<PAGE> 1
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) April 24, 1998
BA Mortgage Securities, Inc. (as depositor under a Pooling and Servicing
Agreement dated as of April 1, 1998 providing for, inter alia, the issuance
of Mortgage Pass-Through Certificates, Series 1998-1)
BA Mortgage Securities, Inc.
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 333-34225-05 94-324470
- --------------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION (COMMISSION) (I.R.S. EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
345 Montgomery Street, Lower Level #2, Unit #8152, San Francisco, CA 94104
--------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (415) 622-3676
--------------
-------------------------------------------------------------
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
Exhibit Index Located on Page 2
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Items 1 through 6 and Item 8 are not included because they are not applicable.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibits
Sequentially
Numbered
Exhibit Exhibit
Number Page
- ------- ------------
4.1 Pooling and Servicing Agreement dated as of
April 1, 1998 among BA Mortgage
Securities, Inc., Depositor, Bank of America,
FSB, Master Servicer, and Bankers Trust
Company of California, N.A., Trustee
(providing for, inter alia, the issuance of
Mortgage Pass-Through Certificates, Series
1998-1)
<PAGE> 3
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.
BA MORTGAGE SECURITIES, INC.
By: /s/ DAVID JAMES
-------------------------------------
Name: David James
Title: Vice President
Dated: April 24, 1998
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[EXECUTION COPY]
================================================================================
BA MORTGAGE SECURITIES, INC.,
Depositor,
BANK OF AMERICA, FSB
Master Servicer,
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
Trustee
POOLING AND SERVICING AGREEMENT
Dated as of April 1, 1998
Mortgage Pass-Through Certificates
Series 1998-1
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS
<S> <C>
Section 1.01. Definitions............................................................... 3
Accrued Certificate Interest....................................................... 3
Adjusted Class IA-4 Percentage..................................................... 3
Administration Fee................................................................. 3
Advance .......................................................................... 4
Affiliate.......................................................................... 4
Aggregate Subordinate Percentage................................................... 4
Agreement.......................................................................... 4
Amount Held for Future Distribution................................................ 4
Appraised Value.................................................................... 4
Assignment......................................................................... 4
Assumed Final Distribution Date.................................................... 4
Available Distribution Amount...................................................... 4
Bankruptcy Amount.................................................................. 5
Bankruptcy Code.................................................................... 5
Bankruptcy Loss.................................................................... 5
Book-Entry Certificate............................................................. 5
Business Day....................................................................... 5
Buydown Funds...................................................................... 5
Buydown Mortgage Loan.............................................................. 6
Cash Liquidation................................................................... 6
Certificate........................................................................ 6
Certificate Account................................................................ 6
Certificate Account Deposit Date................................................... 6
Certificateholder or Holder........................................................ 6
Certificate Insurance Policies..................................................... 7
Certificate Insurer................................................................ 7
Certificate Insurer Default........................................................ 7
Certificate Owner.................................................................. 7
Certificate Principal Balance...................................................... 7
Certificate Register and Certificate Registrar..................................... 8
Class .......................................................................... 8
Class A Certificates............................................................... 8
Class I-PO Certificates............................................................ 8
Class I-PO Fraction................................................................ 8
Class I-PO Mortgage Loan........................................................... 8
Class I-PO Principal Distribution Amount........................................... 8
Class I-X Certificates............................................................. 8
Class I-X Notional Amount.......................................................... 8
Class IA-1 Certificates............................................................ 8
Class IA-2 Certificate Insurance Policy............................................ 8
</TABLE>
i
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<TABLE>
<S> <C>
Class IA-2 Certificates............................................................ 8
Class IA-2 Reimbursement Amount.................................................... 9
Class IA-3 Certificates............................................................ 9
Class IA-4 Certificates............................................................ 9
Class IA-4 Liquidation Amount...................................................... 9
Class IA-4 Percentage.............................................................. 9
Class IA-4 Prepayment Percentage................................................... 9
Class IA-4 Priority Amount......................................................... 9
Class IA-5 Certificate Insurance Policy............................................ 9
Class IA-5 Certificates............................................................ 9
Class IA-5 Reimbursement Amount.................................................... 9
Class IA-6 Certificates............................................................ 10
Class II-PO Certificates........................................................... 10
Class II-PO Fraction............................................................... 10
Class II-PO Mortgage Loan.......................................................... 10
Class II-PO Principal Distribution Amount.......................................... 10
Class II-X Certificates............................................................ 10
Class II-X Notional Amount......................................................... 10
Class IIA-1 Certificates........................................................... 10
Class IIA-2 Certificates........................................................... 10
Class IIA-3 Certificates........................................................... 10
Class IIA-4 Certificates........................................................... 10
Class IIA-4 Liquidation Amount..................................................... 10
Class IIA-4 Percentage............................................................. 11
Class IIA-4 Prepayment Percentage.................................................. 11
Class IIA-4 Priority Amount........................................................ 11
Class IIA-5 Certificates........................................................... 11
Class IIA-6 Accretion Termination Date............................................. 11
Class IIA-6 Accrual Amount......................................................... 11
Class IIA-6 Certificates........................................................... 11
Class B Certificates............................................................... 11
Class B-1 Certificates............................................................. 11
Class B-2 Certificates............................................................. 11
Class B-3 Certificates............................................................. 11
Class B-4 Certificates............................................................. 12
Class B-5 Certificates............................................................. 12
Class M Certificates............................................................... 12
Class P-M Interests................................................................ 12
Class P1-M Interest................................................................ 12
Class P2-M Interest................................................................ 12
Class PO Certificates.............................................................. 12
Class R-I Certificates............................................................. 12
Class R-II Certificates............................................................ 12
Class X Certificates............................................................... 12
Class X-M Interests................................................................ 12
Class X1-M Interest................................................................ 12
</TABLE>
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<TABLE>
<S> <C>
Class X2-M Interest................................................................ 12
Class Y Interests.................................................................. 13
Class Y Principal Reduction Amounts................................................ 13
Class Y1 Interest.................................................................. 15
Class Y1 Principal Distribution Amount............................................. 15
Class Y2 Interest.................................................................. 15
Class Y2 Principal Distribution Amount............................................. 15
Class Z Interests.................................................................. 15
Class Z Principal Reduction Amounts................................................ 16
Class Z1 Interest.................................................................. 16
Class Z1 Principal Distribution Amount............................................. 16
Class Z2 Interest.................................................................. 16
Class Z2 Principal Distribution Amount............................................. 16
Closing Date....................................................................... 16
Code .......................................................................... 16
Compensating Interest.............................................................. 16
Corporate Trust Office............................................................. 16
Credit Support Depletion Date...................................................... 17
Curtailment........................................................................ 17
Custodial Account.................................................................. 17
Custodial Agreement................................................................ 17
Custodian.......................................................................... 17
Cut-off Date....................................................................... 17
Cut-off Date Principal Balance..................................................... 17
DCR .......................................................................... 17
Debt Service Reduction............................................................. 17
Deficiency Amount.................................................................. 17
Deficient Valuation................................................................ 17
Definitive Certificate............................................................. 17
Deleted Mortgage Loan.............................................................. 18
Depository......................................................................... 18
Depository Participant............................................................. 18
Determination Date................................................................. 18
Disqualified Organization.......................................................... 18
Distribution Date.................................................................. 18
Due Date .......................................................................... 18
Due Period......................................................................... 19
Eligible Account................................................................... 19
Event of Default................................................................... 19
Excess Bankruptcy Loss............................................................. 19
Excess Fraud Loss.................................................................. 19
Excess Special Hazard Loss......................................................... 19
Extraordinary Events............................................................... 19
Extraordinary Losses............................................................... 20
FDIC .......................................................................... 20
FHLMC .......................................................................... 20
</TABLE>
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<TABLE>
<S> <C>
FNMA .......................................................................... 20
Final Distribution Date............................................................ 20
Foreclosure Profits................................................................ 20
Fraud Loss Amount.................................................................. 21
Fraud Losses....................................................................... 21
Group I Certificates............................................................... 21
Group I Liquidation Amount:........................................................ 21
Group I Loans...................................................................... 21
Group I Percentage:................................................................ 21
Group I Premium Rate Mortgage Loans:............................................... 21
Group I Prepayment Percentage...................................................... 21
Group I Principal Distribution Amount:............................................. 22
Group II Certificates.............................................................. 23
Group II Liquidation Amount:....................................................... 23
Group II Loan...................................................................... 23
Group II Percentage:............................................................... 23
Group II Premium Rate Mortgage Loans:.............................................. 23
Group II Prepayment Percentage..................................................... 23
Group II Principal Distribution Amount:............................................ 24
Independent........................................................................ 24
Initial Certificate Principal Balance.............................................. 24
Initial Notional Amount............................................................ 24
Insurance Proceeds................................................................. 24
Insured Certificates............................................................... 25
Insured Payment.................................................................... 25
Insurer .......................................................................... 25
Late Collections................................................................... 25
Late Payment Rate.................................................................. 25
Liquidated Mortgage Loan........................................................... 25
Liquidation Principal.............................................................. 25
Liquidation Proceeds............................................................... 25
Loan Group......................................................................... 25
Loan Group I....................................................................... 25
Loan Group II...................................................................... 26
Loan-to-Value Ratio................................................................ 26
Master Servicer Remittance Amount.................................................. 26
Master Servicing Fee............................................................... 26
Maturity Date...................................................................... 26
Monthly Payment.................................................................... 26
Mortgage .......................................................................... 26
Mortgage File...................................................................... 27
Mortgage Loan Purchase Agreement................................................... 27
Mortgage Loan Schedule............................................................. 27
Mortgage Loans..................................................................... 28
Mortgage Note...................................................................... 28
Mortgage Rate...................................................................... 28
</TABLE>
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<TABLE>
<S> <C>
Mortgaged Property................................................................. 28
Mortgagor.......................................................................... 28
Net Mortgage Rate.................................................................. 28
Net Prepayment Interest Shortfall.................................................. 28
Non-Primary Residence Loans........................................................ 28
Non-United States Person........................................................... 28
Nonrecoverable Advance............................................................. 28
Nonrecoverable Subservicer Advance................................................. 28
Nonsubserviced Mortgage Loan....................................................... 29
Notice .......................................................................... 29
Notional Amount.................................................................... 29
Officers' Certificate.............................................................. 29
Opinion of Counsel................................................................. 29
Original Subordinate Principal Balance............................................. 29
Outstanding Mortgage Loan.......................................................... 29
Owner .......................................................................... 29
Ownership Interest................................................................. 29
Pass-Through Rate.................................................................. 29
Paying Agent....................................................................... 30
Percentage Interest................................................................ 30
Permitted Investments.............................................................. 30
Permitted Transferee............................................................... 31
Person .......................................................................... 31
Pool Stated Principal Balance...................................................... 31
Preference Amount.................................................................. 31
Prepayment Assumption.............................................................. 31
Prepayment Interest Shortfall...................................................... 31
Primary Mortgage Insurance Policy.................................................. 32
Primary Servicing Fee.............................................................. 32
Principal Payment Amount........................................................... 32
Principal Prepayment............................................................... 32
Principal Prepayment Amount........................................................ 32
Principal Prepayment in Full....................................................... 32
Prior Period....................................................................... 32
Purchase Price..................................................................... 32
Qualified Substitute Mortgage Loan................................................. 33
Rating Agency...................................................................... 33
Realized Loss...................................................................... 33
Record Date........................................................................ 34
Regular Certificate................................................................ 34
Reimbursement Amount............................................................... 34
REMIC .......................................................................... 34
REMIC I .......................................................................... 34
REMIC I Realized Losses............................................................ 34
REMIC I Regular Interests.......................................................... 34
REMIC II .......................................................................... 34
</TABLE>
v
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<TABLE>
<S> <C>
REMIC Administrator................................................................ 34
REMIC Provisions................................................................... 35
REO Acquisition.................................................................... 35
REO Disposition.................................................................... 35
REO Imputed Interest............................................................... 35
REO Proceeds....................................................................... 35
REO Property....................................................................... 35
Request for Release................................................................ 35
Required Insurance Policy.......................................................... 35
Required Payments.................................................................. 35
Residual Certificates.............................................................. 35
Responsible Officer................................................................ 36
S&P .......................................................................... 36
Seller .......................................................................... 36
Senior Certificates................................................................ 36
Servicing Accounts................................................................. 36
Servicing Advances................................................................. 36
Servicing Officer.................................................................. 36
Special Hazard Amount.............................................................. 36
Special Hazard Loss................................................................ 37
Stated Principal Balance........................................................... 37
Step Down Percentage............................................................... 37
Stripped Interest Rate............................................................. 37
Subordinate Certificate Pass-Through Rate.......................................... 37
Subordinate Certificate............................................................ 37
Subordinate Liquidation Amount..................................................... 37
Subordinate Loan Group Component Balance........................................... 37
Subordinate Percentage............................................................. 38
Subordinate Prepayment Percentage.................................................. 38
Subordinate Principal Distribution Amount.......................................... 38
Subordination Level................................................................ 39
Subserviced Mortgage Loan.......................................................... 39
Subservicer........................................................................ 39
Subservicer Servicing Advances..................................................... 39
Subservicing Account............................................................... 39
Subservicing Agreement............................................................. 39
Targeted Principal Balance......................................................... 39
Tax Returns........................................................................ 39
Transfer .......................................................................... 39
Transferee......................................................................... 40
Transferor......................................................................... 40
Trust Fund......................................................................... 40
Trustee Fee........................................................................ 40
Underwriter........................................................................ 40
Uninsured Cause.................................................................... 40
United States Person............................................................... 40
</TABLE>
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<TABLE>
<S> <C>
Unpaid Accrued Certificate Interest................................................ 40
Voting Rights...................................................................... 40
</TABLE>
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
<TABLE>
<S> <C> <C>
Section 2.01. Conveyance of Mortgage Loans.............................................. 41
Section 2.02. Acceptance by Trustee..................................................... 45
Section 2.03. Representations, Warranties and Covenants of the Master Servicer.......... 46
Section 2.04. Representations and Warranties of Sellers................................. 47
Section 2.05. Issuance of Certificates Evidencing Interests in the Trust Fund........... 49
</TABLE>
ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
<TABLE>
<S> <C> <C>
Section 3.01. Master Servicer to Act as Servicer........................................ 49
Section 3.02. Subservicing Agreements Between Master Servicer and Subservicers;
Enforcement of Subservicers' and Sellers' Obligations; Special Servicing
Agreements................................................................ 50
Section 3.03. Successor Subservicers.................................................... 51
Section 3.04. Liability of the Master Servicer.......................................... 52
Section 3.05. No Contractual Relationship Between Subservicer and Trustee or
Certificateholders........................................................ 52
Section 3.06. Assumption or Termination of Subservicing Agreements by Trustee........... 52
Section 3.07. Collection of Certain Mortgage Loan Payments; Deposits to
Custodial Account......................................................... 53
Section 3.08. Subservicing Accounts; Servicing Accounts................................. 55
Section 3.09. Access to Certain Documentation and Information Regarding the Mortgage
Loans..................................................................... 56
Section 3.10. Permitted Withdrawals..................................................... 56
Section 3.11. Maintenance of the Primary Insurance Policies; Collections Thereunder..... 58
Section 3.12. Maintenance of Fire Insurance and Omissions and Fidelity Coverage......... 58
Section 3.13. Enforcement of Due-on-Sale Clauses; Assumption and Modification
Agreements; Certain Assignments........................................... 60
Section 3.14. Realization Upon Defaulted Mortgage Loans................................. 62
Section 3.15. Trustee to Cooperate; Release of Mortgage Files........................... 64
Section 3.16. Servicing and Other Compensation.......................................... 65
Section 3.17. Annual Statement as to Compliance......................................... 66
Section 3.18. Annual Independent Public Accountants' Servicing Report................... 66
Section 3.19. Rights of the Depositor in Respect of the Master Servicer................. 67
Section 3.20. Administration of Buydown Funds........................................... 67
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
<S> <C> <C>
Section 4.01. Certificate Account....................................................... 68
Section 4.02. Distributions............................................................. 68
Section 4.03. Statements to Certificateholders.......................................... 76
Section 4.04. Distribution of Reports to the Trustee and the Depositor; Advances
by the Master Servicer.................................................... 79
Section 4.05. Allocation of Realized Losses............................................. 80
Section 4.06. Reports of Foreclosures and Abandonment of Mortgaged Property............. 81
Section 4.07. Compliance with Withholding Requirements.................................. 82
Section 4.08. REMIC I Distributions..................................................... 82
Section 4.09. Maintenance of Certificate Insurance Policies; Collections Thereunder..... 83
</TABLE>
<TABLE>
<CAPTION>
ARTICLE V
THE CERTIFICATES
<S> <C> <C>
Section 5.01. The Certificates.......................................................... 84
Section 5.02. Registration of Transfer and Exchange of Certificates..................... 86
Section 5.03. Mutilated, Destroyed, Lost or Stolen Certificates......................... 90
Section 5.04. Persons Deemed Owners..................................................... 91
Section 5.05. Appointment of Paying Agent............................................... 91
ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
Section 6.01. Respective Liabilities of the Depositor and the Master Servicer........... 91
Section 6.02. Merger or Consolidation of the Depositor or the Master Servicer;
Assignment of Rights and Delegation of Duties by Master Servicer.......... 92
Section 6.03. Limitation on Liability of the Depositor, the Master Servicer and Others.. 93
Section 6.04. Depositor and Master Servicer Not to Resign............................... 93
ARTICLE VII
DEFAULT
Section 7.01. Events of Default......................................................... 94
Section 7.02. Trustee to Act; Appointment of Successor.................................. 96
Section 7.03. Notification to Certificateholders........................................ 96
Section 7.04. Waiver of Events of Default............................................... 97
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE VIII
CONCERNING THE TRUSTEE
<S> <C> <C>
Section 8.01. Duties of Trustee......................................................... 97
Section 8.02. Certain Matters Affecting the Trustee..................................... 99
Section 8.03. Trustee Not Liable for Certificates or Mortgage Loans.....................100
Section 8.04. Trustee May Own Certificates..............................................101
Section 8.05. Master Servicer to Pay Trustee's Fees and Expenses; Indemnification.......101
Section 8.06. Eligibility Requirements for Trustee......................................102
Section 8.07. Resignation and Removal of the Trustee....................................102
Section 8.08. Successor Trustee.........................................................103
Section 8.09. Merger or Consolidation of Trustee........................................104
Section 8.10. Appointment of Co-Trustee or Separate Trustee.............................104
Section 8.11. Appointment of Custodians.................................................105
Section 8.12. Appointment of Office or Agency...........................................105
</TABLE>
<TABLE>
ARTICLE IX
TERMINATION
<S> <C>
Section 9.01. Termination Upon Purchase by the Master Servicer or Liquidation of All
Mortgage Loans............................................................106
Section 9.02. Additional Termination Requirements.......................................108
ARTICLE X
REMIC PROVISIONS
Section 10.01. REMIC Administration......................................................109
Section 10.02. Master Servicer and Trustee Indemnification...............................112
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Amendment.................................................................113
Section 11.02. Recordation of Agreement; Counterparts....................................115
Section 11.03. Limitation on Rights of Certificateholders................................115
Section 11.04. Governing Law.............................................................116
Section 11.05. Notices...................................................................116
Section 11.06. Notices to Rating Agency..................................................117
Section 11.07. Severability of Provisions................................................118
</TABLE>
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<TABLE>
<CAPTION>
EXHIBITS
<S> <C> <C>
Exhibit A: Form of Class A, Class X and PO Certificate
Exhibit B: Form of Class M Certificate
Exhibit C: Form of Class B Certificate
Exhibit D: Forms of Residual Certificate
Exhibit E-1: Bank of America National Trust and Savings
Association Mortgage Loan Schedule
Exhibit E-2: Bank of America, FSB Mortgage Loan Schedule
Exhibit F: Form of Mortgage Loan Purchase Agreement
Exhibit G: Form of Request for Release
Exhibit H-1: Form of Transfer Affidavit and Agreement
Exhibit H-2: Form of Transferor Certificate
Exhibit I: Form of Investment Representation Letter
Exhibit J: Form of Transferor Representation Letter
Exhibit K: Form of Rule 144A Investment Representation Letter
Exhibit L: Form of Lender Certification for Assignment of Mortgage Loan
Exhibit M: Schedule of Mortgage Loan Exceptions
Exhibit N: Information Available for Reports to Certificateholders
Exhibit O: Form of Custodial Agreement
Exhibit P: Form of Trustee's Initial Certification
Exhibit Q: Certificate Insurance Policies
Exhibit R: Targeted Principal Balances
Exhibit S: Form of Special Servicing Agreement
</TABLE>
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This is a Pooling and Servicing Agreement, effective as of April 1,
1998, among BA MORTGAGE SECURITIES, INC., as the depositor (together with its
permitted successors and assigns, the "Depositor"), BANK OF AMERICA, FSB, as
master servicer (together with its permitted successors and assigns, the "Master
Servicer"), and BANKERS TRUST COMPANY OF CALIFORNIA, N.A., as Trustee (together
with its permitted successors and assigns, the "Trustee").
PRELIMINARY STATEMENT
The Depositor intends to sell mortgage pass-through certificates
(collectively, the "Certificates"), to be issued hereunder in multiple classes,
which in the aggregate will evidence the entire beneficial ownership interest in
the Trust Fund, the assets of which will consist primarily of the Mortgage
Loans.
As provided herein, the Master Servicer will make an election to treat
the assets consisting of the Mortgage Loans and certain other related assets
described herein as a "real estate mortgage investment conduit" for federal
income tax purposes and such pool of assets will be designated as "REMIC I." The
REMIC I Regular Interests will be the "regular interests" in REMIC I and the
Class R-I Certificates will be the sole class of "residual interest" in REMIC I
for federal income tax purposes.
The Master Servicer will make an election to treat the pool of assets
consisting of the REMIC I Regular Interests as a "real estate mortgage
investment conduit" for federal income tax purposes and such pool of assets will
be designated as "REMIC II." The Class A, Class X, Class PO, Class M and Class B
Certificates will represent "regular interests" in REMIC II and the Class R-II
Certificate will represent the sole class of "residual interest" in REMIC II for
federal income tax purposes.
The following table sets forth the designation, type, initial
Pass-Through Rate, aggregate Initial Certificate Principal Balance, Assumed
Final Distribution Date and initial ratings for each Class of Certificates
comprising the interests in the Trust Fund created hereunder.
1
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<TABLE>
<CAPTION>
Aggregate Initial Assumed
Certificate Final Initial Ratings
Pass-Through Principal Distribution ----------------
Designation Type Rate(1) Balance Date S&P DCR
- ------------ ------- ---------------- ----------------- ------------ --- ----
<S> <C> <C> <C> <C> <C> <C>
Class IA-1 Regular 6.750% $96,101,504 May 25, 2028 AAA AAA
Class IA-2 Regular 6.750% $5,000,000 May 25, 2028 AAA AAA
Class IA-3 Regular 6.750% $9,500,000 May 25, 2028 AAA AAA
Class IA-4 Regular 6.750% $14,250,000 May 25, 2028 AAA AAA
Class IA-5 Regular 6.750% $4,887,000 May 25, 2028 AAA AAA
Class IA-6 Regular 6.750% $9,939,000 May 25, 2028 AAA AAA
Class IIA-1 Regular 6.500% $121,111,453 May 25, 2013 AAA AAA
Class IIA-2 Regular 6.500% $1,000,000 May 25, 2013 AAA AAA
Class IIA-3 Regular 6.500% $8,262,000 May 25, 2013 AAA AAA
Class IIA-4 Regular 6.500% $14,913,749 May 25, 2013 AAA AAA
Class IIA-5 Regular 6.500% $46,447,250 May 25, 2013 AAA AAA
Class IIA6 Regular 6.500%(2) $2,127,000 May 25, 2013 AAA AAA
Class I-X Regular 6.750% (3) May 25, 2028 AAAr AAA
Class II-X Regular 6.500% (4) May 25, 2013 AAAr AAA
Class I-PO Regular 0.000%(5) $21,501 May 25, 2028 AAAr AAA
Class II-PO Regular 0.000%(5) $350,133 May 25, 2013 AAAr AAA
Class M Regular Variable Rate(6) $3,776,882 May 25, 2028 -- AA
Class B-1 Regular Variable Rate(6) $2,231,794 May 25, 2028 -- A
Class B-2 Regular Variable Rate(6) $1,201,735 May 25, 2028 -- BBB
Class B-3 Regular Variable Rate(6) $1,030,060 May 25, 2028 -- BB
Class B-4 Regular Variable Rate(6) $515,029 May 25, 2028 -- B
Class B-5 Regular Variable Rate(6) $686,706 May 25, 2028 -- --
Class R-I Residual 6.75% $50.00 May 25, 2028 AAA AAA
Class R-II Residual 6.75% $50.00 May 25, 2028 AAA AAA
========================================================================================================
</TABLE>
(1) Interest distributed to the Certificates on each Distribution Date will
have accrued during the preceding calendar month.
(2) On each Distribution Date on or before the Class IIA-6 Accretion
Termination Date, an amount equal to the Class IIA-6 Accrual Amount will
be added to the Class IIA-6 Principal Balance, and such amount will be
distributed as principal to the Class IIA-5 Certificates and Class IIA-6
Certificates as described herein.
(3) The Class I-X Certificates will not receive distributions of principal
and will accrue interest on the Class I-X Notional Amount.
(4) The Class II-X Certificates will not receive distributions of principal
and will accrue interest on the Class II-X Notional Amount.
(5) The Class I-PO and Class II-PO Certificates will not bear interest.
(6) The initial Pass-Through Rate for each Class of Subordinate Certificates
will be approximately 6.605% per annum. Thereafter, the Pass-Through
Rate on each Class of Subordinate Certificates will equal, on any
Distribution Date, the quotient expressed as a percentage of (a) the sum
of (i) the product of (x) 6.750% and (y) the excess, if any, of the
aggregate of the Stated Principal Balances of the Group I Loans, as of
the second preceding Due Date after giving effect to payments scheduled
to be received as of such Due Date, whether or not received, and after
giving effect to any Principal Prepayments distributed on the prior
Distribution Date, over the then outstanding aggregate Certificate
Principal Balance of the Group I Certificates and Residual Certificates
(such excess being referred to as the "Group I Subordinate Amount") and
(ii) the product of (x) 6.500% and (y) the excess, if any, of the
aggregate of the Stated Principal Balances of the Group II Loans, as of
the second preceding Due Date after giving effect to payments scheduled
to be received as of such Due Date, whether or not received, and after
giving effect to any Principal Prepayments distributed on the prior
Distribution Date, over the then outstanding aggregate Certificate
Principal Balance of the Group II Certificates (such excess being
referred to as the "Group II Subordinate Amount") over (b) the sum of
the Group I Subordinate Amount and the Group II Subordinate Amount.
2
<PAGE> 14
In consideration of the mutual agreements herein contained, the
Depositor, the Master Servicer and the Trustee agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the meanings specified in this
Article.
Accrued Certificate Interest: With respect to each Distribution Date, as
to any Class of Certificates, one month's interest accrued at the related
Pass-Through Rate on the Certificate Principal Balance or Notional Amount, as
applicable, of the Certificates of such Class immediately prior to such
Distribution Date. Accrued Certificate Interest will be calculated on the basis
of a 360-day year consisting of twelve 30-day months. In each case, Accrued
Certificate Interest on any Class of Certificates will be reduced by the amount
of (i) Net Prepayment Interest Shortfalls (to the extent not offset by the
Master Servicer with a payment of Compensating Interest as provided in Section
4.01), (ii) the interest portion (adjusted to the Net Mortgage Rate) of Realized
Losses (including Excess Special Hazard Losses, Excess Fraud Losses, Excess
Bankruptcy Losses and Extraordinary Losses) not allocated solely to one or more
specific Classes of Certificates pursuant to Section 4.05, (iii) the interest
portion of Advances previously made with respect to a Mortgage Loan or REO
Property which remained unreimbursed following the Cash Liquidation or REO
Disposition of such Mortgage Loan or REO Property that were made with respect to
delinquencies that were ultimately determined to be Excess Special Hazard
Losses, Excess Fraud Losses, Excess Bankruptcy Losses or Extraordinary Losses
and (iv) any other interest shortfalls not covered by the subordination provided
by the Subordinate Certificates, including interest that is not collectible from
the Mortgagor pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended, or similar legislation or regulations as in effect from time to
time, with all such reductions allocated among all of the Certificates in
proportion to their respective amounts of Accrued Certificate Interest payable
on such Distribution Date which would have resulted absent such reductions. In
addition to that portion of the reductions described in the preceding sentence
that are allocated to any Class of Subordinate Certificates, Accrued Certificate
Interest on such Class of Subordinate Certificates will be reduced by the
interest portion (adjusted to the Net Mortgage Rate) of Realized Losses that are
allocated solely to such Class of Subordinate Certificates pursuant to Section
4.05.
Adjusted Class IA-4 Percentage: With respect to any Distribution Date
prior to the Distribution Date in May 2003, 0% and (ii) for any Distribution
Date on or after the Distribution Date in May 2003, the Class IA-4 Percentage.
Administration Fee: With respect to any Mortgage Loan, the sum of the
applicable Master Servicing Fee and Trustee Fee.
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<PAGE> 15
Advance: As to any Mortgage Loan, any advance made by the Master
Servicer pursuant to Section 4.04.
Affiliate: With respect to any Person, any other Person controlling,
controlled by or under common control with such first Person. For the purposes
of this definition, "control" 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.
Aggregate Subordinate Percentage: As to any date of determination, the
sum of the Certificate Principal Balances of the Subordinate Certificates
divided by the then outstanding aggregate Stated Principal Balance of the
Mortgage Loans.
Agreement: This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
Amount Held for Future Distribution: As to any Distribution Date, the
total of the amounts held in the Custodial Accounts at the close of business on
the preceding Determination Date on account of (i) Liquidation Proceeds,
Insurance Proceeds, Principal Prepayments, Mortgage Loan purchases made pursuant
to Sections 2.02 or 2.04 and Mortgage Loan substitutions made pursuant to
Sections 2.03 or 2.04 received or made in the month of such Distribution Date
(other than such Liquidation Proceeds, Insurance Proceeds, Principal Prepayments
and purchases of Mortgage Loans that the Master Servicer has deemed to have been
received in the preceding month in accordance with Section 3.07(b)) and (ii)
payments which represent early receipt of scheduled payments of principal and
interest due on a date or dates subsequent to the related Due Date.
Appraised Value: As to any Mortgaged Property, the lesser of (i) the
appraised value of such Mortgaged Property based upon the appraisal made at the
time of the origination of the related Mortgage Loan, and (ii) the sales price
of the Mortgaged Property at such time of origination, except in the case of a
Mortgaged Property securing a refinanced Mortgage Loan as to which it is the
appraised value determined in an appraisal at the time of refinancing.
Assignment: An assignment of the Mortgage, notice of transfer or
equivalent instrument, in recordable form, sufficient under the laws of the
jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage Loan to the Trustee for the benefit of
Certificateholders, which assignment, notice of transfer or equivalent
instrument may be in the form of one or more blanket assignments covering
Mortgages secured by Mortgaged Properties located in the same county, if
permitted by law.
Assumed Final Distribution Date: With respect to any Class of
Certificates, the date set forth in the Preliminary Statememt hereto.
Available Distribution Amount: As to any Distribution Date, an amount
equal to: (i) the aggregate amount of Monthly Payments on the Mortgage Loans due
on the related Due Date and received on or prior to the related Determination
Date, after deduction of the related
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<PAGE> 16
Administration Fee, (ii) certain unscheduled payments, including Principal
Prepayments, Insurance Proceeds, Liquidation Proceeds and proceeds from
repurchases of and substitutions for the Mortgage Loans pursuant to Section 2.04
occurring during the Prior Period, (iii) all Advances made for such Distribution
Date, in each case net of amounts reimbursable therefrom to the Master Servicer
and any Subservicer, (iv) any amounts payable as Compensating Interest on such
Distribution Date and (v) solely with respect to each Class of Insured
Certificates, any payments received by the Trustee for claims under the
applicable Certificate Insurance Policy. With respect to any Distribution Date,
the "Available Distribution Amount for Loan Group I" and the "Available
Distribution Amount for Loan Group II" will equal the sum of the amounts set
forth in clauses (i)-(v) above in respect of the Group I Loans and the Group II
Loans, respectively, for such Distribution Date, after giving effect to any
adjustments thereto pursuant to Section 4.02(a)(I)(c).
Bankruptcy Amount: As to any Determination Date, $100,000 less the sum
of any amounts allocated solely to the Subordinate Certificates in accordance
with Section 4.05 prior to such Determination Date.
Bankruptcy Code: The United States Bankruptcy Code of 1978, as amended,
or any successor thereto.
Bankruptcy Loss: With respect to any Mortgage Loan, a Deficient
Valuation or Debt Service Reduction; provided, however, that neither a Deficient
Valuation nor a Debt Service Reduction shall be deemed a Bankruptcy Loss
hereunder so long as the Master Servicer has notified the Trustee in writing
that the Master Servicer is diligently pursuing any remedies that may exist in
connection with the representations and warranties made regarding the related
Mortgage Loan and either (A) the related Mortgage Loan is not in default with
regard to payments due thereunder or (B) delinquent payments of principal and
interest under the related Mortgage Loan are being advanced as an Advance and
any premiums on any applicable primary hazard insurance policy and any related
escrow payments in respect of such Mortgage Loan are being advanced as a
Servicing Advance on a current basis by the Master Servicer or a Subservicer, in
either case without giving effect to any Debt Service Reduction.
Book-Entry Certificate: Any Certificate registered in the name of the
Depository or its nominee, which initially shall include the Class A, Class X,
Class PO, Class M, Class B-1 and Class B-2 Certificates.
Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a
day on which the Certificate Insurer is closed (with respect to matters
hereunder affecting the Certificate Insurer) or banking institutions in the
State of California or State of New York (and such other state or states in
which the Custodial Account or the Certificate Account are at the time located)
are required or authorized by law or executive order to be closed.
Buydown Funds: Any amount contributed by the seller of a Mortgaged
Property, the Depositor or other source in order to enable the Mortgagor to
reduce the payments required to be made from the Mortgagor's funds in the early
years of a Mortgage Loan and held by the
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<PAGE> 17
Master Servicer, or the related Subservicer, as applicable. Buydown Funds are
not part of the Trust Fund prior to deposit into the Custodial Account or the
Certificate Account.
Buydown Mortgage Loan: Any Mortgage Loan as to which a specified amount
of interest is paid out of related Buydown Funds in accordance with a related
buydown agreement.
Cash Liquidation: As to any defaulted Mortgage Loan other than a
Mortgage Loan as to which an REO Acquisition occurred, a determination by the
Master Servicer that it has received all Insurance Proceeds, Liquidation
Proceeds and other payments or cash recoveries which the Master Servicer
reasonably and in good faith expects to be finally recoverable with respect to
such Mortgage Loan.
Certificate: Any of the Senior Certificates, the Class M Certificates,
the Class B Certificates or the Residual Certificates.
Certificate Account: The separate account or accounts created and
maintained pursuant to Section 4.01, which shall be entitled "Bankers Trust
Company of California, N.A., as Trustee, in trust for the registered holders of
BA Mortgage Securities, Inc., Mortgage Pass-Through Certificates, Series 1998-1"
and which must be an Eligible Account.
Certificate Account Deposit Date: As to any Distribution Date, the
Business Day prior thereto.
Certificateholder or Holder: The Person in whose name a Certificate is
registered in the Certificate Register, except that neither a Disqualified
Organization nor a Non-United States Person shall be a holder of a Residual
Certificate for purposes hereof and, solely for the purpose of giving any
consent or direction pursuant to this Agreement, any Certificate, other than a
Residual Certificate, registered in the name of the Depositor, the Master
Servicer or any Subservicer or any Affiliate thereof shall be deemed not to be
outstanding and the Percentage Interest or Voting Rights evidenced thereby shall
not be taken into account in determining whether the requisite amount of
Percentage Interests or Voting Rights necessary to effect any such consent or
direction has been obtained. 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. For so long as no Certificate Insurer Default exists, the Certificate
Insurer shall be deemed to be the sole Holder of all outstanding Insured
Certificates, subject to Section 4.09; provided, that the Certificate Insurer
shall have no power without the consent of the Owner of each Certificate
affected thereby to: (i) reduce in any manner the amount of, or delay the timing
of, distributions of principal or interest required to be made hereunder or
reduce the Insured Certificateholder's Percentage Interest, the Pass-Through
Rate or the payment with respect to any of the Insured Certificates pursuant to
Section 9.01, (ii) reduce the percentage of Percentage Interests specified in
Section 11.01 which are required to amend this Agreement, (iii) create or permit
the creation of any lien against any part of the Trust Fund, (iv) modify any
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<PAGE> 18
provision in any way which would permit an earlier retirement of the
Certificates, or (v) amend this definition of "Certificateholder" or "Holder."
Certificate Insurance Policies: The Class IA-2 Certificate Insurance
Policy and the Class IA-5 Certificate Insurance Policy, collectively.
Certificate Insurer: MBIA Insurance Corporation or its successor in
interest.
Certificate Insurer Default: The existence and continuance of any of the
following: (a) a failure by the Certificate Insurer to make a payment required
under the Class IA-2 Certificate Insurance Policy or the Class IA-5 Certificate
Insurance Policy in accordance with its terms; (b) the entry of a decree or
order of a court or agency having jurisdiction in respect of the Certificate
Insurer in an involuntary case under any present or future federal or state
bankruptcy, insolvency or similar law appointing a conservator or receiver or
liquidator or other similar official of the Certificate Insurer or of any
substantial part of its property, or the entering of an order for the winding up
or liquidation of the affairs of the Certificate Insurer and the continuance of
any such decree or order undischarged or unstayed and in force for a period of
90 consecutive days; (c) the Certificate Insurer shall consent to the
appointment of a conservator or receiver or liquidator or other similar official
in any insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings of or relating to the Certificate Insurer or of or relating
to all or substantially all of its property; or (d) the Certificate Insurer
shall admit in writing its inability to pay its debts generally as they become
due, file a petition to take advantage of or otherwise voluntarily commence a
case or proceeding under any applicable bankruptcy, insolvency, reorganization
or other similar statute, make an assignment for the benefit of its creditors,
or voluntarily suspend payment of its obligations.
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 an
indirect participating brokerage firm for which a Depository Participant acts as
agent, if any, and otherwise on the books of a Depository Participant, if any,
and otherwise on the books of the Depository.
Certificate Principal Balance: With respect to each Certificate of any
Class, on any date of determination, an amount equal to (i) the Initial
Certificate Principal Balance of such Certificate as specified on the face
thereof, reduced by (ii) the sum of (x) the aggregate of all amounts previously
distributed with respect to such Certificate (or any predecessor Certificate)
and applied to reduce the Certificate Principal Balance or amount thereof
pursuant to Section 4.02(a) and (y) the aggregate of all reductions in
Certificate Principal Balance deemed to have occurred in connection with
Realized Losses which were previously allocated to such Certificate (or any
predecessor Certificate) pursuant to Section 4.05, and increased in the case of
the Class IIA-6 Certificates by any Class IIA-6 Accrual Amount added thereto.
Exclusively for the purpose of determining any subrogation rights of the
Certificate Insurer arising under Section 4.09 hereof, the "Certificate
Principal Balances" of the Class IA-2 and Class IA-5 Certificates shall not be
reduced by the amount of any payments made by the Certificate Insurer in respect
of principal on such Certificates under the related Certificate Insurance
Policy, except to the extent such payments have been reimbursed to the
Certificate Insurer pursuant to the provisions of this Agreement.
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<PAGE> 19
Certificate Register and Certificate Registrar: The register maintained
and the registrar appointed pursuant to Section 5.02.
Class: Collectively, all of the Certificates bearing the same
designation.
Class A Certificates: The Class IA-1, Class IA-2, Class IA-3, Class
IA-4, Class IA-5, Class IA-6, Class IIA-1, Class IIA-2, Class IIA-3, Class
IIA-4, Class IIA-5 and Class IIA-6 Certificates, collectively.
Class I-PO Certificates: The Certificates designated as "Class I-PO" on
the face thereof and in substantially the form attached hereto as Exhibit A.
Class I-PO Fraction: For each Class I-PO Mortgage Loan, a fraction, the
numerator of which is 6.750% minus the Net Mortgage Rate on such Class I-PO
Mortgage Loan and the denominator of which is 6.750%.
Class I-PO Mortgage Loan: Any Group I Loan with a Net Mortgage Rate of
less than 6.750% per annum.
Class I-PO Principal Distribution Amount: With respect to any
Distribution Date prior to the Credit Support Depletion Date, the aggregate of
the amounts payable to the Class I-PO Certificates pursuant to Sections
4.02(a)(I)(a)(i) and 4.02(a)(I)(a)(iv), and with respect to any Distribution
Date on or after the Credit Support Depletion Date, the amount payable to the
Class I-PO Certificates pursuant to Section 4.02(a)(II)(a)(i).
Class I-X Certificates: The Certificates designated as "Class I-X" on
the face thereof and in substantially the form attached hereto as Exhibit A.
Class I-X Notional Amount: With respect to any Distribution Date, the
product of (x) the aggregate scheduled principal balance, as of the second
preceding Due Date after giving effect to payments scheduled to be received as
of such Due Date, whether or not received, or with respect to the initial
Distribution Date, as of the Cut-off Date, of the Group I Premium Rate Mortgage
Loans and (y) a fraction, the numerator of which is the weighted average of the
Stripped Interest Rates for the Group I Premium Rate Mortgage Loans as of such
Due Date and the denominator of which is 6.750% per annum.
Class IA-1 Certificates: The Certificates designated as "Class IA-1" on
the face thereof and in substantially the form attached hereto as Exhibit A.
Class IA-2 Certificate Insurance Policy: The Certificate Guaranty
Insurance Policy No. 26252 issued in respect of the Class IA-2 Certificates, a
copy of which is attached hereto as Exhibit Q.
Class IA-2 Certificates: The Certificates designated as "Class IA-2" on
the face thereof in substantially the form attached hereto as Exhibit A.
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<PAGE> 20
Class IA-2 Reimbursement Amount: The sum of (a) all amounts previously
paid by the Certificate Insurer under the Class IA-2 Certificate Insurance
Policy which have not been previously reimbursed and (b) interest on the
foregoing at the Late Payment Rate from the date such amount was paid by the
Certificate Insurer until paid in full.
Class IA-3 Certificates: The Certificates designated as "Class IA-3" on
the face thereof in substantially the form attached hereto as Exhibit A.
Class IA-4 Certificates: The Certificates designated as "Class IA-4" on
the face thereof in substantially the form attached hereto as Exhibit A.
Class IA-4 Liquidation Amount: With respect to any Distribution Date,
the aggregate of, for each Group I Loan which became a Liquidated Mortgage Loan
during the Prior Period, the lesser of (i) the Class IA-4 Percentage of the
principal balance of such Mortgage Loan (exclusive of the Class I-PO Fraction
thereof, if applicable) and (ii) the Class IA-4 Percentage on any Distribution
Date occurring prior to the fifth anniversary of the first Distribution Date,
and the Class IA-4 Prepayment Percentage on any Distribution Date thereafter, in
each case, of the Liquidation Principal with respect to such Mortgage Loan.
Class IA-4 Percentage: With respect to any Distribution Date, the lesser
of (a) 100% and (b) the Class IA-4 Certificate Principal Balance divided by the
aggregate Stated Principal Balances of the Group I Loans (less the Class I-PO
Certificate Principal Balance), in each case immediately prior to the
Distribution Date.
Class IA-4 Prepayment Percentage: With respect to any Distribution Date,
the product of (a) the Class IA-4 Percentage for such Distribution Date and (b)
the applicable Step Down Percentage.
Class IA-4 Priority Amount: With respect to any Distribution Date, the
sum of (i) the Adjusted Class IA-4 Percentage of the Principal Payment Amount
for Loan Group I (exclusive of the portion thereof attributable to the Class
I-PO Principal Distribution Amount), (ii) the Class IA-4 Prepayment Percentage
of the Principal Prepayment Amount for Loan Group I (exclusive of the portion
thereof attributable to the Class I-PO Principal Distribution Amount) and (iii)
the Class IA-4 Liquidation Amount.
Class IA-5 Certificate Insurance Policy: The Certificate Guaranty
Insurance Policy No. 26253 issued by the Certificate Insurer in respect of the
Class IA-5 Certificates, a copy of which is attached hereto as Exhibit Q.
Class IA-5 Certificates: The Certificates designated as "Class IA-5" on
the face thereof in substantially the form attached hereto as Exhibit A.
Class IA-5 Reimbursement Amount: The sum of (a) all amounts previously
paid by the Certificate Insurer under the Class IA-5 Certificate Insurance
Policy which have not been previously reimbursed and (b) interest on the
foregoing at the Late Payment Rate from the date such amount was paid by the
Certificate Insurer until paid in full.
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<PAGE> 21
Class IA-6 Certificates: The Certificates designated as "Class IA-6" on
the face thereof in substantially the form attached hereto as Exhibit A.
Class II-PO Certificates: The Certificates designated as "Class II-PO"
on the face thereof and in substantially the form attached hereto as Exhibit A.
Class II-PO Fraction: For each Class II-PO Mortgage Loan, a fraction,
the numerator of which is 6.500% minus the Net Mortgage Rate on such Class II-PO
Mortgage Loan and the denominator of which is 6.500%.
Class II-PO Mortgage Loan: Any Group II Loan with a Net Mortgage Rate of
less than 6.500% per annum.
Class II-PO Principal Distribution Amount: With respect to any
Distribution Date prior to the Credit Support Depletion Date, the aggregate of
the amounts payable to the Class II-PO Certificates pursuant to Sections
4.02(a)(I)(b)(i) and 4.02(a)(I)(b)(iv), and with respect to any Distribution
Date on or after the Credit Support Depletion Date, the amount payable to the
Class II-PO Certificates pursuant to Section 4.02(a)(II)(b)(i).
Class II-X Certificates: The Certificates designated as "Class II-X" on
the face thereof and in substantially the form attached hereto as Exhibit A.
Class II-X Notional Amount: With respect to any Distribution Date, the
product of (x) the aggregate scheduled principal balance, as of the second
preceding Due Date after giving effect to payments scheduled to be received as
of such Due Date, whether or not received, or with respect to the initial
Distribution Date, as of the Cut-off Date, of the Group II Premium Rate Mortgage
Loans and (y) a fraction, the numerator of which is the weighted average of the
Stripped Interest Rates for the Group II Premium Rate Mortgage Loans as of such
Due Date and the denominator of which is 6.500% per annum.
Class IIA-1 Certificates: The Certificates designated as "Class IIA-1"
on the face thereof and in substantially the form attached hereto as Exhibit A.
Class IIA-2 Certificates: The Certificates designated as "Class IIA-2"
on the face thereof and in substantially the form attached hereto as Exhibit A.
Class IIA-3 Certificates: The Certificates designated as "Class IIA-3"
on the face thereof and in substantially the form attached hereto as Exhibit A.
Class IIA-4 Certificates: The Certificates designated as "Class IIA-4"
on the face thereof and in substantially the form attached hereto as Exhibit A.
Class IIA-4 Liquidation Amount: With respect to any Distribution Date,
the aggregate of, for each Group II Loan which became a Liquidated Mortgage Loan
during the Prior Period, the lesser of (i) the Class IIA-4 Percentage of the
principal balance of such Mortgage Loan (exclusive of the Class II-PO Fraction
thereof, if applicable) and (ii) the Class IIA-4 Percentage
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<PAGE> 22
on any Distribution Date occurring prior to the month of the fifth anniversary
of the first Distribution Date, and the Class IIA-4 Prepayment Percentage on any
Distribution Date thereafter, in each case, of the Liquidation Principal with
respect to such Mortgage Loan.
Class IIA-4 Percentage: With respect to any Distribution Date, the
lesser of (i) 100% and (ii) the Class IIA-4 Certificate Principal Balance
divided by the aggregate Stated Principal Balances of the Group II Loans (less
the Class II-PO Certificate Principal Balance), in each case immediately prior
to the Distribution Date.
Class IIA-4 Prepayment Percentage: With respect to any Distribution
Date, the product of (a) the Class IIA-4 Percentage for such Distribution Date
and (b) the applicable Step Down Percentage.
Class IIA-4 Priority Amount: With respect to any Distribution Date, the
sum of (i) the Class IIA-4 Percentage of the Principal Payment Amount for Loan
Group II (exclusive of the portion thereof attributable to the Class II-PO
Principal Distribution Amount), (ii) the Class IIA-4 Prepayment Percentage of
the Principal Prepayment Amount for Loan Group II (exclusive of the portion
thereof attributable to the Class II-PO Principal Distribution Amount) and (iii)
the Class IIA-4 Liquidation Amount.
Class IIA-5 Certificates: The Certificates designated as "Class IIA-5"
on the face thereof and in substantially the form attached hereto as Exhibit A.
Class IIA-6 Accretion Termination Date: The earlier to occur of (i) the
Distribution Date on which the Certificate Principal Balance of the Class IIA-5
Certificates has been reduced to zero and (ii) the Credit Support Depletion
Date.
Class IIA-6 Accrual Amount: On each Distribution Date on or before the
Class IIA-6 Accretion Termination Date, and amount equal to the lesser of (i)
the accrued interest that would otherwise be distributable in respect of the
Class IIA-6 Certificates on such Distribution Date and (ii) the Certificate
Principal Balance of the Class IIA-5 Certificates.
Class IIA-6 Certificates: The Certificates designated as "Class IIA-6"
on the face thereof and in substantially the form attached hereto as Exhibit A.
Class B Certificates: The Class B-1, Class B-2, Class B-3, Class B-4 and
Class B-5 Certificates, collectively.
Class B-1 Certificates: The Certificates designated as "Class B-1" on
the face thereof and in substantially the form attached hereto as Exhibit C.
Class B-2 Certificates: The Certificates designated as "Class B-2" on
the face thereof and in substantially the form attached hereto as Exhibit C.
Class B-3 Certificates: The Certificates designated as "Class B-3" on
the face thereof and in substantially the form attached hereto as Exhibit C.
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<PAGE> 23
Class B-4 Certificates: The Certificates designated as "Class B-4" on
the face thereof and in substantially the form attached hereto as Exhibit C.
Class B-5 Certificates: The Certificates designated as "Class B-5" on
the face thereof and in substantially the form attached hereto as Exhibit C.
Class M Certificates: The Certificates designated as "Class M" on the
face thereof and in substantially the form attached hereto as Exhibit B.
Class P-M Interests: The Class P1-M and Class P2-M Interests,
collectively.
Class P1-M Interest: An uncertificated partial undivided beneficial
ownership interest in REMIC I which does not bear interest and has a principal
balance equal to the Certificate Principal Balance of the Class I-PO
Certificates.
Class P2-M Interest: An uncertificated partial undivided beneficial
ownership interest in REMIC I which does not bear interest and has a principal
balance equal to the Certificate Principal Balance of the Class II-PO
Certificates.
Class PO Certificates: The Class I-PO and Class II-PO Certificates,
collectively.
Class R-I Certificates: The Certificates designated as "Class R-I" on
the face thereof and in substantially the form attached hereto as Exhibit D,
which shall be designated as the single class of "residual interest" in REMIC I.
Class R-II Certificates: The Certificates designated as "Class R-II" on
the face thereof and in substantially the form attached hereto as Exhibit D,
which shall be designated as the single class of "residual interest" in REMIC
II.
Class X Certificates: The Class I-X and Class II-X Certificates,
collectively.
Class X-M Interests: The Class X1-M Interest and Class X2-M Interest,
collectively.
Class X1-M Interest: An uncertificated partial undivided beneficial
ownership interest in REMIC I having no principal balance and accruing interest
with respect to any Distribution Date on a notional amount equal to the
aggregate scheduled principal balance, as of the second preceding Due Date after
giving effect to payments scheduled to be received as of such Due Date, whether
or not received, or with respect to the initial Distribution Date, as of the
Cut-off Date, of the Group I Premium Rate Mortgage Loans and which bears
interest at a rate equal to the weighted average of the Stripped Interest Rates
for the Group I Premium Rate Mortgage Loans as of such Due Date.
Class X2-M Interest: An uncertificated partial undivided beneficial
ownership interest in REMIC I having no principal balance and accruing interest
with respect to any Distribution Date on a notional amount equal to the
aggregate scheduled principal balance, as of the second preceding Due Date after
giving effect to payments scheduled to be received as of such Due
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<PAGE> 24
Date, whether or not received, or with respect to the initial Distribution Date,
as of the Cut-off Date, of the Group II Premium Rate Mortgage Loans and which
bears interest at a rate equal to the weighted average of the Stripped Interest
Rates for the Group II Premium Rate Mortgage Loans as of such Due Date.
