substitute Mortgage Loans for the affected Mortgage Loan within 90
days of the earlier of discovery or receipt of such notice with respect to such
affected Mortgage Loan. Such repurchase or substitution shall be made by (i) the
Seller, if the affected Mortgage Loan's status as a non-qualified mortgage is or
results from a breach of any representation, warranty or covenant made by the
Seller under the Mortgage Loan Purchase Agreement, or (ii) the Depositor, if the
affected Mortgage Loan's status as a non-qualified mortgage is a breach of any
representation or warranty of the Depositor set forth in Section 2.04, or if its
status as a non-qualified mortgage is a breach of no representation or warranty.
Any such repurchase or substitution shall be made in the same manner as set
forth in Sections 2.03(a), if made by the Seller, or 2.03(b), if made by the
Depositor. The Trustee shall reconvey to the Depositor or the Seller, as the
case may be, the Mortgage Loan to be released pursuant hereto in the same
manner, and on the same terms and conditions, as it would a Mortgage Loan
repurchased for breach of a representation or warranty.
SECTION 2.04. Representations and Warranties of the Depositor.
(a) The Depositor hereby represents and warrants to the
Trustee for the benefit of the Certificateholders and the Certificate Insurer
that as of the Closing Date or as of such other date specifically provided
herein:
(i) The information set forth in the Mortgage Loan
Schedule for the Original Mortgage Loans is complete, true and
correct in all material respects at the date or dates
respecting which such information is furnished;
(ii) As of the Cut-off Date, the Monthly Payment due
under each Original Mortgage Loan is not 30 or more days
delinquent in payment and has not been 30 or more days
delinquent in payment more than once in the twelve month
period prior to the Cut-off Date (assuming that a "rolling" 30
day delinquency is considered to be delinquent only once);
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(iii) Each Original Mortgage Loan had an original term to
maturity of up to 30 years; each Original Mortgage Loan is an
adjustable-rate mortgage loan with payments due on the first
day of each month and each such Mortgage Loan is fully
amortizing; effective with the first payment due after each
Adjustment Date, the monthly payment amount for each Original
Mortgage Loan will be adjusted to an amount which would
amortize fully the outstanding principal balance of such
Mortgage Loan over its remaining term and pay interest at the
Mortgage Rate so adjusted; on the first Adjustment Date and on
each Adjustment Date thereafter, the Mortgage Rate on each
Original Mortgage Loan will be adjusted to equal the sum of
the Index and the related Gross Margin, rounded to the nearest
multiple of 0.125%, subject to the Periodic Rate Cap, the
Maximum Mortgage Rate and the Minimum Mortgage Rate applicable
to such Mortgage Loan;
(iv) (A) no more than approximately 44.91%,
approximately 22.70%, approximately 5.96%, approximately
5.92%, approximately 5.61%, approximately 4.59%, and
approximately 3.51% of the Original Mortgage Loans, by
outstanding principal balance of the Original Mortgage Loans
as of the Cut-off Date, will be secured by Mortgaged
Properties located in California, Illinois, Ohio, Colorado,
Arizona, Utah and Minnesota, respectively, and no more than
approximately 6.80% of the Original Mortgage Loans, by
outstanding principal balance of the Original Mortgage Loans
as of the Cut-off Date, will be secured by Mortgaged
Properties located in any other state; (B) as of the Cut-off
Date, no more than approximately 0.85% of the Original
Mortgage Loans, by outstanding principal balance of the
Original Mortgage Loans as of the Cut-off Date, are secured by
Mortgaged Properties located in any one California zip code
area, and no more than approximately 17.92% of the Original
Mortgage Loans, by outstanding principal balance of the
Original Mortgage Loans as of the Cut-off Date, are secured by
units in two- to four-family dwellings, condominiums, town
houses, planned unit developments or manufactured housing and;
(C) at least approximately 82.08% of the Original Mortgage
Loans, by outstanding principal balance of the Original
Mortgage Loans as of the Cut-off Date, are secured by real
property with a single family residence erected thereon;
(v) If the Mortgaged Property securing an Original
Mortgage Loan is identified in the Federal Register by the
Federal Emergency Management Agency ("FEMA") as having special
flood hazards, as of the Closing Date, such Mortgaged Property
is covered by a flood insurance policy that met the
requirements of FEMA at the time such policy was issued;
(vi) With respect to each Original Mortgage Loan, the
Loan-to-Value Ratio was less than or equal to 90.00% at the
origination of such Original Mortgage Loan; and
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(vii) With respect to at least approximately 88.56% of
the Original Mortgage Loans by outstanding principal balance
as of the Cut-off Date, at the time that the Mortgage Loan was
made, the Mortgagor represented that the Mortgagor would
occupy the Mortgaged Property as the Mortgagor's primary
residence. With respect to approximately 11.44% of the
Original Mortgage Loans by outstanding principal balance as of
the Cut-off Date, at the time that the Mortgage Loan was made,
the Mortgagor represented that the Mortgagor would occupy the
Mortgaged Property as the Mortgagor's secondary residence or
that the Mortgaged Property would be an investor property.
(b) It is understood and agreed that the representations and
warranties set forth in this Section 2.04 shall survive delivery of the Mortgage
Files to the Trustee and shall inure to the benefit of the Certificateholders
and the Certificate Insurer notwithstanding any restrictive or qualified
endorsement or assignment. Upon discovery by any of the Depositor, the Master
Servicer or the Trustee of a breach of any of the foregoing representations and
warranties which materially and adversely affects the value of any Mortgage Loan
or the interests therein of the Certificateholders and the Certificate Insurer,
the party discovering such breach shall give prompt written notice to the other
parties, and in no event later than two Business Days from the date of such
discovery. It is understood and agreed that the obligations of the Depositor set
forth in Section 2.03(b) to cure, substitute for or repurchase a Mortgage Loan
constitute the sole remedies available to the Certificateholders or to the
Trustee on their behalf respecting a breach of the representations and
warranties contained in this Section 2.04.
SECTION 2.05. Representations, Warranties and Covenants of
the Master Servicer.
The Master Servicer hereby represents, warrants and covenants
to the Trustee, for the benefit of each of the Trustee, the Certificateholders,
the Certificate Insurer and to the Depositor that as of the Closing Date or as
of such date specifically provided herein:
(i) The Master Servicer is a corporation duly
organized, validly existing and in good standing under the
laws of the State of California and is duly authorized and
qualified to transact any and all business contemplated by
this Agreement to be conducted by the Master Servicer in any
state in which a Mortgaged Property is located or is otherwise
not required under applicable law to effect such qualification
and, in any event, is in compliance with the doing business
laws of any such State, to the extent necessary to ensure its
ability, or to cause a Sub-Servicer, to enforce each Mortgage
Loan and to service the Mortgage Loans in accordance with the
terms of this Agreement;
(ii) The Master Servicer has the full power and
authority to conduct its business as presently conducted by it
and to execute, deliver and perform, and to enter into and
consummate, all transactions contemplated by this Agreement.
The Master Servicer has duly authorized the execution,
delivery and performance of this Agreement, has duly executed
and delivered this Agreement, and this
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Agreement, assuming due authorization, execution and delivery
by the Depositor and the Trustee, constitutes a legal, valid
and binding obligation of the Master Servicer, enforceable
against it in accordance with its terms except as the
enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting the
enforcement of creditors' rights generally and by general
principles of equity;
(iii) The execution and delivery of this Agreement by the
Master Servicer, the servicing of the Mortgage Loans by the
Master Servicer hereunder, the consummation by the Master
Servicer of any other of the transactions herein contemplated,
and the fulfillment of or compliance with the terms hereof are
in the ordinary course of business of the Master Servicer and
will not (A) result in a breach of any term or provision of
the charter or by-laws of the Master Servicer or (B) conflict
with, result in a breach, violation or acceleration of, or
result in a default under, the terms of any other material
agreement or instrument to which the Master Servicer is a
party or by which it may be bound, or any statute, order or
regulation applicable to the Master Servicer of any court,
regulatory body, administrative agency or governmental body
having jurisdiction over the Master Servicer; and the Master
Servicer is not a party to, bound by, or in breach or
violation of any indenture or other agreement or instrument,
or subject to or in violation of any statute, order or
regulation of any court, regulatory body, administrative
agency or governmental body having jurisdiction over it, which
materially and adversely affects or, to the Master Servicer's
knowledge, would in the future materially and adversely
affect, (x) the ability of the Master Servicer to perform its
obligations under this Agreement or (y) the business,
operations, financial condition, properties or assets of the
Master Servicer taken as a whole;
(iv) The Master Servicer is a HUD approved mortgagee
pursuant to Section 203 of the National Housing Act. No event
has occurred, including but not limited to a change in
insurance coverage, that would make the Master Servicer unable
to comply with HUD eligibility requirements or that would
require notification to HUD;
(v) The Master Servicer does not believe, nor does it
have any reason or cause to believe, that it cannot perform
each and every covenant made by it and contained in this
Agreement, it being understood that certain of such covenants
shall be performed by a Sub-Servicer pursuant to a
Sub-Servicing Agreement between the Master Servicer and such
Sub-Servicer in accordance with Section 3.02;
(vi) With respect to each Mortgage Loan, the Master
Servicer, or SubServicer, is in possession of a complete
Mortgage File, except for such documents as have been
delivered to the Trustee;
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(vii) There are no actions or proceedings against, or
investigations known to it of, the Master Servicer before any
court, administrative or other tribunal (A) that might
prohibit its entering into this Agreement, (B) seeking to
prevent the consummation of the transactions contemplated by
this Agreement or (C) that might prohibit or materially and
adversely affect the performance by the Master Servicer of its
obligations under, or validity or enforceability of, this
Agreement; and
(viii) No consent, approval, authorization or order of any
court or governmental agency or body is required for the
execution, delivery and performance by the Master Servicer of,
or compliance by the Master Servicer with, this Agreement or
the consummation by it of the transactions contemplated by
this Agreement, except for such consents, approvals,
authorizations or orders, if any, that have been obtained
prior to the Closing Date.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 2.05 shall survive delivery
of the Mortgage Files to the Trustee and shall inure to the benefit of the
Trustee, the Depositor, the Certificateholders and the Certificate Insurer. Upon
discovery by any of the Depositor, the Master Servicer or the Trustee of a
breach of any of the foregoing representations, warranties and covenants which
materially and adversely affects the value of any Mortgage Loan or the interests
therein of the Certificateholders and the Certificate Insurer, the party
discovering such breach shall give prompt written notice (but in no event later
than two Business Days following such discovery) to the Trustee and the
Certificate Insurer. Subject to Section 7.01, unless such breach shall not be
susceptible of cure within 90 days, the obligation of the Master Servicer set
forth in Section 2.03(c) to cure breaches shall constitute the sole remedy
against the Master Servicer available to the Certificateholders, the Depositor
or the Trustee on behalf of the Certificateholders respecting a breach of the
representations, warranties and covenants contained in this Section 2.05. The
preceding sentence shall not, however, limit any remedies available to the
Certificateholders, the Depositor or the Trustee on behalf of the
Certificateholders, pursuant to the Mortgage Loan Purchase Agreement signed by
the Master Servicer in its capacity as Seller, respecting a breach of the
representations, warranties and covenants of the Master Servicer in its capacity
as Seller contained in the Mortgage Loan Purchase Agreement.
SECTION 2.06. Issuance of the Class R-I Certificates.
The Trustee acknowledges the assignment to it of the Mortgage
Loans and the delivery to it of the Mortgage Files, subject to the provisions of
Section 2.01 and Section 2.02, together with the assignment to it of all other
assets included in REMIC I, the receipt of which is hereby acknowledged.
Concurrently with such assignment and delivery and in exchange therefor, the
Trustee, pursuant to the written request of the Depositor executed by an officer
of the Depositor, has executed, authenticated and delivered to or upon the order
of the Depositor, the Class R-I Certificates in authorized denominations. The
interests evidenced by the Class R-I Certificates, together with the REMIC I
Regular Interests, constitute the entire beneficial ownership interest in REMIC
I.
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SECTION 2.07. Conveyance of the 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 REMIC II
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 all present and future REMIC
II Certificateholders and the Certificate Insurer. The rights of the REMIC II
Certificateholders to receive distributions from the proceeds of REMIC II in
respect of the REMIC II Certificates, and all ownership interests of the REMIC
II Certificateholders in and to such distributions, shall be as set forth in
this Agreement.
SECTION 2.08. Issuance of the REMIC II Certificates.
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 REMIC II Certificates in authorized denominations evidencing
the entire beneficial ownership interest in REMIC II.
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ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
SECTION 3.01. Master Servicer to Act as Master Servicer.
The Master Servicer shall service and administer the Mortgage
Loans on behalf of the Trustee and in the best interests of and for the benefit
of the Certificateholders and the Certificate Insurer (as determined by the
Master Servicer in its reasonable judgment) in accordance with the terms of this
Agreement and the respective Mortgage Loans and, to the extent consistent with
such terms, in the same manner in which it services and administers similar
mortgage loans for its own portfolio, giving due consideration to customary and
usual standards of practice of mortgage lenders and loan servicers administering
similar mortgage loans but without regard to:
(i) any relationship that the Master Servicer, any
Sub-Servicer or any Affiliate of the Master Servicer or any
Sub-Servicer may have with the related Mortgagor;
(ii) the ownership of any Certificate by the
Master Servicer or any Affiliate of the Master Servicer;
(iii) the Master Servicer's obligation to make P&I
Advances or Servicing Advances; or
(iv) the Master Servicer's or any Sub-Servicer's right
to receive compensation for its services hereunder or with
respect to any particular transaction.
To the extent consistent with the foregoing, the Master Servicer shall also seek
to maximize the timely and complete recovery of principal and interest on the
Mortgage Notes. Subject only to the above-described servicing standards and the
terms of this Agreement and of the respective Mortgage Loans, the Master
Servicer shall have full power and authority, acting alone or through
Sub-Servicers as provided in Section 3.02, to do or cause to be done any and all
things in connection with such servicing and administration which it may deem
necessary or desirable. Without limiting the generality of the foregoing, the
Master Servicer in its own name or in the name of a Sub-Servicer is hereby
authorized and empowered by the Trustee when the Master Servicer believes it
appropriate in its best judgment in accordance with the servicing standards set
forth above, to execute and deliver, on behalf of the Certificateholders and the
Trustee or any of them, and upon notice to the Trustee, 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
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Certificateholders. The Master 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 Master Servicer shall also comply in the performance of this Agreement with
all reasonable rules and requirements of each insurer under any standard hazard
insurance policy. Subject to Section 3.17, the Trustee shall execute, at the
written request of the Master Servicer, and furnish to the Master Servicer and
any Sub-Servicer any special or limited powers of attorney and other documents
necessary or appropriate to enable the Master Servicer or any Sub-Servicer to
carry out their servicing and administrative duties hereunder and the Trustee
shall not be liable for the actions of the Master Servicer or any SubServicers
under such powers of attorney.
Subject to Section 3.09 hereof, in accordance with the
standards of the preceding paragraph, the Master Servicer shall advance or cause
to be advanced funds as necessary for the purpose of effecting the timely
payment of taxes and assessments on the Mortgaged Properties, which advances
shall be Servicing Advances reimbursable in the first instance from related
collections from the Mortgagors pursuant to Section 3.09, and further as
provided in Section 3.11. Any cost incurred by the Master Servicer or by
Sub-Servicers in effecting the timely payment of taxes and assessments on a
Mortgaged Property shall not, for the purpose of calculating distributions to
Certificateholders, be added to the unpaid principal balance of the related
Mortgage Loan, notwithstanding that the terms of such Mortgage Loan so permit.
Notwithstanding anything in this Agreement to the contrary,
the Master Servicer may not make any future advances with respect to a Mortgage
Loan (except as provided in Section 4.03) and the Master Servicer shall not
(unless the Mortgagor is in default with respect to the Mortgage Loan or such
default is, in the judgment of the Master Servicer, reasonably foreseeable) (i)
permit any modification with respect to any Mortgage Loan that would change the
Mortgage Rate, reduce or increase the principal balance (except for reductions
resulting from actual payments of principal) or change the final maturity date
on such Mortgage Loan or (ii) permit any modification, waiver or amendment of
any term of any Mortgage Loan that would both (A) effect an exchange or
reissuance of such Mortgage Loan under Section 1001 of the Code (or final,
temporary or proposed Treasury regulations promulgated thereunder) and (B) cause
either REMIC I or REMIC II to fail to qualify as a REMIC under the Code or the
imposition of any tax on "prohibited transactions" or "contributions after the
startup date" under the REMIC Provisions.
The Master Servicer may delegate its responsibilities under
this Agreement; provided, however, that no such delegation shall release the
Master Servicer from the responsibilities or liabilities arising under this
Agreement.
SECTION 3.02. Sub-Servicing Agreements Between Master
Servicer and Sub-Servicers.
(a) The Master Servicer may enter into Sub-Servicing
Agreements with SubServicers for the servicing and administration of the
Mortgage Loans; provided, however, that any Sub-Servicer shall be acceptable to
the Certificate Insurer and provided such agreements
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would not result in a withdrawal or a downgrading by any Rating Agency of the
rating or any shadow rating on any Class of Certificates. The Trustee is hereby
authorized to acknowledge, at the request of the Master Servicer, any
Sub-Servicing Agreement that meets the requirements applicable to Sub-Servicing
Agreements set forth in this Agreement and that is otherwise permitted under
this Agreement.
Each Sub-Servicer shall be (i) authorized to transact business
in the state or states where the related Mortgaged Properties it is to service
are situated, if and to the extent required by applicable law to enable the
Sub-Servicer to perform its obligations hereunder and under the Sub-Servicing
Agreement and (ii) a FHLMC or FNMA approved mortgage servicer. Each SubServicing
Agreement must impose on the Sub-Servicer requirements conforming to the
provisions set forth in Section 3.08 and provide for servicing of the Mortgage
Loans consistent with the terms of this Agreement. The Master Servicer will
examine each Sub-Servicing Agreement and will be familiar with the terms
thereof. The terms of any Sub-Servicing Agreement will not be inconsistent with
any of the provisions of this Agreement. The Master Servicer and the
Sub-Servicers may enter into and make amendments to the Sub-Servicing Agreements
or enter into different forms of Sub-Servicing Agreements; provided, however,
that any such amendments or different forms shall be consistent with and not
violate the provisions of this Agreement, and that no such amendment or
different form shall be made or entered into which could be reasonably expected
to be materially adverse to the interests of the Certificateholders, without the
consent of the Certificate Insurer and the Holders of Certificates entitled to
at least 66% of the Voting Rights. Any variation without the consent of the
Certificate Insurer and the Holders of Certificates entitled to at least 66% of
the Voting Rights from the provisions set forth in Section 3.08 relating to
insurance or priority requirements of Sub-Servicing Accounts, or credits and
charges to the Sub-Servicing Accounts or the timing and amount of remittances by
the Sub-Servicers to the Master Servicer, are conclusively deemed to be
inconsistent with this Agreement and therefore prohibited. The Master Servicer
shall deliver to the Trustee and the Certificate Insurer copies of all
Sub-Servicing Agreements, and any amendments or modifications thereof, promptly
upon the Master Servicer's execution and delivery of such instruments.
(b) As part of its servicing activities hereunder, the Master
Servicer, for the benefit of the Trustee, the Certificateholders and the
Certificate Insurer, shall enforce the obligations of each Sub-Servicer under
the related Sub-Servicing Agreement and of the Seller under the Mortgage Loan
Purchase Agreement, including, without limitation, any obligation to make
advances in respect of delinquent payments as required by a Sub-Servicing
Agreement, or to purchase a Mortgage Loan on account of missing or defective
documentation or on account of a breach of a representation, warranty or
covenant, as described in Section 2.03(a). Such enforcement, including, without
limitation, the legal prosecution of claims, termination of SubServicing
Agreements, and the pursuit of other appropriate remedies, shall be in such form
and carried out to such an extent and at such time as the Master Servicer, in
its good faith business judgment, would require were it the owner of the related
Mortgage Loans. The Master Servicer shall pay the costs of such enforcement at
its own expense, and shall be reimbursed therefor only (i) from a general
recovery resulting from such enforcement, to the extent, if any, that such
recovery exceeds all amounts due in respect of the related Mortgage Loans, or
(ii) from a
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specific recovery of costs, expenses or attorneys' fees against the party
against whom such enforcement is directed. Enforcement of the Mortgage Loan
Purchase Agreement against the Seller shall be effected by the Master Servicer
to the extent it is not the Seller, and otherwise by the Trustee, in accordance
with the foregoing provisions of this paragraph.
SECTION 3.03. Successor Sub-Servicers.
The Master Servicer or the Certificate Insurer shall be
entitled to terminate any Sub-Servicing Agreement and the rights and obligations
of any Sub-Servicer pursuant to any Sub-Servicing Agreement in accordance with
the terms and conditions of such Sub-Servicing Agreement. In the event of
termination of any Sub-Servicer, all servicing obligations of such Sub-Servicer
shall be assumed simultaneously by the Master Servicer without any act or deed
on the part of such Sub-Servicer or the Master Servicer, and the Master Servicer
either shall service directly the related Mortgage Loans or shall enter into a
Sub-Servicing Agreement with a successor Sub-Servicer which qualifies under
Section 3.02.
Any Sub-Servicing Agreement shall include the provision that
such agreement may be immediately terminated by the Trustee or the Certificate
Insurer without fee, in accordance with the terms of this Agreement, in the
event that the Master Servicer shall, for any reason, no longer be the Master
Servicer (including termination due to a Master Servicer Event of Default).
SECTION 3.04. Liability of the Master Servicer.
Notwithstanding any Sub-Servicing Agreement or the provisions
of this Agreement relating to agreements or arrangements between the Master
Servicer and a Sub-Servicer or reference to actions taken through a Sub-Servicer
or otherwise, the Master Servicer shall remain obligated and primarily liable to
the Trustee, the Certificateholders and the Certificate Insurer for the
servicing and administering of the Mortgage Loans in accordance with the
provisions of Section 3.01 without diminution of such obligation or liability by
virtue of such Sub-Servicing Agreements or arrangements or by virtue of
indemnification from the Sub-Servicer and to the same extent and under the same
terms and conditions as if the Master Servicer alone were servicing and
administering the Mortgage Loans. The Master Servicer shall be entitled to enter
into any agreement with a Sub-Servicer for indemnification of the Master
Servicer by such SubServicer and nothing contained in this Agreement shall be
deemed to limit or modify such indemnification.
SECTION 3.05. No Contractual Relationship Between
Sub-Servicers and Trustee or
Certificateholders.
Any Sub-Servicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Sub-Servicer
in its capacity as such shall be deemed to be between the Sub-Servicer and the
Master Servicer alone, and the Trustee and Certificateholders or the Certificate
Insurer shall not be deemed parties thereto and shall have no claims, rights,
obligations, duties or liabilities with respect to the Sub-Servicer except as
set
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forth in Section 3.06. The Master Servicer shall be solely liable for all fees
owed by it to any Sub-Servicer, irrespective of whether the Master Servicer's
compensation pursuant to this Agreement is sufficient to pay such fees.
SECTION 3.06. Assumption or Termination of Sub-Servicing
Agreements by Trustee.
In the event the Master Servicer shall for any reason no
longer be the master servicer (including by reason of the occurrence of a Master
Servicer Event of Default), the Trustee or its designee shall thereupon assume
all of the rights and obligations of the Master Servicer under each
Sub-Servicing Agreement that the Master Servicer may have entered into, unless
the Trustee or the Certificate Insurer elects to terminate any Sub-Servicing
Agreement in accordance with its terms as provided in Section 3.03. Upon such
assumption, the Trustee, its designee or the successor servicer for the Trustee
appointed pursuant to Section 7.02 shall be deemed, subject to Section 3.03, to
have assumed all of the Master Servicer's interest therein and to have replaced
the Master Servicer as a party to each Sub-Servicing Agreement to the same
extent as if each Sub-Servicing Agreement had been assigned to the assuming
party, except that (i) the Master Servicer shall not thereby be relieved of any
liability or obligations under any Sub-Servicing Agreement that arose before it
ceased to be the Master Servicer and (ii) none of the Trustee, its designee or
any successor Master Servicer shall be deemed to have assumed any liability or
obligation of the Master Servicer that arose before it ceased to be the Master
Servicer.
The Master Servicer at its expense shall, upon request of the
Trustee, deliver to the assuming party all documents and records relating to
each Sub-Servicing Agreement and the Mortgage Loans then being serviced and an
accounting of amounts collected and held by or on behalf of it, and otherwise
use its best efforts to effect the orderly and efficient transfer of the
Sub-Servicing Agreements to the assuming party.
SECTION 3.07. Collection of Certain Mortgage Loan Payments.
The Master Servicer shall make reasonable efforts to collect
all payments called for under the terms and provisions of the Mortgage Loans,
and shall, to the extent such procedures shall be consistent with this
Agreement, follow such collection procedures as it would follow with respect to
mortgage loans comparable to the Mortgage Loans and held for its own account.
Consistent with the foregoing, the Master Servicer may in its discretion (i)
waive any late payment charge or, if applicable, penalty interest, and (ii)
extend the due dates for the Monthly Payments due on a Mortgage Note for a
period of not greater than 180 days; provided that any extension pursuant to
clause (ii) above shall not affect the amortization schedule of any Mortgage
Loan for purposes of any computation hereunder.
SECTION 3.08. Sub-Servicing Accounts.
In those cases where a Sub-Servicer is servicing a Mortgage
Loan pursuant to a Sub-Servicing Agreement, the Sub-Servicer will be required to
establish and maintain one or
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more accounts (collectively, the "Sub-Servicing Account"). The Sub-Servicing
Account shall be an Eligible Account and shall comply with all requirements of
this Agreement relating to the Collection Account. The Sub-Servicer shall
deposit in the clearing account in which it customarily deposits payments and
collections on mortgage loans in connection with its mortgage loan servicing
activities on a daily basis, and in no event more than one Business Day after
the Sub-Servicer's receipt thereof, all proceeds of Mortgage Loans received by
the Sub-Servicer less its servicing compensation to the extent permitted by the
Sub-Servicing Agreement, and shall thereafter deposit such amounts in the
Sub-Servicing Account, in no event more than two Business Days after the receipt
of such amounts. The Sub-Servicer shall thereafter deposit such proceeds in the
Collection Account or remit such proceeds to the Master Servicer for deposit in
the Collection Account not later than two Business Days after the deposit of
such amounts in the Sub-Servicing Account. For purposes of this Agreement, the
Master Servicer shall be deemed to have received payments on the Mortgage Loans
when the Sub-Servicer receives such payments.
SECTION 3.09. Collection of Taxes, Assessments and Similar
Items; Servicing Accounts.
The Master Servicer shall establish and maintain, or cause to
be established and maintained, one or more accounts (the "Servicing Accounts"),
into which all collections from the Mortgagors (or related advances from
Sub-Servicers) for the payment of taxes, assessments, hazard insurance premiums
and comparable items for the account of the Mortgagors ("Escrow Payments") shall
be deposited and retained. Servicing Accounts shall be Eligible Accounts. The
Master Servicer shall deposit in the clearing account in which it customarily
deposits payments and collections on mortgage loans in connection with its
mortgage loan servicing activities on a daily basis, and in no event more than
one Business Day after the Master Servicer's receipt thereof, all Escrow
Payments collected on account of the Mortgage Loans and shall thereafter deposit
such Escrow Payments in the Servicing Accounts, in no event more than two
Business Days after the receipt of such Escrow Payments, all Escrow Payments
collected on account of the Mortgage Loans for the purpose of effecting the
timely payment of any such items as required under the terms of this Agreement.
Withdrawals of amounts 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 Master Servicer (or a Sub-Servicer to the extent
provided in the related Sub-Servicing Agreement) out of related collections for
any advances made pursuant to Section 3.01 (with respect to taxes and
assessments) and Section 3.14 (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
the Master Servicer's obligations and responsibilities in respect of the
Mortgage Loans under this Agreement in accordance with Article X. As part of its
servicing duties, the Master Servicer or Sub-Servicers 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 therefor.
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SECTION 3.10. Collection Account and Distribution Account.
(a) On behalf of the Trust Fund, the Master Servicer shall
establish and maintain, or cause to be established and maintained, one or more
accounts (such account or accounts, the "Collection Account"), held in trust for
the benefit of the Trustee, the Certificateholders and the Certificate Insurer.
On behalf of the Trust Fund, the Master Servicer shall deposit or cause to be
deposited in the clearing account in which it customarily deposits payments and
collections on mortgage loans in connection with its mortgage loan servicing
activities on a daily basis, and in no event more than one Business Day after
the Master Servicer's receipt thereof, and shall thereafter deposit in the
Collection Account, in no event more than two Business Days after the Master
Servicer's receipt thereof, as and when received or as otherwise required
hereunder, the following payments and collections received or made by it
subsequent to the Cut-off Date (other than in respect of principal or interest
on the related Mortgage Loans due on or before the Cut-off Date), or payments
(other than Principal Prepayments) received by it on or prior to the Cut-off
Date but allocable to a Due Period subsequent thereto:
(i) all payments on account of principal, including
Principal Prepayments, on the Mortgage Loans;
(ii) all payments on account of interest (net of the
related Servicing Fee) on each Mortgage Loan and any
Prepayment Premiums;
(iii) all Insurance Proceeds and Liquidation Proceeds
(other than proceeds collected in respect of any particular
REO Property and amounts paid in connection with a purchase of
Mortgage Loans and REO Properties pursuant to Section 10.01);
(iv) any amounts required to be deposited pursuant to
Section 3.12 in connection with any losses realized on
Permitted Investments with respect to funds held in the
Collection Account; and
(v) any amounts required to be deposited by the Master
Servicer pursuant to the second paragraph of Section 3.14(a)
in respect of any blanket policy deductibles.
The foregoing requirements for deposit in the Collection
Accounts shall be exclusive, it being understood and agreed that, without
limiting the generality of the foregoing, payments in the nature of late payment
charges, modification or assumption fees, or insufficient funds charges need not
be deposited by the Master Servicer in the Collection Account and may be
retained by the Master Servicer as additional compensation. In the event the
Master Servicer shall deposit in the Collection Account any amount not required
to be deposited therein, it may at any time withdraw such amount from the
Collection Account, any provision herein to the contrary notwithstanding.
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(b) On behalf of the Trust Fund, the Trustee shall establish
and maintain one or more accounts (such account or accounts, the "Distribution
Account"), held in trust for the benefit of the Certificateholders and the
Certificate Insurer. On behalf of the Trust Fund, the Master Servicer shall
deliver to the Trustee in immediately available funds for deposit in the
Distribution Account on or before 3:00 p.m. New York time (i) on the Master
Servicer Remittance Date, that portion of the Available Distribution Amount
(calculated without regard to the references in clause (2) of the definition
thereof to amounts that may be withdrawn from the Distribution Account) for the
related Distribution Date then on deposit in the Collection Account, and (ii) on
each Business Day as of the commencement of which the balance on deposit in the
Collection Account exceeds $75,000 following any withdrawals pursuant to the
next succeeding sentence, the amount of such excess, but only if the Collection
Account constitutes an Eligible Account solely pursuant to clause (ii) of the
definition of "Eligible Account." If the balance on deposit in the Collection
Account exceeds $75,000 as of the commencement of business on any Business Day
and the Collection Account constitutes an Eligible Account solely pursuant to
clause (ii) of the definition of "Eligible Account," the Master Servicer shall,
on or before 3:00 p.m. New York time on such Business Day, withdraw from the
Collection Account any and all amounts payable or reimbursable to the Depositor,
the Master Servicer, the Trustee, the Seller or any Sub-Servicer pursuant to
Section 3.11 and shall pay such amounts to the Persons entitled thereto.
(c) Funds in the Collection Account and the Distribution
Account may be invested in Permitted Investments in accordance with the
provisions set forth in Section 3.12. The Master Servicer shall give notice to
the Trustee and the Certificate Insurer of the location of the Collection
Account maintained by it when established and prior to any change thereof. The
Trustee shall give notice to the Master Servicer, the Depositor and the
Certificate Insurer of the location of the Distribution Account when established
and prior to any change thereof.
(d) Funds held in the Collection Account at any time may be
delivered by the Master Servicer to the Trustee for deposit in an account (which
may be the Distribution Account and must satisfy the standards for the
Distribution Account as set forth in the definition thereof) and for all
purposes of this Agreement shall be deemed to be a part of the Collection
Account; provided, however, that the Trustee shall have the sole authority to
withdraw any funds held pursuant to this subsection (d). In the event the Master
Servicer shall deliver to the Trustee for deposit in the Distribution Account
any amount not required to be deposited therein, it may at any time request that
the Trustee withdraw such amount from the Distribution Account and remit to it
any such amount, any provision herein to the contrary notwithstanding. In
addition, the Master Servicer, with respect to items (i) through (v) below,
shall deliver to the Trustee from time to time for deposit, and the Trustee,
with respect to items (i) through (vi) below, shall so deposit, in the
Distribution Account:
(i) any P&I Advances, as required pursuant to Section
4.03;
(ii) any amounts required to be deposited pursuant to
Section 3.23(d) or (f) in connection with any REO Property;
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(iii) any amounts to be paid in connection with a
purchase of Mortgage Loans and REO Properties pursuant to
Section 10.01;
(iv) any amounts required to be deposited pursuant to
Section 3.24 in connection with any Prepayment Interest
Shortfall;
(v) any Stayed Funds, as soon as permitted by the
federal bankruptcy court having jurisdiction in such matters;
and
(vi) any amounts required to be transferred from the
REMIC II Reserve Fund pursuant to Section 4.06 or from the
Policy Payments Account pursuant to Section 9.04(b) on any
Distribution Date.
(e) Promptly upon receipt of any Stayed Funds, whether from
the Master Servicer, a trustee in bankruptcy, federal bankruptcy court or other
source, the Trustee shall deposit such funds in the Distribution Account,
subject to withdrawal thereof pursuant to Section 7.02(b) or as otherwise
permitted hereunder.
(f) The Master Servicer shall deposit in the Collection
Account or Distribution Account, as the case may be, any amounts required to be
deposited pursuant to Section 3.12(b) in connection with losses realized on
Permitted Investments with respect to funds held in the Collection Account or
Distribution Account, respectively.
SECTION 3.11. Withdrawals from the Collection Account and
Distribution Account.
The Master Servicer shall, from time to time, make withdrawals
from the Collection Account for any of the following purposes or as described in
Section 4.03:
(i) to remit to the Trustee for deposit in the
Distribution Account the amounts required to be so remitted
pursuant to Section 3.10(b) or permitted to be so remitted
pursuant to the first sentence of Section 3.10(d);
(ii) subject to Section 3.16(d), to reimburse the Master
Servicer for P&I Advances, but only to the extent of amounts
received which represent Late Collections (net of the related
Servicing Fees) of Monthly Payments on Mortgage Loans with
respect to which such P&I Advances were made in accordance
with the provisions of Section 4.03;
(iii) subject to Section 3.16(d), to pay the Master
Servicer or any SubServicer (a) any unpaid Servicing Fees, (b)
any unreimbursed Servicing Advances with respect to each
Mortgage Loan, but only to the extent of any Late Collections,
Liquidation Proceeds and Insurance Proceeds received with
respect to such Mortgage Loan, and (c) any Nonrecoverable
Servicing Advances with respect to the final liquidation of a
Mortgage Loan, but only to the extent that
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Late Collections, Liquidation Proceeds and Insurance Proceeds
received with respect to such Mortgage Loan are insufficient
to reimburse the Master Servicer or any Sub-Servicer for
Servicing Advances;
(iv) to pay to the Master Servicer as servicing
compensation (in addition to the Servicing Fee) on the Master
Servicer Remittance Date any interest or investment income
earned on funds deposited in the Collection Account;
(v) to pay to the Master Servicer, the Depositor, or
the Seller, as the case may be, with respect to each Mortgage
Loan that has previously been purchased or replaced pursuant
to Section 2.03 or Section 3.16(c) all amounts received
thereon subsequent to the date of purchase or substitution, as
the case may be;
(vi) to reimburse the Master Servicer for any P&I
Advance previously made which the Master Servicer has
determined to be a Nonrecoverable P&I Advance in accordance
with the provisions of Section 4.03;
(vii) to reimburse the Master Servicer or the Depositor
for expenses incurred by or reimbursable to the Master
Servicer or the Depositor, as the case may be, pursuant to
Section 6.03;
(viii) to reimburse the Master Servicer or the Trustee, as
the case may be, for expenses reasonably incurred in
connection with any breach or defect giving rise to the
purchase obligation under Section 2.03 or Section 2.04 of this
Agreement, including any expenses arising out of the
enforcement of the purchase obligation;
(ix) to pay, or to reimburse the Master Servicer for
advances in respect of, expenses incurred in connection with
any Mortgage Loan pursuant to Section 3.16(b); and
(x) to clear and terminate the Collection Account
pursuant to Section 10.01.
The Trustee shall be entitled to withdraw amounts from the
Distribution Account to transfer funds to the Expense Account on the Business
Day immediately preceding each Distribution Date pursuant to Section 3.25(b)
prior to any payments to Certificateholders and the Certificate Insurer pursuant
to Section 4.01. In addition, on each Distribution Date, the Trustee shall be
entitled to withdraw from the Distribution Account amounts to which it is
entitled pursuant to Section 8.05 and the Available Distribution Amount pursuant
to Section 4.01. The Trustee shall also withdraw from the Distribution Account
and pay to the Master Servicer on each Distribution Date as servicing
compensation any interest or investment income earned on funds deposited in the
Distribution Account. The Master Servicer shall keep and
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maintain separate accounting, on a Mortgage Loan by Mortgage Loan basis, for the
purpose of justifying any withdrawal from the Collection Account, to the extent
held by or on behalf of it, pursuant to subclauses (ii), (iii), (iv), (v), (vi),
(viii) and (ix) above. The Master Servicer shall provide written notification to
the Trustee, on or prior to the next succeeding Master Servicer Remittance Date,
upon making any withdrawals from the Collection Account pursuant to subclauses
(vi) and (vii) above; provided that an Officer's Certificate in the form
described under Section 4.03(d) shall suffice for such written notification to
the Trustee in respect hereof.
SECTION 3.12. Investment of Funds in the Collection Account,
the Expense Account and the Distribution
Account.
(a) The Master Servicer may direct any depository institution
maintaining the Collection Account, the Distribution Account and the Expense
Account (each, for purposes of this Section 3.12, an "Investment Account") to
invest the funds (other than the Initial Deposit) in such Investment Account in
one or more Permitted Investments bearing interest or sold at a discount, and
maturing, unless payable on demand, (i) no later than the Business Day
immediately preceding the date on which such funds are required to be withdrawn
from such account pursuant to this Agreement, if a Person other than the Trustee
is the obligor thereon, and (ii) no later than the date on which such funds are
required to be withdrawn from such account pursuant to this Agreement, if the
Trustee is the obligor thereon. All such Permitted Investments shall be held to
maturity, unless payable on demand. Any investment of funds in an Investment
Account shall be made in the name of the Trustee (in its capacity as such) or in
the name of a nominee of the Trustee. The Trustee shall be entitled to sole
possession (except with respect to investment direction of funds held in the
Collection Account, the Distribution Account and the Expense Account and any
income and gain realized thereon) over each such investment, and any certificate
or other instrument evidencing any such investment shall be delivered directly
to the Trustee or its agent, together with any document of transfer necessary to
transfer title to such investment to the Trustee or its nominee. In the event
amounts on deposit in an Investment Account are at any time invested in a
Permitted Investment payable on demand, the Trustee shall:
(x) consistent with any notice required to be given
thereunder, demand that payment thereon be made on
the last day such Permitted Investment may otherwise
mature hereunder in an amount equal to the lesser of
(1) all amounts then payable thereunder and (2) the
amount required to be withdrawn on such date; and
(y) demand payment of all amounts due thereunder promptly
upon determination by a Responsible Officer of the
Trustee that such Permitted Investment would not
constitute a Permitted Investment in respect of funds
thereafter on deposit in the Investment Account.
(b) All income and gain realized from the investment of funds
deposited in the Collection Account, the Distribution Account, the Expense
Account and the REO Account held by or on behalf of the Master Servicer shall be
for the benefit of the Master Servicer and shall
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be subject to its withdrawal in accordance with Section 3.11 or 3.23, as
applicable, or withdrawal by the Trustee in accordance with Section 3.11 or
3.25, as applicable. The Master Servicer shall deposit in the Collection
Account, the Distribution Account, the Expense Account or the REO Account, as
applicable, the amount of any loss of principal incurred in respect of any such
Permitted Investment made with funds in such accounts immediately upon
realization of such loss.
(c) Except as otherwise expressly provided in this Agreement,
if any default occurs in the making of a payment due under any Permitted
Investment, or if a default occurs in any other performance required under any
Permitted Investment, the Trustee may and, subject to Section 8.01 and Section
8.02(v), upon the request of the Certificate Insurer or the Holders of
Certificates representing more than 50% of the Voting Rights allocated to any
Class of Certificates, shall take such action as may be appropriate to enforce
such payment or performance, including the institution and prosecution of
appropriate proceedings.
SECTION 3.13. [intentionally omitted]
SECTION 3.14. Maintenance of Hazard Insurance and Errors and
Omissions and Fidelity Coverage.
(a) The Master Servicer shall cause to be maintained for each
Mortgage Loan fire insurance with extended coverage on the related Mortgaged
Property in an amount which is at least equal to the lesser of the current
principal balance of such Mortgage Loan and the amount necessary to fully
compensate for any damage or loss to the improvements that are a part of such
property on a replacement cost basis, in each case in an amount not less than
such amount as is necessary to avoid the application of any coinsurance clause
contained in the related hazard insurance policy. The Master Servicer shall also
cause to be maintained fire insurance with extended coverage on each REO
Property in an amount which is at least equal to the lesser of (i) the maximum
insurable value of the improvements which are a part of such property and (ii)
the outstanding principal balance of the related Mortgage Loan at the time it
became an REO Property, plus accrued interest at the Mortgage Rate and related
Servicing Advances. The Master Servicer will comply in the performance of this
Agreement with all reasonable rules and requirements of each insurer under any
such hazard policies. Any amounts to be collected by the Master 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 the procedures that the Master Servicer would
follow in servicing loans held for its own account, subject to the terms and
conditions of the related Mortgage and Mortgage Note) shall be deposited in the
Collection Account, subject to withdrawal pursuant to Section 3.11, if received
in respect of a Mortgage Loan, or in the REO Account, subject to withdrawal
pursuant to Section 3.23, if received in respect of an REO Property. Any cost
incurred by the Master Servicer in maintaining any such insurance shall not, for
the purpose of calculating distributions to Certificateholders and the
Certificate Insurer, be added to the unpaid 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
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as shall at any time be in force and as shall require such additional insurance.