Class Y Interests: The Class Y1 Interest and the Class Y2 Interest,
collectively.
Class Y Principal Reduction Amounts: For any Distribution Date, the
amounts by which the principal balances of the Class Y1 and Class Y2 Interests
respectively will be reduced on such Distribution Date by the allocation of
Realized Losses and the distribution of principal, determined as follows:
For purposes of the succeeding formulas the following symbols shall have the
meanings set forth below:
Y1 = the principal balance of the Class Y1 Interest after distributions on
the prior Distribution Date.
Y2 = the principal balance of the Class Y2 Interest after distributions on
the prior Distribution Date.
[DELTA]Y1 = the Class Y1 Principal Reduction Amount.
[DELTA]Y2 = the Class Y2 Principal Reduction Amount.
P1 = the aggregate principal balance of the Class Y1 and Class Z1 Interests
after distributions on the prior Distribution Date.
P2 = the aggregate principal balance of the Class Y2 and Class Z2 Interests
after distributions on the prior Distribution Date.
[DELTA]P1 = the aggregate of the Class Y1 and Class Z1 Principal Reduction
Amounts.
[DELTA]P2= the aggregate of the Class Y2 and Class Z2 Principal Reduction
Amounts.
[alpha] = .0005
[gamma] = a fraction whose numerator is the Subordinate Loan Group Component
Balance for Loan Group I after giving effect to allocations of Realized
Losses and distributions to be made on the Distribution Date and whose
denominator is the Subordinate Loan Group Component Balance for Loan
Group II after giving effect to allocations of Realized Losses and
distributions to be made on the Distribution Date. [gamma] is a
non-negative number unless its denominator is zero, in which event it is
undefined.
If [gamma] is zero, [DELTA]Y1 = Y1 and [DELTA]Y2 = [alpha][DELTA]P2.
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<PAGE> 25
If [gamma] is undefined, [DELTA]Y2 = Y2 and [DELTA]Y1 = [alpha][DELTA]P1.
In the remaining situations, [DELTA]Y1 and [DELTA]Y2 shall be defined as
follows:
If Y1 - [alpha](P1 - [DELTA]P1) >= 0, Y2- [alpha](P2 - [DELTA]P2) >= 0, and
[gamma](P2 - [DELTA]P2) < (P1 - [DELTA]P1), [DELTA]Y1 = Y1 -
[alpha][gamma](P2 - [DELTA]P2) and [DELTA]Y2 = Y2 - [alpha](P2 -
[DELTA]P2).
If Y1 - [alpha](P1 - [DELTA]P1) >= 0, Y2 - [alpha](P2 - [DELTA]P2) >= 0, and
[gamma](P2 - [DELTA]P2) >= (P1 - [DELTA]P1), [DELTA]Y1 = Y1 - [alpha](P1 -
[DELTA]P1) and [DELTA]Y2 = Y2 - ([alpha]/[gamma])(P1 - [DELTA]P1).
If Y1 - [alpha](P1 - [DELTA]P1) < 0, Y2 - [alpha](P2 - [DELTA]P2) >= 0, and Y2
- [alpha](P2 - [DELTA]P2) >= Y2 - (Y1/[gamma]), [DELTA]Y1 = Y1 -
[alpha][gamma](P2 - [DELTA]P2) and [DELTA]Y2 = Y2 - [alpha](P2 - [DELTA]P2).
If Y1 - [alpha](P1 - [DELTA]P1) < 0, Y2 - (Y1/[gamma]) >= 0, and Y2 -
[alpha](P2 - [DELTA]P2) <= Y2 - (Y1/[gamma]), [DELTA]Y1 = 0 and [DELTA]Y2 =
Y2 - (Y1/[gamma]).
If Y2 - [alpha](P2 - [DELTA]P2) < 0, Y2 - (Y1/[gamma]) < 0, and Y1 - [alpha](P1
- [DELTA]P1) <= Y1 - ([gamma]Y2), [DELTA]Y1 = Y1 - ([gamma]Y2) and [DELTA]Y2
= 0.
If Y2 - [alpha](P2 - [DELTA]P2) < 0, Y1 - [alpha](P1 - [DELTA]P1) >= 0, and Y1
- [alpha](P1 - [DELTA]P1) >= Y1 - ([gamma]Y2), [DELTA]Y1 = Y1 - [alpha](P1 -
[DELTA]P1) and [DELTA]Y2 = Y2 - ([alpha]/[gamma])(P1 - [DELTA]P1).
The purpose of the foregoing definitional provisions together with the related
provisions allocating Realized Losses and defining the Class Y and Class Z
Principal Distribution Amounts is to accomplish the following goals in the
following order of priority:
Making the ratio of the Class Y1 Principal Balance to the Class Y2
Principal Balance equal to the ratio of the Pool 1 Subordinated
Amount to the Pool 2 Subordinated Amount in each case after taking
account of the allocation Realized Losses and the distributions that
will be made through end of the Distribution Date to which such
provisions relate and assuring that the Principal Reduction Amount
for each of the Class Y1, Class Y2, Class Z1 and Class Z2 Interests
is greater than or equal to zero for such Distribution Date;
Making the Class Y1 Principal Balance less than or equal to 0.0005 of
the sum of the Class Y1 and Class Z1 Principal Balances and the Class
Y2 Principal Balance less than or equal to 0.0005 of the sum of the
Class Y2 and Class Z2 Principal Balances in each case after giving
effect to allocations of Realized Losses and distributions to be made
through the end of the Distribution Date to which such provisions
relate; and
Making the larger of (a) the fraction whose numerator is the Class Y1
Principal balance and whose denominator is the sum of the Class Y1
and Class Z1 Principal Balances and (b) the fraction whose numerator
is the Class Y2 Principal balance and whose denominator is the sum of
the Class Y2 and Class Z2 Principal Balances as large as possible
while remaining less than or equal to 0.0005.
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In the event of a failure of the definitions of Class Y1 Principal Reduction
Amount and Class Y2 Principal Reduction Amount to accomplish both of goals 1 and
2 above, the amounts thereof should be adjusted to so as to accomplish such
goals within the requirement that each of the Class Y1 Principal Reduction
Amount and the Class Y2 Principal Reduction must be less than or equal to the
sum of (a) the Principal Realized Losses to be allocated on the related
Distribution Date for the related Loan Group remaining after the allocation of
such Realized Losses to the related Class P-M Interest and (b) the remainder of
the Available Distribution Amount for the related Loan Group after reduction
thereof by the distributions to be made on such Distribution Date (i) to the
related Class P-M Interest, (ii) to the related Class X-M Interest and (iii) in
respect of interest on the related Class Y and Class Z Interests, or, if both of
such goals cannot be accomplished within such requirement, such adjustment as is
necessary shall be made to accomplish goal 1 within such requirement. In the
event of any conflict among the provisions of the definition of the Class Y
Principal Reduction Amounts, such conflict shall be resolved on the basis of the
goals and their priorities set forth above within the requirement set forth in
the preceding sentence.
[The principal balances for the Class Y1 and Class Y2 Interests as of the
Cut-Off Date should be calculated as follows: First, calculate the Cut-Off Date
value of [gamma]. Then calculate the CutOff Date values for P1 and P2. If P1 <=
[gamma]P2, the Cut-Off Date principal balance of the Class Y1 Interest (Y1)
equals .0005P1 and the Cut-Off Date principal balance of the Class Y2 Interest
(Y2) equals .0005P1/[gamma]. If P1 > [gamma]P2, the Cut-Off Date principal
balance of the Class Y1 Interest (Y1) equals .0005[gamma]P2 and the Cut-Off Date
principal balance of the Class Y2 Interest (Y2) equals .0005P2.]
Class Y1 Interest: An uncertificated partial undivided beneficial
ownership interest in REMIC I having an uncertificated principal balance which
in combination with the principal balance of the Class Z1 Interest equals the
principal balance of the Group I Loans (less the Class I-PO Fraction of the
Class I-PO Loans) and which bears interest at 6.750% per annum.
Class Y1 Principal Distribution Amount: For any Distribution Date, the
excess, if any, of the Class Y1 Principal Reduction Amount for such Distribution
Date over the principal portion of Realized Losses allocated to the Class Y1
Interest on such Distribution Date.
Class Y2 Interest: An uncertificated partial undivided beneficial
ownership interest in REMIC I having an uncertificated principal balance which
in combination with the principal balance of the Class Z2 Interest equals the
principal balance of the Group II Loans (less the Class II-PO Fraction of the
Class II-PO Mortgage Loans) and which bears interest at 6.500% per annum.
Class Y2 Principal Distribution Amount: For any Distribution Date, the
excess, if any, of the Class Y2 Principal Reduction Amount for such Distribution
Date over the principal portion of Realized Losses allocated to the Class Y2
Interest on such Distribution Date.
Class Z Interests: The Class Z1 Interest and Class Z2 Interest,
collectively.
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Class Z Principal Reduction Amounts: For any Distribution Date, the
amounts by which the principal balances of the Class Z1 and Class Z2 Interests,
respectively, will be reduced on such Distribution Date by the allocation of
Realized Losses and the distribution of principal, which shall be in each case
the excess of (A) the sum of (x) the excess of the Available Distribution Amount
for the related Loan Group over the sum of the amounts thereof distributable (i)
to the related Class P-M Interest, (ii) to the related Class X-M Interest and
(iii) in respect of interest on the related Class Y and Class Z Interest and (y)
the excess of the Realized Losses allocable to principal for the related Loan
Group over the portion of such Realized Losses allocable to the related Class
P-M Interest over (B) the Class Y Principal Reduction Amount for the related
Loan Group.
Class Z1 Interest: An uncertificated partial undivided beneficial
ownership interest in REMIC I having an uncertificated principal balance which
in combination with the principal balance of Class Y1 Interest equals the
principal balance of the Group I Loans (less the Class I-PO Fraction of the
Class I-PO Mortgage Loans) and which bears interest at 6.750% per annum.
Class Z1 Principal Distribution Amount: For any Distribution Date, the
excess, if any, of the Class Z1 Principal Reduction Amount for such Distribution
Date over the principal portion of Realized Losses allocated to the Class Z1
Interest on such Distribution Date.
Class Z2 Interest: An uncertificated partial undivided beneficial
ownership interest in REMIC I having an uncertificated principal balance which
in combination with the principal balance of Class Y2 Interest equals the
principal balance of the Group II Loans (less the Class II-PO Fraction of the
Class II-PO Mortgage Loans) and which bears interest at 6.500% per annum.
Class Z2 Principal Distribution Amount: For any Distribution Date, the
excess, if any, of the Class Z2 Principal Reduction Amount for such Distribution
Date over the principal portion of Realized Losses allocated to the Class Z2
Interest on such Distribution Date.
Closing Date: April 24, 1998.
Code: The Internal Revenue Code of 1986.
Compensating Interest: With respect to any Distribution Date, an amount
equal to the aggregate of the Prepayment Interest Shortfalls during the calendar
month preceding such Distribution Date, but not more than the sum of one-twelfth
of the applicable annual Master Servicing Fee rate of the Stated Principal
Balance of each of the Mortgage Loans immediately preceding such Distribution
Date; provided that for purposes of this definition the amount of the Master
Servicing Fee will not be reduced pursuant to Section 7.02 except as may be
required pursuant to the second to last sentence of such Section.
Corporate Trust Office: The principal office of the Trustee at which at
any particular time its corporate trust business with respect to this Agreement
shall be administered, which
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office at the date of the execution of this instrument is located at 3 Park
Plaza, 16th Floor, Irvine, California 92614, Attention: BA Mortgage Securities,
Inc., Series 1998-1.
Credit Support Depletion Date: The first Distribution Date on which the
aggregate of the Certificate Principal Balances of the Subordinate Certificates
has been or will be reduced to zero.
Curtailment: Any Principal Prepayment made by a Mortgagor which is not a
Principal Prepayment in Full.
Custodial Account: The custodial account or accounts created and
maintained pursuant to Section 3.07 in the name of a depository institution, as
custodian for the holders of the Certificates, for the holders of certain other
interests in mortgage loans serviced or sold by the Master Servicer and for the
Master Servicer, into which the amounts set forth in Section 3.07 shall be
deposited directly. Any such account or accounts shall be an Eligible Account.
Custodial Agreement: An agreement that may be entered into among a
Seller, the Depositor, the Master Servicer, the Trustee and a Custodian, in
substantially the form of Exhibit O hereto.
Custodian: A custodian appointed pursuant to a Custodial Agreement.
Cut-off Date: April 1, 1998.
Cut-off Date Principal Balance: As to any Mortgage Loan, the unpaid
principal balance thereof at the Cut-off Date after giving effect to all
installments of principal due on or prior thereto, whether or not received.
DCR: Duff & Phelps Credit Rating Co., or its successor in interest.
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
constituting a Deficient Valuation or any reduction that results in a permanent
forgiveness of principal.
Deficiency Amount: With respect to any Distribution Date, the amount of
any shortfall in amounts available in the Certificate Account to pay the
Required Payments.
Deficient Valuation: With respect to any Mortgage Loan, a valuation by a
court of competent jurisdiction of the Mortgaged Property in an amount less than
the then outstanding indebtedness under the Mortgage Loan, or any reduction in
the amount of principal to be paid in connection with any scheduled Monthly
Payment that constitutes a permanent forgiveness of principal, which valuation
or reduction results from a proceeding under the Bankruptcy Code.
Definitive Certificate: Any definitive, fully registered Certificate.
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Deleted Mortgage Loan: A Mortgage Loan replaced or to be replaced with a
Qualified Substitute Mortgage Loan pursuant to Section 2.04 hereof.
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
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 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 any Distribution Date, the 15th day
(or if such 15th day is not a Business Day, the Business Day immediately
preceding such 15th day) of the month of the related Distribution Date.
Disqualified Organization: Any organization defined as a "disqualified
organization" under Section 860E(e)(5) of the Code, which includes 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) a 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, (v) an
electing large partnership described in Section 775 of the Code and (vi) 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 the Trust Fund, 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 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 Date: The 25th day of any month beginning in the month
following the month of the initial issuance of the Certificates or, if such 25th
day is not a Business Day, the Business Day immediately following such 25th day.
Due Date: With respect to any Distribution Date, the first day of the
month in which such Distribution Date occurs.
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Due Period: With respect to any Distribution Date, the period commencing
on the second day of the month preceding the month of such Distribution Date and
ending on the related Due Date.
Eligible Account: An account that is any of the following: (i)
maintained with a depository institution the debt obligations of which have been
rated by each Rating Agency in its highest rating available, or (ii) an account
or accounts in a depository institution in which such accounts are fully insured
to the limits established by the FDIC, provided that any deposits not so insured
shall, to the extent acceptable to each Rating Agency, as evidenced in writing,
be maintained such that (as evidenced by an Opinion of Counsel delivered to the
Trustee and each Rating Agency) the registered Holders of Certificates have a
claim with respect to the funds in such account or a perfected first security
interest against any collateral (which shall be limited to Permitted
Investments) securing such funds that is superior to claims of any other
depositors or creditors of the depository institution with which such account is
maintained, or (iii) in the case of the Certificate Account, a trust account or
accounts maintained in the corporate trust division of Bankers Trust Company of
California, N.A., or if Bankers Trust Company is no longer the Trustee, the
trust department of a federal or state chartered depository institution
acceptable to each Rating Agency; (iv) an account or accounts of a depository
institution acceptable to each Rating Agency (as evidenced in writing by each
Rating Agency that use of any such account as the Custodial Account or the
Certificate Account will not reduce the rating assigned to any Class of
Certificates by such Rating Agency below the lower of the then-current rating or
the rating assigned to such Certificates as of the Closing Date by such Rating
Agency).
Event of Default: As defined in Section 7.01.
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.
Extraordinary Events: Any of the following conditions with respect to a
Mortgaged Property or Mortgage Loan causing or resulting in a loss which causes
the liquidation of such Mortgage Loan:
(a) losses that are of the type that would be covered by the
fidelity bond and the errors and omissions insurance policy required to
be maintained pursuant to Section 3.12(b) but are in excess of the
coverage maintained thereunder;
(b) nuclear reaction or nuclear radiation or radioactive
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;"
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(c) hostile or warlike action in time of peace or war, including
action in hindering, combatting or defending against an actual,
impending or expected attack:
1. by any government or sovereign power, de jure or de
facto, or by any authority maintaining or using military, naval
or air forces; or
2. by military, naval or air forces; or
3. by an agent of any such government, power, authority
or forces;
(d) any weapon of war employing atomic fission or radioactive
force whether in time of peace or war; or
(e) insurrection, rebellion, revolution, civil war, usurped power
or action taken by governmental authority in hindering, combatting or
defending against such an occurrence, seizure or destruction under
quarantine or customs regulations, confiscation by order of any
government or public authority; or risks of contraband or illegal
transportation or trade.
Extraordinary Losses: Any loss incurred on a Mortgage Loan caused by or
resulting from an Extraordinary Event.
FDIC: Federal Deposit Insurance Corporation or any successor thereto.
FHLMC: Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created and existing under Title III of the
Emergency Home Finance Act of 1970, as amended, or any successor thereto.
FNMA: Federal National Mortgage Association, a federally chartered and
privately owned corporation organized and existing under the Federal National
Mortgage Association Charter Act, or any successor thereto.
Final Distribution Date: The Distribution Date on which the final
distribution in respect of the Certificates will be made pursuant to Section
9.01 which Final Distribution Date shall in no event be later than the end of
the 90-day liquidation period described in Section 9.02.
Foreclosure Profits: As to any Mortgage Loan on any date of
determination, the excess, if any, of Liquidation Proceeds, Insurance Proceeds
and REO Proceeds (net of all amounts reimbursable therefrom pursuant to Section
3.10(a)(i)) in respect of each Mortgage Loan or REO Property for which a Cash
Liquidation or REO Disposition occurred in the immediately prior calendar month
over the sum of the unpaid principal balance of such Mortgage Loan or REO
Property (determined, in the case of an REO Disposition, in accordance with
Section 3.14) plus accrued and unpaid interest at the Mortgage Rate on such
unpaid principal balance from the Due Date to which interest was last paid by
the Mortgagor to the first day of the month following the month in which such
Cash Liquidation or REO Disposition occurred.
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Fraud Loss Amount: As of any Determination Date after the Cut-off Date,
an amount equal to (X) prior to the first anniversary of the Cut-off Date an
amount equal to 2% of the aggregate outstanding principal balance of all of the
Mortgage Loans as of the Cut-off Date minus the aggregate amount of Fraud Losses
allocated solely to the Subordinate Certificates in accordance with Section 4.05
since the Cut-off Date up to such Determination Date, (Y) from the first through
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% of the aggregate principal balance of all of the Mortgage Loans as of
the most recent anniversary of the Cut-off Date minus (2) the aggregate amount
of Fraud Losses allocated solely to the Subordinate Certificates in accordance
with Section 4.05 since the most recent anniversary of the Cut-off Date up to
such Determination Date and (Z) on and after the fifth anniversary of the
Cut-off Date, the Fraud Loss Amount shall be zero.
Fraud Losses: Losses on Mortgage Loans as to which there was fraud in
the origination of such Mortgage Loan.
Group I Certificates: The Class IA-1, IA-2, Class IA-3, Class IA-4,
Class IA-5, Class IA-6, Class I-X and Class I-PO Certificates, collectively.
Group I Liquidation Amount: For any Distribution Date, the aggregate,
for each Group I Loan which became a Liquidated Mortgage Loan during the Prior
Period, of the lesser of (i) the Group I Percentage of the principal balance of
such Mortgage Loan (exclusive of the Class I-PO Fraction thereof, if applicable)
and (ii) the Group I Prepayment Percentage of the Liquidation Principal with
respect to such Mortgage Loan.
Group I Loans: The Mortgage Loans designated on the Mortgage Loan
Schedule as Group I Loans.
Group I Percentage: For any Distribution Date, the lesser of (a) 100%
and (b) the sum of the Certificate Principal Balances of the Group I
Certificates (other than the Class I-PO Certificates) and the Residual
Certificates divided by the aggregate principal balance of the Group I Loans
(less the Certificate Principal Balance of the Class I-PO Certificates), in each
case immediately prior to the Distribution Date.
Group I Premium Rate Mortgage Loans: The Group I Loans having Net
Mortgage Rates equal to or greater than 6.750% per annum.
Group I Prepayment Percentage: (i) On any Distribution Date occurring
before the Distribution Date in the month of the fifth anniversary of the first
Distribution Date, 100%; (ii) on any other Distribution Date on which either the
Group I Percentage or the Group II Percentage for such Distribution Date exceeds
the initial Group I Percentage or Group II Percentage, respectively, as of the
Cut-Off Date, 100%; and (iii) on any other Distribution Date in each of the
months of the fifth anniversary of the first Distribution Date and thereafter,
100%, unless, with respect to the Mortgage Pool as a whole:
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(a) the outstanding principal balance of all Mortgage Loans delinquent 60
days or more (averaged over the preceding six month period), as a
percentage of the aggregate principal balance of the Subordinate
Certificates on such Distribution Date, does not equal or exceed 50%,
and
(b) cumulative Realized Losses with respect to the Mortgage Loans do not
exceed (a) with respect to the Distribution Date on the fifth
anniversary of the first Distribution Date, 30% of the Original
Subordinate Principal Balance, (b) with respect to the Distribution
Date on the sixth anniversary of the first Distribution Date, 35% of
the Original Subordinate Principal Balance, (c) with respect to the
Distribution Date on the seventh anniversary of the first
Distribution Date, 40% of the Original Subordinate Principal Balance,
(d) with respect to the Distribution Date on the eighth anniversary
of the first Distribution Date, 45% of the Original Subordinate
Principal Balance, and (e) with respect to the Distribution Date on
the ninth anniversary of the first Distribution Date, 50% of the
Original Subordinate Principal Balance;
in which case, as follows: (1) for any such Distribution Date in or after the
month of the fifth anniversary of the month of the first Distribution Date but
before the sixth anniversary of the month of the first Distribution Date, the
Group I Percentage for such Distribution Date plus 70% of the Subordinate
Percentage for Loan Group I for such Distribution Date; (2) for any such
Distribution Date in or after the month of the sixth anniversary of the month of
the first Distribution Date but before the seventh anniversary of the month of
the first Distribution Date, the Group I Percentage for such Distribution Date
plus 60% of the Subordinate Percentage for Loan Group I for such Distribution
Date; (3) for any such Distribution Date in or after the month of the seventh
anniversary of the month of the first Distribution Date but before the eighth
anniversary of the month of the first Distribution Date, the Group I Percentage
for such Distribution Date plus 40% of the Subordinate Percentage for Loan Group
I for such Distribution Date; (4) for any such Distribution Date in or after the
month of the eighth anniversary of the month of the first Distribution Date but
before the ninth anniversary of the month of the first Distribution Date, the
Group I Percentage for such Distribution Date plus 20% of the Subordinate
Percentage for Loan Group I for such Distribution Date; and (5) for any such
Distribution Date thereafter, the Group I Percentage for such Distribution Date.
If on any Distribution Date the allocation to the Group I Certificates
(other than the Class I-PO Certificates) and the Residual Certificates in the
percentage required would reduce the sum of the Certificate Principal Balances
of such Certificates below zero, the Group I Prepayment Percentage for such
Distribution Date shall be limited to the percentage necessary to reduce such
sum to zero.
Group I Principal Distribution Amount: For any Distribution Date, the sum
of (i) the Group I Percentage of the Principal Payment Amount for Loan Group I
(exclusive of the portion thereof attributable to the Class I-PO Principal
Distribution Amount), (ii) the Group I Prepayment Percentage of the Principal
Prepayment Amount for Loan Group I (exclusive of the portion thereof
attributable to the Class I-PO Principal Distribution Amount) and (iii) the
Group I Liquidation Amount.
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Group II Certificates: The Class IIA-1, Class IIA-2, Class IIA-3, Class
IIA-4, Class IIA-5, Class IIA-6, Class II-X and Class II-PO Certificates,
collectively.
Group II Liquidation Amount: For any Distribution Date, the aggregate, for
each Group II Loan which became a Liquidated Mortgage Loan during the Prior
Period, of the lesser of (i) the Group II Percentage of the principal balance of
such Mortgage Loan (exclusive of the Class II-PO Fraction thereof, if
applicable) and (ii) the Group II Prepayment Percentage of the Liquidation
Principal with respect to such Mortgage Loan.
Group II Loan: The Mortgage Loans designated on the Mortgage Loan Schedule
as Group II Loans.
Group II Percentage: For any Distribution Date, the lesser of (a) 100% and
(b) the sum of the Certificate Principal Balances of the Group II Certificates
(other than the Class II-PO Certificates) divided by the aggregate principal
balance of the Group II Loans (less the Certificate Principal Balance of the
Class II-PO Certificates), in each case immediately prior to the Distribution
Date.
Group II Premium Rate Mortgage Loans: The Group II Loans having Net
Mortgage Rates equal to or greater than 6.500% per annum.
Group II Prepayment Percentage: (i) On any Distribution Date occurring
before the Distribution Date in the month of the fifth anniversary of the first
Distribution Date, 100%; (ii) on any other Distribution Date on which either the
Group I Percentage or the Group II Percentage for such Distribution Date exceeds
the initial Group I Percentage or Group II Percentage, respectively, as of the
Cut-Off Date, 100%; and (iii) on any other Distribution Date in each of the
months of the fifth anniversary of the first Distribution Date and thereafter,
100%, unless, with respect to the Mortgage Pool as a whole:
(a) the outstanding principal balance of all Mortgage Loans delinquent 60
days or more (averaged over the preceding six month period), as a
percentage of the aggregate principal balance of the Subordinate
Certificates on such Distribution Date, does not equal or exceed 50%,
and
(b) cumulative Realized Losses with respect to the Mortgage Loans do not
exceed (a) with respect to the Distribution Date on the fifth
anniversary of the first Distribution Date, 30% of the Original
Subordinate Principal Balance, (b) with respect to the Distribution
Date on the sixth anniversary of the first Distribution Date, 35% of
the Original Subordinate Principal Balance, (c) with respect to the
Distribution Date on the seventh anniversary of the first
Distribution Date, 40% of the Original Subordinate Principal Balance,
(d) with respect to the Distribution Date on the eighth anniversary
of the first Distribution Date, 45% of the Original Subordinate
Principal Balance, and (e) with respect to the Distribution Date on
the ninth anniversary of the first Distribution Date, 50% of the
Original Subordinate Principal Balance;
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in which case, as follows: (1) for any such Distribution Date in or after the
month of the fifth anniversary of the month of the first Distribution Date but
before the sixth anniversary of the month of the first Distribution Date, the
Group II Percentage for such Distribution Date plus 70% of the Subordinate
Percentage for Loan Group II for such Distribution Date; (2) for any such
Distribution Date in or after the month of the sixth anniversary of the month of
the first Distribution Date but before the seventh anniversary of the month of
the first Distribution Date, the Group II Percentage for such Distribution Date
plus 60% of the Subordinate Percentage for Loan Group II for such Distribution
Date; (3) for any such Distribution Date in or after the month of the seventh
anniversary of the month of the first Distribution Date but before the eighth
anniversary of the month of the first Distribution Date, the Group II Percentage
for such Distribution Date plus 40% of the Subordinate Percentage for Loan Group
II for such Distribution Date; (4) for any such Distribution Date in or after
the month of the eighth anniversary of the month of the first Distribution Date
but before the ninth anniversary of the month of the first Distribution Date,
the Group II Percentage for such Distribution Date plus 20% of the Subordinate
Percentage for Loan Group II for such Distribution Date; and (5) for any such
Distribution Date thereafter, the Group II Percentage for such Distribution
Date.
If on any Distribution Date the allocation to the Group II Certificates
(other than of the Class II-PO Certificates) in the percentage required would
reduce the sum of the Certificate Principal Balances of such Certificates below
zero, the Group II Prepayment Percentage for such Distribution Date shall be
limited to the percentage necessary to reduce such sum to zero.
Group II Principal Distribution Amount: For any Distribution Date, the sum
of (i) the Group II Percentage of the Principal Payment Amount for Loan Group II
(exclusive of the portion thereof attributable to the Class II-PO Principal
Distribution Amount), (ii) the Group II Prepayment Percentage of the Principal
Prepayment Amount for Loan Group II (exclusive of the portion thereof
attributable to the Class II-PO Principal Distribution Amount) and (iii) the
Group II Liquidation Amount.
Independent: When used with respect to any specified Person, means such a
Person who (i) is in fact independent of the Depositor, the Master Servicers and
the Trustee, or any Affiliate thereof, (ii) does not have any direct financial
interest or any material indirect financial interest in the Depositor, the
Master Servicer or the Trustee or in an Affiliate thereof, and (iii) is not
connected with the Depositor, the Master Servicer or the Trustee as an officer,
employee, promoter, underwriter, trustee, partner, director or person performing
similar functions.
Initial Certificate Principal Balance: With respect to each Class of
Certificates (other than the Class X Certificates), the Certificate Principal
Balance of such Class of Certificates as of the Cut-off Date as set forth in the
Preliminary Statement hereto.
Initial Notional Amount: With respect to each Class of Class X
Certificates, the Notional Amount of such Class of Certificates as of the
Cut-off Date.
Insurance Proceeds: Proceeds paid in respect of the Mortgage Loans
pursuant to any Primary Mortgage Insurance Policy or any other related insurance
policy, covering a Mortgage Loan, to the extent such proceeds are payable to the
mortgagee under the Mortgage, any
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Subservicer, the Master Servicer or the Trustee and are not 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.
Insured Certificates: The Class IA-2 and Class IA-5 Certificates.
Insured Payment: With respect to the Insured Certificates, (i) as of any
Distribution Date, any Deficiency Amount, and (ii) any Preference Amount.
Insurer: Any named insurer under any Primary Mortgage Insurance Policy or
any successor thereto or the named insurer in any replacement policy.
Late Collections: With respect to any Mortgage Loan, all amounts received
during any Due Period, whether as late payments of Monthly Payments or as
Insurance Proceeds, Liquidation Proceeds or otherwise, which represent late
payments or collections of Monthly Payments due but delinquent for a previous
Due Period and not previously recovered.
Late Payment Rate: The rate of interest publicly announced by Citibank,
N.A. at its principal office in New York, New York as its prime rate (any change
in such prime rate of interest to be effective on the date such change is
announced by Citibank, N.A.) plus two (2) percentage points. The Late Payment
Rate shall be computed on the basis of a year of 365 days calculating the actual
number of days elapsed. In no event shall the Late Payment Rate exceed the
maximum rate permissible under law applicable to the Insurance Agreement
limiting interest rates.
Liquidated Mortgage Loan: A Mortgage Loan as to which the Master Servicer
or any applicable Subservicer has determined in accordance with its customary
servicing practices that all amounts which it expects to recover from or on
account of such Mortgage Loan, whether from Insurance Proceeds, Liquidation
Proceeds or otherwise have been recovered. For purposes of this definition,
acquisition of a Mortgaged Property by the Trust Fund shall not constitute final
liquidation of the related Mortgage Loan.
Liquidation Principal: With respect to any Distribution Date, the
principal portion of Liquidation Proceeds received with respect to each Mortgage
Loan which became a Liquidated Mortgage Loan (but not in excess of the principal
balance thereof) during the Prior Period, exclusive of the portion thereof
attributable to the Class I-PO Principal Distribution Amount or the Class II-PO
Principal Distribution Amount.
Liquidation Proceeds: Amounts (other than Insurance Proceeds) received by
the Master Servicer in connection with the taking of an entire Mortgaged
Property by exercise of the power of eminent domain or condemnation or in
connection with the liquidation of a defaulted Mortgage Loan through trustee's
sale, foreclosure sale or otherwise, other than REO Proceeds.
Loan Group: Loan Group I or Loan Group II, as applicable.
Loan Group I: The group of Mortgage Loans comprised of the Group I Loans.
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Loan Group II: The group of Mortgage Loans comprised of the Group II
Loans.
Loan-to-Value Ratio: As of any date, the fraction, expressed as a
percentage, the numerator of which is the current principal balance of the
related Mortgage Loan at the date of determination and the denominator of which
is the Appraised Value of the related Mortgaged Property.
Master Servicer Remittance Amount: As to any Distribution Date, an amount
equal to (a) the sum of (i) the amount relating to the Mortgage Loans on deposit
in the Custodial Account as of the close of business on the immediately
preceding Determination Date, (ii) the amount of any Advance made on the
immediately preceding Certificate Account Deposit Date, (iii) any amount
deposited in the Custodial Account pursuant to Section 3.12(a), reduced by (b)
the sum as of the close of business on the immediately preceding Determination
Date of (w) aggregate Foreclosure Profits, (x) the Amount Held for Future
Distribution, and (y) amounts permitted to be withdrawn by the Master Servicer
from the Custodial Account in respect of the Mortgage Loans pursuant to clauses
(i)-(xi), inclusive, of Section 3.10(a).
Master Servicing Fee: With respect to any Mortgage Loan, the fee payable
monthly to the Master Servicer in respect of master servicing compensation that
accrues at an annual rate designated on the Mortgage Loan Schedule for such
Mortgage Loan, as may be adjusted with respect to successor Master Servicers as
provided in Section 7.02. In addition, the Master Servicing Fee shall include
any increase in payments of interest on any Mortgage Loan following an increase
in the Mortgage Rate on such Mortgage Loan as a result of (i) the termination of
the Mortgagor's employment by either of the Sellers or any of their Affiliates
or (ii) the Mortgagor's discontinuation of electronic debiting for payments of
the related Mortgage Loan.
Maturity Date: The latest possible maturity date, solely for purposes of
Section 1.860G-1(a)(4)(iii) of the Treasury regulations, by which the
Certificate Principal Balance of each Class of Certificates representing a
regular interest in REMIC II and the principal balance of each REMIC I Regular
Interest would be reduced to zero, which is May 25, 2028, the Distribution Date
immediately following the latest scheduled maturity date of any Mortgage Loan.
Monthly Payment: With respect to any Mortgage Loan (including any REO
Property) and any Due Date, the payment of principal and interest due thereon in
accordance with the amortization schedule at the time applicable thereto (after
adjustment, if any, for curtailments and for Deficient Valuations occurring
prior to such Due Date but before any adjustment to such amortization schedule
by reason of any bankruptcy, other than a Deficient Valuation, or similar
proceeding or any moratorium or similar waiver or grace period).
Mortgage: The mortgage, deed of trust or other comparable instrument
creating a first lien on an estate in fee simple or leasehold interest in real
property securing a Mortgage Note.
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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 Purchase Agreement: A Mortgage Loan Purchase Agreement
between a Seller and the Depositor, dated April 24, 1998, substantially in the
form attached hereto as Exhibit F.
Mortgage Loan Schedule: The list of the Mortgage Loans attached hereto as
Exhibit E-1 and Exhibit E-2 (as amended from time to time to reflect the removal
of Deleted Mortgage Loans and the addition of Qualified Substitute Mortgage
Loans), which list shall set forth at a minimum the following information as to
each Mortgage Loan:
<TABLE>
<S> <C>
(i) the name of the Mortgagor;
(ii) the Mortgage Loan identifying number;
(iii) the street address of the Mortgaged Property including state and
zip code;
(iv) the maturity date of the Mortgage Note;
(v) the Mortgage Rate;
(vi) the Net Mortgage Rate;
(vii) the initial scheduled monthly payment of principal, if any, and
interest;
(viii) the principal balance of the Mortgage Loan at origination;
(ix) the Cut-off Date Principal Balance;
(x) the Loan-to-Value Ratio at origination;
(xi) the rate at which the Master Servicing Fee accrues;
(xii) a code indicating that the Mortgage Loan is secured by a second
or vacation residence;
(xiii) a code indicating that the Mortgage Loan is secured by a
non-owner occupied residence;
(xiv) a code indicating whether or not a Primary Mortgage Policy
exists for the Mortgage Loan; and
(xv) a code indicating that the Mortgage Loan is a Group I Loan or a
Group II Loan.
</TABLE>
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Such schedule may consist of multiple reports that collectively set forth all of
the information requested.
Mortgage Loans: Such of the mortgage loans transferred and assigned to
the Trustee pursuant to Section 2.01 as from time to time are held or deemed to
be held as part of the Trust Fund, the Mortgage Loans originally so held being
identified in the initial Mortgage Loan Schedule, and Qualified Substitute
Mortgage Loans held or deemed held as part of the Trust Fund including, without
limitation, each related Mortgage Note, Mortgage and Mortgage File and all
rights appertaining thereto.
Mortgage Note: The originally executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan,
together with any modification thereto.
Mortgage Rate: As to any Mortgage Loan, the interest rate borne by the
related Mortgage Note, or any modification thereto.
Mortgaged Property: The underlying real property securing a Mortgage
Loan.
Mortgagor: The obligor on a Mortgage Note.
Net Mortgage Rate: As to each Mortgage Loan, a per annum rate of
interest equal to the Mortgage Rate borne by the related Mortgage Note less per
annum rate at which the related Administration Fee accrues.
Net Prepayment Interest Shortfall: As to any Distribution Date, the
Prepayment Interest Shortfall for such Distribution Date not funded by the
Master Servicer as Compensating Interest and, solely for purposes of calculating
Required Payments, expenses and costs allocated in reduction of Accrued
Certificate Interest on each Class entitled thereto pursuant to Section 6.03.
Non-Primary Residence Loans: The Mortgage Loans designated as secured by
second or vacation residences, or by non-owner occupied residences, on the
Mortgage Loan Schedule.
Non-United States Person: Any Person other than a United States Person.
Nonrecoverable Advance: Any Advance or Servicing Advance previously made
or proposed to be made by the Master Servicer in respect of a Mortgage Loan
(other than a Deleted Mortgage Loan) which, in the good faith judgment of the
Master Servicer, will not, or, in the case of a proposed Advance or Servicing
Advance, would not, be ultimately recoverable by the Master Servicer from
related Late Collections, Insurance Proceeds, Liquidation Proceeds, REO Proceeds
or amounts reimbursable to the Master Servicer pursuant to Section 4.02(a)
hereof.
Nonrecoverable Subservicer Advance: Any Subservicer Servicing Advance
previously made or proposed to be made by a Subservicer in respect of a Mortgage
Loan (other than a Deleted Mortgage Loan) which, in the good faith judgment of
Subservicer, will not, or, in the case of a proposed Subservicer Servicing
Advance, would not, be ultimately recoverable by such
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Subservicer from related Late Collections, Insurance Proceeds, Liquidation
Proceeds, or REO Proceeds.
Nonsubserviced Mortgage Loan: Any Mortgage Loan that, at the time of
reference thereto, is not subject to a Subservicing Agreement.
Notice: The telephonic or telegraphic notice, promptly confirmed in
writing by telecopy substantially in the form of Exhibit A attached to the
Certificate Insurance Policies, the original of which is subsequently delivered
by registered or certified mail, from the Trustee specifying the Insured Payment
which shall be due and owing on the applicable Distribution Date.
Notional Amount: With respect to the Class I-X Certificates, the Class
I-X Notional Amount, and with respect to the Class II-X Certificates, the Class
II-X Notional Amount.
Officers' Certificate: A certificate signed by (i) the Chairman of the
Board, the President or a Vice President or Assistant Vice President, or a
Director or Managing Director, and by the Treasurer, the Secretary, or one of
the Assistant Treasurers or Assistant Secretaries of a Seller or the Depositor,
as the case may be, or (ii) a Servicing Officer of the Master Servicer, and
delivered to the Trustee, as required by this Agreement.
Opinion of Counsel: A written opinion of counsel acceptable to the
Trustee and the Master Servicer, who may be counsel for a Seller, the Depositor
or the Master Servicer, provided that any opinion of counsel (i) referred to in
the definition of "Permitted Transferee" or (ii) relating to the qualification
of either REMIC I or REMIC II as a REMIC or compliance with the REMIC Provisions
must, unless otherwise specified, be an opinion of Independent counsel.
Original Subordinate Principal Balance: The sum of the Initial
Certificate Principal Balances of the Subordinate Certificates.
Outstanding Mortgage Loan: As to any Due Date, a Mortgage Loan
(including an REO Property) which was not the subject of a Principal Prepayment
in Full, Cash Liquidation or REO Disposition and which was not purchased,
deleted or substituted for prior to such Due Date pursuant to Section 2.02 or
2.04.
Owner: Each Holder of an Insured Certificate who, on the applicable
Distribution Date, is entitled under the terms of the applicable Insured
Certificates to payment thereunder.
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 any Class of Certificates and any
Distribution Date, the per annum rate set forth or described in the Preliminary
Statement hereto.
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Paying Agent: Bankers Trust Company of California, N.A., or any
successor Paying Agent appointed by the Trustee.
Percentage Interest: With respect to any Certificate (other than a
Residual Certificate), the undivided percentage ownership interest in the
related Class evidenced by such Certificate, which percentage ownership interest
shall be equal to the Initial Certificate Principal Balance or Initial Notional
Amount thereof divided by the aggregate Initial Certificate Principal Balance or
Initial Notional Amount of all of the Certificates of the same Class. With
respect to a Residual Certificate, the interest in distributions to be made with
respect to such Class evidenced thereby, expressed as a percentage, as stated on
the face of each such Certificate.
Permitted Investments: One or more of the following:
(i) obligations of or guaranteed as to principal and interest by the
United States or any agency or instrumentality thereof when such
obligations are backed by the full faith and credit of the
United States;
(ii) repurchase agreements on obligations specified in clause (i)
maturing not more than one month from the date of acquisition
thereof, provided that the unsecured obligations of the party
agreeing to repurchase such obligations are at the time rated by
each Rating Agency in its highest short-term rating available;
(iii) federal funds, certificates of deposit, demand deposits, time
deposits and bankers' acceptances (which shall each have an
original maturity of not more than 90 days and, in the case of
bankers' acceptances, shall in no event have an original
maturity of more than 365 days or a remaining maturity of more
than 30 days) denominated in United States dollars of any U.S.
depository institution or trust company incorporated under the
laws of the United States or any state thereof or of any
domestic branch of a foreign depository institution or trust
company; provided that the debt obligations of such depository
institution or trust company at the date of acquisition thereof
have been rated by each Rating Agency in its next to highest
short-term rating available;
(iv) commercial paper (having original maturities of not more than
365 days) of any corporation incorporated under the laws of the
United States or any state thereof which on the date of
acquisition has been rated by each Rating Agency in its highest
short-term rating available; provided that such commercial paper
shall have a remaining maturity of not more than 30 days;
(v) a money market fund or a qualified investment fund rated by each
Rating Agency in its highest long-term rating available; and
(vi) other obligations or securities that are acceptable to each
Rating Agency as a Permitted Investment hereunder and will not
reduce the rating assigned to any Class of Certificates by such
Rating Agency below the lower of the then-current rating or the
rating assigned to such Certificates as of the Closing Date by
such
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Rating Agency (determined in the case of the Insured
Certificates, without regard to the effect of the Certificate
Insurance Policies), as evidenced in writing;
provided, however, (A) such obligation or security is held for a temporary
period pursuant to Section 1.860G-2(g)(1) of the Treasury regulations and (B)
that no instrument shall be a Permitted Investment if it represents, either (1)
the right to receive only interest payments with respect to the underlying debt
instrument or (2) the right to receive both principal and interest payments
derived from obligations underlying such instrument and the principal and
interest payments with respect to such instrument provide a yield to maturity
greater than 120% of the yield to maturity at par of such underlying
obligations. References herein to the highest rating available and the next to
highest rating available on unsecured long-term debt shall mean AAA and AA,
respectively, in the case of each of DCR and S&P, and references herein to the
highest rating available on unsecured commercial paper and short-term debt
obligations shall mean D-1 in the case of DCR and A-1 in the case of S&P.
Permitted Transferee: Any Transferee of a Residual Certificate, other
than a Disqualified Organization or Non-United States Person.
Person: Any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
Pool Stated Principal Balance: As to any Determination Date, the
aggregate of the Stated Principal Balances of each Mortgage Loan that was an
Outstanding Mortgage Loan on the Due Date in the month preceding the month of
such date of determination.
Preference Amount: Any amount previously distributed to an Owner on the
Insured Certificates that is recoverable and sought to be recovered as a
voidable preference by a trustee in bankruptcy pursuant to the United States
Bankruptcy Code (11 U.S.C.), as amended from time to time in accordance with a
final nonappealable order of a court having competent jurisdiction.
Prepayment Assumption: A prepayment assumption of 250% of the standard
prepayment assumption, used for determining the accrual of original issue
discount and market discount and premium on the Certificates for federal income
tax purposes. The standard prepayment assumption assumes a constant rate of
prepayment of mortgage loans of 0.2% per annum of the then outstanding principal
balance of such mortgage loans in the first month of the life of the mortgage
loans, increasing by an additional 0.2% per annum in each succeeding month until
the thirtieth month, and a constant 6% per annum rate of prepayment thereafter
for the life of the mortgage loans.
Prepayment Interest Shortfall: As to any Distribution Date and any
Mortgage Loan (other than a Mortgage Loan relating to an REO Property) that was
the subject of (a) a Principal Prepayment in Full during the Prior Period, an
amount equal to the excess of one month's interest at the Net Mortgage Rate on
the Stated Principal Balance of such Mortgage Loan over
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the amount of interest (adjusted to the Net Mortgage Rate) paid by the Mortgagor
for the calendar month preceding such Distribution Date to the date of such
Principal Prepayment in Full or (b) a Curtailment during the Prior Period, an
amount equal to the excess of one month's interest at the Net Mortgage Rate on
the amount of such Curtailment over the amount of interest (adjusted to the Net
Mortgage Rate) paid by the Mortgagor for the calendar month preceding such
Distribution Date to the date of such Curtailment.
Primary Mortgage Insurance Policy: A policy of mortgage guaranty
insurance, if any, or any replacement policy therefor, as evidenced by a policy
or certificate, providing coverage as required by clause (xi) of Exhibit 3 to
each Mortgage Loan Purchase Agreement.
Primary Servicing Fee: As to any Mortgage Loan, that portion of the
Master Servicing Fee that constitutes the fee payable monthly to the related
Subservicer in respect of servicing and other compensation that accrues at an
annual rate as set forth in the applicable Subservicing Agreement.
Principal Payment Amount: For any Distribution Date and with respect to
each Loan Group, the sum, with respect to the Mortgage Loans in such Loan Group,
of (i) Monthly Payments on the Mortgage Loans due on the related Due Date, (ii)
the principal portion of repurchase proceeds received with respect to any
Mortgage Loan which was repurchased as permitted or required herein during the
Prior Period and (iii) any other unscheduled payments of principal which were
received during the Prior Period, other than Curtailments, Principal Prepayments
in Full or Liquidation Principal.
Principal Prepayment: Any payment of principal or other recovery on a
Mortgage Loan, including a recovery that takes the form of Liquidation Proceeds
or Insurance Proceeds, which is received in advance of its scheduled Due Date
and is not accompanied by an amount as to interest representing scheduled
interest on such payment due on any date or dates in any month or months
subsequent to the month of prepayment.
Principal Prepayment Amount: For any Distribution Date and with respect
to each Loan Group, the sum, with respect to the Mortgage Loans in such Loan
Group, of all Curtailments and Principal Prepayments in Full which were received
during the Prior Period.
Principal Prepayment in Full: Any Principal Prepayment made by a
Mortgagor of the entire principal balance of a Mortgage Loan.
Prior Period: The calendar month immediately preceding any Distribution
Date.
Purchase Price: With respect to any Mortgage Loan (or REO Property)
required to be purchased on any date pursuant to Section 2.02 or 2.04, an amount
equal to the sum of (i) 100% of the Stated Principal Balance thereof plus the
principal portion of any related unreimbursed Advances and Servicing Advances
and (ii) unpaid accrued interest at the Mortgage Rate on the Stated Principal
Balance thereof to the first day of the month following the month of purchase
from the Due Date to which interest was last paid by the Mortgagor.
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Qualified Substitute Mortgage Loan: A Mortgage Loan substituted by a
Seller for a Deleted Mortgage Loan which must, on the date of such substitution,
as confirmed in an Officers' Certificate delivered to the Trustee, (i) have an
outstanding principal balance, after deduction of the principal portion of the
monthly payment due in the month of substitution (or in the case of a
substitution of more than one Mortgage Loan for a Deleted Mortgage Loan, an
aggregate outstanding principal balance, after such deduction), not in excess of
(and not substantially less than) the Stated Principal Balance of the Deleted
Mortgage Loan (the amount of any shortfall to be remitted by the applicable
Seller to the Master Servicer of such Deleted Mortgage Loan for deposit in the
applicable Custodial Account in the month of substitution); (ii) have a Mortgage
Rate and a Net Mortgage Rate no lower than and not more than 1% per annum higher
than the Mortgage Rate and Net Mortgage Rate, respectively, of the Deleted
Mortgage Loan as of the date of substitution; (iii) have a Loan-to-Value Ratio
at the time of substitution no higher than that of the Deleted Mortgage Loan at
the time of substitution; (iv) have a remaining term to stated maturity not
greater than (and not more than one year less than) that of the Deleted Mortgage
Loan; (v) comply with each representation and warranty set forth in Exhibit 3 to
the applicable Mortgage Loan Purchase Agreement.
Rating Agency: S&P and DCR. If either agency or a successor is no longer
in existence, "Rating Agency" shall be such statistical credit rating agency, or
other comparable Person, designated by the Depositor, notice of which
designation shall be given to the Trustee and the Master Servicer.
Realized Loss: With respect to each Mortgage Loan (or REO Property) as
to which a Cash Liquidation or REO Disposition has occurred, an amount (not less
than zero) equal to (i) the Stated Principal Balance of the Mortgage Loan (or
REO Property) as of the date of Cash Liquidation or REO Disposition, plus (ii)
interest (and REO Imputed Interest, if any) at the Net Mortgage Rate from the
Due Date as to which interest was last paid or advanced to Certificateholders up
to the last day of the month in which the Cash Liquidation (or REO Disposition)
occurred on the Stated Principal Balance of such Mortgage Loan (or REO Property)
outstanding during each Due Period that such interest was not paid or advanced,
minus (iii) the proceeds, if any, received during the month in which such Cash
Liquidation (or REO Disposition) occurred, to the extent applied as recoveries
of interest at the Net Mortgage Rate and to principal of the Mortgage Loan, net
of the portion thereof reimbursable to the Master Servicer or any Subservicer
with respect to related Advances, Servicing Advances, Subservicer Servicing
Advances or expenses as to which the Master Servicer or any Subservicer is
entitled to reimbursement thereunder but which have not been previously
reimbursed. With respect to each Mortgage Loan for which the Master Servicer has
forgiven the payment of any principal, the amount of such forgiven principal.
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 object of a Debt Service Reduction,
the amount of such Debt Service Reduction.
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Record Date: With respect to each Distribution Date, the close of
business on the last Business Day of the month next preceding the month in which
the related Distribution Date occurs.
Regular Certificate: Any of the Certificates other than a Residual
Certificate.
Reimbursement Amount: With respect to any Distribution Date, the sum of
the Class IA-2 Reimbursement Amount and the Class IA-5 Reimbursement Amount.
REMIC: A "real estate mortgage investment conduit" within the meaning of
Section 860D of the Code, including REMIC I and REMIC II.
REMIC I: The segregated pool of assets, with respect to which a REMIC
election is to be made, consisting of the Mortgage Loans.
REMIC I Realized Losses: For any Distribution Date, Realized Losses on
the Mortgage Loans in each Loan Group for the Prior Period shall be allocated as
follows: The interest portion of Realized Losses, if any, shall be allocated
among the classes of REMIC I Regular Interests related to such Loan Group pro
rata according to the interest accrued thereon during the Prior Period to the
extent of such accrued interest in reduction thereof. Any interest portion of
Realized Losses in excess of the amount allocated pursuant to the preceding
sentence shall be treated as Realized Losses of principal not attributable to
any specific Mortgage Loan in such Loan Group and allocated pursuant to the
succeeding sentences. The applicable Class I-PO Fraction or Class II-PO Fraction
of any Realized Loss of principal attributable to a Class I-PO Mortgage Loan or
Class II-PO Mortgage Loan, as applicable, shall be allocated to the related
Class P-M Interest in reduction of the principal balance thereof. The remainder
of the Realized Losses of principal shall be allocated, first, to the Class Y
Interest related to the Loan Group to the extent of the applicable Class Y
Principal Reduction Amount in reduction of the principal balance of such
Interest and, second, the remainder, if any, of such Realized Losses of
principal shall be allocated to the related Class Z Interest in reduction of the
principal balance thereof.
REMIC I Regular Interests: The Class P-M, Class X-M, Class Y1 and Class
Z Interests, collectively.
REMIC II: The segregated pool of assets consisting of the REMIC I
Regular Interests conveyed in trust to the Trustee for the benefit of the
Certificateholders (other than the Class R-I Certificateholders) pursuant to
Section 2.01(a), with respect to which a separate REMIC election is to be made.
REMIC Administrator: Bankers Trust Company of California, N.A., or any
successor REMIC Administrator. If Bankers Trust Company of California, N.A. or
any successor REMIC Administrator is found by a court of competent jurisdiction
to no longer be able to fulfill its obligations as REMIC Administrator under
this Agreement, the Depositor shall appoint a successor REMIC Administrator,
subject to assumption of the REMIC Administrator obligations under this
Agreement.
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REMIC Provisions: Provisions of the federal income tax law relating to
real estate mortgage investment conduits, which appear at Sections 860A through
860G of Subchapter M of Chapter 1 of the Code, and related provisions, and
temporary and final regulations (or, to the extent not inconsistent with such
temporary or final regulations, proposed regulations) and published rulings,
notices and announcements promulgated thereunder, as the foregoing may be in
effect from time to time.
REO Acquisition: The acquisition by the Master Servicer on behalf of the
Trustee for the benefit of the Certificateholders of any REO Property pursuant
to Section 3.14.
REO Disposition: As to any REO Property, a determination by the Master
Servicer that it has received all Insurance Proceeds, Liquidation Proceeds, REO
Proceeds and other payments and recoveries (including proceeds of a final sale)
which the Master Servicer expects to be finally recoverable from the sale or
other disposition of the REO Property.
REO Imputed Interest: As to any REO Property, for any period, an amount
equivalent to interest (at the Net Mortgage Rate that would have been applicable
to the related Mortgage Loan had it been outstanding) on the unpaid principal
balance of the Mortgage Loan as of the date of acquisition thereof for such
period.
REO Proceeds: Proceeds, net of expenses, received in respect of any REO
Property (including, without limitation, proceeds from the rental of the related
Mortgaged Property) which proceeds are required to be deposited into the
Custodial Account only upon the related REO Disposition.
REO Property: A Mortgaged Property acquired by the Master Servicer on
behalf of the Trustee for the benefit of the Certificateholders through
foreclosure or deed in lieu of foreclosure in connection with a defaulted
Mortgage Loan.
Request for Release: A request for release, the form of which is
substantially in the form attached as Exhibit G hereto.
Required Insurance Policy: With respect to any Mortgage Loan, any
insurance policy which is required to be maintained from time to time under this
Agreement or any related Subservicing Agreement in respect of such Mortgage
Loan.
Required Payments: With respect to any Distribution Date, the sum,
without duplication of (i) any interest shortfall (except for shortfalls
relating to the Soldiers' and Sailors' Civil Relief Act of 1940, as amended (or
similar legislation or regulations as in effect from time to time) and except
for any Prepayment Interest Shortfalls or any Net Prepayment Interest
Shortfalls) allocated to the Insured Certificates on such Distribution Date and
(ii) the principal portion of any Realized Losses allocated to the Insured
Certificates for such Distribution Date.
Residual Certificates: The Class R-I Certificates and the Class R-II
Certificates, collectively.
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Responsible Officer: When used with respect to the Trustee, any officer
of the Corporate Trust Department of the Trustee, including any Senior Vice
President, any Vice President, any Assistant Vice President, any Assistant
Secretary, any Trust Officer or Assistant Trust Officer, or any other officer of
the Trustee customarily performing functions similar to those performed by any
of the above designated officers to whom, with respect to a particular matter,
such matter is referred.
S&P: Standard & Poor's Rating Services, a division of the McGraw-Hill
Companies, Inc., or its successor in interest.
Seller: An institution from which the Depositor purchased any Mortgage
Loans pursuant to a Mortgage Loan Purchase Agreement. Bank of America National
Trust and Savings Association is the Seller with respect to the Mortgage Loans
set forth on Exhibit E-1 and Bank of America, FSB is the Seller with respect to
the Mortgage Loans set forth on Exhibit E-2.
Senior Certificates: The Class A Certificates, the Class X Certificates,
the Class PO Certificates and the Residual Certificates, collectively.
Servicing Accounts: The account or accounts created and maintained
pursuant to Section 3.08.
Servicing Advances: All customary and reasonable "out of pocket" costs
and expenses incurred 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, (iii) the management and
liquidation of any REO Property and (iv) compliance with the obligations under
Sections 3.01, 3.08, 3.12(a) and 3.14; and any amount that is stated herein to
be a "Servicing Advance."
Servicing Officer: Any officer of the Master Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature appear on a list of servicing officers furnished to
the Trustee by the Master Servicer, as such list may from time to time be
amended.
Special Hazard Amount: As of any Distribution Date, an amount equal to
$4,502,375 minus the sum of (i) the aggregate amount of Special Hazard Losses
allocated solely to the Subordinate Certificates in accordance with Section 4.05
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 greater of (A) 1% (or, if greater than
1%, the highest percentage of Mortgage Loans, by principal balance, in any
California zip code area) times the aggregate principal balance of all of the
Mortgage Loans in the Mortgage Pool on such anniversary and (ii) twice the
principal balance of the single Mortgage Loan in the Mortgage Pool having the
largest principal balance.
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Special Hazard Loss: Any Realized Loss not in excess of the cost of the
lesser of repair or replacement of a Mortgaged Property suffered by such
Mortgaged Property on account of direct physical loss, exclusive of (i) any loss
of a type covered by a hazard policy or a flood insurance policy required to be
maintained in respect of such Mortgaged Property pursuant to Section 3.12(a),
except to the extent of the portion of such loss not covered as a result of any
coinsurance provision and (ii) any Extraordinary Loss.
Stated Principal Balance: With respect to any Mortgage Loan or related
REO Property, at any given time, (i) the Cut-off Date Principal Balance of the
Mortgage Loan, minus (ii) the sum of (a) the principal portion of the Monthly
Payments due with respect to such Mortgage Loan or REO Property during each Due
Period ending prior to the last succeeding Distribution Date which were received
or with respect to which an Advance was made, and (b) all Principal Prepayments
with respect to such Mortgage Loan or REO Property, and all Insurance Proceeds,
Liquidation Proceeds and REO Proceeds, to the extent applied by the Master
Servicer as recoveries of principal in accordance with Section 3.14 with respect
to such Mortgage Loan or REO Property, in each case which were distributed
pursuant to Section 4.02 on any previous Distribution Date, and (c) any Realized
Loss allocated to Certificateholders with respect thereto for any previous
Distribution Date.
Step Down Percentage: With respect to any Distribution Date occurring
from May 1998 through April 2003, 0%; with respect to any Distribution Date
occurring from May 2003 through April 2004, 30%; with respect to any
Distribution Date occurring from May 2004 through April 2005, 40%; with respect
to any Distribution Date occurring from May 2005 through April 2006, 60%; with
respect to any Distribution Date occurring from May 2006 through April 2007,
80%; with respect to any Distribution Date occurring from and after May 2007,
100%.
Stripped Interest Rate: For each Group I Loan, the excess, if any, of
the Net Mortgage Rate for such Mortgage Loan over 6.750%. For each Group II
Mortgage Loan, the excess, if any, of the Net Mortgage Rate for such Mortgage
Loan over 6.500%.
Subordinate Certificate Pass-Through Rate: With respect to the
Subordinate Certificates, the Pass-Through Rate for each such Class of
Certificates set forth in the Preliminary Statement hereto.
Subordinate Certificates: The Class M and the Class B Certificates,
collectively.
Subordinate Liquidation Amount: With respect to any Distribution Date,
the excess, if any, of the aggregate Liquidation Principal for all Mortgage
Loans which became Liquidated Mortgage Loans during the Prior Period, over the
sum of the Group I Liquidation Amount and Group II Liquidation Amount for such
Distribution Date.
Subordinate Loan Group Component Balance: With respect to each Loan
Group on each Distribution Date, the excess, if any, of the aggregate Stated
Principal Balance of the Mortgage Loans in such Loan Group (less the applicable
Class I-PO or Class II-PO Fraction, as applicable, of any Class I-PO or Class
II-PO Mortgage Loan in such Loan Group) over the aggregate
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Certificate Principal Balance of the Class A Certificates of the related
Certificate Group, plus, in the case of Loan Group I, the aggregate Certificate
Principal Balance of the Residual Certificates.
Subordinate Percentage: For any Distribution Date, (i) for Loan Group I,
the excess of 100% over the Group I Percentage and (ii) for Loan Group II, the
excess of 100% over the Group II Percentage.
Subordinate Prepayment Percentage: For any Distribution Date, (i) for
Loan Group I, the excess of 100% over the Group I Prepayment Percentage and (ii)
for Loan Group II, the excess of 100% over the Group II Percentage; provided,
however, that if the Certificate Principal Balance of the Senior Certificates
(other than the Class PO Certificates) has been reduced to zero, then the
Subordinate Prepayment Percentage will equal 100%.
Subordinate Principal Distribution Amount: For any Distribution Date,
(A) the sum of (i) the Subordinate Percentage for Loan Group I of the Principal
Payment Amount for Loan Group I (exclusive of the portion thereof attributable
to the Class I-PO Principal Distribution Amount), (ii) the Subordinate
Percentage for Loan Group II of the Principal Payment Amount for Loan Group II
(exclusive of the portion thereof attributable to the Class II-PO Principal
Distribution Amount), (iii) the Subordinate Prepayment Percentage for Loan Group
I of the Principal Prepayment Amount for Loan Group I (exclusive of the portion
thereof attributable to the Class I-PO Principal Distribution Amount), (iv) the
Subordinate Prepayment Percentage for Loan Group II of the Principal Prepayment
Amount for Loan Group II (exclusive of the portion thereof attributable to the
Class II-PO Principal Distribution Amount) and (v) the Subordinate Liquidation
Amount minus (B) the sum of (x) the amounts required to be distributed to the
Class I-P and Class II-PO Certificates pursuant to Sections 4.02(a)(I)(a)(iv)
and 4.02(a)(I)(b)(iv) on such Distribution Date and (y) the amounts in respect
of principal paid from the Available Distribution Amount of an
Overcollateralized Group to an Undercollateralized Group pursuant to Section
4.02(a)(I)(c). Notwithstanding the foregoing, on any Distribution Date prior to
distributions on such date, if the Subordination Level for any Class of
Subordinate Certificates is less than such percentage as of the Cut-Off Date,
the pro rata share of the Subordinate Principal Prepayment Distribution Amount
(as defined below) otherwise allocable to the Class or Classes junior to such
Class will be allocated to the most senior Classes of Subordinate Certificates
for which the Subordination Level is less than such percentage as of the Cut-Off
Date and to the Class or Classes of Subordinate Certificates senior thereto, pro
rata according to the Certificate Principal Balances of such Classes.
Any reduction of the Subordinate Principal Distribution Amount for Loan
Group I or Loan Group II pursuant to clauses (x) and (y) above shall, in the
case of Loan Group I each first offset the amount calculated pursuant to clause
(i), second clause (v) and then clause (iii), and in the case of Loan Group II
each first offset the amount calculated pursuant to clause (ii), second clause
(v) and then clause (iv), in each case of the definition thereof. The portion of
the Subordinate Principal Distribution Amount described in clauses (iii) and
(iv) of the definition thereof, as reduced in accordance with the preceding
sentence if applicable, is referred to herein as the "Subordinate Principal
Prepayment Distribution Amount."
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Subordination Level: On any specified date, with respect to any Class of
Subordinate Certificates, the percentage obtained by dividing the sum of (i) the
aggregate Certificate Principal Balance of all Classes of Certificates which are
subordinate in right of payment to such Class by (ii) the sum of the aggregate
Certificate Principal Balances of all of the Certificates as of such date prior
to giving effect to distributions of principal or interest or allocations of
Realized Losses on the Mortgage Loans on such date. For purposes of this
definition, the relative seniority, from highest to lowest, of the Classes of
Subordinate Certificates shall be as follows: Class M, Class B-1, Class B-2,
Class B-3, Class B-4 and Class B-5.
Subserviced Mortgage Loan: Any Mortgage Loan that, at the time of
reference thereto, is subject to a Subservicing Agreement.
Subservicer: Any Person with whom the Master Servicer has entered into a
Subservicing Agreement.
Subservicer Servicing Advances: All customary and reasonable "out of
pocket" costs and expenses incurred in connection with a default, delinquency or
other unanticipated event by a Subservicer in the performance of its servicing
obligations as required by the related Subservicing Agreement, 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, and (iii) the management and liquidation of any REO Property; and
any amount that is stated herein to be a "Subservicer Servicing Advance."
Subservicing Account: An account established by a Subservicer in
accordance with Section 3.08.
Subservicing Agreement: The written contract between the Master Servicer
and any Subservicer relating to servicing and administration of certain Mortgage
Loans as provided in Section 3.02.
Targeted Principal Balance: With respect to any Distribution Date and
the Class IIA-5 Certificates, the Certificate Principal Balance of the Class
IIA-5 Certificates for such Distribution Date set forth in Exhibit R hereto.
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 REMICs due to their classifications as REMICs 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.
Transfer: Any direct or indirect transfer, sale, pledge, hypothecation
or other form of assignment of any Ownership Interest in a Certificate.
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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: The corpus of the trust created by this Agreement consisting
of all of the assets of the REMICs, including:
(i) the Mortgage Loans and the related Mortgage Files,
(ii) all payments on and collections in respect of the Mortgage Loans
due after the Cut-off Date,
(iii) property which secured a Mortgage Loan and which has been
acquired for the benefit of the Certificateholders by
foreclosure or deed in lieu of foreclosure,
(iv) the hazard insurance policies and Primary Insurance Policies, if
any, and certain proceeds thereof, and
(v) with respect to the Insured Certificates only, the Certificate
Insurance Policies.
Trustee Fee: With respect to each Mortgage Loan and each Distribution
Date, the per annum rate set forth in that certain letter agreement between Bank
of America National Trust and Savings Association and the Trustee (which shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust) payable from interest collections on such Mortgage
Loan.
Underwriter: Donaldson, Lufkin & Jenrette Securities Corporation, or its
successor in interest.
Uninsured Cause: Any cause of damage to property subject to a Mortgage
such that the complete restoration of such property is not fully reimbursable by
the hazard insurance policies.
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 or
trust whose income from sources without the United States is includible in gross
income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.
Unpaid Accrued Certificate Interest: With respect to each Distribution
Date and any Class of interest-bearing Certificates, any portion of the related
Accrued Certificate Interest remaining unpaid from any prior Distribution Date.
Voting Rights: The portion of the voting rights of all of the
Certificates which is allocated to any Certificate. 99.0% of all of the Voting
Rights shall be allocated among Holders
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of Certificates, respectively, other than the Residual Certificates, in
proportion to the outstanding Certificate Principal Balances of their respective
Certificates; 1% of all Voting Rights shall be allocated to the Holders of the
Residual Certificates, allocated among the Certificates of such Class in
accordance with their respective Percentage Interests.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of Mortgage Loans.
(a) The Depositor, concurrently with the execution and delivery hereof,
does hereby assign to the Trustee without recourse, all the right, title and
interest of the Depositor in and to the Mortgage Loans, including all interest
and principal received on or with respect to the Mortgage Loans after the
Cut-off Date (other than payments of principal and interest due on the Mortgage
Loans on or before the Cut-off Date) and its rights as purchaser under the
Mortgage Loan Purchase Agreements with each Seller. The Depositor, concurrently
with the execution and delivery hereof, does hereby assign to the Trustee
without recourse, all the right, title and interest of the Depositor in and to
the REMIC I Regular Interests for the benefit of the Certificateholders (other
than the Class R-I Certificateholders).
(b) In connection with such assignment, except as set forth in Section
2.01(c) below, the Depositor does hereby deliver to, and deposit with, the
Trustee, or to and with one or more Custodians, as the duly appointed agent or
agents of the Trustee, the following documents or instruments (or copies thereof
as permitted by this Section):
(i) The original Mortgage Note, endorsed in blank and
showing an unbroken chain of endorsements from the originator thereof to
the Person endorsing it in blank, or, in the event of any Mortgage Note,
the original of which was permanently lost or destroyed and has not been
replaced, a copy of a duplicate original of the Mortgage Note, together
with an original lost note affidavit from the originator of the related
Mortgage Loan stating that the original Mortgage Note was lost,
misplaced or destroyed, together with a copy of the related Mortgage
Note;
(ii) The original Mortgage with evidence of recording
indicated thereon or a copy of the Mortgage certified by the public
recording office in which such Mortgage has been recorded;
(iii) An original Assignment of the Mortgage in blank;
(iv) The original recorded assignment or assignments of the
Mortgage showing an unbroken chain of title from the originator thereof
to the Person assigning it in blank or a copy of such intervening
assignment or assignments of the Mortgage
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certified by the public recording office in which such assignment or
intervening assignments have been recorded;
(v) The original of each modification or assumption
agreement, if any, relating to such Mortgage Loan or a copy of each
modification or assumption agreement certified by the public recording
office in which such document has been recorded; and
(vi) The original mortgage title insurance policy, title
commitment, binder or attorney's opinion of title and abstract title,
which in each case may be a copy of the original thereof.
(c) In the event that in connection with any Mortgage Loan the Depositor
cannot deliver the Mortgage, any assignment, modification or assumption
agreement (or copy thereof certified by the public recording office) with
evidence of recording thereon concurrently with the execution and delivery of
this Agreement solely because of a delay caused by the public recording office
where such Mortgage, assignment, modification or assumption agreement has been
delivered for recordation, the Depositor shall deliver or cause to be delivered
to the Trustee or any respective Custodian a true and correct photocopy of such
Mortgage, assignment, modification or assumption agreement.
The Trustee or the Custodian, as the case may be, shall promptly
complete the endorsement in blank of each Mortgage Note and stamp each
Assignment referred to in Section 2.01(b) as follows: "Bankers Trust Company of
California, N.A., as Trustee for the benefit of the registered holders of BA
Mortgage Securities, Inc., Mortgage Pass-Through Certificates Series 1998-1" and
shall return such Assignments to the Depositor for recordation.
The Depositor shall promptly cause to be recorded in the appropriate
public office for real property records the Assignment referred to in clause
(iii) of Section 2.01(b), except in states where, in the Opinion of Counsel
(which Opinion of Counsel shall be at the expense of the Depositor) acceptable
to the Rating Agencies, the Certificate Insurer, the Trustee and the Master
Servicer, such recording is not required to protect the Trustee's interests in
the Mortgage Loan against the claim of any subsequent transferee or any
successor to or creditor of the Depositor or the originator of such Mortgage
Loan. If any Assignment is lost or returned unrecorded to the Depositor because
of any defect therein, the Depositor shall prepare a substitute Assignment or
cure such defect and cause such Assignment to be recorded in accordance with
this paragraph. The Depositor shall promptly deliver or cause to be delivered to
the Trustee or any respective Custodian such Mortgage or assignment, as
applicable (or copy thereof certified by the public recording office) with
evidence of recording indicated thereon upon receipt thereof from the public
recording office or from the related Subservicer.
(d) It is the express intent of the parties hereto that the conveyance
of the Mortgage Loans by the Depositor to the Trustee as provided in this
Agreement be construed as a sale of the Mortgage Loans by the Depositor to the
Trustee. It is, further, not the intention of the parties that such conveyance
be deemed a pledge of the Mortgage Loans by the Depositor to the Trustee to
secure a debt or other obligation of the Depositor. However, in the event,
notwithstanding the intent of the parties, the Mortgage Loans are held to be
property of the
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Depositor, or if for any reason this Agreement is held or deemed to create a
security interest in the Mortgage Loans, then, (a) this Agreement shall also be
deemed to be a security agreement within the meaning of Articles 8 and 9 of the
Uniform Commercial Code in effect in the applicable state; (b) the conveyance
provided for in this Agreement shall be deemed to be a grant by the Depositor to
the Trustee of a security interest in and to all of the Depositor's right,
title, and interest, whether now owned or hereafter acquired, in and to:
(I) All accounts, general intangibles, chattel paper,
instruments, documents, money, deposit accounts, certificates of
deposit, goods, letters of credit, advices of credit and
investment property consisting of, arising from or relating to
any of the property described in (v), (w), (x), (y) and (z)
below: (v) the Mortgage Loans, including all Qualified Mortgage
Loans and including the related Mortgage Note, the Mortgage, and
all distributions with respect to such Mortgage Loans and
Qualified Substitute Mortgage Loans payable on and after the
Cut-Off Date; (w) the Certificate Account and the Custodial
Account and all money or other property held therein; (x) amounts
paid or payable by the insurer under any insurance policy related
to any Mortgage Loan; (y) each Mortgage Loan Purchase Agreement;
and (z) any and all of any Seller's right, title and interest, if
any, whether now owned or hereafter acquired, in and to the
property described in clauses (v), (w) and (x) above granted by
such Seller to the Depositor pursuant to the related Mortgage
Loan Purchase Agreement;
(II) All accounts, general intangibles, chattel paper,
instruments, documents, money, deposit accounts, certificates of
deposit, goods, letters of credit, advices of credit, investment
property, and other rights arising from or by virtue of the
disposition of, or collections with respect to, or insurance
proceeds payable with respect to, or claims against other persons
with respect to, all or any part of the collateral described in
(I) above (including any accrued discount realized on liquidation
of any investment purchased at a discount); and
(III) All cash and non-cash proceeds of the collateral
described in (I) and (II) above.
(e) It is further the express intent of the parties hereto that the
conveyance of REMIC I Regular Interests to the Trustee by the Depositor as
provided in this Agreement be, and be construed as, an absolute sale of REMIC I
Regular Interests. It is, further, not the intention of the parties that such
conveyance be deemed a pledge of REMIC I Regular Interests by the Depositor to
the Trustee to secure a debt or other obligation of the Depositor. However, in
the event that, notwithstanding the intent of the parties, REMIC I Regular
Interests are held to be the property of the Depositor, or if for any other
reason this Agreement is held or deemed to create a security interest in REMIC I
Regular Interests, then, (a) this Agreement shall also be deemed to be a
security agreement within the meaning of Articles 8 and 9 of the Uniform
Commercial Code in effect in the applicable state; and (b) the conveyance
provided for in this Agreement shall be deemed to be a grant by the Depositor to
the Trustee of a security interest in and to all of the Depositor's right,
title, and interest, whether now owned or hereafter acquired, in and to:
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(I) All accounts, general intangibles, chattel paper,
instruments, documents, money, deposit accounts, certificates of
deposit, goods, letters of credit, advices of credit and
investment property consisting of, arising from or relating to
any of the property described below: The REMIC I Regular
Interests, including without limitation, all rights represented
thereby in and to: (a) the Mortgage Loans, including all
Qualified Mortgage Loans and including the related Mortgage Note,
the Mortgage, and all distributions with respect to such Mortgage
Loans and Qualified Substitute Mortgage Loans payable on and
after the Cut-Off Date; (b) the Certificate Account and the
Custodial Account and all money or other property held therein;
(c) amounts paid or payable by the insurer under any insurance
policy related to any Mortgage Loan; (d) each Mortgage Loan
Purchase Agreement; and (e) any and all of any Seller's right,
title and interest, if any, whether now owned or hereafter
acquired, in and to the property described in clauses (a), (b)
and (c) above granted by such Seller to the Depositor pursuant to
the related Mortgage Loan Purchase Agreement; (f) all property or
rights arising from or by virtue of the disposition of, or
collections with respect to, or insurance proceeds payable with
resect to, or claims against other persons with respect to, all
or any part of the collateral described in (a) through (e) above
(including any accrued discount realized on liquidation of any
investment purchased at a discount), and (g) all cash and
non-cash proceeds of the collateral described in (a) through (f)
above;
(II) All accounts, general intangibles, chattel paper,
instruments, documents, money, deposit accounts, certificates of
deposit, goods, letters of credit, advices of credit, investment
property, and other rights arising from or by virtue of the
disposition of, or collections with respect to, or insurance
proceeds payable with respect to, or claims against other persons
with respect to, all or any part of the collateral described in
(I) above (including any accrued discount realized on liquidation
of any investment purchased at a discount); and
(III) All cash and non-cash proceeds of the collateral
described in (I) and (II) above.
(f) The possession by the Trustee or its designee of the Mortgage Notes,
the Mortgages and such other goods, letters of credit, advices of credit,
instruments, money, documents, chattel paper or certificated securities shall be
deemed to be "possession by the secured party," or possession by a purchaser,
for purposes of perfecting the security interest pursuant to the Uniform
Commercial Code (including, without limitation, Sections 9-305 and 9-115
thereof) as in force in the relevant jurisdiction. Notifications to persons
holding such property, and acknowledgments, receipts or confirmations from
persons holding such property, shall be deemed to be notifications to, or
acknowledgments, receipts or confirmations from, securities intermediaries,
bailees or agents (as applicable) of, or person holding for the Trustee, or its
designee for the purpose of perfecting such security interest under applicable
law. In connection herewith, the Trustee shall have all of the rights and
remedies of a secured party and creditor under the Uniform Commercial Code as in
force in the relevant jurisdiction.
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The Depositor and, at the Depositor's direction, the Sellers and the
Trustee shall, to the extent consistent with this Agreement, take such
reasonable actions as may be necessary to ensure that, if this Agreement were
deemed to create a security interest in the Mortgage Loans, the REMIC I Regular
Interests, and the other property described above, 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.
Without limiting the generality of the foregoing, the Depositor shall prepare
and deliver to the Trustee not less than 15 days prior to any filing date and,
the Trustee shall sign and return to the Depositor for filing, at the expense of
the Depositor, all filings necessary to maintain the effectiveness of any
original filings necessary under the Uniform Commercial Code as in effect in any
jurisdiction to perfect the Trustee's security interest in or lien on the
Mortgage Loans, as evidenced by an Officer's Certificate of the Depositor,
including without limitation (x) continuation statements, and (y) such other
statements as may be occasioned by (1) any change of name of the Depositor or
the Trustee (such preparation and filing shall be at the expense of the Trustee,
if occasioned by a change in the Trustee's name), or (2) any change of location
of the place of business or the chief executive office of the Depositor.
Section 2.02. Acceptance by Trustee.
The Trustee acknowledges receipt (or, with respect to Mortgage Loans
subject to a Custodial Agreement, and based solely upon receipt or certification
executed by the Custodian and delivered to the Trustee, receipt by the
respective Custodian as the duly appointed agent of the Trustee) of the
documents referred to in Section 2.01(b)(i) through (vi) above and declares that
it, or a Custodian as its agent, holds and will hold such documents and the
other documents constituting a part of the Mortgage Files delivered to it, or a
Custodian as its agent, in trust for the use and benefit of all present and
future Certificateholders. Within 45 days following the Closing Date, the
Trustee or Custodian (such Custodian being so obligated under a Custodial
Agreement) agrees, for the benefit of the Certificateholders, to review each
Mortgage File delivered to it by the Depositor or Sellers to ascertain that (i)
the documents required to be delivered in the definition of Mortgage File are in
its possession; (ii) such documents have been reviewed by it and appear regular
on their face and relate to such Mortgage Loan; and (iii) based on its
examination and only as to the foregoing documents, the information set forth in
items (i)-(vi) of the definition of Mortgage Loan Schedule is correct. If the
Trustee or a Custodian, as the Trustee's agent, finds any document or documents
constituting a part of a Mortgage File to be missing or defective in any
material respect, the Trustee or the Custodian (such Custodian being so obliged
under a Custodial Agreement) shall promptly so notify the Depositor. Upon
completion of such review by the Trustee or the Custodian, as applicable, the
Trustee shall promptly deliver to the Depositor a certification in the form of
Exhibit P (if applicable, based solely upon receipt of a certificate from the
Custodian) with respect to the Mortgage Loans on the related Mortgage Loan
Schedule, with any exceptions listed on an attachment thereto. The Trustee shall
be under no duty or obligation to inspect, review or examine said documents,
instruments, certificates or other papers to verify (i) the validity, legality,
enforceability, sufficiency, due authorization, recordability or genuineness of
any document in any Mortgage File or of any of the Mortgage Loans or (ii) the
collectability, insurability, effectiveness or suitability of any such Mortgage
Loan.
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If the Trustee or a Custodian, as the Trustee's agent, finds any
document or documents constituting a part of a Mortgage File to be missing or
defective in any material respect, the Trustee or the Custodian, as applicable,
shall promptly so notify the Master Servicer and the Depositor. The Master
Servicer shall promptly notify the related Seller of such omission or defect and
request that such Seller correct or cure such omission or defect within 60 days
from the date the Master Servicer was notified of such omission or defect and,
if such Seller does not correct or cure such omission or defect within such
period, that such Seller purchase such Mortgage Loan from the Trust Fund at its
Purchase Price, in either case within 90 days from the date the Master Servicer
was notified of such omission or defect. The Purchase Price for any such
Mortgage Loan shall be deposited or caused to be deposited by the Master
Servicer in the Custodial Account maintained by it pursuant to Section 3.07 and,
upon receipt by the Trustee of written notification of such deposit signed by a
Servicing Officer, the Trustee or any Custodian, as the case may be, shall
release to the Master Servicer the related Mortgage File and the Trustee shall
execute and deliver such instruments of transfer or assignment prepared by the
Master Servicer, in each case without recourse, as shall be necessary to vest in
the Seller or its designee any Mortgage Loan released pursuant hereto and
thereafter such Mortgage Loan shall not be part of the Trust Fund. It is
understood and agreed that the obligation of the Seller to so cure or purchase
any Mortgage Loan as to which a material defect in or omission of a constituent
document exists shall constitute the sole remedy respecting such defect or
omission available to Certificateholders or the Trustee on behalf of
Certificateholders.
Section 2.03. Representations, Warranties and Covenants of the Master
Servicer.
The Master Servicer hereby represents and warrants to the Trustee for
the benefit of Certificateholders that:
(i) The Master Servicer is a federal savings bank duly
organized, validly existing and in good standing under the laws
governing its creation and existence and is or will be in compliance
with the laws of each state in which any Mortgaged Property serviced by
it is located to the extent necessary to ensure the enforceability of
each Mortgage Loan in accordance with the terms of this Agreement;
(ii) The execution and delivery of this Agreement by the
Master Servicer and its performance and compliance with the terms of
this Agreement will not violate its 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 in the breach of,
any material contract, agreement or other instrument to which it is a
party or which may be applicable to it or any of its assets;
(iii) This Agreement, assuming due authorization, execution
and delivery by the other parties hereto, constitutes a valid, legal and
binding obligation of the Master Servicer, enforceable against it in
accordance with the terms hereof subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting the
enforcement of creditors' rights generally or the rights of creditors of
banking institutions the accounts of which are insured by the Federal
Deposit Insurance Corporation or any other instrumentalities of the
federal government, and to general
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principles of equity, regardless of whether such enforcement is
considered in a proceeding in equity or at law;
(iv) The Master Servicer is not in default with respect to
any order or decree of any court or any order, regulation or demand of
any Federal, state, municipal or governmental agency, which default
might have consequences that would materially and adversely affect its
condition (financial or other), operations or properties or might have
consequences that would materially adversely affect its performance
hereunder;
(v) No litigation is pending or, to the best of the Master
Servicer's knowledge, threatened against the Master Servicer which would
prohibit its entering into this Agreement or which would adversely
affect the legality and validity of this Agreement or the Master
Servicer's performance of its obligations under this Agreement;
(vi) Subject to Section 4.04(c) hereof, the Master Servicer
will comply in all material respects in the performance of this
Agreement with all reasonable rules and requirements of each insurer
under each Required Insurance Policy; and
(vii) The Master Servicer has examined each existing, and will
examine each new, Subservicing Agreement and is or will be familiar with
the terms thereof. The terms of each existing Subservicing Agreement and
each designated Subservicer are acceptable to the Master Servicer and
any new Subservicing Agreements will comply with the provisions of
Section 3.02.
It is understood and agreed that the representations and warranties set forth in
this Section 2.03 shall survive delivery of the respective Mortgage Files to the
Trustee or any Custodian.
Section 2.04. Representations and Warranties of Sellers.
The Depositor hereby assigns to the Trustee for the benefit of
Certificateholders all of its right, title and interest in respect of the
Mortgage Loan Purchase Agreement applicable to each Mortgage Loan. Insofar as
such Seller's Mortgage Loan Purchase Agreement relates to the representations
and warranties made by the related Seller in respect of such Mortgage Loan and
any remedies provided thereunder for any breach of such representations and
warranties, such right, title and interest may be enforced by the Master
Servicer on behalf of the Trustee and the Certificateholders or by the Trustee
if the Master Servicer is the applicable Seller. Upon the discovery by the
Depositor, the Master Servicer, the Trustee or any Custodian of a breach of any
of the representations and warranties made in a Mortgage Loan Purchase Agreement
(which, for purposes hereof, will be deemed to include any other cause giving
rise to a repurchase obligation under the Mortgage Loan Purchase Agreement) in
respect of any Mortgage Loan which materially and adversely affects the
interests of the Certificateholders in such Mortgage Loan, the party discovering
such breach shall give prompt written notice to the other parties (any Custodian
being so obligated under a Custodial Agreement). The Master Servicer shall
promptly notify the related Seller of such breach and request that such Seller
either (i) cure such breach in all material respects within 90 days from the
date the Master Servicer was notified of such breach or (ii) purchase such
Mortgage Loan from the Trust Fund at the Purchase
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Price and in the manner set forth in Section 2.02; provided that such Seller
shall have the option to substitute a Qualified Substitute Mortgage Loan or
Loans for such Mortgage Loan if such substitution occurs within two years
following the Closing Date, except that if the breach would cause the Mortgage
Loan to be other than a "qualified mortgage" as defined in Section 860G(a)(3) of
the Code, any such substitution must occur within 90 days from the date the
Master Servicer was notified of the breach if such 90 day period expires before
two years following the Closing Date. In the event that the applicable Seller
elects to substitute a Qualified Substitute Mortgage Loan or Loans for a Deleted
Mortgage Loan pursuant to this Section 2.04, such Seller shall deliver to the
Trustee or the Custodian, as the case may be, for the benefit of the
Certificateholders with respect to such Qualified Substitute Mortgage Loan or
Loans, the original Mortgage Note, the Mortgage, an Assignment of the Mortgage
in recordable form, and such other documents and agreements as are required by
Section 2.01, with the Mortgage Note endorsed as required by Section 2.01. No
substitution will be made in any calendar month after the Determination Date for
such month. Monthly Payments due with respect to Qualified Substitute Mortgage
Loans in the month of substitution shall not be part of the Trust Fund and will
be retained by the Master Servicer and remitted by the Master Servicer to the
related Seller on the next succeeding Distribution Date. For the month of
substitution, distributions to Certificateholders will include the Monthly
Payment due on a Deleted Mortgage Loan for such month and thereafter the related
Seller shall be entitled to retain all amounts received in respect of such
Deleted Mortgage Loan. The Master Servicer shall amend or cause to be amended
the Mortgage Loan Schedule for the benefit of the Certificateholders to reflect
the removal of such Deleted Mortgage Loan and the substitution of the Qualified
Substitute Mortgage Loan or Loans and the Master Servicer shall deliver the
amended Mortgage Loan Schedule to the Trustee. Upon such substitution, the
Qualified Substitute Mortgage Loan or Loans shall be subject to the terms of
this Agreement and any related Subservicing Agreement in all respects, the
related Seller shall be deemed to have made the representations and warranties
with respect to the Qualified Substitute Mortgage Loan contained in the related
Mortgage Loan Purchase Agreement as of the date of substitution.
In connection with the substitution of one or more Qualified Substitute
Mortgage Loans for one or more Deleted Mortgage Loans, the Master Servicer will
determine the amount (if any) by which the aggregate principal balance of all
such Qualified Substitute Mortgage Loans as of the date of substitution is less
than the aggregate Stated Principal Balance of all such Deleted Mortgage Loans
(in each case after application of the principal portion of the Monthly Payments
due in the month of substitution that are to be distributed to
Certificateholders in the month of substitution) and promptly shall collect such
amounts from the applicable Seller. The Master Servicer shall deposit the amount
of such shortfall into the Custodial Account on the day of substitution. The
Master Servicer shall give notice in writing to the Trustee of such event, which
notice shall be accompanied by an Officers' Certificate as to the calculation of
such shortfall and by an Opinion of Counsel to the effect that such substitution
will not cause (a) any federal tax to be imposed on either REMIC, including
without limitation, any federal tax imposed on "prohibited transactions" under
Section 860F(a)(1) of the Code or on "contributions after the start up date"
under Section 860G(d)(1) of the Code or (b) any portion of either REMIC to fail
to qualify as a REMIC at any time that any Certificate is outstanding.
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It is understood and agreed that the obligation of the applicable Seller
to cure such breach or purchase (or to substitute for) such Mortgage Loan as to
which such a breach has occurred and is continuing shall constitute the sole
remedy respecting such breach available to Certificateholders or the Trustee on
behalf of Certificateholders. If the Master Servicer is the related Seller, then
the Trustee shall also have the right to give the notification and require the
purchase or substitution provided for in the second preceding paragraph in the
event of such a breach of a representation or warranty made by the related
Seller in the applicable Mortgage Loan Purchase Agreement. In connection with
the purchase of or substitution for any such Mortgage Loan by the related
Seller, the Trustee shall assign to the related Seller all of the right, title
and interest in respect of the Mortgage Loan Purchase Agreement applicable to
such Mortgage Loan.
Section 2.05. Issuance of Certificates Evidencing Interests in the Trust
Fund.
The Trustee acknowledges the assignment to it of the Mortgage Loans and
the delivery of the Mortgage Files to it, or any Custodian on its behalf,
subject to any exceptions noted in the 45 day review (such exceptions based
solely upon receipt by the Trustee of a certificate from the Custodian, if
applicable), together with the assignment to it of all other assets included in
the Trust Fund, receipt of which is hereby acknowledged. Concurrently with such
delivery and in exchange therefor, the Trustee, pursuant to the written request
of the Depositor, executed by an officer of the Depositor, has executed and
caused to be authenticated and delivered to or upon the order of the Depositor
the Certificates in authorized denominations which evidence ownership of the
Trust Fund. The rights of the Certificateholders to receive distributions from
the proceeds of the Trust Fund in respect of the Certificates, and all ownership
interests of the Certificateholders in such distributions, shall be as set forth
in this Agreement.
ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
Section 3.01. Master Servicer to Act as Servicer.
(a) The Master Servicer shall service and administer the Mortgage Loans
in accordance with the terms of this Agreement and the respective Mortgage Loans
and shall have full power and authority, acting alone or through Subservicers as
provided in Section 3.02, to do any and all things which it may deem necessary
or desirable in connection with such servicing and administration. Without
limiting the generality of the foregoing, the Master Servicer in its own name or
in the name of a Subservicer is hereby authorized and empowered by the Trustee
when the Master Servicer or the Subservicer, as the case may be, believes it
appropriate in its best judgment, to execute and deliver, on behalf of the
Certificateholders and the Trustee or any of them, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge, or of
consent to assumption or modification in connection with a proposed conveyance,
or of assignment of any Mortgage and Mortgage Note in connection with the
repurchase of a Mortgage Loan and all other comparable instruments, or with
respect to the
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modification or re-recording of a Mortgage for the purpose of correcting the
Mortgage, the subordination of the lien of the Mortgage in favor of a public
utility company or government agency or unit with powers of eminent domain, the
taking of a deed in lieu of foreclosure, the completion of judicial or
non-judicial foreclosure, the conveyance of a Mortgaged Property to an Insurer,
the acquisition of any property acquired by foreclosure or deed in lieu of
foreclosure, or the management, marketing and conveyance of any property
acquired by foreclosure or deed in lieu of foreclosure with respect to the
Mortgage Loans and with respect to the Mortgaged Properties. Notwithstanding the
foregoing, subject to Section 3.07(a), the Master Servicer shall not permit any
modification with respect to any Mortgage Loan that would both constitute a sale
or exchange of such Mortgage Loan within the meaning of Section 1001 of the Code
and any proposed, temporary or final regulations promulgated thereunder (other
than in connection with a proposed conveyance or assumption of such Mortgage
Loan that is treated as a Principal Prepayment in Full pursuant to Section
3.13(d) hereof) and cause either REMIC I or REMIC II to fail to qualify as a
REMIC under the Code. The Trustee shall furnish the Master Servicer with any
powers of attorney and other documents necessary or appropriate to enable the
Master Servicer to service and administer the Mortgage Loans within five
Business Days of receipt of request therefor from the Master Servicer. The
Trustee shall not be liable for any action taken by the Master Servicer or any
Subservicer pursuant to such powers of attorney.
(b) All costs incurred by the Master Servicer or by Subservicers in
effecting the timely payment of taxes and assessments on the properties subject
to the Mortgage Loans shall not, for the purpose of calculating monthly
distributions to Certificateholders, be added to the amount owing under the
related Mortgage Loans, notwithstanding that the terms of such Mortgage Loan so
permit, and such costs shall be treated as Servicing Advances or Subservicer
Servicing Advances and shall be recoverable to the extent permitted by Section
3.10(a).
Section 3.02. Subservicing Agreements Between Master Servicer and
Subservicers; Enforcement of Subservicers' and Sellers'
Obligations; Special Servicing Agreements.
(a) The Master Servicer may continue in effect Subservicing Agreements
entered into by Sellers and Subservicers prior to the execution and delivery of
this Agreement, and may enter into new Subservicing Agreements with
Subservicers, for the servicing and administration of all or some of the
Mortgage Loans it services. Each Subservicer of a Mortgage Loan shall be
entitled to receive and retain, as provided in the related Subservicing
Agreement and in Section 3.07, the related Primary Servicing Fee from payments
of interest received on such Mortgage Loan after payment of all amounts required
to be remitted to the Master Servicer in respect of such Mortgage Loan. Unless
the context otherwise requires, references in this Agreement to actions taken or
to be taken by the Master Servicer in servicing the Mortgage Loans include
actions taken or to be taken by a Subservicer on behalf of the Master Servicer.
Each Subservicing Agreement will be upon such terms and conditions as are not
inconsistent with this Agreement and as the Master Servicer and the Subservicer
have agreed. With the approval of the Master Servicer, a Subservicer may
delegate its servicing obligations to third-party servicers, but such
Subservicer will remain obligated under the related Subservicing Agreement.
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(b) As part of its servicing activities hereunder, the Master Servicer,
for the benefit of the Trustee and the Certificateholders, shall use its best
reasonable efforts to enforce the obligations of each Subservicer under the
related Subservicing Agreement and of each Seller under the related Mortgage
Loan Purchase Agreement, to the extent that the non-performance of any such
obligation would have a material and adverse effect on a Mortgage Loan,
including, without limitation, the obligation to purchase a Mortgage Loan on
account of defective documentation, as described in Section 2.02, or on account
of a breach of a representation or warranty, as described in Section 2.04. Such
enforcement, including, without limitation, the legal prosecution of claims,
termination of Subservicing Agreements or Mortgage Loan Purchase Agreements, as
appropriate, 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
would employ in its good faith business judgment and which are normal and usual
in its general mortgage servicing activities. The Master Servicer shall pay the
costs of such enforcement at its own expense, and shall be reimbursed therefor
only (i) from a general recovery resulting from such enforcement to the extent,
if any, that such recovery exceeds all amounts due in respect of the related
Mortgage Loan or (ii) from a specific recovery of costs, expenses or attorneys
fees against the party against whom such enforcement is directed.
(c) The Master Servicer may enter into a special servicing agreement
with an unaffiliated Holder of a 100% Percentage Interest of a Class of Class B
Certificates or a holder of a class of securities representing a 100% Percentage
Interest in a Class of Class B Certificates, such agreement to be substantially
in the form of Exhibit S hereto, or, subject to each Rating Agency's
acknowledgment that the ratings of the Certificates in effect immediately prior
to the entering into of such agreement would not be qualified (except for
possible upgrading) as a result of such agreement, as agreed by the Master
Servicer and such Class B Holder. Any such agreement may contain provisions
whereby such Holder may instruct the Master Servicer to commence or delay
foreclosure proceedings with respect to delinquent Mortgage Loans and will
contain provisions for the deposit of cash by the Holder that would be available
for distribution to Certificateholders if Liquidation Proceeds are less than
they otherwise may have been had the Master Servicer acted in accordance with
its normal procedures.
Section 3.03. Successor Subservicers.
The Master Servicer shall be entitled to terminate any Subservicing
Agreement that may exist in accordance with the terms and conditions of such
Subservicing Agreement and without any limitation by virtue of this Agreement;
provided, however, that in the event of termination of any Subservicing
Agreement by the Master Servicer or the Subservicer, the Master Servicer shall
either act as servicer of the related Mortgage Loan or enter into a Subservicing
Agreement with a successor Subservicer which will be bound by the terms of the
related Subservicing Agreement. If the Master Servicer or any Affiliate of the
Master Servicer acts as servicer, it will not assume liability for the
representations and warranties of the Subservicer which it replaces. If the
Master Servicer enters into a Subservicing Agreement with a successor
Subservicer, the Master Servicer shall use reasonable efforts to have the
successor Subservicer assume liability for the representations and warranties
made by the terminated Subservicer in respect of the related Mortgage Loans and,
in the event of any such assumption by the successor
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Subservicer, the Master Servicer may, in the exercise of its business judgment,
release the terminated Subservicer from liability for such representations and
warranties.
Any Subservicing Agreement shall include the provision that such
agreement may be immediately terminated by the Trustee 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 hereunder
(including termination due to an Event of Default).
Section 3.04. Liability of the Master Servicer.
Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Master
Servicer or a Subservicer or reference to actions taken through a Subservicer or
otherwise, the Master Servicer shall remain obligated and liable to the Trustee
and Certificateholders 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 Subservicing Agreements or
arrangements or by virtue of indemnification from the Subservicer or the
Depositor 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
Subservicer for indemnification of the Master Servicer and nothing contained in
this Agreement shall be deemed to limit or modify such indemnification.
Section 3.05. No Contractual Relationship Between Subservicer and
Trustee or Certificateholders.
Any Subservicing Agreement that may be entered into and any other
transactions or services relating to the Mortgage Loans involving a Subservicer
in its capacity as such and not as an originator shall be deemed to be between
such Subservicer and the Master Servicer alone and the Trustee and
Certificateholders shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to the Subservicer in
its capacity as such except as set forth in Section 3.06.
Section 3.06. Assumption or Termination of Subservicing Agreements by
Trustee.
(a) In the event the Master Servicer shall for any reason no longer be
the master servicer hereunder (including by reason of an Event of Default), the
Trustee, its designee or its successor shall thereupon assume, at its sole
discretion, all of the rights and obligations of the Master Servicer under each
Subservicing Agreement that may have been entered into. If the Trustee so
elects, the Trustee, its designee or the successor servicer for the Trustee
shall be deemed to have assumed all of the Master Servicer's interest therein
and to have replaced the Master Servicer as a party to the Subservicing
Agreement to the same extent as if the Subservicing Agreement had been assigned
to the assuming party except that the Master Servicer shall not thereby be
relieved of any liability or obligations under the Subservicing Agreement.
(b) The outgoing Master Servicer shall promptly, upon request of the
Trustee but at the expense of the Master Servicer, deliver to the assuming party
all documents and records
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relating to each Subservicing Agreement and the Mortgage Loans then being
serviced and an accounting of amounts collected and held by it and otherwise use
its best efforts to effect the orderly and efficient transfer of each
Subservicing Agreement to the assuming party.
Section 3.07. Collection of Certain Mortgage Loan Payments; Deposits to
Custodial Account.
(a) The Master Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans, and
shall, to the extent such procedures shall be consistent with this Agreement and
the terms and provisions of any related Primary Mortgage Insurance Policy,
follow such collection procedures as it would employ in its good faith business
judgment and which are normal and usual in its general mortgage servicing
activities. Consistent with the foregoing, the Master Servicer may in its
discretion (i) waive payments of interest or principal, (ii) accept a deed in
lieu of foreclosure, (iii) waive any late payment charge or any prepayment
charge or penalty interest in connection with the prepayment of a Mortgage Loan
and (iv) extend the Due Date for payments due on a Mortgage Loan; provided,
however, that the Master Servicer shall first determine that any such waiver or
extension will not impair the coverage of any related Primary Mortgage Insurance
Policy or materially adversely affect the lien of the related Mortgage. Subject
in all instances to the provisions of Section 4.04(c), the Master Servicer must
continue to make Advances as set forth herein without regard to any such waiver
or indulgence, in accordance with the original terms of the Mortgage Loan.
Consistent with the terms of this Agreement, the Master Servicer may also waive,
modify or vary any term of a Mortgage Loan or consent to the postponement of
strict compliance with any such term or in any manner grant indulgence to any
Mortgagor if in the Master Servicer's determination such waiver, modification,
postponement or indulgence is not materially adverse to the interests of the
Certificateholders; provided, however, that the Master Servicer may not modify
materially or permit any Subservicer to modify a Mortgage Loan, including
without limitation any modification that would change the Mortgage Rate, forgive
the payment of any principal or interest (unless in connection with the
liquidation of the related Mortgage Loan or except in connection with
prepayments to the extent that such reamortization is not inconsistent with the
terms of such Mortgage Loan), or extend the final maturity date of such Mortgage
Loan, unless such Mortgage Loan is in default or, in the judgment of the Master
Servicer, such default is reasonably foreseeable.
(b) The Master Servicer shall establish and maintain a Custodial Account
in which the Master Servicer shall deposit or cause to be deposited on a daily
basis, except as otherwise specifically provided herein, the following payments
and collections remitted by Subservicers or received by it in respect of the
Mortgage Loans subsequent to the Cut-off Date (other than in respect of
principal and interest on the Mortgage Loans due on or before the Cut-off Date):
(i) All payments on account of principal, including
Principal Prepayments made by Mortgagors on the Mortgage Loans and the
principal component of any REO Proceeds received in connection with an
REO Property for which an REO Disposition has occurred;
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(ii) All payments on account of interest on the Mortgage Loans,
including Buydown Funds, if any, and the interest component of any REO
Proceeds received in connection with an REO Property for which an REO
Disposition has occurred, less any applicable Primary Servicing Fee;
(iii) Insurance Proceeds and Liquidation Proceeds (net of any
related expenses of the Subservicer);
(iv) All proceeds of any Mortgage Loans purchased pursuant to
Section 2.02 or 2.04 and all amounts required to be deposited in
connection with the substitution of a Qualified Substitute Mortgage Loan
pursuant to Section 2.04;
(v) Any amounts required to be deposited pursuant to Section
3.07(c) or 3.20; and
(vi) All amounts transferred from the Certificate Account to the
Custodial Account in accordance with Section 4.02(a).
The foregoing requirements for deposit in the Custodial Account shall be
exclusive, it being understood and agreed that, without limiting the generality
of the foregoing, payments on the Mortgage Loans which are not part of the Trust
Fund (consisting of payments in respect of principal and interest on the
Mortgage Loans due on or before the Cut-off Date) and payments or collections in
the nature of prepayment charges or late payment charges or assumption fees may
but need not be deposited by the Master Servicer in the Custodial Account. In
the event any amount not required to be deposited in the Custodial Account is so
deposited by the Master Servicer, the Master Servicer may at any time withdraw
such amount from the Custodial Account, any provision herein to the contrary
notwithstanding. The Custodial Account may contain funds that belong to one or
more trust funds created for mortgage pass-through certificates of other series
and may contain other funds respecting payments on mortgage loans belonging to
the Master Servicer or serviced or master serviced by them on behalf of others.
Notwithstanding such commingling of funds, the Master Servicer shall keep
records that accurately reflect the funds on deposit in the Custodial Account
that have been identified by it as being attributable to the Mortgage Loans.
(c) The Master Servicer may cause the institution maintaining the
Custodial Account to invest the funds in the Custodial Account attributable to
the Mortgage Loans in Permitted Investments which shall mature not later than
the Certificate Account Deposit Date next following the date of such investment
(with the exception of the Amount Held for Future Distribution) and which shall
not be sold or disposed of prior to their maturities. All income and gain
realized from any such investment shall be for the benefit of the Master
Servicer as additional servicing compensation and shall be subject to its
withdrawal or order from time to time. The amount of any losses incurred in
respect of any such investments attributable to the investment of amounts in
respect of the Mortgage Loans shall be deposited in the Custodial Account by the
Master Servicer out of its own funds immediately as realized, without right of
reimbursement.
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(d) The Master Servicer shall give notice to the Trustee and the
Depositor of any change in the location of the Custodial Account.
Section 3.08. Subservicing Accounts; Servicing Accounts.