If the Mortgaged Property or REO Property is at any time in an area identified
in the Federal Register by the Federal Emergency Management Agency as having
special flood hazards and flood insurance has been made available, the Master
Servicer will cause to be maintained a flood insurance policy in respect
thereof. Such flood insurance shall be in an amount equal to the lesser of (i)
the unpaid principal balance of the related Mortgage Loan and (ii) the maximum
amount of such insurance available for the related Mortgaged Property under the
national flood insurance program (assuming that the area in which such Mortgaged
Property is located is participating in such program).
In the event that the Master Servicer shall obtain and
maintain a blanket policy with an insurer having a General Policy Rating of A:X
or better in Best's Key Rating Guide (or such other rating that is comparable to
such rating) insuring against hazard losses on all of the Mortgage Loans, it
shall conclusively be deemed to have satisfied its obligations as set forth in
the first two sentences of this Section 3.14, it being understood and agreed
that such policy may contain a deductible clause, in which case the Master
Servicer shall, in the event that there shall not have been maintained on the
related Mortgaged Property or REO Property a policy complying with the first two
sentences of this Section 3.14, and there shall have been one or more losses
which would have been covered by such policy, deposit to the Collection Account
from its own funds the amount not otherwise payable under the blanket policy
because of such deductible clause. In connection with its activities as
administrator and servicer of the Mortgage Loans, the Master Servicer agrees to
prepare and present, on behalf of itself, the Trustee, Certificateholders and
the Certificate Insurer, claims under any such blanket policy in a timely
fashion in accordance with the terms of such policy.
(b) The Master 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 Master 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, unless the Master Servicer has obtained a waiver of such requirements
from FNMA or FHLMC. The Master Servicer shall also maintain a fidelity bond in
the form and amount that would meet the requirements of FNMA or FHLMC, unless
the Master Servicer has obtained a waiver of such requirements from FNMA or
FHLMC. The Master Servicer shall be deemed to have complied with this provision
if an Affiliate of the Master 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 Master Servicer. Any such
errors and omissions policy and fidelity bond shall by its terms not be
cancelable without thirty days' prior written notice to the Trustee. The Master
Servicer shall also cause each Sub-Servicer to maintain a policy of insurance
covering errors and omissions and a fidelity bond which would meet such
requirements.
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SECTION 3.15. Enforcement of Due-On-Sale Clauses; Assumption
Agreements.
The Master 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; provided,
however, that the Master Servicer shall not be required to take such action if
in its sole business judgment the Master Servicer believes it is not in the best
interests of the Trust Fund and shall not exercise any such rights if prohibited
by law from doing so. If the Master Servicer reasonably believes it is unable
under applicable law to enforce such "due-on-sale" clause, or if any of the
other conditions set forth in the proviso to the preceding sentence apply, the
Master Servicer will 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 Master Servicer 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, provided that no such
substitution shall be effective unless such person satisfies the underwriting
criteria of the Master Servicer and has a credit risk rating at least equal to
that of the original Mortgagor. In connection with any assumption or
substitution, the Master Servicer shall apply such underwriting standards and
follow such practices and procedures as shall be normal and usual in its general
mortgage servicing activities and as it applies to other mortgage loans owned
solely by it. The Master Servicer shall not take or enter into any assumption
and modification agreement, however, unless (to the extent practicable in the
circumstances) it shall have received confirmation, in writing, of the continued
effectiveness of any applicable hazard insurance policy. Any fee collected by
the Master Servicer in respect of an assumption, modification or substitution of
liability agreement shall be retained by the Master 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 Rate and
the amount of the Monthly Payment) may be amended or modified, except as
otherwise required pursuant to the terms thereof. The Master Servicer shall
notify the Trustee that any such substitution, modification or assumption
agreement has been completed by forwarding to the Trustee the executed original
of such substitution, modification or assumption agreement, which document shall
be added to the related Mortgage File and shall, for all purposes, be considered
a part of such Mortgage File to the same extent as all other documents and
instruments constituting a part thereof.
Notwithstanding the foregoing paragraph or any other provision
of this Agreement, the Master 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 Master Servicer may be restricted by
law from preventing, for any reason whatever. For purposes of this Section 3.15,
the term "assumption" is deemed to also include a sale (of the Mortgaged
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Property) subject to the Mortgage that is not accompanied by an assumption or
substitution of liability agreement.
SECTION 3.16. Realization Upon Defaulted Mortgage Loans.
(a) The Master Servicer shall use its best efforts, consistent
with Accepted Servicing Practices, to foreclose upon or otherwise comparably
convert the ownership of properties securing such of the Mortgage Loans as come
into and continue in default and as to which no satisfactory arrangements can be
made for collection of delinquent payments pursuant to Section 3.07. The Master
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 Master Servicer as contemplated in
Section 3.11 and 3.23. The foregoing is subject to the provision that, in any
case in which Mortgaged Property shall have suffered damage from an Uninsured
Cause, the Master Servicer shall not be required to expend its own funds toward
the restoration of such property unless it shall determine in its discretion
that such restoration will increase the proceeds of liquidation of the related
Mortgage Loan after reimbursement to itself for such expenses.
(b) Notwithstanding the foregoing provisions of this Section
3.16 or any other provision of this Agreement, with respect to any Mortgage Loan
as to which the Master Servicer has received actual notice of, or has actual
knowledge of, the presence of any toxic or hazardous substance on the related
Mortgaged Property, the Master Servicer shall not, on behalf of the Trustee,
either (i) obtain title to such Mortgaged Property as a result of or in lieu of
foreclosure or otherwise, or (ii) otherwise acquire possession of, or take any
other action with respect to, such Mortgaged Property, if, as a result of any
such action, the Trustee, the Trust Fund, the Certificateholders or the
Certificate Insurer would be considered to hold title to, to be a
"mortgagee-in-possession" of, or to be an "owner" or "operator" of such
Mortgaged Property within the meaning of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended from time to time,
or any comparable law, unless the Master Servicer has also previously
determined, based on its reasonable judgment and a report prepared by a Person
who regularly conducts environmental audits using customary industry standards,
that:
(1) such Mortgaged Property is in compliance with
applicable environmental laws or, if not, that it would be in
the best economic interest of the Trust Fund to take such
actions as are necessary to bring the Mortgaged Property into
compliance therewith; and
(2) there are no circumstances present at such
Mortgaged Property relating to the use, management or disposal
of any hazardous substances, hazardous materials, hazardous
wastes, or petroleum-based materials for which investigation,
testing, monitoring, containment, clean-up or remediation
could be required under any federal, state or local law or
regulation, or that if any such materials are present for
which such action could be required, that it would be in the
best economic interest of the Trust Fund to take such actions
with respect to the affected Mortgaged Property.
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The cost of the environmental audit report contemplated by
this Section 3.23 shall be advanced by the Master Servicer, subject to the
Master Servicer's right to be reimbursed therefor from the Collection Account as
provided in Section 3.11(ix), such right of reimbursement being prior to the
rights of Certificateholders to receive any amount in the Collection Account
received in respect of the affected Mortgage Loan or other Mortgage Loans.
If the Master Servicer determines, as described above, that it
is in the best economic interest of the Trust Fund to take such actions as are
necessary to bring any such Mortgaged Property into compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
wastes or petroleum-based materials affecting any such Mortgaged Property, then
the Master Servicer shall take such action as it deems to be in the best
economic interest of the Trust Fund; provided that any amounts disbursed by the
Master Servicer pursuant to this Section 3.16(b) shall constitute Servicing
Advances, subject to Section 4.03(d). The cost of any such compliance,
containment, cleanup or remediation shall be advanced by the Master Servicer,
subject to the Master Servicer's right to be reimbursed therefor from the
Collection Account as provided in Section 3.11(iii) and (ix), such right of
reimbursement being prior to the rights of Certificateholders to receive any
amount in the Collection Account received in respect of the affected Mortgage
Loan or other Mortgage Loans.
(c) The Master Servicer may at its option purchase from REMIC
I any Mortgage Loan that is 90 days or more delinquent, which the Master
Servicer determines in good faith will otherwise become subject to foreclosure
proceedings (evidence of such determination to be delivered in writing to the
Trustee and the Certificate Insurer prior to purchase), at a price equal to the
Purchase Price; provided, however, that the Master Servicer purchases any such
Mortgage Loans on the basis of delinquency, purchasing the most delinquent
Mortgage Loans first. The Purchase Price for any Mortgage Loan purchased
hereunder shall be deposited in the Collection Account, and the Trustee, upon
receipt of written certification from the Master Servicer of such deposit, shall
release or cause to be released to the Master Servicer the related Mortgage File
and shall execute and deliver such instruments of transfer or assignment, in
each case without recourse, as the Master Servicer shall furnish and as shall be
necessary to vest in the Master Servicer title to any Mortgage Loan released
pursuant hereto.
(d) Proceeds received in connection with any Final Recovery
Determination, as well as any recovery resulting from a partial collection of
Insurance Proceeds or Liquidation Proceeds, in respect of any Mortgage Loan,
will be applied in the following order of priority: FIRST, to reimburse the
Master Servicer or any Sub-Servicer for any related unreimbursed Servicing
Advances and P&I Advances, pursuant to Section 3.11(ii) or (iii); SECOND, to
accrued and unpaid interest on the Mortgage Loan, to the date of the Final
Recovery Determination, or to the Due Date prior to the Distribution Date on
which such amounts are to be distributed if not in connection with a Final
Recovery Determination; and THIRD, as a recovery of principal of the Mortgage
Loan. If the amount of the recovery so allocated to interest is less than the
full amount of accrued and unpaid interest due on such Mortgage Loan, the amount
of such recovery will be allocated by the Master Servicer as follows: FIRST, to
unpaid Servicing Fees; and SECOND, to the balance of the interest then due and
owing. The portion of the recovery so allocated to
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unpaid Servicing Fees shall be reimbursed to the Master Servicer or any
Sub-Servicer pursuant to Section 3.11(iii). The portion of the recovery
allocated to interest (net of unpaid Servicing Fees) and the portion of the
recovery allocated to principal of the Mortgage Loan shall be applied as
follows: FIRST, to reimburse the Master Servicer for any related unreimbursed
P&I Advances and Servicing Advances in accordance with Section 3.11, and SECOND,
as part of the amounts to be transferred to the Distribution Account in
accordance with Section 3.10(b).
SECTION 3.17. Trustee to Cooperate; Release of Mortgage Files.
(a) Upon the payment in full of any Mortgage Loan, or the
receipt by the Master Servicer of a notification that payment in full shall be
escrowed in a manner customary for such purposes, the Master Servicer will
immediately notify the Trustee and the Certificate Insurer by a certification in
the form of Exhibit E-2 (which certification shall include a statement to the
effect that all amounts received or to be received in connection with such
payment which are required to be deposited in the Collection Account pursuant to
Section 3.10 have been or will be so deposited) of a Servicing Officer and shall
request delivery to it of the Mortgage File. Upon receipt of such certification
and request, the Trustee shall promptly release the related Mortgage File to the
Master Servicer. No expenses incurred in connection with any instrument of
satisfaction or deed of reconveyance shall be chargeable to the Collection
Account or the Distribution Account.
(b) From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, including, for this purpose, collection under
any insurance policy relating to the Mortgage Loans, the Trustee shall, upon
request of the Master Servicer and delivery to the Trustee of a Request for
Release in the form of Exhibit E-l, release the related Mortgage File to the
Master Servicer, and the Trustee shall, at the direction of the Master Servicer,
execute such documents as shall be necessary to the prosecution of any such
proceedings. Such Request for Release shall obligate the Master Servicer to
return each and every document previously requested from the Mortgage File to
the Trustee when the need therefor by the Master Servicer no longer exists,
unless the Mortgage Loan has been liquidated and the Liquidation Proceeds
relating to the Mortgage Loan have been deposited in the Collection Account or
the Mortgage 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 Master
Servicer has delivered, or caused to be delivered, to the Trustee an additional
Request for Release certifying as to such liquidation or action or proceedings.
Upon the request of the Trustee or the Certificate Insurer, the Master Servicer
shall provide notice to the Trustee and Certificate Insurer of the name and
address of the Person to which such Mortgage File or such document was delivered
and the purpose or purposes of such delivery. 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 that are
required to be deposited into the Collection Account have been so deposited, or
that such Mortgage Loan has become an REO Property, any outstanding Requests for
Release with respect to such Mortgage Loan shall be released by the Trustee to
the Master Servicer.
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(c) Upon written certification of a Servicing Officer, the
Trustee shall execute and deliver to the Master Servicer or the Sub-Servicer, as
the case may be, and upon the request of the Certificate Insurer the Master
Servicer shall deliver or cause to be delivered to the Certificate Insurer
copies of, 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.
SECTION 3.18. Servicing Compensation.
As compensation for the activities of the Master Servicer
hereunder, the Master Servicer shall be entitled to the Servicing Fee with
respect to each Mortgage Loan payable solely from payments of interest in
respect of such Mortgage Loan, subject to Section 3.24. In addition, the Master
Servicer shall be entitled to recover unpaid Servicing Fees out of Insurance
Proceeds or Liquidation Proceeds to the extent permitted by Section 3.11(iii)
and out of amounts derived from the operation and sale of an REO Property to the
extent permitted by Section 3.23. The right to receive the Servicing Fee may not
be transferred in whole or in part except in connection with the transfer of all
of the Master Servicer's responsibilities and obligations under this Agreement;
provided, however, that the Master Servicer may pay from the Servicing Fee any
amounts due to a Sub-Servicer pursuant to a Sub-Servicing Agreement entered into
under Section 3.02.
Additional servicing compensation in the form of assumption or
modification fees, late payment charges, insufficient funds charges or otherwise
(other than Prepayment Premiums) shall be retained by the Master Servicer only
to the extent such fees or charges are received by the Master Servicer. The
Master Servicer shall also be entitled pursuant to Section 3.11(iv) to withdraw
from the Collection Account, pursuant to Section 3.11 to be paid by the Trustee
from the Distribution Account, pursuant to Section 3.25 to be paid by the
Trustee from the Expense Account, and pursuant to Section 3.23(b) to withdraw
from any REO Account, as additional servicing compensation, interest or other
income earned on deposits therein, subject to Section 3.12 and Section 3.24. The
Master Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder (including premiums for the
insurance required by Section 3.14, to the extent such premiums are not paid by
the related Mortgagors or by a Sub-Servicer, servicing compensation of each
Sub-Servicer, and to the extent provided herein in Section 8.05, the fees and
expenses of the Trustee) and shall not be entitled to reimbursement therefor
except as specifically provided herein.
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SECTION 3.19. Reports to the Trustee; Collection Account
Statements.
Not later than twenty days after each Distribution Date, the
Master Servicer shall forward to the Trustee, the Certificate Insurer and the
Depositor the most current available bank statement for the Collection Account.
Copies of such statement shall be provided by the Trustee to any
Certificateholder and to any Person identified to the Trustee as a prospective
transferee of a Certificate, upon request at the expense of the requesting
party, provided such statement is delivered by the Master Servicer to the
Trustee.
SECTION 3.20. Statement as to Compliance.
The Master Servicer will deliver to the Trustee, the
Certificate Insurer and the Depositor not later than 90 days following the end
of the fiscal year of the Master Servicer, which as of the Closing Date ends on
the last day in December, an Officers' Certificate stating, as to each signatory
thereof, that (i) a review of the activities of the Master Servicer during the
preceding year and of performance under this Agreement has been made under such
officers' supervision and (ii) to the best of such officers' knowledge, based on
such review, the Master 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
officer and the nature and status thereof. Copies of any such statement shall be
provided by the Trustee to any Certificateholder and to any Person identified to
the Trustee as a prospective transferee of a Certificate, upon request at the
expense of the requesting party, provided such statement is delivered by the
Master Servicer to the Trustee.
SECTION 3.21. Independent Public Accountants' Servicing
Report.
Not later than 90 days following the end of each fiscal year
of the Master Servicer, the Master Servicer, at its expense, shall cause a
nationally recognized firm of independent certified public accountants to
furnish to the Master Servicer a report stating that (i) it has obtained a
letter of representation regarding certain matters from the management of the
Master Servicer which includes an assertion that the Master Servicer has
complied with certain minimum residential mortgage loan servicing standards,
identified in the Uniform Single Attestation Program for Mortgage Bankers
established by the Mortgage Bankers Association of America, with respect to the
servicing of residential mortgage loans during the most recently completed
fiscal year and (ii) on the basis of an examination conducted by such firm in
accordance with standards established by the American Institute of Certified
Public Accountants, such representation is fairly stated in all material
respects, subject to such exceptions and other qualifications that may be
appropriate. In rendering its report such firm may rely, as to matters relating
to the direct servicing of residential mortgage loans by Sub-Servicers, upon
comparable reports of firms of independent certified public accountants rendered
on the basis of examinations conducted in accordance with the same standards
(rendered within one year of such report) with respect to those Sub-Servicers.
Immediately upon receipt of such report, the Master Servicer shall furnish a
copy of such report to the Trustee, the Certificate Insurer and each Rating
Agency. Copies of such statement shall be provided by the Trustee to any
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Certificateholder upon request at the Master Servicer's expense, provided that
such statement is delivered by the Master Servicer to the Trustee.
SECTION 3.22. Access to Certain Documentation.
The Master Servicer shall provide to the Office of Thrift
Supervision, the FDIC, and any other federal or state banking or insurance
regulatory authority that may exercise authority over any Certificateholder,
access to the documentation regarding the Mortgage Loans required by applicable
laws and regulations. Such access shall be afforded without charge, but only
upon reasonable request and during normal business hours at the offices of the
Master Servicer designated by it. In addition, access to the documentation
regarding the Mortgage Loans will be provided to any Certificateholder, the
Certificate Insurer, the Trustee and to any Person identified to the Master
Servicer as a prospective transferee of a Certificate, upon reasonable request
during normal business hours at the offices of the Master Servicer designated by
it at the expense of the Person requesting such access.
SECTION 3.23. Title, Management and Disposition of REO
Property.
(a) The deed or certificate of sale of any REO Property shall
be taken in the name of the Trustee, or its nominee, in trust for the benefit of
the Certificateholders and the Certificate Insurer. The Master Servicer, on
behalf of REMIC I, shall either sell any REO Property within two years after
REMIC I acquires ownership of such REO Property for purposes of Section
860G(a)(8) of the Code or request from the Internal Revenue Service, more than
60 days before the day on which the two-year grace period would otherwise
expire, an extension of the two-year grace period, unless the Master Servicer
had delivered to the Trustee an Opinion of Counsel, addressed to the Trustee,
the Depositor and the Certificate Insurer, to the effect that the holding by
REMIC I of such REO Property subsequent to two years after its acquisition will
not result in the imposition on either REMIC I or REMIC II of taxes on
"prohibited transactions" thereof, as defined in Section 860F of the Code, or
cause either REMIC I or REMIC II to fail to qualify as a REMIC under Federal law
at any time that any Certificates are outstanding. The Master Servicer shall
manage, conserve, protect and operate each REO Property for the
Certificateholders solely for the purpose of its prompt disposition and sale in
a manner which does not cause such REO Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code or
result in the receipt by either REMIC I or REMIC II of any "income from
non-permitted assets" within the meaning of Section 860F(a)(2)(B) of the Code,
or any "net income from foreclosure property" which is subject to taxation under
the REMIC Provisions.
(b) The Master Servicer shall segregate and hold all funds
collected and received in connection with the operation of any REO Property
separate and apart from its own funds and general assets and shall establish and
maintain, or cause to be established and maintained, with respect to REO
Properties an account held in trust for the Trustee for the benefit of the
Certificateholders and the Certificate Insurer (the "REO Account"), which shall
be an Eligible Account. The Master Servicer shall be permitted to allow the
Collection Account to serve as the REO Account, subject to separate ledgers for
each REO Property. The Master
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Servicer shall be entitled to retain or withdraw any interest income paid on
funds deposited in the REO Account.
(c) The Master Servicer shall have full power and authority,
subject only to the specific requirements and prohibitions of this Agreement, to
do any and all things in connection with any REO Property as are consistent with
the manner in which the Master Servicer manages and operates similar property
owned by the Master Servicer or any of its Affiliates, all on such terms and for
such period as the Master Servicer deems to be in the best interests of
Certificateholders. In connection therewith, the Master Servicer shall deposit,
or cause to be deposited in the clearing account in which it customarily
deposits payments and collections on mortgage loans in connection with its
mortgage loan servicing activities on a daily basis, and in no event more than
one Business Day after the Master Servicer's receipt thereof, and shall
thereafter deposit in the REO Account, in no event more than two Business Days
after the Master Servicer's receipt thereof, all revenues received by it with
respect to an REO Property and shall withdraw therefrom funds necessary for the
proper operation, management and maintenance of such REO Property including,
without limitation:
(i) all insurance premiums due and payable in respect
of such REO Property;
(ii) all real estate taxes and assessments in respect of
such REO Property that may result in the imposition of a lien
thereon; and
(iii) all costs and expenses necessary to maintain such
REO Property.
To the extent that amounts on deposit in the REO Account with respect to an REO
Property are insufficient for the purposes set forth in clauses (i) through
(iii) above with respect to such REO Property, the Master Servicer shall advance
from its own funds such amount as is necessary for such purposes if, but only
if, the Master Servicer would make such advances if the Master Servicer owned
the REO Property and if in the Master Servicer's judgment, the payment of such
amounts will be recoverable from the rental or sale of the REO Property.
Notwithstanding the foregoing, the Master Servicer shall not:
(i) authorize the Trust Fund to enter into, renew or
extend any New Lease with respect to any REO Property, if the
New Lease by its terms will give rise to any income that does
not constitute Rents from Real Property;
(ii) authorize any amount to be received or accrued
under any New Lease other than amounts that will constitute
Rents from Real Property;
(iii) authorize any construction on any REO Property,
other than the completion of a building or other improvement
thereon, and then only if more than ten percent of the
construction of such building or other improvement was
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completed before default on the related Mortgage Loan became
imminent, all within the meaning of Section 856(e)(4)(B) of
the Code; or
(iv) authorize any Person to Directly Operate any REO
Property on any date more than 90 days after its date of
acquisition by the Trust Fund;
unless, in any such case, the Master Servicer has obtained an Opinion of
Counsel, provided to the Trustee and the Certificate Insurer, to the effect that
such action will not cause such REO Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code at any time that
it is held by REMIC I, in which case the Master Servicer may take such actions
as are specified in such Opinion of Counsel.
The Master Servicer may contract with any Independent
Contractor for the operation and management of any REO Property, provided that:
(i) the terms and conditions of any such
contract shall not be inconsistent herewith;
(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 REO Property, including those
listed above and remit all related revenues (net of such costs
and expenses) to the Master Servicer as soon as practicable,
but in no event later than thirty days following the receipt
thereof by such Independent Contractor;
(iii) none of the provisions of this Section 3.23(c)
relating to any such contract or to actions taken through any
such Independent Contractor shall be deemed to relieve the
Master Servicer of any of its duties and obligations to the
Trustee on behalf of the Certificateholders and the
Certificate Insurer with respect to the operation and
management of any such REO Property; and
(iv) the Master 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 REO Property.
The Master 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 Master Servicer by such
Independent Contractor, and nothing in this Agreement shall be deemed to limit
or modify such indemnification. The Master Servicer shall be solely liable for
all fees owed by it to any such Independent Contractor, irrespective of whether
the Master Servicer's compensation pursuant to Section 3.18 is sufficient to pay
such fees; provided, however, that to the extent that any payments made by such
Independent Contractor would constitute Servicing Advances if made by the Master
Servicer, such amounts shall be reimbursable as Servicing Advances made by the
Master Servicer.
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(d) In addition to the withdrawals permitted under Section
3.23(c), the Master Servicer may from time to time make withdrawals from the REO
Account for any REO Property: (i) to pay itself or any Sub-Servicer unpaid
Servicing Fees in respect of the related Mortgage Loan; and (ii) to reimburse
itself or any Sub-Servicer for unreimbursed Servicing Advances and P&I Advances
made in respect of such REO Property or the related Mortgage Loan. On the Master
Servicer Remittance Date, the Master Servicer shall withdraw from each REO
Account maintained by it and deposit into the Distribution Account in accordance
with Section 3.10(d)(ii), for distribution on the related Distribution Date in
accordance with Section 4.01, the income from the related REO Property received
during the prior calendar month, net of any withdrawals made pursuant to Section
3.23(c) or this Section 3.23(d).
(e) Subject to the time constraints set forth in Section
3.23(a), each REO Disposition shall be carried out by the Master Servicer at
such price and upon such terms and conditions as the Master Servicer shall deem
necessary or advisable, as shall be normal and usual in its Accepted Servicing
Practices.
(f) The proceeds from the REO Disposition, net of any amount
required by law to be remitted to the Mortgagor under the related Mortgage Loan
and net of any payment or reimbursement to the Master Servicer or any
Sub-Servicer as provided above, shall be deposited in the Distribution Account
in accordance with Section 3.10(d)(ii) on the Master Servicer Remittance Date in
the month following the receipt thereof for distribution on the related
Distribution Date in accordance with Section 4.01. Any REO Disposition shall be
for cash only (unless changes in the REMIC Provisions made subsequent to the
Startup Day allow a sale for other consideration).
(g) The Master Servicer shall file information returns with
respect to the receipt of mortgage interest received in a trade or business,
reports of foreclosures and abandonments of any Mortgaged Property and
cancellation of indebtedness income with respect to any Mortgaged Property as
required by Sections 6050H, 6050J and 6050P of the Code, respectively. Such
reports shall be in form and substance sufficient to meet the reporting
requirements imposed by such Sections 6050H, 6050J and 6050P of the Code.
SECTION 3.24. Obligations of the Master Servicer in Respect
of Prepayment Interest Shortfalls.
The Master Servicer shall deliver to the Trustee for deposit
into the Distribution Account on or before 3:00 p.m. New York time on the Master
Servicer Remittance Date from its own funds an amount equal to the lesser of (i)
the aggregate of the Prepayment Interest Shortfalls for the related Distribution
Date resulting solely from Principal Prepayments in full during the related
Prepayment Period and (ii) the Servicing Fee for the related Prepayment Period.
Any amounts paid by the Master Servicer pursuant to this Section 3.24 shall not
be reimbursed by REMIC I.
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SECTION 3.25. Expense Account.
(a) The Trustee shall establish and maintain in its name, for
the benefit of the Trustee in trust for (1) the Certificateholders and (2) the
Certificate Insurer, the Expense Account. The Expense Account shall be an
Eligible Account, and funds on deposit therein shall be held separate and apart
from, and shall not be commingled with, any other moneys, including, without
limitation, other moneys of the Trustee held pursuant to this Agreement.
(b) On the Business Day immediately preceding each
Distribution Date, the Trustee shall withdraw from the Distribution Account and
deposit into the Expense Account an amount equal to 1/12 of the Certificate
Insurer Premium Rate on the Certificate Principal Balance of the Class A
Certificates for such Distribution Date.
(c) The Trustee shall make withdrawals from the Expense
Account to pay the Certificate Insurer Premium on each Distribution Date.
(d) Funds in the Expense Account may be invested in Permitted
Investments in accordance with the provisions set forth in Section 3.12. Any
earnings on such amounts shall be payable to the Master Servicer on each
Distribution Date as additional servicing compensation. The Trustee shall give
notice to the Depositor and the Certificate Insurer of the location of the
Expense Account on the Closing Date and prior to any change thereof.
(e) Upon termination of the Trust Fund in accordance with
Section 10.01, any amounts remaining in the Expense Account following the
payment of all unpaid Certificate Insurer Premiums shall be released to the
Master Servicer as additional servicing compensation.
SECTION 3.26. Obligations of the Master Servicer in Respect
of Mortgage Rates and Monthly Payments.
In the event that a shortfall in any collection on or
liability with respect to any Mortgage Loan results from or is attributable to
adjustments to Mortgage Rates, Monthly Payments or Stated Principal Balances
that were made by the Master Servicer in a manner not consistent with the terms
of the related Mortgage Note and this Agreement, the Master Servicer, upon
discovery or receipt of notice thereof, immediately shall deliver to the Trustee
for deposit in the Distribution Account from its own funds the amount of any
such shortfall and shall indemnify and hold harmless the Trust Fund, the
Trustee, the Certificate Insurer, the Depositor and any successor master
servicer in respect of any such liability. Such indemnities shall survive the
termination or discharge of this Agreement. Notwithstanding the foregoing, this
Section 3.26 shall not limit the ability of the Master Servicer to seek recovery
of any such amounts from the related Mortgagor under the terms of the related
Mortgage Note, as permitted by law.
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ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
SECTION 4.01. Distributions.
(a)(1) On each Distribution Date, the following amounts, in
the following order of priority, shall be distributed by REMIC I to REMIC II on
account of the REMIC I Regular Interests or withdrawn from the Distribution
Account and distributed to the holders of the Class R-I Certificates, as the
case may be:
(i) to the Holders of REMIC I Regular Interests, in an
amount equal to (A) the Uncertificated Interest for such
Distribution Date, plus (B) any amounts in respect thereof
remaining unpaid from previous Distribution Dates. On the
first Distribution Date, the Class R-I Certificates shall be
entitled to interest accrued on its Certificate Principal
Balance at the related Pass-Through Rate and on each
Distribution Date, the Class R-I Certificates shall be
entitled to the excess, if any, of the REMIC I Remittance Rate
on the REMIC I Regular Interest LT1 over the REMIC I
Remittance Rate on the REMIC I Regular Interest LT2 calculated
on the Uncertificated Balance of REMIC I Regular Interest LT2.
Amounts payable as Uncertificated Interest in respect of the
REMIC I Regular Interest LT3 shall be reduced (I) when the
REMIC I Subordinated Amount is less than the REMIC I Required
Subordinated Amount, by the lesser of (x) the amount of such
difference and (y) the Maximum LT3 Uncertificated Interest
Deferral Amount and (II) when the REMIC I Basis Risk Shortfall
is reduced, by an amount equal to the resulting increase in
the REMIC I Regular Interest LT3 Adjusted Uncertificated
Balance;
(ii) (x) on the first Distribution Date, to the Holders
of the Class R-I Certificates the Certificate Principal
Balance thereof and (y) on each Distribution Date, to the
Holders of REMIC I Regular Interests, in an amount equal to
the remainder of the Available Distribution Amount for such
Distribution Date after the distributions made pursuant to
clauses (i) and (ii)(x) above, allocated as follows:
(a) to the Holders of the REMIC I Regular
Interest LT1, the REMIC II Percentage of such
amounts; and
(b) one-half of the remainder of such
amounts to each Holder of the REMIC I Regular
Interest LT2 and the REMIC I Regular Interest LT3,
for so long as the REMIC I Subordinated Amount is
less than or equal to the REMIC I Required
Subordinated Amount and, thereafter, one-half of such
amounts to the Holder of the REMIC I Regular Interest
LT3, and the remainder of such amounts divided
between the REMIC I Regular Interest LT2 and the
REMIC I Regular Interest LT3 such that
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REMIC I Subordinated Amount equals the REMIC I
Required Subordinated Amount; and
(iii) from amounts that would otherwise be payable as
Servicing Fees, to the Holders of the REMIC I Regular Interest
LT3, an amount equal to any increase in the REMIC I Basis Risk
Shortfall.
(2) On each Distribution Date, the Trustee shall withdraw from
the Distribution Account and the REMIC II Reserve Fund an amount equal to the
Available Distribution Amount (other than any amount in the Distribution Account
that was transferred from the Policy Payments Account to the Distribution
Account pursuant to Section 9.04) and distribute to the Certificateholders the
following amounts, in the following order of priority:
(i) (x) on the first Distribution Date, to the Holders
of the Class R-II Certificates, the Certificate Principal
Balance thereof and any interest accrued thereon at the
related Pass-Through Rate, (y) to the REMIC II Reserve Fund,
amounts payable in respect of the REMIC I Regular Interest LT2
and the REMIC I Regular Interest LT3 for such Distribution
Date pursuant to clauses (a)(1)(i) and (a)(1)(ii) above, and
(z) to the Holders of the Class A Certificates, in an amount
equal to (A) the Interest Distribution Amount for such
Distribution Date, plus (B) any undistributed amount described
in the immediately preceding clause (i)(z)(A) from any
previous Distribution Date for which no Insurance Payment has
been previously paid to Holders of the Class A Certificates;
(ii) to the Holders of the Class A Certificates, in an
amount equal to the Class A Principal Distribution Amount
(except for any portion thereof consisting of any
Subordination Increase Amount, any amount payable pursuant to
clause (iii) below and any amount payable as principal on the
Residual Certificates on the first Distribution Date), applied
to reduce the Certificate Principal Balances of the Class A
Certificates, until the aggregate Certificate Principal
Balance of the Class A Certificates is reduced to zero;
(iii) to the Holders of the Class A Certificates, payable
first from the REMIC II Reserve Fund and then from Net Monthly
Excess Cashflow, in an amount equal to (A) the REMIC II
Percentage of the principal portion of any Realized Losses
incurred or deemed to have been incurred on the Mortgage
Loans, applied to reduce the Certificate Principal Balances of
the Class A Certificates, until the aggregate Certificate
Principal Balance of the Class A Certificates is reduced to
zero, plus (B) the principal portion of any Realized Losses
allocated to the Class A Certificates on previous Distribution
Dates but not paid under the Policy due to a Certificate
Insurer Default and not previously paid pursuant to this
clause (iii)(B);
(iv) to the Certificate Insurer, payable first from the
REMIC II Reserve Fund and then from Net Monthly Excess
Cashflow, to reimburse the Certificate
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Insurer for claims under the Policy, to the extent of
Cumulative Insurance Payments;
(v) to the Holders of the Class A Certificates, payable
from Net Monthly Excess Cashflow, in an amount equal to the
portion of the Class A Principal Distribution Amount
consisting of any Subordination Increase Amount, applied to
reduce the Certificate Principal Balances of the Class A
Certificates, until the aggregate Certificate Principal
Balance of the Class A Certificates is reduced to zero;
(vi) to the Holders of the Class A Certificates, payable
first from the REMIC II Reserve Fund and then from Net Monthly
Excess Cashflow, in an amount equal to any Prepayment Interest
Shortfall (to the extent not covered by payments by the Master
Servicer pursuant to Section 3.24) and any Relief Act
Shortfalls that were allocated pursuant to Section 1.02 and
therefore not distributed pursuant to clause (i) above;
(vii) to the Holders of the Class A Certificates, payable
from Net Monthly Excess Cashflow, in an amount equal to any
Basis Risk Shortfall for such Distribution Date;
(viii) to the Holders of the Class A Certificates, payable
from Net Monthly Excess Cashflow, in an amount equal to any
Unpaid Basis Risk Shortfall on such Distribution Date;
(ix) to the Certificate Insurer, payable first from the
REMIC II Reserve Fund and then from Net Monthly Excess
Cashflow, any amounts remaining due to the Insurer under the
terms of the Insurance Agreement (other than those
attributable to Excess Bankruptcy Losses, Excess Fraud Losses,
Excess Special Hazard Losses and Extraordinary Losses); and
(x) to the Holders of the Class CE Certificates,
payable from Net Monthly Excess Cashflow, the Interest
Distribution Amount and any Subordination Reduction Amount for
such Distribution Date.
On the final Distribution Date, any funds on deposit in the REMIC II Reserve
Fund, after the distributions required under clauses (i) through (ix) above have
been made, will be paid to the Holders of the Class R-II Certificates.
In addition, on each Distribution Date, the Trustee shall
withdraw from the Distribution Account and distribute to the Holders of the
Class CE Certificates an amount equal to any Prepayment Premium collected during
the related Prepayment Period. Any such amounts distributed pursuant to this
paragraph shall not be in reduction of the Certificate Principal Balance of the
Class CE Certificates.
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All Realized Losses to be allocated to the Certificate
Principal Balances of all Classes on any Distribution Date shall be so allocated
after the actual distributions to be made on such date as provided above. All
references above to the Certificate Principal Balance of any Class of
Certificates shall be to the Certificate Principal Balance of such Class
immediately prior to the relevant Distribution Date, before reduction thereof by
any Realized Losses, in each case to be allocated to such Class of Certificates,
on such Distribution Date pursuant to Section 4.04.
(b) In addition to making the distributions required pursuant
to Section 4.01(a)(2), on each Distribution Date for which there exists a
Deficiency Amount, the Trustee shall withdraw from the Distribution Account any
amount therein that was transferred from the Policy Payments Account to the
Distribution Account pursuant to Section 9.04 and distribute to the Holders of
the Class A Certificates and the Residual Certificates (i) an amount equal to
any amount required to be paid to such Class pursuant to Section 4.01(a)(2)(i)
for such Distribution Date remaining unpaid after giving effect to all
distributions made pursuant to Section 4.01(a)(2) for such Distribution Date,
(ii) an amount equal to the principal portion of any Realized Losses allocated
to such Class on such Distribution Date after giving effect to all distributions
made pursuant to Section 4.01(a)(2) for such Distribution Date and (iii) without
duplication, any other amount constituting a Deficiency Amount.
(c) Each Holder of a Certificate, by its acceptance of such
Certificate, hereby agrees that, in the event any distribution is made to any
Holder of a Class A Certificate or a Residual Certificate from amounts paid
under the Policy, (i) the Certificate Insurer shall be subrogated in the manner
herein provided to the rights of the Holder of such Class A Certificate or
Residual Certificate to receive from amounts on deposit in the Distribution
Account the distributions allocable to principal and interest that would have
been distributable to such Holder if no such distribution to such Holder had
been made from amounts paid under the Policy; and (ii) in addition to the rights
of the Holders of the Class A Certificates and the Residual Certificates that
the Certificate Insurer may exercise in accordance with the provisions of
Section 9.01, the Certificate Insurer may exercise any option, vote, right,
power or the like with respect to each Class A Certificate or Residual
Certificate for which Cumulative Insurance Payments are outstanding.
(d) All distributions made with respect to each Class of
Certificates on each Distribution Date shall be allocated PRO RATA among the
outstanding Certificates in such Class based on their respective Percentage
Interests. Payments in respect of each Class of Certificates on each
Distribution Date will be made to the Holders of the respective Class of record
on the related Record Date (except as otherwise provided in Section 4.01(f) or
Section 10.01 respecting the final distribution on such Class), based on the
aggregate Percentage Interest represented by their respective Certificates, and
shall be made by wire transfer of immediately available funds to the account of
any such Holder at a bank or other entity having appropriate facilities
therefor, if such Holder shall have so notified the Trustee in writing at least
five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Certificates having an initial
aggregate Certificate Principal Balance that is in excess of the lesser of (i)
$5,000,000 or (ii) two-thirds of the initial Certificate Principal Balance of
such Class of Certificates, or otherwise by check mailed by first class mail to
the address of such Holder
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appearing in the Certificate Register. The final distribution on each
Certificate will be made in like manner, but only upon presentment and surrender
of such Certificate at the Corporate Trust Office or such other location
specified in the notice to Certificateholders of such final distribution.
Payments to the Certificate Insurer on any Distribution Date will be made by
wire transfer of immediately available funds to the account designated by the
Certificate Insurer under the Premium Letter (as defined in the Insurance
Agreement).
Each distribution with respect to a Book-Entry Certificate
shall be paid to the Depository, as Holder thereof, and the Depository shall be
responsible for crediting the amount of such distribution to the accounts of its
Depository Participants in accordance with its normal procedures. Each
Depository Participant shall be responsible for disbursing such distribution to
the Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. None of the Trustee, the Depositor
or the Master Servicer shall have any responsibility therefor except as
otherwise provided by this Agreement or applicable law.
(e) The rights of the Certificateholders to receive
distributions in respect of the Certificates, and all interests of the
Certificateholders in such distributions, shall be as set forth in this
Agreement. Neither the Holders of any Class of Certificates nor the Trustee nor
the Master Servicer shall in any way be responsible or liable to the Holders of
any other Class of Certificates in respect of amounts properly previously
distributed on the Certificates.
(f) Except as otherwise provided in Section 10.01, whenever
the Trustee expects that the final distribution with respect to any Class of
Certificates will be made on the next Distribution Date, the Trustee shall, no
later than three (3) days before the related Distribution Date, mail to each
Holder on such date of such Class of Certificates and to the Certificate Insurer
a notice to the effect that:
(i) the Trustee expects that the final distribution with respect
to such Class of Certificates will be made on such Distribution Date
but only upon presentation and surrender of such Certificates at the
office of the Trustee therein specified, and
(ii) no interest shall accrue on such Certificates from and after
the end of the related Interest Accrual Period.
Any funds not distributed to any Holder or Holders of Certificates of such Class
on such Distribution Date because of the failure of such Holder or Holders to
tender their Certificates shall, on such date, be set aside and held in trust by
the Trustee and credited to the account of the appropriate non-tendering Holder
or Holders. If any Certificates as to which notice has been given pursuant to
this Section 4.01(f) shall not have been surrendered for cancellation within six
months after the time specified in such notice, the Trustee shall mail a second
notice to the remaining non-tendering Certificateholders to surrender their
Certificates for cancellation in order to receive the final distribution with
respect thereto. If within one year after the second notice all such
Certificates shall not have been surrendered for cancellation, the Trustee
shall,
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directly or through an agent, (i) mail a final notice to the remaining
non-tendering Certificateholders concerning surrender of their Certificates and
(ii) pay to the Certificate Insurer any amount of such funds which were paid by
the Certificate Insurer under the Policy but shall continue to hold any
remaining funds for the benefit of non-tendering Certificateholders, and all
liability of the Certificate Insurer with respect to such trust funds shall
thereupon cease. The costs and expenses of maintaining the funds in trust and of
contacting such Certificateholders shall be paid out of the assets remaining in
such trust fund. If within one year after the final notice any such Certificates
shall not have been surrendered for cancellation, the Trustee shall pay to
Salomon Brothers Inc all such amounts, and all rights of non-tendering
Certificateholders in or to such amounts shall thereupon cease. No interest
shall accrue or be payable to any Certificateholder on any amount held in trust
by the Trustee as a result of such Certificateholder's failure to surrender its
Certificate(s) for final payment thereof in accordance with this Section
4.01(f). Any such amounts held in trust by the Trustee shall be held in an
Eligible Account and the Trustee may direct any depository institution
maintaining such account to invest the funds in one or more Permitted
Investments. All income and gain realized from the investment of funds deposited
in such accounts held in trust by the Trustee shall be for the benefit of the
Trustee; provided, however, that the Trustee shall deposit in such account the
amount of any loss of principal incurred in respect of any such Permitted
Investment made with funds in such accounts immediately upon the realization of
such loss.
(g) Notwithstanding anything to the contrary herein, (i) in no
event shall the Certificate Principal Balance of a Class A Certificate be
reduced more than once in respect of any particular amount both (a) allocated to
such Certificate in respect of Realized Losses pursuant to Section 4.04 and (b)
distributed to the Holder of such Certificate in reduction of the Certificate
Principal Balance thereof pursuant to this Section 4.01 from Net Monthly Excess
Cashflow or from amounts paid under the Policy and (ii) in no event shall the
Uncertificated Balance of a REMIC I Regular Interest be reduced more than once
in respect of any particular amount both (a) allocated to such REMIC I Regular
Interest in respect of Realized Losses pursuant to Section 4.04 and (b)
distributed on such REMIC I Regular Interest in reduction of the Uncertificated
Balance thereof pursuant to this Section 4.01.