(a) In those cases where a Subservicer is servicing a Mortgage Loan
pursuant to a Subservicing Agreement, the Master Servicer shall cause the
Subservicer, pursuant to the Subservicing Agreement, to establish and maintain
one or more Subservicing Accounts which shall be an Eligible Account or, if such
account is not an Eligible Account, shall be otherwise acceptable to the Master
Servicer and each Rating Agency. The Subservicer will be required thereby to
deposit into the Subservicing Account on a daily basis all proceeds of the
Mortgage Loans received by the Subservicer, less its Primary Servicing Fees and
unreimbursed advances and expenses, to the extent permitted hereby and by the
Subservicing Agreement. The Master Servicer shall be deemed to have received
such monies upon receipt thereof by the Subservicer. The Subservicer shall not
be required to deposit in the Subservicing Account payments or collections in
the nature of prepayment charges or late charges or assumption fees. On or
before the date specified in the Subservicing Agreement, but in no event later
than the Determination Date, the Master Servicer shall cause the Subservicer,
pursuant to the Subservicing Agreement, to remit to the Master Servicer for
deposit in the Custodial Account all funds held in the Subservicing Account with
respect to each Mortgage Loan serviced by such Subservicer that are required to
be remitted to the Master Servicer.
(b) In addition to the Custodial Account, the Master Servicer shall for
any Nonsubserviced Mortgage Loan, and shall cause the Subservicers for
Subserviced Mortgage Loans to, establish and maintain one or more Servicing
Accounts and deposit and retain therein all collections from the Mortgagors (or
advances from Subservicers) for the payment of taxes, assessments, hazard
insurance premiums, Primary Mortgage Insurance Policy premiums, if applicable,
or comparable items for the account of the Mortgagors. Each Servicing Account
shall satisfy the requirements for a Subservicing Account and, to the extent
acceptable to the Master Servicer, may also function as a Subservicing Account.
Withdrawals of amounts related to the Mortgage Loans from the Servicing Accounts
may be made only to effect timely payment of taxes, assessments, hazard
insurance premiums, Primary Mortgage Insurance Policy premiums, if applicable,
or comparable items, to reimburse the Master Servicer or Subservicer out of
related collections for any payments made pursuant to Sections 3.11 (with
respect to the Primary Mortgage Insurance Policy) and 3.12(a) (with respect to
hazard insurance), to refund to any Mortgagors any sums as may be determined to
be overages, to pay interest, if required, to Mortgagors on balances in the
Servicing Account or to clear and terminate the Servicing Account at the
termination of this Agreement in accordance with Section 9.01. As part of its
servicing duties, the Master Servicer shall, and the Subservicers will, pursuant
to the Subservicing Agreements, be required to pay to the Mortgagors interest on
funds in this account to the extent required by law.
(c) Subject to the provisions of Section 4.04(c) hereof, the Master
Servicer shall advance as a Servicing Advance the payments for taxes, premiums
or other costs referred to in the preceding subsection that are not timely paid
by the Mortgagors or advanced by the Subservicers as a Subservicer Servicing
Advance to the same extent as the Master Servicer
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would advance such payments on loans similar to the Mortgage Loans that the
Master Servicer owns.
Section 3.09. Access to Certain Documentation and Information Regarding
the Mortgage Loans.
In the event that compliance with this Section 3.09 shall make any Class
of Certificates legal for investment by federally insured savings associations,
the Master Servicer shall provide, or cause the Subservicers to provide, to the
Trustee, the Office of Thrift Supervision or the FDIC and the supervisory agents
and examiners thereof access to the documentation regarding the Mortgage Loans
required by applicable regulations of the Office of Thrift Supervision, such
access being afforded without charge but only upon reasonable request and during
normal business hours at the offices designated by the Master Servicer. The
Master Servicer shall permit such representatives to photocopy any such
documentation and shall provide equipment for that purpose at a charge
reasonably approximating the cost of such photocopying to the Master Servicer.
Section 3.10. Permitted Withdrawals.
(a) The Master Servicer may, from time to time as provided herein, make
withdrawals from the Custodial Account of amounts on deposit therein pursuant to
Section 3.07 that are attributable to the Mortgage Loans for the following
purposes:
(i) to reimburse itself or the related Subservicer for
previously unreimbursed advances or expenses made pursuant to Sections
3.01(b), 3.08(c), 3.11, 3.12(a), 3.14 and 4.04 or otherwise reimbursable
pursuant to the terms of this Agreement, such withdrawal right being
limited to amounts received on particular Mortgage Loans (including, for
this purpose, REO Proceeds, Insurance Proceeds, Liquidation Proceeds and
proceeds from the purchase of a Mortgage Loan pursuant to Section 2.02
or 2.04) which represent (A) Late Collections of Monthly Payments for
which any such advance was made in the case of Advances pursuant to
Section 4.04 and (B) late recoveries of the payments for which such
advances were made in the case of Servicing Advances;
(ii) to pay to itself the Master Servicing Fee (if not
previously retained by the Master Servicer) and to the related
Subservicer (if not previously retained by such Subservicer) the Primary
Servicing Fee;
(iii) to remit funds to the Trustee for deposit into the
Certificate Account in the amounts and in the manner provided for in
Section 4.01;
(iv) to pay to itself as additional servicing compensation
any interest or investment income earned on funds deposited in the
Custodial Account that it is entitled to withdraw pursuant to Section
3.07(c);
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(v) to pay to itself as additional servicing compensation any
Foreclosure Profits;
(vi) to pay to itself, a Seller, the Depositor or any other
appropriate Person, as the case may be, with respect to each Mortgage
Loan or property acquired in respect thereof that has been purchased or
otherwise transferred pursuant to Section 2.02, 2.04 or 9.01, all
amounts received thereon and not required to be distributed to
Certificateholders as of the date on which the related Stated Principal
Balance or Purchase Price is determined;
(vii) to reimburse itself or any Subservicer for any
Nonrecoverable Advance or Nonrecoverable Subservicer Advances in the
manner and to the extent provided in subsection (c) below or any Advance
reimbursable to the Master Servicer pursuant to Section 4.02(a);
(viii) to reimburse itself, the Depositor or the REMIC
Administrator for expenses incurred by and reimbursable to it, the
Depositor or the REMIC Administrator pursuant to Sections 3.13, 3.14(c),
6.03 or 10.01;
(ix) to reimburse itself for amounts expended by it (a)
pursuant to Section 3.14 in good faith in connection with the
restoration of property damaged by an Uninsured Cause, and (b) in
connection with the liquidation of a Mortgage Loan or disposition of an
REO Property to the extent not otherwise reimbursed pursuant to clause
(i) or (viii) above;
(x) to withdraw any amount deposited in the Custodial
Account that was not required to be deposited therein pursuant to
Section 3.07; and
(xi) to clear and terminate the Custodial Account pursuant to
Section 9.01.
(b) The Master Servicer shall keep and maintain separate accounting, on
a Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Custodial Account pursuant to clauses (i), (ii), (v) and
(vi) above.
(c) The Master Servicer shall be entitled to reimburse itself or the
related Subservicer for any Advance or Servicing Advance or Subservicer
Servicing Advance made in respect of a Mortgage Loan that the Master Servicer
determines in its sole discretion to be a Nonrecoverable Advance or a
Nonrecoverable Subservicer Advance by withdrawal from the Custodial Account,
prior to any other withdrawals therefrom, of amounts on deposit therein on any
Certificate Account Deposit Date succeeding the date of such determination.
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Section 3.11. Maintenance of the Primary Insurance Policies; Collections
Thereunder.
(a) Subject to Section 4.04(c) hereof, the Master Servicer shall not
take, or permit any Subservicer to take, any action which would result in
non-coverage under any applicable Primary Mortgage Insurance Policy of any loss
which, but for the actions of the Master Servicer or Subservicer, would have
been covered thereunder. To the extent coverage is available, the Master
Servicer shall keep or cause to be kept in full force and effect each such
Primary Mortgage Insurance Policy until the principal balance of the related
Mortgage Loan secured by a Mortgaged Property is reduced to 80% or less of the
Appraised Value in the case of such a Mortgage Loan having a Loan-to-Value Ratio
at origination in excess of 80%, provided that such Primary Mortgage Insurance
Policy was in place as of the Cut-off Date and the Depositor had knowledge of
such Primary Mortgage Insurance Policy. Except with respect to the Mortgage
Loans listed on Exhibit M, in the event that the Depositor gains knowledge that
as of the Closing Date, a Mortgage Loan had a Loan-to-Value Ratio at origination
in excess of 80% and is not the subject of a Primary Mortgage Insurance Policy
and that such Mortgage Loan has a current Loan-to-Value Ratio in excess of 80%,
then the Master Servicer shall or use its reasonable efforts to obtain and
maintain a Primary Mortgage Insurance Policy to the extent that such a policy is
obtainable at a reasonable price. The Master Servicer shall not cancel or refuse
to renew any such Primary Mortgage Insurance Policy applicable to a
Nonsubserviced Mortgage Loan, or consent to any Subservicer canceling or
refusing to renew any such Primary Mortgage Insurance Policy applicable to a
Mortgage Loan subserviced by it, that is in effect at the date of the initial
issuance of the Certificates and is required to be kept in force hereunder
unless the replacement Primary Mortgage Insurance Policy for such canceled or
non-renewed policy is maintained with an insurer whose claims-paying ability is
acceptable to each Rating Agency for mortgage pass-through certificates having a
rating equal to or better than the lower of the then-current rating or the
rating assigned to the Certificates as of the Closing Date by such Rating
Agency. Any premium on a Primary Mortgage Insurance Policy paid by the Master
Servicer or a Subservicer from its own funds shall constitute a Servicing
Advance or a Subservicer Servicing Advance, as the case may be, hereunder.
(b) In connection with its activities as administrator and servicer of
the Mortgage Loans the Master Servicer agrees to present or to cause the related
Subservicer to present, on behalf of the Master Servicer, the Subservicer, if
any, the Trustee and Certificateholders, claims to the Insurer under any Primary
Insurance Policies, in a timely manner in accordance with such policies, and, in
this regard, to take or cause to be taken, subject to Section 4.04(c) hereof,
such reasonable action as shall be necessary to permit recovery under any
Primary Insurance Policies respecting defaulted Mortgage Loans. Pursuant to
Section 3.07, any Insurance Proceeds collected by or remitted to the Master
Servicer under any Primary Insurance Policies shall be deposited in the
Custodial Account, subject to withdrawal pursuant to Section 3.10.
Section 3.12. Maintenance of Fire Insurance and Omissions and Fidelity
Coverage.
(a) The Master Servicer shall cause to be maintained for each Mortgage
Loan fire insurance with extended coverage in an amount which is equal to the
lesser of the principal balance owing on such Mortgage Loan or 100 percent of
the insurable value of the improvements; provided, however, that such coverage
may not be less than the minimum amount
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required to fully compensate for any loss or damage on a replacement cost basis.
To the extent it may do so without breaching the related Subservicing Agreement,
the Master Servicer shall replace any Subservicer that does not cause such
insurance, to the extent it is available, to be maintained. The Master Servicer
shall also cause to be maintained on property acquired upon foreclosure, or deed
in lieu of foreclosure, of any Mortgage Loan, fire insurance with extended
coverage in an amount which is at least equal to the amount necessary to avoid
the application of any co-insurance clause contained in the related hazard
insurance policy. Pursuant to Section 3.07, any amounts collected by the Master
Servicer under any such policies (other than amounts to be applied to the
restoration or repair of the related Mortgaged Property or property thus
acquired or amounts released to the Mortgagor in accordance with the Master
Servicer's normal servicing procedures) shall be deposited in the Custodial
Account, subject to withdrawal pursuant to Section 3.10. Any cost incurred by
the Master Servicer or any Subservicer in maintaining any insurance described in
this Section 3.12(a) shall not, for the purpose of calculating monthly
distributions to Certificateholders, be added to the amount owing under the
Mortgage Loan, notwithstanding that the terms of the Mortgage Loan so permit,
but shall be treated as a Servicing Advance or Subservicer Servicing Advance, as
applicable. Such costs shall be recoverable by the Master Servicer or the
Subservicer out of related late payments by the Mortgagor or out of Insurance
Proceeds and Liquidation Proceeds to the extent permitted by Section 3.10 and
otherwise as permitted by Section 3.10(a). It is understood and agreed that no
earthquake or other additional insurance is to be required of any Mortgagor or
maintained on property acquired in respect of a Mortgage Loan other than
pursuant to such applicable laws and regulations as shall at any time be in
force and as shall require such additional insurance. When the improvements
securing a Mortgage Loan are located at the time of origination of such Mortgage
Loan in a federally designated special flood hazard area, the Master Servicer
shall cause flood insurance (to the extent available) to be maintained in
respect thereof. Such flood insurance shall be in an amount equal to the lesser
of (i) the amount required to compensate for any loss or damage to the Mortgaged
Property on a replacement cost basis 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).
(b) The Master Servicer shall obtain and maintain at its own expense and
keep in full force and effect throughout the term of this Agreement a blanket
fidelity bond and an errors and omissions insurance policy covering the Master
Servicer's officers and employees and other persons acting on behalf of the
Master Servicer in connection with its activities under this Agreement. The
amount of coverage shall be at least equal to the coverage that would be
required by FNMA or FHLMC, whichever is greater, with respect to the Master
Servicer if the Master Servicer were servicing and administering the Mortgage
Loans for FNMA or FHLMC. In the event that any such bond or policy ceases to be
in effect, the Master Servicer shall obtain a comparable replacement bond or
policy from an issuer or insurer acceptable to the Depositor. Coverage of the
Master Servicer under a policy or bond obtained by an Affiliate of the Master
Servicer and providing the coverage required by this Section 3.12(b) shall
satisfy the requirements of this Section 3.12(b).
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Section 3.13. Enforcement of Due-on-Sale Clauses; Assumption and
Modification Agreements; Certain Assignments.
(a) When any Mortgaged Property is conveyed by the Mortgagor, the Master
Servicer or Subservicer, to the extent it has knowledge of such conveyance,
shall enforce any due-on-sale clause contained in any Mortgage Note or Mortgage,
to the extent permitted under applicable law and governmental regulations, but
only to the extent that such enforcement will not adversely affect or jeopardize
coverage under any Required Insurance Policy. Notwithstanding the foregoing:
(i) the Master Servicer shall not be deemed to be in default
under this Section 3.13(a) by reason of any transfer or assumption which
the Master Servicer is restricted by law from preventing; and
(ii) if the Master Servicer determines that it is reasonably
likely that any Mortgagor will bring, or if any Mortgagor does bring,
legal action to declare invalid or otherwise avoid enforcement of a
due-on-sale clause contained in any Mortgage Note or Mortgage, the
Master Servicer shall not be required to enforce the due-on-sale clause
or to contest such action.
(b) Subject to the Master Servicer's duty to enforce any due-on-sale
clause to the extent set forth in Section 3.13(a), in any case in which a
Mortgaged Property is to be conveyed to a Person by a Mortgagor, and such Person
is to enter into an assumption or modification agreement or supplement to the
Mortgage Note or Mortgage which requires the signature of the Trustee, or if an
instrument of release signed by the Trustee is required releasing the Mortgagor
from liability on the Mortgage Loan, the Master Servicer is authorized, subject
to the requirements of the sentence next following, to execute and deliver, on
behalf of the Trustee, the assumption agreement with the Person to whom the
Mortgaged Property is to be conveyed and such modification agreement or
supplement to the Mortgage Note or Mortgage or other instruments as are
reasonable or necessary to carry out the terms of the Mortgage Note or Mortgage
or otherwise to comply with any applicable laws regarding assumptions or the
transfer of the Mortgaged Property to such Person; provided, however, none of
such terms and requirements shall both constitute a "significant modification"
effecting an exchange or reissuance of such Mortgage Loan under the Code (or
final, temporary or proposed Treasury Regulations promulgated thereunder) and
cause any REMIC to fail to qualify as a REMIC under the Code. The Master
Servicer shall execute and deliver such documents only if it reasonably
determines that (i) its execution and delivery thereof will not conflict with or
violate any terms of this Agreement or cause the unpaid balance and interest on
the Mortgage Loan to be uncollectible in whole or in part, (ii) any required
consents of insurers under any Required Insurance Policies have been obtained
and (iii) subsequent to the closing of the transaction involving the assumption
or transfer (A) the Mortgage Loan will continue to be secured by a first
mortgage lien pursuant to the terms of the Mortgage, (B) such transaction will
not adversely affect the coverage under any Required Insurance Policies, (C) the
Mortgage Loan will fully amortize over the remaining term thereof, (D) no
material term of the Mortgage Loan (including the interest rate on the Mortgage
Loan) will be altered nor will the term of the Mortgage Loan be changed and (E)
if the seller/transferor of the Mortgaged Property is to be released from
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liability on the Mortgage Loan, such release will not (based on the Master
Servicer's or Subservicer's good faith determination) adversely affect the
collectability of the Mortgage Loan. Upon receipt of appropriate instructions
from the Master Servicer in accordance with the foregoing, the Trustee shall
execute any necessary instruments for such assumption or substitution of
liability as directed by the Master Servicer. Upon the closing of the
transactions contemplated by such documents, the Master Servicer shall cause the
originals or true and correct copies of the assumption agreement, the release
(if any), or the modification or supplement to the Mortgage Note or Mortgage to
be delivered to the Trustee or the Custodian and deposited with the Mortgage
File for such Mortgage Loan. Any fee collected by the Master Servicer or such
related Subservicer for entering into an assumption or substitution of liability
agreement will be retained by the Master Servicer or such Subservicer as
additional servicing compensation.
(c) The Master Servicer or the related Subservicer, as the case may be,
shall be entitled to approve a request from a Mortgagor for a partial release of
the related Mortgaged Property, the granting of an easement thereon in favor of
another Person, any alteration or demolition of the related Mortgaged Property
or other similar matters if it has determined, exercising its good faith
business judgment in the same manner as it would if it were the owner of the
related Mortgage Loan, that the security for, and the timely and full
collectability of, such Mortgage Loan would not be adversely affected thereby
and that neither REMIC I or REMIC II would fail to continue to qualify as a
REMIC under the Code as a result thereof and that no tax on "prohibited
transactions" or "contributions" after the start-up day would be imposed on any
such REMIC as a result thereof. Any fee collected by the Master Servicer or the
related Subservicer for processing such a request will be retained by the Master
Servicer or Subservicer as additional servicing compensation.
(d) Subject to any other applicable terms and conditions of this
Agreement, the Trustee, and the Master Servicer shall be entitled to approve an
assignment in lieu of satisfaction with respect to a Mortgage Loan, provided the
obligee with respect to such Mortgage Loan following such proposed assignment
provides the Trustee and the Master Servicer with a "Lender Certification for
Assignment of Mortgage Loan" in the form attached hereto as Exhibit L, in form
and substance satisfactory to the Trustee and the Master Servicer, providing the
following: (i) that such Mortgage Loan is secured by Mortgaged Property located
in a jurisdiction in which an assignment in lieu of satisfaction is required to
preserve lien priority, minimize or avoid mortgage recording taxes or otherwise
comply with, or facilitate a refinancing under, the laws of such jurisdiction;
(ii) that the substance of the assignment is, and is intended to be, a
refinancing of such Mortgage Loan and that the form of the transaction is solely
to comply with, or facilitate the transaction under, such local laws; (iii) that
such Mortgage Loan following the proposed assignment will have a rate of
interest at least 0.25 percent below or above the rate of interest on such
Mortgage Loan prior to such proposed assignment; and (iv) that such assignment
is at the request of the borrower under the related Mortgage Loan. Upon approval
of an assignment in lieu of satisfaction with respect to any Mortgage Loan, the
Master Servicer shall receive cash in an amount equal to the unpaid principal
balance of and accrued interest on such Mortgage Loan, and the Master Servicer
shall treat such amount as a Principal Prepayment in Full with respect to such
Mortgage Loan for all purposes hereof.
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Section 3.14. Realization Upon Defaulted Mortgage Loans.
(a) The Master Servicer shall foreclose upon or otherwise comparably
convert (which may include an REO Acquisition) 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. In connection with such foreclosure or other
conversion, the Master Servicer shall, consistent with Section 3.11, follow such
practices and procedures as it shall deem necessary or advisable, as shall be
normal and usual in its general mortgage servicing activities; provided that the
Master Servicer shall not be liable in any respect hereunder if the Master
Servicer is acting in connection with any such foreclosure or other conversion
in a manner that is consistent with the provisions of this Agreement. The Master
Servicer, however, shall not be required to expend its own funds in connection
with any foreclosure, or attempted foreclosure which is not completed, or
towards the restoration of any property unless it shall determine (i) that such
restoration and/or foreclosure will increase the proceeds of liquidation of the
Mortgage Loan to Holders of Certificates of one or more Classes after
reimbursement to itself for such expenses and (ii) that such expenses will be
recoverable to it through Liquidation Proceeds, Insurance Proceeds or REO
Proceeds (respecting which it shall have priority for purposes of withdrawals
from the Custodial Account pursuant to Section 3.10, whether or not such
expenses are actually recoverable from related Liquidation Proceeds, Insurance
Proceeds or REO Proceeds); any such expenditure shall be treated as a Servicing
Advance hereunder. In the event of a determination by the Master Servicer
pursuant to this Section 3.14(a), the Master Servicer shall be entitled to
reimbursement of its funds so expended pursuant to Section 3.10. Concurrently
with the foregoing, the Master Servicer may pursue any remedies that may be
available in connection with a breach of a representation and warranty with
respect to any such Mortgage Loan in accordance with Section 2.04. Upon the
occurrence of a Cash Liquidation or REO Disposition, following the deposit in
the Custodial Account of all Insurance Proceeds, Liquidation Proceeds and other
payments and recoveries referred to in the definition of "Cash Liquidation" or
"REO Disposition," as applicable, upon receipt by the Trustee of written
notification of such deposit signed by a Servicing Officer, the Trustee or any
Custodian, as the case may be, shall release to the Master Servicer the related
Mortgage File and the Trustee shall execute and deliver such instruments of
transfer or assignment prepared by the Master Servicer, in each case without
recourse, as shall be necessary to vest in the designee of the Master Servicer
the related Mortgaged Property, and thereafter such Mortgaged Property shall not
be part of the Trust Fund. Notwithstanding the foregoing or any other provision
of this Agreement, in the Master Servicer's sole discretion with respect to any
defaulted Mortgage Loan or REO Property as to either of the following
provisions, (i) a Cash Liquidation or REO Disposition may be deemed to have
occurred if substantially all amounts expected by the Master Servicer to be
received in connection with the related defaulted Mortgage Loan or REO Property
have been received, and (ii) for purposes of determining the amount of any
Liquidation Proceeds, Insurance Proceeds, REO Proceeds or any other unscheduled
collections or the amount of any Realized Loss, the Master Servicer may take
into account minimal amounts of additional receipts expected to be received or
any estimated additional liquidation expenses expected to be incurred in
connection with the related defaulted Mortgage Loan or REO Property.
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(b) In the event that title to any Mortgaged Property is acquired by the
Trust Fund as an REO Property by foreclosure or by deed in lieu of foreclosure,
the deed or certificate of sale shall be issued to the Trustee or to its nominee
on behalf of Certificateholders. Notwithstanding any such acquisition of title
and cancellation of the related Mortgage Loan, such REO Property shall (except
as otherwise expressly provided herein) be considered to be an Outstanding
Mortgage Loan held in the Trust Fund until such time as the REO Property shall
be sold. Consistent with the foregoing for purposes of all calculations
hereunder so long as such REO Property shall be considered to be an Outstanding
Mortgage Loan it shall be assumed that, notwithstanding that the indebtedness
evidenced by the related Mortgage Note shall have been discharged, such Mortgage
Note and the related amortization schedule in effect at the time of any such
acquisition of title (after giving effect to any previous Curtailments and
before any adjustment thereto by reason of any bankruptcy or similar proceeding
or any moratorium or similar waiver or grace period) remain in effect.
(c) In the event that the Trust Fund acquires any REO Property as
aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, the Master Servicer shall dispose of such REO Property within
three full years after the taxable year of its acquisition by the Trust Fund for
purposes of Section 860G(a)(8) of the Code (or such shorter period as may be
necessary under applicable state (including any state in which such property is
located) law to maintain the status of REMIC I and REMIC II as REMICs under
applicable state law and avoid taxes resulting from such property failing to be
foreclosure property under applicable state law) unless (i) at the expense of
the Trust Fund, the Master Servicer requests and receives an extension of such
period in which case the Master Servicer shall sell such REO property within the
applicable extension period or (ii) the Master Servicer obtains for the Trustee
an Opinion of Counsel, addressed to the Trustee, the Master Servicer and the
Certificate Insurer, to the effect that the holding by the Trust Fund of such
REO Property subsequent to such period will not result in the imposition of
taxes on "prohibited transactions" as defined in Section 860F of the Code or
cause REMIC I or REMIC II to fail to qualify as REMICs (for federal (or any
applicable state or local) income tax purposes) at any time that any
Certificates are outstanding, in which case the Trust Fund may continue to hold
such REO Property (subject to any conditions contained in such Opinion of
Counsel). The Master Servicer shall be entitled to be reimbursed from the
applicable Custodial Account for any costs incurred in obtaining such Opinion of
Counsel, as provided in Section 3.10, and such costs shall be treated as
Servicing Advances hereunder. Notwithstanding any other provision of this
Agreement, no REO Property acquired by the Trust Fund shall be rented (or
allowed to continue to be rented) or otherwise used by or on behalf of the Trust
Fund in such a manner or pursuant to any terms that would (i) cause such REO
Property to fail to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code or (ii) subject the Trust Fund to the imposition
of any federal income taxes on the income earned from such REO Property,
including any taxes imposed by reason of Section 860G(c) and 860F(a)(2)(B) of
the Code.
(d) The proceeds of any Cash Liquidation, REO Disposition or purchase or
repurchase of any Mortgage Loan pursuant to the terms of this Agreement, as well
as any recovery resulting from a collection of Liquidation Proceeds, Insurance
Proceeds or REO Proceeds, will be applied in the following order of priority:
first, to reimburse the Master Servicer or the related Subservicer in accordance
with Section 3.10(a)(i); second, to all Master
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Servicing Fees and Primary Servicing Fees payable therefrom (and the Master
Servicer and the Subservicer shall have no claims for any deficiencies with
respect to such fees which result from the foregoing allocation); third, to the
Certificateholders to the extent of accrued and unpaid interest on the Mortgage
Loan, and any related REO Imputed Interest, at the Net Mortgage Rate to the Due
Date prior to the Distribution Date on which such amounts are to be distributed;
fourth, to the Certificateholders as a recovery of principal on the Mortgage
Loan (or REO Property); and fifth, to Foreclosure Profits.
Section 3.15. Trustee to Cooperate; Release of Mortgage Files.
(a) Upon becoming aware of the payment in full of a Mortgage Loan, or
upon the receipt by the Master Servicer of a notification that payment in full
will be escrowed in a manner customary for such purposes, the Master Servicer
will immediately notify the Trustee and the Custodian, if applicable, by a
certification of a Servicing Officer (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 Custodial
Account pursuant to Section 3.07 have been or will be so deposited),
substantially in one of the forms attached hereto as Exhibit G requesting
delivery to it of the Mortgage File. Upon receipt of such certification and
request, the Trustee shall promptly release, or cause the Custodian to release,
the related Mortgage File to the Master Servicer. The Master Servicer is
authorized to execute and deliver to the Mortgagor the request for reconveyance,
deed of reconveyance or release or satisfaction of mortgage or such instrument
releasing the lien of the Mortgage, together with the Mortgage Note with, as
appropriate, written evidence of cancellation thereon. No expenses incurred in
connection with any instrument of satisfaction or deed of reconveyance shall be
chargeable to the Custodial Account or the Certificate Account.
(b) From time to time as is appropriate for the servicing or foreclosure
of a Mortgage Loan, the Master Servicer shall deliver to the Trustee (if it
holds the related Mortgage File) or the Custodian, with a copy to the Trustee, a
certificate of a Servicing Officer substantially in one of the forms attached as
Exhibit G hereto, requesting that possession of all, or any document
constituting part of, the Mortgage File be released to the Master Servicer and
certifying as to the reason for such release and that such release will not
invalidate any insurance coverage provided in respect of such Mortgage Loan
under any Required Insurance Policy. Upon receipt of the foregoing, the Trustee
shall deliver, or cause the Custodian to deliver, the Mortgage File or any
document therein to the Master Servicer. The Master Servicer shall cause each
Mortgage File or any document therein so released to be returned to the Trustee,
or the Custodian as agent for the Trustee, when the need therefor by the Master
Servicer no longer exists, unless (i) the Mortgage Loan has been liquidated and
the Liquidation Proceeds relating to the Mortgage Loan have been deposited in
the Custodial Account or (ii) the Mortgage File or such document has been
delivered directly or through a Subservicer 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 directly or through a Subservicer to the Trustee a certificate of
a Servicing Officer certifying as to 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. In the event that the Mortgage File or any document therein is
retained for purposes of initiating
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or pursuing foreclosure of the Mortgage Property, if such foreclosure
proceedings are terminated or the need for the Mortgage File or other document
no longer exists and the Mortgage Loan is still part of the Trust Fund, the
Master Servicer shall cause the Mortgage File or any document therein to be
returned to the Trustee. In the event of the liquidation of a Mortgage Loan, the
Trustee shall deliver the Request for Release with respect thereto to the Master
Servicer of such Mortgage Loan upon deposit of the related Liquidation Proceeds
in the Custodial Account.
(c) The Trustee or the Master Servicer on the Trustee's behalf shall
execute and deliver to the Master Servicer, if necessary, any court pleadings,
requests for trustee's sale or other documents necessary to the foreclosure or
trustee's sale in respect of a Mortgaged Property or to any legal action brought
to obtain judgment against any Mortgagor on the Mortgage Note or Mortgage or to
obtain a deficiency judgment, or to enforce any other remedies or rights
provided by the Mortgage Note or Mortgage or otherwise available at law or in
equity. Together with such documents or pleadings (if signed by the Trustee),
the Master Servicer shall deliver to the Trustee a certificate of a Servicing
Officer requesting that such pleadings or documents be executed by the Trustee
and certifying as to the reason such documents or pleadings are required and
that the execution and delivery thereof by the Trustee will not invalidate any
insurance coverage under any Required Insurance Policy or 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 3.16. Servicing and Other Compensation; Compensating Interest.
(a) The Master Servicer, as compensation for its activities hereunder,
shall be entitled to retain from collections on the Mortgage Loans the amounts
provided for by clauses (ii), (iv), (v) and (vi) of Section 3.10(a), subject to
clause (e) below. The amount of servicing compensation provided for in such
clauses shall be accounted for on a Mortgage Loan-by-Mortgage Loan basis.
(b) Additional servicing compensation in the form of prepayment charges,
assumption fees, late payment charges, investment income on amounts in the
Custodial Account or otherwise shall be retained by the Master Servicers or the
Subservicer to the extent provided herein, subject to clause (e) below.
(c) The Master Servicers shall be required to pay, or cause to be paid,
all expenses incurred by it in connection with its servicing activities
hereunder (including the fees and expenses of the Trustees any co-trustee and
any Custodian) and shall not be entitled to reimbursement therefor except as
specifically provided in Sections 3.10 and 3.14.
(d) The Master Servicer's right to receive servicing compensation may
not be transferred in whole or in part except in connection with the transfer of
all of its responsibilities and obligations as Master Servicer under this
Agreement.
(e) Notwithstanding any other provision herein, the amount of servicing
compensation that the Master Servicer shall be entitled to receive for its
activities hereunder for the period
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ending on each Distribution Date shall be reduced (but not below zero) by an
amount equal to Compensating Interest (if any) for such Distribution Date. Such
reduction shall be applied during such period in reduction of the Master
Servicing Fee to which the Master Servicer is entitled pursuant to Section
3.10(a)(ii). Such reduction in the Master Servicing Fee shall be effectuated by
the remittance of Compensating Interest (if any) to the Trustee for deposit in
the Certificate Account pursuant to Section 4.01(a).
Section 3.17. Annual Statement as to Compliance.
The Master Servicer will deliver to the Depositor, the Trustee and the
Certificate Insurer not later than March 31 of each year beginning in 1999, an
Officers' Certificate stating, as to each signer thereof, that (i) a review of
the activities of the Master Servicer during the preceding calendar year and of
its performance under the pooling and servicing agreements, including this
Agreement, has been made under such officers' supervision, (ii) to the best of
such officers' knowledge, based on such review, the Master Servicer has
fulfilled all of its material obligations in all material respects throughout
such year, or, if there has been a default in the fulfillment in all material
respects of any such obligation relating to this Agreement, specifying each such
default known to such officer and the nature and status thereof and (iii) to the
best of such officers' knowledge, each related Subservicer has fulfilled its
material obligations under its Subservicing Agreement in all material respects,
or if there has been a material default in the fulfillment of such obligations
relating to this Agreement, specifying such default known to such officer and
the nature and status thereof.
Section 3.18. Annual Independent Public Accountants' Servicing Report.
Not later than March 31 of each year beginning in 1999, the Master
Servicer at its expense shall cause a firm of Independent public accountants
which is a member of the American Institute of Certified Public Accountants to
furnish a statement to the Depositor, the Trustee and the Certificate Insurer to
the effect that such firm has examined certain documents and records relating to
the servicing of the mortgage loans under pooling and servicing agreements
(including this Agreement) substantially similar one to another (such statement
to have attached thereto a schedule setting forth the pooling and servicing
agreements covered thereby, including this Agreement) and that, on the basis of
such examination conducted substantially in compliance with the Uniform Single
Attestation Program for Mortgage Bankers or the Audit Program for Mortgages
serviced for FHLMC, such servicing has been conducted in compliance with such
pooling and servicing agreements except for such significant exceptions or
errors in records that, in the opinion of such firm, the Uniform Single
Attestation Program for Mortgage Bankers or the Audit Program for Mortgages
serviced for FHLMC requires it to report. In rendering such statement, such firm
may rely, as to matters relating to direct servicing of mortgage loans by
Subservicers, upon comparable statements for examinations conducted
substantially in compliance with the Uniform Single Attestation Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC (rendered
within one year of such statement) of Independent public accountants with
respect to the related Subservicer. For purposes of such statement, such firm
may conclusively assume that all pooling and servicing agreements among the
Depositor, the Master Servicer and the Trustee relating to Mortgage Pass-Through
Certificates evidencing an interest in first mortgage loans are
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substantially similar one to another except for any such pooling and servicing
agreement which, by its terms, specifically states otherwise.
Section 3.19. Rights of the Depositor in Respect of the Master Servicer.
The Master Servicer shall afford the Depositor, upon reasonable notice,
during normal business hours access to all records maintained by the Master
Servicer in respect of its rights and obligations hereunder and access to
officers of the Master Servicer responsible for such obligations. Upon request,
the Master Servicer shall furnish the Depositor with its most recent financial
statements and such other information as the Master Servicer possesses regarding
its business, affairs, property and condition, financial or otherwise. The
Master Servicer shall also cooperate with all reasonable requests for
information including, but not limited to, notices, tapes and copies of files,
regarding itself, the Mortgage Loans or the Certificates from any Person or
Persons identified by the Depositor or the Master Servicer. The Depositor may,
but is not obligated to, enforce the obligations of the Master Servicer
hereunder. 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.
Section 3.20. Administration of Buydown Funds.
(a) With respect to any Buydown Mortgage Loan, the Master Servicer or
the related Subservicer has deposited Buydown Funds in an account that satisfies
the requirements for a Custodial Account (the "Buydown Account"). Upon receipt
from the Mortgagor of the amount due on a Due Date for each Buydown Mortgage
Loan, the Master Servicer or the related Subservicer, as applicable, will
withdraw from the Buydown Account the predetermined amount that, when added to
the amount due on such date from the Mortgagor, equals the full Monthly Payment
and deposit that amount in the Custodial Account in accordance with the terms
hereof or transmit that amount in accordance with the terms of the Subservicing
Agreement to the Master Servicer, in either case together with the related
payment made by the Mortgagor or advanced by the Subservicer.
(b) If the Mortgagor on a Buydown Mortgage Loan prepays such loan in its
entirety during the period (the "Buydown Period") when Buydown Funds are
required to be applied to such Buydown Mortgage Loan, the Master Servicer or the
related Subservicer shall be required to withdraw from the Buydown Account and
remit any Buydown Funds remaining in the Buydown Account in accordance with the
related buydown agreement. The amount of Buydown Funds which may be remitted in
accordance with the related buydown agreement may reduce the amount required to
be paid by the Mortgagor to fully prepay the related Mortgage Loan. If the
Mortgagor on a Buydown Mortgage Loan defaults on such Mortgage Loan during the
Buydown Period and the property securing such Buydown Mortgage Loan is sold in
the liquidation thereof (either by the Master Servicer or the insurer under any
related Primary Mortgage Insurance Policy), the Master Servicer or the related
Subservicer shall be required to withdraw from the Buydown Account the Buydown
Funds for such Buydown Mortgage Loan still held in the Buydown Account and
deposit that amount in the Custodial Account in accordance with the terms hereof
or remit the same to the Master Servicer in accordance with
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the terms of the Subservicing Agreement for deposit in the Custodial Account, as
applicable, or pay to the insurer under any related Primary Mortgage Insurance
Policy if the Mortgaged Property is transferred to such insurer and such insurer
pays all of the loss incurred in respect of such default. Any amount so remitted
pursuant to the preceding sentence will be deemed to reduce the amount owed on
the Mortgage Loan.
ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
Section 4.01. Certificate Account.
(a) The Trustee shall establish and maintain a Certificate Account. On
or before 11:00 A.M. Los Angeles time on each Certificate Account Deposit Date
the Master Servicer shall remit to the Trustee for deposit into the Certificate
Account, by wire transfer of immediately available funds, an amount equal to the
sum of (i) any Advance for the immediately succeeding Distribution Date, (ii)
any amount required to be remitted to the Trustee for deposit in the Certificate
Account pursuant to Section 3.16(e), (iii) any amount required to be paid
pursuant to Section 9.01 and (iv) all other amounts constituting the Master
Servicer Remittance Amount attributable to collections made or payments owed by
the Master Servicer for the immediately succeeding Distribution Date. The
Trustee shall promptly deposit such funds in the Certificate Account. Funds
remitted by the Master Servicer as set forth above shall include the amount
required to be remitted to the Trustee and any co-trustee pursuant to Section
8.05(a).
(b) The Trustee shall be entitled to all investment earnings on the
funds in the Certificate Account from the receipt of such funds from the Master
Servicer as set forth in Section 4.01(a) until the distribution of such funds to
the Certificateholders as set forth in Section 4.02.
Section 4.02. Distributions.
(a) On each Distribution Date, the Trustee or the Paying Agent shall,
from funds received by the Trustee pursuant to Section 4.01(a) (i) distribute to
the Master Servicer or a Subservicer, by remitting for deposit to the Custodial
Account, to the extent of and in reimbursement for any Advances previously made
by the Master Servicer or Subservicer with respect to any Mortgage Loan it
services or REO Property which remain unreimbursed in whole or in part following
the Cash Liquidation or REO Disposition of such Mortgage Loan or REO Property as
evidenced by an Officer's Certificate received by the Trustee by the
Determination Date; (ii) distribute to the Trustee and any co-trustee the
Trustee Fee with respect to each Mortgage Loan for such Distribution Date; and
then (iii) distribute to each Certificateholder of record on the next preceding
Record Date (other than as provided in Section 9.01 respecting the final
distribution) and the Certificate Insurer either in immediately available funds
(by wire transfer or otherwise) to the account of such Certificateholder holding
Certificates in the amount of at least $5,000,000 at a bank or other entity
having appropriate facilities therefor, if such Certificateholder has so
notified the Trustee or the Paying Agent at least five (5) Business Days
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prior to the related Record Date, as the case may be, or, if such
Certificateholder has not so notified the Trustee or the Paying Agent at least
five (5) Business Days prior to the related Record Date, by check mailed to such
Certificateholder at the address of such Holder appearing in the Certificate
Register such Certificateholder's share (based on the aggregate of the
Percentage Interests represented by Certificates of the applicable Class held by
such Holder) of the following amounts, in the following order of priority
(subject to the provisions of Section 4.02(b)), and, with respect to payments to
the Certificate Insurer, by means of payment acceptable to the Certificate
Insurer, to the extent of the Available Distribution Amount on deposit in the
Certificate Account on the Distribution Date; provided, however, that amounts
representing Insured Payments received pursuant to a Certificate Insurance
Policy shall be used to make payments only on the applicable Insured
Certificates:
(I) For any Distribution Date prior to the Credit Support Depletion Date,
(a) with respect to the Group I Certificates and the Residual
Certificates, to the extent of the Available Distribution Amount
for Loan Group I on such Distribution Date:
(i) First, to the Class I-PO Certificates, the Class I-PO
Fraction of all principal received on or in respect of each Class I-PO
Mortgage Loan;
(ii) Second, to the Group I Certificates entitled to interest and
the Residual Certificates, Accrued Certificate Interest and Unpaid
Accrued Certificate Interest;
(iii) Third, to the Group I Certificates entitled to principal,
other than the Class I-PO Certificates, and the Residual Certificates,
the Group I Principal Distribution Amount as follows:
(1) first, to the Class IA-4 Certificates, an amount, up
to the amount of the Class IA-4 Priority Amount for such
Distribution Date, until the Certificate Principal Balance
thereof has been reduced to zero;
(2) second, to each Class of the Residual Certificates,
pro rata, according to their respective Certificate Principal
Balances, until the Certificate Principal Balances of the
Residual Certificates have been reduced to zero;
(3) third, to the Class IA-1 Certificates until the
Certificate Principal Balance thereof has been reduced to zero;
(4) fourth, concurrently, 20.2216290544% to the Class IA-2
Certificates, until the Certificate Principal Balance thereof has
been reduced to zero, and 79.7783709456% sequentially as follows:
(A) concurrently, 67.0376365844% to the Class IA-6
Certificates, and 32.9623634156% to the Class IA-5
Certificates, in each case until the Certificate
Principal Balance thereof has been reduced to zero;
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(B) to the Class IA-3 Certificates;
(5) fifth, to the Class IA-3 Certificates until the
Certificate Principal Balance thereof has been reduced to zero;
and
(6) sixth, to the Class IA-4 Certificates, until the
Certificate Principal Balance thereof has been reduced to zero.
(iv) Fourth, to the Class I-PO Certificates, as principal, the
sum of: (a) an amount equal to the Class I-PO Fraction of any Realized
Loss on a Class I-PO Mortgage Loan, other than an Excess Special Hazard
Loss, an Excess Fraud Loss, an Excess Bankruptcy Loss or an
Extraordinary Loss to the extent of amounts otherwise available to pay
the Subordinate Principal Distribution Amount (without regard to clause
(B) of the definition thereof) on such Distribution Date and (b) the sum
of amounts, if any, by which the amount described in clause (a) above on
each prior Distribution Date exceeded the amount actually distributed in
respect thereof on such prior Distribution Dates and not subsequently
distributed to the extent of the Subordinate Principal Distribution
Amount on such Distribution Date, provided that any amounts distributed
in respect of losses pursuant to this paragraph shall not cause a
further reduction in the Class I-PO Certificate Principal Balance;
provided, further, that if the amounts otherwise available to pay the
Subordinate Principal Distribution Amount for any such Distribution Date
are insufficient to cover such outstanding principal losses for the
Class I-PO Certificates as provided above and the Class II-PO
Certificates as provided in Section 4.02(a)(I)(b)(iv) below, then the
amounts otherwise available to pay the Subordinate Principal
Distribution Amount will be allocated pro rata to the Class I-PO and the
Class II-PO Certificates based on the amount such Certificates are
entitled to receive pursuant to this clause, in the case of the Class
I-PO Certificates, and pursuant to in Section 4.02(a)(I)(b)(iv) below,
in the case of the Class II-PO Certificates;
(b) with respect to the Group II Certificates, to the extent of the
Available Distribution Amount for Loan Group II on such
Distribution Date:
(i) First, to the Class II-PO Certificates, the Class
II-PO Fraction of all principal received on or in respect of each
Class II-PO Mortgage Loan;
(ii) Second, to the Group II Certificates entitled to
interest, Accrued Certificate Interest and any Unpaid Accrued
Certificate Interest, reduced in the case of the Class IIA-6
Certificates on or before the Class IIA-6 Accretion Termination
Date by the Class IIA-6 Accrual Amount, with such amount being
distributed, as principal, to the following Certificates:
(1) first, to the Class IIA-5 Certificates, to the
extent necessary to reduce the Class IIA-5 Certificate
Principal Balance to its Targeted Principal Balance for
such Distribution Date; and
(2) second, to the Class IIA-6 Certificates;
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(iii) Third, to the Group II Certificates entitled to
principal, other than the Class II-PO Certificates, the Group II
Principal Distribution Amount concurrently, 62.4732001904% to the
Class IIA-1 Certificates, until the Certificates Principal
Balance thereof has been reduced to zero, and 37.5267998096%
sequentially as follows:
(1) to the Class IIA-4 Certificates, an amount, up
to the amount of the Class IIA-4 Priority Amount for such
Distribution Date, until the Certificate Principal Balance
thereof has been reduced to zero;
(2) concurrently, 2.0171762558% to the Class IIA-2
Certificates until the Certificate Balance thereof has
been reduced to zero, and 97.9828237442% as follows:
(A) first, to the Class IIA-5
Certificates, to the extent
necessary to reduce the Class IIA-5
Certificate Principal Balance to its
Targeted Principal Balance for such
Distribution Date (after giving
effect to any distributions to the
Class IIA-5 Certificates of the
Class IIA-6 Accrual Amount as
principal);
(B) second, to the Class IIA-6
Certificates until the Certificate
Principal Balance thereof has been
reduced to zero;
(C) third, to the Class IIA-5
Certificates until the Certificate
Principal Balance thereof has been
reduced to zero;
(3) to the Class IIA-3 Certificates until the
Certificate Principal Balance thereof has been reduced to
zero; and
(4) to the Class IIA-4 Certificates, until the
Certificate Principal Balance thereof has been reduced to
zero.
(iv) Fourth, to the Class II-PO Certificates, as
principal, the sum of (a) an amount equal to the Class II-PO
Fraction of any Realized Loss on a Class II-PO Mortgage Loan,
other than an Excess Special Hazard Loss, an Excess Fraud Loss,
an Excess Bankruptcy Loss, or an Extraordinary Loss to the extent
of amounts otherwise available to pay the Subordinate Principal
Distribution Amount (without regard to clause (B) of the
definition thereof) on such Distribution Date and (b) the sum of
amounts, if any, by which the amount described in clause (a)
above on each prior Distribution Date exceeded the amount
actually distributed in respect thereof on such prior
Distribution Dates and not subsequently distributed to the extent
of the Subordinate Principal Distribution Amount on such
Distribution Date, provided that any amounts distributed in
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respect of losses pursuant to this paragraph shall not cause a
further reduction in the Class II-PO Certificate Principal
Balance; provided, further, that if the amounts otherwise
available to pay the Subordinate Principal Distribution Amount
for any such Distribution Date are insufficient to cover such
outstanding principal losses for the Class II-PO Certificates as
provided above and the Class I-PO Certificates as provided in
Section 4.02(a)(I)(a)(iv) above, then the amounts otherwise
available to pay the Subordinate Principal Distribution Amount
will be allocated pro rata to the Class I-PO and Class II-PO
Certificates based on the amount such Certificates are entitled
to receive pursuant to Section 4.02(a)(I)(a)(iv) above, in the
case of the Class I-PO Certificates, and pursuant to this
paragraph in the case of the Class II-PO Certificates;
(c) with respect to the Subordinate Certificates, the Residual
Certificates and the Certificate Insurer, subject to the
payment of the Senior Certificates as described above and
the payments from an Overcollateralized Group to an
Undercollateralized Group described in the following
paragraph, and to the extent of the Available Distribution
Amount from both Loan Groups remaining, if any, following
prior distributions on such Distribution Date:
(i) First, to the Class M Certificates, Accrued
Certificate Interest and Unpaid Accrued Certificate
Interest;
(ii) Second, to the Class M Certificates, their pro rata
share of the Subordinate Principal Distribution
Amount;
(iii) Third, to the Class B-1 Certificates, Accrued
Certificate Interest and Unpaid Accrued Certificate
Interest;
(iv) Fourth, to the Class B-1 Certificates, their pro
rata share of the Subordinate Principal
Distribution Amount;
(v) Fifth, to the Class B-2 Certificates, Accrued
Certificate Interest and Unpaid Accrued Certificate
Interest;
(vi) Sixth, to the Class B-2 Certificates, their pro
rata share of the Subordinate Principal
Distribution Amount;
(vii) Seventh, to the Class B-3 Certificates, Accrued
Certificate Interest and Unpaid Accrued Certificate
Interest;
(viii) Eighth, to the Class B-3 Certificates, their pro
rata share of the Subordinate Principal
Distribution Amount;
(ix) Ninth, to the Class B-4 Certificates, Accrued
Certificate Interest and Unpaid Accrued Certificate
Interest;
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(x) Tenth, to the Class B-4 Certificates, their pro
rata share of the Subordinate Principal
Distribution Amount;
(xi) Eleventh, to the Class B-5 Certificates, Accrued
Certificate Interest and Unpaid Accrued Certificate
Interest;
(xii) Twelfth, to the Class B-5 Certificates, their pro
rata share of the Subordinate Principal
Distribution Amount;
(xiii) Thirteenth, to each Class of Subordinate
Certificates, in order of seniority, the remaining
portion, if any, of the sum of the Available
Distribution Amounts for both Loan Groups, up to
the amount of unreimbursed Realized Losses
previously allocated to such Class;
(xiv) Fourteenth, to the Certificate Insurer, the
Reimbursement Amount; and
(xv) Fifteenth, to the Class R-I Certificates, the
remaining portion, if any, of the Available
Distribution Amount for such Distribution Date.
Notwithstanding the foregoing, (X) on any Distribution Date occurring on or
after the date on which the Certificate Principal Balances of the Group I
Certificates (other than the Class I-PO Certificate Principal Balance) or the
Certificate Principal Balances of the Group II Certificates (other than the
Class II-PO Certificate Principal Balance) have been reduced to zero and on
which (a) the Aggregate Subordinate Percentage for such Distribution Date is
less than 200% of the Aggregate Subordinate Percentage as of the Cut-off Date or
(b) the average outstanding principal balance of the Mortgage Loans in either
Loan Group delinquent 60 days or more over the last six months, as a percentage
of the related Subordinate Loan Group Component Balance, is greater than or
equal to 50%, the remaining Class or Classes of Class A Certificates will be
entitled to receive as principal, in addition to any principal payments
otherwise described above, all amounts in respect of principal (in excess of the
amounts needed to reduce the Certificate Principal Balances of the Class A
Certificates that have been paid in full to zero) on the Mortgage Loans in the
Loan Group relating to the Class A Certificates that have been paid in full
(after distributions of principal to the Class I-PO Certificates or Class II-PO
Certificates, as applicable) pursuant to paragraph (I)(a)(iii) (other than
Clause (1) thereof) or paragraph (I)(b)(iii) (other than Clause (1) thereof)
above, as applicable, to the extent of and in reduction of the Certificate
Principal Balances thereof, and (Y) if on any Distribution Date the aggregate of
the Certificate Principal Balances of the Group I Certificates or the Group II
Certificates is greater than the Aggregate Stated Principal Balance of the
Mortgage Loans in the related Loan Group, less the related Class I-PO Fraction
or Class II-PO Fraction of any Class I-PO Mortgage Loans or Class II-PO Mortgage
Loans, as applicable, in such Loan Group (the "Undercollateralized Group"), (i)
the portion of the Available Distribution Amount in respect of principal on the
Mortgage Loans in the other Loan Group (the "Overcollateralized Group") (after
distributions of principal to the Class I-PO or the Class II-PO Certificates, as
applicable, and the Class A
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Certificates related to the Overcollateralized Group) will be distributed to the
Class A Certificates of the Undercollateralized Group in accordance with the
order set forth in paragraphs (I)(a)(iii) (other than Clause (1) thereof) or
(I)(b)(iii) (other than Clause (1) thereof) above, as applicable, until the
aggregate Certificate Principal Balances of the Class A Certificates of the
Undercollateralized Group equals the aggregate of the Stated Principal Balances
of the Mortgage Loans in the related Loan Group (other than the Class I-PO
Fraction or the Class II-PO Fraction of any Class I-PO Mortgage Loans or Class
II-PO Mortgage Loans, as applicable, in such Loan Group) and (ii) a portion of
the Available Distribution Amount of the Overcollateralized Group remaining
after distributions to the Overcollateralized Group pursuant to paragraphs
(I)(a)(i) and (I)(a)(ii) or (I)(b)(i) and (I)(b)(ii) above, as applicable, equal
to one month's interest on the amount by which the Undercollateralized Group is
undercollateralized at 6.750% per annum if the Undercollateralized Group is Loan
Group I or 6.500% per annum if the Undercollateralized Loan Group is Loan Group
II plus any shortfall of interest on the Class A Certificates of the
Undercollateralized Group remaining unpaid pursuant to paragraphs (I)(a)(ii) or
(I)(b)(ii) above, as applicable, after distributions on such Distribution Date,
including accrued interest on such shortfall at the rate described above, will
(1) be added to the Available Distribution Amount of the Undercollateralized
Group and distributed in accordance with the priorities as described in
paragraphs (I)(a) and (I)(b) above, as applicable (any amount covering interest
shortfalls and interest accrued thereon will be distributed to the applicable
Class or Classes of Certificates on such Distribution Date in the priority
described in paragraphs (I)(a)(ii) or (I)(b)(ii) above, as applicable, pro rata
according to their respective shares of such amount) and (2) be subtracted from
the Available Distribution Amount of the Overcollateralized Group; provided,
however, that in no case will the Available Distribution Amount for an
Overcollateralized Group be so reduced by more than the sum of (a) its
Subordinate Loan Group Component Balance and (b) interest on such amount at the
Pass-Through Rate for such Overcollateralized Group.