SECTION 4.02. Statements to Certificateholders.
On each Distribution Date, the Trustee shall prepare and
forward by mail to each Holder of the Regular Certificates, a statement as to
the distributions made on such Distribution Date setting forth:
(i) the amount of the distribution made on such
Distribution Date to the Holders of the Class A Certificates
and the Class CE Certificates allocable to principal;
(ii) the amount of the distribution made on such
Distribution Date to the Holders of the Class A Certificates
and the Class CE Certificates allocable to interest;
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(iii) the aggregate amount of servicing compensation
received by the Master Servicer during the related Due Period
and such other customary information as the Trustee deems
necessary or desirable, or which a Certificateholder
reasonably requests, to enable Certificateholders to prepare
their tax returns;
(iv) the Guaranteed Distribution for such Distribution
Date and the respective portions thereof allocable to
principal and interest;
(v) the amount of any Insurance Payment made to Class A
Certificateholders on such Distribution Date, the amount of
any reimbursement payment made to the Certificate Insurer on
such Distribution Date pursuant to Section 4.01(a)(2)(iv) and
the amount of Cumulative Insurance Payments after giving
effect to any such Insurance Payment to Class A
Certificateholders or any such reimbursement payment to the
Certificate Insurer;
(vi) the aggregate amount of P&I Advances for such
Distribution Date;
(vii) the aggregate Stated Principal Balance of the
Mortgage Loans and any REO Properties as of the close of
business on such Distribution Date;
(viii) the number, aggregate principal balance, weighted
average remaining term to maturity and weighted average
Mortgage Rate of the Mortgage Loans as of the related Due
Date;
(ix) the number and aggregate unpaid principal balance
of Mortgage Loans (a) delinquent 30 days, (b) delinquent 60
days, (c) delinquent 90 or more days and (d) as to which
foreclosure proceedings have been commenced;
(x) with respect to any Mortgage Loan that became an
REO Property during the preceding calendar month, the loan
number of such Mortgage Loan, the unpaid principal balance and
the Stated Principal Balance of such Mortgage Loan as of the
date it became an REO Property;
(xi) the book value of any REO Property as of the close
of business on the last Business Day of the calendar month
preceding the Distribution Date;
(xii) the aggregate amount of Principal Prepayments made
during the related Prepayment Period;
(xiii) the aggregate amount of Realized Losses incurred
during the related Prepayment Period (or, in the case of
Bankruptcy Losses allocable to interest, during the related
Due Period), separately identifying whether such Realized
Losses constituted Extraordinary Losses, Fraud Losses, Special
Hazard Losses or Bankruptcy Losses;
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(xiv) the aggregate amount of extraordinary Trust Fund
expenses withdrawn from the Collection Account or the
Distribution Account for such Distribution Date;
(xv) the aggregate Certificate Principal Balance of the
Class A Certificates and the Class CE Certificates, after
giving effect to the distributions, and allocations of
Realized Losses, made on such Distribution Date, separately
identifying any reduction thereof due to allocations of
Realized Losses;
(xvi) the Certificate Factor for each such Class of
Certificates applicable to such Distribution Date;
(xvii) the Interest Distribution Amount in respect of the
Class A Certificates and the Class CE Certificates for such
Distribution Date and, in the case of the Class A
Certificates, the portion thereof, if any, paid under the
Policy or (in the event of a Deficiency Event) remaining
unpaid following the distributions made in respect of the
Class A Certificates on such Distribution Date and, in the
case of the Class A Certificates or the Class CE Certificates,
separately identifying any reduction thereof due to
allocations of Realized Losses, Prepayment Interest
Shortfalls, Relief Act Interest Shortfalls and Basis Risk
Shortfalls;
(xviii) the aggregate amount of any Prepayment Interest
Shortfall for such Distribution Date, to the extent not
covered by payments by the Master Servicer pursuant to Section
3.24;
(xix) the aggregate amount of Relief Act Interest
Shortfalls for such Distribution Date;
(xx) the then-applicable Bankruptcy Amount, Fraud Loss
Amount and Special Hazard Amount;
(xxi) the Basis Risk Shortfall, if any, for such
Distribution Date;
(xxii) the Unpaid Basis Risk Shortfalls, if any,
outstanding after reimbursements therefor on such
Distribution Date;
(xxiii) the Required Subordinated Amount for such
Distribution Date;
(xxiv) the Subordination Increase Amount, if any, for such
Distribution Date;
(xxv) the Subordination Reduction Amount, if any, for
such Distribution Date;
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(xxvi) the respective Pass-Through Rates applicable to the
Class A Certificates and the Class CE Certificates for such
Distribution Date and the PassThrough Rate applicable to the
Class A Certificates for the immediately succeeding
Distribution Date; and
(xxvii) the aggregate of any deposits to and withdrawals
from the REMIC II Reserve Fund for such Distribution Date and
the remaining amount on deposit in the REMIC II Reserve Fund
after such deposits and withdrawals.
In the case of information furnished pursuant to subclauses
(i) through (iii) above, the amounts shall be expressed as a dollar amount per
Single Certificate of the relevant Class.
Within a reasonable period of time after the end of each
calendar year, the Trustee shall furnish to each Person who at any time during
the calendar year was a Holder of a Regular Certificate a statement containing
the information set forth in subclauses (i) through (iii) above, aggregated for
such calendar year or applicable portion thereof during which such person was a
Certificateholder. Such obligation of the Trustee shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Trustee pursuant to any requirements of the Code as from time to
time are in force.
On each Distribution Date, the Trustee shall forward to the
Depositor, to each Holder of a Residual Certificate, to the Certificate Insurer
and to the Master Servicer, a copy of the reports forwarded to the Regular
Certificateholders on such Distribution Date and a statement setting forth the
amounts, if any, actually distributed with respect to the Residual Certificates,
respectively, on such Distribution Date.
Within a reasonable period of time after the end of each
calendar year, the Trustee shall furnish to each Person who at any time during
the calendar year was a Holder of a Residual Certificate a statement setting
forth the amount, if any, actually distributed with respect to the Residual
Certificates, as appropriate, aggregated for such calendar year or applicable
portion thereof during which such Person was a Certificateholder.
The Trustee shall, upon request, furnish to each
Certificateholder, during the term of this Agreement, such periodic, special, or
other reports or information, whether or not provided for herein, as shall be
reasonable with respect to the Certificateholder, or otherwise with respect to
the purposes of this Agreement, all such reports or information to be provided
at the expense of the Certificateholder in accordance with such reasonable and
explicit instructions and directions as the Certificateholder may provide. For
purposes of this Section 4.02, the Trustee's duties are limited to the extent
that the Trustee receives timely reports as required from the Master Servicer.
On each Distribution Date the Trustee shall provide Bloomberg
Financial Markets, L.P. ("Bloomberg") Cusip Level Factors for each class of
Certificates as of such Distribution Date, using a format and media mutually
acceptable to the Trustee and Bloomberg.
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SECTION 4.03. Remittance Reports; P&I Advances.
(a) On the Business Day following each Determination Date, the
Master Servicer shall deliver to the Trustee and the Certificate Insurer by
telecopy (or by such other means as the Master Servicer, the Trustee or the
Certificate Insurer, as the case may be, may agree from time to time) a
Remittance Report with respect to the related Distribution Date. On the same
date, the Master Servicer shall forward to the Trustee by overnight mail a
computer readable magnetic tape containing the information set forth in such
Remittance Report with respect to the related Distribution Date. Such Remittance
Report will include (i) the amount of P&I Advances to be made by the Master
Servicer in respect of the related Distribution Date, the aggregate amount of
P&I Advances outstanding after giving effect to such P&I Advances, and the
aggregate amount of Nonrecoverable P&I Advances in respect of such Distribution
Date and (ii) such other information with respect to the Mortgage Loans as the
Trustee may reasonably require to perform the calculations necessary to make the
distributions contemplated by Section 4.01 and to prepare the statements to
Certificateholders contemplated by Section 4.02. Not later than the close of
business on the third Business Day prior to the Distribution Date, the Trustee
shall deliver or cause to be delivered to the Certificate Insurer, in addition
to the information provided on the Remittance Report, a report setting forth (i)
the Guaranteed Distribution for such Distribution Date, separately identifying
the portions thereof allocable to principal and interest; (ii) the Available
Distribution Amount for such Distribution Date; (iii) whether the Available
Distribution Amount expected to be on deposit in the Distribution Account on
such Distribution Date will be sufficient to cover the Guaranteed Distribution
and, if not, the amount of the shortfall; (iv) with respect to any reimbursement
to be made to the Certificate Insurer on such Distribution Date pursuant to
Section 4.01(a)(2)(iv), the amount, if any, allocable to principal and the
amount allocable to interest; and (v) Cumulative Insurance Payments after giving
effect to the distributions to be made on such Distribution Date. The Trustee
shall not be responsible to recompute, recalculate or verify any information
provided to it by the Master Servicer.
(b) The amount of P&I Advances to be made by the Master
Servicer for any Distribution Date shall equal, subject to Section 4.03(d), the
sum of (i) the aggregate amount of Monthly Payments (with each interest portion
thereof net of the related Servicing Fee), due on the related Due Date in
respect of the Mortgage Loans, which Monthly Payments were delinquent as of the
close of business on the related Determination Date and (ii) with respect to
each REO Property, which REO Property was acquired during or prior to the
related Prepayment Period and as to which REO Property an REO Disposition did
not occur during the related Prepayment Period, an amount equal to the excess,
if any, of the REO Imputed Interest on such REO Property for the most recently
ended calendar month, over the net income from such REO Property transferred to
the Distribution Account pursuant to Section 3.23 for distribution on such
Distribution Date.
On or before 3:00 p.m. New York time on the Master Servicer
Remittance Date, the Master Servicer shall remit in immediately available funds
to the Trustee for deposit in the Distribution Account an amount equal to the
aggregate amount of P&I Advances, if any, to be made in respect of the Mortgage
Loans and REO Properties for the related Distribution Date either (i) from its
own funds or (ii) from the Collection Account, to the extent of funds held
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therein for future distribution (in which case it will cause to be made an
appropriate entry in the records of Collection Account that amounts held for
future distribution have been, as permitted by this Section 4.03, used by the
Master Servicer in discharge of any such P&I Advance) or (iii) in the form of
any combination of (i) and (ii) aggregating the total amount of P&I Advances to
be made by the Master Servicer with respect to the Mortgage Loans and REO
Properties. Any amounts held for future distribution and so used shall be
appropriately reflected in the Master Servicer's records and replaced by the
Master Servicer by deposit in the Collection Account on or before any future
Master Servicer Remittance Date to the extent that the Available Distribution
Amount for the related Distribution Date (determined without regard to P&I
Advances to be made on the Master Servicer Remittance Date) shall be less than
the total amount that would be distributed to the Classes of Certificateholders
pursuant to Section 4.01 on such Distribution Date if such amounts held for
future distributions had not been so used to make P&I Advances. The Trustee will
provide notice to the Master Servicer and the Certificate Insurer by telecopy by
the close of business on the third Business Day prior to the Distribution Date
in the event that the amount remitted by the Master Servicer to the Trustee on
such date is less than the P&I Advances required to be made by the Master
Servicer for the related Distribution Date.
(c) The obligation of the Master Servicer to make such P&I
Advances is mandatory, notwithstanding any other provision of this Agreement but
subject to (d) below, and, with respect to any Mortgage Loan or REO Property,
shall continue until a Final Recovery Determination in connection therewith or
the removal thereof from the Trust Fund pursuant to any applicable provision of
this Agreement, except as otherwise provided in this Section.
(d) Notwithstanding anything herein to the contrary, no P&I
Advance or Servicing Advance shall be required to be made hereunder by the
Master Servicer if such P&I Advance or Servicing Advance would, if made,
constitute a Nonrecoverable P&I Advance or Nonrecoverable Servicing Advance,
respectively. The determination by the Master Servicer that it has made a
Nonrecoverable P&I Advance or a Nonrecoverable Servicing Advance or that any
proposed P&I Advance or Servicing Advance, if made, would constitute a
Nonrecoverable P&I Advance or Nonrecoverable Servicing Advance, respectively,
shall be evidenced by an Officers' Certificate of the Master Servicer delivered
to the Depositor, the Trustee and the Certificate Insurer.
(e) If, at the close of business on the third Business Day
prior to any Distribution Date, the funds on deposit in the Distribution Account
are less than the Guaranteed Distribution for such Distribution Date, the
Trustee shall give notice by telephone or telecopy of the amount of such
deficiency, confirmed in writing in the form set forth as Exhibit A to the
Endorsement of the Policy, to the Certificate Insurer and the Fiscal Agent (as
defined in the Policy), if any, at or before 10:00 a.m., New York time, on the
second Business Day prior to such Distribution Date.
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SECTION 4.04. Allocation of Realized Losses.
(a) Prior to each Determination Date, the Master Servicer
shall determine as to each Mortgage Loan and REO Property: (i) the total amount
of Realized Losses, if any, incurred in connection with any Final Recovery
Determinations made during the related Prepayment Period; (ii) whether and the
extent to which such Realized Losses constituted Fraud Losses, Bankruptcy
Losses, Special Hazard Losses or Extraordinary Losses; and (iii) the respective
portions of such Realized Losses allocable to interest and allocable to
principal. Prior to each Determination Date, the Master Servicer shall also
determine as to each Mortgage Loan: (i) the total amount of Realized Losses, if
any, incurred in connection with any Deficient Valuations made during the
related Prepayment Period; and (ii) the total amount of Realized Losses, if any,
incurred in connection with Debt Service Reductions in respect of Monthly
Payments due during the related Due Period. The information described in the two
preceding sentences that is to be supplied by the Master Servicer shall be
evidenced by an Officers' Certificate delivered to the Trustee and the
Certificate Insurer by the Master Servicer prior to the Determination Date
immediately following the end of (i) in the case of Bankruptcy Losses allocable
to interest, the Due Period during which any such Realized Loss was incurred,
and (ii) in the case of all other Realized Losses, the Prepayment Period during
which any such Realized Loss was incurred.
(b) All Realized Losses on the Mortgage Loans allocated to the
REMIC I Regular Interest LT1 pursuant to Section 4.04(c), other than Excess
Special Hazard Losses, Excess Fraud Losses, Excess Bankruptcy Losses and
Extraordinary Losses on the Mortgage Loans shall be allocated by the Trustee on
each Distribution Date as follows: first, to Net Monthly Excess Cashflow;
second, to the Class CE Certificates, until the Certificate Principal Balance
thereof has been reduced to zero; and, third, to the Class A Certificates.
Notwithstanding anything to the contrary herein, for purposes of determining the
Special Hazard Amount, the Fraud Loss Amount and the Bankruptcy Amount as of any
date of determination, Special Hazard Losses, Fraud Losses and Bankruptcy Losses
paid from Net Monthly Excess Cashflow which would otherwise have been payable to
the holders of the Class CE Certificates shall be deemed to have been allocated
to the Class CE Certificates. Any Excess Special Hazard Losses, Excess
Bankruptcy Losses, Excess Fraud Losses and Extraordinary Losses allocated to the
REMIC I Regular Interest LT1 pursuant to Section 4.04(c) will be allocated
between the Class A Certificates and the Class CE Certificates on a PRO RATA
basis. No allocations of Realized Losses pursuant to this Section 4.04 shall
affect any liability of the Certificate Insurer with respect to such amounts
under the Policy. Any allocation of Realized Losses to a Class A Certificate or
a Class CE Certificate on any Distribution Date shall be made by reducing the
Certificate Principal Balance thereof by the amount so allocated, or in the case
of the Class CE Certificates, by reducing the amount otherwise payable in
respect thereof pursuant to Section 4.01(a)(2)(x). All Realized Losses allocated
to a Class of Certificates hereunder will be allocated among the Certificates of
such Class in proportion to the Percentage Interests evidenced thereby.
As used herein, an allocation of a Realized Loss on a "PRO
RATA basis" among two or more specified Classes of Certificates means an
allocation on a PRO RATA basis, among the
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various Classes so specified, to each such Class of Certificates on the basis of
their then outstanding Certificate Principal Balances prior to giving effect to
distributions to be made on such Distribution Date. All Realized Losses and all
other losses allocated to a Class of Certificates hereunder will be allocated
among the Certificates of such Class in proportion to the Percentage Interests
evidenced thereby.
(c) All Realized Losses on the Mortgage Loans, other than
Excess Special Hazard Losses, Excess Bankruptcy Losses, Excess Fraud Losses and
Extraordinary Losses on the Mortgage Loans, shall be allocated by the Trustee on
each Distribution Date as follows: first, to Uncertificated Interest payable to
the REMIC I Regular Interest LT1 and the REMIC I Regular Interest LT3 up to an
aggregate amount equal to the REMIC I Interest Loss Allocation Amount, on a PRO
RATA basis; second, to the Uncertificated Balances of the REMIC I Regular
Interest LT1 and the REMIC I Regular Interest LT3 up to an aggregate amount
equal to the REMIC I Principal Loss Allocation Amount, on a PRO RATA basis; and
third, to the remainder of the Uncertificated Balances of the REMIC I Regular
Interests, including the REMIC I Regular Interest LT2, on a PRO RATA basis. Any
Excess Special Hazard Losses, Excess Bankruptcy Losses, Excess Fraud Losses and
Extraordinary Losses will be allocated among the REMIC I Regular Interests on a
PRO RATA basis. As used herein, an allocation of a Realized Loss on a "PRO RATA
basis" among the REMIC I Regular Interests means an allocation on a PRO RATA
basis among the REMIC I Regular Interests on the basis of their then current
entitlement to Uncertificated Interest or their then outstanding Uncertificated
Balances, as applicable, in each case prior to giving effect to distributions to
be made on such Distribution Date.
SECTION 4.05. Compliance with Withholding Requirements .
Notwithstanding any other provision of this Agreement, the
Trustee shall comply with all federal withholding requirements respecting
payments to Certificateholders of interest or original issue discount that the
Trustee reasonably believes are applicable under the Code. The consent of
Certificateholders shall not be required for such withholding. In the event the
Trustee does withhold any amount from interest or original issue discount
payments or advances thereof to any Certificateholder pursuant to federal
withholding requirements, the Trustee shall indicate the amount withheld to such
Certificateholders.
SECTION 4.06. REMIC II Reserve Fund.
(a) The Trustee shall deposit into the Distribution Account
amounts from the REMIC II Reserve Fund to the extent described herein. The REMIC
II Reserve Fund shall be an Eligible Account. Amounts held in the REMIC II
Reserve Fund from time to time shall continue to constitute assets of REMIC II
until released from the REMIC II Reserve Fund pursuant to this Section 4.06. The
Trustee shall keep records that accurately reflect the funds on deposit in the
REMIC II Reserve Fund. The Trustee shall not invest the funds in the REMIC II
Reserve Fund.
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(b) The Trustee shall withdraw from the REMIC II Reserve Fund
and deposit in the Distribution Account any amounts required pursuant to Section
4.01 to the extent of funds available on deposit therein.
(c) Upon the termination of REMIC II (after giving effect to
payments required to be made from the REMIC II Reserve Fund for the Distribution
Date applicable thereto), all amounts in the REMIC II Reserve Fund shall be
distributed to the Holders of the Class R-II Certificates.
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ARTICLE V
THE CERTIFICATES
SECTION 5.01. The Certificates.
(a) The Certificates in the aggregate will represent the
entire beneficial ownership interest in the Mortgage Loans and all other assets
included in REMIC I.
The Certificates will be substantially in the forms annexed
hereto as Exhibits A-1 through A-4. The Certificates of each Class will be
issuable in registered form only, in denominations of authorized Percentage
Interests as described in the definition thereof. Each Certificate will share
ratably in all rights of the related Class.
Upon original issue, the Certificates shall be executed,
authenticated and delivered by the Trustee to or upon the order of the
Depositor. The Certificates shall be executed by manual or facsimile signature
on behalf of the Trustee by an authorized signatory. Certificates bearing the
manual or facsimile signatures of individuals who were at any time the proper
officers of the Trustee shall bind the Trustee, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Certificates or did not hold such offices at
the date of such Certificates. No Certificate shall be entitled to any benefit
under this Agreement or be valid for any purpose, unless there appears on such
Certificate a certificate of authentication substantially in the form provided
herein executed by the Trustee by manual signature, and such certificate of
authentication shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication.
(b) The Class A Certificates shall initially be issued as one
or more Certificates held by the Book-Entry Custodian or, if appointed to hold
such Certificates as provided below, the Depository and registered in the name
of the Depository or its nominee and, except as provided below, registration of
such Certificates may not be transferred by the Trustee except to another
Depository that agrees to hold such Certificates for the respective Certificate
Owners with Ownership Interests therein. The Certificate Owners shall hold their
respective Ownership Interests in and to such Certificates through the
book-entry facilities of the Depository and, except as provided below, shall not
be entitled to definitive, fully registered Certificates ("Definitive
Certificates") in respect of such Ownership Interests. All transfers by
Certificate Owners of their respective Ownership Interests in the Book-Entry
Certificates shall be made in accordance with the procedures established by the
Depository Participant or brokerage firm representing such Certificate Owner.
Each Depository Participant shall only transfer the Ownership Interests in the
Book-Entry Certificates of Certificate Owners it represents or of brokerage
firms for which it acts as agent in accordance with the Depository's normal
procedures. The Trustee is hereby initially appointed as the Book-Entry
Custodian and hereby agrees to act as such in accordance herewith and in
accordance with the agreement that it has with the Depository authorizing it to
act as such. The Book-Entry Custodian may, and, if it is no longer qualified to
act as such, the Book-Entry Custodian shall, appoint, by a written
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instrument delivered to the Depositor, the Master Servicer, the Certificate
Insurer and, if the Trustee is not the Book-Entry Custodian, the Trustee, any
other transfer agent (including the Depository or any successor Depository) to
act as Book-Entry Custodian under such conditions as the predecessor Book-Entry
Custodian and the Depository or any successor Depository may prescribe, provided
that the predecessor Book-Entry Custodian shall not be relieved of any of its
duties or responsibilities by reason of any such appointment of other than the
Depository. If the Trustee resigns or is removed in accordance with the terms
hereof, the successor trustee or, if it so elects, the Depository shall
immediately succeed to its predecessor's duties as Book-Entry Custodian. The
Depositor shall have the right to inspect, and to obtain copies of, any
Certificates held as Book-Entry Certificates by the Book-Entry Custodian.
The Trustee, the Master Servicer, the Depositor and the
Certificate Insurer may for all purposes (including the making of payments due
on the Book-Entry Certificates) deal with the Depository as the authorized
representative of the Certificate Owners with respect to the Book-Entry
Certificates for the purposes of exercising the rights of Certificateholders
hereunder. The rights of Certificate Owners with respect to the Book-Entry
Certificates shall be limited to those established by law and agreements between
such Certificate Owners and the Depository Participants and brokerage firms
representing such Certificate Owners. Multiple requests and directions from, and
votes of, the Depository as Holder of the Book-Entry Certificates with respect
to any particular matter shall not be deemed inconsistent if they are made with
respect to different Certificate Owners. The Trustee may establish a reasonable
record date in connection with solicitations of consents from or voting by
Certificateholders and shall give notice to the Depository of such record date.
If (i)(A) the Depositor advises the Trustee in writing that
the Depository is no longer willing or able to properly discharge its
responsibilities as Depository, and (B) the Depositor is unable to locate a
qualified successor, (ii) the Depositor at its option advises the Trustee in
writing that it elects to terminate the book-entry system through the Depository
or (iii) after the occurrence of a Master Servicer Event of Default, Certificate
Owners representing in the aggregate not less than 51% of the Ownership
Interests of the Book-Entry Certificates advise the Trustee through the
Depository, in writing, that the continuation of a book-entry system through the
Depository is no longer in the best interests of the Certificate Owners, the
Trustee shall notify all Certificate Owners, through the Depository, of the
occurrence of any such event and of the availability of Definitive Certificates
to Certificate Owners requesting the same. Upon surrender to the Trustee of the
Book-Entry Certificates by the Book-Entry Custodian or the Depository, as
applicable, accompanied by registration instructions from the Depository for
registration of transfer, the Trustee shall issue the Definitive Certificates.
Such Definitive Certificates will be issued in minimum denominations of $10,000,
except that any beneficial ownership that was represented by a Book-Entry
Certificate in an amount less than $10,000 immediately prior to the issuance of
a Definitive Certificate shall be issued in a minimum denomination equal to the
amount represented by such Book-Entry Certificate. None of the Depositor, the
Master Servicer or the Trustee shall be liable for any delay in the delivery of
such instructions and may conclusively rely on, and shall be protected in
relying on, such instructions. Upon the issuance of Definitive Certificates all
references herein to obligations imposed upon or to be performed by the
Depository shall be deemed to be imposed upon and
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performed by the Trustee, to the extent applicable with respect to such
Definitive Certificates, and the Trustee shall recognize the Holders of the
Definitive Certificates as Certificateholders hereunder.
SECTION 5.02. Registration of Transfer and Exchange of
Certificates.
(a) The Trustee shall cause to be kept at one of the offices
or agencies to be appointed by the Trustee in accordance with the provisions of
Section 8.11 a Certificate Register for the Certificates in which, subject to
such reasonable regulations as it may prescribe, the Trustee shall provide for
the registration of Certificates and of transfers and exchanges of Certificates
as herein provided.
(b) No transfer of any Class CE Certificate shall be made
unless that transfer is made pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the "1933 Act"), and effective
registration or qualification under applicable state securities laws, or is made
in a transaction that does not require such registration or qualification. In
the event that such a transfer of a Class CE Certificate is to be made without
registration or qualification, the Trustee shall each require receipt of: (i) if
such transfer is purportedly being made in reliance upon Rule 144A under the
1933 Act, written certifications from the Certificateholder desiring to effect
the transfer and from such Certificateholder's prospective transferee,
substantially in the forms attached hereto as Exhibit F-1; and (ii) in all other
cases, an Opinion of Counsel satisfactory to it that such transfer may be made
without such registration or qualification (which Opinion of Counsel shall not
be an expense of the Trust Fund or of the Depositor, the Trustee or the Master
Servicer in its capacity as such), together with copies of the written
certification(s) of the Certificateholder desiring to effect the transfer and/or
such Certificateholder's prospective transferee upon which such Opinion of
Counsel is based, if any. Neither the Depositor nor the Trustee is obligated to
register or qualify the Class CE Certificates under the 1933 Act or any other
securities laws or to take any action not otherwise required under this
Agreement to permit the transfer of such Certificates without registration or
qualification. Any Certificateholder desiring to effect the transfer of a Class
CE Certificate shall, and does hereby agree to, indemnify the Trustee, the
Depositor, the Master Servicer and the Certificate Insurer against any liability
that may result if the transfer is not so exempt or is not made in accordance
with such federal and state laws.
(c) No transfer of a Class CE Certificate or Residual
Certificate or any interest therein shall be made to any Plan subject to ERISA
or Section 4975 of the Code, any Person acting, directly or indirectly, on
behalf of any such Plan or any Person acquiring such Certificates with "plan
assets" of a Plan within the meaning of the Department of Labor regulation
promulgated at 29 C.F.R. ss. 2510.3-101 ("Plan Assets") unless the Depositor,
the Trustee, the Master Servicer and the Certificate Insurer are provided with
an Opinion of Counsel which establishes to the satisfaction of the Depositor,
the Trustee, the Master Servicer and the Certificate Insurer that the purchase
of such Certificates is permissible under applicable law, will not constitute or
result in any prohibited transaction under ERISA or Section 4975 of the Code and
will not subject the Depositor, the Master Servicer, the Trustee, the Trust Fund
or the Certificate Insurer to any obligation or liability (including obligations
or liabilities under ERISA
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or Section 4975 of the Code) in addition to those undertaken in this Agreement,
which Opinion of Counsel shall not be an expense of the Depositor, the Master
Servicer, the Trustee, the Trust Fund or the Certificate Insurer. In lieu of
such Opinion of Counsel, a Plan, any Person acting, directly or indirectly, on
behalf of any such Plan or any Person acquiring such Certificates with Plan
Assets may provide a certification substantially in the form of Exhibit G to
this Agreement (or other form acceptable to the Depositor), which the Trustee
may rely upon without further inquiry or investigation. In the absence of its
having received the Opinion of Counsel or certification contemplated by this
paragraph, the Trustee shall require the prospective transferee of any Class CE
Certificate or Residual Certificate to certify that it is not an employee
benefit plan subject to ERISA or the Code, a Person acting, directly or
indirectly, on behalf of any such Plan or any Person acquiring such Certificates
with Plan Assets. Neither an Opinion of Counsel nor any certification will be
required in connection with the initial transfer of any such Certificate by the
Depositor to an affiliate of the Depositor (in which case, the Depositor or any
affiliate thereof shall have deemed to have represented that such affiliate is
not a Plan or a Person investing Plan Assets) and the Trustee shall be entitled
to conclusively rely upon a representation (which, upon the request of the
Trustee, shall be a written representation) from the Depositor of the status of
such transferee as an affiliate of the Depositor.
(d) (i) Each Person who has or who acquires any Ownership
Interest in a Residual Certificate shall be deemed by the acceptance or
acquisition of such Ownership Interest to have agreed to be bound by the
following provisions and to have irrevocably authorized the Trustee or its
designee under clause (iii)(A) below to deliver payments to a Person other than
such Person and to negotiate the terms of any mandatory sale under clause
(iii)(B) below and to execute all instruments of Transfer and to do all other
things necessary in connection with any such sale. The rights of each Person
acquiring any Ownership Interest in a Residual Certificate are expressly subject
to the following provisions:
(A) Each Person holding or acquiring any
Ownership Interest in a Residual Certificate shall be
a Permitted Transferee and shall promptly notify the
Trustee of any change or impending change in its
status as a Permitted Transferee.
(B) In connection with any proposed Transfer
of any Ownership Interest in a Residual Certificate,
the Trustee shall require delivery to it, and shall
not register the Transfer of any Residual Certificate
until its receipt of, an affidavit and agreement (a
"Transfer Affidavit and Agreement" attached hereto as
Exhibit F-2) from the proposed Transferee, in form
and substance satisfactory to the Trustee,
representing and warranting, among other things, that
such Transferee is a Permitted Transferee, that it is
not acquiring its Ownership Interest in the Residual
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 Certificate, it will endeavor to remain a
Permitted Transferee, and that it has reviewed the
provisions of this Section 5.02(d) and agrees to be
bound by them.
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(C) Notwithstanding the delivery of a
Transfer Affidavit and Agreement by a proposed
Transferee under clause (B) above, if a Responsible
Officer of the Trustee who is assigned to this
transaction has actual knowledge that the proposed
Transferee is not a Permitted Transferee, no Transfer
of an Ownership Interest in a Residual Certificate to
such proposed Transferee shall be effected.
(D) Each Person holding or acquiring any
Ownership Interest in a Residual Certificate shall
agree (x) to require a Transfer Affidavit and
Agreement (in the form attached hereto as Exhibit
F-2) from any other Person to whom such Person
attempts to transfer its Ownership Interest in a
Residual Certificate and (y) not to transfer its
Ownership Interest unless it provides a Transferor
Affidavit (in the form attached hereto as Exhibit
F-2) to the Trustee stating that, among other things,
it has no actual knowledge that such other Person is
not a Permitted Transferee.
(E) Each Person holding or acquiring an
Ownership Interest in a Residual Certificate, by
purchasing an Ownership Interest in such Certificate,
agrees to give the Trustee written notice that it is
a "pass-through interest holder" within the meaning
of temporary Treasury regulation Section
1.67-3T(a)(2)(i)(A) immediately upon acquiring an
Ownership Interest in a Residual Certificate, if it
is, or is holding an Ownership Interest in a Residual
Certificate on behalf of, a "pass-through interest
holder."
(ii) The Trustee will register the Transfer of any
Residual Certificate only if it shall have received the
Transfer Affidavit and Agreement and all of such other
documents as shall have been reasonably required by the
Trustee as a condition to such registration. In addition, no
Transfer of a Residual Certificate shall be made unless the
Trustee shall have received a representation letter from the
Transferee of such Certificate to the effect that such
Transferee is a Permitted Transferee.
(iii) (A) If any purported Transferee shall become a
Holder of a Residual Certificate in violation of the
provisions of this Section 5.02(d), then the last preceding
Permitted Transferee shall be restored, to the extent
permitted by law, to all rights as holder thereof retroactive
to the date of registration of such Transfer of such Residual
Certificate. The Trustee shall be under no liability to any
Person for any registration of Transfer of a Residual
Certificate that is in fact not permitted by this Section
5.02(d) or for making any payments due on such Certificate to
the holder thereof or for taking any other action with respect
to such holder under the provisions of this Agreement.
(B) If any purported Transferee shall become a
holder of a Residual Certificate in violation of the
restrictions in this Section 5.02(d) and to
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the extent that the retroactive restoration of the rights of
the holder of such Residual Certificate as described in clause
(iii)(A) above shall be invalid, illegal or unenforceable,
then the Trustee shall have the right, without notice to the
holder or any prior holder of such Residual Certificate, to
sell such Residual Certificate to a purchaser selected by the
Trustee on such terms as the Trustee may choose. Such
purported Transferee shall promptly endorse and deliver each
Residual Certificate in accordance with the instructions of
the Trustee. Such purchaser may be the Trustee itself or any
Affiliate of the Trustee. The proceeds of such sale, net of
the commissions (which may include commissions payable to the
Trustee or its Affiliates), expenses and taxes due, if any,
will be remitted by the Trustee to such purported Transferee.
The terms and conditions of any sale under this clause
(iii)(B) shall be determined in the sole discretion of the
Trustee, and the Trustee shall not be liable to any Person
having an Ownership Interest in a Residual Certificate as a
result of its exercise of such discretion.
(iv) The Trustee shall make available to the Internal
Revenue Service and those Persons specified by the REMIC
Provisions all information necessary to compute any tax
imposed (A) as a result of the Transfer of an Ownership
Interest in a Residual Certificate to any Person who is a
Disqualified Organization, including the information described
in Treasury regulations sections 1.860D-1(b)(5) and
1.860E-2(a)(5) with respect to the "excess inclusions" of such
Residual Certificate and (B) as a result of any regulated
investment company, real estate investment trust, common trust
fund, partnership, trust, estate or organization described in
Section 1381 of the Code that holds an Ownership Interest in a
Residual Certificate having as among its record holders at any
time any Person which is a Disqualified Organization.
Reasonable compensation for providing such information may be
accepted by the Trustee.
(v) The provisions of this Section 5.02(d) set forth
prior to this subsection (v) may be modified, added to or
eliminated, provided that there shall have been delivered to
the Trustee at the expense of the party seeking to modify, add
to or eliminate any such provision the following:
(A) written notification from each Rating
Agency to the effect that the modification, addition
to or elimination of such provisions will not cause
such Rating Agency to downgrade its then-current
ratings of any Class of Certificates; and
(B) an Opinion of Counsel, in form and
substance satisfactory to the Trustee, to the effect
that such modification of, addition to or elimination
of such provisions will not cause either REMIC I or
REMIC II to cease to qualify as a REMIC and will not
cause either REMIC I or REMIC II, as the case may be,
to be subject to an entity-level tax caused by the
Transfer of any Residual Certificate to a Person that
is not a Permitted Transferee or a Person other than
the prospective transferee to
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be subject to a REMIC-tax caused by the Transfer of a
Residual Certificate to a Person that is not a
Permitted Transferee.
(e) Subject to the preceding subsections, upon surrender for
registration of transfer of any Certificate at any office or agency of the
Trustee maintained for such purpose pursuant to Section 8.11, the Trustee shall
execute, authenticate and deliver, in the name of the designated Transferee or
Transferees, one or more new Certificates of the same Class of a like aggregate
Percentage Interest.
(f) At the option of the Holder thereof, any Certificate may
be exchanged for other Certificates of the same Class with authorized
denominations and a like aggregate Percentage Interest, upon surrender of such
Certificate to be exchanged at any office or agency of the Trustee maintained
for such purpose pursuant to Section 8.11. 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. Every Certificate presented or surrendered for transfer or exchange
shall (if so required by the Trustee) be duly endorsed by, or be accompanied by
a written instrument of transfer in the form satisfactory to the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in writing.
(g) No service charge to the Certificateholders 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.
(h) All Certificates surrendered for transfer and exchange
shall be canceled and destroyed by the Trustee in accordance with its customary
procedures.
SECTION 5.03. Mutilated, Destroyed, Lost or Stolen
Certificates.
If (i) any mutilated Certificate is surrendered to the
Trustee, or the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Certificate, and (ii) there is delivered to
the Trustee such security or indemnity as may be required by it to save it
harmless, then, in the absence of actual knowledge by 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 the same
Class and of like denomination and Percentage Interest. Upon the issuance of any
new Certificate under this Section, the Trustee may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Trustee) connected therewith. Any replacement Certificate issued pursuant to
this Section shall constitute complete and indefeasible evidence of ownership in
the applicable REMIC created hereunder, as if originally issued, whether or not
the lost, stolen or destroyed Certificate shall be found at any time.
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SECTION 5.04. Persons Deemed Owners.
The Depositor, the Master Servicer, the Trustee, the
Certificate Insurer and any agent of any of them may treat the Person in whose
name any Certificate is registered as the owner of such Certificate for the
purpose of receiving distributions pursuant to Section 4.01 and for all other
purposes whatsoever, and none of the Depositor, the Master Servicer, the Trustee
or any agent of any of them shall be affected by notice to the contrary.
SECTION 5.05. Certain Available Information.
On or prior to the date of the first sale of any Class CE
Certificate to an Independent third party, the Depositor shall provide to the
Trustee 10 copies of any private placement memorandum or other disclosure
document used by the Depositor in connection with the offer and sale of the
Class CE Certificates. In addition, if any such private placement memorandum or
disclosure document is revised, amended or supplemented at any time following
the delivery thereof to the Trustee, the Depositor promptly shall inform the
Trustee of such event and shall deliver to the Trustee 10 copies of the private
placement memorandum or disclosure document, as revised, amended or
supplemented. The Trustee shall maintain at its Corporate Trust Office and shall
make available free of charge during normal business hours for review by any
Holder of a Certificate or any Person identified to the Trustee as a prospective
transferee of a Certificate, originals or copies of the following items: (i) in
the case of a Holder or prospective transferee of a Class CE Certificate, the
private placement memorandum or other disclosure document relating to the Class
CE Certificates, in the form most recently provided to the Trustee; and (ii) in
all cases, (A) this Agreement and any amendments hereof entered into pursuant to
Section 12.01, (B) all monthly statements required to be delivered to
Certificateholders of the relevant Class pursuant to Section 4.02 since the
Closing Date, and all other notices, reports, statements and written
communications delivered to the Certificateholders of the relevant Class
pursuant to this Agreement since the Closing Date, (C) all certifications
delivered by a Responsible Officer of the Trustee since the Closing Date
pursuant to Section 11.01(h), (D) any and all Officers' Certificates delivered
to the Trustee by the Master Servicer since the Closing Date to evidence the
Master Servicer's determination that any P&I Advance or Servicing Advance was,
or if made, would be a Nonrecoverable P&I Advance or Nonrecoverable Servicing
Advance, respectively, and (E) any and all Officers' Certificates delivered to
the Trustee by the Master Servicer since the Closing Date pursuant to Section
4.04(a). Copies and mailing of any and all of the foregoing items will be
available from the Trustee upon request at the expense of the Person requesting
the same.
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ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
SECTION 6.01. Liability of the Depositor and the Master
Servicer.
The Depositor and the Master Servicer each shall be liable in
accordance herewith only to the extent of the obligations specifically imposed
by this Agreement upon them in their respective capacities as Depositor and
Master Servicer and undertaken hereunder by the Depositor and the Master
Servicer herein.
SECTION 6.02. Merger or Consolidation of the Depositor or the
Master Servicer.
Subject to the following paragraph, the Depositor will keep in
full effect its existence, rights and franchises as a corporation under the laws
of the jurisdiction of its incorporation. Subject to the following paragraph,
the Master Servicer will keep in full effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation. The Depositor and the Master Servicer each will obtain and
preserve its qualification to do business as a foreign corporation in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Agreement, the Certificates or any of the
Mortgage Loans and to perform its respective duties under this Agreement.
The Depositor or the Master Servicer may be merged or
consolidated with or into any Person, or transfer all or substantially all of
its assets to any Person, in which case any Person resulting from any merger or
consolidation to which the Depositor or the Master Servicer shall be a party, or
any Person succeeding to the business of the Depositor or the Master Servicer,
shall be the successor of the Depositor or the Master Servicer, as the case may
be, hereunder, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor or surviving Person to
the Master Servicer shall be qualified to service mortgage loans on behalf of
FNMA or FHLMC; and provided further that the Rating Agencies' ratings and shadow
ratings of the Class A Certificates in effect immediately prior to such merger
or consolidation will not be qualified, reduced or withdrawn as a result thereof
(as evidenced by a letter to such effect from the Rating Agencies).
SECTION 6.03. Limitation on Liability of the Depositor, the
Master Servicer and Others.
None of the Depositor, the Master Servicer or any of the
directors, officers, employees or agents of the Depositor or the Master Servicer
shall be under any liability to the Trust Fund or the Certificateholders for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Agreement, or for errors in judgment; provided, however, that
this provision shall not protect the Depositor, the Master Servicer or any such
person against
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any breach of warranties, representations or covenants made herein, or against
any specific liability imposed on the Master Servicer pursuant hereto, or
against any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties or by
reason of reckless disregard of obligations and duties hereunder. The Depositor,
the Master Servicer and any director, officer, employee or agent of the
Depositor or the Master Servicer may rely in good faith on any document of any
kind which, PRIMA FACIE, is properly executed and submitted by any Person
respecting any matters arising hereunder. The Depositor, the Master Servicer and
any director, officer, employee or agent of the Depositor or the Master Servicer
shall be indemnified and held harmless by the Trust Fund against any loss,
liability or expense incurred in connection with any legal action relating to
this Agreement or the Certificates, other than any loss, liability or expense to
any specific Mortgage Loan or Mortgage Loans (except as any such loss, liability
or expense shall be otherwise reimbursable pursuant to this Agreement) or any
loss, liability or expense incurred by reason of willful misfeasance, bad faith
or gross negligence in the performance of duties hereunder or by reason of
reckless disregard of obligations and duties hereunder. Neither the Depositor
nor the Master Servicer shall be under any obligation to appear in, prosecute or
defend any legal action unless such action is related to its respective duties
under this Agreement and, in its opinion, does not involve it in any expense or
liability; provided, however, that each of the Depositor and the Master Servicer
may 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 hereunder. In such
event, unless the Depositor or the Master Servicer acts without the consent of
the Certificate Insurer prior to a Certificate Insurer Default or without the
consent of Holders of Certificates entitled to at least 51% of the Voting Rights
after a Certificate Insurer Default, the legal expenses and costs of such action
and any liability resulting therefrom (except any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder) shall be expenses, costs and liabilities of
the Trust Fund, and the Depositor and the Master Servicer shall be entitled to
be reimbursed therefor from the Collection Account as and to the extent provided
in Section 3.11, any such right of reimbursement being prior to the rights of
the Certificateholders to receive any amount in the Collection Account.
SECTION 6.04.Limitation on Resignation of the Master Servicer.
The Master Servicer shall not resign from the obligations and
duties hereby imposed on it except upon determination that its duties hereunder
are no longer permissible under applicable law. Any such determination pursuant
to the preceding sentence permitting the resignation of the Master Servicer
shall be evidenced by an Opinion of Counsel to such effect obtained at the
expense of the Master Servicer and delivered to the Trustee. No resignation of
the Master Servicer shall become effective until the Trustee or a successor
servicer shall have assumed the Master Servicer's responsibilities, duties,
liabilities (other than those liabilities arising prior to the appointment of
such successor) and obligations under this Agreement.
Except as expressly provided herein, the Master Servicer shall
not assign or transfer any of its rights, benefits or privileges hereunder to
any other Person, or delegate to or
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subcontract with, or authorize or appoint any other Person to perform any of the
duties, covenants or obligations to be performed by the Master Servicer
hereunder. If, pursuant to any provision hereof, the duties of the Master
Servicer are transferred to a successor master servicer, the entire amount of
the Servicing Fee and other compensation payable to the Master Servicer pursuant
hereto shall thereafter be payable to such successor master servicer.
SECTION 6.05. Rights of the Depositor in Respect of the
Master Servicer.
The Master Servicer shall afford (and any Sub-Servicing
Agreement shall provide that each Sub-Servicer shall afford) the Depositor, the
Trustee and the Certificate Insurer, upon reasonable notice, during normal
business hours, access to all records maintained by the Master Servicer (and any
such Sub-Servicer) in respect of the Master Servicer's rights and obligations
hereunder and access to officers of the Master Servicer (and those of any such
Sub-Servicer) responsible for such obligations. Upon request, the Master
Servicer shall furnish to the Depositor, the Trustee and the Certificate Insurer
its (and any such Sub-Servicer's) most recent financial statements and such
other information relating to the Master Servicer's capacity to perform its
obligations under this Agreement as it possesses (and that any such Sub-Servicer
possesses). To the extent such information is not otherwise available to the
public, the Depositor, the Trustee and the Certificate Insurer shall not
disseminate any information obtained pursuant to the preceding two sentences
without the Master Servicer's written consent, except as required pursuant to
this Agreement or to the extent that it is appropriate to do so (i) in working
with legal counsel, auditors, taxing authorities or other governmental agencies
or (ii) pursuant to any law, rule, regulation, order, judgment, writ, injunction
or decree of any court or governmental authority having jurisdiction over the
Depositor, the Trustee, the Certificate Insurer or the Trust Fund, and in either
case, the Depositor, the Certificate Insurer or the Trustee, as the case may be,
shall use its best efforts to assure the confidentiality of any such
disseminated non-public information. The Depositor may, but is not obligated to,
enforce the obligations of the Master Servicer under this Agreement and may, but
is not obligated to, perform, or cause a designee to perform, any defaulted
obligation of the Master Servicer under this Agreement or exercise the rights of
the Master Servicer under this Agreement; provided that the Master Servicer
shall not be relieved of any of its obligations under this Agreement by virtue
of such performance by the Depositor or its designee. The Depositor shall not
have any responsibility or liability for any action or failure to act by the
Master Servicer and is not obligated to supervise the performance of the Master
Servicer under this Agreement or otherwise.
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ARTICLE VII
DEFAULT
SECTION 7.01. Master Servicer Events of Default.
(a) "Master Servicer Event of Default," wherever used herein,
means any one of the following events:
(i) any failure by the Master Servicer to remit to the
Trustee for distribution to the Certificateholders any payment
(other than a P&I Advance required to be made from its own
funds on any Master Servicer Remittance Date pursuant to
Section 4.03) required to be made under the terms of the
Certificates and this Agreement which continues unremedied for
a period of one Business Day after the date upon which written
notice of such failure, requiring the same to be remedied,
shall have been given to the Master Servicer by the Depositor,
the Certificate Insurer or the Trustee (in which case notice
shall be provided by telecopy), or to the Master Servicer, the
Depositor, the Certificate Insurer and the Trustee by the
Holders of Certificates entitled to at least 25% of the Voting
Rights; or
(ii) any failure on the part of the Master Servicer duly
to observe or perform in any material respect any other of the
covenants or agreements on the part of the Master Servicer
contained in this Agreement, or the breach by the Master
Servicer of any representation and warranty contained in
Section 2.05, which continues unremedied for a period of 30
days after the earlier of (i) the date on which written notice
of such failure, requiring the same to be remedied, shall have
been given to the Master Servicer by the Depositor, the
Certificate Insurer or the Trustee, or to the Master Servicer,
the Depositor, the Certificate Insurer and the Trustee by the
Holders of Certificates entitled to at least 25% of the Voting
Rights and (ii) actual knowledge of such failure by a
Servicing Officer of the Master Servicer; or
(iii) a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises in
an involuntary case under any present or future federal or
state bankruptcy, insolvency or similar law or the appointment
of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceeding, or for the winding-up or liquidation of
its affairs, shall have been entered against the Master
Servicer and such decree or order shall have remained in force
undischarged or unstayed for a period of 90 days; or
(iv) the Master Servicer shall consent to the
appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt,
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marshalling of assets and liabilities or similar proceedings
of or relating to it or of or relating to all or
substantially all of its property; or
(v) the Master Servicer shall admit in writing its
inability to pay its debts generally as they become due, file
a petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of
its creditors, or voluntarily suspend payment of its
obligations; or
(vi) there shall have occurred, and the Certificate
Insurer shall have notified the Master Servicer and the
Trustee of, an event of default by the Master Servicer under
the Insurance Agreement, provided (except in the case of a
default by the Master Servicer under Section 5.01(f) of the
Insurance Agreement) that no Certificate Insurer Default
exists; or
(vii) any failure of the Master Servicer to make any P&I
Advance on any Master Servicer Remittance Date required to be
made from its own funds pursuant to Section 4.03 which
continues unremedied until 3:00 p.m. New York time on the
Business Day immediately following the Master Servicer
Remittance Date.
Subject to Article IX, if a Master Servicer Event of Default described in
clauses (i) through (vi) of this Section shall occur, then, and in each and
every such case, so long as such Master Servicer Event of Default shall not have
been remedied, the Depositor, the Certificate Insurer or the Trustee may, and at
the written direction of the Holders of Certificates entitled to at least 51% of
Voting Rights, the Trustee shall, by notice in writing to the Master Servicer
(and to the Depositor and the Certificate Insurer if given by the Trustee or to
the Trustee if given by the Depositor or the Certificate Insurer), terminate all
of the rights and obligations of the Master Servicer in its capacity as Master
Servicer under this Agreement, to the extent permitted by law, and in and to the
Mortgage Loans and the proceeds thereof. Subject to Article IX, if a Master
Servicer Event of Default described in clause (vii) hereof shall occur, the
Trustee shall, by notice in writing to the Master Servicer, the Certificate
Insurer and the Depositor, terminate all of the rights and obligations of the
Master Servicer in its capacity as Master Servicer under this Agreement and in
and to the Mortgage Loans and the proceeds thereof. On or after the receipt by
the Master Servicer of such written notice, all authority and power of the
Master Servicer under this Agreement, whether with respect to the Certificates
(other than as a Holder of any Certificate) or the Mortgage Loans or the Policy
or otherwise, shall pass to and be vested in the Trustee pursuant to and under
this Section, and, without limitation, the Trustee is hereby authorized and
empowered, as attorney-in-fact or otherwise, to execute and deliver, on behalf
of and at the expense of the Master Servicer, any and all documents and other
instruments and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement or assignment of the Mortgage Loans and
related documents, or otherwise. The Master Servicer agrees promptly (and in any
event no later than ten Business Days subsequent to such notice) to provide the
Trustee with all documents and records requested by it to enable it to assume
the Master Servicer's functions under this Agreement, and to cooperate with the
Trustee in effecting the
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termination of the Master Servicer's responsibilities and rights under this
Agreement, including, without limitation, the transfer within one Business Day
to the Trustee for administration by it of all cash amounts which at the time
shall be or should have been credited by the Master Servicer to the Collection
Account held by or on behalf of the Master Servicer, the Distribution Account,
the Expense Account, the Policy Payments Account or any REO Account or Servicing
Account held by or on behalf of the Master Servicer or thereafter be received
with respect to the Mortgage Loans or any REO Property serviced by the Master
Servicer (provided, however, that the Master Servicer shall continue to be
entitled to receive all amounts accrued or owing to it under this Agreement on
or prior to the date of such termination, whether in respect of P&I Advances or
otherwise, and shall continue to be entitled to the benefits of Section 6.03
notwithstanding any such termination). For purposes of this Section 7.01, the
Trustee shall not be deemed to have knowledge of a Master Servicer Event of
Default unless a Responsible Officer of the Trustee assigned to and working in
the Trustee's Corporate Trust Office has actual knowledge thereof or unless
written notice of any event which is in fact such a Master Servicer Event of
Default is received by the Trustee and such notice references the Certificates,
the Trust Fund or this Agreement.
SECTION 7.02. Trustee to Act; Appointment of Successor.
(a) (1) On and after the time the Master Servicer receives a
notice of termination, the Trustee shall be the successor in all respects to the
Master Servicer in its capacity as Master Servicer under this Agreement and the
transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto and arising thereafter
placed on the Master Servicer (except for any representations or warranties of
the Master Servicer under this Agreement, the responsibilities, duties and
liabilities contained in Section 2.03(c) and its obligation to deposit amounts
in respect of losses pursuant to Section 3.12) by the terms and provisions
hereof including, without limitation, the Master Servicer's obligations to make
P&I Advances pursuant to Section 4.03; provided, however, that if the Trustee is
prohibited by law or regulation from obligating itself to make advances
regarding delinquent mortgage loans, then the Trustee shall not be obligated to
make P&I Advances pursuant to Section 4.03; and provided further, that any
failure to perform such duties or responsibilities caused by the Master
Servicer's failure to provide information required by Section 7.01 shall not be
considered a default by the Trustee as successor to the Master Servicer
hereunder. As compensation therefor, the Trustee shall be entitled to the
Servicing Fees and all funds relating to the Mortgage Loans to which the Master
Servicer would have been entitled if it had continued to act hereunder.
Notwithstanding the above, the Trustee may, if it shall be unwilling to so act,
or shall, if it is unable to so act or if it is prohibited by law from making
advances regarding delinquent mortgage loans or if the Certificate Insurer or if
the Holders of Certificates entitled to at least 51% of the Voting Rights so
request in writing to the Trustee, promptly appoint or petition a court of
competent jurisdiction to appoint, an established mortgage loan servicing
institution selected by the Certificate Insurer and acceptable to each Rating
Agency and having a net worth of not less than $15,000,000, as the successor to
the Master Servicer under this Agreement in the assumption of all or any part of
the responsibilities, duties or liabilities of the Master Servicer under this
Agreement. The Trustee is hereby authorized to agree that, if at the time the
Trustee becomes successor to the Master Servicer hereunder (i) a
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successor Master Servicer is not selected by the Certificate insurer and a
Certificate Insurer Default has occurred and is continuing, (ii) the terminated
Master Servicer is New Century Mortgage Corporation or its successors or
assigns, (iii) Advanta Mortgage Corp. USA is the Sub-Servicer of all of the
Mortgage Loans and (A) the termination of the terminated Master Servicer has
occurred for reasons unrelated to the sub-servicing of the Mortgage Loans (B)
the Sub-Servicer is not in default under the applicable Sub-Servicing Agreement
(it being understood that if the Sub-Servicing Agreement, dated as of February
1, 1997, as may have been amended, between New Century Mortgage Corporation and
Advanta Mortgage Corp. USA is at such time the applicable SubServicing
Agreement, then "default" as used in this clause (iii)(B) shall mean that a
Sub-Servicer Event of Default, as defined in such agreement, is continuing) and
(iv) the Sub-Servicer meets the eligibility requirements set forth in the
preceding sentence, the Trustee will select and offer the Sub-Servicer
appointment, subject to the terms of Section 7.02(a)(2) below, as successor
under this Agreement in the assumption of all of the responsibilities, duties or
liabilities of the Master Servicer under this Agreement for compensation equal
to that permitted the Master Servicer hereunder.
(2) No appointment of a successor to the Master
Servicer under this Agreement shall be effective until the assumption by the
successor of all of the Master Servicer's responsibilities, duties and
liabilities hereunder. In connection with such appointment and assumption
described herein, the Trustee may make such arrangements for the compensation of
such successor out of payments on Mortgage Loans as it and such successor shall
agree; provided, however, that no such compensation shall be in excess of that
permitted the Master Servicer as such hereunder. The Depositor, the Trustee and
such successor shall take such action, consistent with this Agreement, as shall
be necessary to effectuate any such succession. Pending appointment of a
successor to the Master Servicer under this Agreement, the Trustee shall act in
such capacity as hereinabove provided.
(b) If the Master Servicer fails to remit to the Trustee for
distribution to the Certificateholders any payment required to be made under the
terms of this Agreement (for purposes of this Section 7.02(b), a "Remittance")
because the Master Servicer is the subject of a proceeding under the federal
Bankruptcy Code and the making of such Remittance is prohibited by Section 362
of the federal Bankruptcy Code, the Trustee shall upon notice of such
prohibition, regardless of whether it has received a notice of termination under
Section 7.01, advance the amount of such Remittance by depositing such amount in
the Distribution Account on the related Distribution Date. The Trustee shall be
obligated to make such advance only if (i) such advance, in the good faith
judgment of the Trustee, can reasonably be expected to be ultimately recoverable
from funds which are in the custody of the Master Servicer, a trustee in
bankruptcy or a federal bankruptcy court and should have been the subject of
such Remittance absent such prohibition (the "Stayed Funds") and (ii) the
Trustee is not prohibited by law from making such advance or obligating itself
to do so. Upon remittance of the Stayed Funds to the Trustee or the deposit
thereof in the Distribution Account by the Master Servicer, a trustee in
bankruptcy or a federal bankruptcy court, the Trustee may recover the amount so
advanced, without interest, by withdrawing such amount from the Distribution
Account; however, nothing in this Agreement shall be deemed to affect the
Trustee's rights to recover from the Master Servicer's own funds interest on the
amount of any such advance. If the Trustee at any time
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makes an advance under this Subsection which it later determines in its good
faith judgment will not be ultimately recoverable from the Stayed Funds with
respect to which such advance was made, the Trustee shall be entitled to
reimburse itself for such advance, without interest, by withdrawing from the
Distribution Account, out of amounts on deposit therein, an amount equal to the
portion of such advance attributable to the Stayed Funds.
SECTION 7.03. Notification to Certificateholders.
(a) Upon any termination of the Master Servicer pursuant to
Section 7.01 above or any appointment of a successor to the Master Servicer
pursuant to Section 7.02 above, the Trustee shall give prompt written notice
thereof to Certificateholders at their respective addresses appearing in the
Certificate Register.
(b) Not later than the later of 60 days after the occurrence
of any event, which constitutes or which, with notice or lapse of time or both,
would constitute a Master Servicer Event of Default or five days after a
Responsible Officer of the Trustee becomes aware of the occurrence of such an
event, the Trustee shall transmit by mail to all Holders of Certificates notice
of each such occurrence, unless such default or Master Servicer Event of Default
shall have been cured or waived.
SECTION 7.04. Waiver of Master Servicer Events of Default.
Subject to Article IX, the Holders representing at least 66%
of the Voting Rights evidenced by all Classes of Certificates affected by any
default or Master Servicer Event of Default hereunder, with the written consent
of the Certificate Insurer, may waive such default or Master Servicer Event of
Default; PROVIDED, HOWEVER, that a default or Master Servicer Event of Default
under clause (i) or (vi) of Section 7.01 may be waived only by all of the
Holders of the Regular Certificates with the written consent of the Certificate
Insurer. Upon any such waiver of a default or Master Servicer Event of Default,
such default or Master Servicer Event of Default shall cease to exist and shall
be deemed to have been remedied for every purpose hereunder. No such waiver
shall extend to any subsequent or other default or Master Servicer Event of
Default or impair any right consequent thereon except to the extent expressly so
waived.
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ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.01. Duties of Trustee.
The Trustee, prior to the occurrence of a Master Servicer
Event of Default and after the curing of all Master Servicer Events of Default
which may have occurred, undertakes to perform such duties and only such duties
as are specifically set forth in this Agreement. During a Master Servicer Event
of Default, the Trustee shall exercise such of the rights and powers vested in
it by this Agreement, and use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the circumstances in
the conduct of such person's own affairs. Any permissive right of the Trustee
enumerated in this Agreement shall not be construed as a duty.
The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement. If any such instrument is found
not to conform to the requirements of this Agreement in a material manner, the
Trustee shall take such 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 provide notice thereof to the Certificateholders and the
Certificate Insurer.
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 misconduct; provided, however, that:
(i) Prior to the occurrence of a Master Servicer Event
of Default, and after the curing of all such Master Servicer
Events of Default which may have occurred, the duties and
obligations of the Trustee shall be determined solely by the
express provisions of this Agreement, the Trustee shall not be
liable except for the performance of such duties and
obligations as are specifically set forth in this Agreement,
no implied covenants or obligations shall be read into this
Agreement against the Trustee and, in the absence of bad faith
on the part of the Trustee, the Trustee may conclusively rely,
as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Trustee that conform 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 Responsible Officers of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the
pertinent facts; and
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(iii) The Trustee shall not be personally liable with
respect to any action taken, suffered or omitted to be taken
by it in good faith in accordance with the direction of the
Certificate Insurer or Holders of Certificates entitled to at
least 25% of the Voting Rights relating to the time, method
and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Agreement.
SECTION 8.02. Certain Matters Affecting the Trustee.
(a) Except as otherwise provided in Section 8.01:
(i) The Trustee may request and rely upon and shall be
protected in acting or refraining from acting upon any
resolution, Officers' Certificate, certificate of auditors or
any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond or other
paper or document reasonably believed by it to be genuine and
to have been signed or presented by the proper party or
parties;
(ii) The Trustee may consult with counsel and any
Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken or suffered or
omitted by it hereunder in good faith and in accordance with
such Opinion of Counsel;
(iii) The Trustee shall be under no obligation to
exercise any of the trusts or powers vested in it by this
Agreement or to institute, conduct or defend any litigation
hereunder or in relation hereto at the request, order or
direction of any of the Certificateholders, pursuant to the
provisions of this Agreement, unless such Certificateholders
shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which
may be incurred therein or thereby; nothing contained herein
shall, however, relieve the Trustee of the obligation, upon
the occurrence of a Master Servicer Event of Default (which
has not been cured or waived), to exercise such of the rights
and powers vested in it by this Agreement, and to use the same
degree of care and skill in their exercise as a prudent 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 occurrence of a Master Servicer Event
of Default hereunder and after the curing of all Master
Servicer 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
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document, unless requested in writing to do so by the
Certificate Insurer or by Holders of Certificates entitled to
at least 25% of the Voting Rights; 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 such
Certificateholders or the Certificate Insurer, the Trustee may
require reasonable indemnity against such expense, or
liability from such Certificateholders or the Certificate
Insurer as a condition to taking any such action;
(vi) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or
by or through agents or attorneys; and
(vii) The Trustee shall not be personally liable for any
loss resulting from the investment of funds held in the
Collection Account or the Expense Account at the direction of
the Master Servicer pursuant to Section 3.12.
(b) All rights of action under this Agreement or under any of
the Certificates, enforceable by the Trustee, may be enforced by it without the
possession of any of the Certificates, or the production thereof at the trial or
other proceeding relating thereto, and any such suit, action or proceeding
instituted by the Trustee shall be brought in its name for the benefit of all
the Holders of such Certificates, subject to the provisions of this Agreement.
SECTION 8.03. Trustee Not Liable for Certificates or Mortgage
Loans.
The recitals contained herein and in the Certificates (other
than the signature of the Trustee, the authentication of the Trustee on the
Certificates, the acknowledgments of the Trustee contained in Article II and the
representations and warranties of the Trustee in Section 8.12) shall be taken as
the statements of the Depositor and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations or warranties as to the
validity or sufficiency of this Agreement (other than as specifically set forth
in Section 8.12) or of the Certificates (other than the signature of the Trustee
and authentication of the Trustee on the Certificates) or of any Mortgage Loan
or related document. The Trustee shall not be accountable for the use or
application by the Depositor of any of the Certificates or of the proceeds of
such Certificates, or for the use or application of any funds paid to the
Depositor or the Master Servicer in respect of the Mortgage Loans or deposited
in or withdrawn from the Collection Account by the Master Servicer, other than
any funds held by or on behalf of the Trustee in accordance with Section 3.10.
SECTION 8.04. Trustee May Own Certificates.
The Trustee in its individual capacity or any other capacity
may become the owner or pledgee of Certificates with the same rights it would
have if it were not Trustee.
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SECTION 8.05. Trustee's Fees and Expenses.
The Trustee shall withdraw from the Distribution Account on
each Distribution Date and pay to itself the Trustee Fee and, to the extent that
the funds therein are at anytime insufficient for such purpose, the Master
Servicer shall pay such fees. The Trustee and any director, officer, employee or
agent of the Trustee shall be indemnified by REMIC I and held harmless against
any loss, liability or expense (not including expenses, disbursements and
advances incurred or made by the Trustee, including the compensation and the
expenses and disbursements of its agents and counsel, in the ordinary course of
the Trustee's performance in accordance with the provisions of this Agreement)
incurred by the Trustee in connection with any claim or legal action or any
pending or threatened claim or legal action arising out of or in connection with
the acceptance or administration of its obligations and duties under this
Agreement, other than any loss, liability or expense (i) resulting from any
breach by the Master Servicer of its obligations in connection with this
Agreement, (ii) that constitutes a specific liability of the Trustee pursuant to
Section 11.01(c) or (iii) 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
or as a result of a breach of the Trustee's obligations under Article XI hereof.
The Master Servicer agrees to indemnify the Trustee from, and hold it harmless
against, any loss, liability or expense arising in respect of any breach by the
Master Servicer of its obligations in connection with this Agreement. Such
indemnity shall survive the termination or discharge of this Agreement and the
resignation or removal of the Trustee. Any payment hereunder made by the Master
Servicer to the Trustee shall be from the Master Servicer's own funds, without
reimbursement from REMIC I therefor.
SECTION 8.06. Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a corporation or
an association (other than the Depositor, the Seller, the Master Servicer or any
Affiliate of the foregoing) organized and doing business under the laws of any
state or the United States of America, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$50,000,000 (or a member of a bank holding company whose capital and surplus is
at least $50,000,000) and subject to supervision or examination by federal or
state authority. If such corporation or association publishes reports of
conditions at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section the combined capital and surplus of such corporation or association
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of conditions so published. In case at any time the Trustee shall
cease to be eligible in accordance with the provisions of this Section, the
Trustee shall resign immediately in the manner and with the effect specified in
Section 8.07.
SECTION 8.07. Resignation and Removal of the Trustee.
The Trustee may at any time resign and be discharged from the
trust hereby created by giving written notice thereof to the Depositor, the
Certificate Insurer, the Master Servicer and to the Certificateholders. Upon
receiving such notice of resignation, the Depositor
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shall, with the written consent of the Certificate Insurer, 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 Certificateholders, the Certificate
Insurer, and the Master Servicer by the Depositor. If no successor trustee shall
have been so appointed and have accepted appointment within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.06 and shall fail to resign after
written request therefor by the Depositor 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 of rehabilitation, conservation or
liquidation, then the Depositor may remove the Trustee and appoint 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 Certificateholders, the Certificate Insurer
and the Master Servicer by the Depositor.
The Certificate Insurer or the Holders of Certificates
entitled to at least 51% of the Voting Rights, with the written consent of the
Certificate Insurer, may at any time 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-fact duly authorized,
one complete set of which instruments shall be delivered to the Depositor, one
complete set to the Trustee so removed and one complete set to the successor so
appointed. A copy of such instrument shall be delivered to the
Certificateholders, the Certificate Insurer and the Master Servicer by the
Depositor.
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 8.08.
SECTION 8.08. Successor Trustee.
Any successor trustee appointed as provided in Section 8.07
shall execute, acknowledge and deliver to the Depositor, the Certificate Insurer
and to its predecessor trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor trustee
shall become effective and such successor trustee, without any further act, deed
or conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee herein. The predecessor trustee shall deliver to the successor
trustee all Mortgage Files and related documents and statements, as well as all
moneys, held by it hereunder, and the Depositor 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.
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No successor trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 8.06 and the appointment of such
successor trustee shall not result in a downgrading of any Class of Certificates
by either Rating Agency, as evidenced by a letter from each Rating Agency.
Upon acceptance of appointment by a successor trustee as
provided in this Section, the Depositor shall mail notice of the succession of
such trustee hereunder to the Certificate Insurer and to all Holders of
Certificates at their addresses as shown in the Certificate Register. If the
Depositor fails to mail such notice within 10 days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Depositor.
Notwithstanding anything to the contrary contained herein, so
long as no Certificate Insurer Default has occurred and is continuing, the
appointment of any successor trustee pursuant to any provision of this Agreement
will be subject to the prior written consent of the Certificate Insurer.
SECTION 8.09. Merger or Consolidation of Trustee.
Any corporation or association into which the Trustee may be
merged or converted or with which it may be consolidated or any corporation or
association resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation or association succeeding to the
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation or association shall be eligible under the provisions
of Section 8.06, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
SECTION 8.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions hereof, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of REMIC I or property securing the same may at the time be located, the
Trustee shall have the power and shall execute and deliver all instruments to
appoint one or more Persons approved by the Trustee to act as co-trustee or
co-trustees, jointly with the Trustee, or separate trustee or separate trustees,
of all or any part of REMIC I, and to vest in such Person or Persons, in such
capacity, such title to REMIC I, or any part thereof, and, subject to the other
provisions of this Section 8.10, such powers, duties, obligations, rights and
trusts as the Trustee may consider necessary or desirable. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 8.06 hereunder and no notice to Holders of
Certificates of the appointment of co-trustee(s) or separate trustee(s) shall be
required under Section 8.08 hereof.
In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 8.10 all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate
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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 by the
Trustee (whether as Trustee hereunder or as successor to a defaulting Master
Servicer hereunder), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to REMIC I 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.
Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VIII. Each separate trustee and co-trustee, upon
its acceptance of the trust conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee.
Any separate trustee or co-trustee may, at any time,
constitute the Trustee, its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 8.11. Appointment of Office or Agency.
The Trustee will appoint an office or agency in the City of
St. Paul, Minnesota where the Certificates may be surrendered for registration
of transfer or exchange, and presented for final distribution, and where notices
and demands to or upon the Trustee in respect of the Certificates and this
Agreement may be served.
SECTION 8.12. Representations and Warranties of the Trustee.
The Trustee hereby represents and warrants to the Master
Servicer, the Depositor and the Certificate Insurer, as of the Closing Date,
that:
(i) The Trustee is a national banking association duly
organized, validly existing and in good standing under the laws of the
United States of America.
(ii) The execution and delivery of this Agreement by the
Trustee, and the performance and compliance with the terms of this
Agreement by the Trustee, will not violate the Trustee's articles of
association or bylaws or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or
result
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in the breach of, any material agreement or other instrument to which
it is a party or which is applicable to it or any of its assets.
(iii) The Trustee 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.
(iv) This Agreement, assuming due authorization, execution and
delivery by the Master Servicer and the Depositor, constitutes a valid,
legal and binding obligation of the Trustee, enforceable against the
Trustee in accordance with the terms hereof, subject to (A) applicable
bankruptcy, insolvency, receivership, reorganization, moratorium and
other laws affecting the enforcement of creditors' rights generally,
and (B) general principles of equity, regardless of whether such
enforcement is considered in a proceeding in equity or at law.
(v) The Trustee is not in violation of, and its execution and
delivery of this Agreement and its performance and compliance with the
terms of this Agreement will not constitute a violation of, any law,
any order or decree of any court or arbiter, or any order, regulation
or demand of any federal, state or local governmental or regulatory
authority, which violation, in the Trustee's good faith and reasonable
judgment, is likely to affect materially and adversely either the
ability of the Trustee to perform its obligations under this Agreement
or the financial condition of the Trustee.
(vi) No litigation is pending or, to the best of the Trustee's
knowledge, threatened against the Trustee which would prohibit the
Trustee from entering into this Agreement or, in the Trustee's good
faith reasonable judgment, is likely to materially and adversely affect
either the ability of the Trustee to perform its obligations under this
Agreement or the financial condition of the Trustee.
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ARTICLE IX
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
SECTION 9.01. Rights of the Certificate Insurer To Exercise
Rights of Class A Certificateholders.
Each of the Depositor, the Master Servicer and the Trustee,
and, by accepting its Certificate, each Class A Certificateholder, agrees that
unless a Certificate Insurer Default has occurred and is continuing, the
Certificate Insurer shall have the right to exercise all rights of the Class A
Certificateholders under this Agreement (except as provided in clause (i) of the
second paragraph of Section 12.01) without any further consent of the Class A
Certificateholders, including, without limitation:
(a) the right to direct foreclosures upon Mortgage Loans
upon failure of the Master Servicer to do so;
(b) the right to require the Seller or the Depositor to
repurchase or substitute for Mortgage Loans pursuant to Section 2.03;
(c) the right to give notices of breach or to terminate
the rights and obligations of the Master Servicer as Master Servicer
pursuant to Section 7.01;
(d) the right to direct the actions of the Trustee during
the continuance of a Master Servicer Event of Default pursuant to
Sections 7.01 and 7.02;
(e) the right to consent to or direct any waivers of
Master Servicer Events of Default pursuant to Section 7.04;
(f) the right to direct the Trustee to investigate
certain matters pursuant to Section 8.02(a)(v); and
(g) the right to remove the Trustee pursuant to Section
8.07 hereof.
In addition, each Class A Certificateholder agrees that,
unless a Certificate Insurer Default has occurred and is continuing, the rights
specifically set forth above may be exercised by the Class A Certificateholders
only with the prior written consent of the Certificate Insurer.
SECTION 9.02. Trustee To Act Solely with Consent of the
Certificate Insurer.
Unless a Certificate Insurer Default has occurred and is
continuing, the Trustee shall not:
(a) agree to any amendment pursuant to Section 12.01; or
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(b) undertake any litigation pursuant to
Section 8.02(a)(iii);
without the prior written consent of the Certificate Insurer which consent shall
not be unreasonably withheld.
SECTION 9.03. Trust Fund and Accounts Held for Benefit of the
Certificate Insurer.
The Trustee shall hold the Trust Fund and the Mortgage Files
for the benefit of the Certificateholders and the Certificate Insurer and all
references in this Agreement (including, without limitation, in Sections 2.01
and 2.02) and in the Certificates to the benefit of Holders of the Certificates
shall be deemed to include the Certificate Insurer. The Trustee shall 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.
The Master Servicer hereby acknowledges and agrees that it
shall service and administer the Mortgage Loans and any REO Properties, and
shall maintain the Collection Account and any REO Account, for the benefit of
the Certificateholders and for the benefit of the Certificate Insurer, and all
references in this Agreement (including, without limitation, in Sections 3.01
and 3.10) to the benefit of or actions on behalf of the Certificateholders shall
be deemed to include the Certificate Insurer. Unless a Certificate Insurer
Default has occurred and is continuing, the Master Servicer shall not terminate
any Sub-Servicing Agreements without cause without the prior consent of the
Certificate Insurer. Unless a Certificate Insurer Default has occurred and is
continuing, neither the Master Servicer nor the Depositor shall undertake any
litigation pursuant to Section 6.03 (other than litigation to enforce their
respective rights hereunder) without the prior consent of the Certificate
Insurer.
SECTION 9.04. Claims Upon the Policy; Policy Payments Account.
(a) If, by the close of business on the third Business Day
prior to a Distribution Date, the Trustee determines that a Deficiency Amount
for any Distribution Date is greater than zero, then the Trustee shall give
notice to the Certificate Insurer by telephone or telecopy of the amount of such
Deficiency Amount. Such notice of such Deficiency Amount shall be confirmed in
writing in the form set forth as Exhibit A to the Endorsement of the Policy, to
the Certificate Insurer and the Fiscal Agent (as defined in the Policy), if any,
at or before 10:00 a.m. New York time on the second Business Day prior to such
Distribution Date. Following Receipt (as defined in the Policy) by the
Certificate Insurer of such notice in such form, the Certificate Insurer or the
Fiscal Agent will pay any amount payable under the Policy on the later to occur
of (i) 12:00 noon New York time on the second Business Day following such
receipt and (ii) 12:00 noon New York time on the Distribution Date to which such
deficiency relates, as provided in the Endorsement to the Policy.
(b) The Trustee shall establish a separate special purpose
trust account for the benefit of Holders of the Class A Certificates and the
Residual Certificates and the Certificate
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Insurer referred to herein as the "Policy Payments Account" over which the
Trustee shall have exclusive control and sole right of withdrawal. The Trustee
shall deposit any amount paid under the Policy in the Policy Payments Account
and distribute such amount only for purposes of payment to Holders of Class A
Certificates and the Residual Certificates of the Guaranteed Distribution for
which a claim was made, and such amount may not be applied to satisfy any costs,
expenses or liabilities of the Master Servicer, the Trustee or the Trust Fund.
Amounts paid under the Policy shall be transferred to the Distribution Account
in accordance with the next succeeding paragraph and disbursed by the Trustee to
Holders of Class A Certificates and the Residual Certificates in accordance with
Section 4.01(b) or Section 10.01, as applicable. It shall not be necessary for
such payments to be made by checks or wire transfers separate from the checks or
wire transfers used to pay the Guaranteed Distribution with other funds
available to make such payment. However, the amount of any payment of principal
of or interest on the Class A Certificates and the Residual Certificates to be
paid from funds transferred from the Policy Payments Account shall be noted as
provided in paragraph (c) below in the Certificate Register and in the statement
to be furnished to Holders of the Class A Certificates and Residual Certificates
pursuant to Section 4.02. Funds held in the Policy Payments Account shall not be
invested.
On any Distribution Date with respect to which a claim has
been made under the Policy, the amount of any funds received by the Trustee as a
result of any claim under the Policy, to the extent required to make the
Guaranteed Distribution on such Distribution Date, shall be withdrawn from the
Policy Payments Account and deposited in the Distribution Account and applied by
the Trustee, together with the other funds to be withdrawn from the Distribution
Account pursuant to Section 4.01(b) or Section 10.01, as applicable, directly to
the payment in full of the Guaranteed Distribution due on the Class A
Certificates and the Residual Certificates. Funds received by the Trustee as a
result of any claim under the Policy shall be deposited by the Trustee in the
Policy Payments Account and used solely for payment to the Holders of the Class
A Certificates and the Residual Certificates and may not be applied to satisfy
any costs, expenses or liabilities of the Master Servicer, the Trustee or the
Trust Fund. Any funds remaining in the Policy Payments Account on the first
Business Day following a Distribution Date shall be remitted to the Certificate
Insurer, pursuant to the instructions of the Certificate Insurer, by the end of
such Business Day.
(c) The Trustee shall keep a complete and accurate record of
the amount of interest and principal paid in respect of any Class A Certificate
and Residual Certificate from moneys received under the Policy. The Certificate
Insurer shall have the right to inspect such records at reasonable times during
normal business hours upon one Business Day's prior notice to the Trustee.
(d) The Trustee shall promptly notify the Certificate Insurer
and Fiscal Agent of any proceeding or the institution of any action, of which a
Responsible Officer of the Trustee has actual knowledge, seeking the avoidance
as a preferential transfer under applicable bankruptcy, insolvency, receivership
or similar law (a "Preference Claim") of any Guaranteed Distribution made with
respect to the Class A Certificates and the Residual Certificates. Each Holder
of the Class A Certificates or the Residual Certificates, by its purchase of
Class A
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Certificates or the Residual Certificates, the Master Servicer and the Trustee
hereby agree that the Certificate Insurer (so long as no Certificate Insurer
Default has occurred and is continuing) may at any time during the continuation
of any proceeding relating to a Preference Claim direct all matters relating to
such Preference Claim, including, without limitation, (i) the direction of any
appeal of any order relating to such Preference Claim and (ii) the posting of
any surety, supersedeas or performance bond pending any such appeal. In addition
and without limitation of the foregoing, the Certificate Insurer shall be
subrogated to the rights of the Master Servicer, the Trustee and each Holder of
the Class A Certificates and the Residual Certificates in the conduct of any
such Preference Claim, including, without limitation, all rights of any party to
an adversary proceeding action with respect to any court order issued in
connection with any such Preference Claim.
SECTION 9.05 Effect of Payments by the Certificate Insurer;
Subrogation.
Anything herein to the contrary notwithstanding, any payment
with respect to principal of or interest on any of the Class A Certificates and
the Residual Certificates which is made with moneys received pursuant to the
terms of the Policy shall not be considered payment of such Class A Certificates
and the Residual Certificates from the Trust Fund and shall not result in the
payment of or the provision for the payment of the principal of or interest on
such Class A Certificates and the Residual Certificates within the meaning of
Section 4.01. The Depositor, the Master 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 Master Servicer or the Trustee (a) to the extent the Certificate Insurer
makes payments, directly or indirectly, on account of principal of or interest
on any Class A Certificates and the Residual Certificates to the Holders of such
Certificates, the Certificate Insurer will be fully subrogated to the rights of
such Holders to receive such principal and interest from the Trust Fund and (b)
the Certificate Insurer shall be paid such principal and interest but only from
the sources and in the manner provided herein for the payment of such principal
and interest.
The Trustee and the Master Servicer shall cooperate in all
respects with any reasonable request by the 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 Holders
as otherwise set forth herein.
SECTION 9.06. Notices to the Certificate Insurer.
All notices, statements, reports, certificates or opinions
required by this Agreement to be sent to any other party hereto or to any of the
Certificateholders shall also be sent to the Certificate Insurer.
SECTION 9.07. Third-Party Beneficiary.
The Certificate Insurer shall be a third-party beneficiary of
this Agreement, entitled to enforce the provisions hereof as if a party hereto.
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SECTION 9.08. Trustee to Hold the Policy.
The Trustee will hold the Policy in trust as agent for the
Holders of the Class A Certificates and the Residual Certificates for the
purpose of making claims thereon and distributing the proceeds thereof. Neither
the Policy nor the amounts paid on the Policy will constitute part of the Trust
Fund or assets of either REMIC created by this Agreement. Each Holder of Class A
Certificates and the Residual Certificates, by accepting its Class A
Certificates, appoints the Trustee as attorney-in-fact for the purpose of making
claims on the Policy.
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ARTICLE X
TERMINATION
SECTION 10.01 Termination Upon Repurchase or Liquidation of
All Mortgage Loans.
(a) Subject to Section 10.02, the respective obligations and
responsibilities under this Agreement of the Depositor, the Master Servicer and
the Trustee (other than the obligations of the Master Servicer to the Trustee
pursuant to Section 8.05 and of the Master Servicer to provide for and the
Trustee to make payments in respect of the REMIC I Regular Interests or the
Classes as hereinafter set forth) shall terminate upon payment to the
Certificateholders and the deposit of all amounts held by or on behalf of the
Trustee and required hereunder to be so paid or deposited on the Distribution
Date coinciding with or following the earlier to occur of (i) the purchase by
the Terminator (as defined below) of all Mortgage Loans and each REO Property
remaining in REMIC I and (ii) the final payment or other liquidation (or any
advance with respect thereto) of the last Mortgage Loan or REO Property
remaining in REMIC I; provided, however, that in no event shall the trust
created hereby continue beyond the expiration of 21 years from the death of the
last survivor of the descendants of Joseph P. Kennedy, the late ambassador of
the United States to the Court of St. James, living on the date hereof. The
purchase by the Terminator of all Mortgage Loans and each REO Property remaining
in REMIC I shall be at a price equal to the greater of (A) the aggregate
Purchase Price of all the Mortgage Loans included in REMIC I, plus the appraised
value of each REO Property, if any, included in REMIC I, such appraisal to be
conducted by an appraiser mutually agreed upon by the Terminator and the Trustee
in their reasonable discretion (and approved by the Certificate Insurer in its
reasonable discretion) and (B) the aggregate fair market value of all of the
assets of REMIC I (as determined by the Terminator, the Certificate Insurer (to
the extent the Certificate Insurer is not the Terminator) and the Trustee, as of
the close of business on the third Business Day next preceding the date upon
which notice of any such termination is furnished to Certificateholders pursuant
to the third paragraph of this Section 10.01); provided, however, that in the
event the Majority Class CE Certificateholder is the Terminator, the purchase by
the Majority Class CE Certificateholder of all Mortgage Loans and each REO
Property remaining in REMIC I shall be at a price equal to the greater of: (i)
the amount designated in clause (A) above or (ii) the lesser of (x) the sum of
the amount designated in clause (A) above and any amounts due under the
Insurance Agreement and (y) the amount designated in clause (B) above.
(b) The Majority Class CE Certificateholder shall have the
right and, to the extent the Majority Class CE Certificateholder fails to
exercise such right, the Certificate Insurer shall have the right and, to the
extent neither the Majority Class CE Certificateholder nor the Certificate
Insurer exercises such right, the Master Servicer shall have the right (the
party exercising such right, the "Terminator"), to purchase all of the Mortgage
Loans and each REO Property remaining in REMIC I pursuant to clause (i) of the
preceding paragraph no later than the Determination Date in the month
immediately preceding the Distribution Date on which the Certificates will be
retired; provided, however, that the Terminator may elect to purchase all of
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the Mortgage Loans and each REO Property remaining in REMIC I pursuant to clause
(i) above only if the aggregate Stated Principal Balance of the Mortgage Loans
and each REO Property remaining in the Trust Fund at the time of such election
is reduced to less than 10%, in the event the Majority Class CE
Certificateholder is the Terminator, or 5%, in the event the Master Servicer or
the Certificate Insurer is the Terminator, of the aggregate Stated Principal
Balance of the Mortgage Loans as of the Cut-off Date. By acceptance of the Class
R-II Certificates, the Holder of the Class R-II Certificates agrees, in
connection with any termination hereunder, to assign and transfer any amounts in
excess of par, and to the extent received in respect of such termination, to pay
any such amounts to the Holders of the Class CE Certificates.