(II) For any Distribution Date on or after the Credit Support Depletion Date,
(a) with respect to the Group I Certificates, the Certificate Insurer
and the Residual Certificates, to the extent of the Available
Distribution Amount for Loan Group I remaining following prior
distributions, if any, on such Distribution Date:
(i) First, to the Class I-PO Certificates, the Class I-PO
Fraction of all principal received on or in respect of each Class I-PO
Mortgage Loan;
(ii) Second, to the Group I Certificates entitled to interest and
the Residual Certificates, Accrued Certificate Interest and Unpaid
Accrued Certificate Interest;
(iii) Third, to the Group I Certificates entitled to principal
(other than the Class I-PO Certificates) and the Residual Certificates,
the Group I Principal Distribution Amount, pro rata, according to their
respective Certificate Principal Balances;
(iv) Fourth, to the Certificate Insurer, the Reimbursement
Amount;
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(v) Fifth, to the Class R-I Certificates, the remaining portion,
if any, of the Available Distribution Amount for Loan Group I for such
Distribution Date; and
(b) with respect to the Group II Certificates, the Certificate
Insurer and the Residual Certificates, to the extent of the
Available Distribution Amount for Loan Group II remaining
following prior distributions, if any, on such Distribution Date:
and
(i) First, to the Class II-PO Certificates, the Class II-PO
Fraction of all principal received on or in respect of each Class II-PO
Mortgage Loan;
(ii) Second, to the Group II Certificates entitled to interest,
Accrued Certificate Interest and Unpaid Accrued Certificate Interest;
(iii) Third, to the Group II Certificates entitled to principal
(other than the Class II-PO Certificates), the Group II Principal
Distribution Amount, pro rata, according to their respective Certificate
Principal Balances;
(iv) Fourth, to the Certificate Insurer, the Reimbursement
Amount; and
(v) Fifth, to the Class R-I Certificates, the remaining portion,
if any, of the Available Distribution Amount for Loan Group II for such
Distribution Date.
(b) In addition to the foregoing distributions, with respect to any
Mortgage Loan that was previously the subject of a Cash Liquidation or an REO
Disposition that resulted in a Realized Loss, in the event that within two years
of the date on which such Realized Loss was determined to have occurred the
Master Servicer receives amounts, which the Master Servicer reasonably believes
to represent subsequent recoveries (net of any related liquidation expenses), or
determines that it holds surplus amounts previously reserved to cover estimated
expenses, specifically related to such Mortgage Loan (including, but not limited
to, recoveries in respect of the representations and warranties made by the
related Seller pursuant to the applicable Mortgage Loan Purchase Agreement) the
Master Servicer shall notify the Trustee of the existence of such amounts by
means of an Officer's Certificate delivered on the related Determination Date
and, the Trustee shall distribute such amounts to the applicable
Certificateholders of the Class or Classes (or to the Certificate Insurer, to
the extent of any Insured Payment made) to which such Realized Loss was
allocated (with the amounts to be distributed allocated among such Classes in
the same proportions as such Realized Loss was allocated), subject to the
following: No such distribution shall be in an amount that would result in total
distributions on the Certificates of any such Class in excess of the total
amounts of principal and interest that would have been distributable thereon if
such Cash Liquidation or REO Disposition had occurred but had resulted in a
Realized Loss equal to zero. Any amount to be so distributed with respect to the
Certificates of any Class shall be remitted by the Master Servicer to the
Trustee for distribution to the Certificateholders of record as of the Record
Date immediately preceding the date of such distribution, on a pro rata basis
based on the Percentage Interest represented by each Certificate of such Class
as of such Record Date. Any amounts to be so distributed shall not be remitted
to or distributed from the Trust Fund, and shall constitute
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subsequent recoveries with respect to Mortgage Loans that are no longer assets
of the Trust Fund.
(c) 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
Certificate Registrar, the Depositor or the Master Servicer shall have any
responsibility therefor except as otherwise provided by this Agreement or
applicable law.
(d) If the Master Servicer or the Trustee anticipates that a final
distribution with respect to any Class of Certificates will be made on the next
Distribution Date, the Master Servicer, if applicable, shall, no later than the
Determination Date in the month of such final distribution, notify the Trustee
and the Trustee shall, no later than two (2) Business Days after such
Determination Date, mail on such date to each Holder of such Class of
Certificates a notice to the effect that: (i) the Trustee anticipates 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 or as otherwise specified therein, and
(ii) no interest shall accrue on such Certificates from and after the end of the
prior calendar month. In the event that Certificateholders required to surrender
their Certificates pursuant to Section 9.01(c) do not surrender their
Certificates for final cancellation, the Trustee shall cause funds distributable
with respect to such Certificates to be withdrawn from the Certificate Account
and credited to a separate escrow account for the benefit of such
Certificateholders as provided in Section 9.01(d).
Section 4.03. Statements to Certificateholders.
(a) No later than two Business Days after the Determination Date for the
immediately succeeding Distribution Date, the Master Servicer shall deliver to
the Trustee a report in computer-readable form containing such date such
information as the Trustee shall reasonably require in order to make, or cause
its agents to make, distributions on the Certificates and prepare reports to
Certificateholders. The Trustee may conclusively rely upon the accuracy of and
shall be under no duty to recalculate, verify or recompute the information
provided to it by the Master Servicer.
(b) Concurrently with each distribution charged to the Certificate
Account and with respect to each Distribution Date the Trustee shall forward by
mail to each Holder, the Underwriter, the Master Servicer and the Depositor a
statement setting forth the following information as to each Class of
Certificates to the extent applicable and to the extent the Trustee has received
the Master Servicer tape in a timely manner:
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(i) (a) the amount of such distribution to the
Certificateholders of such Class applied to reduce the Certificate
Principal Balance thereof, and (b) the aggregate amount included therein
representing Principal Prepayments;
(ii) the amount of such distribution to Holders of such
Class of Certificates allocable to interest;
(iii) if the distribution to the Holders of such Class of
Certificates is less than the full amount that would be distributable to
such Holders if there were sufficient funds available therefor, the
amount of the shortfall;
(iv) the amount of any Advances by the Master Servicer
pursuant to Section 4.04 by Loan Group;
(v) the number and Pool Stated Principal Balance of the
Mortgage Loans by Loan Group after giving effect to the distribution of
principal on such Distribution Date;
(vi) the aggregate Certificate Principal Balance of each
Class of Certificates, after giving effect to the amounts distributed on
such Distribution Date, separately identifying any reduction thereof due
to Realized Losses other than pursuant to an actual distribution of
principal;
(vii) the related Subordinate Principal Distribution
Amount;
(viii) on the basis of the most recent reports furnished
to it by Subservicers, if applicable, the number and aggregate principal
balances of Mortgage Loans by Loan Group (not including REO Properties)
that are delinquent (A) one month, (B) two months and (C) three months
and the number and aggregate principal balance of Mortgage Loans (not
including REO Properties) that are in foreclosure;
(ix) the number, aggregate principal balance and book
value of any REO Properties;
(x) the aggregate Accrued Certificate Interest remaining
unpaid, if any, for each Class of Certificates, after giving effect to
the distribution made on such Distribution Date;
(xi) the Special Hazard Amount, Fraud Loss Amount and
Bankruptcy Amount as of the close of business on such Distribution Date
and a description of any change in the calculation of such amounts;
(xii) the occurrence of the Credit Support Depletion Date;
(xiii) the Group I Percentage and the Group II Percentage
for such Distribution Date;
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(xiv) the aggregate amount of Realized Losses by Loan
Group for such Distribution Date;
(xv) the aggregate amount of any recoveries on previously
foreclosed loans from Sellers due to a breach of representation or
warranty;
(xvi) the weighted average remaining term to maturity of
the Mortgage Loans after giving effect to the amounts distributed on
such Distribution Date;
(xvii) the weighted average Mortgage Rates of the Mortgage
Loans after giving effect to the amounts distributed on such
Distribution Date;
(xviii) the Group I Prepayment Percentage and Group II
Prepayment Percentage for such Distribution Date;
(xix) Extraordinary Losses by Loan Group for the Prior
Period; and
(xx) the cumulative Realized Losses by Loan Group.
In the case of information furnished pursuant to clauses (i) and (ii) above, the
amounts shall be expressed as a dollar amount per Certificate with a $1,000
denomination.
(c) Within a reasonable period of time after the end of each calendar
year, the Trustee shall prepare, or cause to be prepared, and shall forward to
each Person who at any time during the calendar year was the Holder of a
Certificate other than a Residual Certificate, a statement containing the
information set forth in clauses (i) and (ii) of subsection (a) 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.
(d) Within a reasonable period of time after the end of each calendar
year, the Trustee shall prepare, or cause to be prepared, and shall forward to
each Person who at any time during the calendar year was the Holder of a
Residual Certificate, a statement containing the applicable distribution
information provided pursuant to this Section 4.03 aggregated for such calendar
year or applicable portion thereof during which such Person was the Holder of a
Residual Certificate. 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.
(e) Upon the written request of any Holder of a Class B-3, Class B-4,
Class B-5 or Residual Certificate, the Master Servicer, as soon as reasonably
practicable, shall provide the requesting Certificateholder with such
information as is necessary and appropriate, in the Master Servicer's sole
discretion, for purposes of satisfying applicable reporting requirements under
Rule 144A.
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(f) Upon request to the Trustee by any Holder of a Certificate who is a
Holder thereof at the time of making such request (an "Eligible
Certificateholder"), the Trustee shall provide, in the form of a
computer-readable tape or disk, loan by loan data with respect to the payment
experience on the Mortgage Loans containing at least the fields of information
listed on Exhibit N hereto (based on information provided by the Master
Servicer). In addition, upon the written request of any Eligible
Certificateholder, the Trustee shall provide similar loan by loan data with
respect to any prior monthly remittance report to the Certificateholders
pursuant to this Agreement (as and when such information becomes available). The
expense of providing any tape or disk pursuant to this subsection shall be the
expense of the Eligible Certificateholder. The Trustee shall include in each
monthly remittance report pursuant to this Agreement a statement that the
monthly loan by loan information described in this subsection is available upon
the request and at the expense of any Eligible Certificateholder directed to the
Trustee.
Section 4.04. Distribution of Reports to the Trustee and the
Depositor; Advances by the Master Servicer.
(a) Prior to the close of business on the Business Day next succeeding
each Determination Date, the Master Servicer shall furnish a written (or in such
electronic format as the Trustee and the Master Servicer shall mutually agree)
statement to the Trustee, any Paying Agent and the Depositor (the information in
such statement to be made available to Certificateholders by the Master Servicer
on request) setting forth (i) the portion of the Master Servicer Remittance
Amount to be remitted by the Master Servicer, (ii) the aggregate amount of
Special Hazard Losses, Fraud Losses and Bankruptcy Losses attributable to the
Mortgage Loans for such Distribution Date and (iii) the amounts required to be
withdrawn from the Custodial Account and remitted to the Trustee for deposit
into the Certificate Account on the immediately succeeding Certificate Account
Deposit Date pursuant to clause (iii) of Section 4.01(a) and (iv) the aggregate
book value of REO Properties. The determination by the Master Servicer of such
amounts shall, in the absence of obvious error, be presumptively deemed to be
correct for all purposes hereunder and the Trustee shall be protected in relying
upon the same without any independent check or verification.
(b) On or before 11:00 A.M. Los Angeles time on each Certificate Account
Deposit Date, the Master Servicer shall either (i) remit to the Trustee for
deposit in the Certificate Account from its own funds, or funds received
therefor from the Subservicers, an amount equal to the Advances to be made by
the Master Servicer in respect of the related Distribution Date, which shall be
in an aggregate amount equal to the aggregate amount of Monthly Payments (with
each interest portion thereof adjusted to the Net Mortgage Rate), less the
amount of any related Debt Service Reductions or reductions in the amount of
interest collectable from the Mortgagor pursuant to the Soldiers' and Sailors'
Civil Relief Act of 1940, as amended, or similar legislation or regulations then
in effect, on the Outstanding Mortgage Loans as of the related Due Date, which
Monthly Payments were delinquent as of the close of business as of the related
Determination Date; provided that no Advance shall be made if it would be a
Nonrecoverable Advance, (ii) withdraw from amounts on deposit in the applicable
Custodial Account and deposit in the Certificate Account all or a portion of the
Amount Held for Future Distribution in discharge of any such Advance, or (iii)
make advances in the form of any combination of (i) and (ii) aggregating the
amount of such Advance. Any portion of the Amount Held for Future
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Distribution so used shall be replaced by the Master Servicer by remittance to
the Trustee for deposit in the Certificate Account on or before 11:00 A.M. Los
Angeles time on any future Certificate Account Deposit Date to the extent that
funds attributable to the Mortgage Loans that are available in the Custodial
Account for remittance to the Trustee on such Certificate Account Deposit Date
shall be less than payments to Certificateholders required to be made on the
following Distribution Date.
The determination by the Master Servicer that it has made a
Nonrecoverable Advance or that any proposed Advance, if made, would constitute a
Nonrecoverable Advance, shall be evidenced by a certificate of a Servicing
Officer delivered to the Depositor and the Trustee by 11:00 A.M. Los Angeles
time on the related Determination Date.
In the event that the Master Servicer determines as of the Business Day
preceding any Certificate Account Deposit Date that it will be unable to remit
to the Trustee an amount equal to the Advance required to be made by it for the
immediately succeeding Distribution Date, it shall give written notice to the
Trustee of its inability to advance (such notice may be given by telecopy), not
later than 12:00 P.M. Los Angeles time on such Business Day, specifying the
portion of such amount that it will be unable to remit. Not later than 12:00
P.M. Los Angeles time on the Certificate Account Deposit Date the Trustee shall
(a) terminate all of the rights and obligations of the Master Servicer under
this Agreement in accordance with Section 7.01 and (b) assume the rights and
obligations of the Master Servicer hereunder, including the obligation to
advance funds in an amount equal to the Advance required to be made by the
Master Servicer for the immediately succeeding Distribution Date.
The Trustee shall deposit all funds it receives pursuant to this Section
4.04 into the Certificate Account.
(c) Notwithstanding any other provision of this Agreement or any
provision of any Subservicing Agreement, (i) the Master Servicer shall not make
any Advance or any Servicing Advance if (A) it determines in its good faith
judgment after reasonable inquiry that such Advance or Servicing Advance, if
made, would be a Nonrecoverable Advance, (B) a Cash Liquidation or REO
Disposition has occurred with respect to the related Mortgage Loan, or (C) the
related Mortgage Loan is a Deleted Mortgage Loan, and (ii) any Subservicer shall
not make any Subservicer Servicing Advance if (A) it determines in its good
faith judgment after reasonable inquiry that such Subservicer Servicing Advance,
if made, would be a Nonrecoverable Subservicer Advance, (B) a Cash Liquidation
or REO Disposition has occurred with respect to the related Mortgage Loan, or
(C) the related Mortgage Loan is a Deleted Mortgage Loan.
Section 4.05. Allocation of Realized Losses.
Prior to each Determination Date, the Master Servicer shall determine
the total amount of Realized Losses with respect to the Mortgage Loans, if any,
that resulted from any Cash Liquidation, Debt Service Reduction, Deficient
Valuation or REO Disposition that occurred during the Prior Period. The amount
of each Realized Loss shall be evidenced by an Officers' Certificate delivered
to the Trustee no later than the Determination Date. All Realized Losses
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other than Excess Special Hazard Losses, Extraordinary Losses, Excess Bankruptcy
Losses or Excess Fraud Losses, shall be allocated by the Trustee as follows:
first, to the Class B-5 Certificates until the Class B-5 Certificate Principal
Balance has been reduced to zero; second, to the Class B-4 Certificates until
the Class B-4 Certificate Principal Balance has been reduced to zero; third, to
the Class B-3 Certificates until the Class B-3 Certificate Principal Balance has
been reduced to zero; fourth, to the Class B-2 Certificates until the Class B-2
Certificate Principal Balance has been reduced to zero; fifth, to the Class B-1
Certificates until the Class B-1 Certificate Principal Balance has been reduced
to zero; sixth, to the Class M Certificates until the Class M Certificate
Principal Balance has been reduced to zero; seventh, (x) in the case of losses
on a Group I Loan, to the Group I Certificates and the Residual Certificates,
pro rata according to their Certificate Principal Balances in reduction thereof,
and (y) in the case of losses on a Group II Loan, to the Group II Certificates
pro rata according to their Certificate Principal Balances in reduction thereof;
provided, however, that in each case if any such Realized Losses in on Class
I-PO Mortgage Loan or Class II-PO Mortgage Loan, the Class I-PO Fraction or
Class II-PO Fraction of such loss will first be allocated to the Class I-PO
Certificates or the Class II-PO Certificates, as applicable, and the remainder
of such Realized Losses will be allocated as described above in this paragraph.
Realized Losses shall be allocated to the REMIC I Regular Interests in
accordance with the definition of "REMIC I Realized Losses."
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 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 in the case of the principal portion of a Realized Loss or based on the
Accrued Certificate Interest thereon payable on such Distribution Date (without
regard to any Compensating Interest for such Distribution Date) in the case of
an interest portion of a Realized Loss. Except as provided in the following
sentence, any allocation of Realized Losses (other than Debt Service Reductions)
to a Class of Certificates shall be made by reducing the Certificate Principal
Balance thereof in the case of the principal portion of such Realized Loss and
the Accrued Certificate Interest thereon, in the case of the interest portion of
such Realized Loss by the amount so allocated, which allocation shall be deemed
to have occurred on such Distribution Date. Any allocation of the principal
portion of Realized Losses (other than Debt Service Reductions) to the most
junior Subordinate Certificates then outstanding shall be made by operation of
the definition of "Certificate Principal Balance" and by operation of the
provisions of Section 4.02(a). Allocations of the interest portions of Realized
Losses shall be made by operation of the definition of "Accrued Certificate
Interest" and by operation of the provisions of Section 4.02(a). Allocations of
the principal portion of Debt Service Reductions shall be made by operation of
the provisions of Section 4.02(a). 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.
Section 4.06. Reports of Foreclosures and Abandonment of Mortgaged
Property.
The Master Servicer or the related Subservicers shall file information
returns with respect to the receipt of mortgage interests received in a trade or
business, the reports of foreclosures and abandonments of any Mortgaged Property
and the information returns relating to
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cancellation of indebtedness income with respect to any Mortgaged Property
required by Sections 6050H, 6050J and 6050P, respectively, of the Code, and
deliver to the Trustee an Officers' Certificate on or before March 31 of each
year stating that such reports have been filed. Such reports shall be in form
and substance sufficient to meet the reporting requirements imposed by Sections
6050H, 6050J and 6050P of the Code.
Section 4.07. Compliance with Withholding Requirements.
Notwithstanding any other provision of this Agreement, the Master
Servicer shall comply with all federal withholding requirements with respect to
payments to Certificateholders of interest or original issue discount that the
Master Servicer reasonably believes are applicable under the Code. The consent
of Certificateholders shall not be required for any such withholding. Without
limiting the foregoing, the Master Servicer agrees that it will not withhold
with respect to payments of interest or original issue discount in the case of a
Certificateholder that has furnished or caused to be furnished an effective Form
W-8 or an acceptable substitute form or a successor form and who is not a "10
percent shareholder" within the meaning of Code Section 871(h)(3)(B) or a
"controlled foreign corporation" described in Code Section 881(c)(3)(C) with
respect to the Trust Fund or the Depositor. In the event a Paying Agent
withholds any amount from interest or original issue discount payments or
advances thereof to any Certificateholder pursuant to federal withholding
requirements, the Paying Agent shall indicate the amount withheld to such
Certificateholder.
Section 4.08. REMIC I Distributions. On each Distribution Date, the
Trustee shall be deemed to distribute to itself, as holder of the REMIC I
Regular Interests, the following amounts in the order set forth below:
(a) to the extent of the Available Distribution Amount, for each REMIC I
Regular Interest, an amount equal to the interest accrued on the aggregate
principal balance or notional amount of such REMIC I Regular Interest at the
applicable interest rate for such REMIC I Regular Interest (as set forth in the
definition for such REMIC I Regular Interest) during the Prior Period, plus any
unpaid portion of accrued interest for any prior period with interest thereon at
the applicable interest rate for such REMIC I Regular Interest, reduced by the
amount of any interest shortfalls (including Prepayment Interest Shortfalls, to
the extent not covered by Compensating Interest) allocable to such REMIC I
Regular Interest);
(b) to the extent of the Available Distribution Amount remaining after
the distributions deemed made under clause (a), to the following Classes in
respect of principal:
(i) to the Class P1-M Interest, an amount equal to the Class I-PO
Principal Distribution Amount;
(ii) to the Class P2-M Interest, an amount equal to the Class
II-PO Principal Distribution Amount;
(iii) to the Class Y1 Interest, the Class Y1 Principal
Distribution Amount;
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(iv) to the Class Y2 Interest, the Class Y2 Principal
Distribution Amount;
(v) to the Class Z1 Interest, the Class Z1 Principal Distribution
Amount; and
(vi) to the Class Z2 Interest, the Class Z2 Principal
Distribution Amount.
(c) after the principal balance of each REMIC I Regular Interest is
reduced to zero, to the Class R-I Certificate, all other amounts remaining in
REMIC I;
provided, however, that notwithstanding the deemed distributions set forth in
clauses (a), (b) and (c) above, distributions from the Certificate Account shall
only be made to the holders of the Certificates.
Section 4.09. Maintenance of Certificate Insurance Policies; Collections
Thereunder
(a) Prior to Noon New York City time on the fourth Business Day prior to
each Distribution Date, the Trustee shall determine if a Deficiency Amount for
such Distribution Date will exist and, if so, shall complete the Notice and
submit such Notice in accordance with the applicable Certificate Insurance
Policy to the Certificate insurer no later than 12:00 P.M., New York City time,
on the third Business Day immediately preceding each Distribution Date, as a
claim for an Insured Payment in an amount equal to such Deficiency Amount. If at
any time the Trustee determines that a Preference Amount is payable under the
terms of a Certificate Insurance Policy, the Trustee shall take the actions
required by the terms of such Certificate Insurance Policy to obtain payment of
such Preference Amount by the Certificate Insurer.
(b) Upon receipt of any Insured Payment from the Certificate Insurer on
behalf of the Insurer Certificateholders, the Trustee shall deposit such Insured
Payment in the Certificate Account. All such amounts on deposit in the
Certificate Account shall remain uninvested. The Trustee shall include on each
Distribution Date the Deficiency Amount for such Distribution Date in the amount
distributed to the applicable Insured Certificateholders pursuant to Section
4.02. If on any Distribution Date, the Trustee or the Master Servicer determines
that the Certificate Insurer has paid more under a Certificate Insurance Policy
than is required by the terms thereof, the Trustee shall promptly return the
excess amount to the Certificate Insurer.
(c) The Trustee shall (i) receive as attorney-in-fact of each Insured
Certificateholder any Insured Payment from the Certificate Insurer and (ii)
distribute such Insured Payment to such Insured Certificateholders as set forth
in subsection (b) above. Insured Payments disbursed by the Trustee from proceeds
of the Certificate Insurance Policies shall not be considered payment by REMIC
II with respect to the Insured Certificates, nor shall such disbursement of such
Insured Payments discharge the obligations of REMIC II with respect to the
amounts thereof, and the Certificate Insurer shall become owner of such amounts
to the extent covered by such Insured Payments as the deemed assignee of such
Insured Certificateholders. The Trustee hereby agrees on behalf of each Insured
Certificateholder (and each Insured Certificateholder, by its acceptance of its
Insured Certificates, hereby agrees) for the benefit of the Certificate Insurer
that, to the extent the Certificate Insurer makes Insured Payments, either
directly or indirectly (as by paying through the Trustee), to the Insured
Certificateholders, the
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Certificate Insurer will be subrogated to the rights of the Insured
Certificateholders to the extent of such payments.
(d) The Trustee will hold the Certificate Insurance Policies in trust as
agent for the Insured Certificateholders for the purpose of making claims
thereof and distributing the proceeds thereof in accordance with the terms of
this Agreement. Neither Certificate Insurance Policy, nor the amounts paid on
the Certificate Insurance Policies will constitute part of the Trust Fund or
assets of either REMIC I or REMIC II.
ARTICLE V
THE CERTIFICATES
Section 5.01. The Certificates.
(a) The Class A, Class X and Class PO Certificates shall be
substantially in the form set forth in Exhibit A. The Class M, Class B and
Residual Certificates, respectively, shall be substantially in the forms set
forth in Exhibits B, C and D. Each of the foregoing Certificates shall, on
original issue, be executed and delivered by the Trustee to the Certificate
Registrar for authentication and delivery to or upon the order of the Depositor
upon receipt by the Trustee of the documents specified in Section 2.01. The
Certificates, other than the Class IA-2, Class IA-3, Class IA-5, Class IA-6,
Class IIA-3 and Residual Certificates, shall be issuable in minimum dollar
denominations of $100,000 initial Certificate Principal Balance (or initial
Notional Amount in the case of the Notional Amount Certificates) each and
integral multiples of $1 in excess thereof. The Class IA-2, Class IA-3, Class
IA-5, Class IA-6 and Class IIA-3 Certificates shall be issuable in minimum
dollar denominations of $1,000 initial Certificate Principal Balance each and
integral multiples of $1 in excess thereof.
The Residual Certificates shall be issuable in minimum denominations of
not less than a 99.99% Percentage Interest; provided, however, that one Class
R-I Certificate, and one Class R-II Certificate will be issuable to the Master
Servicer as "tax matters person" pursuant to Section 10.01(c) and (e) in a
minimum denomination representing a Percentage Interest of not less than 0.01%.
The Certificates shall be executed by manual or facsimile signature on
behalf of an authorized officer of the Trustee. Certificates bearing the manual
or facsimile signatures of individuals who were at the time of issuance of such
Certificates 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 Certificate 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 for herein executed by the Certificate
Registrar by manual signature, and such certificate upon any Certificate shall
be conclusive evidence, and the only evidence, that such Certificate has been
duly authenticated and delivered hereunder. All Certificates shall be dated the
date of their authentication.
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(b) The Class A, Class X, Class PO, Class M, Class B-1 and Class B-2
Certificates shall initially be issued as one or more Certificates 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 each of the Book-Entry
Certificates through the book-entry facilities of the Depository and, except as
provided below, shall not be entitled to 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 transfer the Ownership Interests only 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, the Master Servicer and the Depositor may for all purposes
(including the making of payments due on the respective Classes of Book-Entry
Certificates) deal with the Depository as the authorized representative of the
Certificate Owners with respect to the respective Classes of Book-Entry
Certificates for the purposes of exercising the rights of Certificateholders
hereunder. The rights of Certificate Owners with respect to the respective
Classes of 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 any Class of
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 with respect to the Book-Entry Certificates and
(B) the Trustee and the Depositor are 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 an
Event of Default, holders of 51% of the Book-Entry Certificates notify the
Trustee that the book-entry system is not in their best interest, 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 Depository, accompanied by registration
instructions from the Depository for registration of transfer, the Trustee shall
issue the Definitive Certificates. Neither the Depositor, the Master Servicer
nor the Trustee shall be liable for any actions taken by the Depository or its
nominee, including, without limitation, any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of Definitive Certificates all references
herein to obligations imposed upon or to be performed by the Depository in
connection with the issuance of the Definitive Certificates pursuant to this
Section 5.01 shall be deemed to be imposed upon and performed by the Trustee,
and the Trustee and
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the Master Servicer 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 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. The Trustee
is initially appointed Certificate Registrar for the purpose of registering
Certificates and transfers and exchanges of Certificates as herein provided.
Upon the request of the Master Servicer, the Certificate Registrar or the
Trustee shall provide the Master Servicer with a certified list of
Certificateholders.
(b) 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 and, in the case of any Class M, Class B or Residual Certificate,
upon satisfaction of the conditions set forth below, the Trustee shall execute
and the Certificate Registrar shall authenticate and deliver within five (5)
Business Days, in the name of the designated transferee or transferees, one or
more new Certificates of a like Class and aggregate Percentage Interest.
(c) At the option of the Certificateholders, Certificates may be
exchanged for other Certificates of authorized denominations of a like Class and
aggregate Percentage Interest, upon surrender of the Certificates to be
exchanged at any such office or agency. Whenever any Certificates are so
surrendered for exchange the Trustee shall execute and the Certificate Registrar
shall authenticate and deliver within five (5) Business Days the Certificates of
such Class 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 or the Certificate Registrar) be duly
endorsed by, or be accompanied by a written instrument of transfer in form
satisfactory to the Trustee and the Certificate Registrar duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing.
(d) No transfer, sale, pledge or other disposition of a Class B-3, Class
B-4 or Class B-5 Certificate shall be made unless such transfer, sale, pledge or
other disposition is exempt from the registration requirements of the Securities
Act of 1933, as amended, or is made in accordance with said Act. In the event
that a transfer of a Class B-3, Class B-4 or Class B-5 Certificate is to be
made, either (i)(A) the Trustee shall require a written Opinion of Counsel
acceptable to and in form and substance satisfactory to the Trustee and the
Depositor that such transfer may be made pursuant to an exemption, describing
the applicable exemption and the basis therefor, from said Act or is being made
pursuant to said Act, which Opinion of Counsel shall not be an expense of the
Trustee, the Depositor or the Master Servicer or (B) the Trustee shall require
the transferee to execute a representation letter, substantially in the form of
Exhibit I hereto, and the Trustee shall require the transferor to execute a
representation letter, substantially in the form of Exhibit J hereto, certifying
to the Depositor and the Trustee the facts surrounding such transfer, which
representation letters shall not be an expense of the Trustee, the Depositor or
the Master Servicer or (ii) the prospective transferee of such a Certificate
shall
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be required to provide the Trustee, the Depositor and the Master Servicers with
an investment letter substantially in the form of Exhibit K attached hereto, or
such other form as the Depositor in its sole discretion deems acceptable, which
investment letter shall not be an expense of the Trustee, the Depositor or the
Master Servicer, and which investment letter states that, among other things,
such transferee (A) is a "qualified institutional buyer" as defined under Rule
144A, acting for its own account or the accounts of other "qualified
institutional buyers" as defined under Rule 144A, and (B) is aware that the
proposed transferor intends to rely on the exemption from registration
requirements under the Securities Act of 1933, as amended, provided by Rule
144A. The Holder of any such Certificate desiring to effect any such transfer,
sale, pledge or other disposition shall, and does hereby agree to, indemnify the
Trustee, the Depositor, the Master Servicer and the Certificate Registrar
against any liability that may result if the transfer, sale, pledge or other
disposition is not so exempt or is not made in accordance with the Securities
Act of 1933, as amended, or any similar state laws.
(e) In the case of any Class M, Class B or Residual Certificate
presented for registration in the name of any Person, either (i) the Trustee
shall require an Opinion of Counsel acceptable to and in form and substance
satisfactory to the Trustee, the Depositor and the Master Servicer to the effect
that the purchase or holding of such Class M, Class B or Residual Certificate
will not constitute or result in any non-exempt prohibited transaction under
Section 406 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or Section 4975 of the Code (or comparable provisions of any
subsequent enactments), and will not subject the Trustee, the Depositor or the
Master Servicer to any obligation or liability (including obligations or
liabilities under ERISA 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 Trustee, the Depositor or the Master Servicer or (ii) the prospective
transferee shall be required to provide the Trustee, the Depositor and the
Master Servicer with a certification to the effect set forth in paragraph six of
Exhibit I (with respect to any Class M or Class B Certificate), or paragraph
five of Exhibit H-1 (with respect to any Residual Certificate), which the
Trustee may rely upon without further inquiry or investigation, or such other
certifications as the Trustee may deem desirable or necessary in order to
establish that such transferee or the Person in whose name such registration is
requested is not an employee benefit plan or other plan subject to the
prohibited transaction provisions of ERISA or Section 4975 of the Code, or any
Person (including an investment manager, a named fiduciary or a trustee of any
such plan) who is using "plan assets" of any such plan to effect such
acquisition.
So long as the Class M, Class B-1, or Class B-2 Certificates are
Book-Entry Certificates, any purchaser of a Class M, Class B-1, or Class B-2
Certificate will be deemed to have represented by such purchases that either (a)
such purchaser is not an employee benefit plan or other plan subject to the
prohibited transaction provisions of ERISA or Section 4975 of the Code and is
not purchasing such certificates on behalf of or with "plan assets" of any Plan,
(b) the purchase of any such Certificate by or on behalf of or with "plan
assets" of any Plan is permissible under applicable law, will not result in any
non-exempt prohibited transaction under ERISA or Section 4975 of the Code, and
will not subject the Master Servicer, the Depositor or the Trustee to any
obligation in addition to those undertaken in this Agreement, or (c) if the
transferee is an insurance company, that the transferee is an insurance company,
and the source of funds used to purchase such Certificate is an "insurance
company general account" (as such
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term is defined in PTCE 95-60) and the conditions set forth in Sections I and
III of PTCE 95-60 have been satisfied.
(f) (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, (I) an affidavit and agreement (a "Transfer
Affidavit and Agreement," in the form attached hereto as Exhibit H-1)
from the proposed Transferee, representing and warranting, among other
things, that it 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 who
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(f) and agrees to be bound by them, and (II) a certificate,
in the form attached hereto as Exhibit H-2, from the Holder wishing to
transfer the Residual Certificate, representing and warranting, among
other things, that no purpose of the proposed Transfer is to impede the
assessment or collection of tax.
(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 Agreement 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 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 certificate to the Trustee
in the form attached hereto as Exhibit H-2.
(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
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Temporary Treasury Regulations 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,
a certificate of the Holder requesting such transfer in the form attached hereto
as Exhibit H-2. Transfers of the Residual Certificates to Non-United States
Persons and Disqualified Organizations (as defined in Section 860E(e)(5) of the
Code) are prohibited.
(iii) (A) If any Disqualified Organization shall become a holder of a
Residual Certificate, then the last preceding Permitted Transferee shall be
restored, to the extent permitted by law, to all rights and obligations as
Holder thereof retroactive to the date of registration of such Transfer of such
Residual Certificate. If a Non-United States Person shall become a holder of a
Residual Certificate, then the last preceding United States Person shall be
restored, to the extent permitted by law, to all rights and obligations as
Holder thereof retroactive to the date of registration of such Transfer of such
Residual Certificate. If a transfer of a Residual Certificate is disregarded
pursuant to the provisions of Treasury Regulations Section 1.860E-1 or Section
1.860G-3, then the last preceding Permitted Transferee shall be restored, to the
extent permitted by law, to all rights and obligations 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(f) 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(f)
and to 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 Master Servicer 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
Master Servicer on such terms as the Master Servicer may choose. Such purported
Transferee shall promptly endorse and deliver each Residual Certificate in
accordance with the instructions of the Master Servicer. Such purchaser may be
the Master Servicer itself or any Affiliate of the Master Servicer. The proceeds
of such sale, net of the commissions (which may include commissions payable to
the Master Servicer or its Affiliates), expenses and taxes due, if any, will be
remitted by the Master Servicer 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 Master Servicer, and the Master Servicer 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 Master Servicer, on behalf of the Trustee, shall make
available, upon written request from the Trustee, 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 regarding "excess inclusions" of such
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Residual Certificates required to be provided to the Internal Revenue Service
and certain Persons as described in Treasury Regulations Sections 1.860D-1(b)(5)
and 1.860E-2(a)(5), 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 who is a Disqualified Organization. Reasonable compensation for
providing such information may be required by the Master Servicer from such
Person.
(v) The provisions of this Section 5.02(f) set forth prior to this
clause (v) may be modified, added to or eliminated pursuant to Section 11.01,
provided that there shall have also been delivered to the Trustee 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,
if any, of any Class of the Class A, Class X, Class PO, Class M, Class B
or Residual Certificates below the lower of the then-current rating or
the rating assigned to such Certificates as of the Closing Date by such
Rating Agency (determined in the case of the Insured Certificates,
without regard to the effect of the Certificate Insurance Policies); and
(B) a certificate of the Master Servicer stating that the Master
Servicer has received an Opinion of Counsel, in form and substance
satisfactory to the Master Servicer, to the effect that such
modification, addition to or absence of such provisions will not cause
REMIC I or REMIC II to cease to qualify as a REMIC and will not cause
(x) REMIC I or REMIC II to be subject to an entity-level tax caused by
the Transfer of any Residual Certificate to a Person that is a
Disqualified Organization or (y) a Certificateholder or another Person
to be subject to a REMIC-related tax caused by the Transfer of a
Residual Certificate to a Person that is not a Permitted Transferee.
(g) No service charge shall be made for any transfer or exchange of
Certificates of any Class, 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
destroyed by the Certificate Registrar.
Section 5.03. Mutilated, Destroyed, Lost or Stolen Certificates.
If (i) any mutilated Certificate is surrendered to the Certificate
Registrar, or the Trustee and the Certificate Registrar receive evidence to
their satisfaction of the destruction, loss or theft of any Certificate, and
(ii) there is delivered to the Trustee and the Certificate Registrar such
security or indemnity as may be required by them to save each of them harmless,
then, in the absence of notice to the Trustee or the Certificate Registrar that
such Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute and the Certificate Registrar shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or
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stolen Certificate, a new Certificate of like tenor, Class and Percentage
Interest but bearing a number not contemporaneously outstanding. Upon the
issuance of any new Certificate under this Section, the Trustee may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses (including the fees
and expenses of the Trustee and the Certificate Registrar) connected therewith.
Any duplicate Certificate issued pursuant to this Section shall constitute
complete and indefeasible evidence of ownership in the Trust Fund, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
Section 5.04. Persons Deemed Owners.
Prior to due presentation of a Certificate for registration of transfer,
the Depositor, the Master Servicer, the Trustee, the Certificate Registrar, the
Certificate Insurer and any of their respective agents 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 4.02 and for all
other purposes whatsoever, and neither the Depositor, the Master Servicer, the
Trustee, the Certificate Registrar, the Certificate Insurer nor any of their
respective agents shall be affected by notice to the contrary except as provided
in Section 5.02(f).
Section 5.05. Appointment of Paying Agent.
The Trustee may appoint a Paying Agent for the purpose of making
distributions to Certificateholders pursuant to Section 4.02. In the event of
any such appointment, on or prior to each Distribution Date, the Trustee shall
deposit or cause to be deposited with the Paying Agent a sum sufficient to make
the payments to Certificateholders in the amounts and in the manner provided for
in Section 4.02, such sum to be held in trust for the benefit of
Certificateholders.
The Trustee shall cause each Paying Agent to execute and deliver to the
Trustee an instrument in which such Paying Agent shall agree with the Trustee
that such Paying Agent will hold all sums held by it for the payment to
Certificateholders in trust for the benefit of the Certificateholders entitled
thereto until such sums shall be paid to such Certificateholders. Any sums so
held by such Paying Agent shall be held only in Eligible Accounts to the extent
such sums are not distributed to the Certificateholders on the date of receipt
by such Paying Agent.
ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
Section 6.01. Respective Liabilities of the Depositor and the Master
Servicer.
The Depositor and the Master Servicer shall each be liable in accordance
herewith only to the extent of the obligations specifically and respectively
imposed upon and undertaken by the Depositor and the Master Servicer herein. By
way of illustration and not limitation, the Depositor is not liable for the
servicing and administration of the Mortgage Loans, nor is it
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obligated by Section 7.01 or Section 10.01 to assume any obligations of the
Master Servicer or to appoint a designee to assume such obligations, nor is it
liable for any other obligation hereunder that it may, but is not obligated to,
assume unless it elects to assume such obligation in accordance herewith.
Section 6.02. Merger or Consolidation of the Depositor or the
Master Servicer; Assignment of Rights and Delegation of
Duties by Master Servicer.
(a) The Depositor and the Master Servicer will each keep in full effect
its existence, rights and franchises as a corporation or federal savings bank,
as applicable, under the laws governing its incorporation, and will each obtain
and preserve its qualification to do business as a foreign corporation in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Agreement, the Certificates or any of the
Mortgage Loans and to perform its respective duties under this Agreement.
(b) Any Person into which the Depositor or the Master Servicer may be
merged or consolidated, or any corporation 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 each Rating Agency's ratings, if any,
of the Class A, Class X, Class PO, Class M, Class B or Residual 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 each Rating Agency).
(c) Notwithstanding anything else in this Section 6.02 and Section 6.04
to the contrary, the Master Servicer may assign its rights and delegate its
duties and obligations under this Agreement; provided that the Person accepting
such assignment or delegation shall be a Person which is qualified to service
mortgage loans on behalf of FNMA or FHLMC, is reasonably satisfactory to the
Trustee and the Depositor, has a minimum net worth of $50,000,000, is willing to
service the Mortgage Loans previously serviced by the Master Servicer assigning
its rights or delegating its duties and obligations under this Agreement and
executes and delivers to the Depositor and the Trustee an agreement, in form and
substance reasonably satisfactory to the Depositor and the Trustee, which
contains an assumption by such Person of the due and punctual performance and
observance of each covenant and condition to be performed or observed by the
Master Servicer under this Agreement; provided further that each Rating Agency's
rating of the Classes of Certificates that have been rated in effect immediately
prior to such assignment and delegation will not be qualified, reduced or
withdrawn as a result of such assignment and delegation (as evidenced by a
letter to such effect from each Rating Agency). In the case of any such
assignment and delegation, the Master Servicer shall be released from its
obligations under this Agreement, except that the Master Servicer shall remain
liable for all liabilities and obligations incurred by it as the Master Servicer
hereunder
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prior to the satisfaction of the conditions to such assignment and delegation
set forth in the next preceding sentence.
Section 6.03. Limitation on Liability of the Depositor, the Master
Servicer and Others.
Neither the Depositor, the Master Servicer nor 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 any breach of warranties or representations made herein or 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 prima facie
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
by the Trust Fund and held harmless against any loss, liability or expense
incurred in connection with any legal action relating to this Agreement or the
Certificates, other than any loss, liability or expense related to any specific
Mortgage Loan or Mortgage Loans (except as any such loss, liability or expense
shall be otherwise reimbursable pursuant to this Agreement) and any loss,
liability or expense incurred by reason of 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 or administrative action,
proceeding, hearing or examination that is not incidental to its respective
duties under this Agreement and which in its opinion may involve it in any
expense or liability; provided, however, that the Depositor or the Master
Servicer may in its discretion undertake any such action, proceeding, hearing or
examination that 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, the legal expenses and costs of
such action, proceeding, hearing or examination and any liability resulting
therefrom shall be expenses, costs and liabilities of the Trust Fund, and the
Depositor and the Master Servicer shall be entitled to be reimbursed therefor
out of amounts attributable to the Mortgage Loans on deposit in the Custodial
Account as provided by Section 3.10 and, on the Distribution Date(s) following
such reimbursement, the aggregate of such expenses and costs shall be allocated
in reduction of the Accrued Certificate Interest on each Class entitled thereto
in the same manner as if such expenses and costs constituted a Net Prepayment
Interest Shortfall.
Section 6.04. Depositor and Master Servicer Not to Resign.
Subject to the provisions of Section 6.02, neither the Depositor nor the
Master Servicer shall resign from its respective obligations and duties hereby
imposed on it except upon determination that its duties hereunder are no longer
permissible under applicable law. Any such
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determination permitting the resignation of the Depositor or the Master Servicer
shall be evidenced by an Opinion of Counsel to such effect delivered to the
Trustee. No such resignation by the Master Servicer shall become effective until
the Trustee or a successor servicer shall have assumed the Master Servicer's
responsibilities and obligations in accordance with Section 7.02.
ARTICLE VII
DEFAULT
Section 7.01. Events of Default.
Event of Default, wherever used herein with respect to the Master
Servicer, means any one of the following events (whatever reason for such Event
of Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) the Master Servicer shall fail to remit to the Trustee
any remittance required to be made under the terms of this Agreement,
other than any Advances required by Section 4.04, and such failure shall
continue unremedied for a period of 5 days after the date upon which
written notice of such failure, requiring such failure to be remedied,
shall have been given to the Master Servicer by the Trustee or the
Depositor or to the Master Servicer, the Depositor and the Trustee by
the Holders of Certificates of any Class affected thereby evidencing
Percentage Interests aggregating not less than 25%; or
(ii) the Master Servicer shall fail 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 and such failure
shall continue unremedied for a period of 30 days (except that such
number of days shall be 15 in the case of a failure to pay the premium
for any Required Insurance Policy) after 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 Trustee or the Depositor, or to
the Master Servicer, the Depositor and the Trustee by the Holders of
Certificates of any Class evidencing, in the case of any such Class,
Percentage Interests aggregating not less than 25%; 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 appointing a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Master Servicer and such
decree or order shall have remained in force undischarged or unstayed
for a period of 60 days; or
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(iv) the Master Servicer shall consent to the appointment of
a conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshalling of assets and liabilities, or similar proceedings
of, or relating to, the Master Servicer or of, or relating to, all or
substantially all of the property of the Master Servicer; or
(v) the Master Servicer shall admit in writing its inability
to pay its debts generally as they become due, file a petition to take
advantage of, or commence a voluntary case under, any applicable
insolvency or reorganization statute, make an assignment for the benefit
of its creditors, or voluntarily suspend payment of its obligations; or
(vi) the Master Servicer shall notify the Trustee pursuant to
Section 4.04(b) that it is unable to remit to the Trustee an amount
equal to the Advance it must make or fails to make Advances, regardless
of notice.
If an Event of Default described in clauses (i)-(v) of this Section
shall occur, then, and in each and every such case, so long as such Event of
Default shall not have been remedied, either the Depositor or the Trustee may,
and at the direction of Holders of Certificates entitled to at least 51% of the
Voting Rights, the Trustee shall, by notice in writing to the Master Servicer
(and to the Depositor if given by the Trustee or to the Trustee if given by the
Depositor), terminate all of the rights and obligations of the Master Servicer
under this Agreement, other than its rights as a Certificateholder hereunder. If
an Event of Default described in clause (vi) hereof shall occur, the Trustee
shall, by notice to the Master Servicer and the Depositor, immediately terminate
all of the rights and obligations of the Master Servicer under this Agreement,
other than its rights as a Certificateholder hereunder as provided in Section
4.04(b). 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 thereof) or the
Mortgage Loans or otherwise, shall, subject to Section 7.02, pass to and be
vested in the Trustee or the Trustee's designee appointed pursuant to Section
7.02; and, without limitation, the Trustee is hereby authorized and empowered to
execute and deliver, on behalf of the Master Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement or
assignment of the Mortgage Loans and related documents, or otherwise. The Master
Servicer agrees to cooperate with the Trustee in effecting the termination of
the Master Servicer's responsibilities and rights hereunder, including, without
limitation, the transfer to the Trustee or its designee for administration by it
of all cash amounts which shall at the time be credited to the Custodial Account
or thereafter be received with respect to the Mortgage Loans, all at the Master
Servicer's cost. No such termination shall release the Master Servicer for any
liability that it would otherwise have hereunder for any act or omission prior
to the effective time of such termination.
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Section 7.02. Trustee to Act; Appointment of Successor.
On and after the time the Master Servicer receives a notice of
termination pursuant to Section 7.01 or resigns in accordance with Section 6.04,
the Trustee or, upon notice to the Depositor and with the Depositor's consent
(which shall not be unreasonably withheld), a designee (which meets the
standards set forth below) of the Trustee, shall be the successor in all
respects to the Master Servicer in its capacity as servicer under this Agreement
and the transactions set forth or provided for herein and shall be subject to
all the responsibilities, duties and liabilities relating thereto placed on the
Master Servicer (except for the responsibilities, duties and liabilities
contained in Sections 2.02 and 2.03, excluding the duty to notify related
Subservicers or Sellers as set forth in such Sections, and its obligations to
deposit amounts in respect of losses incurred prior to such termination or
resignation on the investment of funds in the Custodial Account or remit such
amounts to the Trustee pursuant to Sections 3.07(c) and 4.01(b), respectively,
by the terms and provisions hereof); provided, however, that any failure to
perform such duties or responsibilities caused by the preceding Master
Servicer's failure to provide information required by Section 4.04 shall not be
considered a default by the Trustee hereunder. As compensation therefor, the
Trustee shall be entitled to all funds relating to the Mortgage Loans which the
Master Servicer would have been entitled to charge to the Custodial Account or
the Certificate Account if the Master Servicer had continued to act hereunder
and, in addition, shall be entitled to the income from any Permitted Investments
made with amounts attributable to the Mortgage Loans held in the Custodial
Account or the Certificate Account. If the Trustee has become the successor to
the Master Servicer in accordance with Section 6.04 or Section 7.01, then
notwithstanding the above, the Trustee may, if it shall be unwilling to so act,
or shall, if it is unable to so act, appoint, or petition a court of competent
jurisdiction to appoint, any established housing and home finance institution,
which is also a FNMA- or FHLMC-approved mortgage servicing institution, having a
net worth of not less than $10,000,000, as the successor to the Master Servicer
hereunder in the assumption of all or any part of the responsibilities, duties
or liabilities of the Master Servicer hereunder. Pending appointment of a
successor to the Master Servicer hereunder, the Trustee shall become successor
to the Master Servicer and shall act in such capacity as hereinabove provided.
In connection with such appointment and assumption, the Trustee may make such
arrangements for the compensation of such successor out of payments on Mortgage
Loans as it and such successor shall agree; provided, however, that no such
compensation shall be in excess of that permitted the initial Master Servicer
hereunder. The Depositor, the Trustee, the Custodian, if any, and such successor
shall take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession.
Section 7.03. Notification to Certificateholders.
(a) Upon any such termination or appointment of a successor to the
Master Servicer, the Trustee shall give prompt written notice thereof to
Certificateholders at their respective addresses appearing in the Certificate
Register.
(b) Within 60 days after the occurrence of any Event of Default, the
Trustee shall transmit by mail to all Holders of Certificates notice of each
such Event of Default hereunder known to the Trustee, unless such Event of
Default shall have been cured or waived.
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Section 7.04. Waiver of Events of Default.
The Holders representing at least 66% of the Voting Rights affected by a
default or Event of Default hereunder, may waive such default or Event of
Default; provided, however, that (a) a default or Event of Default under clause
(i) of Section 7.01 may be waived only by all of the Holders of Certificates
affected by such default or Event of Default and (b) no waiver pursuant to this
Section 7.04 shall affect the Holders of Certificates in the manner set forth in
Section 11.01(b)(i), (ii) or (iii). Upon any such waiver of a default or Event
of Default by the Holders representing the requisite percentage of Voting Rights
affected by such default or Event of Default, such default or 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
Event of Default or impair any right consequent thereon except to the extent
expressly so waived.
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.01. Duties of Trustee.
(a) The Trustee, prior to the occurrence of an Event of Default and
after the curing of all Events of Default which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement. In case an Event of Default has occurred (which has not been cured or
waived), the Trustee shall exercise such of the rights and powers vested in it
by this Agreement, and use the same degree of care and skill in their exercise
as a reasonably prudent investor would exercise or use under the circumstances
in the conduct of such investor's own affairs.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
The Trustee shall forward or cause to be forwarded in a timely fashion
the notices, reports and statements required to be forwarded by the Trustee
pursuant to Sections 4.03, 7.03 and 10.01. The Trustee shall furnish in a timely
fashion to the Master Servicer such information as the Master Servicer may
reasonably request from time to time for the Master Servicer to fulfill its
duties as set forth in this Agreement. The Trustee covenants and agrees that it
shall perform its obligations hereunder in a manner so as to maintain the status
of both REMIC I and REMIC II as REMICs under the REMIC Provisions and to prevent
the imposition of any federal, state or local income, prohibited transaction,
contribution or other tax on either REMIC I or REMIC II to the extent that
maintaining such status and avoiding such taxes are reasonably within the
control of the Trustee and are reasonably within the scope of its duties under
this Agreement.