(c) Notice of the liquidation of the REMIC I Regular Interest
shall be given promptly by the Trustee by letter to Certificateholders and the
Certificate Insurer mailed (a) in the event such notice is given in connection
with the purchase of the Mortgage Loans and each REO Property by the Terminator,
not earlier than the 15th day and not later than the 25th day of the month next
preceding the month of the final distribution on the Certificates or (b)
otherwise during the month of such final distribution on or before the
Determination Date in such month, in each case specifying (i) the Distribution
Date upon which the Trust Fund will terminate and the final payment of in
respect of the REMIC I Regular Interests and the Certificates will be made upon
presentation and surrender of the related Certificates at the office of the
Trustee therein designated, (ii) the amount of any such final payment, (iii)
that no interest shall accrue in respect of the REMIC I Regular Interests or the
Certificates from and after the Interest Accrual Period relating to the final
Distribution Date therefor and (iv) that the Record Date otherwise applicable to
such Distribution Date is not applicable, payments being made only upon
presentation and surrender of the Certificates at the office of the Trustee. In
the event such notice is given in connection with the purchase of all of the
Mortgage Loans and each REO Property remaining in REMIC I by the Terminator, the
Terminator shall deliver to the Trustee for deposit in the Distribution Account
not later than the last Business Day of the month next preceding the month of
the final distribution on the Certificates an amount in immediately available
funds equal to the above-described purchase price. The Trustee shall remit to
the Master Servicer from such funds deposited in the Distribution Account (i)
any amounts which the Master Servicer would be permitted to withdraw and retain
from the Collection Account pursuant to Section 3.11 and (ii) any other amounts
otherwise payable by the Trustee to the Master Servicer from amounts on deposit
in the Distribution Account pursuant to the terms of this Agreement, in each
case prior to making any final distributions pursuant to Section 10.01(d) below.
Upon certification to the Trustee by a Servicing Officer (a copy of which
certification shall be delivered to the Certificate Insurer) of the making of
such final deposit, the Trustee shall promptly release to the Terminator the
Mortgage Files for the remaining Mortgage Loans, and the Trustee shall execute
all assignments, endorsements and other instruments necessary to effectuate such
transfer.
(d) Upon presentation of the Certificates by the
Certificateholders on the final Distribution Date, the Trustee shall distribute
to each Certificateholder so presenting and surrendering its Certificates the
amount otherwise distributable on such Distribution Date in accordance with
Section 4.01 in respect of the Certificates so presented and surrendered. Any
funds not distributed to any Holder or Holders of Certificates being retired on
such Distribution
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Date because of the failure of such Holder or Holders to tender their
Certificates shall, on such date, be set aside and held in trust and credited to
the account of the appropriate non-tendering Holder or Holders. If any
Certificates as to which notice has been given pursuant to this Section 10.01
shall not have been surrendered for cancellation within six months after the
time specified in such notice, the Trustee shall mail a second notice to the
remaining non-tendering Certificateholders to surrender their Certificates for
cancellation in order to receive the final distribution with respect thereto. If
within one year after the second notice all such Certificates shall not have
been surrendered for cancellation, the Trustee shall, directly or through an
agent, mail a final notice to the remaining related non-tendering
Certificateholders concerning surrender of their Certificates. The costs and
expenses of maintaining the funds in trust and of contacting such
Certificateholders shall be paid out of the assets remaining in the trust funds.
If within one year after the final notice any such Certificates shall not have
been surrendered for cancellation, the Trustee shall pay to Salomon Brothers Inc
all such amounts, and all rights of non-tendering Certificateholders in or to
such amounts shall thereupon cease. No interest shall accrue or be payable to
any Certificateholder on any amount held in trust by the Trustee as a result of
such Certificateholder's failure to surrender its Certificate(s) for final
payment thereof in accordance with this Section 10.01. Any such amounts held in
trust by the Trustee shall be held in an Eligible Account and the Trustee may
direct any depository institution maintaining such account to invest the funds
in one or more Permitted Investments. All income and gain realized from the
investment of funds deposited in such accounts held in trust by the Trustee
shall be for the benefit of the Trustee; provided, however, that the Trustee
shall deposit in such account the amount of any loss of principal incurred in
respect of any such Permitted Investment made with funds in such accounts
immediately upon the realization of such loss.
Immediately following the deposit of funds in trust hereunder
in respect of the Certificates, the Trust Fund shall terminate.
SECTION 10.02 Additional Termination Requirements.
(a) In the event that the Terminator purchases all the
Mortgage Loans and each REO Property or the final payment on or other
liquidation of the last Mortgage Loan or REO Property remaining in REMIC I
pursuant to Section 10.01, the Trust Fund shall be terminated in accordance with
the following additional requirements:
(i) The Trustee shall specify the first day in the
90-day liquidation period in a statement attached to the final
Tax Return of each of REMIC I and REMIC II pursuant to
Treasury regulation Section 1.860F-1 and shall satisfy all
requirements of a qualified liquidation under Section 860F of
the Code and any regulations thereunder, as evidenced by an
Opinion of Counsel obtained at the expense of the Terminator;
(ii) During such 90-day liquidation period and, at or
prior to the time of making of the final payment on the
Certificates, the Trustee shall sell all of the assets of
REMIC I to the Terminator for cash; and
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(iii) At the time of the making of the final payment on
the Certificates, the Trustee shall distribute or credit, or
cause to be distributed or credited, to the Holders of the
Residual Certificates all cash on hand in the Trust Fund
(other than cash retained to meet claims), and the Trust Fund
shall terminate at that time.
(b) At the expense of the requesting Terminator (or, if the
Trust Fund is being terminated as a result of the occurrence of the event
described in clause (ii) of the first paragraph of Section 10.01, at the expense
of the Trustee without the right of reimbursement from the Trust Fund), the
Trustee shall prepare or cause to be prepared the documentation required in
connection with the adoption of a plan of liquidation of each of REMIC I and
REMIC II pursuant to this Section 10.02.
(c) By their acceptance of Certificates, the Holders thereof
hereby agree to authorize the Trustee to specify the 90-day liquidation period
for each of REMIC I and REMIC II, which authorization shall be binding upon all
successor Certificateholders.
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ARTICLE XI
REMIC PROVISIONS
SECTION 11.01. REMIC Administration.
(a) The Trustee shall elect to treat each of REMIC I and REMIC
II as a REMIC under the Code and, if necessary, under applicable state law. Each
such election will be made by the Master Servicer on behalf of the Trustee 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 the purposes of the
REMIC election in respect of REMIC I, the REMIC I Regular Interests shall be
designated as the Regular Interests in REMIC I and the Class R-I Certificates
shall be designated as the Residual Interests in REMIC I. The Class A
Certificates and Class CE Certificates shall be designated as the Regular
Interests in REMIC II and the Class R-II Certificates shall be designated as the
Residual Interests in REMIC II. Neither the Trustee nor the Master Servicer
shall permit the creation of any "interests" in either REMIC I or REMIC II
(within the meaning of Section 860G of the Code) other than the REMIC I Regular
Interests and the interests represented by the Certificates.
(b) The Closing Date is hereby designated as the "Startup Day"
of REMIC I and REMIC II within the meaning of Section 860G(a)(9) of the Code.
(c) The Master Servicer shall pay out of its own funds,
without any right of reimbursement, any and all expenses relating to any tax
audit of the Trust Fund (including, but not limited to, any professional fees or
any administrative or judicial proceedings with respect to either REMIC I or
REMIC II that involve the Internal Revenue Service or state tax authorities),
other than the expense of obtaining any tax related Opinion of Counsel except as
specified herein. The Master Servicer, as agent for the tax matters person of
both REMIC I and REMIC II, shall (i) act on behalf of the Trust Fund in relation
to any tax matter or controversy involving either REMIC I or REMIC II and (ii)
represent the Trust Fund in any administrative or judicial proceeding relating
to an examination or audit by any governmental taxing authority with respect
thereto. The holder of the largest Percentage Interest of the Residual
Certificates shall be designated, in the manner provided under Treasury
regulations section 1.860F-4(d) and temporary Treasury regulations section
301.6231(a)(7)-IT, as the tax matters person of the related REMIC created
hereunder. By their acceptance thereof, the holder of the largest Percentage
Interest of the Residual Certificates hereby agrees to irrevocably appoint the
Master Servicer or an Affiliate as its agent to perform all of the duties of the
tax matters person for the Trust Fund.
(d) The Master Servicer shall prepare and the Trustee shall
sign and file all of the Tax Returns in respect of each REMIC created hereunder.
The expenses of preparing and filing such returns shall be borne by the Master
Servicer without any right of reimbursement therefor.
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(e) The Master Servicer shall perform on behalf of each of
REMIC I and REMIC II all reporting and other tax compliance duties that are the
responsibility of such REMIC under the Code, the 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 Master Servicer shall provide
(i) to any Transferor of a Residual Certificate such information as is necessary
for the application of any tax relating to the transfer of a Residual
Certificate to any Person who is not a Permitted Transferee, (ii) to the
Certificateholders such information or reports as are required by the Code or
the REMIC Provisions including reports relating to interest, original issue
discount and market discount or premium (using the Prepayment Assumption as
required) and (iii) to the Internal Revenue Service the name, title, address and
telephone number of the person who will serve as the representative of REMIC I
and REMIC II. The Depositor shall provide or cause to be provided to the Master
Servicer, within ten (10) days after the Closing Date, all information or data
that the Master Servicer reasonably determines to be relevant for tax purposes
as to the valuations and issue prices of the Certificates, including, without
limitation, the price, yield, prepayment assumption and projected cash flow of
the Certificates.
(f) The Master Servicer and the Trustee shall take such action
and shall cause each REMIC created hereunder to take such action as shall be
necessary to create or maintain the status thereof as a REMIC under the REMIC
Provisions. The Master Servicer and the Trustee shall not take any action, cause
the Trust Fund 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 status of either REMIC I or REMIC II as a REMIC
or (ii) result in the imposition of a tax upon the Trust Fund (including but not
limited to the tax on prohibited transactions as defined in Section 860F(a)(2)
of the Code and the tax on contributions to a REMIC set forth in Section 860G(d)
of the Code) (either such event, an "Adverse REMIC Event") unless the Trustee
has received an Opinion of Counsel, addressed to the Trustee and the Certificate
Insurer (at the expense of the party seeking to take such action but in no event
at the expense of the Trustee) to the effect that the contemplated action will
not, with respect to either REMIC I or REMIC II, endanger such status or result
in the imposition of such a tax, nor shall the Master Servicer take or fail to
take any action (whether or not authorized hereunder) as to which the Trustee
has advised it in writing that it has received an Opinion of Counsel to the
effect that an Adverse REMIC Event could occur with respect to such action;
provided that the Master Servicer may conclusively rely on such Opinion of
Counsel and shall incur no liability for its action or failure to act in
accordance with such Opinion of Counsel. In addition, prior to taking any action
with respect to either REMIC I or REMIC II or the respective assets of each, or
causing either REMIC I or REMIC II to take any action, which is not expressly
permitted under the terms of this Agreement, the Master 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 either REMIC
I or REMIC II, and the Master Servicer shall not take any such action or cause
either REMIC I or REMIC II to take any such action as to which the Trustee has
advised it in writing that an Adverse REMIC Event could occur; provided that the
Master Servicer may conclusively rely on such writing and shall incur no
liability for its action or failure to act in accordance with such writing. The
Trustee may consult with counsel
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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 or the Master Servicer will ensure that substantially all
of the assets of both REMIC I and 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, to the extent such obligations are
within such party's control and not otherwise inconsistent with the terms of
this Agreement.
(g) In the event that any tax is imposed on "prohibited
transactions" of either REMIC created hereunder as defined in Section 860F(a)(2)
of the Code, on the "net income from foreclosure property" of either REMIC as
defined in Section 860G(c) of the Code, on 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 11.03
hereof, if such tax arises out of or results from a breach by the Trustee of any
of its obligations under this Article XI, (ii) to the Master Servicer pursuant
to Section 11.03 hereof, if such tax arises out of or results from a breach by
the Master Servicer of any of its obligations under Article III or this Article
XI, or (iii) against amounts on deposit in the Distribution Account and shall be
paid by withdrawal therefrom.
(h) On or before April 15 of each calendar year, commencing
April 15, 1998, the Master Servicer shall deliver to each Rating Agency an
Officer's Certificate of the Master Servicer stating the Master Servicer's
compliance with this Article XI.
(i) The Master Servicer shall, for federal income tax
purposes, maintain books and records with respect to each of REMIC I and REMIC
II on a calendar year and on an accrual basis.
(j) Following the Startup Day, the Master Servicer and the
Trustee shall not accept any contributions of assets to either REMIC I or REMIC
II other than in connection with any Qualified Substitute Mortgage Loan
delivered in accordance with Section 2.03 unless it shall have received an
Opinion of Counsel to the effect that the inclusion of such assets in the Trust
Fund will not cause the related REMIC to fail to qualify as a REMIC at any time
that any Certificates are outstanding or subject such REMIC to any tax under the
REMIC Provisions or other applicable provisions of federal, state and local law
or ordinances.
(k) Neither the Trustee nor the Master Servicer shall enter
into any arrangement by which REMIC I or REMIC II will receive a fee or other
compensation for services nor permit either 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.
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SECTION 11.02. Prohibited Transactions and Activities.
None of the Depositor, the Master Servicer or the Trustee
shall sell, dispose of or substitute for any of the Mortgage Loans (except in
connection with (i) the foreclosure of a Mortgage Loan, including but not
limited to, the acquisition or sale of a Mortgaged Property acquired by deed in
lieu of foreclosure, (ii) the bankruptcy of REMIC I, (iii) the termination of
REMIC I pursuant to Article X of this Agreement, (iv) a substitution pursuant to
Article II of this Agreement or (v) a purchase of Mortgage Loans pursuant to
Article II or III of this Agreement), nor acquire any assets for either REMIC I
or REMIC II (other than REO Property acquired in respect of a defaulted Mortgage
Loan), nor sell or dispose of any investments in the Collection Account or the
Distribution Account for gain, nor accept any contributions to either REMIC I or
REMIC II after the Closing Date (other than a Qualified Substitute Mortgage Loan
delivered in accordance with Section 2.03), unless it has received an Opinion of
Counsel, addressed to the Certificate Insurer and the Trustee (at the expense of
the party seeking to cause such sale, disposition, substitution, acquisition or
contribution but in no event at the expense of the Trustee) that such sale,
disposition, substitution, acquisition or contribution will not (a) affect
adversely the status of either REMIC I or REMIC II as a REMIC or (b) cause
either REMIC I or REMIC II to be subject to a tax on "prohibited transactions"
or "contributions" pursuant to the REMIC Provisions.
SECTION 11.03. Master Servicer and Trustee Indemnification.
(a) The Trustee agrees to indemnify the Trust Fund, the
Depositor, the Certificate Insurer and the Master Servicer for any taxes and
costs including, without limitation, any reasonable attorneys fees imposed on or
incurred by the Trust Fund, the Depositor, the Certificate Insurer or the Master
Servicer, as a result of a breach of the Trustee's covenants set forth in this
Article XI.
(b) The Master Servicer agrees to indemnify the Trust Fund,
the Depositor, the Certificate Insurer and the Trustee for any taxes and costs
including, without limitation, any reasonable attorneys' fees imposed on or
incurred by the Trust Fund, the Depositor, the Certificate Insurer or the
Trustee, as a result of a breach of the Master Servicer's covenants set forth in
Article III or this Article XI.
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ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.01. Amendment.
This Agreement may be amended with the consent of the
Certificate Insurer from time to time by the Depositor, the Master Servicer and
the Trustee without the consent of any of the Certificateholders, (i) to cure
any ambiguity, (ii) to correct, modify or supplement any provisions herein, or
(iii) to make any other provisions with respect to matters or questions arising
under this Agreement which shall not be inconsistent with the provisions of this
Agreement, provided that such action shall not, as evidenced by an Opinion of
Counsel delivered to the Trustee and the Certificate Insurer, adversely affect
in any material respect the interests of any Certificateholder or the
Certificate Insurer.
This Agreement may also be amended from time to time by the
Depositor, the Master Servicer and the Trustee with the consent of the
Certificate Insurer and the Holders of Certificates entitled to at least 66% of
the Voting Rights for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying in
any manner the rights of the Holders of Certificates; provided, however, that no
such amendment shall (i) reduce in any manner the amount of, or delay the timing
of, payments received on Mortgage Loans which are required to be distributed on
any Certificate without the consent of the Holder of such Certificate, (ii)
adversely affect in any material respect the interests of the Holders of any
Class of Certificates in a manner, other than as described in (i), without the
consent of the Holders of Certificates of such Class evidencing at least 66% of
the Voting Rights allocated to such Class, or (iii) modify the consents required
by the immediately preceding clauses (i) and (ii) without the consent of the
Certificate Insurer and the Holders of all Certificates then outstanding.
Notwithstanding any other provision of this Agreement, for purposes of the
giving or withholding of consents pursuant to this Section 12.01, Certificates
registered in the name of the Depositor or the Master Servicer or any Affiliate
thereof shall be entitled to Voting Rights with respect to matters affecting
such Certificates.
Notwithstanding any contrary provision of this Agreement, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel to the effect that such amendment will
not result in the imposition of any tax on either REMIC I or REMIC II pursuant
to the REMIC Provisions or cause either REMIC I or REMIC II to fail to qualify
as a REMIC at any time that any Certificates are outstanding. Any such amendment
pursuant to the first paragraph of this Section 12.01 shall not be deemed to
adversely affect in any material respect the interests of any Certificateholder
if such change is required by the Certificate Insurer, so long as no Certificate
Insurer Default has occurred and is continuing, and the Trustee receives written
confirmation from each Rating Agency that such amendment will not cause such
Rating Agency to reduce the then current rating or any shadow rating of the
affected Certificates.
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Promptly after the execution of any such amendment the Trustee
shall furnish a copy of such amendment to each Certificateholder and the
Certificate Insurer.
It shall not be necessary for the consent of
Certificateholders under this Section 12.01 to approve the particular form of
any proposed amendment, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable regulations as the Trustee may prescribe.
The cost of any Opinion of Counsel to be delivered pursuant to
this Section 12.01 shall be borne by the Person seeking the related amendment,
but in no event shall such Opinion of Counsel be an expense of the Trustee.
The Trustee may, but shall not be obligated to enter into any
amendment pursuant to this Section that affects its rights, duties and
immunities under this Agreement or otherwise.
SECTION 12.02. Recordation of Agreement; Counterparts.
To the extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices for real property
records in all the counties or other comparable jurisdictions in which any or
all of the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Master Servicer at the expense of the Certificateholders, but
only upon direction of the Trustee accompanied by an Opinion of Counsel to the
effect that such recordation materially and beneficially affects the interests
of the Certificateholders.
For the purpose of facilitating the recordation of this
Agreement as herein provided and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and such counterparts shall
constitute but one and the same instrument.
SECTION 12.03. Limitation on Rights of Certificateholders.
The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the
Trust Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
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 Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of any 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
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liability to any third person by reason of any action taken by the parties to
this Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue of any
provision of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of default
and of the continuance thereof, as hereinbefore provided, and unless also the
Holders of Certificates entitled to at least 25% of the Voting Rights 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 15 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding. It is
understood and intended, and expressly covenanted by each Certificateholder with
every other Certificateholder and the Trustee, that no one or more Holders of
Certificates shall have any right in any manner whatsoever by virtue of any
provision of this Agreement to affect, disturb or prejudice the rights of the
Holders of any other of such 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, each and every Certificateholder
and the Trustee shall be entitled to such relief as can be given either at law
or in equity.
SECTION 12.04. Governing Law.
This Agreement shall be construed in accordance with the laws
of the State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.
SECTION 12.05. Notices.
All directions, demands and notices hereunder shall be in
writing and shall be deemed to have been duly given when received if personally
delivered at or mailed by first class mail, postage prepaid, or by express
delivery service or delivered in any other manner specified herein, to (a) in
the case of the Depositor, Seven World Trade Center, New York, New York 10048,
Attention: Mortgage Finance Group (telecopy number (212) 783-3895), or such
other address or telecopy number as may hereafter be furnished to the Master
Servicer, the Certificate Insurer and the Trustee in writing by the Depositor,
(b) in the case of the Master Servicer, 4910 Birch Street, Suite 100, Newport
Beach, California 92660 (telecopy number: (714) 440-7033), or such other address
or telecopy number as may hereafter be furnished to the Trustee and the
Depositor in writing by the Master Servicer, (c) in the case of the Trustee, 180
East Fifth Street, St. Paul, Minnesota, 55101, Attention: Structured Finance/New
Century 1997-NC1 (telecopy number (612) 244-0089), or such other address or
telecopy number as may hereafter be furnished to the Master Servicer and the
Depositor in writing by the Trustee and (d) in the Case of the Certificate
Insurer, 350 Park Avenue, New York, New York 10022, Attention:
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Surveillance Department (telecopy number (212) 339-3518 or (212) 339-3529) or
such other address or telecopy number as may hereafter be furnished to the
Trustee, the Depositor and the Master Servicer in writing by the Certificate
Insurer. In each case in which a notice or other communication to the
Certificate Insurer refers to a Master Servicer Event of Default or a claim
under the Policy or with respect to which failure on the part of the Certificate
Insurer to respond shall be deemed to constitute consent or acceptance, then a
copy of such notice or other communication should also be sent to the attention
of the General Counsel and the HeadFinancial Guaranty Group and shall be marked
to indicate "URGENT MATERIAL ENCLOSED." Any notice required or permitted to be
given to a Certificateholder shall be given by first class mail, postage
prepaid, at the address of such Holder as shown in the Certificate Register. Any
notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given when mailed, whether or not the
Certificateholder receives such notice. A copy of any notice required to be
telecopied hereunder also shall be mailed to the appropriate party in the manner
set forth above.
SECTION 12.06. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement or of the Certificates or the rights of the Holders thereof.
SECTION 12.07. Notice to Rating Agencies and Certificate
Insurer.
The Trustee shall use its best efforts promptly to provide
notice to the Rating Agencies and the Certificate Insurer with respect to each
of the following of which it has actual knowledge:
1. Any material change or amendment to this Agreement;
2. The occurrence of any Master Servicer Event of Default
that has not been cured or waived;
3. The resignation or termination of the Master Servicer or
the Trustee;
4. The repurchase or substitution of Mortgage Loans
pursuant to or as contemplated by Section 2.03;
5. The final payment to the Holders of any Class of
Certificates;
6. Any change in the location of the Collection Account or
the Distribution Account;
<PAGE>
-137-
7. Any event that would result in the inability of the
Trustee to make advances regarding delinquent
Mortgage Loans;
8. Any Certificate Insurer Default that has not been cured;
and
9. The filing of any claim under any Master Servicer's
blanket bond and errors and omissions insurance
policy required by Section 3.14 or the cancellation
or material modification of coverage under any such
instrument.
In addition, the Trustee shall promptly furnish to each Rating
Agency and the Certificate Insurer copies of each report to Certificateholders
described in Section 4.02 and the Master Servicer shall promptly furnish to each
Rating Agency copies of the following:
1. Each annual statement as to compliance described in
Section 3.20; and
2. Each annual independent public accountants' servicing
report described in Section 3.21.
Any such notice pursuant to this Section 12.07 shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by first class mail, postage prepaid, or by express delivery service
to Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007,
Attention: Residential Mortgage Pass-Through Monitoring, and to Standard &
Poor's Ratings Services, 25 Broadway, New York, New York 10004, or such other
addresses as the Rating Agencies may designate in writing to the parties hereto.
SECTION 12.08. Article and Section References.
All article and section references used in this Agreement,
unless otherwise provided, are to articles and sections in this Agreement.
<PAGE>
IN WITNESS WHEREOF, the Depositor, the Master Servicer and the
Trustee have caused their names to be signed hereto by their respective officers
thereunto duly authorized, in each case as of the day and year first above
written.
SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.,
as Depositor
By: /s/ Vincent J. Varca
---------------------------------
Name: Vincent J. Varca
Title: Assistant Vice President
NEW CENTURY MORTGAGE CORPORATION
as Master Servicer
By: /s/ Brad A. Morrice
---------------------------------
Name: Brad A. Morrice
Title: Chairman
FIRST TRUST NATIONAL ASSOCIATION
as Trustee
By: /s/ Eve D. Kaplan
---------------------------------
Name: Eve D. Kaplan
Title: Vice President
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 27th day of February 1997, before me, a notary public
in and for said State, personally appeared Vincent J. Varca, known to me to be
an Assistant Vice President of Salomon Brothers Mortgage Securities VII, Inc.,
one of the corporations that executed the within instrument, and also known to
me to be the person who executed it on behalf of said corporation, and
acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
Notary Public
[Notarial Seal]
<PAGE>
STATE OF CALIFORNIA )
) ss.:
COUNTY OF ORANGE )
On the 27th day of February 1997, before me, a notary public
in and for said State, personally appeared Brad A. Morrice, known to me to be
Chairman of New Century Mortgage Corporation, one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
Notary Public
[Notarial Seal]
<PAGE>
STATE OF MINNESOTA )
) ss.:
COUNTY OF ________ )
On the 27th day of February 1997, before me, a notary public
in and for said State, personally appeared Eve D. Kaplan, known to me to be a
Vice President of First Trust National Association, one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
Notary Public
[Notarial Seal]
<PAGE>
EXHIBIT A-1
-----------
FORM OF CLASS A CERTIFICATE
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS
A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS
860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").
Series 1997-NC1, Class A Aggregate Certificate Principal
Balance of the Class A Certificates
as of the Issue Date:
Variable Pass-Through Rate $__________________
Date of Pooling and Servicing Agreement Denomination: $_____________
and Cut-off Date: February 1, 1997
Master Servicer: New Century
Mortgage Corporation
First Distribution Date:
March 25, 1997
Trustee: First Trust National
Association
No. ___
Issue Date: February 27, 1997
CUSIP: _________________
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE
OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE
HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS
THE DENOMINATION OF THIS CERTIFICATE.
<PAGE>
ASSET-BACKED FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family first
mortgage loans (the "Mortgage Loans") formed and sold by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
IN SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER
SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE
GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED
STATES.
This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class A Certificates as of
the Issue Date) in that certain beneficial ownership interest evidenced by all
the Class A Certificates in REMIC II created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Master Servicer and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), in an amount equal
to the product of the Percentage Interest evidenced by this Certificate and the
amount required to be distributed to the Holders of Class A Certificates on such
Distribution Date pursuant to the Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class A Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class A Certificates, or otherwise by check mailed by
first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register. Notwithstanding the above, the
final distribution on this Certificate will be made after due notice by the
Trustee of the pendency
<PAGE>
-2-
of such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Trustee for that purpose as
provided in the Agreement.
The Pass-Through Rate applicable to the calculation of
interest payable with respect to this Certificate on any Distribution Date shall
equal a rate per annum equal to the lesser of (i) the one-Month LIBOR plus
0.21%, in the case of each Distribution Date through and including the
Distribution Date on which the aggregate principal balance of the Mortgage Loans
is reduced to less than 10% of the aggregate Stated Principal Balance of the
Mortgage Loans as of the Cut-off Date, or one-Month LIBOR plus 0.71% per annum,
in the case of any Distribution Date thereafter, and (ii) the Available Funds
Pass-Through Rate for such Distribution Date.
This Certificate is one of a duly authorized issue of
Certificates designated as Asset_Backed Floating Rate Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.
The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Master Servicer, the Trustee and the Certificate Insurer with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights and the
Certificate Insurer. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates but with the consent of the Certificate Insurer.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the Agreement, duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of the same Class in
<PAGE>
-3-
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.
The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange of Certificates, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any transfer or exchange of Certificates.
The Depositor, the Master Servicer, the Trustee, the
Certificate Insurer and the Certificate Registrar and any agent of the
Depositor, any Master Servicer, the Trustee, the Certificate Insurer or the
Certificate Registrar may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and none of the Depositor, the
Master Servicer, the Trustee, the Certificate Insurer, the Certificate Registrar
nor any such agent shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by or on behalf of the Trustee and required to be paid to them
pursuant to the Agreement following the earlier of (i) the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in REMIC I, and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase is reduced to
less than 10%, in the event the majority holder of the Subordinate Certificates
exercises such option, or less than 5%, in the event the Master Servicer or the
Insurer exercises such option.
The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been
executed by the Certificate Registrar, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed under its official seal.
Dated: February 27, 1997
FIRST TRUST NATIONAL ASSOCIATION
as Trustee
By:
_________________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class A Certificates referred to in the
within-mentioned Agreement.
FIRST TRUST NATIONAL ASSOCIATION
as Certificate Registrar
By:
_________________________________
Authorized Signatory
<PAGE>
ABBREVIATIONS
-------------
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM _ as tenants in common UNIF GIFT MIN ACT _ Custodian
___________________
(Cust) (Minor)
TEN ENT _ as tenants by the entireties under Uniform Gifts
to Minors Act
JT TEN _ as joint tenants with right ___________________
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in
the above list.
ASSIGNMENT
----------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)
a Percentage Interest equal to ____% evidenced by the within Asset_Backed
Floating Rate Certificate and hereby authorize(s) the registration of transfer
of such interest to assignee on the Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
Dated:
______________________________________
Signature by or on behalf of assignor
______________________________________
Signature Guaranteed
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
for the account of _______________________, account number ____________________,
or, if mailed by check, to______________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to_______________________________________
_______________________________________________________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.
<PAGE>
EXHIBIT A-2
-----------
FORM OF CLASS CE CERTIFICATE
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS
A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT", AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS
860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").
THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE PURPOSES OF
APPLYING THE U.S. FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT
("OID") RULES TO THIS CERTIFICATE. THE ISSUE DATE OF THIS
CERTIFICATE IS FEBRUARY 27, 1997. BASED ON THE OID REGULATIONS
AND ASSUMING THAT THE MORTGAGE LOANS PREPAY AT 25% CONSTANT
PREPAYMENT RATE, USED SOLELY FOR THE PURPOSES OF APPLYING THE
OID RULES TO THE CERTIFICATES (THE "PREPAYMENT ASSUMPTION"),
THIS CERTIFICATE HAS BEEN ISSUED WITH NO MORE THAN $___ OF OID
PER $100,000 OF INITIAL NOTIONAL AMOUNT, THE YIELD TO MATURITY
IS ____% AND THE AMOUNT OF OID ATTRIBUTABLE TO THE INITIAL
ACCRUAL PERIOD IS NO MORE THAN $____ PER $100,000 OF INITIAL
NOTIONAL AMOUNT, COMPUTED UNDER THE EXACT METHOD. NO
REPRESENTATION IS MADE THAT THE MORTGAGE LOANS WILL PREPAY AT A
RATE BASED ON THE PREPAYMENT ASSUMPTION OR AT ANY OTHER RATE.
THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES AND
THE RESIDUAL CERTIFICATES TO THE EXTENT DESCRIBED IN THE POOLING
AND SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS
REGISTERED PURSUANT TO SUCH ACT AND LAWS OR IS SOLD OR
TRANSFERRED IN TRANSACTIONS THAT ARE EXEMPT FROM REGISTRATION
UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED
IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE
AGREEMENT.
NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR
OTHER RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE
<PAGE>
REGISTERED EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED
HEREIN.
Series 1997-NC1, Class CE Aggregate Certificate Principal
Balance of the Class CE
Certificates as of the Issue
Variable Pass-Through Rate Date: $__________________
Date of Pooling and Servicing Agreement Denomination: $_____________
and Cut-off Date: February 1, 1997
Master Servicer: New Century
Mortgage Corporation
First Distribution Date:
March 25, 1997
Trustee: First Trust National
Association
No. ___
Issue Date: February 27, 1997
Aggregate Notional Amount of the Class
CE Certificates as of the Issue Date:
$__________________
Notional Amount: $_________________
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE
OF THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE
HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS
THE DENOMINATION OF THIS CERTIFICATE.
<PAGE>
ASSET-BACKED FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family first
mortgage loans (the "Mortgage Loans") formed and sold by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
IN SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER
SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE
GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED
STATES.
This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class CE Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class CE Certificates in REMIC II created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), in an amount equal
to the product of the Percentage Interest evidenced by this Certificate and the
amount required to be distributed to the Holders of Class CE Certificates on
such Distribution Date pursuant to the Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class CE Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class CE Certificates, or otherwise by check mailed by
first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate
<PAGE>
-2-
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.
This Certificate is one of a duly authorized issue of
Certificates designated as Asset_Backed Floating Rate Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.
The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Master Servicer, the Trustee and the Certificate Insurer with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights and the
Certificate Insurer. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates but with the consent of the Certificate Insurer.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the Agreement, duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest will be issued to the designated transferee or
transferees.
The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are
<PAGE>
-3-
exchangeable for new Certificates of the same Class in authorized denominations
evidencing the same aggregate Percentage Interest, as requested by the Holder
surrendering the same.
No transfer of this Certificate shall be made unless the
transfer is made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), and an effective
registration or qualification under applicable state securities laws, or is made
in a transaction that does not require such registration or qualification. In
the event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee and the Certificate Registrar shall
require receipt of (i) if such transfer is purportedly being made in reliance
upon Rule 144A under the 1933 Act, written certifications from the Holder of the
Certificate desiring to effect the transfer, and from such Holder's prospective
transferee, substantially in the forms attached to the Agreement as Exhibit F-1,
and (ii) in all other cases, an Opinion of Counsel satisfactory to it that such
transfer may be made without such registration or qualification (which Opinion
of Counsel shall not be an expense of the Trust Fund or of the Depositor, the
Trustee or the Master Servicer in their respective capacities as such), together
with copies of the written certification(s) of the Holder of the Certificate
desiring to effect the transfer and/or such Holder's prospective transferee upon
which such Opinion of Counsel is based. None of the Depositor, the Certificate
Registrar or the Trustee is obligated to register or qualify the Class of
Certificates specified on the face hereof under the 1933 Act or any other
securities law or to take any action not otherwise required under the Agreement
to permit the transfer of such Certificates without registration or
qualification. Any Holder desiring to effect a transfer of this Certificate
shall be required to indemnify the Trustee, the Depositor, the Certificate
Registrar and the Master Servicer against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal and
state laws.
No transfer of this Certificate or any interest herein shall
be made to any Plan subject to ERISA or Section 4975 of the Code, any Person
acting, directly or indirectly, on behalf of any such Plan or any Person
acquiring such Certificates with "plan assets" of a Plan within the meaning of
the Department of Labor regulation promulgated at 29 C.F.R. ss.2510.3-101 ("Plan
Assets") unless the Depositor, the Trustee and the Master Servicer are provided
with an Opinion of Counsel which establishes to the satisfaction of the
Depositor, the Trustee and the Master Servicer that the purchase of this
Certificate is permissible under applicable law, will not constitute or result
in any prohibited transaction under ERISA or Section 4975 of the Code and will
not subject the Depositor, the Master Servicer, the Trustee, the Trust Fund or
the Certificate Insurer to any obligation or liability (including obligations or
liabilities under ERISA or Section 4975 of the Code) in addition to those
undertaken in the Agreement, which Opinion of Counsel shall not be an expense of
the Depositor, the Master Servicer, the Trustee, the Trust Fund or the
Certificate Insurer. In lieu of such Opinion of Counsel, a Plan, any Person
acting, directly or indirectly, on behalf of any such Plan or any Person
acquiring this Certificate with Plan Assets of a Plan may provide a
certification in the form of Exhibit G to the Agreement, which the Trustee may
rely upon without further inquiry or investigation. Neither an Opinion of
Counsel nor a certification will be required in connection with the initial
transfer of this Certificate by the Depositor to an affiliate of the Depositor
(in which case, the Depositor or any affiliate
<PAGE>
-4-
thereof shall have deemed to have represented that such affiliate is not a Plan
or a Person investing Plan Assets of any Plan) and the Trustee shall be entitled
to conclusively rely upon a representation (which, upon the request of the
Trustee, shall be a written representation) from the Depositor of the status of
such transferee as an affiliate of the Depositor.
No service charge will be made for any such registration of
transfer or exchange of Certificates, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.
The Depositor, the Master Servicer, the Trustee and the
Certificate Registrar and any agent of the Depositor, the Master Servicer, the
Trustee or the Certificate Registrar may treat the Person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
Depositor, the Master Servicer, the Trustee, the Certificate Registrar nor any
such agent shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by or on behalf of the Trustee and required to be paid to them
pursuant to the Agreement following the earlier of (i) the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in REMIC I, and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase is reduced to
less than 10%, in the event the majority holder of the Subordinate Certificates
exercises such option, or less than 5%, in the event the Master Servicer or the
Insurer exercises such option.
The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been
executed by the Certificate Registrar, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed under its official seal.
Dated: February 27, 1997
FIRST TRUST NATIONAL ASSOCIATION
as Trustee
By:
_________________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class CE Certificates referred to in the
within-mentioned Agreement.
FIRST TRUST NATIONAL ASSOCIATION
as Certificate Registrar
By:
_________________________________
Authorized Signatory
<PAGE>
ABBREVIATIONS
-------------
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM _ as tenants in common UNIF GIFT MIN ACT _ Custodian
___________________
(Cust) (Minor)
TEN ENT _ as tenants by the entireties under Uniform Gifts
to Minors Act
JT TEN _ as joint tenants with right ___________________
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in
the above list.
ASSIGNMENT
----------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)
a Percentage Interest equal to ____% evidenced by the within Asset_Backed
Floating Rate Certificate and hereby authorize(s) the registration of transfer
of such interest to assignee on the Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
Dated:
______________________________________
Signature by or on behalf of assignor
______________________________________
Signature Guaranteed
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
for the account of _______________________, account number ____________________,
or, if mailed by check, to______________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to_______________________________________
_______________________________________________________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.
<PAGE>
EXHIBIT A-3
-----------
FORM OF CLASS R-I CERTIFICATE
THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON- UNITED STATES
PERSON.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS
A "RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT" ("REMIC"), AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN
SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE
"CODE").
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE
MAY BE MADE ONLY IN ACCORDANCE WITH THE PROVISIONS OF SECTION
5.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR
OTHER RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE
REGISTERED EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED
HEREIN.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE
MAY BE MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES (I) AN
AFFIDAVIT TO THE TRUSTEE THAT (A) SUCH TRANSFEREE IS NOT (1) THE
UNITED STATES OR ANY POSSESSION THEREOF, ANY STATE OR POLITICAL
SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL
ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE
FOREGOING, (2) ANY ORGANIZATION (OTHER THAN A COOPERATIVE
DESCRIBED IN SECTION 521 OF THE CODE) THAT 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, (3) ANY
ORGANIZATION DESCRIBED IN SECTION 1381(A)(2)(C) OF THE CODE (ANY
SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES (1), (2) OR (3)
SHALL HEREINAFTER BE REFERRED TO AS A "DISQUALIFIED
ORGANIZATION") OR (4) AN AGENT OF A DISQUALIFIED ORGANIZATION
AND (B) NO PURPOSE OF SUCH TRANSFER IS TO IMPEDE THE ASSESSMENT
OR COLLECTION OF TAX, AND (II) SUCH TRANSFEREE SATISFIES CERTAIN
ADDITIONAL CONDITIONS RELATING TO THE FINANCIAL CONDITION OF THE
PROPOSED TRANSFEREE. NOTWITHSTANDING THE REGISTRATION IN THE
CERTIFICATE REGISTER OF ANY
<PAGE>
TRANSFER, SALE OR OTHER DISPOSITION OF THIS CERTIFICATE TO A
DISQUALIFIED ORGANIZATION OR AN AGENT OF A DISQUALIFIED
ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE OF NO
LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE
DEEMED TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER,
INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON
THIS CERTIFICATE. EACH HOLDER OF THIS CERTIFICATE BY ACCEPTANCE
HEREOF SHALL BE DEEMED TO HAVE CONSENTED TO THE PROVISIONS OF
THIS PARAGRAPH AND THE PROVISIONS OF SECTION 5.02(D) OF THE
POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN. ANY PERSON
THAT IS A DISQUALIFIED ORGANIZATION IS PROHIBITED FROM ACQUIRING
BENEFICIAL OWNERSHIP OF THIS CERTIFICATE.
Series 1997-NC1, Class R-1 Aggregate Certificate Principal
Balance of the Class A Certificates
as of the Issue Date:
Variable Pass-Through Rate $100.00
Date of Pooling and Servicing Agreement Denomination: $100.00
and Cut-off Date: February 1, 1997
Master Servicer: New Century
Mortgage Corporation
First Distribution Date:
March 25, 1997
Trustee: First Trust National
Association
No. ___
Issue Date: February 27, 1997
CUSIP: _________________
<PAGE>
ASSET-BACKED FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family first
mortgage loans (the "Mortgage Loans") formed and sold by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
IN SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER
SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE
GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED
STATES.
This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class R-I Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class R-I Certificates in REMIC I created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), in an amount equal
to the product of the Percentage Interest evidenced by this Certificate and the
amount required to be distributed to the Holders of Class R-I Certificates on
such Distribution Date pursuant to the Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class R-I Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class R-I Certificates, or otherwise by check mailed by
first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate
<PAGE>
-2-
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.
This Certificate is one of a duly authorized issue of
Certificates designated as Asset_Backed Floating Rate Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.
The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Master Servicer, the Trustee and the Certificate Insurer with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights and the
Certificate Insurer. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates but with the consent of the Certificate Insurer.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the Agreement, duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest will be issued to the designated transferee or
transferees.
The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are
<PAGE>
-3-
exchangeable for new Certificates of the same Class in authorized denominations
evidencing the same aggregate Percentage Interest, as requested by the Holder
surrendering the same.
No transfer of this Certificate or any interest herein shall
be made to any Plan subject to ERISA or Section 4975 of the Code, any Person
acting, directly or indirectly, on behalf of any such Plan or any Person
acquiring such Certificates with "plan assets" of a Plan within the meaning of
the Department of Labor regulation promulgated at 29 C.F.R. ss.2510.3_101 ("Plan
Assets") unless the Depositor, the Trustee and the Master Servicer are provided
with an Opinion of Counsel which establishes to the satisfaction of the
Depositor, the Trustee and the Master Servicer that the purchase of this
Certificate is permissible under applicable law, will not constitute or result
in any prohibited transaction under ERISA or Section 4975 of the Code and will
not subject the Depositor, the Master Servicer, the Trustee, the Trust Fund or
the Certificate Insurer to any obligation or liability (including obligations or
liabilities under ERISA or Section 4975 of the Code) in addition to those
undertaken in the Agreement, which Opinion of Counsel shall not be an expense of
the Depositor, the Master Servicer, the Trustee, the Trust Fund or the
Certificate Insurer. In lieu of such Opinion of Counsel, a Plan, any Person
acting, directly or indirectly, on behalf of any such Plan or any Person
acquiring this Certificate with Plan Assets of a Plan may provide a
certification in the form of Exhibit G to the Agreement, which the Trustee may
rely upon without further inquiry or investigation. Neither an Opinion of
Counsel nor a certification will be required in connection with the initial
transfer of this Certificate by the Depositor to an affiliate of the Depositor
(in which case, the Depositor or any affiliate thereof shall have deemed to have
represented that such affiliate is not a Plan or a Person investing Plan Assets
of any Plan) and the Trustee shall be entitled to conclusively rely upon a
representation (which, upon the request of the Trustee, shall be a written
representation) from the Depositor of the status of such transferee as an
affiliate of the Depositor.