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(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own grossly negligent action, its own grossly
negligent failure to act or its own willful misfeasance; provided, however,
that:
(i) Prior to the occurrence of an Event of Default, and
after the curing or waiver of all such Events of Default which may have
occurred, the duties and obligations of the Trustee shall be determined
solely by the express provisions of this Agreement, the Trustee shall
not be liable except for the performance of such duties and obligations
as are 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 by the Depositor or the Master Servicer and
which on their face, do not contradict the requirements of this
Agreement;
(ii) The Trustee (in its individual capacity) 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 grossly negligent in ascertaining
the pertinent facts;
(iii) The Trustee (in its individual capacity) 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
Certificateholders of any Class holding Certificates which evidence, as
to such Class, Percentage Interests aggregating not less than 25% as to
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Agreement;
(iv) The Trustee shall not be charged with knowledge of any
default (other than a default in payment to the Trustee) specified in
clauses (i) and (ii) of Section 7.01 or an Event of Default under
clauses (iii), (iv) and (v) of Section 7.01 unless a Responsible Officer
of the Trustee assigned to and working in the Corporate Trust Office
obtains actual knowledge of such failure or event or the Trustee
receives written notice of such failure or event at its Corporate Trust
Office from the Master Servicer, the Depositor or any Certificateholder;
and
(v) Except to the extent provided in Section 7.02, no
provision in this Agreement shall require the Trustee to expend or risk
its own funds (including, without limitation, the making of any Advance
as successor Master Servicer) or otherwise incur any personal financial
liability in the performance of any of its duties as Trustee hereunder,
or in the exercise of any of its rights or powers, if the Trustee shall
have reasonable grounds for believing that repayment of funds or
adequate indemnity against such risk or liability is not reasonably
assured to it.
(d) The Trustee shall timely pay, from its own funds, the amount of any
and all federal, state and local taxes imposed on the Trust Fund or its assets
or transactions including,
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without limitation, (A) "prohibited transaction" penalty taxes as defined in
Section 860F of the Code, if, when and as the same shall be due and payable, (B)
any tax on contributions to a REMIC after the Closing Date imposed by Section
860G(d) of the Code and (C) any tax on "net income from foreclosure property" as
defined in Section 860G(c) of the Code, but only if such taxes arise out of a
breach by the Trustee of its obligations hereunder, which breach constitutes
gross negligence or willful misfeasance of the Trustee. If any tax on "net
income from foreclosure property" as defined in Section 860G(c) of the Code does
not arise out of a breach by the Trustee as set forth above, such tax will be
paid as provided in Section 10.01(g).
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 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 an Event of Default
(which has not been cured), to exercise such of the rights and powers
vested in it by this Agreement, and to use the same degree of care and
skill in their exercise as a prudent investor would exercise or use
under the circumstances in the conduct of such investor'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 an Event of Default hereunder
and after the curing of all Events of Default which may have occurred,
the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or
other paper or document, unless requested in writing so to do by Holders
of Certificates of any Class evidencing, as to such Class, Percentage
Interests,
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aggregating not less than 50%; provided, however, that if the payment
within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured
to the Trustee by the security afforded to it by the terms of this
Agreement, the Trustee may require reasonable indemnity against such
expense or liability as a condition to so proceeding. The reasonable
expense of every such examination shall be paid by the Master Servicer,
if an Event of Default shall have occurred and is continuing, and
otherwise by the Certificateholder requesting the investigation;
(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) To the extent authorized under the Code and the
regulations promulgated thereunder, each Holder of a Residual
Certificate hereby irrevocably appoints and authorizes the Trustee to be
its attorney-in-fact for purposes of signing any Tax Returns required to
be filed on behalf of the Trust Fund. The Trustee shall sign on behalf
of the Trust Fund and deliver to REMIC Administrator in a timely manner
any Tax Returns prepared by or on behalf of REMIC Administrator that the
Trustee is required to sign as determined by REMIC Administrator
pursuant to applicable federal, state or local tax laws, provided that
REMIC Administrator shall indemnify the Trustee for signing any such Tax
Returns that contain errors or omissions.
(b) Following the issuance of the Certificates, the Trustee shall not
accept any contribution of assets to the Trust Fund unless it shall have
obtained or been furnished with an Opinion of Counsel to the effect that such
contribution will not (i) cause either REMIC I or REMIC II to fail to qualify as
a REMIC at any time that any Certificates are outstanding or (ii) cause the
Trust Fund to be subject to any federal tax as a result of such contribution
(including the imposition of any federal tax on "prohibited transactions"
imposed under Section 860F(a) of the Code).
Section 8.03. Trustee Not Liable for Certificates or Mortgage Loans.
The recitals contained herein and in the Certificates (other than the
execution of the Certificates and relating to the acceptance and receipt of the
Mortgage Loans) shall be taken as the statements of the Depositor or the Master
Servicer as the case may be, and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Agreement or of the Certificates (except that the
Certificates shall be duly and validly executed and authenticated by it as
Certificate Registrar) or of any Mortgage Loan or related document. Except as
otherwise provided herein, the Trustee shall not be accountable for the use or
application by the Depositor or the Master Servicer 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 Custodial Account by the Depositor
or the Master Servicer.
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Section 8.04. Trustee May Own Certificates.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Certificates with the same rights it would have if it were not
Trustee.
Section 8.05. Master Servicer to Pay Trustee's Fees and Expenses;
Indemnification.
(a) The Master Servicer covenants and agrees to pay to the Trustee and
any co-trustee on a monthly basis, and the Trustee and any co-trustee shall be
entitled to, the Trustee Fee for all services rendered by each of them in the
execution of the trusts hereby created and in the exercise and performance of
any of the powers and duties hereunder of the Trustee and any co-trustee, and
the Master Servicer will pay or reimburse the Trustee and any co-trustee upon
request for all reasonable expenses, disbursements and advances incurred or made
by the Trustee or any co-trustee in accordance with any of the provisions of
this Agreement (including the reasonable compensation and the expenses and
disbursements of its counsel and of all persons not regularly in its employ, and
the expenses incurred by the Trustee or any co-trustee in connection with the
appointment of an office or agency pursuant to Section 8.12) except any such
expense, disbursement or advance as may arise from its gross negligence or bad
faith. The Trustee Fee set forth herein shall be withheld by the Trustee from
funds remitted by the Master Servicer pursuant to Section 4.01(a).
(b) The Master Servicer agrees to indemnify the Trustee and its
officers, directors, agents and employees for, and to hold it and them harmless
against, any loss, liability or expense incurred without negligence or willful
misconduct on its or their part, arising out of, or in connection with, the
acceptance and administration of the Trust Fund, including the costs and
expenses (including reasonable legal fees and expenses) of defending itself
against any claim in connection with the exercise or performance of any of its
or their powers or duties under this Agreement, provided that:
(i) with respect to any such claim, the Trustee shall have
given the Master Servicer written notice thereof promptly after the
Trustee shall have actual knowledge thereof;
(ii) while maintaining control over its own defense, the
Trustee shall cooperate and consult fully with the Master Servicer in
preparing such defense; and
(iii) notwithstanding anything in this Agreement to the
contrary, the Master Servicer shall not be liable for settlement of any
claim by the Trustee entered into without the prior consent of the
Master Servicer, which consent shall not be unreasonably withheld, and,
provided further, that in the event the Master Servicer withhold its
consent to any settlement of a claim proposed by the Trustee, except as
to liability for such settlement, the obligation to indemnify set forth
in this Section 8.05 shall continue in full force and effect.
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No termination of this Agreement or the resignation or removal of the Trustee
hereunder shall affect the obligations created by this Section 8.05(b) of the
Master Servicer to indemnify the Trustee under the conditions and to the extent
set forth herein.
Notwithstanding the foregoing, the indemnification provided by the
Master Servicer in this Section 8.05(b) shall not pertain to any loss, liability
or expense of the Trustee, including the costs and expenses of defending itself
against any claim, incurred in connection with any actions taken by the Trustee
at the direction of Certificateholders pursuant to the terms of this Agreement.
Section 8.06. Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a corporation or a national
banking association having its principal office in a state and city acceptable
to the Depositor and organized and doing business under the laws of such 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 and subject to supervision or examination by federal or state
authority. If such corporation or national banking association publishes reports
of condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, 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.
(a) The Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice thereof to the Depositor. Upon receiving
such notice of resignation, the Depositor shall promptly appoint a successor
trustee by written instrument, in duplicate, one copy of which instrument shall
be delivered to the resigning Trustee and one copy to the successor trustee. 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.
(b) 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 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, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee. In addition, in the event that
the Depositor determines that the Trustee has failed (i) to distribute or cause
to be distributed to Certificateholders any amount required to be distributed
hereunder, if such amount is held by the Trustee or its Paying Agent for
distribution or (ii) to otherwise observe
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or perform in any material respect any of its covenants, agreements or
obligations hereunder, and such failure shall continue unremedied for a period
of 5 days (in respect of clause (i) above) or 30 days (in respect of clause (ii)
above) after the date on which written notice of such failure, requiring that
the same be remedied, shall have been given to the Trustee by the Depositor,
then the Depositor may remove the Trustee and appoint a successor trustee by
written instrument delivered as provided in the preceding sentence. In
connection with the appointment of a successor trustee pursuant to the preceding
sentence, the Depositor shall, on or before the date on which any such
appointment becomes effective, obtain from each Rating Agency written
confirmation that the appointment of any such successor trustee will not result
in the reduction of the ratings on any class of Certificates below the lesser of
the then current or original ratings on such Certificates.
(c) The Holders of Certificates entitled to at least 51% of the Voting
Rights may at any time remove the Trustee and appoint a successor trustee by
written instrument or instruments, in triplicate, signed by such Holders or
their attorneys-in-fact duly authorized, one complete set of which instruments
shall be delivered to the Depositor, one complete set to the Trustee so removed
and one complete set to the successor so appointed.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 8.08.
Section 8.08. Successor Trustee.
(a) Any successor trustee appointed as provided in Section 8.07 shall
execute, acknowledge and deliver to the Depositor 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 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 held by it hereunder (other than any Mortgage Files at
the time held by a Custodian, which shall become the agent of any successor
trustee hereunder), and the Depositor, the Master Servicer and the predecessor
trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for more fully and certainly vesting and confirming
in the successor trustee all such rights, powers, duties and obligations.
(b) 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.
(c) 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 all Holders of Certificates at their addresses as shown in the
Certificate Register. If the Depositor fails to mail
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such notice within 10 days after acceptance of appointment by the successor
trustee, the successor trustee shall cause such notice to be mailed at the
expense of the Depositor.
Section 8.09. Merger or Consolidation of Trustee.
Any corporation or national banking association into which the Trustee
may be merged or converted or with which it may be consolidated or any
corporation or national banking association resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation or national banking association succeeding to the business of the
Trustee, shall be the successor of the Trustee hereunder, provided such
corporation or national banking association shall be eligible under the
provisions of Section 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. The Trustee shall mail notice of any such merger or
consolidation to the Certificateholders at their address as shown in the
Certificate Register.
Section 8.10. Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions hereof, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Fund or property securing the same may at the time be located, the
Master Servicer and the Trustee acting jointly shall have the power and shall
execute and deliver all instruments to appoint one or more Persons approved by
the Trustee to act as co-trustee or co-trustees, jointly with the Trustee, or
separate trustee or separate trustees, of all or any part of the Trust Fund, and
to vest in such Person or Persons, in such capacity, such title to the Trust
Fund, or any part thereof, and, subject to the other provisions of this Section
8.10, such powers, duties, obligations, rights and trusts as the Master Servicer
and the Trustee may consider necessary or desirable. If the Master Servicer
shall not have joined in such appointment within 15 days after the receipt by it
of a request so to do, the Trustee alone shall have the power to make such
appointment, or in case an Event of Default shall have occurred and be
continuing, the Trustee shall have the power to make such appointment. No
co-trustee or separate trustee hereunder shall be required to meet the terms of
eligibility as a successor trustee under Section 8.06 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.
(b) 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 trustee or co-trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed (whether as Trustee hereunder or
as successor to the Master Servicer hereunder), the Trustee shall be incompetent
or unqualified to perform such act or acts, in which event such rights, powers,
duties and obligations (including the holding of title to the Trust Fund or any
portion thereof in any such jurisdiction) shall be exercised and performed by
such separate trustee or co-trustee at the direction of the Trustee.
(c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each
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of them. Every instrument appointing any separate trustee or co-trustee shall
refer to this Agreement and the conditions of this Article VIII. Each separate
trustee and co-trustee, upon its acceptance of the trusts conferred, shall be
vested with the estates or property specified in its instrument of appointment,
either jointly with the Trustee or separately, as may be provided therein,
subject to all the provisions of this Agreement, specifically including every
provision of this Agreement relating to the conduct of, affecting the liability
of, or affording protection to, the Trustee. Every such instrument shall be
filed with the Trustee.
(d) 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 Custodians.
The Trustee may, with the consent of the Master Servicer and the
Depositor, appoint one or more Custodians who are not Affiliates of the
Depositor, the Master Servicer or any Seller to hold all or a portion of the
Mortgage Files as agent for the Trustee, by entering into a Custodial Agreement.
Subject to Article VIII, the Trustee agrees to comply with the terms of each
Custodial Agreement and to enforce the terms and provisions thereof against the
Custodian for the benefit of the Certificateholders. Each Custodian shall be a
depository institution subject to supervision by federal or state authority,
shall have a combined capital and surplus of at least $15,000,000 and shall be
qualified to do business in the jurisdiction in which it holds any Mortgage
File. Each Custodial Agreement may be amended only as provided in Section 11.01.
The Trustee shall notify the Certificateholders of the appointment of any
Custodian (other than the Custodian appointed as of the Closing Date) pursuant
to this Section 8.11.
Section 8.12. Appointment of Office or Agency.
The Trustee will maintain an office or agency in the City of New York
where Certificates may be surrendered for registration of transfer or exchange.
The Trustee initially designates its offices located at 4 Albany Street, New
York, New York 10004 for the purpose of keeping the Certificate Register. The
Trustee will maintain an office at the address stated in Section 11.05(d) hereof
where notices and demands to or upon the Trustee in respect of this Agreement
may be served.
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ARTICLE IX
TERMINATION
Section 9.01. Termination Upon Purchase by the Master Servicer or
Liquidation of All Mortgage Loans.
(a) Subject to Section 9.02, the respective obligations and
responsibilities of the Depositor, the Master Servicer and the Trustee created
hereby in respect of the Certificates (other than the obligation of the Trustee
to make certain payments after the Final Distribution Date to Certificateholders
and the obligation of the Depositor to send certain notices as hereinafter set
forth) shall terminate upon the last action required to be taken by the Trustee
on the Final Distribution Date pursuant to this Article IX following the earlier
of:
(i) the later of the final payment or other liquidation (or any
Advance with respect thereto) of the last Mortgage Loan remaining in the
Trust Fund or the disposition of all property acquired upon foreclosure
or deed in lieu of foreclosure of any Mortgage Loan, or
(ii) the purchase by the Master Servicer of all Mortgage Loans
and all property acquired in respect of any Mortgage Loan remaining in
the Trust Fund at a price equal to 100% of the Stated Principal Balance
of each Mortgage Loan (other than Mortgage Loans as to which a Cash
Liquidation has occurred) or the fair market value of the related
underlying property of such Mortgage Loan with respect to Mortgage Loans
as to which an REO Acquisition has occurred if such fair market value is
less than such unpaid principal balance (net of any unreimbursed
Advances attributable to principal), in each case less any Realized
Losses that have not previously been allocated to the Certificates on
the day of repurchase plus accrued interest thereon at the Net Mortgage
Rate to, but not including, the first day of the month in which such
repurchase price is distributed, 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 right of the Master Servicer to purchase all the assets of the Trust
Fund pursuant to clause (ii) above is conditioned upon the Pool Stated Principal
Balance as of the Final Distribution Date being less than ten percent of the
Cut-off Date Principal Balance of the Mortgage Loans. If such right is exercised
by the Master Servicer, Master Servicer shall be deemed to have been reimbursed
for the full amount of any unreimbursed Advances theretofore made by it with
respect to the Mortgage Loans it services. In addition, the Master Servicer
shall provide to the Trustee the certification required by Section 3.15 and the
Trustee and any Custodian shall, promptly following payment of the purchase
price, release to the Master Servicer the Mortgage Files pertaining to the
Mortgage Loans being purchased.
(b) Upon final distribution as a result of the exercise by the Master
Servicer of its right to purchase the assets of the Trust Fund, the Master
Servicer shall give the Trustee not less
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than 60 days' prior notice of the Distribution Date on which the Master Servicer
anticipates that the final distribution will be made to Certificateholders.
Notice of any termination, specifying the anticipated Final Distribution Date
(which shall be a date that would otherwise be a Distribution Date) upon which
the Certificateholders may surrender their Certificates to the Trustee (if so
required by the terms hereof) for payment of the final distribution and
cancellation, shall be given promptly by the Trustee by letter to
Certificateholders mailed not earlier than the 15th day and not later than the
25th day of the month next preceding the month of such final distribution
specifying:
(i) the anticipated Final Distribution Date upon which final
payment of the Certificates is anticipated to be made upon presentation
and surrender of Certificates at the office or agency of the Trustee
therein designated,
(ii) the amount of any such final payment, if known, and
(iii) that the Record Date otherwise applicable to such
Distribution Date is not applicable and that payment will be made only
upon presentation and surrender of the Certificates at the office or
agency of the Trustee therein specified.
If the Trustee is obligated to give notice as aforesaid, it shall give such
notice to the Certificate Registrar at the time such notice is given to
Certificateholders. In the event such notice is given, the Master Servicer shall
remit to the Trustee for deposit in the Certificate Account before the Final
Distribution Date in immediately available funds an amount equal to the purchase
price for the assets of the Trust Fund computed as above provided.
(c) Upon presentation and surrender of the Certificates by the
Certificateholders thereof, the Trustee shall distribute to the
Certificateholders (i) the amount otherwise distributable on such Distribution
Date, if not in connection with the Master Servicer's election to repurchase, or
(ii) if the Master Servicer elected to so repurchase, an amount determined as
follows: (A)(I) with respect to each Certificate, the outstanding Certificate
Principal Balance thereof, plus one month's Accrued Certificate Interest and any
previously unpaid Accrued Certificate Interest, and (II) with respect to the
Certificate Insurer, any Reimbursement Amounts, in each case subject to the
priority set forth in Section 4.02(a), and (B) with respect to the Residual
Certificates, any excess of the amounts available for distribution (including
the repurchase price specified in clause (ii) of subsection (a) of this Section)
over the total amount distributed under the immediately preceding clause (A).
(d) In the event that any Certificateholders shall not surrender their
Certificates for final payment and cancellation on or before the Final
Distribution Date (if so required by the terms hereof), the Trustee shall on
such date cause all funds in the Certificate Account not distributed in final
distribution to Certificateholders to be withdrawn therefrom and credited to the
remaining Certificateholders by depositing such funds in a separate escrow
account for the benefit of such Certificateholders, and the Master Servicer (if
it exercised its right to purchase the assets of the Trust Fund), or the Trustee
(in any other case) shall give a second written notice to the remaining
Certificateholders to surrender their Certificates for cancellation and receive
the final distribution with respect thereto. If within six months after the
second notice,
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any Certificate shall not have been surrendered for cancellation, the Trustee
shall take appropriate steps as directed by the Master Servicer to contact the
remaining Certificateholders concerning surrender of their Certificates. The
costs and expenses of maintaining the escrow account and of contacting
Certificateholders shall be paid out of the assets which remain in the escrow
account. No interest shall accrue or be payable to any Certificateholder on any
amount held in the escrow account as a result of such Certificateholder's
failure to surrender its Certificate(s) for final payment thereof in accordance
with this Section 9.01.
Section 9.02. Additional Termination Requirements.
(a) REMIC I and REMIC II as the case may be, shall be terminated in
accordance with the following additional requirements, unless the Trustee, the
Certificate Insurer and the Master Servicer have received an Opinion of Counsel
(which Opinion of Counsel shall not be an expense of the Trustee) to the effect
that the failure of REMIC I or REMIC II, as the case may be, to comply with the
requirements of this Section 9.02 will not (i) result in the imposition on
either REMIC of taxes on "prohibited transactions," as described in Section 860F
of the Code, or (ii) cause either REMIC I or REMIC II to fail to qualify as a
REMIC at any time that any Certificate is outstanding:
(i) The REMIC Administrator shall establish a 90-day
liquidation period for REMIC I and REMIC II, as the case may be, and
specify the first day of such period in a statement attached to such
REMIC's final Tax Return pursuant to Treasury regulations Section
1.860F-1. The REMIC Administrator also shall satisfy all of the
requirements of a qualified liquidation for REMIC I and REMIC II, as the
case may be, under Section 860F of the Code and regulations thereunder;
(ii) The REMIC Administrator shall notify the Trustee at the
commencement of 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 or otherwise dispose of all of the remaining assets of the
Trust Fund in accordance with the terms hereof; and
(iii) If the Master Servicer is exercising its right to
purchase the assets of the Trust Fund, the Master Servicer shall, during
the 90-day liquidation period prior to the Final Distribution Date,
purchase all of the assets of such REMIC for cash at the price set forth
in Section 9.01 hereof; provided, however, that in the event that a
calendar quarter ends after the commencement of the 90-day liquidation
period but prior to the Final Distribution Date, such Master Servicer
shall not purchase any of the assets of such REMIC prior to the close of
that calendar quarter.
(b) Each Holder of a Certificate and the Trustee hereby irrevocably
approves and appoints the REMIC Administrator as its attorney-in-fact to adopt a
plan of complete liquidation for the Trust Fund at the expense of the Trust Fund
in accordance with the terms and conditions of this Agreement.
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ARTICLE X
REMIC PROVISIONS
Section 10.01.REMIC Administration.
(a) The REMIC Administrator shall make an election 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 on Form 1066 or other
appropriate federal tax or information return (including Form 8811) 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 I election in respect of the Trust Fund, the REMIC I Regular Interests
shall be designated as the "regular interests" and the Class R-I Certificates
shall be designated as the sole class of "residual interests" in REMIC I. For
the purposes of the REMIC II election in respect of the Trust Fund, the Regular
Certificates shall be designated as the "regular interests" and the Class R-II
Certificates shall be designated as the sole class of "residual interests" in
REMIC II. The REMIC Administrator and the Trustee shall not permit the creation
of any "interests" (within the meaning of Section 860G of the Code) in REMIC I
or REMIC II other than the REMIC I Regular Interests and the Class R-I
Certificates, and the Regular Certificates and the Class R-II Certificates,
respectively.
(b) The Closing Date is hereby designated as the "start-up day"
of the Trust Fund within the meaning of Section 860G(a)(9) of the Code.
(c) The Master Servicer shall hold a Class R-I Certificate
representing a 0.01% Percentage Interest of the Class R-I Certificates, a Class
R-II Certificate representing a 0.01% Percentage Interest of the Class R-II
Certificates and shall be designated as "the tax matters person" with respect to
REMIC I and REMIC II in the manner provided under Treasury regulations section
1.860F-4(d) and temporary Treasury regulations section 301.6231(a)(7)-1T. The
Master Servicer shall appoint the REMIC Administrator to serve as
attorney-in-fact and agent for the tax matters person, and as such the Remic
Administrator shall (i) act on behalf of REMIC I and REMIC II in relation to any
tax matter or controversy involving the Trust Fund 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 legal
expenses, including without limitation attorneys' or accountants' fees, and
costs of any such proceeding and any liability resulting therefrom shall be
expenses of the Trust Fund and the REMIC Administrator shall be entitled to
reimbursement therefor out of amounts attributable to the Mortgage Loans on
deposit in the Custodial Account as provided by Section 3.10 unless such legal
expenses and costs are incurred by reason of the REMIC Administrator's willful
misfeasance, bad faith or gross negligence.
(d) The REMIC Administrator shall prepare or cause to be prepared
all of the Tax Returns that it determines are required with respect to either
REMIC I or REMIC II created hereunder and deliver such Tax Returns in a timely
manner to the Trustee and the Trustee shall sign and file such Tax Returns in a
timely manner. The expenses of preparing such returns shall be borne by the
REMIC Administrator without any right of reimbursement therefor. The
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Trustee and the Master Servicer shall promptly provide the REMIC Administrator
with such information as the REMIC Administrator may from time to time request
for the purpose of enabling the REMIC Administrator to prepare Tax Returns.
(e) The REMIC Administrator 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 Class R-I or Class R-II Certificate to
any Person who is not a Permitted Transferee, (ii) to the Trustee and the
Trustee shall forward 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) and (iii) to the Internal Revenue Service the name,
title, address and telephone number of the person who will serve as the
representative of each of REMIC and REMIC II.
(f) The Master Servicer and the REMIC Administrator shall take
such actions and shall cause each of REMIC I and REMIC II created hereunder to
take such actions as are reasonably within the Master Servicer's or the REMIC
Administrator's control and the scope of their duties more specifically set
forth herein as shall be necessary or desirable to maintain the status thereof
as REMICs under the REMIC Provisions (and the Trustee shall assist the Master
Servicer and the REMIC Administrator, to the extent reasonably requested by the
Master Servicer and the REMIC Administrator to do so). The Master Servicer and
the REMIC Administrator shall not knowingly or intentionally take any action,
cause REMIC I or REMIC II to take any action or fail to take (or fail to cause
to be taken) any action reasonably within its control and the scope of duties
more specifically set forth herein, that, under the REMIC Provisions, if taken
or not taken, as the case may be, could (i) endanger the status of REMIC I or
REMIC II as a REMIC or (ii) result in the imposition of a tax upon REMIC I or
REMIC II (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 Master Servicer or the REMIC Administrator, as
applicable, have received an Opinion of Counsel (at the expense of the party
seeking to take such action or, if such party fails to pay such expense, and the
Master Servicers or the REMIC Administrator, as applicable, determine that
taking such action is in the best interest of the Trust Fund and the
Certificateholders, at the expense of the Trust Fund, but in no event at the
expense of the Master Servicer, the REMIC Administrator or the Trustee) to the
effect that the contemplated action will not, with respect to each of REMIC I or
REMIC II created hereunder, endanger such status. The Trustee shall not take or
fail to take any action (whether or not authorized hereunder) as to which the
Master Servicer or the REMIC Administrator, as applicable, have advised it in
writing that they have received an Opinion of Counsel to the effect that an
Adverse REMIC Event could occur with respect to such action. In addition, prior
to taking any action with respect to REMIC I or REMIC II or their assets, or
causing REMIC I or REMIC II to take any action, which is not expressly permitted
under the terms of this Agreement, the Trustee will consult with the Master
Servicer or the REMIC Administrator, as applicable, or their designee, in
writing, with respect to whether such action could cause an Adverse REMIC Event
to occur with respect to REMIC I or REMIC II and the Trustee shall not take any
such action or cause REMIC I or REMIC II to take any such action as to which the
Master Servicer or the REMIC Administrator, as applicable, have advised it in
writing that an Adverse REMIC Event could occur. The Master Servicer or the
REMIC
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Administrator, as applicable, may consult with counsel to make such written
advice, and the cost of same shall be borne by the party seeking to take the
action not expressly permitted by this Agreement, but in no event at the expense
of the Master Servicer or the REMIC Administrator. At all times as may be
required by the Code, the Master Servicer will to the extent within their
control and the scope of their duties more specifically set forth herein,
maintain substantially all of the assets of REMIC I or REMIC II as "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.
(g) In the event that any tax is imposed on "prohibited
transactions" of REMIC I or REMIC II created hereunder as defined in Section
860F(a)(2) of the Code, on "net income from foreclosure property" of REMIC I or
REMIC II as defined in Section 860G(c) of the Code, on any contributions to
REMIC I or REMIC II after the Start-up 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
Master Servicer, if such tax arises out of or results from a breach by the
Master Servicer of any of its obligations under this Agreement, (ii) to the
Trustee, if such tax arises out of or results from a breach by the Trustee of
any of its obligations under this Article X or (iii) to the REMIC Administrator
if such tax results from a breach by the REMIC Administrator of its obligations
under this Article X, or (iv) otherwise against amounts on deposit in the
Custodial Account as provided by Section 3.10 and on the Distribution Date(s)
following such reimbursement the aggregate of such taxes shall be allocated in
reduction of the Accrued Certificate Interest on each Class entitled thereto in
the same manner as if such taxes constituted a Net Prepayment Interest
Shortfall.
(h) The Trustee and the Master Servicer shall, for federal income
tax purposes, maintain books and records with respect to REMIC I and REMIC II on
a calendar year and on an accrual basis or as otherwise may be required by the
REMIC Provisions.
(i) Following the Start-up Day, neither the Master Servicer nor
the Trustee shall accept any contributions of assets to REMIC I or REMIC II
unless the Master Servicer and the Trustee shall have received an Opinion of
Counsel (at the expense of the party seeking to make such contribution) to the
effect that the inclusion of such assets in REMIC I or REMIC II will not cause
either REMIC I or REMIC II to fail to qualify as a REMIC at any time that any
Certificates are outstanding or subject REMIC I or REMIC II to any tax under the
REMIC Provisions or other applicable provisions of federal, state and local law
or ordinances.
(j) Neither the Master Servicer nor the Trustee shall enter into
any arrangement by which REMIC I or REMIC II will receive a fee or other
compensation for services nor permit any such REMIC to receive any income from
assets other than "qualified mortgages" as defined in Section 860G(a)(3) of the
Code or "permitted investments" as defined in Section 860G(a)(5) of the Code.
(k) Solely for the purposes of Section 1.860G-1(a)(4)(iii) of the
Treasury Regulations, the "latest possible maturity date" by which Certificate
Principal Balance of each Regular Certificate and the principal balance of each
REMIC I Regular Interest Regular Interest
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would be reduced to zero is May 25, 2028, which is the Distribution Date
immediately following the latest scheduled maturity of any Mortgage Loan.
(l) Within 30 days after the Closing Date, the REMIC
Administrator shall prepare and file with the Internal Revenue Service Form
8811, "Information Return for Real Estate Mortgage Investment Conduits (REMIC)
and Issuers of Collateralized Debt Obligations" for REMIC I and REMIC II.
(m) Neither the Trustee nor the Master Servicer shall sell,
dispose of or substitute for any of the Mortgage Loans (except in connection
with (i) the default, imminent default or 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 or REMIC
II, (iii) the termination of REMIC I or REMIC II pursuant to Article IX of this
Agreement or (iv) a purchase of Mortgage Loans pursuant to Article II or III of
this Agreement) nor acquire any assets for REMIC I or REMIC II, nor sell or
dispose of any investments in the Custodial Account or the Certificate Account
for gain nor accept any contributions to REMIC I or REMIC II after the Closing
Date unless it has received an Opinion of Counsel that such sale, disposition,
substitution or acquisition will not (a) affect adversely the status of REMIC I
or REMIC II as REMICs or (b) cause REMIC I or REMIC II to be subject to a tax on
"prohibited transactions" or "contributions" pursuant to the REMIC Provisions.
Section 10.02. Master Servicer and Trustee Indemnification.
(a) The Trustee agrees to indemnify the Trust Fund, the
Depositor, the REMIC Administrator 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 or the Master Servicer, as a result of
a breach of the Trustee's covenants set forth in Article VIII or this Article X.
(b) The REMIC Administrator agrees to indemnify the Trust Fund,
the Depositor 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 or the Trustee, as a result of a breach of the REMIC
Administrator's covenants set forth in this Article X with respect to compliance
with the REMIC Provisions, including without limitation, any penalties arising
from the Trustee's execution of Tax Returns prepared by the REMIC Administrator
that contain errors or omissions; provided, however, that such liability will
not be imposed to the extent such breach is a result of an error or omission in
information provided to the REMIC Administrator by the Master Servicer in which
case Section 10.02(c) will apply.
(c) The Master Servicer agrees to indemnify the Trust Fund, the
Depositor, the REMIC Administrator 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 or the Trustee, as a result of a
breach of the Master Servicer's covenants set forth in this Article X or in
Article III with respect to compliance with the REMIC Provisions, including,
without limitation, any penalties arising from the Trustee's execution of Tax
Returns prepared by the Master Servicer that contain errors or omissions.
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ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Amendment.
(a) This Agreement may be amended from time to time by the Depositor,
the Master Servicer and the Trustee, without the consent of any of the
Certificateholders, but with the prior written consent of the Certificate
Insurer with respect to any amendment that adversely affects the interests of
any of the Holders of the Insured Certificates or the Certificate Insurer:
(i) to cure any ambiguity, provided that (A) such change
shall not, as evidenced by an Opinion of Counsel (at the expense of the
Depositor), adversely affect in any material respect the interest of any
Certificateholder, or (B) such change shall not result in a withdrawal
of the rating assigned to any Class of Certificates or a reduction of
such rating below the lower of the then-current rating or the rating
assigned to such Certificates as of the Closing Date, as evidenced by a
letter from each Rating Agency to such effect;
(ii) to correct or supplement any provisions herein or
therein, which may be inconsistent with any other provisions herein or
therein or to correct any error, provided that (A) such change shall
not, as evidenced by an Opinion of Counsel (at the expense of the
Depositor), adversely affect in any material respect the interest of any
Certificateholder, or (B) such change shall not result in a withdrawal
of the rating assigned to any Class of Certificates or a reduction of
such rating below the lower of the then-current rating or the rating
assigned to such Certificates as of the Closing Date, as evidenced by a
letter from each Rating Agency to such effect;
(iii) to modify, eliminate or add to any of its provisions to
such extent as shall be necessary or desirable to maintain the
qualification of the Trust Fund as a REMIC at all times that any
Certificate is outstanding or to avoid or minimize the risk of the
imposition of any tax on the Trust Fund pursuant to the Code that would
be a claim against the Trust Fund, provided that the Trustee has
received an Opinion of Counsel to the effect that (A) such action is
necessary or desirable to maintain such qualification or to avoid or
minimize the risk of the imposition of any such tax and (B) such action
will not adversely affect in any material respect the interests of any
Certificateholder;
(iv) to change the timing and/or nature of deposits into the
Custodial Account or the Certificate Account or to change the name in
which the Custodial Account are maintained, provided that (A) the
Certificate Account Deposit Date shall in no event be later than the
related Distribution Date, (B) such change shall not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the
interests of any Certificateholder and (C) such change shall not result
in a reduction of the rating assigned to any Class of Certificates below
the lower of the then-current rating or the
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rating assigned to such Certificates as of the Closing Date (without
regard to the Certificate Insurance Policies), as evidenced by a letter
from each Rating Agency to such effect;
(v) to modify, eliminate or add to the provisions of Section
5.02(f) or any other provision hereof restricting transfer of the
Residual Certificates by virtue of their being the "residual interests"
in the Trust Fund, provided that (A) such change shall not result in
reduction of the rating assigned to any such Class of Certificates below
the lower of the then-current rating or the rating assigned to such
Certificates as of the Closing Date (determined in the case of the
Insured Certificates, without regard to the effect of the Certificate
Insurance Policies), as evidenced by a letter from each Rating Agency to
such effect, and (B) such change shall not, as evidenced by an Opinion
of Counsel (at the expense of the party seeking so to modify, eliminate
or add such provisions), cause either the Trust Fund or any of the
Certificateholders (other than the transferor) to be subject to a
federal tax caused by a transfer to a Person that is not a Permitted
Transferee; or
(vi) to make any other provisions with respect to matters or
questions arising under this Agreement which shall not be materially
inconsistent with the provisions of this Agreement, provided that such
action shall not, as evidenced by an Opinion of Counsel, adversely
affect in any material respect the interests of any Certificateholder.
(b) This Agreement may also be amended from time to time by the
Depositor, the Master Servicer and the Trustee with the consent of the Holders
of Certificates evidencing in the aggregate not less than 66% of the Percentage
Interests of each Class of Certificates affected thereby for the purpose of
adding any provisions to or changing in any manner or eliminating any or of the
provisions of this Agreement or of modifying in any manner the rights of the
Holders of Certificates of such Class; provided, however, that no such amendment
shall:
(i) reduce in any manner the amount of, or delay the timing
of, payments which are required to be distributed on any Certificate
without the consent of the Holder of such Certificate;
(ii) reduce the aforesaid percentage of Certificates of any
Class the Holders of which are required to consent to any such
amendment, in any such case without the consent of the Holders of all
Certificates of such Class then outstanding.
(c) 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 (at the expense of the party seeking
such amendment, except if the Trustee requests such amendment, in which case it
shall be at the expense of the Trust Fund) to the effect that such amendment or
the exercise of any power granted to the Master Servicer, the Depositor or the
Trustee in accordance with such amendment will not result in the imposition of a
federal tax on the Trust Fund or cause REMIC I or REMIC II to fail to qualify as
a REMIC at any time that any Certificate is outstanding. The placement of an
"original issue discount" legend on, or
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any change required to correct any such legend previously placed on, a
Certificate shall not be deemed an amendment of the Agreement.
(d) Promptly after the execution of any such amendments, the Trustee
shall furnish written notification of the substance of such amendment to each
Certificateholder. It shall not be necessary for the consent of
Certificateholders under this Section 11.01 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.
Section 11.02. Recordation of Agreement; Counterparts.
(a) 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
Depositor and at its expense on direction by the Trustee (pursuant to the
request of Holders of Certificates entitled to at least 25% of the Voting
Rights), but only upon direction accompanied by an Opinion of Counsel to the
effect that such recordation materially and beneficially affects the interests
of the Certificateholders.
(b) 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 11.03. Limitation on Rights of Certificateholders.
(a) The death or incapacity of any Certificateholder shall not operate
to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or 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 any
of the parties hereto.
(b) No Certificateholder shall have any right to vote (except as
expressly provided herein) or in any manner otherwise control the operation and
management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of the Certificates,
be construed so as to constitute the Certificateholders from time to time as
partners or members of an association; nor shall any Certificateholder be under
any liability to any third person by reason of any action taken by the parties
to this Agreement pursuant to any provision hereof.
(c) No Certificateholder shall have any right by virtue 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
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written notice of default and of the continuance thereof, as hereinbefore
provided, and unless also the Holders of Certificates of any Class evidencing in
the aggregate not less than 25% of the related Percentage Interests of such
Class, shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as Trustee hereunder and shall have
offered to the Trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or thereby, and the
Trustee, for 60 days after its receipt of such notice, request and offer of
indemnity, shall have neglected or refused to institute any such action, suit or
proceeding it being understood and intended, and being expressly covenanted by
each Certificateholder with every other Certificateholder and the Trustee, that
no one or more Holders of Certificates of any Class shall have any right in any
manner whatever by virtue of any provision of this Agreement to affect, disturb
or prejudice the rights of the Holders of any other of such Certificates of such
Class or any other Class, or to obtain or seek to obtain priority over or
preference to any other such Holder, or to enforce any right under this
Agreement, except in the manner herein provided and for the common benefit of
Certificateholders of such Class or all Classes, as the case may be. For the
protection and enforcement of the provisions of this Section 11.03, each and
every Certificateholder and the Trustee shall be entitled to such relief as can
be given either at law or in equity.
For so long as no Certificate Insurer Default exists, the Certificate
Insurer shall be deemed to be the sole Holder of all outstanding Insured
Certificates with respect to any rights hereunder (other than the right to
receive distributions on such Insured Certificates, except as provided in
Section 4.09); provided that such rights may not be used to reduce the rights of
the Insured Certificateholders to receive distributions or to otherwise impair
their rights under this Agreement as further described in the definition of
"Certificateholder."
Section 11.04. Governing Law.
This agreement and the Certificates shall be governed by and construed
in accordance with the laws of the State of California and the obligations,
rights and remedies of the parties hereunder shall be determined in accordance
with such laws.
Section 11.05. Notices.
All demands and notices hereunder shall be in writing and shall be
deemed to have been duly given if personally delivered at or mailed by
registered mail, postage prepaid (except for notices to the Trustee which shall
be deemed to have been duly given only when received), to (a) in the case of the
Depositor, 345 Montgomery Street, Lower Level #2, Unit #8152, San Francisco,
California 94104, Attention: David Grout, or such other address as may hereafter
be furnished to the Master Servicer and the Trustee in writing by the Depositor,
(b) in the case of the Master Servicer, 2810 North Parham Road, Richmond,
Virginia 23294, Attention: Sean Clevenger or such other address as may be
hereafter furnished to the Depositor and the Trustee by the Master Servicer in
writing, (c) in the case of the Trustee, 3 Park Plaza, 16th Floor, Irvine,
California 92614, Attention: BA Mortgage Securities, Inc., Series 1998-1 or such
other address as may hereafter be furnished to the Depositor and the Master
Servicer in writing by the Trustee, (d) in the case of S&P, Standard & Poor's,
26 Broad Street, 15th Floor, New York, New York 10004, Attention: Frank Raiter,
or such other address as may
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hereafter be furnished to the Depositor, the Trustee and the Master Servicer in
writing by S&P, (e) in the case of DCR, Duff & Phelps Credit Rating Co., 55 East
Monroe Street, 35th Floor, Chicago, IL 60603, Attn: MBS Monitoring, or such
other address as may be hereafter furnished to the Depositor, the Trustee and
the Master Servicer by DCR, (f) in the case of the Underwriter, DLJ Mortgage
Capital, Inc., 277 Park Avenue, 9th Floor, New York, New York 10172, Attention:
Paul Najarian, or such other address as may hereafter be furnished to the
Depositor, the Trustee and the Master Servicer in writing by the Underwriter and
(g) in the case of the Certificate Insurer, to MBIA Insurance Corporation, 113
King Street, Armonk, New York 10504, Attention: Insured Portfolio Management -
Structured Finance (IPM-SF), or such other address as may hereafter be furnished
to the Depositor, the Trustee and the Master Servicer in writing by the
Certificate Insurer. Any notice required or permitted to be mailed to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder receives
such notice.
Section 11.06. Notices to Rating Agency.
The Depositor, the Master Servicer or the Trustee, as applicable, shall
notify each Rating Agency, the Certificate Insurer and any Subservicers at such
time as it is otherwise required pursuant to this Agreement to give notice of
the occurrence of, any of the events described in clause (a), (b), (c), (d),
(g), (h), (i) or (j) below or provide a copy to each Rating Agency (with a copy
to the Certificate Insurer) at such time as otherwise required to be delivered
pursuant to this Agreement of any of the statements described in clauses (e) and
(f) below:
(a) a material change or amendment to this Agreement,
(b) the occurrence of an Event of Default,
(c) the termination or appointment of a successor Master Servicer
or Trustee or a change in the majority ownership of the Trustee,
(d) the filing of any claim under the Master Servicer's blanket
fidelity bond and the errors and omissions insurance policy required by
Section 3.12 or the cancellation or modification of coverage under any
such instrument,
(e) the statement required to be delivered to the Holders of each
Class of Certificates pursuant to Section 4.03,
(f) the statements required to be delivered pursuant to Section
3.18,
(g) a change in the location of the Custodial Account or the
Certificate Account,
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(h) the occurrence of any monthly cash flow shortfall to the
Holders of any Class of Certificates resulting from the failure by the
Master Servicer to make an Advance pursuant to Section 4.04,
(i) the occurrence of the Final Distribution Date, and
(j) the repurchase of or substitution for any Mortgage Loan,
provided, however, that with respect to notice of the occurrence of the events
described in clauses (d), (g) or (h) above, the Master Servicer shall provide
prompt written notice to each Rating Agency and any Subservicers of any such
event known to the Master Servicer.
Section 11.07. 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.
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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 as of the day and year first above written.
BA MORTGAGE SECURITIES, INC.
By:
-------------------------------------
Name:
Title:
BANK OF AMERICA, FSB, as Master Servicer
By:
-------------------------------------
Name:
Title:
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A.,
as Trustee
By:
-------------------------------------
Name:
Title:
<PAGE> 131
STATE OF __________ )
) ss.:
COUNTY OF __________ )
On the ____ day of __________, 19__ before me, a notary public in
and for said State, personally appeared _____________, known to me to be a
______________ of BA Mortgage Securities, 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> 132
STATE OF __________ )
) ss.:
COUNTY OF __________ )
On the ____ day of __________, 19__ before me, a notary public in
and for said State, personally appeared _______________, known to me to be a
__________ of Bank of America, FSB, the federal savings bank 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> 133
STATE OF __________ )
) ss.:
COUNTY OF __________ )
On the ____ day of __________, 19__ before me, a notary public in
and for said State personally appeared ________________, known to me to be a
______________ of Bankers Trust Company of California, N.A., the national
banking association that executed the within instrument, and also known to me to
be the person who executed it on behalf of said association, and acknowledged to
me that such association 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.
c
-------------------------
Notary Public
[Notarial Seal]
<PAGE> 134
EXHIBIT A
FORM OF CLASS A, CLASS X AND CLASS PO CERTIFICATES
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 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 ____________, 19__. ASSUMING
THAT THE MORTGAGE LOANS PREPAY AT ____% OF THE STANDARD PREPAYMENT ASSUMPTION
(AS DESCRIBED IN THE PROSPECTUS SUPPLEMENT), [AND ASSUMING A CONSTANT
PASS-THROUGH RATE EQUAL TO THE INITIAL PASS-THROUGH RATE,] THIS CERTIFICATE HAS
BEEN ISSUED WITH NO MORE THAN $_____ OF OID PER $1,000 OF [INITIAL CERTIFICATE
PRINCIPAL BALANCE][NOTIONAL AMOUNT], THE YIELD TO MATURITY IS ___% AND THE
AMOUNT OF OID ATTRIBUTABLE TO THE INITIAL ACCRUAL PERIOD IS NO MORE THAN
$_______ PER $1,000 OF INITIAL [CERTIFICATE PRINCIPAL BALANCE][NOTIONAL AMOUNT],
COMPUTED USING THE APPROXIMATE METHOD. NO REPRESENTATION IS MADE THAT THE
MORTGAGE LOANS WILL PREPAY AT A RATE BASED ON THE STANDARD PREPAYMENT ASSUMPTION
OR AT ANY OTHER RATE OR AS TO THE CONSTANCY OF THE PASS-THROUGH RATE.]
<PAGE> 135
Certificate No. ____ [___%] Pass-Through Rate
Class [ ] Senior [based on a Notional Amount]
Date of Pooling and Servicing
Agreement and Cut-off Date:
April 1, 1998 Aggregate Initial [Certificate Principal Balance]
[Notional Amount] of the Class [ ] Certificates:
First Distribution Date:
May 26, 1998
Master Servicer: Initial [Certificate Principal Balance
Bank of America, FSB [Notional Amount] of this Certificate: $___________
Assumed Final
Distribution Date:
May 25, 20__ CUSIP: ____________
MORTGAGE PASS-THROUGH CERTIFICATE
SERIES 1998-1
evidencing a percentage interest in the distributions allocable to the
Class [ ] Certificates with respect to a Trust Fund consisting primarily
of a pool of conventional one- to four-family fixed interest rate first
mortgage loans formed and sold by BA MORTGAGE SECURITIES, INC.
This Certificate is payable solely from the assets of the Trust Fund, and
does not represent an obligation of or interest in BA Mortgage Securities, Inc.,
the Master Servicer, the Trustee referred to below or any of their affiliates.
Neither this Certificate nor the underlying Mortgage Loans are guaranteed or
insured by any governmental agency or instrumentality or by BA Mortgage
Securities, Inc., the Master Servicer, the Trustee or any of their affiliates.
None of the Depositor, the Master Servicer or any of their affiliates will have
any obligation with respect to any certificate or other obligation secured by or
payable from payments on the Certificates.
This certifies that ________________ is the registered owner of the
Percentage Interest evidenced by this Certificate (obtained by dividing the
Certificate Principal Balance of this Certificate by the aggregate Certificate
Principal Balance of all Class [ ] Certificates, both as specified above) in
certain distributions with respect to a Trust Fund consisting primarily of an
interest in a pool of conventional one- to four-family fixed interest rate first
mortgage loans (the
A-2
<PAGE> 136
"Mortgage Loans"), formed and sold by BA Mortgage Securities, Inc. (hereinafter
called the "Depositor," which term includes any successor entity under the
Agreement referred to below). The Trust Fund was created pursuant to a Pooling
and Servicing Agreement dated as specified above (the "Agreement") among the
Depositor, the Master Servicer and Bankers Trust Company of California, N.A., as
trustee (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, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month immediately preceding the month of such distribution (the "Record
Date"), from the Available Distribution Amount in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to Holders of Class [ ] Certificates on such Distribution
Date.
Distributions on this Certificate will be made either by the Trustee or
by a Paying Agent appointed by the Trustee in immediately available funds (by
wire transfer or otherwise) to any Person holding an aggregate [Certificate
Principal Balance][Notional Amount] of at least five million dollars for the
account of the Person entitled thereto if such Person shall have so notified the
Trustee or such Paying Agent at least five Business Days prior to the related
Record Date, or by check mailed 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 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 in the City and State of New York. The Initial
[Certificate Principal Balance][Notional Amount] of this Certificate is set
forth above. The [Certificate Principal Balance][Notional Amount] hereof will be
reduced to the extent of distributions allocable to principal and any Realized
Losses allocable hereto.
This Certificate is one of a duly authorized issue of Certificates issued
in several Classes designated as Mortgage Pass-Through Certificates of the
Series specified hereon (herein collectively called the "Certificates").
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. In the event Master Servicer or any Subservicer
funds are advanced with respect to any Mortgage Loan, such advance is
reimbursable to the Master Servicer or the Subservicer, to the extent provided
in the Agreement, from related recoveries on such Mortgage Loan or from other
cash that would have been distributable to Certificateholders.
A-3
<PAGE> 137
As provided in the Agreement, withdrawals from the Custodial Account
created for the benefit of Certificateholders may be made by the Master Servicer
from time to time for purposes other than distributions to Certificateholders,
such purposes including without limitation reimbursement to the Depositor, the
Subservicers and the Master Servicer of advances made, or certain expenses
incurred, by either of them.
The Agreement permits, with certain exceptions therein provided, the
amendment of the Agreement and the modification of the rights and obligations of
the Depositor, the Master Servicer and the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer and the Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 66% of the Percentage Interests of
each Class of Certificates affected thereby. 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 the Certificate. The Agreement also permits the
amendment thereof in certain circumstances without the consent of the Holders of
any of the Certificates and, in certain additional circumstances, without the
consent of the Holders of certain Classes of Certificates.
As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register upon surrender of this Certificate for registration of transfer at the
offices or agencies appointed by the Trustee in the City and State of New York,
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 authorized denominations evidencing the same Class and aggregate Percentage
Interest will be issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates without
coupons in Classes and in denominations specified in the Agreement. As provided
in the Agreement and subject to certain limitations therein set forth,
Certificates are exchangeable for new Certificates of authorized denominations
evidencing the same Class and aggregate Percentage Interest, as requested by the
Holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Depositor, the Master Servicer, the 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 neither the Depositor, the
Master Servicer, the Trustee nor any such agent shall be affected by notice to
the contrary.
A-4
<PAGE> 138
This Certificate shall be governed by and construed in accordance with
the laws of the State of California.
The obligations created by the Agreement in respect of the Certificates
and the Trust Fund created thereby shall terminate upon the payment to
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 maturity or other liquidation of the last Mortgage Loan subject thereto
or the disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure of any Mortgage Loan and (ii) the purchase by the Master Servicer
from the Trust Fund of all remaining Mortgage Loans and all property acquired in
respect of such Mortgage Loans, thereby effecting early retirement of the
Certificates. The Agreement permits, but does not require, the Master Servicer
to purchase at a price determined as provided in the Agreement all remaining
Mortgage Loans and all property acquired in respect of any Mortgage Loan;
provided, that such option may only be exercised if the aggregate Stated
Principal Balance of the Mortgage Loans as of the Distribution Date upon which
the proceeds of any such purchase are distributed is less than ten percent of
the Cut-off Date Principal Balance of the Mortgage Loans.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
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.
A-5
<PAGE> 139
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: ____________________
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., as Trustee
By:
-------------------------------------
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class [ ] Certificates referred to in the
within-mentioned Agreement.
-----------------------,
as Certificate Registrar
By:
-------------------------------------
Authorized Signatory
A-6
<PAGE> 140
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _____________________________________________________
(Please print or typewrite name and address including postal
zip code of assignee) a Percentage Interest evidenced by the within Mortgage
Pass-Through Certificate and hereby authorizes the transfer of registration 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 denomination 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
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.
A-7
<PAGE> 141
EXHIBIT B
FORM OF CLASS M CERTIFICATE
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE SENIOR CERTIFICATES
AS DESCRIBED IN THE AGREEMENT (AS DEFINED HEREIN).