Prior to registration of any transfer, sale or other
disposition of this Certificate, the proposed transferee shall provide to the
Trustee (i) an affidavit to the effect that such transferee is any Person other
than a Disqualified Organization or the agent (including a broker, nominee or
middleman) of a Disqualified Organization, and (ii) a certificate that
acknowledges that (A) the Class R-I Certificates have been designated as a
residual interest in a REMIC, (B) it will include in its income a PRO RATA share
of the net income of the Trust Fund and that such income may be an "excess
inclusion," as defined in the Code, that, with certain exceptions, cannot be
offset by other losses or benefits from any tax exemption, and (C) it expects to
have the financial means to satisfy all of its tax obligations including those
relating to holding the Class R-I Certificates. Notwithstanding the registration
in the Certificate Register of any transfer, sale or other disposition of this
Certificate to a Disqualified Organization or an agent (including a broker,
nominee or middleman) of a Disqualified Organization, such registration shall be
deemed to be of no legal force or effect whatsoever and such Person shall not be
deemed to be a Certificateholder for any purpose, including, but not limited to,
the receipt of distributions in respect of this Certificate.
<PAGE>
-4-
The Holder of this Certificate, by its acceptance hereof, shall be
deemed to have consented to the provisions of Section 5.02 of the Agreement and
to any amendment of the Agreement deemed necessary by counsel of the Depositor
to ensure that the transfer of this Certificate to any Person other than a
Permitted Transferee or any other Person will not cause the Trust Fund to cease
to qualify as a REMIC or cause the imposition of a tax upon the REMIC.
No service charge will be made for any such registration of
transfer or exchange of Certificates, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any transfer or exchange of Certificates.
The Depositor, the Master Servicer, the Trustee, the
Certificate Insurer and the Certificate Registrar and any agent of the
Depositor, any Master Servicer, the Trustee, the Certificate Insurer or the
Certificate Registrar may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and none of the Depositor, the
Master Servicer, the Trustee, the Certificate Insurer, the Certificate Registrar
nor any such agent shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by or on behalf of the Trustee and required to be paid to them
pursuant to the Agreement following the earlier of (i) the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in REMIC I, and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase is reduced to
less than 10%, in the event the majority holder of the Subordinate Certificates
exercises such option, or less than 5%, in the event the Master Servicer or the
Insurer exercises such option.
The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been
executed by the Certificate Registrar, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed under its official seal.
Dated: February 27, 1997
FIRST TRUST NATIONAL ASSOCIATION
as Trustee
By:
_________________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class R-1 Certificates referred to in the
within-mentioned Agreement.
FIRST TRUST NATIONAL ASSOCIATION
as Certificate Registrar
By:
_________________________________
Authorized Signatory
<PAGE>
ABBREVIATIONS
-------------
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
___________________
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts
to Minors Act
JT TEN - as joint tenants with right ___________________
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in
the above list.
ASSIGNMENT
----------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)
a Percentage Interest equal to ____% evidenced by the within Asset_Backed
Floating Rate Certificate and hereby authorize(s) the registration of transfer
of such interest to assignee on the Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
Dated:
______________________________________
Signature by or on behalf of assignor
______________________________________
Signature Guaranteed
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
for the account of _______________________, account number ____________________,
or, if mailed by check, to______________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to_______________________________________
_______________________________________________________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.
<PAGE>
EXHIBIT A-4
FORM OF CLASS R-II CERTIFICATE
THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON- UNITED STATES
PERSON.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS
A "RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT" ("REMIC"), AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN
SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE
"CODE").
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE
MAY BE MADE ONLY IN ACCORDANCE WITH THE PROVISIONS OF SECTION
5.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR
OTHER RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE
REGISTERED EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED
HEREIN.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE
MAY BE MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES (I) AN
AFFIDAVIT TO THE TRUSTEE THAT (A) SUCH TRANSFEREE IS NOT (1) THE
UNITED STATES OR ANY POSSESSION THEREOF, ANY STATE OR POLITICAL
SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL
ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE
FOREGOING, (2) ANY ORGANIZATION (OTHER THAN A COOPERATIVE
DESCRIBED IN SECTION 521 OF THE CODE) THAT 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, (3) ANY
ORGANIZATION DESCRIBED IN SECTION 1381(A)(2)(C) OF THE CODE (ANY
SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES (1), (2) OR (3)
SHALL HEREINAFTER BE REFERRED TO AS A "DISQUALIFIED
ORGANIZATION") OR (4) AN AGENT OF A DISQUALIFIED ORGANIZATION
AND (B) NO PURPOSE OF SUCH TRANSFER IS TO IMPEDE THE ASSESSMENT
OR COLLECTION OF TAX, AND (II) SUCH TRANSFEREE SATISFIES CERTAIN
ADDITIONAL CONDITIONS RELATING TO THE FINANCIAL CONDITION OF THE
PROPOSED TRANSFEREE. NOTWITHSTANDING THE REGISTRATION IN THE
CERTIFICATE REGISTER OF ANY
<PAGE>
TRANSFER, SALE OR OTHER DISPOSITION OF THIS CERTIFICATE TO A
DISQUALIFIED ORGANIZATION OR AN AGENT OF A DISQUALIFIED
ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE OF NO
LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE
DEEMED TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER,
INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON
THIS CERTIFICATE. EACH HOLDER OF THIS CERTIFICATE BY ACCEPTANCE
HEREOF SHALL BE DEEMED TO HAVE CONSENTED TO THE PROVISIONS OF
THIS PARAGRAPH AND THE PROVISIONS OF SECTION 5.02(D) OF THE
POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN. ANY PERSON
THAT IS A DISQUALIFIED ORGANIZATION IS PROHIBITED FROM ACQUIRING
BENEFICIAL OWNERSHIP OF THIS CERTIFICATE.
Series 1997-NC1, Class R-II Aggregate Certificate Principal
Balance of the Class A Certificates
as of the Issue Date:
Variable Pass-Through Rate $100.00
Date of Pooling and Servicing Agreement Denomination: $100.00
and Cut-off Date: February 1, 1997
Master Servicer: New Century
Mortgage Corporation
First Distribution Date:
March 25, 1997
Trustee: First Trust Nationa
Association
No. ___
Issue Date: February 27, 199
CUSIP: _________________
<PAGE>
ASSET-BACKED FLOATING RATE CERTIFICATE
evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family first
mortgage loans (the "Mortgage Loans") formed and sold by
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
IN SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER
SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES.
NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE
GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED
STATES.
This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class R-II Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class R-II Certificates in REMIC II created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), in an amount equal
to the product of the Percentage Interest evidenced by this Certificate and the
amount required to be distributed to the Holders of Class R-II Certificates on
such Distribution Date pursuant to the Agreement.
All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class R-II Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class R-II Certificates, or otherwise by check mailed
by first class mail to the address of the Person entitled thereto, as such name
and address shall appear on the Certificate
<PAGE>
-2-
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.
This Certificate is one of a duly authorized issue of
Certificates designated as Asset_Backed Floating Rate Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.
The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Master Servicer, the Trustee and the Certificate Insurer with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights and the
Certificate Insurer. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates but with the consent of the Certificate Insurer.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the Agreement, duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest will be issued to the designated transferee or
transferees.
The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are
<PAGE>
-3-
exchangeable for new Certificates of the same Class in authorized denominations
evidencing the same aggregate Percentage Interest, as requested by the Holder
surrendering the same.
No transfer of this Certificate or any interest herein shall
be made to any Plan subject to ERISA or Section 4975 of the Code, any Person
acting, directly or indirectly, on behalf of any such Plan or any Person
acquiring such Certificates with "plan assets" of a Plan within the meaning of
the Department of Labor regulation promulgated at 29 C.F.R. ss.2510.3-101 ("Plan
Assets") unless the Depositor, the Trustee and the Master Servicer are provided
with an Opinion of Counsel which establishes to the satisfaction of the
Depositor, the Trustee and the Master Servicer that the purchase of this
Certificate is permissible under applicable law, will not constitute or result
in any prohibited transaction under ERISA or Section 4975 of the Code and will
not subject the Depositor, the Master Servicer, the Trustee, the Trust Fund or
the Certificate Insurer to any obligation or liability (including obligations or
liabilities under ERISA or Section 4975 of the Code) in addition to those
undertaken in the Agreement, which Opinion of Counsel shall not be an expense of
the Depositor, the Master Servicer, the Trustee, the Trust Fund or the
Certificate Insurer. In lieu of such Opinion of Counsel, a Plan, any Person
acting, directly or indirectly, on behalf of any such Plan or any Person
acquiring this Certificate with Plan Assets of a Plan may provide a
certification in the form of Exhibit G to the Agreement, which the Trustee may
rely upon without further inquiry or investigation. Neither an Opinion of
Counsel nor a certification will be required in connection with the initial
transfer of this Certificate by the Depositor to an affiliate of the Depositor
(in which case, the Depositor or any affiliate thereof shall have deemed to have
represented that such affiliate is not a Plan or a Person investing Plan Assets
of any Plan) and the Trustee shall be entitled to conclusively rely upon a
representation (which, upon the request of the Trustee, shall be a written
representation) from the Depositor of the status of such transferee as an
affiliate of the Depositor.
Prior to registration of any transfer, sale or other
disposition of this Certificate, the proposed transferee shall provide to the
Trustee (i) an affidavit to the effect that such transferee is any Person other
than a Disqualified Organization or the agent (including a broker, nominee or
middleman) of a Disqualified Organization, and (ii) a certificate that
acknowledges that (A) the Class R-II Certificates have been designated as a
residual interest in a REMIC, (B) it will include in its income a PRO RATA share
of the net income of the Trust Fund and that such income may be an "excess
inclusion," as defined in the Code, that, with certain exceptions, cannot be
offset by other losses or benefits from any tax exemption, and (C) it expects to
have the financial means to satisfy all of its tax obligations including those
relating to holding the Class R-II Certificates. Notwithstanding the
registration in the Certificate Register of any transfer, sale or other
disposition of this Certificate to a Disqualified Organization or an agent
(including a broker, nominee or middleman) of a Disqualified Organization, such
registration shall be deemed to be of no legal force or effect whatsoever and
such Person shall not be deemed to be a Certificateholder for any purpose,
including, but not limited to, the receipt of distributions in respect of this
Certificate.
<PAGE>
-4-
The Holder of this Certificate, by its acceptance hereof, shall be
deemed to have consented to the provisions of Section 5.02 of the Agreement and
to any amendment of the Agreement deemed necessary by counsel of the Depositor
to ensure that the transfer of this Certificate to any Person other than a
Permitted Transferee or any other Person will not cause the Trust Fund to cease
to qualify as a REMIC or cause the imposition of a tax upon the REMIC.
No service charge will be made for any such registration of
transfer or exchange of Certificates, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any transfer or exchange of Certificates.
The Depositor, the Master Servicer, the Trustee, the
Certificate Insurer and the Certificate Registrar and any agent of the
Depositor, any Master Servicer, the Trustee, the Certificate Insurer or the
Certificate Registrar may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and none of the Depositor, the
Master Servicer, the Trustee, the Certificate Insurer, the Certificate Registrar
nor any such agent shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by or on behalf of the Trustee and required to be paid to them
pursuant to the Agreement following the earlier of (i) the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in REMIC I, and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase is reduced to
less than 10%, in the event the majority holder of the Subordinate Certificates
exercises such option, or less than 5%, in the event the Master Servicer or the
Insurer exercises such option. By acceptance of this Certificate, the Holder of
this Certificate agrees, in connection with any termination hereunder, to assign
and transfer any amounts in excess of par, and to the extent received in respect
of such termination, to pay any such amounts to the Holders of the Class CE
Certificates.
The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.
Unless the certificate of authentication hereon has been
executed by the Certificate Registrar, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed under its official seal.
Dated: February 27, 1997
FIRST TRUST NATIONAL ASSOCIATION
as Trustee
By:
_________________________________
Authorized Officer
CERTIFICATE OF AUTHENTICATION
-----------------------------
This is one of the Class CE Certificates referred to in the
within-mentioned Agreement.
FIRST TRUST NATIONAL ASSOCIATION
as Certificate Registrar
By:
_________________________________
Authorized Signatory
<PAGE>
ABBREVIATIONS
-------------
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM _ as tenants in common UNIF GIFT MIN ACT _ Custodian
___________________
(Cust) (Minor)
TEN ENT _ as tenants by the entireties under Uniform Gifts
to Minors Act
JT TEN _ as joint tenants with right ___________________
if survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in
the above list.
ASSIGNMENT
----------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)
a Percentage Interest equal to ____% evidenced by the within Asset_Backed
Floating Rate Certificate and hereby authorize(s) the registration of transfer
of such interest to assignee on the Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:
Dated:
______________________________________
Signature by or on behalf of assignor
______________________________________
Signature Guaranteed
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
for the account of _______________________, account number ____________________,
or, if mailed by check, to______________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to_______________________________________
_______________________________________________________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.
<PAGE>
EXHIBIT B
FORM OF FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL FINANCIAL GUARANTY
SECURITY INSURANCE POLICY
ASSURANCE SM
Trust: As described in Endorsement No. 1 Policy No.: 50563-N
Certificates: $96,126,200 Salomon Brothers Mortgage
Securities VII, Inc., Date of Issuance: 2/27/97
New Asset-Backed Floating Rate Certificates, Series 1997-NC1,
Class A, Class R-I and Class R-II
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for
consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to the
Trustee for the benefit of each Holder, subject only to the terms of this Policy
(which includes each endorsement hereto), the full and complete payment of
Guaranteed Distributions with respect to the Certificates of the Trust referred
to above.
For the further protection of each Holder, Financial Security
irrevocably and unconditionally guarantees payment of the amount of any
distribution of principal or interest with respect to the Certificates made
during the Term of this Policy to such Holder that is subsequently avoided in
whole or in part as a preference payment under applicable law.
Payment of any amount required to be paid under this Policy will be
made following receipt by Financial Security of notice as described in
Endorsement No. 1 hereto.
Financial Security shall be subrogated to the rights of each Holder to
receive distributions with respect to each Certificate held by such Holder to
the extent of any payment by Financial Security hereunder.
Except to the extent expressly modified by Endorsement No. 1 hereto,
the following terms shall have the meanings specified for all purposes of this
Policy. "Holder" means the registered owner of any Certificate as indicated on
the registration books maintained by or on behalf of the Trustee for such
purpose or, if the Certificate is in bearer form, the holder of the Certificate.
"Trustee", "Guaranteed Distributions" and "Term of this Policy" shall have the
meanings set forth in Endorsement No. 1 hereto.
This Policy sets forth in full the undertaking of Financial Security,
and shall not be modified, altered or affected by any other agreement or
instrument, including any modification or amendment thereto. Except to the
extent expressly modified by an endorsement hereto, the premiums paid in respect
of this Policy are nonrefundable for any reason whatsoever. This Policy may not
be canceled or revoked during the Term of this Policy. An acceleration payment
shall not be due under this Policy unless such acceleration is at the sole
option of Financial Security. THIS POLICY IS NOT COVERED BY THE
PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW
YORK INSURANCE LAW.
In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this
Policy to be executed on its behalf by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By
---------------------------------
AUTHORIZED OFFICER
A subsidiary of Financial Security Assurance Holdings Ltd.
350 Park Avenue, New York, N.Y. 10022-6022 (212) 826-0100
Form 101NY (5/89)
<PAGE>
ENDORSEMENT NO. 1 TO FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL SECURITY ASSURANCE INC.
TRUST: Established pursuant to the Pooling and Servicing Agreement
dated as of February 1, 1997 among Salomon Brothers
Mortgage Securities VII, Inc., as Depositor, New Century
Mortgage Corporation, as Master Servicer, and First Trust
National Association, as Trustee
POLICY NO.: 50563-N
CERTIFICATES: $96,126,200 Salomon Brothers Mortgage Securities VII, Inc.,
New Century Asset-Backed Floating Rate Certificates, Series
1997-NC1, Class A, Class R-I and Class R-II
DATE OF ISSUANCE: February 27, 1997
1. DEFINITIONS. For all purposes of this Policy, the terms
specified below shall have the meanings or constructions provided below.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings provided in the Pooling and Servicing Agreement unless the context
shall otherwise require.
"BUSINESS DAY" means any day other than (i) a Saturday or Sunday, or
(ii) a day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to be closed.
"FINAL DISTRIBUTION DATE" means the Distribution Date coinciding with
or following a purchase by the Terminator in accordance with the terms of clause
(i) of the first paragraph of Section 10.01 of the Pooling and Servicing
Agreement.
"GUARANTEED DISTRIBUTIONS" means, with respect to each Distribution
Date, the distribution to be made to the Class A Holders of the Certificates on
such Distribution Date, and (b) with respect to the first (and only the first)
Distribution Date, the distribution to be made to the Holders of the Class R-I
and Class R-II Certificates on such Distribution Date, in an aggregate amount
equal to the sum of (i) the Accrued Certificate Interest on the Certificates,
less the amount of any Prepayment Interest Shortfalls and any shortfalls
resulting from the application of the Relief Act, (ii) the principal portion of
any Realized Losses allocated to the Certificates and, without duplication, the
excess, if any, of (a) the aggregate Certificate Principal Balance of all of the
Class A, Class R-I Certificates and Class R-II Certificates then outstanding
over (b) the REMIC II Percentage of the aggregate principal balances of the
Mortgage Loans then outstanding and (iii) if (but only if) such Distribution
Date is the final Distribution Date or Maturity Date for the Certificates, the
outstanding Certificate Principal Balance of the Certificates (without
duplication of amounts included pursuant to clause (ii)), in each case in
accordance with the original terms of the Certificates when issued and without
regard to any amendment or modification of the Certificates or the Pooling and
Servicing Agreement which has not been consented to by
<PAGE>
Financial Security. Guaranteed Distributions shall not include, nor shall
coverage be provided under this Policy in respect of, Basis Risk Shortfalls,
Unpaid Basis Risk Shortfalls or any taxes, withholding or other charge imposed
by any governmental authority.
"MATURITY DATE" means the Distribution Date coinciding with or
following the final payment or other liquidation of the last Mortgage Loan or
REO Property as described in clause (ii) of the first paragraph of Section 10.01
of the Pooling and Servicing Agreement, subject to the proviso set forth
therein.
"POLICY" means this Financial Guaranty Insurance Policy and includes
each endorsement thereto.
"POOLING AND SERVICING AGREEMENT" means the Pooling and Servicing
Agreement dated as of February 1, 1997 among Salomon Brothers Mortgage
Securities VII, Inc., New Century Mortgage Corporation, and First Trust National
Association as amended from time to time with the consent of Financial Security.
"RECEIPT" and "RECEIVED" mean actual delivery to Financial Security and
to the Fiscal Agent (as defined below), if any, at or prior to 12:00 noon, New
York City time, on a Business Day; delivery either on a day that is not a
Business Day, or after 12:00 noon, New York City time, shall be deemed to be
Received on succeeding Business Day. If any notice or certificate given
hereunder by the Trustee is not in proper form or is not properly completed,
executed or delivered, it shall be deemed not to have been Received, and
Financial Security or its Fiscal Agent shall promptly so advise the Trustee and
the Trustee may submit an amended notice.
"TERM OF THIS POLICY" means the period from and including the Date of
Issuance to and including the date on which (i) the Certificate Principal
Balance of all of the Certificates is zero, (ii) any period during which any
payment on the Certificates could have been avoided in whole or in part as a
preference payment under applicable bankruptcy, insolvency, receivership or
similar law has expired, and (iii) if any proceedings requisite to avoidance as
a preference payment have been commenced prior to the occurrence of (i) and
(ii), a final and nonappealable order in resolution of each such proceeding has
been entered.
"TRUSTEE" means First Trust National Association, in its capacity as
Trustee under the Pooling and Servicing Agreement and any successor in such
capacity.
2. NOTICES AND CONDITIONS TO PAYMENT IN RESPECT OF GUARANTEED
DISTRIBUTIONS. Following Receipt by Financial Security of a notice and
certificate from the Trustee in the form attached as Exhibit A to this
Endorsement, Financial Security will pay any amount payable hereunder in respect
of Guaranteed Distributions out of the funds of Financial Security on the later
to occur of (a) 12:00 noon, New York City time, on the second Business Day
following such Receipt; and (b) 12:00 noon, New York City time, on the
Distribution Date to which such claim relates. Payments due hereunder in respect
of Guaranteed distributions will be disbursed by wire transfer of immediately
available funds to the Policy Payments Account established pursuant to the
Pooling and Servicing Agreement or, if no such Policy Payments Account has been
established, to the Trustee.
<PAGE>
Financial Security shall be entitled to pay any amount hereunder in
respect of Guaranteed Distributions whether or not any notice and certificate
shall have been Received by Financial Security as provided above. Financial
Security's obligations hereunder in respect of guaranteed Distributions shall be
discharged to the extent funds are disbursed by Financial Security as provided
herein whether or not such funds are properly applied by the Trustee.
3. NOTICES AND CONDITIONS TO PAYMENT IN RESPECT OF SCHEDULED PAYMENTS
AVOIDED AS PREFERENCE PAYMENTS. If any Guaranteed Distribution is avoided as a
preference payment under applicable bankruptcy, insolvency, receivership or
similar law, Financial Security will pay such amount out of the funds of
Financial Security on the later of (a) the date when due to be paid pursuant to
the Order referred to below or (b) the first to occur of (i) the fourth Business
Day following Receipt by Financial Security from the Trustee of (A) a certified
copy of the order to the court or other governmental body which exercised
jurisdiction to the effect that the Holder is required to return principal of or
interest distributed with respect to the Certificates during the Term of this
Policy because such distributions were avoidable as preference payments under
applicable bankruptcy law (the "Order"), (B) a certificate of the Holder that
the Order has been entered and is not subject to any stay and (C) an assignment
duly executed and delivered by the Holder, in such form as is reasonably
required by Financial Security, and provided to the Holder by Financial
Security, irrevocably assigning to Financial Security all rights and claims of
the Holder relating to or arising under the Certificates against the debtor
which made such preference payment or otherwise with respect to such preference
payment or (ii) the date of Receipt by Financial Security from the Trustee of
the items referred to in clauses (A), (B) and (C) above if, at least four
Business Days prior to such date of Receipt, Financial Security shall have
Received written notice from the Trustee that such items were to be delivered on
such date and such date was specified in such notice. Such payment shall be
disbursed to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Order and not to the Trustee or any Holder directly
(unless a Holder has previously paid such amount to the receiver, conservator,
debtoR-In_possession or trustee in bankruptcy named in the Order, in which case
such payment shall be disbursed to the Trustee for distribution to such Holder
upon proof of such payment reasonably satisfactory to Financial Security). In
connection with the foregoing, Financial Security shall have the rights provided
pursuant to Section 9.04(d) of the Pooling and Servicing Agreement.
4. GOVERNING LAW. This Policy shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
5. FISCAL AGENT. At any time during the Term of this Policy, Financial
Security may appoint a fiscal agent (the "Fiscal Agent") for purposes of this
Policy by written notice to the Trustee at the notice address specified in the
Pooling and Servicing Agreement specifying the name and notice address of the
Fiscal Agent. From and after the date of receipt of such notice by the Trustee,
(i) copies of all notices and documents required to be delivered to Financial
Security pursuant to this Policy shall be simultaneously delivered to the Fiscal
Agent and to Financial Security and shall not be deemed Received until Received
by both and (ii) all payments required to be made by Financial Security under
this Policy may
<PAGE>
be made directly by Financial Security or by the Fiscal Agent on behalf of
Financial Security. The Fiscal Agent is the agent of Financial Security only and
the Fiscal Agent shall in no event be liable to any Holder for any acts of the
Fiscal Agent or any failure of Financial Security to deposit, or cause to be
deposited, sufficient funds to make payments due under this Policy.
6. WAIVER OF DEFENSES. To the fullest extent permitted by applicable
law, Financial Security agrees not to assert, and hereby waives, for the benefit
of each Holder, all rights (whether by counterclaim, setoff or otherwise) and
defenses (including, without limitation, the defense of fraud), whether acquired
by subrogation, assignment or otherwise, to the extent that such rights and
defenses may be available to Financial Security to avoid payment of its
obligations under this Policy in accordance with the express provisions of this
Policy.
7. NOTICES. All notices to be given hereunder shall be in writing
(except as otherwise specifically provided herein) and shall be mailed by
registered mail or personally delivered or telecopied to Financial Security as
follows:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Senior Vice President
- Surveillance
Re: Salomon Brothers Mortgage Securities VII, Inc.,
New Century Asset-Backed Floating Rate Certificates,
Series 1997-NC1
Telecopy No.: (212) 339-3518
Confirmation: (212) 826-0100
Financial Security may specify a different address or addresses by writing
mailed or delivered to the Trustee.
8. PRIORITIES. In the event any term or provisions of the face of this
Policy is inconsistent with the provisions of this Endorsement, the provisions
of this Endorsement shall take precedence and shall be binding.
9. EXCLUSIONS FROM INSURANCE GUARANTY FUNDS. This Policy is not covered
by the Property/Casualty Insurance Security Fund specified in Article 76 of the
New York Insurance Law. This Policy is not covered by the Florida Insurance
Guaranty Association created under Part II of Chapter 631 of the Florida
Insurance Code. In the event Financial Security were to become insolvent, any
claims arising under this Policy are excluded from coverage by the California
Insurance Guaranty Association, established pursuant to Article 14.2 of Chapter
1 of Part 2 of Division 1 of the California Insurance Code.
10. SURRENDER OF POLICY. The Trustee shall surrender this Policy to
Financial Security for cancellation upon expiration of the Term of this Policy.
<PAGE>
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused
this Endorsement No. 1 to be executed by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By:
---------------------------------
Authorized Officer
<PAGE>
Exhibit A
To Endorsement 1
NOTICE OF CLAIM AND CERTIFICATE
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
The undersigned, a duly authorized officer of First Trust National
Association (the "Trustee"), hereby certifies to Financial Security Assurance
Inc. ("Financial Security"), with reference to Financial Guaranty Insurance
Policy No. 50563-N dated February 27, 1997 (the "Policy") issued by Financial
Security in respect of the Salomon Brothers Mortgage Securities VII, Inc., New
Century Asset-Backed Floating Rate Certificates, Series 1997-NC1, Class A, Class
R-I and Class R-II (the "Certificates), that:
(i) The Trustee is the Trustee under the Pooling and
Servicing Agreement for the Holders.
(ii) The sum of all amounts on deposit (or scheduled to be on
deposit) in the Certificate Account and available to the Holders of the
Guaranteed Distributions pursuant to the Pooling and Servicing
Agreement will be $____________ (the "Shortfall") less than the
Guaranteed Distributions with respect to the Distribution Date
occurring on ________________.
(iii) The Trustee is making a claim under the Policy for the
Shortfall to be applied to distributions of principal or interest or
both with respect to the Certificates.
(iv) The Trustee agrees that, following receipt of funds from
Financial Security, it shall (a) hold such amounts in trust and apply
the same directly to the payment of Guaranteed Distributions on the
Certificates when due; (b) not apply such funds for any other purpose;
(c) not commingle such funds with other funds held by the Trustee and
(d) maintain an accurate record of such payments with respect to each
Certificate and the corresponding claim on the Policy and proceeds
thereof and, if the Certificate is required to be surrendered for such
payment, shall stamp on each such Certificate the legend "$[INSERT
APPLICABLE AMOUNT] paid by Financial Security and the balance hereof
has been canceled and reissued" and then shall deliver such Certificate
to Financial Security.
(v) The Trustee, on behalf of the Holders, hereby assigns to
Financial Security the rights of the Holders with respect to the
Certificates to the extent of any payments under the Policy, including,
without limitation, any amounts due to the Holders in respect of
securities law violations arising from the offer and sale of the
Certificates. The foregoing assignment is in addition to, and not in
limitation of, rights of subrogation otherwise available to Financial
Security in respect of such
<PAGE>
payments. The Trustee shall take such action and deliver such
instruments as may be reasonably requested or required by Financial
Security to effectuate the purpose or provisions of this clause (v).
(vi) The Trustee, on its behalf and on behalf of the Holders,
hereby appoints Financial Security as agent and attorney_in_fact for
the Trustee and each such Holder in any legal proceeding with respect
to the Certificates. The Trustee hereby agrees that, so long as a
Certificate Insurer Default (as defined in the Pooling and Servicing
Agreement) shall not exist, Financial Security may at any time during
the continuation of any proceeding by or against the Depositor under
the United States Bankruptcy Code or any other applicable bankruptcy,
insolvency, receivership, rehabilitation or similar law (an "Insolvency
Proceeding") direct all matters relating to such Insolvency Proceeding.
In addition, the Trustee hereby agrees that Financial Security shall be
subrogated to, and the Trustee on its behalf and on behalf of each
Holder, hereby delegates and assigns, to the fullest extent permitted
by law, the rights of the Trustee and each Holder in the conduct of any
Insolvency Proceeding, including, without limitation, all rights of any
party to an adversary proceeding or action with respect to any court
order issued in connection with any such Insolvency Proceeding.
(vii) Payment should be made by wire transfer directed to
Policy Payments Account.
Unless the context otherwise requires, capitalized terms used in this
Notice of Claim and Certificate and not defined herein shall have the meanings
provided in the Policy.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice
of Claim and Certificate as of the ______ day of _________________, _______.
By:
Title:
_______________________________________________
For Financial Security or Fiscal Agent Use Only
Wire transfer sent on ___________________ by __________________________
Confirmation Number _________________________________
<PAGE>
EXHIBIT C-1
-----------
FORM OF TRUSTEE'S INITIAL CERTIFICATION
[Date]
Salomon Brothers Mortgage
Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
[Master Servicer]
_________________________
_________________________
Re: Pooling and Servicing Agreement, dated as of February 1, 1997,
among Salomon Brothers Mortgage Securities VII, Inc.,
New Century Mortgage Corporation and First Trust
National Association Asset-Backed Floating Rate Certificates,
SERIES 1997-NC1
Ladies and Gentlemen:
Attached is the Trustee's preliminary exceptions in accordance with
Section 2.02 of the referenced Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"). Capitalized terms used but not otherwise defined herein
shall have the meanings ascribed to them in the Pooling and Servicing Agreement.
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
Pooling and Servicing Agreement. The Trustee makes no representations as to: (i)
the validity, legality, sufficiency, enforceability or genuineness of any of the
documents contained in the Mortgage File of any of the Mortgage Loans identified
on the Mortgage Loan Schedule, (ii) the collectability, insurability,
effectiveness or suitability of any such Mortgage Loan, or (iii) whether any
Mortgage File included any of the documents specified in clause (v) of Section
2.01 of the Pooling and Servicing Agreement.
FIRST TRUST NATIONAL ASSOCIATION
By:
Name:
Title:
<PAGE>
EXHIBIT C-2
FORM OF TRUSTEE FINAL CERTIFICATION
[Date]
Salomon Brothers Mortgage
Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
[Master Servicer]
____________________________
____________________________
Re: Pooling and Servicing Agreement, dated as of February 1, 1997,
among Salomon Brothers Mortgage Securities VII, Inc.,
New Century Mortgage Corporation and First Trust
National Association Asset-Backed Floating Rate Certificates,
SERIES 1997-NC1
-------------------------------------------------------------
Ladies and Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that as to
each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage
Loan paid in full or listed on the attachment hereto), it or a Custodian on its
behalf has received:
(i) the original recorded Mortgage, and the original recorded
power of attorney, if the Mortgage was executed pursuant to a power of
attorney, or a certified copy thereof in those instances where the
public recording office retains the original or where the original has
been lost; and
(ii) an original recorded Assignment of the Mortgage to the
Trustee together with the original recorded Assignment or Assignments
of the Mortgage showing a complete chain of assignment from the
originator, or a certified copy of such Assignments in those instances
where the public recording retains the original or where original has
been lost;
(iii) the original lender's title insurance policy; and
<PAGE>
(iv) the original Primary Insurance Policy for each Mortgage Loan
indicated on the Mortgage Loan Schedule as having a Loan-to-Value Ratio
at origination in excess of 80%.
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The Trustee makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any of the documents contained in the Mortgage File of any of
the Mortgage Loans identified on the Mortgage Loan Schedule, or (ii) the
collectability, insurability, effectiveness or suitability of any such Mortgage
Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
FIRST TRUST NATIONAL ASSOCIATION
By: ____________________________
Name:___________________________
Title:__________________________
<PAGE>
EXHIBIT D
FORM OF MORTGAGE LOAN PURCHASE AGREEMENT
This is a Mortgage Loan Purchase Agreement (this "Agreement"),
dated February 25, 1997, between Salomon Brothers Mortgage Securities VII, Inc.,
a Delaware corporation (the "Purchaser") and New Century Mortgage Corporation, a
California corporation (the "Seller").
PRELIMINARY STATEMENT
The Seller intends to sell the Mortgage Loans (as hereinafter
identified) to the Purchaser on the terms and subject to the conditions set
forth in this Agreement. The Purchaser intends to deposit the Mortgage Loans
into a mortgage pool comprising the Trust Fund. The Trust Fund will be evidenced
by a single series of asset-backed floating rate certificates designated as
Series 1997-NC1 (the "Certificates"). The Certificates will consist of four
classes of certificates: (i) a senior class (the "Class A Certificates") to be
rated in the highest rating category by rating agencies mutually acceptable to
the Purchaser and the Certificate Insurer and fully insured as to payments of
principal and interest by the Certificate Insurer and (ii) a single subordinate
class (the "Class CE Certificates") to be unrated and subordinated to the Class
A Certificates and the Certificate Insurer and two noneconomic residual classes
(together with the Class CE Certificates, the "New Century Certificates"), such
New Century Certificates to be delivered to the Seller as partial consideration
for the Mortgage Loans as further described below. The Certificates will be
issued pursuant to a Pooling and Servicing Agreement, dated as of February 1,
1997 (the "Pooling and Servicing Agreement"), among the Purchaser as depositor,
the Seller as master servicer (in such capacity, the "Master Servicer") and
First Trust National Association as trustee (the "Trustee"). Capitalized terms
used but not defined herein shall have the meanings set forth in the Pooling and
Servicing Agreement.
The parties hereto agree as follows:
SECTION 1. AGREEMENT TO PURCHASE. The Seller agrees to sell,
and the Purchaser agrees to purchase, on or before February 27, 1997 (the
"Closing Date"), certain conventional, one- to four-family, adjustable-rate
residential mortgage loans (the "Mortgage Loans"), having an aggregate principal
balance as of the close of business on February 1, 1997 (the "Cut-off Date") of
approximately $99,119,536 (the "Closing Balance"), after giving effect to all
payments due on the Mortgage Loans on or before the Cut-off Date, whether or not
received.
SECTION 2. MORTGAGE LOAN SCHEDULE. The Purchaser and the
Seller have agreed upon which of the mortgage loans owned by the Seller are to
be purchased by the Purchaser pursuant to this Agreement and the Seller will
prepare or cause to be prepared on or prior to the Closing Date a final schedule
(the "Closing Schedule") that shall describe such Mortgage Loans and set forth
all of the Mortgage Loans to be purchased under this Agreement. The Closing
Schedule will conform to the requirements set forth in this Agreement and to the
definition of "Mortgage Loan Schedule" under the Pooling and
<PAGE>
Servicing Agreement. The Closing Schedule shall be used as the Mortgage Loan
Schedule under the Pooling and Servicing Agreement.
SECTION 3. CONSIDERATION.
(a) In consideration for the Mortgage Loans to be purchased
hereunder, the Purchaser shall, as described in Section 8, (i) pay to or upon
the order of the Seller in immediately available funds an amount (the "Purchase
Price") equal to approximately 99.625% times the initial Certificate Balance of
the Class A Certificates and (ii) deliver the New Century Certificate to the
Seller.
(b) The Purchaser or any assignee, transferee or designee of
the Purchaser shall be entitled to all scheduled payments of principal due after
the Cut-off Date, all other payments of principal due and collected after the
Cut-off Date, and all payments of interest on the Mortgage Loans allocable to
the period after the Cut-off Date. All scheduled payments of principal and
interest due on or before the Cut-off Date and collected after the Cut-off Date
shall belong to the Seller.
(c) Pursuant to the Pooling and Servicing Agreement, the
Purchaser will assign all of its right, title and interest in and to the
Mortgage Loans, together with its rights under this Agreement, to the Trustee
for the benefit of the Certificateholders.
SECTION 4. TRANSFER OF THE MORTGAGE LOANS.
(a) POSSESSION OF MORTGAGE FILES. The Seller does hereby sell,
transfer, assign, set over and convey to the Purchaser, without recourse but
subject to the terms of this Agreement, all of its right, title and interest in,
to and under the Mortgage Loans. The contents of each Mortgage File not
delivered to the Purchaser or to any assignee, transferee or designee of the
Purchaser on or prior to the Closing Date are and shall be held in trust by the
Seller for the benefit of the Purchaser or any assignee, transferee or designee
of the Purchaser. Upon the sale of the Mortgage Loans, the ownership of each
Mortgage Note, the related Mortgage and the other contents of the related
Mortgage File is vested in the Purchaser and the ownership of all records and
documents with respect to the related Mortgage Loan prepared by or that come
into the possession of the Seller on or after the Closing Date shall immediately
vest in the Purchaser and shall be delivered immediately to the Purchaser or as
otherwise directed by the Purchaser.
(b) DELIVERY OF MORTGAGE LOAN DOCUMENTS. The Seller will, on
or prior to the Closing Date, deliver or cause to be delivered to the Purchaser
or any assignee, transferee or designee of the Purchaser each of the following
documents for each Mortgage Loan:
(i) the original Mortgage Note, endorsed in the
following form: "Pay to the order of First Trust National Association,
as Trustee for the registered holders of Salomon Brothers Mortgage
Securities VII, Inc., Asset-Backed Floating Rate Certificates, Series
1997-NC1, without recourse," with all prior and intervening
<PAGE>
endorsements showing a complete chain of endorsement from the
originator to the Person so endorsing to the Trustee;
(ii) the original Mortgage with evidence of recording
thereon;
(iii) an original Assignment of Mortgage executed in
the following form: "First Trust National Association, as Trustee for
the registered holders of Salomon Brothers Mortgage Securities VII,
Inc., Asset_Backed Floating Rate Certificates, Series 1997-NC1";
(iv) the original recorded Assignment or Assignments
of the Mortgage showing a complete chain of assignment from the
originator to the Person assigning the Mortgage to the Trustee as
contemplated by the immediately preceding clause (iii);
(v) the original or copies of each assumption,
modification, written assurance or substitution agreement, if any; and
(vi) the original lender's title insurance policy,
together with all endorsements or riders that were issued with or
subsequent to the issuance of such policy, insuring the priority of the
Mortgage as a first lien on the Mortgaged Property represented therein
as a fee interest vested in the Mortgagor.
The Seller promptly shall (and in no event later than five
Business Days following the Closing Date submit or cause to be submitted for
recording, at no expense to Purchaser (or the Trust Fund, the Certificate
Insurer or the Trustee under the Pooling and Servicing Agreement), in the
appropriate public office for real property records, each Assignment referred to
in clauses (b)(iii) and (b)(iv) of this Section 4. In the event that any such
Assignment is lost or returned unrecorded because of a defect therein, the
Seller promptly shall prepare a substitute Assignment or cure such defect, as
the case may be, and thereafter cause each such Assignment to be duly recorded.
Notwithstanding anything to the contrary contained in this
Section 4, if any document referred to in Section 4(b)(ii) or 4(b)(iv) above has
been submitted for recording but either (x) has not been returned from the
applicable public recording office or (y) has been lost or such public recording
office has retained the original of such document, the obligations of the Seller
hereunder shall be deemed to have been satisfied upon delivery to the Purchaser
or any assignee, transferee or designee of the Purchaser promptly upon receipt
thereof by or on behalf of the Seller of either the original or a copy of such
document certified by the applicable public recording office to be a true and
complete copy of the original.
In the event that the original lender's title insurance policy
has not yet been issued, the Seller shall deliver to the Purchaser or any
assignee, transferee or designee of the Purchaser a written commitment or
interim binder or preliminary report of title issued by the title insurance or
escrow company. The Seller shall deliver to the Purchaser or any assignee,
<PAGE>
transferee or designee of the Purchaser promptly upon receipt by the Seller of
any such original title insurance policy or original Primary Mortgage Insurance
Policy.
(c) ACCEPTANCE OF MORTGAGE LOANS. The documents delivered
pursuant to Section 4(b) hereof shall be reviewed by the Purchaser or any
assignee, transferee or designee of the Purchaser at any time before or after
the Closing Date (and with respect to each document permitted to be delivered
after the Closing Date, within seven days of its delivery) to ascertain that all
required documents have been executed and received and that such documents
relate to the Mortgage Loans identified on the Mortgage Loan Schedule.
(d) TRANSFER OF INTEREST IN AGREEMENTS. The Purchaser has the
right to assign its interest under this Agreement, in whole or in part, to the
Trustee, as may be required to effect the purposes of the Pooling and Servicing
Agreement, without the consent of the Seller, and the assignee shall succeed to
the rights and obligations hereunder of the Purchaser. Any expense reasonably
incurred by or on behalf of the Purchaser or the Trustee in connection with
enforcing any obligations of the Seller under this Agreement will be promptly
reimbursed by the Seller.
(e) EXAMINATION OF MORTGAGE FILES. Prior to the Closing Date,
the Seller shall either (i) deliver in escrow to the Purchaser or to any
assignee, transferee or designee of the Purchaser for examination the Mortgage
File pertaining to each Mortgage Loan, or (ii) make such Mortgage Files
available to the Purchaser or to any assignee, transferee or designee of the
Purchaser for examination. Such examination may be made by the Purchaser or the
Trustee, and their respective designees, upon reasonable notice to the Seller
during normal business hours before the Closing Date and within 60 days after
the Closing Date. If any such person makes such examination prior to the Closing
Date and identifies any Mortgage Loans that do not conform to the requirements
of the Purchaser as described in this Agreement, such Mortgage Loans shall be
deleted from the Closing Schedule. The Purchaser may, at its option and without
notice to the Seller, purchase all or part of the Mortgage Loans without
conducting any partial or complete examination. The fact that the Purchaser or
any person has conducted or has failed to conduct any partial or complete
examination of the Mortgage Files shall not affect the rights of the Purchaser
or any assignee, transferee or designee of the Purchaser to demand repurchase or
other relief as provided herein or under the Pooling and Servicing Agreement.