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO ANY PERSON, UNLESS THE TRANSFEREE
PROVIDES EITHER A CERTIFICATION PURSUANT TO SECTION 5.02(e) OF THE AGREEMENT OR
AN OPINION OF COUNSEL SATISFACTORY TO THE MASTER SERVICER, THE DEPOSITOR AND THE
TRUSTEE THAT THE PURCHASE OF THIS CERTIFICATE WILL NOT CONSTITUTE OR RESULT IN A
NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE") AND WILL NOT SUBJECT THE MASTER
SERVICER, THE DEPOSITOR OR THE TRUSTEE TO ANY OBLIGATION OR LIABILITY IN
ADDITION TO THOSE UNDERTAKEN IN THE AGREEMENT.
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 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 _____________, 19__. ASSUMING
THAT THE MORTGAGE LOANS PREPAY AT ____% OF THE STANDARD PREPAYMENT ASSUMPTION
(AS DESCRIBED IN THE PROSPECTUS SUPPLEMENT), THIS CERTIFICATE HAS BEEN ISSUED
WITH NO MORE THAN $___ OF OID PER $1,000 OF INITIAL CERTIFICATE PRINCIPAL
BALANCE, THE YIELD TO MATURITY IS ____% AND THE AMOUNT OF OID ATTRIBUTABLE TO
THE INITIAL ACCRUAL PERIOD IS NO MORE THAN $____ PER $1,000 OF INITIAL
CERTIFICATE PRINCIPAL BALANCE, COMPUTED UNDER THE APPROXIMATE METHOD. NO
REPRESENTATION IS MADE THAT THE MORTGAGE LOANS WILL PREPAY AT A RATE BASED ON
THE STANDARD PREPAYMENT ASSUMPTION OR AT ANY OTHER RATE.]
<PAGE> 142
Certificate No. __ Variable Pass-Through Rate
Class M Aggregate Certificate
Principal Balance
of the Class M
Certificates as of
Date of Pooling and Servicing the Cut-off Date:
Agreement and Cut-off Date: $_______________
April 1, 1998
Initial Certificate Principal
Balance of this Certificate:
First Distribution Date: $_______________
May 26, 1998
Master Servicer: CUSIP ______________
Bank of America, FSB
Assumed Final Distribution Date:
May 25, 2028
MORTGAGE PASS-THROUGH CERTIFICATE,
SERIES 1998-1
evidencing a percentage interest in any distributions allocable to the
Class M Certificates with respect to the Trust Fund consisting primarily
of a pool of conventional one- to four-family fixed interest rate first
mortgage loans formed and sold by BA MORTGAGE SECURITIES, INC.
This Certificate is payable solely from the assets of the Trust Fund, and
does not represent an obligation of or interest in BA Mortgage Securities, Inc.,
the Master Servicer, the Trustee referred to below or any of their affiliates.
Neither this Certificate nor the underlying Mortgage Loans are guaranteed or
insured by any governmental agency or instrumentality or by BA Mortgage
Securities, Inc., the Master Servicer, the Trustee or any of their affiliates.
None of the Depositor, the Master Servicer or any of their affiliates will have
any obligation with respect to any certificate or other obligation secured by or
payable from payments on the Certificates.
This certifies that ______________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate (obtained by
dividing the Certificate Principal Balance of this Certificate by the aggregate
Certificate Principal Balance of all Class M Certificates, both as specified
above) in certain distributions with respect to a Trust Fund consisting
primarily of a pool of conventional one- to four-family fixed interest rate
first
B-2
<PAGE> 143
mortgage loans (the "Mortgage Loans"), formed and sold by BA Mortgage
Securities, Inc. (hereinafter called the "Depositor," which term includes any
successor entity under the Agreement referred to below). The Trust Fund was
created pursuant to a Pooling and Servicing Agreement dated as specified above
(the "Agreement") among the Depositor, the Master Servicer and Bankers Trust
Company of California, N.A., as trustee (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, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month next preceding the month of such distribution (the "Record Date"),
from the Available Distribution Amount in an amount equal to the product of the
Percentage Interest evidenced by this Certificate and the amount required to be
distributed to Holders of Class M Certificates on such Distribution Date.
Distributions on this Certificate will be made either by the Trustee or
by a Paying Agent appointed by the Trustee in immediately available funds (by
wire transfer or otherwise) to any Person holding an aggregate Certificate
Principal Balance of at least five million dollars for the account of the Person
entitled thereto if such Person shall have so notified the Trustee or such
Paying Agent at least five Business Days prior to the related Record Date, or by
check mailed 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 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 in the City and State of New York. The Initial
Certificate Principal Balance of this Certificate is set forth above. The
Certificate Principal Balance hereof will be reduced to the extent of the
distributions allocable to principal and any Realized Losses allocable hereto.
No transfer of this Class M Certificate will be made unless the Trustee
has received either (i) an opinion of counsel acceptable to and in form and
substance satisfactory to the Trustee, the Depositor and the Master Servicer
with respect to the permissibility of such transfer under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and Section 4975
of the Internal Revenue Code (the "Code") and stating, among other things, that
the transferee's acquisition of a Class M Certificate will not constitute or
result in a non-exempt prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code or (ii) a representation letter, in the form prescribed
by the Agreement, either stating that the transferee is not an employee benefit
or other plan subject to the prohibited transaction provisions of ERISA or
Section 4975 of the Code (a "Plan"), or any other person (including an
investment manager, a named fiduciary or a trustee of any Plan) acting, directly
or indirectly, on behalf of or
B-3
<PAGE> 144
purchasing any Certificate with "plan assets" of any Plan, or stating that the
transferee is an insurance company, the source of funds to be used by it to
purchase the Certificate is an "insurance company general account" (within the
meaning of Department of Labor Prohibited Transaction Class Exemption ("PTCE")
95-60), and the purchase is being made in reliance upon the availability of the
exemptive relief afforded under Sections I and III of PTCE 95-60.
This Certificate is one of a duly authorized issue of Certificates issued
in several Classes designated as Mortgage Pass-Through Certificates of the
Series specified hereon (herein collectively called the "Certificates").
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. In the event Master Servicer or any Subservicer
funds are advanced with respect to any Mortgage Loan, such advance is
reimbursable to the Master Servicer or the Subservicer, to the extent provided
in the Agreement, from related recoveries on such Mortgage Loan or from other
cash that would have been distributable to Certificateholders.
As provided in the Agreement, withdrawals from the Custodial Account
created for the benefit of Certificateholders may be made by the Master Servicer
from time to time for purposes other than distributions to Certificateholders,
such purposes including without limitation reimbursement to the Depositor and
the Master Servicer of advances made, or certain expenses incurred, by either of
them.
The Agreement permits, with certain exceptions therein provided, the
amendment of the Agreement and the modification of the rights and obligations of
the Depositor, the Master Servicer and the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer and the Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 66% of the Percentage Interests of
each Class of Certificates affected thereby. 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 the Certificate. The Agreement also permits the
amendment thereof in certain circumstances without the consent of the Holders of
any of the Certificates and, in certain additional circumstances, without the
consent of the Holders of certain Classes of Certificates.
As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register upon surrender of this Certificate for registration of transfer at the
offices or agencies appointed by the Trustee in the City and State of New York,
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 authorized denominations evidencing the same Class and aggregate Percentage
Interest will be issued to the designated transferee or transferees.
B-4
<PAGE> 145
The Certificates are issuable only as registered Certificates without
coupons in Classes and in denominations specified in the Agreement. As provided
in the Agreement and subject to certain limitations therein set forth,
Certificates are exchangeable for new Certificates of authorized denominations
evidencing the same Class and aggregate Percentage Interest, as requested by the
Holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Depositor, the Master Servicer, the 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 neither the Depositor, the
Master Servicer, the Trustee nor any such agent shall be affected by notice to
the contrary.
This Certificate shall be governed by and construed in accordance with
the laws of the State of California.
The obligations created by the Agreement in respect of the Certificates
and the Trust Fund created thereby shall terminate upon the payment to
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 maturity or other liquidation of the last Mortgage Loan subject thereto
or the disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure of any Mortgage Loan and (ii) the purchase by the Master Servicer
from the Trust Fund of all remaining Mortgage Loans and all property acquired in
respect of such Mortgage Loans, thereby effecting early retirement of the
Certificates. The Agreement permits, but does not require, the Master Servicer
to purchase at a price determined as provided in the Agreement all remaining
Mortgage Loans and all property acquired in respect of any Mortgage Loan;
provided, that such option may only be exercised if the aggregate Stated
Principal Balance of the Mortgage Loans as of the Distribution Date upon which
the proceeds of any such purchase are distributed is less than ten percent of
the Cut-off Date Principal Balance of the Mortgage Loans.
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.
B-5
<PAGE> 146
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated:
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., as Trustee
By:
-------------------------------------
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class M Certificates referred to in the
within-mentioned Agreement.
------------------------------,
as Certificate Registrar
By:
-------------------------------------
Authorized Signatory
B-6
<PAGE> 147
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _____________________________________________________
(Please print or typewrite name and address including postal
zip code of assignee) a Percentage Interest evidenced by the within Mortgage
Pass-Through Certificate and hereby authorizes the transfer of registration 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 denomination 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
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.
B-7
<PAGE> 148
EXHIBIT C
FORM OF CLASS B CERTIFICATE
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE SENIOR
CERTIFICATES AND CLASS M CERTIFICATES AS DESCRIBED IN THE AGREEMENT
(AS DEFINED HEREIN).
[FOR CLASS B-3, CLASS B-4 AND CLASS B-5: THIS CERTIFICATE HAS NOT BEEN AND WILL
NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS
REGISTERED PURSUANT TO SUCH ACT AND LAWS OR IS SOLD OR TRANSFERRED IN
TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT AND UNDER
APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 5.02 OF THE AGREEMENT.]
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO ANY PERSON, UNLESS THE TRANSFEREE
PROVIDES EITHER A CERTIFICATION PURSUANT TO SECTION 5.02(e) OF THE AGREEMENT OR
AN OPINION OF COUNSEL SATISFACTORY TO THE MASTER SERVICER, THE DEPOSITOR AND THE
TRUSTEE THAT THE PURCHASE OF THIS CERTIFICATE WILL NOT CONSTITUTE OR RESULT IN A
NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE") AND WILL NOT SUBJECT THE MASTER
SERVICER, THE DEPOSITOR OR THE TRUSTEE TO ANY OBLIGATION OR LIABILITY IN
ADDITION TO THOSE UNDERTAKEN IN THE AGREEMENT.
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 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
_____________, 19__. ASSUMING THAT THE MORTGAGE LOANS PREPAY AT ____%
OF THE STANDARD PREPAYMENT ASSUMPTION (AS DESCRIBED IN THE
PROSPECTUS SUPPLEMENT), THIS CERTIFICATE HAS BEEN ISSUED WITH NO MORE
THAN $___ OF OID PER $1,000 OF INITIAL CERTIFICATE PRINCIPAL BALANCE, THE
YIELD TO MATURITY IS ____% AND THE AMOUNT OF OID ATTRIBUTABLE TO THE
INITIAL ACCRUAL PERIOD IS NO MORE THAN $____ PER $1,000 OF INITIAL
CERTIFICATE PRINCIPAL BALANCE, COMPUTED UNDER THE APPROXIMATE
METHOD. NO REPRESENTATION IS MADE THAT THE MORTGAGE LOANS WILL
<PAGE> 149
PREPAY AT A RATE BASED ON THE STANDARD PREPAYMENT ASSUMPTION OR
AT ANY OTHER RATE.]
2
<PAGE> 150
Certificate No. ____ Variable Pass-Through Rate
Class B-__ Subordinate Aggregate Certificate
Principal Balance
of the Class B-__
Certificates as of
Date of Pooling and Servicing the Cut-off Date:
Agreement and Cut-off Date: $__________
April 1, 1998
Initial Certificate Principal
Balance of this Certificate:
First Distribution Date: $__________
May 26, 1998
Master Servicer: CUSIP: __________
Bank of America, FSB
Assumed Final Distribution Date:
May 25, 2028
MORTGAGE PASS-THROUGH CERTIFICATE,
SERIES 1998-1
evidencing a percentage interest in any distributions allocable to the
Class B-__ Certificates with respect to the Trust Fund consisting
primarily of a pool of conventional one- to four-family fixed interest
rate first mortgage loans formed and sold by BA MORTGAGE SECURITIES, INC.
This Certificate is payable solely from the assets of the Trust Fund, and
does not represent an obligation of or interest in BA Mortgage Securities, Inc.,
the Master Servicer, the Trustee referred to below or any of their affiliates.
Neither this Certificate nor the underlying Mortgage Loans are guaranteed or
insured by any governmental agency or instrumentality or by BA Mortgage
Securities, Inc., the Master Servicer, the Trustee or any of their affiliates.
None of the Depositor, the Master Servicer or any of their affiliates will have
any obligation with respect to any certificate or other obligation secured by or
payable from payments on the Certificates.
This certifies that _____________________________ is the registered owner
of the Percentage Interest evidenced by this Certificate (obtained by dividing
the Certificate Principal Balance of this Certificate by the aggregate
Certificate Principal Balance of all Class B-__
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<PAGE> 151
Certificates, both as specified above) in certain distributions with respect to
a Trust Fund consisting primarily of a pool of conventional one- to four-family
fixed interest rate first mortgage loans (the "Mortgage Loans"), formed and sold
by BA Mortgage Securities, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement referred to below). The Trust
Fund was created pursuant to a Pooling and Servicing Agreement dated as
specified above (the "Agreement") among the Depositor, the Master Servicer and
Bankers Trust Company of California, N.A., as trustee (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, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month next preceding the month of such distribution (the "Record Date"),
from the Available Distribution Amount in an amount equal to the product of the
Percentage Interest evidenced by this Certificate and the amount required to be
distributed to Holders of Class B-__ Certificates on such Distribution Date.
Distributions on this Certificate will be made either by the Trustee or
by a Paying Agent appointed by the Trustee in immediately available funds (by
wire transfer or otherwise) to any Person holding an aggregate Certificate
Principal Balance of at least five million dollars for the account of the Person
entitled thereto if such Person shall have so notified the Trustee or such
Paying Agent at least five Business Days prior to the related Record Date, or by
check mailed 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 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 in the City and State of New York. The Initial
Certificate Principal Balance of this Certificate is set forth above. The
Certificate Principal Balance hereof will be reduced to the extent of the
distributions allocable to principal and any Realized Losses allocable hereto.
[For Class B-3, Class B-4 and Class B-5: No transfer of this Certificate
will be made unless such transfer is exempt from the registration requirements
of the Securities Act of 1933, as amended, or is made in accordance with said
Act. In the event that such a transfer is to be made, (A)(i) the Trustee shall
require an opinion of counsel acceptable to and in form and substance
satisfactory to the Trustee and the Depositor that such transfer is exempt
(describing the applicable exemption and the basis therefor) from or is being
made pursuant to the registration requirements of the Securities Act of 1933, as
amended, or (ii) the transferee and the transferor shall execute investment
letters in the forms prescribed by the Agreement, or (B) the prospective
transferee of the Certificate shall provide to the Trustee, the Depositor and
the
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<PAGE> 152
Master Servicer with an investment letter in the form prescribed by the
Agreement, as required under Section 5.02(d) of the Agreement. The Holder hereof
desiring to effect such transfer shall, and does hereby agree to, indemnify the
Trustee, the Depositor, the Master Servicer and the Certificate Registrar acting
on behalf of the Trustee against any liability that may result if the transfer
is not so exempt or is not made in accordance with the Securities Act of 1933,
as amended, or any similar state laws.]
No transfer of this Certificate will be made unless the Trustee has
received either (i) an opinion of counsel acceptable to and in form and
substance satisfactory to the Trustee, the Depositor and the Master Servicer
with respect to the permissibility of such transfer under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and Section 4975
of the Internal Revenue Code (the "Code") and stating, among other things, that
the transferee's acquisition of a Class M Certificate will not constitute or
result in a non-exempt prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code or (ii) a representation letter, in the form prescribed
by the Agreement, either stating that the transferee is not an employee benefit
or other plan subject to the prohibited transaction provisions of ERISA or
Section 4975 of the Code (a "Plan"), or any other person (including an
investment manager, a named fiduciary or a trustee of any Plan) acting, directly
or indirectly, on behalf of or purchasing any Certificate with "plan assets" of
any Plan, or stating that the transferee is an insurance company, the source of
funds to be used by it to purchase the Certificate is an "insurance company
general account" (within the meaning of Department of Labor Prohibited
Transaction Class Exemption ("PTCE") 95-60), and the purchase is being made in
reliance upon the availability of the exemptive relief afforded under Sections I
and III of PTCE 95-60.
This Certificate is one of a duly authorized issue of Certificates issued
in several Classes designated as Mortgage Pass-Through Certificates of the
Series specified hereon (herein collectively called the "Certificates").
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. In the event Master Servicer or any Subservicer
funds are advanced with respect to any Mortgage Loan, such advance is
reimbursable to the Master Servicer or the Subservicer, to the extent provided
in the Agreement, from related recoveries on such Mortgage Loan or from other
cash that would have been distributable to Certificateholders.
As provided in the Agreement, withdrawals from the Custodial Account
created for the benefit of Certificateholders may be made by the Master Servicer
from time to time for purposes other than distributions to Certificateholders,
such purposes including without limitation reimbursement to the Depositor and
the Master Servicer of advances made, or certain expenses incurred, by either of
them.
The Agreement permits, with certain exceptions therein provided, the
amendment of the Agreement and the modification of the rights and obligations of
the Depositor, the Master Servicer and the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer and the Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 66% of the Percentage Interests of
each
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<PAGE> 153
Class of Certificates affected thereby. 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 the Certificate. The Agreement also permits the amendment
thereof in certain circumstances without the consent of the Holders of any of
the Certificates and, in certain additional circumstances, without the consent
of the Holders of certain Classes of Certificates.
As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register upon surrender of this Certificate for registration of transfer at the
offices or agencies appointed by the Trustee in the City and State of New York,
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 authorized denominations evidencing the same Class and aggregate Percentage
Interest will be issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates without
coupons in Classes and in denominations specified in the Agreement. As provided
in the Agreement and subject to certain limitations therein set forth,
Certificates are exchangeable for new Certificates of authorized denominations
evidencing the same Class and aggregate Percentage Interest, as requested by the
Holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Depositor, the Master Servicer, the 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 neither the Depositor, the
Master Servicer, the Trustee nor any such agent shall be affected by notice to
the contrary.
This Certificate shall be governed by and construed in accordance with
the laws of the State of California.
The obligations created by the Agreement in respect of the Certificates
and the Trust Fund created thereby shall terminate upon the payment to
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 maturity or other liquidation of the last Mortgage Loan subject thereto
or the disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure of any Mortgage Loan and (ii) the purchase by the Master Servicer
from the Trust Fund of all remaining Mortgage Loans and all property acquired in
respect of such Mortgage Loans, thereby effecting early retirement of the
Certificates. The Agreement permits, but does not require, the Master Servicer
to purchase at a price determined as provided in the Agreement all remaining
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<PAGE> 154
Mortgage Loans and all property acquired in respect of any Mortgage Loan;
provided, that such option may only be exercised if the aggregate Stated
Principal Balance of the Mortgage Loans as of the Distribution Date upon which
the proceeds of any such purchase are distributed is less than ten percent of
the Cut-off Date Principal Balance of the Mortgage Loans.
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.
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<PAGE> 155
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated:
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., as Trustee
By:
-------------------------------------
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class B-__ Certificates referred to in the
within-mentioned Agreement.
---------------------------------------,
as Certificate Registrar
By:
-------------------------------------
Authorized Signatory
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<PAGE> 156
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _____________________________________________________
(Please print or typewrite name and address including postal
zip code of assignee) a Percentage Interest evidenced by the within Mortgage
Pass-Through Certificate and hereby authorizes the transfer of registration 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 denomination 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
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.
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<PAGE> 157
EXHIBIT D
FORM OF RESIDUAL CERTIFICATE
THIS CERTIFICATE MAY NOT BE HELD BY OR TRANSFERRED TO A NON-UNITED STATES PERSON
OR A DISQUALIFIED ORGANIZATION (AS DEFINED BELOW).
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "RESIDUAL
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986 (THE "CODE").
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND LAWS OR
IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER
SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
THE PROVISIONS OF SECTION 5.02 OF THE AGREEMENT.
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO ANY PERSON, UNLESS THE TRANSFEREE
PROVIDES EITHER A CERTIFICATION PURSUANT TO SECTION 5.02(e) OF THE AGREEMENT OR
AN OPINION OF COUNSEL SATISFACTORY TO THE MASTER SERVICER, THE DEPOSITOR AND THE
TRUSTEE THAT THE PURCHASE OF THIS CERTIFICATE WILL NOT CONSTITUTE OR RESULT IN A
NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE CODE
AND WILL NOT SUBJECT THE MASTER SERVICER, THE DEPOSITOR OR THE TRUSTEE TO ANY
OBLIGATION OR LIABILITY IN ADDITION TO THOSE UNDERTAKEN IN THE AGREEMENT.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY BE MADE ONLY
IF THE PROPOSED TRANSFEREE PROVIDES A TRANSFER AFFIDAVIT TO THE MASTER SERVICER
AND THE TRUSTEE THAT (1) SUCH TRANSFEREE IS NOT (A) THE UNITED STATES, ANY STATE
OR POLITICAL SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL
ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE FOREGOING, (B) ANY
ORGANIZATION (OTHER THAN A COOPERATIVE DESCRIBED IN SECTION 521 OF THE CODE)
WHICH IS EXEMPT FROM THE TAX IMPOSED BY CHAPTER 1 OF THE CODE UNLESS SUCH
ORGANIZATION IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE, (C) ANY
ORGANIZATION DESCRIBED IN SECTION 1381(a)(2)(C) OF THE CODE, (ANY SUCH PERSON
DESCRIBED IN THE FOREGOING CLAUSES (A), (B) OR (C) BEING HEREIN REFERRED TO AS A
"DISQUALIFIED ORGANIZATION") OR (D) AN AGENT OF A DISQUALIFIED ORGANIZATION, (2)
NO PURPOSE OF SUCH TRANSFER IS TO IMPEDE THE ASSESSMENT OR COLLECTION OF TAX AND
(3) SUCH TRANSFEREE SATISFIES CERTAIN ADDITIONAL
<PAGE> 158
CONDITIONS RELATING TO THE FINANCIAL CONDITION OF THE PROPOSED TRANSFEREE.
NOTWITHSTANDING THE REGISTRATION IN THE CERTIFICATE REGISTER OR ANY 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 OF THIS CERTIFICATE SHALL BE DEEMED TO HAVE CONSENTED
TO THE PROVISIONS OF THIS PARAGRAPH.
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<PAGE> 159
Certificate No. ___ ____% Pass-Through Rate
Class [R-I] [R-II] Senior Aggregate Initial Certificate
Principal Balance of the
Class [R-I] [R-II] Certificates
as of the Cut-off Date:
$----------------
Date of Pooling and Servicing Certificates: $50.00
Agreement and Cut-off Date:
April 1, 1998
Initial Certificate Principal
Balance of this Certificate:
First Distribution Date: $_______________
May 26, 1998
Master Servicer:
Bank of America, FSB Percentage Interest:
-------%
CUSIP ____________
Assumed Final Distribution Date:
May 25, 2028
MORTGAGE PASS-THROUGH CERTIFICATE,
SERIES 1998-1
evidencing a percentage interest in any distributions allocable to the
Class [R-I][R-II] Certificates with respect to a Trust Fund consisting
primarily of a pool of conventional one- to four-family fixed interest
rate first mortgage loans formed and sold by BA MORTGAGE SECURITIES, INC.
This Certificate is payable solely from the assets of the Trust Fund, and
does not represent an obligation of or interest in BA Mortgage Securities, Inc.,
the Master Servicer, the Trustee referred to below or any of their affiliates.
Neither this Certificate nor the underlying Mortgage Loans are guaranteed or
insured by any governmental agency or instrumentality or by BA Mortgage
Securities, Inc., the Master Servicer, the Trustee or any of their affiliates.
None of the Depositor, the Master Servicer or any of their affiliates will have
any obligation with respect to any certificate or other obligation secured by or
payable from payments on the Certificates.
This certifies that _________________________ is the registered owner of
the Percentage Interest evidenced by this Certificate (obtained by dividing the
Initial Certificate Principal Balance of this Certificate by the aggregate
Initial Certificate Principal Balance of all Class [R-I][R-II] Certificates,
both as specified above) in certain distributions with respect to the Trust Fund
consisting primarily of a pool of conventional one- to four-family fixed
interest rate first
D-3
<PAGE> 160
mortgage loans (the "Mortgage Loans"), formed and sold by BA Mortgage
Securities, Inc. (hereinafter called the "Depositor," which term includes any
successor entity under the Agreement referred to below). The Trust Fund was
created pursuant to a Pooling and Servicing Agreement dated as specified above
(the "Agreement") among the Depositor, the Master Servicer and Bankers Trust
Company of California, N.A., as trustee (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, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month immediately preceding the month of such distribution (the "Record
Date"), from the Available Distribution Amount in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to Holders of Class [R-I][R-II] Certificates on such
Distribution Date.
Distributions on this Certificate will be made either by the Trustee or
by a Paying Agent appointed by the Trustee in immediately available funds (by
wire transfer or otherwise) to any Person holding an aggregate Certificate
Principal Balance of at least five million dollars for the account of the Person
entitled thereto if such Person shall have so notified the Trustee or such
Paying Agent at least five Business Days prior to the related Record Date, or by
check mailed 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 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 in the City and State of New York. The Initial
Certificate Principal Balance of this Certificate is set forth above. The
Certificate Principal Balance hereof will be reduced to the extent of
distributions allocable to principal and any Realized Losses allocable hereto.
Notwithstanding the reduction of the Certificate Principal Balance hereof to
zero, this Certificate will remain outstanding under the Agreement and the
Holder hereof may have additional obligations with respect to this Certificate,
including tax liabilities, and may be entitled to certain additional
distributions hereon, in accordance with the terms and provisions of the
Agreement.
Each Holder of this Certificate will be deemed to have agreed to be bound
by the restrictions set forth in the Agreement to the effect that (i) each
person holding or acquiring any Ownership Interest in this Certificate must be a
United States Person and a Permitted Transferee, (ii) the transfer of any
Ownership Interest in this Certificate will be conditioned upon the delivery to
the Trustee of, among other things, an affidavit to the effect that it is a
United States Person and Permitted Transferee, (iii) any attempted or purported
transfer of any Ownership Interest in this Certificate in violation of such
restrictions will be absolutely null and void and
D-4
<PAGE> 161
will vest no rights in the purported transferee, and (iv) if any person other
than a United States Person and a Permitted Transferee acquires any Ownership
Interest in this Certificate in violation of such restrictions, then the Master
Servicer will have the right, in their sole discretion and without notice to the
Holder of this Certificate, to sell this Certificate to a purchaser selected by
the Master Servicer, which purchaser may be the Master Servicer, or any
affiliate of the Master Servicer, on such terms and conditions as the Master
Servicer may choose.
No transfer of this Certificate will be made unless such transfer is
exempt from the registration requirements of the Securities Act of 1933, as
amended, or is made in accordance with said Act. In the event that such a
transfer is to be made, (A)(i) the Trustee shall require an opinion of counsel
acceptable to and in form and substance satisfactory to the Trustee and the
Depositor that such transfer is exempt (describing the applicable exemption and
the basis therefor) from or is being made pursuant to the registration
requirements of the Securities Act of 1933, as amended, or (ii) the transferee
and the transferor shall execute investment letters in the forms prescribed by
the Agreement, or (B) the prospective transferee of the Certificate shall
provide to the Trustee, the Depositor and the Master Servicer with an investment
letter in the form prescribed by the Agreement, as required under Section
5.02(d) of the Agreement. The Holder hereof desiring to effect such transfer
shall, and does hereby agree to, indemnify the Trustee, the Depositor, the
Master Servicer and the Certificate Registrar acting on behalf of the Trustee
against any liability that may result if the transfer is not so exempt or is not
made in accordance with the Securities Act of 1933, as amended, or any similar
state laws.
No transfer of this Certificate will be made unless the Trustee has
received either (i) an opinion of counsel acceptable to and in form and
substance satisfactory to the Trustee, the Depositor and the Master Servicer
with respect to the permissibility of such transfer under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and Section 4975
of the Internal Revenue Code (the "Code") and stating, among other things, that
the transferee's acquisition of a Class M Certificate will not constitute or
result in a non-exempt prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code or (ii) a representation letter, in the form as
prescribed by the Agreement, either stating that the transferee is not an
employee benefit or other plan subject to the prohibited transaction provisions
of ERISA or Section 4975 of the Code (a "Plan"), or any other person (including
an investment manager, a named fiduciary or a trustee of any Plan) acting,
directly or indirectly, on behalf of or purchasing any Certificate with "plan
assets" of any Plan, or stating that the transferee is an insurance company, the
source of funds to be used by it to purchase the Certificate is an "insurance
company general account" (within the meaning of Department of Labor Prohibited
Transaction Class Exemption ("PTCE") 95-60), and the purchase is being made in
reliance upon the availability of the exemptive relief afforded under Sections I
and III of PTCE 95-60.
This Certificate is one of a duly authorized issue of Certificates issued
in several Classes designated as Mortgage Pass-Through Certificates of the
Series specified hereon (herein collectively called the "Certificates").
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. In the event Master Servicer or any Subservicer
funds are advanced with respect to any
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<PAGE> 162
Mortgage Loan, such advance is reimbursable to the Master Servicer or the
Subservicer, to the extent provided in the Agreement, from related recoveries on
such Mortgage Loan or from other cash that would have been distributable to
Certificateholders.
As provided in the Agreement, withdrawals from the Custodial Account
created for the benefit of Certificateholders may be made by the Master Servicer
from time to time for purposes other than distributions to Certificateholders,
such purposes including without limitation reimbursement to the Depositor, the
Subservicers and the Master Servicer of advances made, or certain expenses
incurred, by either of them.
The Agreement permits, with certain exceptions therein provided, the
amendment of the Agreement and the modification of the rights and obligations of
the Depositor, the Master Servicer and the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer and the Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 66% of the Percentage Interests of
each Class of Certificates affected thereby. 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 the Certificate. The Agreement also permits the
amendment thereof in certain circumstances without the consent of the Holders of
any of the Certificates and, in certain additional circumstances, without the
consent of the Holders of certain Classes of Certificates.
As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register upon surrender of this Certificate for registration of transfer at the
offices or agencies appointed by the Trustee in the City and State of New York,
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 authorized denominations evidencing the same Class and aggregate Percentage
Interest will be issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates without
coupons in Classes and in denominations specified in the Agreement. As provided
in the Agreement and subject to certain limitations therein set forth,
Certificates are exchangeable for new Certificates of authorized denominations
evidencing the same Class and aggregate Percentage Interest, as requested by the
Holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Depositor, the Master Servicer, the 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
D-6
<PAGE> 163
neither the Depositor, the Master Servicer, the Trustee nor any such agent shall
be affected by notice to the contrary.
This Certificate shall be governed by and construed in accordance with
the laws of the State of California.
The obligations created by the Agreement in respect of the Certificates
and the Trust Fund created thereby shall terminate upon the payment to
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 maturity or other liquidation of the last Mortgage Loan subject thereto
or the disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure of any Mortgage Loan and (ii) the purchase by the Master Servicer
from the Trust Fund of all remaining Mortgage Loans and all property acquired in
respect of such Mortgage Loans, thereby effecting early retirement of the
Certificates. The Agreement permits, but does not require, the Master Servicer
to purchase at a price determined as provided in the Agreement all remaining
Mortgage Loans and all property acquired in respect of any Mortgage Loan;
provided, that such option may only be exercised if the aggregate Stated
Principal Balance of the Mortgage Loans as of the Distribution Date upon which
the proceeds of any such purchase are distributed is less than ten percent of
the Cut-off Date Principal Balance of the Mortgage Loans.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purpose
have the same effect as if set forth at this place.
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.
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IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated:
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., as Trustee
By:
-------------------------------------
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class [R-I][R-II] Certificates referred to in the
within-mentioned Agreement.
---------------------------------------,
as Certificate Registrar
By:
-------------------------------------
Authorized Signatory
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _____________________________________________________
(Please print or typewrite name and address including postal
zip code of assignee) a Percentage Interest evidenced by the within Mortgage
Pass-Through Certificate and hereby authorizes the transfer of registration 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 denomination 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
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.
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EXHIBIT E-1
MORTGAGE LOAN SCHEDULE
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
<PAGE> 167
EXHIBIT E-2
MORTGAGE LOAN SCHEDULE
BANK OF AMERICA, FSB
<PAGE> 168
EXHIBIT F
FORM OF MORTGAGE LOAN PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
BA MORTGAGE SECURITIES, INC.,
DEPOSITOR
AND
[BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION]
[BANK OF AMERICA, FSB]
MORTGAGE LOAN PURCHASE AGREEMENT
DATED APRIL ___, 1998
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-1
- --------------------------------------------------------------------------------
<PAGE> 169
MORTGAGE LOAN PURCHASE AGREEMENT
Mortgage Loan Purchase Agreement ("Agreement"), dated April ___, 1998,
between BA Mortgage Securities, Inc., a Delaware corporation (the "Depositor"),
and [Bank of America National Trust and Savings Association] [Bank of America,
FSB] a [national banking association] [federal savings bank] ([in such
capacity,] the "Seller").
PRELIMINARY STATEMENT
The Seller intends to sell certain Mortgage Loans (as defined below) to
the Depositor as provided herein. The Depositor intends to deposit such mortgage
loans, together with certain other mortgage loans, into a trust fund (the "Trust
Fund") evidenced by mortgage pass-through certificates (the "Certificates"). The
Certificates will be issued pursuant to a Pooling and Servicing Agreement (the
"Pooling Agreement") among the Depositor, Bank of America, FSB, as master
servicer ([in such capacity,] the "Master Servicer"), and Bankers Trust Company
of California, N.A., as Trustee (the "Trustee") dated as of April 1, 1998 (the
"Cut-off Date"). The Certificates are described more fully in the related
Prospectus Supplement (the "Prospectus Supplement") dated April ___, 1998.
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned in the Pooling Agreement.
In consideration of the mutual agreements herein contained, the Depositor
and the Seller hereby agree as follows:
SECTION 1. Agreement to Purchase. The Seller agrees to sell, and the
Depositor agrees to purchase, the mortgage loans (the "Mortgage Loans"),
identified on the schedules annexed hereto as Exhibit 1 (the "15 Year Loan
Schedule") and Exhibit 2 (the "30 Year Loan Schedule," and together with the 15
Year Loan Schedule, the "Mortgage Loan Schedule"). The Mortgage Loans will be
conventional fixed rate one- to four-family residential mortgage loans with
original terms to maturity of not more than 15 years from the date of
origination, in the case of the Mortgage Loans identified on the 15 Year Loan
Schedule (the "15 Year Loans"), and 30 years from the date of origination, in
the case of the Mortgage Loans identified on the 30 Year Loan Schedule (the "30
Year Loans"). The 15 Year Loans and the 30 Year Loans will have an aggregate
outstanding principal balance as of the close of business on the Cut-off Date,
after giving effect to any payments due on or before such date whether or not
received, of approximately $__________ (plus or minus 2.5%) and $__________
(plus or minus 2.5%), respectively, or such other amounts acceptable to the
Depositor as evidenced by the actual aggregate outstanding principal balance of
the 15 Year Loans and 30 Year Loans accepted by the Depositor for deposit into
the Trust Fund. The sale of the Mortgage Loans shall take place on or prior to
April __, 1998 or such other date as shall be mutually acceptable to the parties
hereto (the "Closing Date"), subject to the deposit of the Mortgage Loans into
the Trust Fund, the issuance of the Certificates and the sale of the
Certificates by the Depositor pursuant to the Underwriting Agreement (the
"Underwriting Agreement") and Purchase Agreement (the "Purchase Agreement"),
each to be entered into among the Depositor, Bank of America, FSB and Donaldson,
Lufkin & Jenrette Securities Corporation (the "Underwriter"). The purchase price
for the 15 Year Loans (the "15 Year Loan Purchase Price") shall be equal to
_____% of the aggregate outstanding principal balances thereof as of the close
of business on the Cut-off
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Date, together with interest accrued on such principal balance at a per annum
rate equal to ____% from the Cut-off Date to but not including the Closing Date,
and the purchase price for the 30 Year Loans (the "30 Year Loan Purchase Price")
shall be equal to _____% of the aggregate outstanding principal balances thereof
as of the close of business on the Cut-off Date, together with interest accrued
on such principal balance at a per annum rate equal to ____% from the Cut-off
Date to but not including the Closing Date. The "Purchase Price" for the
Mortgage Loans shall be equal to the sum of the 15 Year Loan Purchase Price and
the 30 Year Loan Purchase Price. The Purchase Price shall be paid to the Seller
by wire transfer in immediately available funds on the Closing Date by the
Depositor, or as otherwise agreed by the Depositor and the Seller.
Pursuant to the terms of the Pooling Agreement, the Depositor shall
assign to the Trustee all of its right, title and interest in and to the
Mortgage Loans, and other rights and obligations under this Agreement (except
with respect to its rights to either indemnification or notice) and the Trustee
shall succeed to such right, title and interest and rights and obligations
hereunder of the Depositor.
SECTION 2. Conveyance of Mortgage Loans. The Seller hereby agrees to
transfer, assign, set over and otherwise convey to the Depositor, without
recourse but subject to the terms of this Agreement, on the Closing Date and as
of the Cut-off Date, all the right, title and interest of the Seller in and to
the Mortgage Loans identified on the Mortgage Loan Schedule as of the Closing
Date. The Mortgage Loan Schedule shall conform to the requirements of the
Depositor as set forth in this Agreement and the Pooling Agreement. The Mortgage
Loan Schedule, as amended on the Closing Date if necessary to reflect the actual
Mortgage Loans accepted by the Depositor on the Closing Date in accordance with
Section 3 hereof, shall be used as part of the Mortgage Loan Schedule under the
Pooling Agreement. In connection with such transfer and assignment, the Seller
shall deliver, or cause to be delivered, to the Custodian, the documents or
instruments specified in Section 2.01 of the Pooling Agreement with respect to
each Mortgage Loan (each such set of documents, a "Mortgage File"). At least two
days prior to the Closing Date, each Mortgage File shall have been delivered by
the Seller to the Custodian. All Mortgage Files so delivered will be held by the
Custodian, as bailee of the Seller, in escrow at all times prior to the Closing
Date.
In the event that any assignment is lost or returned unrecorded because
of a defect therein, the Seller shall prepare a substitute assignment or cure
such defect and record and deliver such assignment in accordance with this
Section 2. The Seller will also pay the fees of the Custodian incurred in
connection with the removal and replacement of each assignment of Mortgage
delivered for recording, as well as the fees of the Custodian incurred in
connection with the addition of any title insurance policy or recorded Mortgage
to the related Mortgage File.
Upon sale of the Mortgage Loans by the Seller to the Depositor hereunder,
the ownership of each Mortgage Note, the Mortgage and the contents of the
related Mortgage File is vested in the Depositor 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 shall immediately vest in the
Depositor. The Seller's records shall accurately reflect the sale of each
Mortgage Loan to the Depositor. In the event that any original document held by
the Seller is required pursuant
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to the terms of this Section to be a part of a Mortgage File, such document
shall be delivered promptly to the Depositor or its designee.
SECTION 3. Examination of Mortgage Files and Due Diligence Review. On or
before the Closing Date, the Seller shall either, as specified by the Depositor,
deliver to the Depositor, or its designee, in escrow, or make available, or
cause to be made available, for examination during normal business hours, all
credit files, underwriting documentation and Mortgage Files relating to the
Mortgage Loans. The fact that the Depositor has conducted or has failed to
conduct any partial or complete examination of the credit files, underwriting
documentation or Mortgage Files relating to the Mortgage Loans shall not affect
the Depositor's, the Trustee's or any holder of the Certificates' right to
demand repurchase of or substitution for the Mortgage Loans or other relief as
provided under this Agreement or to be provided under the Pooling Agreement.
In addition to the foregoing examination of the Mortgage Files and
related documents, the Seller agrees to allow the Depositor, or its designee,
any representative of a statistical Rating Agency, or the Underwriter, to
examine and audit all books, records and files pertaining to the Mortgage Loans,
the Seller's underwriting procedures and the Seller's ability to perform or
observe all of the terms, covenants and conditions of this Agreement. Such
examinations and audits shall take place at one or more offices of the Seller
during normal business hours and in the course of such examinations and audits,
the Seller will make available to the Depositor, or its designee, adequate
facilities, as well as the assistance of a sufficient number of knowledgeable
and responsible individuals who are familiar with the Mortgage Loans and the
terms of this Agreement and the Seller shall cooperate fully with any such
review in all respects. The Seller agrees to provide the Depositor, its designee
and any representative of a Rating Agency or the Underwriter with all material
information regarding the Seller (including its financial condition), and to
provide access to knowledgeable financial or accounting officers for the purpose
of answering questions with respect to the Seller's financial condition,
financial statements or other developments affecting the Seller. The Depositor
shall, upon reasonable prior notice, also have the right to perform such
examinations and audits or to obtain such material information regarding the
Seller's financial condition and access to the officers described above
following the Closing Date.
The Seller understands and agrees that any information, including but not
limited to financial information, the Seller's mortgage loan underwriting
standards, information regarding the status of the Seller with respect to any
regulatory body or entity and information as to the loss, foreclosure and
delinquency experience of loans originated or acquired by the Seller, obtained
in the examination and review described in the foregoing paragraph may be
disclosed in the Prospectus Supplement. In addition, the Seller will provide at
its own expense a letter from an independent nationally recognized accounting
firm verifying any financial information referred to in the previous sentence as
is reasonably required to be disclosed in such Prospectus Supplement. The
Depositor assumes no responsibility with respect to information referred to in
this paragraph.
SECTION 4. Representations, Warranties and Covenants of the Seller. In
order to induce the Depositor to enter into this Agreement, the Seller hereby
represents, warrants and
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covenants to the Depositor, and any assignee of the Depositor, that as of the
date hereof and as of the Closing Date (or such other date specifically provided
herein):
(i) The Seller is duly incorporated and validly existing as a
[national banking association] [federal savings bank] in good standing under the
laws of the United States with full power and authority to carry on its business
as presently conducted by it. The Seller had the full power and authority and
legal right to originate or acquire the Mortgage Loans. The Seller has the full
power and authority and legal right to own the Mortgage Loans and to transfer
and convey the Mortgage Loans to the Depositor and has the full power and
authority and legal right to execute and deliver, engage in the transactions
contemplated by, and perform and observe the terms and conditions of, this
Agreement.
(ii) This Agreement has been duly and validly authorized,
executed and delivered by the Seller, all requisite corporate action has been or
will have been taken, and (assuming the due authorization, execution and
delivery hereof by the Depositor) constitutes or will constitute the valid,
legal and binding agreements of the Seller, enforceable in accordance with its
terms, except as such enforcement may be limited by (i) laws relating to
bankruptcy, insolvency, reorganization, receivership or moratorium, (ii) other
laws relating to or affecting the rights of creditors generally and by general
principles of equity or the rights of creditors of banking institutions the
accounts of which are insured by the Federal Deposit Insurance Corporation or
any other instrumentality of the federal government (regardless of whether such
enforcement is considered in a proceeding in equity or at law) or (iii) public
policy considerations underlying the securities laws, to the extent that such
public policy considerations limit the enforceability of the provisions of this
Agreement which purport to provide indemnification from liabilities under
applicable securities laws.
(iii) Either (a) no consent, approval, authorization or order of,
registration or filing with, or notice to, any governmental authority or court
is required, under federal or state laws, for the execution, delivery and
performance of or compliance by the Seller with this Agreement or the
consummation by the Seller of any other transaction contemplated hereby or (b)
such consent, approval, authorization or order has been obtained, or such
registration, filing or notice has been made.
(iv) Neither the transfer of the Mortgage Loans to the Depositor,
nor the execution, delivery or performance of this Agreement by the Seller,
conflicts or will conflict with, or results or will result in a breach of, or
constitutes or will constitute a default under (a) any term or provision of the
documents governing the Seller's organization, or (b) any term or provision of
any material agreement, contract, instrument or indenture, to which the Seller
is a party or 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 results or will result in the creation or imposition of any
lien, charge or encumbrance which, in any of the foregoing cases, would have a
material adverse effect upon the Mortgage Loans or any documents or instruments
evidencing or securing the Mortgage Loans.
(v) There are no actions or proceedings against, or
investigations of, the Seller pending or, to the Seller's knowledge, threatened
against the Seller before any court,
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administrative agency or other tribunal, which would reasonably be expected to
adversely affect the transfer of the Mortgage Loans, the issuance of the
Certificates, the execution, delivery or enforceability of this Agreement or
have a material adverse effect on the financial condition of the Seller.
(vi) The information set forth on the Mortgage Loan Schedule with
respect to each Mortgage Loan was true and correct as of the Cut-off Date.
(vii) The Seller represents and warrants that each of the
representations and warranties contained in Exhibit 3 hereto is true and correct
and will be true and correct as of the Closing Date.
(viii) The Seller covenants to (a) provide in a timely manner all
of the information regarding itself and the Mortgage Loans as the Depositor may
reasonably request in connection with the preparation of the Prospectus
Supplement, (b) fully cooperate with, and supply all information requested by
the Rating Agencies to the extent practicable, and (c) dedicate adequate
personnel and resources as may be required to comply with all of the terms and
conditions of this Agreement.
(ix) The Seller may advertise its availability for handling
refinancings of mortgage loans in its servicing portfolio, as long as it does
not specifically target Mortgagors whose Mortgage Loans are owned by the
Depositor or its assigns. The Depositor and its assigns will not object to the
Seller promoting the terms they have available for refinancings by sending
letters or promotional material to the mortgagors for all of the mortgage loans
in its servicing portfolio (those they own as well as those serviced for others)
or to all the mortgagors who have specific types of mortgage loans, such as
adjustable-rate mortgage loans, or to those whose mortgage loans fall within
specific interest rate ranges. The Seller may not, however, target the Mortgage
Loans as a separate class of mortgage loans for purposes of advertising the
availability of refinancing terms. The Seller may provide payoff information and
otherwise cooperate with individual Mortgagors who contact it about prepaying
their Mortgage Loans by advising them of refinancing terms and streamlined
origination arrangements that are available.
SECTION 5. Cure, Repurchase and Indemnity Obligations of the Seller.
Each of the representations, warranties and covenants contained in or required
to be made pursuant to Section 4 of this Agreement shall survive the sale of 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 or the Pooling Agreement. The
representations, warranties and covenants contained in or required to be made
pursuant to Section 4 of this Agreement shall not be impaired by any review or
examination of the Mortgage Files or other documents evidencing or relating to
the Mortgage Loans or any failure on the part of the Depositor to review or
examine such documents and shall inure to the benefit of any transferee of the
Mortgage Loans from the Depositor including, without limitation, the Trustee for
the benefit of the Certificateholders.
If the Depositor or its assignee finds any document or documents
constituting a part of a Mortgage File not to have been executed or otherwise
defective as set forth in Section 2.02
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of the Pooling Agreement or received, or to be unrelated to the Mortgage Loans
identified in the Mortgage Loan Schedule, the Depositor or its assignee shall
promptly so notify the Seller. The Seller hereby covenants and agrees that, if
any such defect cannot be corrected or cured, the Seller shall either (i)
repurchase the related Mortgage Loan from the Depositor or its assignee at the
Purchase Price, or (ii) substitute for any Mortgage Loan to which such defect
relates a Qualified Substitute Mortgage Loan, in either case in accordance with
Section 2.04 of the Pooling Agreement.
It is understood and agreed that the representations and warranties set
forth in Exhibit 3 hereto shall survive delivery of the respective Mortgage
Files to the Depositor or its assignee and shall continue throughout the term of
this Agreement. The Seller hereby covenants and agrees that if there is a breach
of any such representation or warranty which materially and adversely affects
the interests of the Depositor or its assigns in the related Mortgage Loans, the
Seller shall either (i) repurchase the related Mortgage Loan from the Depositor
or its assignee at the Purchase Price, or (ii) substitute for any Mortgage Loan
to which such defect relates a Qualified Substitute Mortgage Loan, in either
case in accordance with Section 2.04 of the Pooling Agreement. If the aggregate
of the principal balances of the Qualified Substitute Mortgage Loans substituted
for a Mortgage Loan is less than the Stated Principal Balance of such Mortgage
Loan, the Seller shall pay the difference in cash to the Depositor or its
assignee, and such payment by the Seller shall be treated in the same manner as
proceeds of the repurchase by the Seller of a Mortgage Loan. Furthermore, such
Qualified Substitute Mortgage Loan shall otherwise have such characteristics so
that the representations and warranties of the Depositor set forth in Exhibit 3
hereto would not have been incorrect had such Qualified Substitute Mortgage Loan
originally been a Mortgage Loan. A Qualified Substitute Mortgage Loan may be
substituted for a defective Mortgage Loan whether or not such defective Mortgage
Loan is itself a Qualified Substitute Mortgage Loan.
The Purchase Price for each repurchased Mortgage Loan shall be payable
to the Depositor or its assignee by wire transfer of immediately available funds
to the account specified by the Depositor or its assignee, as applicable, and,
upon receipt by the Depositor or its assignee of written notification of such
deposit signed by an authorized officer, the Depositor or its assignee 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
shall be necessary to vest in the Seller or its designee or assignee title to
any Mortgage Loan released pursuant hereto. The obligation of the Seller to
repurchase or substitute any Mortgage Loan as to which such a defect in a
constituent document exists or a breach of the Seller's representations with
respect to the Mortgage Loans which materially and adversely affects the
interests of the Depositor or the Certificateholders in any Mortgage Loan shall
constitute the sole remedy respecting such defects available to the Depositor or
its assignee on behalf of the Certificateholders; provided that this limitation
shall not in any way limit the Depositor's rights or remedies upon breach of any
representation or warranty herein.
With respect to any Mortgage Loan as to which the Seller delivers to the
Depositor or the Trustee an affidavit certifying that the original Mortgage Note
has been lost or destroyed, if such Mortgage Loan is subsequently in default and
the enforcement thereof or of the related Mortgage is materially adversely
affected by the absence of the original Mortgage Note, the
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Seller will be obligated to repurchase or substitute for such Mortgage Loan in
the manner set forth above.
SECTION 6. Representations and Warranties of the Depositor. In order to
induce the Seller to enter into this Agreement, the Depositor hereby represents
and warrants to the Seller that as of the date hereof:
(i) The Depositor is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Delaware with full
power and authority to carry on its business as presently conducted by it. The
Depositor has the full power and authority and legal right to execute and
deliver, engage in the transactions contemplated by, and perform and observe the
terms and conditions of, this Agreement.
(ii) This Agreement has been duly and validly authorized, executed
and delivered by the Depositor, all requisite corporate action has been or will
have been taken, and (assuming the due authorization, execution and delivery
hereof by the Seller) constitutes or will constitute the valid, legal and
binding agreement of the Depositor, enforceable in accordance with its terms,
except as such enforcement may be limited by (i) laws relating to bankruptcy,
insolvency, reorganization, receivership or moratorium, (ii) other laws relating
to or affecting the rights of creditors generally and by general principles of
equity (regardless of whether such enforcement is considered in a proceeding in
equity or at law) or (iii) public policy considerations underlying the
securities laws, to the extent that such public policy considerations limit the
enforceability of the provisions of this Agreement which purport to provide
indemnification from liabilities under applicable securities laws.
(iii) Either (a) no consent, approval, authorization or order of,
registration or filing with, or notice to, any governmental authority or court
is required, under federal or state laws, for the execution, delivery and
performance of or compliance by the Depositor with this Agreement, or the
consummation by the Depositor of any other transaction contemplated hereby or
(b) such consent, approval, authorization or order has been obtained, or such
registration, filing or notice has been made.
(iv) The execution, delivery or performance of this Agreement by
the Depositor does not conflict or will not conflict with, or result or will
result in a breach of, or constitute or will constitute a default under (a) any
term or provision of the documents governing the Depositor's organization, or
(b) any term or provision of any material agreement, contract, instrument or
indenture, to which the Depositor is a party or is bound, or (c) any law, rule,
regulation, order, judgment, writ, injunction or decree of any court or
governmental authority having jurisdiction over the Depositor.
(v) There are no actions or proceedings against, or
investigations of, the Depositor pending or, to the Depositor's knowledge,
threatened against the Depositor before any court, administrative agency or
other tribunal, which would reasonably be expected to adversely affect the
transfer of the Mortgage Loans, the execution, delivery or enforceability of
this Agreement or have a material adverse effect on the financial condition of
the Depositor.