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
SELLER.
The Seller hereby represents and warrants, as of the date
hereof and as of the Closing Date, and covenants, that:
(i) The Seller is duly organized, validly existing
and in good standing as a corporation under the laws of the State of California
with full corporate power and authority to conduct its business as presently
conducted by it to the extent material to the consummation of the transactions
contemplated herein. The Seller had the full corporate power and authority to
own the Mortgage Loans and to transfer and convey the Mortgage Loans to the
Purchaser and has the full corporate power and authority to execute and deliver,
<PAGE>
engage in the transactions contemplated by, and perform and observe the terms
and conditions of this Agreement.
(ii) The Seller has duly authorized the
execution, delivery and performance of this Agreement, has duly executed and
delivered this Agreement, and this Agreement, assuming due authorization,
execution and delivery by the Purchaser, constitutes a legal, valid and binding
obligation of the Seller, enforceable against it in accordance with its terms
except as the enforceability thereof may be limited by bankruptcy, insolvency or
reorganization or by general principles of equity.
(iii) The execution, delivery and performance of
this Agreement by the Seller (x) does not conflict and will not conflict with,
does not breach and will not result in a breach of and does not constitute and
will not constitute a default (or an event, which with notice or lapse of time
or both, would constitute a default) under (A) any terms or provisions of the
articles of incorporation or by_laws of the Seller, (B) any term or provision of
any material agreement, contract, instrument or indenture, to which the Seller
is a party or by which the Seller or any of its property is bound, or (C) any
law, rule, regulation, order, judgment, writ, injunction or decree of any court
or governmental authority having jurisdiction over the Seller or any of its
property and (y) does not create or impose and will not result 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.
(iv) No consent, approval, authorization or order
of, registration or filing with, or notice on behalf of the Seller to any
governmental authority or court is required, under federal laws or the laws of
the State of California, for the execution, delivery and performance by the
Seller of, or compliance by the Seller with, this Agreement or the consummation
by the Seller of any other transaction contemplated hereby and by the Pooling
and Servicing Agreement; provided, however, that the Seller makes no
representation or warranty regarding federal or state securities laws in
connection with the sale or distribution of the Certificates.
(v) This Agreement does not contain any untrue
statement of material fact or omit to state a material fact necessary to make
the statements contained herein not misleading. The written statements, reports
and other documents prepared and furnished or to be prepared and furnished by
the Seller pursuant to this Agreement or in connection with the transactions
contemplated hereby taken in the aggregate do not contain any untrue statement
of material fact or omit to state a material fact necessary to make the
statements contained therein not misleading.
(vi) The Seller is not in violation of, and the
execution and delivery of this Agreement by the Seller 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 over the
Seller or its assets, which violation might have consequences that would
materially and adversely affect the condition (financial or otherwise) or the
operation of the
<PAGE>
Seller or its assets or might have consequences that would materially and
adversely affect the performance of its obligations and duties hereunder.
(vii) The Seller is a HUD approved mortgagee
pursuant to Section 203 of the National Housing Act. No event has occurred,
including but not limited to a change in insurance coverage, that would make the
Seller unable to comply with HUD eligibility requirements or that would require
notification to HUD.
(viii) The Seller 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.
(ix) Immediately prior to the sale of the
Mortgage Loans to the Purchaser as herein contemplated, the Seller was the owner
of the related Mortgage and the indebtedness evidenced by the related Mortgage
Note, and, upon the payment to the Seller of the Purchase Price, in the event
that the Seller retains or has retained record title, the Seller shall retain
such record title to each Mortgage, each related Mortgage Note and the related
Mortgage Files with respect thereto in trust for the Purchaser as the owner
thereof from and after the date hereof.
(x) There are no actions or proceedings against,
or investigations known to it of, the Seller before any court, administrative or
other tribunal (A) that might prohibit its entering into this Agreement, (B)
seeking to prevent the sale of the Mortgage Loans by the Seller or the
consummation of the transactions contemplated by this Agreement or (C) that
might prohibit or materially and adversely affect the performance by the Seller
of its obligations under, or validity or enforceability of, this Agreement.
(xi) The consummation of the transactions
contemplated by this Agreement are in the ordinary course of business of the
Seller, and the transfer, assignment and conveyance of the Mortgage Notes and
the Mortgages by the Seller are not subject to the bulk transfer or any similar
statutory provisions.
(xii) [intentionally omitted]
(xiii) The Seller has not dealt with any broker,
investment banker, agent or other person, except for the Purchaser or any of its
affiliates, that may be entitled to any commission or compensation in connection
with the sale of the Mortgage Loans (except that an entity that previously
financed the Seller's ownership of the Mortgage Loans may be entitled to a fee
to release its security interest in the Mortgage Loans, which fee shall have
been paid and which security interest shall have been released on or prior to
the Closing Date).
(xiv) There is no litigation currently pending or,
to the best of the Seller's knowledge without independent investigation,
threatened against the Seller that would reasonably be expected to adversely
affect the transfer of the Mortgage Loans, the issuance of the Certificates or
the execution, delivery, performance or enforceability of this
<PAGE>
Agreement, or that would result in a material adverse change in the financial
condition of the Seller.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE SELLER
RELATING TO THE MORTGAGE LOANS.
REPRESENTATIONS AND WARRANTIES AS TO INDIVIDUAL MORTGAGE
LOANS. The Seller hereby represents and warrants to the Purchaser that as to
each Mortgage Loan as of the Closing Date:
(i) The information set forth in the Mortgage Loan
Schedule is complete, true and correct as of the Cut-off Date;
(ii) The Mortgage Loan is in compliance with all requirements
set forth on Exhibit 4, and the characteristics of the Mortgage Loans as set
forth on Exhibit 4 are true and correct;
(iii) (a) All payments required to be made on or before the
first day of the month prior to the month of the Closing Date, with respect to
such Mortgage Loan under the terms of the Mortgage Note have been made; (b) the
Seller has not advanced funds, or induced, solicited or knowingly received any
advance of funds from a party other than the owner of the related Mortgaged
Property, directly or indirectly, for the payment of any amount required by the
Mortgage Note or Mortgage; and (c) no payment required under any Mortgage Loan
has been 30 days delinquent more than once during the last twelve months and no
Mortgage Loan has ever been 60 or more days delinquent;
(iv) There are no delinquent taxes, ground rents, water
charges, sewer rents, assessments, insurance premiums, leasehold payments,
including assessments payable in future installments or other outstanding
charges affecting the related Mortgaged Property;
(v) The terms of the Mortgage Note and the Mortgage have not
been impaired, waived, altered or modified in any respect, except by written
instruments, recorded in the applicable public recording office if necessary to
maintain the lien priority of the Mortgage; the substance of any such waiver,
alteration or modification has been approved by the title insurer, to the extent
required by the related policy, and is reflected on the Mortgage Loan Schedule.
No instrument of waiver, alteration or modification has been executed, and no
Mortgagor has been released, in whole or in part, except in connection with an
assumption agreement approved by the title insurer, to the extent required by
the policy, and the terms of which are reflected in the Mortgage Loan Schedule;
(vi) The Mortgage Note and the Mortgage are not subject to any
right of rescission, set-off, counterclaim or defense, including the defense of
usury, nor will the operation of any of the terms of the Mortgage Note and the
Mortgage, or the exercise of any right thereunder, render 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
<PAGE>
such right of rescission, set-off, counterclaim or defense has been asserted
with respect thereto;
(vii) All buildings upon the Mortgaged Property are insured by
a generally acceptable insurer 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 the Pooling and Servicing Agreement. All such insurance policies
contain a standard mortgagee clause naming the Seller, its successors and
assigns as mortgagee and all premiums thereon have been paid. If upon
origination of the Mortgage Loan, the Mortgaged Property was in an area
identified on a Flood Hazard 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) a flood insurance policy meeting the
requirements of the current guidelines of the Federal Insurance Administration
is in effect which policy conforms to the requirements of FNMA and FHLMC. The
Mortgage obligates the Mortgagor thereunder to maintain all such insurance at
the Mortgagor's cost and expense, and on the Mortgagor's failure to do so,
authorizes the holder of the Mortgage to maintain such insurance at Mortgagor's
cost and expense and to seek reimbursement therefor from the Mortgagor;
(viii) Any and all requirements of any federal, state or local
law including, without limitation, usury, truth in lending, real estate
settlement procedures, consumer credit protection, equal credit opportunity or
disclosure laws applicable to the origination and servicing of Mortgage Loan
have been complied with. Any and all statements or acknowledgments required to
be made by the Mortgagor relating to such requirements are and will remain in
the Mortgage File;
(ix) The Mortgage has not been satisfied, canceled,
subordinated or rescinded, in whole or in part, and the Mortgaged Property has
not been released from the lien of the Mortgage, in whole or in part, nor has
any instrument been executed that would effect any such satisfaction,
cancellation, subordination, rescission or release;
(x) The Mortgage is a valid, existing and enforceable first
lien on the Mortgaged Property, including all improvements on the Mortgaged
Property subject only to (a) the lien of current real property taxes and
assessments not yet due and payable, (b) covenants, conditions and restrictions,
rights of way, easements and other matters of the public record as of the date
of recording being acceptable to mortgage lending institutions generally and
specifically referred to in the lender's title insurance policy delivered to the
originator of the Mortgage Loan and which do not adversely affect the appraised
value of the Mortgaged Property, and (c) other matters to which like properties
are commonly subject which do not materially interfere with the benefits of the
security intended to be provided by the Mortgage or the use, enjoyment, value or
marketability of the related Mortgaged Property. Any security agreement, chattel
mortgage or equivalent document related to and delivered in connection with the
Mortgage Loan establishes and creates a valid, existing and enforceable first
lien and first priority security interest on the property described therein and
the Seller has full right to sell and assign the same to the Purchaser. The
Mortgaged Property was not, as of the date of origination of the Mortgage Loan,
subject to a mortgage, deed of
<PAGE>
trust, deed to secured debt or other security instrument creating a lien
subordinate to the lien of the Mortgage;
(xi) The Mortgage Note and the related Mortgage are genuine
and each is the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms;
(xii) All parties to the Mortgage Note and the Mortgage had
legal capacity to enter into the Mortgage Loan and to execute and deliver the
Mortgage Note and the Mortgage, and the Mortgage Note and the Mortgage have been
duly and properly executed by such parties. The Mortgagor is a natural person
who is a party to the Mortgage Note and the Mortgage is in an individual
capacity or family trust that is guaranteed by a natural person;
(xiii) The proceeds of the Mortgage Loan have been fully
disbursed to or for the account of the Mortgagor and there is no obligation for
the Mortgagee to advance additional funds thereunder and any and all
requirements as to completion of any on_site or off_site improvement and as to
disbursements of any escrow funds therefor have been complied with. All costs,
fees and expenses incurred in making or closing the Mortgage Loan and the
recording of the Mortgage have been paid, and the Mortgagor is not entitled to
any refund of any amounts paid or due to the Mortgagee pursuant to the Mortgage
Note or Mortgage;
(xiv) As of the Closing Date and prior to the sale of the
Mortgage Loan hereunder, the Seller was the sole legal, beneficial and equitable
owner of the Mortgage Note and the Mortgage and has full right to transfer and
sell the Mortgage Loan to the Purchaser free and clear of any encumbrance,
equity, lien, pledge, charge, claim or security interest;
(xv) All parties which have had any interest in the Mortgage
Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or, during the
period in which they held and disposed of such interest, were) in compliance
with any and all applicable "doing business" and licensing requirements of the
laws of the state wherein the Mortgaged Property is located;
(xvi) The Mortgage Loan is covered by an ALTA lender's title
insurance policy with an adjustable rate mortgage endorsement, such endorsement
substantially in the form of ALTA Form 6.0 or 6.1, acceptable to FNMA or FHLMC,
issued by a title insurer acceptable to FNMA and FHLMC and qualified to do
business in the jurisdiction where the Mortgaged Property is located, insuring
(subject to the exceptions contained in (x)(a) and (b) above) the Seller, its
successors and assigns as to the first priority lien of the Mortgage in the
original principal amount of the Mortgage Loan and against any loss by reason of
the invalidity or unenforceability of the lien resulting from the provisions of
the Mortgage providing for adjustment in the Mortgage Rate and monthly payment.
Additionally, such lender's title insurance policy affirmatively insures ingress
and egress to and from the Mortgaged Property, and against encroachments by or
upon the Mortgaged Property or any interest therein. The Seller is the sole
insured of such lender's title insurance policy, and such lender's title
insurance policy is in full force and effect and will be in full force and
<PAGE>
effect upon the consummation of the transactions contemplated by this Agreement.
No claims have been made under such lender's title insurance policy, and no
prior holder of the related Mortgage, including the Seller, has done, by act or
omission, anything which would impair the coverage of such lender's title
insurance policy;
(xvii) 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 a default, breach, violation or event of
acceleration, and the Seller has not waived any default, breach, violation or
event of acceleration;
(xviii) There are no mechanics' or similar liens or claims
which have been filed for work, labor or material (and no rights are outstanding
that under law could give rise to such lien) affecting the related Mortgaged
Property which are or may be liens prior to, or equal or coordinate with, the
lien of the related Mortgage;
(xix) All improvements which were considered in determining
the appraised value of the related Mortgaged Property lay wholly within the
boundaries and building restriction lines of the Mortgaged Property, and no
improvements on adjoining properties encroach upon the Mortgaged Property. Each
appraisal has been performed in accordance with the provisions of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989;
(xx) The Mortgage Loan was (i) originated by the Seller or by
a savings and loan association, a savings bank, a commercial bank or similar
banking institution which is supervised and examined by a federal or state
authority, or by a mortgagee approved as such by the Secretary of HUD or (ii)
acquired by the Seller directly through loan brokers or correspondents such that
(a) the Mortgage Loan was originated in conformity with the Seller's
underwriting guidelines, (b) the Seller approved the Mortgage Loan prior to
funding and (c) the Seller provided the funds used to originate the Mortgage
Loan and acquired the Mortgage Loan on the date of origination thereof;
(xxi) Principal payments on the Mortgage Loan commenced no
more than two months after the proceeds of the Mortgage Loan were disbursed. The
Mortgage Loan bears interest at the Mortgage Rate. The Mortgage Note is payable
on the first day of each month in Monthly Payments which are changed on each
Adjustment Date to an amount which will amortize the Stated Principal Balance of
the Mortgage Loan over its remaining term at the Mortgage Rate. Interest on the
Mortgage Loan is calculated on the basis of a 360-day year consisting of twelve
30-day months. The Mortgage Note does not permit negative amortization. The
Mortgage Loan does not permit the Mortgagor to convert the Mortgage Loan to a
fixed rate Mortgage Loan;
(xxii) The origination and collection practices used by the
Seller with respect to each Mortgage Note and Mortgage have been in all respects
legal, proper, prudent and customary in the mortgage origination and servicing
industry. The Mortgage Loan has been serviced by the Seller (directly or through
a subservicer) and any predecessor servicer in accordance with the terms of the
Mortgage Note. With respect to escrow deposits and
<PAGE>
Escrow Payments, if any, all such payments are in the possession of, or under
the control of, the Seller and there exist no deficiencies in connection
therewith for which customary arrangements for repayment thereof have not been
made. No escrow deposits or Escrow Payments or other charges or payments due the
Seller have been capitalized under any Mortgage or the related Mortgage Note;
(xxiii) The Mortgaged Property is free of damage and waste and
there is no proceeding pending for the total or partial condemnation thereof;
(xxiv) The Mortgage and related Mortgage Note contain
customary and enforceable provisions such as to render the rights and remedies
of the holder thereof adequate for the realization against the Mortgaged
Property of the benefits of the security provided thereby, including, (a) in the
case of a Mortgage designated as a deed of trust, by trustee's sale, and (b)
otherwise by judicial foreclosure. Since the date of origination of the Mortgage
Loan, the Mortgaged Property has not been subject to any bankruptcy proceeding
or foreclosure proceeding and the Mortgagor has not filed for protection under
applicable bankruptcy laws. There is no homestead or other exemption available
to the Mortgagor which would interfere with the right to sell the Mortgaged
Property at a trustee's sale or the right to foreclose the Mortgage. The
Mortgagor has not notified the Seller and the Seller has no knowledge of any
relief requested or allowed to the Mortgagor under the Soldiers and Sailors
Civil Relief Act of 1940;
(xxv) The related Mortgaged Property is not a leasehold estate
or, if such Mortgaged Property is a leasehold estate, the remaining term of such
lease is at least ten (10) years greater than the remaining term of the related
Mortgage Note;
(xxvi) The Mortgage Note is not and has not been secured by
any collateral except the lien of the corresponding Mortgage on the Mortgaged
Property and the security interest of any applicable security agreement or
chattel mortgage referred to in (x) above;
(xxvii) The Mortgage File contains an appraisal of the related
Mortgaged Property made and signed, prior to the approval of the Mortgage Loan
application, by a qualified appraiser, approved by the Seller, who had no
interest, direct or indirect in the Mortgaged Property or in any loan made on
the security thereof, whose compensation is not affected by the approval or
disapproval of the Mortgage Loan and who met the minimum qualifications of FNMA
and FHLMC;
(xxviii) In the event the Mortgage constitutes a deed of
trust, a trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in the Mortgage, and no
fees or expenses are or will become payable by the Purchaser to the trustee
under the deed of trust, except in connection with a trustee's sale after
default by the Mortgagor;
(xxix) No Mortgage Loan contains provisions pursuant to which
Monthly Payments are (a) paid or partially paid with funds deposited in any
separate account established by the Seller, the Mortgagor, or anyone on behalf
of the Mortgagor, (b) paid by any source other than the Mortgagor or (c)
contains any other similar provisions which may
<PAGE>
constitute a "buydown" provision. The Mortgage Loan is not a graduated payment
mortgage loan and the Mortgage Loan does not have a shared appreciation or other
contingent interest feature;
(xxx) The Mortgagor has executed a statement to the effect
that the Mortgagor has received all disclosure materials required by applicable
law with respect to the making of adjustable rate mortgage loans; and if the
Mortgage Loan is a Refinanced Mortgage Loan, the Mortgagor has received all
disclosure and rescission materials required by applicable law with respect to
the making of a Refinanced Mortgage Loan, and evidence of such receipt is and
will remain in the Mortgage File;
(xxxi) No Mortgage Loan was made in connection with (a) the
construction or rehabilitation of a Mortgaged Property or (b) facilitating the
trade_in or exchange of a Mortgaged Property;
(xxxii) The Mortgage Note, the Mortgage, the Assignment of
Mortgage and any other documents required to be delivered with respect to each
Mortgage Loan pursuant to the Pooling and Servicing Agreement, have been
delivered to the Trustee all in compliance with the specific requirements of the
Pooling and Servicing Agreement;
(xxxiii) The Mortgaged Property is lawfully occupied under
applicable law; all inspections, licenses and certificates required to be made
or issued with respect to all occupied portions of the Mortgaged Property and,
with respect to the use and occupancy of the same, including but not limited to
certificates of occupancy, have been made or obtained from the appropriate
authorities;
(xxxiv) 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, without limitation, the Mortgagor, any
appraiser, any builder or 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;
(xxxv) The Assignment of Mortgage, is in recordable form and
is acceptable for recording under the laws of the jurisdiction in which the
Mortgaged Property is located;
(xxxvi) Any principal advances made to the Mortgagor prior to
the Cut-off Date have been consolidated with the outstanding principal amount
secured by the Mortgage, and the secured principal amount, as consolidated,
bears a single interest rate and single repayment term. The lien of the Mortgage
securing the consolidated principal amount is expressly insured as having first
lien priority by a title insurance policy, an endorsement to the policy insuring
the mortgagee's consolidated interest or by other title evidence acceptable to
FNMA and FHLMC. The consolidated principal amount does not exceed the original
principal amount of the Mortgage Loan;
(xxxvii) No Mortgage Loan has a balloon payment feature;
<PAGE>
(xxxviii) If the Residential Dwelling on the Mortgaged
Property is a condominium unit or a unit in a planned unit development (other
than a de minimis planned unit development) such condominium or planned unit
development project meets the FNMA's eligibility requirements;
(xxxix) Neither the Seller nor any affiliate of the Seller
has made a mortgage on any Mortgaged Property other than the Mortgage Loan;
(xl) Any Mortgage Loan subject to the provisions of the
Homeownership and Equity Protection Act of 1994, P.L. 103-325, 108 Stat 2160 was
originated in compliance therewith;
(xli) The Mortgage Loan was not intentionally selected by
the Seller in a manner intended to adversely affect the interest of the
Purchaser;
(xlii) The Seller has not dealt with any broker or agent or
other Person who might be entitled to a fee, commission or compensation in
connection with the transaction contemplated by this Agreement other than the
Purchaser except as set forth in the parenthetical in Section 5(xiii) hereof;
(xliii) The Mortgaged Property consists of a parcel of real
property of not more than ten acres with a single family residence erected
thereon, or a two to four-family dwelling, or an individual condominium unit in
a low-rise or high-rise condominium project, or an individual unit in a planned
unit development. The Mortgaged Property is improved with a Residential
Dwelling. Without limiting the foregoing, the Mortgaged Property does NOT
consist of any of the following property types: (a) co-operative units, (b) log
homes, (c) earthen homes, (d) underground homes, (e) mobile homes and (f)
manufactured homes (as defined in the FNMA Originator-Servicer's Guide), except
when the appraisal indicates that the home is of comparable construction to a
stick or beam construction home, is readily marketable, has been permanently
affixed to the site and is not in a mobile home "park." The Mortgaged Property
is either a fee simple estate or a long-term residential lease. If the Mortgage
Loan is secured by a long-term residential lease, unless otherwise specifically
disclosed in the Mortgage Loan Schedule, (A) the terms of such lease expressly
permit the mortgaging of the leasehold estate, the assignment of the lease
without the lessor's consent (or the lessor's consent has been obtained and such
consent is the Mortgage File) and the acquisition by the holder of the Mortgage
of the rights of the lessee upon foreclosure or assignment in lieu of
foreclosure or provide the holder of the Mortgage with substantially similar
protection; (B) the terms of such lease do not (x) allow the termination thereof
upon the lessee's default without the holder of the Mortgage being entitled to
receive written notice of, and opportunity to cure, such default or (y) prohibit
the holder of the Mortgage from being insured under the hazard insurance policy
relating to the Mortgaged Property; (C) the original term of such lease is not
less than 15 years; (D) the term of such lease does not terminate earlier than
ten years after the maturity date of the Mortgage Note; and (E) the Mortgaged
Property is located in a jurisdiction in which the use of leasehold estates for
residential properties is an accepted practice;
<PAGE>
(xliv) At the time of origination, the Loan-To-Value Ratio
of the Mortgage Loan was not greater than 90%;
(xlv) The Mortgage, and if required by applicable law the
related Mortgage Note, contains a provision for the acceleration of the payment
of the unpaid principal balance of the Mortgage Loan in the event that the
Mortgaged Property is sold or transferred without the prior written consent of
the Mortgagee, at the option of the Mortgagee; and
(xlvi) The Mortgage Loan either contains a customary
due-on-sale clause or may be assumed by a creditworthy purchaser of the related
Mortgaged Property; and
(xlvii) As of any Adjustment Date for such Mortgage Loan, the
Index applicable to the determination of the Mortgage Rate on such Mortgage Loan
will be the average of the interbank offered rates for six_month United States
dollar deposits in the London market, generally as published in THE WALL STREET
JOURNAL and as most recently available as of either (i) the first business day
45 days prior to such Adjustment Date or (ii) the first business day of the
month preceding the month of such Adjustment Date, as specified in the related
Mortgage Note.
SECTION 7. REPURCHASE OBLIGATION FOR DEFECTIVE DOCUMENTATION
AND FOR BREACH OF REPRESENTATION AND WARRANTY.
(a) The representations and warranties contained in Section 6
shall not be impaired by any review and examination of loan files or other
documents evidencing or relating to the Mortgage Loans or any failure on the
part of the Seller or the Purchaser to review or examine such documents and
shall inure to the benefit of any assignee, transferee or designee of the
Purchaser, including the Trustee for the benefit of holders of the Certificates.
With respect to the representations and warranties contained herein as to which
the Seller has no knowledge, if it is discovered that the substance of any such
representation and warranty was inaccurate as of the date such representation
and warranty was made or deemed to be made, and such inaccuracy materially and
adversely affects the value of the related Mortgage Loan or the interest therein
of the Purchaser or the Purchaser's assignee, transferee or designee, then
notwithstanding the lack of knowledge by the Seller with respect to the
substance of such representation and warranty being inaccurate at the time the
representation and warranty was made, the Seller shall take such action
described in the following paragraph in respect of such Mortgage Loan.
Upon discovery by the Seller, the Purchaser or any assignee,
transferee or designee of the Purchaser of any materially defective document in,
or that any material document was not transferred by the Seller (as listed on
the Trustee's Preliminary Exception Report) as part of any Mortgage File, or of
a breach of any of the representations and warranties contained in Section 6
that materially and adversely affects the value of any Mortgage Loan or the
interest therein of the Purchaser or the Purchaser's assignee, transferee or
designee, the party discovering such breach shall give prompt written notice to
the other. Within sixty (60) days of its discovery or its receipt of notice of
any such missing documentation that was not transferred by the Seller as
described above, or of materially defective documentation, or of any such breach
of a representation and warranty, the Seller
<PAGE>
promptly shall deliver such missing document or cure such defect or breach in
all material respects or, in the event the Seller cannot deliver such missing
document or cannot cure such defect or breach, the Seller shall, within ninety
(90) days of its discovery or receipt of notice, repurchase the affected
Mortgage Loan at the Purchase Price (as such term is defined in the Pooling and
Servicing Agreement). The Seller shall amend the Closing Schedule to reflect the
withdrawal of such Mortgage Loan from the terms of this Agreement and the
Pooling and Servicing Agreement. The Seller shall deliver to the Purchaser such
amended Closing Schedule and shall deliver such other documents as are required
by this Agreement or the Pooling and Servicing Agreement within five (5) days of
any such amendment. Any repurchase pursuant to this Section 7(a) shall be
accomplished by transfer to an account designated by the Purchaser of the amount
of the Purchase Price in accordance with Section 2.03 of the Pooling and
Servicing Agreement. Any repurchase required by this Section shall be made in a
manner consistent with Section 2.03 of the Pooling and Servicing Agreement.
(b) It is understood and agreed that the obligations of the
Seller set forth in this Section 7 to cure or repurchase a defective Mortgage
Loan constitute the sole remedies of the Purchaser against the Seller respecting
a missing document or a breach of the representations and warranties contained
in Section 6.
SECTION 8. CLOSING; PAYMENT FOR THE MORTGAGE LOANS. The
closing of the purchase and sale of the Mortgage Loans shall be held at the New
York City office of Thacher Proffitt & Wood at 10:00 a.m. New York City time on
the Closing Date.
The closing shall be subject to each of the following
conditions:
(a) All of the representations and warranties of the
Seller under this Agreement shall be true and correct
in all material respects as of the date as of which
they are made and no event shall have occurred which,
with notice or the passage of time, would constitute
a default under this Agreement;
(b) The Purchaser shall have received, or the attorneys
of the Purchaser shall have received in escrow (to be
released from escrow at the time of closing), all
Closing Documents as specified in Section 9 of this
Agreement, in such forms as are agreed upon and
acceptable to the Purchaser, duly executed by all
signatories other than the Purchaser as required
pursuant to the respective terms thereof;
(c) The Seller shall have delivered and released to the
Purchaser or to its designee, all documents
(including without limitation, the Mortgage Loans)
required to be so delivered by the Purchaser pursuant
to Section 2.01 of the Pooling and Servicing
Agreement; and
(d) All other terms and conditions of this Agreement and
the Pooling and Servicing Agreement shall have been
complied with.
<PAGE>
Subject to the foregoing conditions, the Purchaser shall
deliver or cause to be delivered to the Seller on the Closing Date, against
delivery and release by the Seller to the Trustee of all documents required
pursuant to the Pooling and Servicing Agreement, the consideration for the
Mortgage Loans as specified in Section 3 of this Agreement, by delivery to the
Seller of (i) the Purchase Price in immediately available funds and (ii) the New
Century Certificates.
SECTION 9. CLOSING DOCUMENTS. Without limiting the generality
of Section 8 hereof, the closing shall be subject to delivery of each of the
following documents:
(a) An Officers' Certificate of the Seller, dated the
Closing Date, upon which the Purchaser, Financial
Security Assurance Inc. ("FSA") and Salomon Brothers
Inc (the "Underwriter") may rely, in the form of
Exhibit 1 hereto, and attached thereto copies of the
certificate of incorporation, by-laws and certificate
of good standing of the Seller under the laws of
California;
(b) An Officers' Certificate of the Seller, dated the
Closing Date, upon which the Purchaser, FSA and the
Underwriter may rely, in the form of Exhibit 2
hereto, with respect to certain facts regarding the
sale of the Mortgage Loans by the Seller to the
Purchaser;
(c) An Opinion of Counsel of the Seller, dated the
Closing Date and addressed to the Purchaser, FSA and
the Underwriter, substantially in the form attached
hereto as Exhibit 3;
(d) Such opinions of counsel as the Rating Agencies or
the Trustee may request in connection with the sale
of the Mortgage Loans by the Seller to the Purchaser
or the Seller's execution and delivery of, or
performance under, this Agreement;
(e) A letter from KPMG Peat Marwick, L.L.P., certified
public accountants, dated the date hereof, to the
effect that they have performed certain specified
procedures as a result of which they determined that
certain information of an accounting, financial or
statistical nature set forth in the Purchaser's
Prospectus Supplement, dated February 25, 1997, under
the captions "Summary-- The Mortgage Pool," "Risk
Factors-- Additional Risks Associated with the
Mortgage Loans," "The Mortgage Pool" and "Pooling and
Servicing Agreement-- The Master Servicer" agrees
with the records of the Seller; and
(f) Such further information, certificates, opinions and
documents as the Purchaser or the Underwriter may
reasonably request.
SECTION 10. COSTS. The Seller shall pay (or shall reimburse
the Purchaser or any other Person to the extent that the Purchaser or such other
Person shall
<PAGE>
pay) all costs and expenses incurred in connection with the transfer and
delivery of the Mortgage Loans, including without limitation, recording fees,
fees for title policy endorsements and continuations and the fees for recording
Assignments of Mortgage, the fees and expenses of the Seller's accountants and
attorneys, the costs and expenses incurred in connection with producing the
Seller's or any Subservicer's loan loss, foreclosure and delinquency experience,
and the costs and expenses incurred in connection with obtaining the documents
referred to in Sections 9(d), 9(e) and 9(g), the costs and expenses of printing
(or otherwise reproducing) and delivering this Agreement, the Pooling and
Servicing Agreement, the Certificates, the prospectus and prospectus supplement,
and any private placement memorandum relating to the Certificates, the Insurance
Agreement and other related documents, the initial fees, costs and expenses of
the Trustee, the initial fees, costs and expenses of FSA, the fees and expenses
of the Purchaser's counsel in connection with the preparation of all documents
relating to the securitization of the Mortgage Loans, the filing fee charged by
the Securities and Exchange Commission for registration of the Certificates and
the fees charged by any rating agency to rate the Certificates. All other costs
and expenses in connection with the transactions contemplated hereunder shall be
borne by the party incurring such expense.
SECTION 11. SERVICING. The Seller has represented to the
Purchaser that certain of the Mortgage Loans are being serviced by the Seller,
in its capacity as servicer under the Mortgage Loan Purchase and Servicing
Agreement dated as of September 1, 1996 between Salomon Brothers Realty Corp.
and the Seller, and that such Mortgage Loans are not subject to any other
servicing agreements with third parties (other than SubServicing Agreements with
Advanta Mortgage Corp. USA). It is understood and agreed between the Seller and
the Purchaser that the Mortgage Loans are to be delivered free and clear of any
servicing agreements. The Seller, without reimbursement from the Purchaser,
shall pay any fees or penalties required by any servicer for releasing the
Mortgage Loans from any such servicing agreement (it being understood that
neither the Purchaser nor any affiliate of the Purchaser is servicing the
Mortgage Loans under any such servicing agreement and, accordingly, that neither
the Purchaser nor any affiliate of the Purchaser is entitled to receive any fee
for releasing the Mortgage Loans from any such servicing agreement) and shall
arrange for the orderly transfer, as of the Cut-off Date, of such servicing from
any such servicer to the Master Servicer. The Mortgage Loans shall be serviced
by the Seller, in its capacity as Master Servicer, in accordance with the terms
of the Pooling and Servicing Agreement. For so long as the Seller services the
Mortgage Loans, the Seller shall be entitled to the Servicing Fee and such other
payments as provided for under the terms of the Pooling and Servicing Agreement.
SECTION 12. INDEMNIFICATION. (a) The Seller shall indemnify
and hold harmless each of (i) the Purchaser, (ii) the Underwriter, (iii) FSA,
(iv) the Person, if any, to which the Purchaser assigns its rights in and to a
Mortgage Loan and each of their respective successors and assigns and (v) each
person, if any, who controls the Purchaser within the meaning of Section 15 of
the Securities Act of 1933, as amended (the "1933 Act") ((i) through (vi)
collectively, the "Indemnified Party") against any and all losses, claims,
expenses, damages or liabilities to which the Indemnified Party may become
subject, under the 1933 Act or otherwise, insofar as such losses, claims,
expenses, damages or liabilities (or actions in respect thereof) arise out of or
are based upon (a) any untrue statement or alleged
<PAGE>
untrue statement of any material fact contained in the prospectus supplement
(the "Prospectus Supplement") or any private placement memorandum, or the
omission or the alleged omission to state therein the material fact necessary in
order to make the statements therein not misleading, in each case to the extent,
but only to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in reliance upon and in conformity with
(i) information furnished in writing to the Purchaser or any of its affiliates
by the Seller specifically for use therein, which shall include, with respect to
the Prospectus Supplement, the information set forth under the captions "Summary
- -- The Mortgage Pool," "Risk Factors -- Additional Risks Associated with the
Mortgage Loans," "The Mortgage Pool" and "Pooling and Servicing Agreement -- The
Master Servicer" and, with respect to any private placement memorandum, any
information of a comparable nature, or (ii) the data files containing
information with respect to the Mortgage Loans as transmitted by modem to the
Purchaser by the Seller on February 19, 1997 (as such transmitted information
may have been amended in writing by the Seller with the written consent of the
Purchaser subsequent to such transmission), or (b) any representation, warranty
or covenant made by the Seller herein or in the Pooling and Servicing Agreement,
on which the Purchaser has relied, being, or alleged to be, untrue or incorrect;
provided, however, that to the extent that any such losses, claims, expenses,
damages or liabilities to which the Indemnified Party may become subject arise
out of or are based upon both (1) statements, omissions, representations,
warranties or covenants of the Seller described in clause (a) or (b) above and
(2) any other factual basis, the Seller shall indemnify and hold harmless the
Indemnified Party only to the extent that the losses, claims, expenses, damages,
or liabilities of the person or persons asserting the claim are determined to
rise from or be based upon matters set forth in clause (1) above and do not
result from the gross negligence or willful misconduct of such Indemnified
Party. This indemnity shall be in addition to any liability that the Seller may
otherwise have.
SECTION 13. MANDATORY DELIVERY; GRANT OF SECURITY INTEREST.
The sale and delivery on the Closing Date of the Mortgage Loans described on the
Mortgage Loan Schedule in accordance with the terms and conditions of this
Agreement is mandatory. It is specifically understood and agreed that each
Mortgage Loan is unique and identifiable on the date hereof and that an award of
money damages would be insufficient to compensate the Purchaser for the losses
and damages incurred by the Purchaser in the event of the Seller's failure to
deliver the Mortgage Loans on or before the Closing Date. The Seller hereby
grants to the Purchaser a lien on and a continuing security interest in the
Seller's interest in each Mortgage Loan and each document and instrument
evidencing each such Mortgage Loan to secure the performance by the Seller of
its obligation hereunder, and the Seller agrees that it holds such Mortgage
Loans in custody for the Purchaser, subject to the Purchaser's (i) right, prior
to the Closing Date, to reject any Mortgage Loan to the extent permitted by this
Agreement, and (ii) obligation to deliver or cause to be delivered the
consideration for the Mortgage Loans pursuant to Section 8 hereof. Any Mortgage
Loans rejected by the Purchaser shall concurrently therewith be released from
the security interest created hereby. All rights and remedies of the Purchaser
under this Agreement are distinct from, and cumulative with, any other rights or
remedies under this Agreement or afforded by law or equity and all such rights
and remedies may be exercised concurrently, independently or successively.
<PAGE>
Notwithstanding the foregoing, if on the Closing Date, each of
the conditions set forth in Section 8 hereof shall have been satisfied and the
Purchaser shall not have paid or caused to be paid the Purchase Price, or any
such condition shall not have been waived or satisfied and the Purchaser
determines not to pay or cause to be paid the Purchase Price, the Purchaser
shall immediately effect the redelivery of the Mortgage Loans, if delivery to
the Purchaser has occurred, and the security interest created by this Section 12
shall be deemed to have been released.
SECTION 14. NOTICES. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered to or mailed by registered mail, postage prepaid, or
transmitted by fax and, receipt of which is confirmed by telephone, if to the
Purchaser, addressed to the Purchaser at Seven World Trade Center, New York, New
York 10048, Attention: Mortgage Finance Group, fax (212) 783-4581, or such other
address as may hereafter be furnished to the Seller in writing by the Purchaser;
and if to the Seller, addressed to the Seller at 4910 Birch Street, Suite 100,
Newport Beach, California 92660, fax (714) 440-7033, or to such other address as
the Seller may designate in writing to the Purchaser.
SECTION 15. SEVERABILITY OF PROVISIONS. Any part, provision,
representation or warranty of this Agreement that is prohibited or that is held
to be void or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof. Any part, provision, representation or warranty of this Agreement that
is prohibited or unenforceable or is held to be void or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof.
SECTION 16. AGREEMENT OF PARTIES. The Seller and the Purchaser
each agree to execute and deliver such instruments and take such actions as
either of the others may, from time to time, reasonably request in order to
effectuate the purpose and to carry out the terms of this Agreement and the
Pooling and Servicing Agreement.
SECTION 17. SURVIVAL. (a) The Seller agrees that the
representations, warranties and agreements made by it herein and in any
certificate or other instrument delivered pursuant hereto shall be deemed to be
relied upon by the Purchaser, notwithstanding any investigation heretofore or
hereafter made by the Purchaser or on its behalf, and that the representations,
warranties and agreements made by the Seller herein or in any such certificate
or other instrument shall survive the delivery of and payment for the Mortgage
Loans and shall continue in full force and effect, notwithstanding any
restrictive or qualified endorsement on the Mortgage Notes and notwithstanding
subsequent termination of this Agreement, the Pooling and Servicing Agreement or
the Trust Fund.
<PAGE>
SECTION 18. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS,
DUTIES, OBLIGATIONS AND RESPONSIBILITIES OF THE PARTIES HERETO SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS (INCLUDING THE CHOICE OF LAW
PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK. THE PARTIES HERETO INTEND
THAT THE PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW
SHALL APPLY TO THIS AGREEMENT.
SECTION 19. MISCELLANEOUS. This Agreement may be executed in
two or more counterparts, each of which when so executed and delivered shall be
an original, but all of which together shall constitute one and the same
instrument. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. This Agreement
supersedes all prior agreements and understandings relating to the subject
matter hereof. Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans by the Seller to the Purchaser as provided in
Section 4 hereof be, and be construed as, a sale of the Mortgage Loans by the
Seller to the Purchaser and not as a pledge of the Mortgage Loans by the Seller
to the Purchaser to secure a debt or other obligation of the Seller. However, in
the event that, notwithstanding the aforementioned intent of the parties, the
Mortgage Loans are held to be property of the Seller, then (a) it is the express
intent of the parties that such conveyance be deemed a pledge of the Mortgage
Loans by the Seller to the Purchaser to secure a debt or other obligation of the
Seller and (b) (1) this Agreement shall also be deemed to be a security
agreement within the meaning of Articles 8 and 9 of the New York Uniform
Commercial Code; (2) the conveyance provided for in Section 4 hereof shall be
deemed to be a grant by the Seller to the Purchaser of a security interest in
all of the Seller's right, title and interest in and to the Mortgage Loans and
all amounts payable to the holders of the Mortgage Loans in accordance with the
terms thereof and all proceeds of the conversion, voluntary or involuntary, of
the foregoing into cash, instruments, securities or other property, including
without limitation all amounts, other than investment earnings, from time to
time held or invested in the Collection Account whether in the form of cash,
instruments, securities or other property; (3) the possession by the Purchaser
or its agent of Mortgage Notes, the related Mortgages and such other items of
property that constitute instruments, money, negotiable documents or chattel
paper shall be deemed to be "possession by the secured party" for purposes of
perfecting the security interest pursuant to Section 9-305 of the New York
Uniform Commercial Code; and (4) notifications to persons holding such property
and acknowledgments, receipts or confirmations from persons holding such
property shall be deemed notifications to, or acknowledgments, receipts or
confirmations from, financial intermediaries, bailees or agents (as applicable)
of the Purchaser for the purpose of perfecting such security interest under
applicable law. Any assignment of the interest of the Purchaser pursuant to
Section 4(d) hereof shall also be deemed to be an assignment of any security
interest created hereby. The Seller and the Purchaser shall, to the extent
consistent with this Agreement, take such actions
<PAGE>
as may be necessary to ensure that, if this Agreement were deemed to create a
security interest in the Mortgage Loans, such security interest would be deemed
to be a perfected security interest of first priority under applicable law and
will be maintained as such throughout the term of this Agreement and the Pooling
and Servicing Agreement.
<PAGE>
IN WITNESS WHEREOF, the Purchaser and the Seller have caused
their names to be signed by their respective officers thereunto duly authorized
as of the date first above written.
SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
By:____________________________________
Name: Vincent J. Varca
Title: Assistant Vice President
NEW CENTURY MORTGAGE
CORPORATION
By:____________________________________
Name:
Title:
<PAGE>
EXHIBIT 1
[FORM OF OFFICER'S CERTIFICATE OF THE SELLER]
I, __________________ hereby certify that I am the duly
appointed __________________________ of New Century Mortgage Corporation, a
California corporation (the "Company"), and further certify, on behalf of the
Company, as follows:
1. Attached hereto as Attachment I is a true and correct copy
of the Articles of Incorporation and By_laws of the Company as in full
force and effect on the date hereof. Attached hereto as Attachment II
is a certificate of good standing, dated February __, 1997, issued by
the State of California with respect to the Company. No event has
occurred since the date thereof that has affected the good standing of
the Company under the laws of the State of California.
2. There are no actions, suits or proceedings pending or, to
the best of my knowledge, threatened against or affecting the Company
which, if adversely determined, individually or in the aggregate, would
materially and adversely affect the Company's ability to perform its
obligations under the Mortgage Loan Purchase Agreement, dated February
__, 1997 (the "Mortgage Loan Purchase Agreement"), between Salomon
Brothers Mortgage Securities VII, Inc. (the "Purchaser") and the
Company or the Pooling and Servicing Agreement, dated as of February 1,
1997 (the "Pooling and Servicing Agreement"), among the Purchaser as
depositor, the Company as master servicer (in such capacity, the
"Master Servicer") and First Trust National Association as Trustee. No
proceedings looking toward merger, consolidation or liquidation,
dissolution or bankruptcy of the Company are pending or contemplated.
3. Each person who, as an officer or representative of the
Company, signed the Mortgage Loan Purchase Agreement, the Pooling and
Servicing Agreement and any other document delivered prior hereto or on
the date hereof in connection with the transactions contemplated by the
Mortgage Loan Purchase Agreement and the Pooling and Servicing
Agreement, was at the respective times of such signing and delivery,
and is as of the date hereof, duly elected or appointed, qualified and
acting as such officer or representative, and the signatures of such
persons appearing on such documents are their genuine signatures.
4. Each of the Mortgage Loans referred to in the Mortgage Loan
Purchase Agreement and the Pooling and Servicing Agreement was
originated in accordance with Section 6(xx) of the Mortgage Loan
Purchase Agreement.
5. Attached hereto as Attachment III is a true and correct
copy of the resolutions duly adopted by the Board of Directors of the
Company on February 21, 1997 (the "Resolutions") with respect to the
transactions contemplated by the Mortgage Loan Purchase Agreement and
the Pooling and Servicing Agreement; said Resolutions have not been
amended or modified, annulled or revoked and are in full force and
effect on the date hereof.
<PAGE>
6. All of the representations and warranties of the Company
contained in the Mortgage Loan Purchase Agreement and contained in the
Pooling and Servicing Agreement are true and correct in all material
respects as of the Closing Date, and no event has occurred which, with
notice or the passage of time or both, would constitute a default under
the Mortgage Loan Purchase Agreement or an Event of Default under the
Pooling and Servicing Agreement.
7. The information set forth in the Mortgage Loan Schedule
attached as an exhibit to the Pooling and Servicing Agreement is true
and correct in all material respects.
8. The transactions contemplated in the Mortgage Loan Purchase
Agreement will be reported as a sale in the Company's financial
reports.
9. The information contained in the Purchaser's Prospectus
Supplement, dated February 25, 1997, relating to the Mortgage Loans,
the Company, and its loan portfolio, specifically the information, in
the summary under the subheadings "Summary_The Mortgage Pool," "Risk
Factors_Additional Risks Associated with the Mortgage Loans," "The
Mortgage Pool" and "Pooling and Servicing Agreement_The Master
Servicer" is true and accurate and does not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
10. The Company has performed all of its duties and has
satisfied all of the material conditions on its part to be performed
or satisfied prior to the Closing Date.
11. Capitalized terms used but not defined herein shall have
the meanings assigned in the Mortgage Loan Purchase Agreement and the
Pooling and Servicing Agreement.
<PAGE>
IN WITNESS WHEREOF, I have hereunto signed my name and affixed
the seal of the Company.
Dated: February 27, 1997
By:____________________________________
Name:
[Seal] Title:
I, ____________________________, an [Assistant] Secretary of
New Century Mortgage Corporation, hereby certify that __________________ is the
duly appointed, qualified and acting _______________________ of New Century
Mortgage Corporation and that the signature appearing above is his genuine
signature.
IN WITNESS WHEREOF, I have hereunto signed my name.
Dated: February 27, 1997
By:____________________________________
Name:
Title:
<PAGE>
EXHIBIT 2
[FORM OF OFFICER'S CERTIFICATE OF THE SELLER WITH RESPECT TO
CERTAIN FACTS REGARDING THE SALE OF THE MORTGAGE LOANS]
Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Certificates
Series 1997-NC1
Reference is made to the sale of mortgage loans (the "Mortgage
Loans") by New Century Mortgage Corporation ("New Century") to Salomon Brothers
Mortgage Securities VII, Inc. (the "Depositor") pursuant to the Mortgage Loan
Purchase Agreement, dated February 25, 1997 (the "Purchase Agreement"), between
the Depositor and New Century, and the simultaneous issuance of Asset_Backed
Floating Rate Certificates, Series 1997_NC1, Class A, Class CE, Class R-I and
Class R-II (the "Certificates"), pursuant to a Pooling and Servicing Agreement,
dated as of February 1, 1997 (the "Pooling and Servicing Agreement"), among the
Depositor as depositor, New Century as master servicer (in such capacity, the
"Master Servicer") and First Trust National Association as trustee (the
"Trustee"). In consideration for its purchase of the Mortgage Loans, the
Depositor will deliver to New Century immediately available funds, the Class CE
Certificates, the Class R-I Certificates and the Class R-II Certificates. The
Depositor will sell the Class A Certificates to Salomon Brothers Inc (the
"Underwriter") for offer and sale pursuant to the terms of an Underwriting
Agreement, dated February 25, 1997 (the "Underwriting Agreement"), between the
Depositor and the Underwriter. The Purchase Agreement, the Pooling and Servicing
Agreement and the Underwriting Agreement are hereinafter collectively referred
to as the "Agreements." Capitalized terms not otherwise defined herein shall
have the meanings set forth in the Agreements.
The undersigned is a duly appointed ___________________ of New
Century Mortgage Corporation and hereby certifies after reasonable investigation
that:
1. The price to be paid to New Century for the Mortgage Loans
will have been paid in full at the closing of the sale pursuant to the Purchase
Agreement, and no agreement or arrangement exists or will exist that permits the
modification of the consideration for the Mortgage Loans subsequent to that
sale. New Century will not have any right or obligation to repurchase any
Mortgage Loan, except as provided in the Purchase Agreement.
2. Each Mortgage Note and each related Mortgage has been
appropriately prepared and duly executed and delivered by the related Mortgagor,
and each Mortgage has been appropriately recorded in the applicable jurisdiction
and any intervening endorsement of any Mortgage Note and any intervening
assignment of any Mortgage, which was required in order to transfer to New
Century ownership of the Mortgage Loans, was obtained and completed.
<PAGE>
3. Each Mortgage Note has been endorsed or assigned in a
manner that satisfies all requirements necessary to transfer to the Trustee all
right, title and interest of the party so endorsing or assigning, as noteholder
or transferee thereof, in and to that Mortgage Note, as provided in the Purchase
Agreement and the Pooling and Servicing Agreement. Each Assignment is in
recordable form and is sufficient to effect the assignment and transfer to the
Depositor of the benefits of the assignor, as original mortgagee or assignee
thereof, under each Mortgage to which that Assignment relates, as provided in
the Purchase Agreement and the Pooling and Servicing Agreement. Each Assignment
has been or will be appropriately recorded to the extent required under
applicable law, as provided in the Mortgage Loan Purchase Agreement.
4. Each original Mortgage Note, each original recorded
Mortgage, each original recorded intervening Assignment and each Assignment has
been delivered to the Trustee at the direction of the Depositor.
5. Immediately prior to the transfer of the Mortgage Loans by
New Century to the Depositor, New Century was the sole owner of each Mortgage
Loan, free and clear of any and all prior liens, mortgages, security interests,
pledges, participation interests, adverse claims, charges or other equities or
encumbrances of any nature, and had full right and authority to sell, assign and
transfer the Mortgage Loans.
6. No Mortgage Note, Mortgage or other document constituting
part of the Mortgage File reflects or will reflect on its face any interest that
is inconsistent with the ownership interest of the Trustee in and to the
Mortgage Loans or the transfer of the Mortgage Loans by New Century to the
Trustee.
7. The transfer of the Mortgage Loans by New Century to the
Depositor as provided in the Purchase Agreement is intended by New Century to
be, and is in fact, a contemporaneous exchange in which New Century receives new
value.
8. New Century was solvent at all relevant times prior to, and
will not be rendered insolvent by, the transfer of the Mortgage Loans to the
Depositor.
9. New Century did not transfer the Mortgage Loans to the
Depositor with any intent to hinder, delay or defraud any of New Century's
creditors.
10. Neither New Century nor any agent acting on behalf of it,
has been or will become a party to any fraud or illegality affecting any
Mortgage Loan or Certificate.
11. To the best of my knowledge, no breach of the Agreements
by any party, misrepresentation or failure by any party to perform all acts
required to be performed prior to the Closing Date, or fraud or mistake on the
part of any party to the Agreements in connection with the transactions
contemplated by the Agreements, has occurred or will occur.
12. To the best of my knowledge, no party to the
Agreements has taken or will take any action that is unreasonable, arbitrary or
capricious, or that is not taken in good
<PAGE>
faith or in a commercially reasonable manner, affecting the Mortgage Loans in
connection with the transactions contemplated by the Agreements.
13. To the best of my knowledge, there is not and will not be
any other agreement among the parties to the Agreements that modifies or
otherwise supplements the agreement of the parties as expressed in the
Agreements.
14. New Century does not have and will not have any right to
modify or alter the terms of the transfer of the Mortgage Loans by New Century
to the Depositor, or to substitute or add any mortgage loan thereafter, except
as provided in the Agreements.
15. New Century will not take any action that is inconsistent
with the ownership interest in the Mortgage Loans evidenced by the Certificates.
New Century will promptly indicate to other persons or entities, when a response
is appropriate, that the Mortgage Loans were transferred by New Century to the
Depositor. New Century will not claim any ownership interest directly in the
Mortgage Loans other than that represented by Certificates in which it may have
an ownership interest from time to time and that represented by its role as
Master Servicer.
16. Under generally accepted accounting principles ("GAAP")
and for federal income tax purposes, New Century will report the transfer of the
Mortgage Loans to the Depositor, as provided in the Purchase Agreement as a sale
of all of its interest in the Mortgage Loans. New Century has been advised by or
has confirmed with its independent public accountants for similar transactions
that the sale will be so classified under GAAP in accordance with Statement No.
125 of the Financial Accounting Standards Board.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of the 27th day of February, 1997.
NEW CENTURY MORTGAGE
CORPORATION
By:
Name:
Title:
<PAGE>
[FORM OF OPINION OF COUNSEL TO THE SELLER]
<PAGE>
EXHIBIT 4
On the Cut-off Date, the Mortgage Loans shall comply with the following
conditions:
(i) no less than 51.00% of the Mortgage Loans shall have a risk grade
of A+ or A-, no more than 26.00% of such loans shall have a risk grade of B and
no more than 24.00% of such loans shall have a risk grade of C or C-; provided,
however, with regard to the Delayed First Adjustment Mortgage Loans, no less
than 45.00% of such loans shall have a risk grade of A or A-, no more than
32.00% of such loans shall have a risk grade of B and no more than 23.00% of
such loans shall have a risk grade of C or C-;
(ii) any Mortgage Loan with a loan-to-value ratio (an "LTV") between
80% and 85% shall have a risk grade of A+, A- or B; any Mortgage Loan with an
LTV between 85% and 90% shall have a risk grade of A+ or A-;
(iii) the maximum weighted average LTV for each of the Mortgage Loans
shall be 90.00%; provided, however, the maximum weighted average LTV for each of
the Delayed First Adjustment Mortgage Loans shall be 70.82%;
(iv) the maximum percentage concentration of Mortgage Loans secured by
mortgaged properties in any one zip code shall be 0.85%;
(v) approximately 58.90% of the Mortgage Loans will have 1, 2, 3, 5 or
6 year prepayment penalties; provided, however, approximately 78.28% of the
Delayed First Adjustment Mortgage Loans will have 1, 2, 3, 5 or 6 year
prepayment penalties;
(vi) the Mortgage Loans shall have a weighted average Mortgage Rate
equal to 9.226% per annum and a weighted average margin equal to 7.000% per
annum, provided, however, the Delayed First Adjustment Mortgage Loans to be
purchased shall have a weighted average Mortgage Rate equal to 9.805% per annum
and a weighted average margin equal to 7.306% per annum. The Mortgage Loans will
be adjustable rate mortgage loans, payable on the first day of each month.
Interest on the Mortgage Loans and the monthly payments will be adjusted on each
Adjustment Date to equal the sum of the Index and the margin, rounded to the
next highest multiple of 0.125%, subject to the Periodic Rate Cap, the Maximum
Mortgage Rate and the Minimum Mortgage Rate. The Mortgage Loans will not be
subject to negative amortization and will not provide for graduated payments.
None of the Mortgage Loans will be convertible to a fixed mortgage interest
rate. None of the Mortgage Loans shall be subject to temporary buydown
agreements. Each of the Mortgage Loans shall be fully-amortizing and none of the
Mortgage Loans shall provide for the payment of a balloon payment.
<PAGE>
EXHIBIT E-1
REQUEST FOR RELEASE
(for Trustee/Custodian)
LOAN INFORMATION
- ----------------
Name of Mortgagor: ____________________________________
Master Servicer
Loan No.: ____________________________________
TRUSTEE/CUSTODIAN
Name: ____________________________________
Address: ____________________________________
Trustee/Custodian
Mortgage File No.: ____________________________________
DEPOSITOR
Name: SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
Address: ____________________________________
____________________________________
Certificates: Asset-Backed Floating Rate
Certificates, Series 1997-NC1.
<PAGE>
The undersigned Master Servicer hereby acknowledges that it
has received from _______________________, as Trustee for the Holders of
Asset-Backed Floating Rate Certificates, Series 1997-NC1, the documents referred
to below (the "Documents"). All capitalized terms not otherwise defined in this
Request for Release shall have the meanings given them in the Pooling and
Servicing Agreement, dated as of February 1, 1997, among the Trustee, the
Depositor and the Master Servicer (the "Pooling and Servicing Agreement").
( ) Promissory Note dated _______________, 19__, in the original principal
sum of $__________, made by _____________________, payable to, or
endorsed to the order of, the Trustee.
( ) Mortgage recorded on _________________________ as instrument no.
____________________ in the County Recorder's Office of the County of
_________________, State of __________________ in book/reel/docket
_________________ of official records at page/image _____________.
( ) Deed of Trust recorded on ___________________ as instrument no.
________________ in the County Recorder's Office of the County of
_________________, State of ____________________ in book/reel/docket
_________________ of official records at page/image ______________.
( ) Assignment of Mortgage or Deed of Trust to the Trustee, recorded on
___________________ as instrument no. _________ in the County
Recorder's Office of the County of _______________, State of
_______________________ in book/reel/docket ____________ of official
records at page/image ____________.
( ) Other documents, including any amendments, assignments or other
assumptions of the Mortgage Note or Mortgage.
( ) _____________________________________________
( ) _____________________________________________
( ) _____________________________________________
( ) _____________________________________________
The undersigned Master Servicer hereby acknowledges and agrees
as follows:
(1) The Master Servicer shall hold and retain possession of
the Documents in trust for the benefit of the Trustee, solely for the
purposes provided in the Agreement.
(2) The Master Servicer shall not cause or permit the
Documents to become subject to, or encumbered by, any claim, liens,
security interest, charges, writs of attachment or other impositions
nor shall the Master Servicer assert or seek to assert any claims or
rights of setoff to or against the Documents or any proceeds thereof.
<PAGE>
(3) The Master Servicer shall return each and every Document
previously requested from the Mortgage File to the Trustee when the
need therefor no longer exists, unless the Mortgage Loan relating to
the Documents has been liquidated and the proceeds thereof have been
remitted to the Collection Account and except as expressly provided in
the Agreement.
(4) The Documents and any proceeds thereof, including any
proceeds of proceeds, coming into the possession or control of the
Master Servicer shall at all times be earmarked for the account of the
Trustee, and the Master Servicer shall keep the Documents and any
proceeds separate and distinct from all other property in the Master
Servicer's possession, custody or control.
Dated:
NEW CENTURY MORTGAGE CORPORATION
By:____________________________________
Name:__________________________________
Title:_________________________________
<PAGE>
EXHIBIT E-2
REQUEST FOR RELEASE
[Mortgage Loans Paid in Full]
OFFICERS' CERTIFICATE AND TRUST RECEIPT
ASSET-BACKED FLOATING RATE CERTIFICATES
SERIES 1997-NC1
____________________________________________________ HEREBY CERTIFIES THAT
HE/SHE IS AN OFFICER OF THE MASTER SERVICER, HOLDING THE OFFICE SET
FORTH BENEATH HIS/HER SIGNATURE, AND HEREBY FURTHER CERTIFIES AS
FOLLOWS:
WITH RESPECT TO THE MORTGAGE LOANS, AS THE TERM IS DEFINED IN THE
POOLING AND SERVICING AGREEMENT DESCRIBED IN THE ATTACHED
SCHEDULE:
ALL PAYMENTS OF PRINCIPAL, PREMIUM (IF ANY), AND INTEREST HAVE BEEN
MADE.
LOAN NUMBER:_____________________ BORROWER'S NAME:___________________
COUNTY:__________________________
WE HEREBY CERTIFY THAT ALL AMOUNTS RECEIVED IN CONNECTION WITH SUCH PAYMENTS,
WHICH ARE REQUIRED TO BE DEPOSITED IN THE COLLECTION ACCOUNT PURSUANT TO SECTION
3.10 OF THE POOLING AND SERVICING AGREEMENT, HAVE BEEN OR WILL BE CREDITED.
____________________________________ DATED:______________________________
/ / VICE PRESIDENT
/ / ASSISTANT VICE PRESIDENT
<PAGE>
EXHIBIT F-1
FORM OF TRANSFEROR REPRESENTATION LETTER
[Date]
[Trustee]
[Certificate Registrar]
Re: Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Floating Rate Certificates, Series 1997-NC1,
Class ___, Representing A ___% Class ___ Percentage Interest
-------------------------------------------------------------
Ladies and Gentlemen:
In connection with the transfer by ________________ (the
"Transferor") to ________________ (the "Transferee") of the captioned
asset-backed certificates (the "Certificates"), the Transferor hereby certifies
as follows:
Neither the Transferor nor anyone acting on its behalf has (a)
offered, pledged, sold, disposed of or otherwise transferred any Certificate,
any interest in any Certificate or any other similar security to any person in
any manner, (b) has solicited any offer to buy or to accept a pledge,
disposition or other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c) has
otherwise approached or negotiated with respect to any Certificate, any interest
in any Certificate or any other similar security with any person in any manner,
(d) has made any general solicitation by means of general advertising or in any
other manner, (e) has taken any other action, that (in the case of each of
subclauses (a) through (e) above) would constitute a distribution of the
Certificates under the Securities Act of 1933, as amended (the "1933 Act"), or
would render the disposition of any Certificate a violation of Section 5 of the
1933 Act or any state securities law or would require registration or
qualification pursuant thereto. The Transferor will not act, nor has it
authorized or will it authorize any person to act, in any manner set forth in
the foregoing sentence with respect to any Certificate. The Transferor will not
sell or otherwise transfer any of the Certificates, except in compliance with
the provisions of that certain Pooling and Servicing Agreement, dated as of
February 1, 1997, among Salomon Brothers Mortgage Securities VII, Inc. as
Depositor, New Century Mortgage Corporation as Master Servicer and First Trust
National Association as Trustee
<PAGE>
(the "Pooling and Servicing Agreement"), pursuant to which Pooling and Servicing
Agreement the Certificates were issued.
Capitalized terms used but not defined herein shall have the
meanings assigned thereto in the Pooling and Servicing Agreement.
Very truly yours,
[Transferor]
By:
Name:
Title:
<PAGE>
FORM OF TRANSFEREE REPRESENTATION LETTER
[Date]
[Trustee]
__________________________
__________________________
[Certificate Registrar]
__________________________
__________________________
Re: Salomon Brothers Mortgage Securities VII, Inc.,
Asset-Backed Floating Rate Certificates, Series 1997-NC1,
CLASS ___, REPRESENTING A ___% CLASS ___ PERCENTAGE INTEREST
Ladies and Gentlemen:
In connection with the purchase from ______________________
(the "Transferor") on the date hereof of the captioned trust certificates (the
"Certificates"), _______________ (the "Transferee") hereby certifies as follows:
1. The Transferee is a "qualified institutional buyer" as that
term is defined in Rule 144A ("Rule 144A") under the Securities Act of
1933 (the "1933 Act") and has completed either of the forms of
certification to that effect attached hereto as Annex 1 or Annex 2. The
Transferee is aware that the sale to it is being made in reliance on
Rule 144A. The Transferee is acquiring the Certificates for its own
account or for the account of a qualified institutional buyer, and
understands that such Certificate may be resold, pledged or transferred
only (i) to a person reasonably believed to be a qualified
institutional buyer that purchases for its own account or for the
account of a qualified institutional buyer to whom notice is given that
the resale, pledge or transfer is being made in reliance on Rule 144A,
or (ii) pursuant to another exemption from registration under the 1933
Act.
2. The Transferee has been furnished with all information
regarding (a) the Certificates and distributions thereon, (b) the
nature, performance and servicing of the Mortgage Loans, (c) the
Pooling and Servicing Agreement referred to below, and (d) any credit
enhancement mechanism associated with the Certificates, that it has
requested.
<PAGE>
All capitalized terms used but not otherwise defined herein
have the respective meanings assigned thereto in the Pooling and Servicing
Agreement, dated as of February 1, 1997, among Salomon Brothers Mortgage
Securities VII, Inc. as Depositor, New Century Mortgage Corporation as Master
Servicer and First Trust National Association as Trustee, pursuant to which the
Certificates were issued.
[TRANSFEREE]
By:______________________________
Name:____________________________
Title:___________________________
<PAGE>
ANNEX 1 TO EXHIBIT F_1
----------------------
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
--------------------------------------------------------
[For Transferees Other Than Registered Investment Companies]
The undersigned hereby certifies as follows to [name of
Transferor] (the "Transferor") and First Trust National Association, as Trustee
and Certificate Registrar, with respect to the asset-backed certificates (the
"Certificates") described in the Transferee Certificate to which this
certification relates and to which this certification is an Annex:
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
entity purchasing the Certificates (the "Transferee").
2. In connection with purchases by the Transferee, the
Transferee is a "qualified institutional buyer" as that term is defined in Rule
144A under the Securities Act of 1933 ("Rule 144A") because (i) the Transferee
owned and/or invested on a discretionary basis $______________________1 in
securities (except for the excluded securities referred to below) as of the end
of the Transferee's most recent fiscal year (such amount being calculated in
accordance with Rule 144A) and (ii) the Transferee satisfies the criteria in the
category marked below.
___ CORPORATION, ETC. The Transferee is a corporation (other than
a bank, savings and loan association or similar institution),
Massachusetts or similar business trust, partnership, or any
organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986.
___ BANK. The Transferee (a) is a national bank or banking
institution organized under the laws of any State, territory
or the District of Columbia, the business of which is
substantially confined to banking and is supervised by the
State or territorial banking commission or similar official or
is a foreign bank or equivalent institution, and (b) has an
audited net worth of at least $25,000,000 as demonstrated in
its latest annual financial statements, A COPY OF WHICH IS
ATTACHED HERETO.
___ SAVINGS AND LOAN. The Transferee (a) is a savings and loan
association, building and loan association, cooperative bank,
homestead association or similar institution, which is
supervised and examined by a State or Federal authority having
supervision over any such institutions or is a foreign savings
and loan association or equivalent institution and (b) has an
audited net worth
________
1 Transferee must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Transferee is a dealer, and, in that case,
Transferee must own and/or invest on a discretionary basis at least $10,000,000
in securities.
<PAGE>
of at least $25,000,000 as demonstrated in its latest annual
financial statements, A COPY OF WHICH IS ATTACHED HERETO.
___ BROKER-DEALER. The Transferee is a dealer registered pursuant
to Section 15 of _____________ the Securities Exchange Act of
1934.
___ INSURANCE COMPANY. The Transferee is an insurance company
whose primary and predominant business activity is the writing
of insurance or the reinsuring of risks underwritten by
insurance companies and which is subject to supervision by the
insurance commissioner or a similar official or agency of a
State, territory or the District of Columbia.
___ STATE OR LOCAL PLAN. The Transferee is a plan established and
maintained by a State, its political subdivisions, or any
agency or instrumentality of the State or its political
subdivisions, for the benefit of its employees.
___ ERISA PLAN. The Transferee is an employee benefit plan within
the meaning of Title I of the Employee Retirement Income
Security Act of 1974.
___ INVESTMENT ADVISOR. The Transferee is an investment advisor
registered under the Investment Advisers Act of 1940.
3. The term "SECURITIES" as used herein DOES NOT INCLUDE (i)
securities of issuers that are affiliated with the Transferee, (ii) securities
that are part of an unsold allotment to or subscription by the Transferee, if
the Transferee is a dealer, (iii) securities issued or guaranteed by the U.S. or
any instrumentality thereof, (iv) bank deposit notes and certificates of
deposit, (v) loan participations, (vi) repurchase agreements, (vii) securities
owned but subject to a repurchase agreement and (viii) currency, interest rate
and commodity swaps.
4. For purposes of determining the aggregate amount of
securities owned and/or invested on a discretionary basis by the Transferee, the
Transferee used the cost of such securities to the Transferee and did not
include any of the securities referred to in the preceding paragraph. Further,
in determining such aggregate amount, the Transferee may have included
securities owned by subsidiaries of the Transferee, but only if such
subsidiaries are consolidated with the Transferee in its financial statements
prepared in accordance with generally accepted accounting principles and if the
investments of such subsidiaries are managed under the Transferee's direction.
However, such securities were not included if the Transferee is a
majority_owned, consolidated subsidiary of another enterprise and the Transferee
is not itself a reporting company under the Securities Exchange Act of 1934.
5. The Transferee acknowledges that it is familiar with Rule
144A and understands that the Transferor and other parties related to the
Certificates are relying and will continue to rely on the statements made herein
because one or more sales to the Transferee may be in reliance on Rule 144A.
<PAGE>
___ ___ Will the Transferee be purchasing the Certificates
Yes No only for the Transferee's own account?
6. If the answer to the foregoing question is "no", the
Transferee agrees that, in connection with any purchase of securities sold to
the Transferee for the account of a third party (including any separate account)
in reliance on Rule 144A, the Transferee will only purchase for the account of a
third party that at the time is a "qualified institutional buyer" within the
meaning of Rule 144A. In addition, the Transferee agrees that the Transferee
will not purchase securities for a third party unless the Transferee has
obtained a current representation letter from such third party or taken other
appropriate steps contemplated by Rule 144A to conclude that such third party
independently meets the definition of "qualified institutional buyer" set forth
in Rule 144A.
7. The Transferee will notify each of the parties to which
this certification is made of any changes in the information and conclusions
herein. Until such notice is given, the Transferee's purchase of the
Certificates will constitute a reaffirmation of this certification as of the
date of such purchase. In addition, if the Transferee is a bank or savings and
loan as provided above, the Transferee agrees that it will furnish to such
parties updated annual financial statements promptly after they become
available.
Dated:
Print Name of Transferee
------------------------
By:_____________________________
Name:___________________________
Title:__________________________
<PAGE>
ANNEX 2 TO EXHIBIT F-1
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees That Are Registered Investment Companies]
The undersigned hereby certifies as follows to [name of
Transferor] (the "Transferor") and First Trust National Association, as Trustee
and Certificate Registrar, with respect to the asset_backed certificates (the
"Certificates") described in the Transferee Certificate to which this
certification relates and to which this certification is an Annex:
1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the entity purchasing the
Certificates (the "Transferee") or, if the Transferee is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act of 1933 ("Rule 144A") because the Transferee is part of a Family of
Investment Companies (as defined below), is such an officer of the investment
adviser (the "Adviser").
2. In connection with purchases by the Transferee, the
Transferee is a "qualified institutional buyer" as defined in Rule 144A because
(i) the Transferee is an investment company registered under the Investment
Company Act of 1940, and (ii) as marked below, the Transferee alone, or the
Transferee's Family of Investment Companies, owned at least $100,000,000 in
securities (other than the excluded securities referred to below) as of the end
of the Transferee's most recent fiscal year. For purposes of determining the
amount of securities owned by the Transferee or the Transferee's Family of
Investment Companies, the cost of such securities was used.
____ The Transferee owned $___________________ in securities (other
than the excluded securities referred to below) as of the
end of the Transferee's most recent fiscal year (such amount
being calculated in accordance with Rule 144A).
____ The Transferee is part of a Family of Investment Companies
which owned in the aggregate $______________ in securities
(other than the excluded securities referred to below) as of
the end of the Transferee's most recent fiscal year (such
amount being calculated in accordance with Rule 144A).
3. The term "FAMILY OF INVESTMENT COMPANIES" as used herein
means two or more registered investment companies (or series thereof) that have
the same investment adviser or investment advisers that are affiliated (by
virtue of being majority owned subsidiaries of the same parent or because one
investment adviser is a majority owned subsidiary of the other).
4. The term "SECURITIES" as used herein does not include
(i) securities of issuers that are affiliated with the Transferee or are part of
the Transferee's Family of
<PAGE>
Investment Companies, (ii) securities issued or guaranteed by the U.S. or any
instrumentality thereof, (iii) bank deposit notes and certificates of deposit,
(iv) loan participations, (v) repurchase agreements, (vi) securities owned but
subject to a repurchase agreement and (vii) currency, interest rate and
commodity swaps.
5. The Transferee is familiar with Rule 144A and understands
that the parties to which this certification is being made are relying and will
continue to rely on the statements made herein because one or more sales to the
Transferee will be in reliance on Rule 144A. In addition, the Transferee will
only purchase for the Transferee's own account.
6. The undersigned will notify the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice, the Transferee's purchase of the Certificates will constitute
a reaffirmation of this certification by the undersigned as of the date of such
purchase.
Dated:
Print Name of Transferee
------------------------
By:_____________________________
Name:___________________________
Title:__________________________
IF AN ADVISER:
------------------------
Print Name of Transferee
<PAGE>
FORM OF TRANSFEREE REPRESENTATION LETTER
The undersigned hereby certifies on behalf of the purchaser
named below (the "Purchaser") as follows:
1. I am an executive officer of the Purchaser.
2. The Purchaser is a "qualified institutional buyer",
as defined in Rule 144A, ("Rule 144A") under the Securities Act of
1933, as amended.
3. As of the date specified below (which is not earlier than
the last day of the Purchaser's most recent fiscal year), the amount of
"securities", computed for purposes of Rule 144A, owned and invested on
a discretionary basis by the Purchaser was in excess of $100,000,000.
Name of Purchaser_______________________________________________________________
By: (Signature)____________________________________________________________
Name of Signatory ______________________________________________________________
Title___________________________________________________________________________
Date of this certificate________________________________________________________
Date of information provided in paragraph 3_____________________________________
<PAGE>
EXHIBIT F-2
FORM OF TRANSFER AFFIDAVIT AND AGREEMENT
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
___________, being duly sworn, deposes, represents and
warrants as follows:
17. I am a ______________________ of_________________________
(the "Owner") a corporation duly organized and existing under the laws of
______________, the record owner of Salomon Brothers Mortgage Securities VII,
Inc., Asset-Backed Floating Rate Certificates, Series 1997-NC1, [Class R-I] [and
Class R-II] (the "Class R Certificates"), on behalf of whom I make this
affidavit and agreement. Capitalized terms used but not defined herein have the
respective meanings assigned thereto in the Pooling and Servicing Agreement
pursuant to which the Class R Certificates were issued.
18. The Owner (i) is and will be a "Permitted Transferee" as
of ____________________, 199___ and (ii) is acquiring the Class R Certificates
for its own account or for the account of another Owner from which it has
received an affidavit in substantially the same form as this affidavit. A
"Permitted Transferee" is any person other than a "disqualified organization" or
a possession of the United States. For this purpose, a "disqualified
organization" means the United States, any state or political subdivision
thereof, any agency or instrumentality of any of the foregoing (other than an
instrumentality all of the activities of which are subject to tax and, except
for the Federal Home Loan Mortgage Corporation, a majority of whose board of
directors is not selected by any such governmental entity) or any foreign
government, international organization or any agency or instrumentality of such
foreign government or organization, any rural electric or telephone cooperative,
or any organization (other than certain farmers' cooperatives) that is generally
exempt from federal income tax unless such organization is subject to the tax on
unrelated business taxable income.
19. The Owner is aware (i) of the tax that would be imposed on
transfers of the Class R Certificates to disqualified organizations under the
Internal Revenue Code of 1986 that applies to all transfers of the Class R
Certificates after March 31, 1988; (ii) that such tax would be on the transferor
or, if such transfer is through an agent (which person includes a broker,
nominee or middleman) for a non-Permitted Transferee, on the agent; (iii) that
the person otherwise liable for the tax shall be relieved of liability for the
tax if the transferee furnishes to such person an affidavit that the transferee
is a Permitted Transferee and, at the time of transfer, such person does not
have actual knowledge that the affidavit is false; and (iv) that each of the
Class R Certificates may be a "noneconomic residual interest" within the meaning
of proposed Treasury regulations promulgated under the Code and that the
transferor of a "noneconomic residual interest" will remain liable for any taxes
due with
<PAGE>
respect to the income on such residual interest, unless no significant purpose
of the transfer is to impede the assessment or collection of tax.
20. The Owner is aware of the tax imposed on a "Pass-Through
entity" holding the Class R Certificates if, at any time during the taxable year
of the Pass-Through entity, a Non-Permitted Transferee is the record holder of
an interest in such entity. (For this purpose, a "Pass-Through entity" includes
a regulated investment company, a real estate investment trust or common trust
fund, a partnership, trust or estate, and certain cooperatives.)
21. The Owner is aware that the Trustee will not register the
transfer of any Class R Certificate unless the transferee, or the transferee's
agent, delivers to the Trustee, among other things, an affidavit in
substantially the same form as this affidavit. The Owner expressly agrees that
it will not consummate any such transfer if it knows or believes that any of the
representations contained in such affidavit and agreement are false.
22. The Owner consents to any additional restrictions or
arrangements that shall be deemed necessary upon advice of counsel to constitute
a reasonable arrangement to ensure that the Class R Certificates will only be
owned, directly or indirectly, by an Owner that is a Permitted Transferee.
23. The Owner's taxpayer identification number is __________.
24. The Owner has reviewed the restrictions set forth on the
face of the Class R Certificates and the provisions of Section 5.02(d) of the
Pooling and Servicing Agreement under which the Class R Certificates were issued
(in particular, clauses (iii)(A) and (iii)(B) of Section 5.02(d) which authorize
the Trustee to deliver payments to a person other than the Owner and negotiate a
mandatory sale by the Trustee in the event that the Owner holds such Certificate
in violation of Section 5.02(d)); and that the Owner expressly agrees to be
bound by and to comply with such restrictions and provisions.
25. The Owner is not acquiring and will not transfer the Class
R Certificates in order to impede the assessment or collection of any tax.
26. The Owner anticipates that it will, so long as it holds
the Class R Certificates, have sufficient assets to pay any taxes owed by the
holder of such Class R Certificates, and hereby represents to and for the
benefit of the person from whom it acquired the Class R Certificates that the
Owner intends to pay taxes associated with holding such Class R Certificates as
they become due, fully understanding that it may incur tax liabilities in excess
of any cash flows generated by the Class R Certificates.
27. The Owner has no present knowledge that it may become
insolvent or subject to a bankruptcy proceeding for so long as it holds the
Class R Certificates.
28. The Owner has no present knowledge or expectation that it
will be unable to pay any United States taxes owed by it so long as any of the
Certificates remain outstanding.
<PAGE>
29. The Owner is not acquiring the Class R Certificates with
the intent to transfer the Class R Certificates to any person or entity that
will not have sufficient assets to pay any taxes owed by the holder of such
Class R Certificates, or that may become insolvent or subject to a bankruptcy
proceeding, for so long as the Class R Certificates remain outstanding.
30. The Owner will, in connection with any transfer that it
makes of the Class R Certificates, obtain from its transferee the
representations required by Section 5.02(d) of the Pooling and Servicing
Agreement under which the Class R Certificate were issued and will not
consummate any such transfer if it knows, or knows facts that should lead it to
believe, that any such representations are false.
31. The Owner will, in connection with any transfer that it
makes of the Class R Certificates, deliver to the Trustee an affidavit, which
represents and warrants that it is not transferring the Class R Certificates to
impede the assessment or collection of any tax and that it has no actual
knowledge that the proposed transferee: (i) has insufficient assets to pay any
taxes owed by such transferee as holder of the Class R Certificates; (ii) may
become insolvent or subject to a bankruptcy proceeding for so long as the Class
R Certificates remains outstanding; and (iii) is not a "Permitted Transferee".
32. The Owner is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate or
trust whose income from sources without the United States may be included in
gross income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.
<PAGE>
IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
__________, 199___.
[OWNER]
By: _____________________________________
Name:_____________________________________
Title: [Vice] President
ATTEST:
By:
Name:
Title: [Assistant] Secretary
Personally appeared before me the above-named , known or
proved to me to be the same person who executed the foregoing instrument and to
be a [Vice] President of the Owner, and acknowledged to me that [he/she]
executed the same as [his/her] free act and deed and the free act and deed of
the Owner.
Subscribed and sworn before me this ____ day of __________,
199___.
__________________________________
Notary Public
County of
State of
My Commission expires:
<PAGE>
FORM OF TRANSFEROR AFFIDAVIT
STATE OF NEW YORK )
: ss. :
COUNTY OF NEW YORK )
___________________, being duly sworn, deposes, represents and
warrants as follows:
1. I am a ____________________ of ______________________
(the "Owner"), a corporation duly organized and existing under the laws of
______________, on behalf of whom I make this affidavit.
2. The Owner is not transferring the [Class R-I][and
Class R-II] (the "Residual Certificates") to impede the assessment or collection
of any tax.
3. The Owner has no actual knowledge that the Person that is
the proposed transferee (the "Purchaser") of the Residual Certificates: (i) has
insufficient assets to pay any taxes owed by such proposed transferee as holder
of the Residual Certificates; (ii) may become insolvent or subject to a
bankruptcy proceeding for so long as the Residual Certificates remain
outstanding and (iii) is not a Permitted Transferee.
4. The Owner understands that the Purchaser has delivered to
the Trustee a transfer affidavit and agreement in the form attached to the
Pooling and Servicing Agreement as Exhibit F-2. The Owner does not know or
believe that any representation contained therein is false.
5. At the time of transfer, the Owner has conducted a
reasonable investigation of the financial condition of the Purchaser as
contemplated by Treasury Regulations Section 1.860E-1(c)(4)(i) and, as a result
of that investigation, the Owner has determined that the Purchaser has
historically paid its debts as they became due and has found no significant
evidence to indicate that the Purchaser will not continue to pay its debts as
they become due in the future. The Owner understands that the transfer of a
Residual Certificate may not be respected for United States income tax purposes
(and the Owner may continue to be liable for United States income taxes
associated therewith) unless the Owner has conducted such an investigation.
6. Capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Pooling and Servicing Agreement.
<PAGE>
IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
___________, 199___.
[OWNER]
By:___________________________
Name:_________________________
Title: [Vice] President
ATTEST:
By:___________________________
Name:_________________________
Title: [Assistant] Secretary
Personally appeared before me the above-named ________________
___________, known or proved to me to be the same person who executed the
foregoing instrument and to be a [Vice] President of the Owner, and acknowledged
to me that [he/she] executed the same as [his/her] free act and deed and the
free act and deed of the Owner.
Subscribed and sworn before me this ____ day of __________,
199___.
____________________________________
Notary Public
County of __________________________
State of ___________________________
My Commission expires:
<PAGE>
EXHIBIT G
FORM OF CERTIFICATION WITH RESPECT TO ERISA AND THE CODE
_____________, 199__
Salomon Brothers Mortgage Securities VII, Inc.
Seven World Trade Center
New York, New York 10048
First Trust National Association
___________________________
___________________________
New Century Mortgage Corporation
___________________________
___________________________
Re: Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Certificates,
SERIES 1997-NC1, CLASS ___
Dear Sirs:
__________________________________ (the "Transferee") intends
to acquire from _____________________ (the "Transferor") $____________ Initial
Certificate Principal Balance of Salomon Brothers Mortgage Securities VII, Inc.
Asset-Backed Floating Rate Certificates, Series 1997-NC1, Class ___ (the
"Certificates"), issued pursuant to a Pooling and Servicing Agreement (the
"Pooling and Servicing Agreement") dated February 1, 1997 among Salomon Brothers
Mortgage Securities VII, Inc., as depositor (the "Depositor"), New Century
Mortgage Corporation, as master servicer (the "Master Servicer") and First Trust
National Association, as trustee (the "Trustee"). Capitalized terms used herein
and not otherwise defined shall have the meanings assigned thereto in the
Pooling and Servicing Agreement. The Transferee hereby certifies, represents and
warrants to, and covenants with the Depositor, the Trustee and the Master
Servicer that the following statements in either (1) or (2) are accurate:
(1) The Certificates (i) are not being acquired by, and will
not be transferred to, any employee benefit plan within the meaning of
section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or other retirement arrangement, including individual
retirement accounts and annuities, Keogh plans and bank collective
investment funds and insurance company general or separate accounts in
which such plans, accounts or arrangements are invested, that is
subject to Section 406 of ERISA or Section 4975 of the Internal Revenue
Code of 1986 (the
<PAGE>
"Code") (any of the foregoing, a "Plan"), (ii) are not being acquired
with "plan assets" of a Plan within the meaning of the Department of
Labor ("DOL") regulation, 29 C.F.R. ss. 2510.3-101, and (iii) will not
be transferred to any entity that is deemed to be investing in plan
assets within the meaning of the DOL regulation, 29 C.F.R. ss.
2510.3-101; or
(2) The purchase of Certificates is permissible under
applicable law, will not constitute or result in any prohibited
transaction under ERISA or Section 4975 of the Code, will not subject
the Depositor, the Trustee or the Master Servicer to any obligation in
addition to those undertaken in the Pooling and Servicing Agreement
and, with respect to each source of funds ("Source") being used by the
Transferee to acquire the Certificates, each of the following
statements are accurate: (a) the Transferee is an insurance company;
(b) the Source is assets of the Transferee's "general account;" (c) the
conditions set forth in Sections I and III of Prohibited Transaction
Class Exemption ("PTCE") 95-60 issued by the DOL have been satisfied
and the purchase, holding and transfer of Certificates by or on behalf
of the Transferee are exempt under PTCE 95-60; and (d) the amount of
reserves and liabilities for such general account contracts held by or
on behalf of any Plan do not exceed 10% of the total reserves and
liabilities of such general account plus surplus as of the date hereof
(for purposes of this clause, all Plans maintained by the same employer
(or affiliate thereof) or employee organization are deemed to be a
single Plan) in connection with its purchase and holding of such
Certificates.
Very truly yours,
______________________________
By:___________________________
Name:
Title:
<PAGE>
SCHEDULE 1
MORTGAGE LOAN SCHEDULE