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SECTION 7. Closing. The closing of the sale of the Mortgage Loans shall
be held at the office of Orrick, Herrington & Sutcliffe LLP at 7:00 a.m., San
Francisco 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 and the
Depositor shall be true and correct in all material respects as of the
Closing Date;
(b) All Closing Documents specified in Section 8 of this Agreement, in
such forms as are agreed upon and acceptable to the Depositor and the
Seller, shall be duly executed and delivered by all signatories as
required pursuant to the respective terms thereof;
(c) The Seller shall have delivered and released to the Depositor or its
designee, all documents required to be delivered to the Depositor
pursuant to Section 2 of this Agreement;
(d) The result of the examination and audit performed by the Depositor
pursuant to Section 3 hereof shall be satisfactory to the Depositor in
its sole determination and the parties shall have agreed to the form and
content of the Seller's information (as defined in Section 9 hereof) to
be disclosed in the Prospectus Supplement;
(e) All other terms and conditions of this Agreement required to be
complied with on or before the Closing Date shall have been complied
with and the Seller and the Depositor shall have the ability to comply
with all terms and conditions and perform all duties and obligations
required to be complied with or performed after the Closing Date; and
(f) All of the terms and conditions of the Underwriting Agreement and
the Purchase Agreement required to be complied with on or before the
Closing Date shall have been complied with.
SECTION 8. Closing Documents. The Closing Documents shall consist of the
following:
(a) The Underwriting Agreement duly executed by the Depositor,
Bank of America, FSB and the Underwriter, and all exhibits thereto duly
executed by all applicable signatories;
(b) The Purchase Agreement duly executed by the Depositor, Bank
of America, FSB and the Underwriter, and all exhibits thereto duly
executed by all applicable signatories;
(c) This Agreement duly executed by the Depositor and the Seller;
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(d) A cross-receipt dated the Closing Date duly executed by the
Seller and the Depositor; and
(e) A duly executed Bill of Sale in the form attached hereto as
Exhibit 4.
SECTION 9. Costs. The Seller shall pay directly all of its own expenses,
including out-of-pocket expenses, the expenses of the preparation and recording
of assignments of Mortgage pursuant to Section 2 hereof and the delivery of
documents required pursuant to Section 2 hereof to the Trustee and its attorney
fees.
SECTION 10. Servicing. The Mortgage Loans are to be delivered free and
clear of any servicing agreements with third party servicers.
SECTION 11. Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered or mailed by registered mail, postage prepaid, return receipt
requested, to the following addresses: if to the Depositor, addressed to the
Depositor at 345 Montgomery Street, Lower Level #2, Unit #8152, San Francisco,
California 94104, Attention: David James or to such other address as the
Depositor may designate in writing to the Seller; or if to the Seller, addressed
to the Seller at 555 California Street, San Francisco, California 94104,
Attention: David Grout, or to such other addresses as the Seller may designate
in writing to the Depositor.
SECTION 12. Severability of Provisions. Any part, provision,
representation, warranty or covenant 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 13. Further Assurances. The Seller and the Depositor each agree
to execute and deliver such instruments and take such actions as the other may,
from time to time, reasonably request in order to effectuate the purpose and to
carry out the terms of this Agreement.
SECTION 14. Survival. The Seller and the Depositor agree that the
representations, warranties and agreements made herein and in any certificate or
other instrument delivered pursuant hereto shall be deemed to be relied upon by
the other party, notwithstanding any investigation heretofore or hereafter made
by such party or on such party's behalf, and that the representations,
warranties and agreements made by the Seller and the Depositor herein or in any
such certificate or other instrument shall survive the delivery of and payment
for the Mortgage Loans.
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SECTION 15. Miscellaneous. This Agreement is to be governed by, and
construed in accordance with, the laws of the State of California. The rights
and obligations of the Seller under this Agreement shall not be assigned by the
Seller without the prior written consent of the Depositor. The Depositor 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 Agreement, by
written notice to the Seller, without the consent of Seller, and the Trustee
shall thereupon succeed to the rights and obligations hereunder of the
Depositor. Notwithstanding any such assignment of the Depositor's interest under
this Agreement, the Depositor shall be entitled to indemnification from the
Seller in the circumstances and to the extent described in Section 9. Notice is
hereby given to the Seller by the Depositor that the representations and
warranties made by the Seller and contained in Exhibit 3 of this Agreement are
or will be assigned by the Depositor to the Trustee for the benefit of the
Certificateholders, together with such additional representations and warranties
as the Depositor shall specify. The Seller, without any further action on its
part, hereby consents to such assignment. Subject to the foregoing, 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 Depositor as provided in this Agreement
be, and be construed as, a sale of the Mortgage Loans by Seller to the
Depositor. It is, further, not the intention of the parties that such conveyance
be deemed a pledge of the Mortgage Loans by Seller to the Depositor to secure a
debt or other obligation of Seller. However, in the event, notwithstanding the
intent of the parties, the Mortgage Loans are held to be property of Seller, or
if for any reason this Agreement is held or deemed to create a security interest
in the Mortgage Loans, then, (a) this Agreement shall also be deemed to be a
security agreement within the meaning of Articles 8 and 9 of the Uniform
Commercial Code in effect in the applicable state; (b) the conveyance provided
for in this Agreement shall be deemed to be a grant by Seller to the Depositor
of a security interest in and to all of the Seller's right, title, and interest,
whether now owned or hereafter acquired, in and to:
(I) All accounts, contract rights, general intangibles,
chattel paper, instruments, documents, money, deposit accounts,
certificates of deposit, goods, letters of credit, advices of
credit and uncertificated securities consisting of, arising from
or relating to the Mortgage Loans, including all Qualified
Substitute Mortgage Loans and including (i) the Mortgage and
Mortgage Note, any insurance policies and all other documents in
the related Mortgage File, (ii) all title, hazard and primary
mortgage insurance policies identified on the Mortgage Loan
Schedule as defined herein, and (iii) all distributions with
respect thereto payable on and after the Cut-off Date;
F-11
<PAGE> 179
(II) All accounts, contract rights, general intangibles,
chattel paper, instruments, documents, money, deposit accounts,
certificates of deposit, goods, letters of credit, advices of
credit, uncertificated securities, and other rights arising from
or by virtue of the disposition of, or collections with respect
to, or insurance proceeds payable with respect to, or claims
against other persons with respect to, all or any part of the
collateral described in (I) above (including any accrued discount
realized on liquidation of any investment purchased at a
discount); and
(III) All cash and non-cash proceeds of the collateral
described in (I) and (II) above.
The possession by the Depositor or its assignee of the Mortgage Notes, the
Mortgages and such other goods, letters of credit, advices of credit,
instruments, money, documents, chattel paper or certificated securities shall be
deemed to be "possession by the secured party," or possession by a purchaser or
a person designated by him or her, for purposes of perfecting the security
interest pursuant to the Uniform Commercial Code (including, without limitation,
Sections 9-305, 8-313 or 8-321 thereof) as in force in the relevant
jurisdiction. Notifications to persons holding such property, and
acknowledgments, receipts or confirmations from persons holding such property,
shall be deemed to be notifications to, or acknowledgments, receipts or
confirmations from, financial intermediaries, bailees or agents (as applicable)
of the Depositor or its assignee for the purpose of perfecting such security
interest under applicable law. In connection herewith, the Depositor (or its
assignee) shall have all of the rights and remedies of a secured party and
creditor under the Uniform Commercial Code as in force in the relevant
jurisdiction.
Any assignment of the interest of the Depositor pursuant to Section 1
hereof shall also be deemed to be an assignment of any security interest created
hereby. The Seller and the Depositor shall, to the extent consistent with this
Agreement, take such actions as may be necessary to ensure that, if this
Agreement were deemed to create a security interest in or lien on the Mortgage
Loans, such security interest or lien would be deemed to be a perfected security
interest or lien of first priority under applicable law and will be maintained
as such throughout the term of the Agreement.
SECTION 16. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall constitute an original but all of which,
when taken together, shall constitute but one legal instrument. It shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
F-12
<PAGE> 180
IN WITNESS WHEREOF, the Seller and the Depositor have caused their names
to be signed by their respective officers thereunto duly authorized as of the
date first above written.
[BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION] [BANK OF AMERICA,
FSB],
the Seller
By:
--------------------------------------
Name:
Title:
BA MORTGAGE SECURITIES, INC.,
the Depositor
By:
--------------------------------------
Name:
Title:
F-13
<PAGE> 181
EXHIBIT 1
15 YEAR LOAN SCHEDULE
F-1-1
<PAGE> 182
EXHIBIT 2
30 YEAR LOAN SCHEDULE
F-2-1
<PAGE> 183
EXHIBIT 3
SELLER REPRESENTATIONS AND WARRANTIES
Seller's Representations to be Assigned by Depositor to Trustee
The Seller hereby represents and warrants to the Depositor, as to each
Mortgage Loan, that as of the Closing Date or as of such other date specifically
provided herein:
(i) The information set forth on the Mortgage Loan Schedule with
respect to each Mortgage Loan is true and correct as of the Closing Date;
(ii) As of the Closing Date, each Mortgage is a valid first lien on an
unencumbered estate in fee simple or leasehold estate in the related Mortgaged
Property subject only to (a) liens for current real property taxes and special
assessments; (b) covenants, conditions and restrictions, rights of way,
easements and other matters of public record as of the date of recording of such
Mortgage, such exceptions appearing of record being acceptable to mortgage
lending institutions generally or specifically reflected in the appraisal
obtained in connection with the origination of the Mortgage Loan; (c) exceptions
set forth in the title insurance policy relating to such Mortgage, such
exceptions being acceptable to mortgage lending institutions generally; and (d)
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;
(iii) As of the Closing Date, the Seller had good title to, and was the
sole owner of, each Mortgage Loan free and clear of any encumbrance or lien, and
immediately upon the transfer and assignment herein contemplated, the Depositor
shall have good title to, and will be the sole legal owner of, each Mortgage
Loan, free and clear of any encumbrance or lien (other than any lien under this
Agreement);
(iv) As of the day prior to the Cut-off Date, all payments due on each
Mortgage Loan had been made and no Mortgage Loan had been delinquent (i.e., was
more than 30 days past due) more than once in the preceding 12 months and any
such delinquency lasted for no more than 30 days;
(v) As of the Closing Date, there is no delinquent tax or assessment
lien against any Mortgaged Property;
(vi) As of the Closing Date, there is no offset, defense or
counterclaim to any Mortgage Note, including the obligation of the Mortgagor to
pay the unpaid principal or interest on such Mortgage Note except as may be
provided under the Soldiers and Sailors Civil Relief Act of 1940, as amended,
and except to the extent that the Buydown Agreement for a Buydown Loan forgives
certain indebtedness of a Mortgagor;
(vii) As of the Closing Date, the Mortgaged Property securing each
Mortgage is undamaged by water, fire, earthquake, earth movement other than
earthquake, windstorm, flood, tornado or similar casualty (excluding casualty
from the presence of hazardous wastes or
F-3-1
<PAGE> 184
hazardous substances, as to which the Seller makes no representations), so as to
affect adversely the value of the Mortgaged Property as security for the
Mortgage Loan or the use for which the premises were intended;
(viii) Each Mortgage Loan at the time it was made complied with all
applicable state and federal laws, including, without limitation, usury, equal
credit opportunity, disclosure and recording laws;
(ix) Each Mortgage Loan was originated by a savings association,
savings bank, credit union, insurance company, or similar institution which is
supervised and examined by a federal or state authority or by a mortgagee
approved by the FHA;
(x) As of the Closing Date, except for Mortgage Loans for which the
related Mortgaged Properties are located in areas where such policies are
generally not available, each Mortgage Loan is covered by an ALTA form or CLTA
form of mortgagee title insurance policy or other form of policy of insurance
which, as of the Closing Date, is acceptable to FNMA or FHLMC, and has been
issued by, and is the valid and binding obligation of, a title insurer
acceptable to FNMA and FHLMC and qualified to do business in the state in which
the related Mortgaged Property is located. Such policy insures the originator of
the Mortgage Loan, its successors and assigns as to the first priority lien of
the Mortgage in the original principal amount of the Mortgage Loan subject to
the exceptions set forth in such policy. With respect to each Mortgage Loan for
which the related Mortgage Property is located in an area where such policies
are generally not available, an attorney's certificate of title was obtained at
origination. Such policy (or certificate of title) is in full force and effect
and will be in full force and effect and inure to the benefit of the
Certificateholders upon the consummation of the transactions contemplated by
this Agreement and no claims have been made under such policy (or certificate of
title), 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
policy (or certificate of title);
(xi) As of the Closing Date, except as specified on the mortgage Loan
Schedule, each Mortgage Loan which had a Loan-to-Value Ratio at the time of the
origination of the Mortgage Loan in excess of 80% was covered by a Primary
Mortgage Insurance Policy or an FHA insurance policy or a VA guaranty, and such
policy or guaranty is valid and remains in full force and effect, except for any
Mortgage Loan for which the outstanding Stated Principal Balance thereof at any
time subsequent to origination was 80% or less of the value of the related
Mortgaged Property (as determined by the original appraisal or an appraisal
obtained subsequent to origination);
(xii) As of the Closing Date, each insurer issuing a Primary Mortgage
Insurance Policy will hold a rating acceptable to the Rating Agency;
(xiii) Each Mortgage was documented by appropriate FNMA/FHLMC mortgage
instruments in effect at the time of origination, or other instruments approved
by the Seller;
F-3-2
<PAGE> 185
(xiv) The Mortgaged Property securing each Mortgage is improved with a
one- to four-family dwelling unit, including units in a duplex, condominium
project, townhouse, a planned unit development or a de minimis planned unit
development;
(xv) Each Mortgage and Mortgage Note is genuine and the legal, valid
and binding obligation of the maker thereof and is enforceable in accordance
with its terms, except only as such enforcement may be limited by laws relating
to bankruptcy, insolvency, reorganization, receivership or moratorium, or laws
relating to or affecting the enforcement of creditors' rights generally;
(xvi) As of the date of origination, as to Mortgaged Properties which
are units in condominiums or planned unit developments, all of such units met
FNMA requirements, are located in a condominium or planned unit development
projects which have received FNMA approval, or are approvable by FNMA;
(xvii) No more than __ of the Mortgage Loans are Buydown Loans;
(xviii) As of the Cut-off Date, all but approximately ____% (by Stated
Principal Balance) of the Mortgage Loans will be secured by owner-occupied
Mortgaged Properties which are the primary residences of the related Mortgagors,
based solely on representations of the Mortgagors obtained at the origination of
the related Mortgage Loans and approximately ____% (by Stated Principal Balance)
of the Mortgage Loans will be secured by owner-occupied Mortgaged Properties
which were second or vacation homes of the Mortgagors, based solely on such
representations, and ____% (by Stated Principal Balance) of the Mortgage Loans
will be secured by Mortgaged Properties which were investor properties of the
related Mortgagors, based solely on such representations;
(xix) Prior to origination or refinancing, an appraisal of each
Mortgaged Property was made by an appraiser on a form satisfactory to FNMA and
FHLMC;
(xx) The Mortgage Loans have been underwritten substantially in
accordance with the underwriting standards of the originator of the Mortgage
Loan as in effect on the date of origination;
(xxi) All of the Mortgage Loans have due-on-sale clauses; by the terms
of the Mortgage Notes, however, the due on sale provisions may not be exercised
at the time of a transfer if prohibited by federal law;
(xxii) The Seller used no adverse selection procedures in selecting the
Mortgage Loans from among the outstanding fixed-rate conventional mortgage loans
originated or purchased by it which were available for inclusion in the Mortgage
Pool and as to which the representations and warranties in this Exhibit could be
made; and
(xxiii) No material misrepresentation or fraud with respect to a
Mortgage Loan has taken place on the part of any person involved in the
origination of the Mortgage Loan or in the application of any insurance in
relation to such Mortgage Loan.
F-3-3
<PAGE> 186
(xxiv) There are no mechanics' liens or claims for work, labor or
material affecting any Mortgaged Property which are or may be a lien prior to,
or equal with, the lien of such Mortgage, except those which are insured against
by the title insurance policy referred to in item (x) above;
(xxv) To the Seller's knowledge, no improvement located on or being
part of the Mortgaged Property is in violation of any applicable zoning law or
regulation. To the Seller's knowledge, all inspections, licenses and
certificates required to be made or issued with respect to all occupied portions
of the Mortgaged Property and, with respect to the use and occupancy of the
same, including but not limited to certificates of occupancy and fire
underwriting certificates, have been made or obtained from the appropriate
authorities, unless the lack thereof would not have a material adverse effect on
the value of such Mortgaged Property, and the Mortgaged Property is lawfully
occupied under applicable law;
(xxvi) The proceeds of the Mortgage Loan have been fully disbursed,
there is no requirement for future advances thereunder and any and all
requirements as to completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefor have been complied with. All costs,
fees and expenses incurred in making, or closing or recording the Mortgage Loans
were paid;
(xxvii) The related Mortgage contains customary and enforceable, subject
to paragraph (xv) above, provisions which render the rights and remedies of the
holder thereof adequate for the realization against the Mortgaged Property of
the benefits of the security, including, (i) in the case of a Mortgage
designated as a deed of trust, by trustee's sale, and (ii) otherwise by judicial
foreclosure;
(xxviii) With respect to each Mortgage constituting a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in such Mortgage, and no fees or
expenses are or will become payable by the Certificateholders to the trustee
under the deed of trust, except in connection with a trustee's sale after
default by the Mortgagor;
(xxix) No Mortgage Loan has a shared appreciation feature, or other
contingent interest feature;
(xxx) None of the Mortgage Loans provides for a prepayment penalty;
(xxxi) If the Mortgaged Property is in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special flood
hazards, a flood insurance policy in a form meeting the requirements of the
current guidelines of the Flood Insurance Administration is in effect with
respect to such Mortgaged Property with a generally acceptable carrier in an
amount representing coverage not less than the least of (A) the original
outstanding principal balance of the Mortgage Loan, (B) the minimum amount
required to compensate for damage or loss on a replacement cost basis, or (C)
the maximum amount of insurance that is available under the Flood Disaster
Protection Act of 1973, as amended;
F-3-4
<PAGE> 187
(xxxii) There is no proceeding pending or threatened for the total or
partial condemnation of any Mortgaged Property, nor is such a proceeding
currently occurring;
(xxxiii) There is no material monetary default existing under any
Mortgage or the related Mortgage Note that is likely to result in a lien on the
Mortgaged Property with a higher priority than that of the Mortgage or an
impairment of the value of the Mortgaged property and, to the best of the
Seller's knowledge, there is no material event which, with the passage of time
or with notice and the expiration of any grace or cure period, would constitute
a default, breach, violation or event of acceleration under the Mortgage or the
related Mortgage Note; and the Seller has not waived any default, breach,
violation or event of acceleration;
(xxxiv) None of the Mortgage Loans is a graduated payment mortgage loan
or a growing equity mortgage loan;
(xxxv) As of the Closing Date, neither the Seller nor any prior holder
of any Mortgage has modified the Mortgage in any material respect (except that a
Mortgage Loan may have been modified by a written instrument which has been
recorded or submitted for recordation, if necessary, to protect the interests of
the Certificateholders and which has been delivered to the Trustee); satisfied,
cancelled or subordinated such Mortgage in whole or in part; released the
related Mortgaged property in whole or in part from the lien of such mortgage;
or executed any instrument of release, cancellation, modification or
satisfaction with respect thereto;
(xxxvi) There exist no material deficiencies with respect to escrow
deposits and payments, if such are required, for which customary arrangements
for repayment thereof have not been made, and no escrow deposits or payments of
other charges or payments due the Seller have been capitalized under the
mortgage or the related Mortgage Note.
(xxxvii) Other than any Buydown Fund with respect to a Buydown Loan,
there is no pledged account or other security other than real estate securing
the Mortgagor's obligations.
(xxxviii) Other than any such obligation relating to a Buydown Loan,
there is no obligation on the part of the Seller or any other party under the
terms of the Mortgage or related Mortgage Note to make payments in addition to
those made by the Mortgagor;
(xxxix) Except for (A) payments in the nature of escrow payments, (B)
interest accruing from the date of the Mortgage Note or date of disbursement of
the Mortgage proceeds, whichever is later, to the day which precedes by one
month the Due Date of the first installment of principal and interest, including
without limitation taxes and insurance payments, and (C) any Buydown Fund with
respect to a Buydown Loan, the Seller has not advanced funds, or induced,
solicited or knowingly received any advance of funds by a party other than the
Mortgagor, directly or indirectly, for the payment of any amount required by the
Mortgage; and
(xxxx) The Mortgage Loans in the aggregate conform in all material
respects to the descriptions thereof in the Prospectus Supplement.
F-3-5
<PAGE> 188
EXHIBIT 4
BILL OF SALE
1. PARTIES. The parties to this Bill of Sale are the following:
Seller: [Bank of America National Trust and Savings Association]
[Bank of America, FSB]
Depositor: BA Mortgage Securities, Inc.
2. SALE. For value received, the Seller hereby conveys to the Depositor, without
recourse, all right, title and interest in and to the Mortgage Loans identified
on Exhibit 1 and Exhibit 2 (collectively, the "Mortgage Loan Schedule") to the
Mortgage Loan Purchase Agreement, dated as of April [___], 1998 (the "Mortgage
Loan Purchase Agreement"), between the Seller and the Depositor and all of the
following property:
(a) All accounts, contract rights, general intangibles,
chattel paper, instruments, documents, money, deposit accounts,
certificates of deposit, goods, letters of credit, advices of
credit and uncertificated securities consisting of, arising from
or relating to the Mortgage Loans, including all Qualified
Substitute Mortgage Loans and including (i) the Mortgage and
Mortgage Note, any insurance policies and all other documents in
the related Mortgage File, (ii) all title, hazard and primary
mortgage insurance policies identified in the Mortgage Loan
Schedule as defined herein and (iii) all distributions with
respect thereto payable on and after the Cut-off Date;
(b) All accounts, contract rights, general intangibles,
chattel paper, instruments, documents, money, deposit accounts,
certificates of deposit, goods, letters of credit, advices of
credit, uncertificated securities, and other rights arising from
or by virtue of the disposition of, or collections with respect
to, or insurance proceeds payable with respect to, or claims
against other persons with respect to, all or any part of the
collateral described in clause (a) above (including any accrued
discount realized on liquidation of any investment purchased at a
discount); and
(c) All cash and non-cash proceeds of the collateral described
in clauses (a) and (b) above.
3. PURCHASE PRICE. $[________].
4. DEFINITIONS. Terms used but not defined herein shall have the meanings
assigned to them in the Mortgage Loan Purchase Agreement.
F-4-1
<PAGE> 189
IN WITNESS WHEREOF, each of the parties hereto has caused this Bill of
Sale to be duly executed and delivered on this [ ] day of April, 1998.
SELLER: [BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION]
[BANK OF AMERICA, FSB]
By:
------------------------------------
Name:
Title:
DEPOSITOR: BA MORTGAGE SECURITIES, INC.
By:
------------------------------------
Name:
Title:
F-4-2
<PAGE> 190
EXHIBIT G
FORM OF REQUEST FOR RELEASE
DATE:
TO:
RE: REQUEST FOR RELEASE OF DOCUMENTS
In connection with the administration of the pool of Mortgage Loans held by you
in custody for the referenced pool, the undersigned requests the release of the
mortgage documents described below for the reasons indicated. All documents to
be released to the undersigned shall be held in trust by the undersigned for the
benefit of the applicable securities holders solely for the purpose indicated
below. The Master Servicer shall return the documents to the custodian when the
Master Servicer's need thereof no longer exists, except where the mortgage is
paid in full or otherwise disposed of in accordance with the applicable pooling
and servicing agreement.
BA Mortgage Securities, Inc., Mortgage Pass-through Certificates, Series 1998-1
Pooling and Servicing Agreement Dated: April 1, 1998
Pool/Series#: 1998-1
Loan #
FHA/VA/FHMA#
Investor Loan#
Borrower Name(s):
Reason for Documents Request: (circle one)
1. Mortgage Paid in Full
2. Foreclosure
3. Substitution
4. Other Liquidation
5. Nonliquidation
"We hereby certify that all amounts received or to be received in connection
with such payments which are required to be deposited have been or will be so
deposited as provided in the Pooling and Servicing Agreement."
- ---------------------------------------
[name of Master Servicer]
Authorized Signature
****************************************************************
TO TRUSTEE: Please acknowledge this request, and check off documents being
enclosed with a copy of this form. You should retain this form for your files in
accordance with the terms of the Pooling and Servicing Agreement.
<PAGE> 191
Enclosed Documents: [ ] Promissory Note
[ ] Primary Mortgage Insurance Policy
[ ] Mortgage or Deed of Trust
[ ] Assignment(s) of Mortgage or Deed
of Trust
Title Insurance Policy
[ ] Other:
- ----------------------------------------
Name
- ----------------------------------------
Title
- ----------------------------------------
Date
G-2
<PAGE> 192
EXHIBIT H-1
FORM OF TRANSFER AFFIDAVIT AND AGREEMENT
STATE OF )
: ss.:
COUNTY OF )
[NAME OF OFFICER], being first duly sworn, deposes and says:
1. That he/she is [Title of Officer] of [Name of Owner] (record
or beneficial owner of the Mortgage Pass-Through Certificates, Series 1998-1,
Class [R-I][R-II] (the "Owner")), a [savings institution] [corporation] duly
organized and existing under the laws of [the State of __________________] [the
United States], on behalf of which he/she makes this affidavit and agreement.
2. That the Owner (i) is not and will not be a "disqualified
organization" as of [date of transfer] within the meaning of Section 860E(e)(5)
of the Internal Revenue Code of 1986, as amended (the "Code"), (ii) will
endeavor to remain other than a disqualified organization for so long as it
retains its ownership interest in the Class [R-I][R-II] Certificates, and (iii)
is acquiring the Class [R-I][R-II] Certificates for its own account or for the
account of another Owner from which it has received an affidavit and agreement
in substantially the same form as this affidavit and agreement. (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).
3. That the Owner is aware (i) of the tax that would be imposed
on transfers of Class [R-I][R-II] Certificates to disqualified organizations
under the Code, that applies to all transfers of Class [R-I][R-II] 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 disqualified organization, 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 not a
disqualified organization and, at the time of transfer, such person does not
have actual knowledge that the affidavit is false; and (iv) that the Class
[R-I][R-II] Certificates may be "noneconomic residual interests" within the
meaning of Treasury regulations promulgated pursuant to the Code and that the
transferor of a noneconomic residual interest will remain liable for any taxes
due with respect to the income on such residual interest, unless no significant
purpose of the transfer was to impede the assessment or collection of tax.
<PAGE> 193
4. That the Owner is aware of the tax imposed on a "pass-through
entity" holding Class [R-I][R-II] Certificates if at any time during the taxable
year of the pass-through entity a disqualified organization 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.)
5. The Owner is not an employee benefit plan or other plan
subject to the prohibited transaction provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the
Internal Revenue Code of 1986, as amended (the "Code"), or an investment
manager, named fiduciary or a trustee of any such plan, or any other Person
acting, directly or indirectly, on behalf of or purchasing any Certificate with
"plan assets" of any such plan.
6. That the Owner is aware that the Trustee will not register the
transfer of any Class [R-I][R-II] Certificates unless the transferee, or the
transferee's agent, delivers to it an affidavit and agreement, among other
things, in substantially the same form as this affidavit and agreement. 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.
7. That the Owner has reviewed the restrictions set forth on the
face of the Class [R-I][R-II] Certificates and the provisions of Section 5.02(f)
of the Pooling and Servicing Agreement under which the Class [R-I][R-II]
Certificates were issued (in particular, clause (iii)(A) and (iii)(B) of Section
5.02(f) 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 the Owner
holds such Certificates in violation of Section 5.02(f)). The Owner expressly
agrees to be bound by and to comply with such restrictions and provisions.
8. That 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-I][R-II] Certificates will
only be owned, directly or indirectly, by an Owner that is not a disqualified
organization.
9. The Owner's Taxpayer Identification Number is ______________.
10. This affidavit and agreement relates only to the Class
[R-I][R-II] Certificates held by the Owner and not to any other holder of the
Class [R-I][R-II] Certificates. The Owner understands that the liabilities
described herein relate only to the Class [R-I][R-II] Certificates.
11. That no purpose of the Owner relating to the transfer of any
of the Class [R-I][R-II] Certificates by the Owner is or will be to impede the
assessment or collection of any tax.
12. That 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. In this regard, the Owner hereby represents
to and for the benefit of the person
H-1-2
<PAGE> 194
from whom it acquired the Class [R-I][R-II] that the Owner intends to pay taxes
associated with holding such Class [R-I][R-II] Certificate as they become due,
fully understanding that it may incur tax liabilities in excess of any cash
flows generated by the Class [R-I][R-II] Certificate.
13. That the Owner has no present knowledge or expectation that
it will become insolvent or subject to a bankruptcy proceeding for so long as
any of the Class [R-I][R-II] Certificates remain outstanding.
14. 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 is includible in gross
income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.
H-1-3
<PAGE> 195
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 [Title of Officer] and its corporate seal to be hereunto attached, attested
by its [Assistant] Secretary, this ____ day of _______________, 199__.
[NAME OF OWNER]
By:
-------------------------------------
[Name of Officer]
[Title of Officer]
[Corporate Seal]
ATTEST:
- -----------------------------------
[Assistant] Secretary
Personally appeared before me the above-named [Name of Officer],
known or proved to me to be the same person who executed the foregoing
instrument and to be the [Title of Officer] 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 the ____ day
of _______________, 19__.
H-1-4
<PAGE> 196
EXHIBIT H-2
FORM OF TRANSFEROR CERTIFICATE
__________________, 19__
BA Mortgage Securities, Inc.
345 Montgomery Street
Lower Level #2, Unit #8152
San Francisco, California 94104
Bankers Trust Company of California, N.A.
3 Park Plaza
16th Floor
Irvine, California 92714
Attention: BA Mortgage Securities, Inc., Series 1998-1
Re: Mortgage Pass-Through Certificates,
Series 1998-1, Class [R-I][R-II]
Ladies and Gentlemen:
This letter is delivered to you in connection with the transfer
by _______________________________ (the "Seller") to
_______________________________ (the "Purchaser") of $_____________ Initial
Certificate Principal Balance of Mortgage Pass-Through Certificates, Series
1998-1 Class [R-I][R-II] (the "Certificates"), pursuant to Section 5.02 of the
Pooling and Servicing Agreement (the "Pooling and Servicing Agreement"), dated
as April 1, 1998 among BA Mortgage Securities, Inc., as depositor (the
"Depositor"), Bank of America, FSB, as master servicer (the "Master Servicer"),
and Bankers Trust Company of California, N.A., as trustee (the "Trustee"). All
terms used herein and not otherwise defined shall have the meanings set forth in
the Pooling and Servicing Agreement. The Seller hereby certifies, represents and
warrants to, and covenants with, the Depositor and the Trustee that:
1. No purpose of the Seller relating to the transfer of the
Certificate by the Seller to the Purchaser is or will be to impede the
assessment or collection of any tax.
2. The Seller understands that the Purchaser has delivered to the
Trustee and the Master Servicer a transfer affidavit and agreement in the form
attached to the Pooling and Servicing Agreement as Exhibit H-1. The Seller does
not know or believe that any representation contained therein is false.
3. The Seller has at the time of the transfer conducted a
reasonable investigation of the financial condition of the Purchaser as
contemplated by Treasury Regulations
<PAGE> 197
Section 1.860E-1(c)(4)(i) and, as a result of that investigation, the Seller has
determined that the Purchaser has historically paid its debts as they become 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 Seller
understands that the transfer of a Residual Certificate may not be respected for
United States income tax purposes (and the Seller may continue to be liable for
United States income taxes associated therewith) unless the Seller has conducted
such an investigation.
4. The Seller has no actual knowledge that the proposed
Transferee is not both a United States Person and a Permitted Transferee.
Very truly yours,
----------------------------------------
(Seller)
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
H-2-2
<PAGE> 198
EXHIBIT I
FORM OF INVESTOR REPRESENTATION LETTER
______________, 19__
BA Mortgage Securities, Inc.
345 Montgomery Street
Lower Level #2, Unit #8152
San Francisco, California 94104
Bankers Trust Company of California, N.A.
3 Park Plaza
16th Floor
Irvine, California 92714
Attention: BA Mortgage Securities, Inc., Series 1998-1
RE: Mortgage Pass-Through Certificates,
Series 1998-1, Class [ ]
Ladies and Gentlemen:
_________________________ (the "Purchaser") intends to purchase
from ___________________________ (the "Seller") $_____________ Initial
Certificate Principal Balance of Mortgage Pass-Through Certificates, Series
1998-1, Class __ (the "Certificates"), issued pursuant to the Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), dated as of April
1, 1998 among BA Mortgage Securities, Inc., as depositor (the "Depositor"), Bank
of America, FSB, as master servicer (the "Master Servicer"), and Bankers Trust
Company of California, N.A., as trustee (the "Trustee"). All terms used herein
and not otherwise defined shall have the meanings set forth in the Pooling and
Servicing Agreement. The Purchaser hereby certifies, represents and warrants to,
and covenants with, the Depositor and the Trustee that:
1. The Purchaser understands that (a) the Certificates
have not been and will not be registered or qualified under the
Securities Act of 1933, as amended (the "Act") or any state
securities law, (b) the Depositor is not required to so register
or qualify the Certificates, (c) the Certificates may be resold
only if registered and qualified pursuant to the provisions of
the Act or any state securities law, or if an exemption from such
registration and qualification is available, (d) the Pooling and
Servicing Agreement contains restrictions regarding the transfer
of the Certificates and (e) the Certificates will bear a legend
to the foregoing effect.
2. The Purchaser is acquiring the Certificates for its own
account for investment only and not with a view to or for sale in
connection with any
<PAGE> 199
distribution thereof in any manner that would violate the Act or
any applicable state securities laws.
3. The Purchaser is (a) a substantial, sophisticated
institutional investor having such knowledge and experience in
financial and business matters, and, in particular, in such
matters related to securities similar to the Certificates, such
that it is capable of evaluating the merits and risks of
investment in the Certificates, (b) able to bear the economic
risks of such an investment and (c) an "accredited investor"
within the meaning of Rule 501(a) promulgated pursuant to the
Act.
4. The Purchaser has been furnished with, and has had an
opportunity to review (a) a copy of the Private Placement
Memorandum, dated April [__], 1998, relating to the Certificates,
(b) a copy of the Pooling and Servicing Agreement and (c) such
other information concerning the Certificates, the Mortgage Loans
and the Depositor as has been requested by the Purchaser from the
Depositor or the Seller and is relevant to the Purchaser's
decision to purchase the Certificates. The Purchaser has had any
questions arising from such review answered by the Depositor or
the Seller to the satisfaction of the Purchaser. If the Purchaser
did not purchase the Certificates from the Seller in connection
with the initial distribution of the Certificates and was
provided with a copy of the Private Placement Memorandum (the
"Memorandum") relating to the original sale (the "Original Sale")
of the Certificates by the Depositor, the Purchaser acknowledges
that such Memorandum was provided to it by the Seller, that the
Memorandum was prepared by the Depositor solely for use in
connection with the Original Sale and the Depositor did not
participate in or facilitate in any way the purchase of the
Certificates by the Purchaser from the Seller, and the Purchaser
agrees that it will look solely to the Seller and not to the
Depositor with respect to any damage, liability, claim or expense
arising out of, resulting from or in connection with (a) error or
omission, or alleged error or omission, contained in the
Memorandum, or (b) any information, development or event arising
after the date of the Memorandum.
5. The Purchaser has not and will not nor has it
authorized or will it authorize any person to (a) offer, pledge,
sell, dispose of or otherwise transfer any Certificate, any
interest in any Certificate or any other similar security to any
person in any manner, (b) solicit any offer to buy or to accept a
pledge, disposition of other transfer of any Certificate, any
interest in any Certificate or any other similar security from
any person in any manner, (c) otherwise approach or negotiate
with respect to any Certificate, any interest in any Certificate
or any other similar security with any person in any manner, (d)
make any general solicitation by means of general advertising or
in any other manner or (e) take any other action, that (as to any
of (a) through (e) above) would constitute a distribution of any
Certificate under the Act, that would render the disposition of
any Certificate a violation of Section 5 of the Act or any state
securities law, or that would require registration or
qualification pursuant thereto. The Purchaser
I-2
<PAGE> 200
will not sell or otherwise transfer any of the Certificates,
except in compliance with the provisions of the Pooling and
Servicing Agreement.
6. The Purchaser
(a) is not an employee benefit or other plan
subject to the prohibited transaction provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Internal Revenue Code of 1986, as amended
(the "Code") (a Plan"), or any other person (including an
investment manager, a named fiduciary or a trustee of any Plan)
acting, directly or indirectly, on behalf of or purchasing any
Certificate with "plan assets" of any Plan within the meaning of
the Department of Labor ("DOL") regulation at 29 C.F.R.
Section 2510.3-101; or
(b) is an insurance company, the source of funds
to be used by it to purchase the Certificates is an "insurance
company general account" (within the meaning of DOL Prohibited
Transaction Class Exemption ("PTCE") 95-60), and the purchase is
being made in reliance upon the availability of the exemptive
relief afforded under Sections I and III of PTCE 95-60.
7. The Purchaser is not a non-United States person.
Very truly yours,
----------------------------------------
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
I-3
<PAGE> 201
EXHIBIT J
FORM OF TRANSFEROR REPRESENTATION LETTER
_______, 19__
BA Mortgage Securities, Inc.
345 Montgomery Street
Lower Level #2, Unit #8152
San Francisco, California 94104
Bankers Trust Company of California, N.A.
3 Park Plaza
16th Floor
Irvine, California 92714
Bank of America, FSB
555 California Street
San Francisco, California 94104
Attention: BA Mortgage Securities, Inc., Series 1998-1
Re: Mortgage Pass-Through Certificates,
Series 1998-1, Class [ ]
Ladies and Gentlemen:
In connection with the sale by (the "Seller") to (the
"Purchaser") of $ Initial Certificate Principal Balance of Mortgage Pass-Through
Certificates, Series 1998-1, Class (the "Certificates"), issued pursuant to the
Pooling and Servicing Agreement (the "Pooling and Servicing Agreement"), dated
as of April 1, 1998 among BA Mortgage Securities, Inc., as depositor (the
"Depositor"), Bank of America, FSB, as master servicer (the "Master Servicer"),
and Bankers Trust Company of California, N.A., as trustee (the "Trustee"). The
Seller hereby certifies, represents and warrants to, and covenants with, the
Depositor and the Trustee that:
Neither the Seller 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
<PAGE> 202
security with any person in any manner, (d) has made any general solicitation by
means of general advertising or in any other manner, or (e) has taken any other
action, that (as to any of (a) through (e) above) would constitute a
distribution of the Certificates under the Securities Act of 1933 (the "Act"),
that would render the disposition of any Certificate a violation of Section 5 of
the Act or any state securities law, or that would require registration or
qualification pursuant thereto. The Seller will not act, in any manner set forth
in the foregoing sentence with respect to any Certificate. The Seller has not
and will not sell or otherwise transfer any of the Certificates, except in
compliance with the provisions of the Pooling and Servicing Agreement.
Very truly yours,
----------------------------------------
(Seller)
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
J-2
<PAGE> 203
EXHIBIT K
FORM OF RULE 144A INVESTMENT REPRESENTATION
Description of Rule 144A Securities, including numbers:
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
The undersigned seller, as registered holder (the "Seller"),
intends to transfer the Rule 144A Securities described above to the undersigned
buyer (the "Buyer").
1. In connection with such transfer and in accordance with the
agreements pursuant to which the Rule 144A Securities were issued, the Seller
hereby certifies the following facts: Neither the Seller nor anyone acting on
its behalf has offered, transferred, pledged, sold or otherwise disposed of the
Rule 144A Securities, any interest in the Rule 144A Securities or any other
similar security to, or solicited any offer to buy or accept a transfer, pledge
or other disposition of the Rule 144A Securities, any interest in the Rule 144A
Securities or any other similar security from, or otherwise approached or
negotiated with respect to the Rule 144A Securities, any interest in the Rule
144A Securities or any other similar security with, any person in any manner, or
made any general solicitation by means of general advertising or in any other
manner, or taken any other action, that would constitute a distribution of the
Rule 144A Securities under the Securities Act of 1933, as amended (the "1933
Act"), or that would render the disposition of the Rule 144A Securities a
violation of Section 5 of the 1933 Act or require registration pursuant thereto,
and that the Seller has not offered the Rule 144A Securities to any person other
than the Buyer or another "qualified institutional buyer" as defined in Rule
144A under the 1933 Act.
2. The Buyer warrants and represents to, and covenants with, the
Depositor, the Trustee and the Master Servicer pursuant to Section 5.02 of the
Pooling and Servicing Agreement, dated as of April 1, 1998 among BA Mortgage
Securities, Inc., as Depositor, Bank of America, FSB, as Master Servicer and
Bankers Trust Company of California, N.A., as Trustee, as follows:
a. The Buyer understands that the Rule 144A Securities
have not been registered under the 1933 Act or the securities laws of any
state.
b. The Buyer considers itself a substantial, sophisticated
institutional investor having such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and
risks of investment in the Rule 144A Securities.
c. The Buyer has been furnished with all information
regarding the Rule 144A Securities that it has requested from the Seller,
the Trustee or the Master Servicer.
<PAGE> 204
d. Neither the Buyer nor anyone acting on its behalf has
offered, transferred, pledged, sold or otherwise disposed of the Rule
144A Securities, any interest in the Rule 144A Securities or any other
similar security to, or solicited any offer to buy or accept a transfer,
pledge or other disposition of the Rule 144A Securities, any interest in
the Rule 144A Securities or any other similar security from, or otherwise
approached or negotiated with respect to the Rule 144A Securities, any
interest in the Rule 144A Securities or any other similar security with,
any person in any manner, or made any general solicitation by means of
general advertising or in any other manner, or taken any other action,
that would constitute a distribution of the Rule 144A Securities under
the 1933 Act or that would render the disposition of the Rule 144A
Securities a violation of Section 5 of the 1933 Act or require
registration pursuant thereto, nor will it act, nor has it authorized or
will it authorize any person to act, in such manner with respect to the
Rule 144A Securities.
e. The Buyer is a "qualified institutional buyer" as that
term is defined in Rule 144A under the 1933 Act and has completed either
of the forms of certification to that effect attached hereto as Annex 1
or Annex 2. The Buyer is aware that the sale to it is being made in
reliance on Rule 144A. The Buyer is acquiring the Rule 144A Securities
for its own account or the accounts of other qualified institutional
buyers, understands that such Rule 144A Securities 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.
3. The Buyer warrants and represents to, and covenants with, the
Seller, the Trustee, Master Servicer and the Depositor that either (1) the Buyer
is (A) not an employee benefit plan (within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), or a
plan (within the meaning of Section 4975(e)(1) of the Internal Revenue Code of
1986 ("Code")), which (in either case) is subject to ERISA or Section 4975 of
the Code (both a "Plan"), and (B) is not directly or indirectly purchasing the
Rule 144A Securities on behalf of, as investment manager of, as named fiduciary
of, as trustee of, or with "plan assets" of a Plan, or (2) the Buyer understands
that registration of transfer of any Rule 144A Securities to any Plan, or to any
Person acting on behalf of or purchasing any such Certificate with "plan assets"
of any Plan, may not be made unless such Plan or Person, including the Buyer,
delivers an opinion of its counsel, addressed and satisfactory to the Trustee,
the Depositor and the Master Servicer, to the effect that the purchase and
holding of the Rule 144A Securities by, on behalf of or with "plan assets" of
such Plan is permissible under applicable law, will not constitute or result in
any non-exempt prohibited transaction under Section 406 of ERISA or Section 4975
of the Code, and will not subject the Depositor, the Master Servicer or the
Trustee to any obligation or liability (including liabilities under ERISA or
Section 4975 of the Code) in addition to those undertaken in the Pooling and
Servicing Agreement.
4. This document may be executed in one or more counterparts and
by the different parties hereto on separate counterparts, each of which, when so
executed, shall be
K-2
<PAGE> 205
deemed to be an original; such counterparts, together, shall constitute one and
the same document.
IN WITNESS WHEREOF, each of the parties has executed this
document as of the date set forth below.
- ------------------------- -----------------------------
Print Name of Seller Print Name of Buyer
By: By:
---------------------- --------------------------
Name: Name:
Title: Title:
Taxpayer Identification: Taxpayer Identification:
No. No.
---------------------- --------------------------
Date: Date:
-------------------- ------------------------
K-3
<PAGE> 206
ANNEX 1 TO EXHIBIT K
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers Other Than Registered Investment Companies]
The undersigned hereby certifies as follows in connection with the
Rule 144A Investment Representation to which this Certification is attached:
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Buyer.
2. In connection with purchases by the Buyer, the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933 ("Rule 144A") because (i) the Buyer owned and/or invested
on a discretionary basis $______________________ in securities (except for the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year (such amount being calculated in accordance with Rule 144A) and (ii)
the Buyer satisfies the criteria in the category marked below.
___ Corporation, etc. The Buyer is a corporation (other than a bank,
savings association or similar institution), limited liability
company, Massachusetts or similar business trust, partnership, or
charitable organization described in Section 501(c)(3) of the
Internal Revenue Code.
___ Bank. The Buyer (a) is a national bank or banking institution
organized under the laws of any State, territory or the District of
Columbia, the business of which is substantially confined to banking
and is supervised by the State or territorial banking commission or
similar official or is a foreign bank or equivalent institution, and
(b) has an audited net worth of at least $25,000,000 as demonstrated
in its latest annual financial statements, a copy of which is
attached hereto.
___ Savings Association. The Buyer (a) is a savings association, building
and loan association, cooperative bank, homestead association or
similar institution, which is supervised and examined by a State or
Federal authority having supervision over any such institutions or is
a foreign savings and loan association or equivalent institution and
(b) has an audited net worth of at least $25,000,000 as demonstrated
in its latest annual financial statements.
___ Broker-Dealer. The Buyer is a dealer registered pursuant to Section
15 of the Securities Exchange Act of 1934.
___ Insurance Company. The Buyer is an insurance company whose primary
and predominant business activity is the writing of insurance or the
reinsuring of risks underwritten by insurance companies and which is
subject to supervision by the
K-1-1
<PAGE> 207
insurance commissioner or a similar official or agency of a State or
territory or the District of Columbia.
___ State or Local Plan. The Buyer is a plan established and maintained
by a State, its political subdivisions, or any agency or
instrumentality of the State or its political subdivisions, for the
benefit of its employees.
___ ERISA Plan. The Buyer is an employee benefit plan within the meaning
of Title I of the Employee Retirement Income Security Act of 1974.
___ Investment Adviser. The Buyer is an investment adviser registered
under the Investment Advisers Act of 1940.
___ SBIC. The Buyer is a Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or (d) of
the Small Business Investment Act of 1958.
___ Business Development Company. The Buyer is a business development
company as defined in Section 202(a)(22) of the Investment Advisers
Act of 1940.
___ Trust Fund. The Buyer is a trust fund whose trustee is a bank or
trust company and whose participants are exclusively (a) plans
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, or (b) employee
benefit plans within the meaning of Title I of the Employee
Retirement Income Security Act of 1974, but is not a trust fund that
includes as participants individual retirement accounts or H.R.
10 plans.
3. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer, (ii) securities that
are part of an unsold allotment to or subscription by the Buyer, if the Buyer is
a dealer, (iii) bank deposit notes and certificates of deposit, (iv) loan
participations, (v) repurchase agreements, (vi) securities owned but subject to
a repurchase agreement and (vii) currency, interest rate and commodity swaps.
4. For purposes of determining the aggregate amount of securities
owned and/or invested on a discretionary basis by the Buyer, the Buyer used the
cost of such securities to the Buyer and did not include any of the securities
referred to in the preceding paragraph. Further, in determining such aggregate
amount, the Buyer may have included securities owned by subsidiaries of the
Buyer, but only if such subsidiaries are consolidated with the Buyer in its
financial statements prepared in accordance with generally accepted accounting
principles and if the investments of such subsidiaries are managed under the
Buyer's direction. However, such securities were not included if the Buyer is a
majority-owned, consolidated subsidiary of another enterprise and the Buyer is
not itself a reporting company under the Securities Exchange Act of 1934.
K-1-2
<PAGE> 208
5. The Buyer acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the Certificates
are relying and will continue to rely on the statements made herein because one
or more sales to the Buyer may be in reliance on Rule 144A.
___ ___ Will the Buyer be purchasing the Rule 144A
Yes No Securities only for the Buyer's own account?
6. If the answer to the foregoing question is "no", the Buyer agrees
that, in connection with any purchase of securities sold to the Buyer for the
account of a third party (including any separate account) in reliance on Rule
144A, the Buyer 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 Buyer agrees that the Buyer will not purchase securities for a
third party unless the Buyer 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 Buyer will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice is given, the Buyer's purchase of Rule 144A Securities will
constitute a reaffirmation of this certification as of the date of such
purchase.
--------------------------------------------
Print Name of Buyer
By:
-----------------------------------------
Name:
Title:
Date:
---------------------------------------
K-1-3
<PAGE> 209
ANNEX 2 TO EXHIBIT K
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers That Are Registered Investment Companies]
The undersigned hereby certifies as follows in connection with
the Rule 144A Investment Representation to which this Certification is attached:
1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the Buyer or, if the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933 ("Rule 144A") because Buyer is part of a Family of
Investment Companies (as defined below), is such an officer of the Adviser.
2. In connection with purchases by Buyer, the Buyer is a
"qualified institutional buyer" as defined in SEC Rule 144A because (i) the
Buyer is an investment company registered under the Investment Company Act of
1940, and (ii) as marked below, the Buyer alone, or the Buyer's Family of
Investment Companies, owned at least $100,000,000 in securities (other than the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year. For purposes of determining the amount of securities owned by the
Buyer or the Buyer's Family of Investment Companies, the cost of such securities
was used.
____ The Buyer owned $___________________ in securities (other than the
excluded securities referred to below) as of the end of the Buyer's
most recent fiscal year (such amount being calculated in accordance
with Rule 144A).
____ The Buyer is part of a Family of Investment Companies which owned in
the aggregate $______________ in securities (other than the excluded
securities referred to below) as of the end of the Buyer's most
recent fiscal year (such amount being calculated in accordance with
Rule 144A).
3. The term "Family of Investment Companies" as used herein means
two or more registered investment companies (or series thereof) that have the
same investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).
4. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer or are part of the
Buyer's Family of Investment Companies, (ii) bank deposit notes and certificates
of deposit, (iii) loan participations, (iv) repurchase agreements, (v)
securities owned but subject to a repurchase agreement and (vi) currency,
interest rate and commodity swaps.
K-2-1
<PAGE> 210
5. The Buyer is familiar with Rule 144A and understands that each
of the parties to which this certification is made are relying and will continue
to rely on the statements made herein because one or more sales to the Buyer
will be in reliance on Rule 144A. In addition, the Buyer will only purchase for
the Buyer's own account.
6. The undersigned will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice, the Buyer's purchase of Rule 144A Securities will constitute
a reaffirmation of this certification by the undersigned as of the date of such
purchase.
------------------------------------------
Print Name of Buyer
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
IF AN ADVISER:
------------------------------------------
Print Name of Buyer
Date:
-------------------------------------
K-2-2
<PAGE> 211
EXHIBIT L
FORM OF LENDER CERTIFICATION FOR ASSIGNMENT OF MORTGAGE LOAN
__________________, 19____
Bank of America, FSB
555 California Street
San Francisco, California 94104
Bankers Trust Company of California, N.A.
3 Park Plaza
16th Floor
Irvine, California 92714
Attention: BA Mortgage Securities, Inc., Series 1998-1
Re: Mortgage Pass-Through Certificates, Series 1998-1
Assignment of Mortgage Loan
Ladies and Gentlemen:
This letter is delivered to you in connection with the assignment
by _________________ (the "Trustee") to _______________________ (the "Lender")
of _______________ (the "Mortgage Loan") pursuant to Section 3.13(d) of the
Pooling and Servicing Agreement (the "Pooling and Servicing Agreement"), dated
as of April 1, 1998 among BA Mortgage Securities, Inc., as depositor, Bank of
America, FSB, as master servicer (the "Master Servicer"), and Bankers Trust
Company of California, N.A., as trustee (the "Trustee"). All terms used herein
and not otherwise defined shall have the meanings set forth in the Pooling and
Servicing Agreement. The Lender hereby certifies, represents and warrants to,
and covenants with, the Master Servicer and the Trustee that:
(i) the Mortgage Loan is secured by Mortgaged Property located in a
jurisdiction in which an assignment in lieu of satisfaction is required to
preserve lien priority, minimize or avoid mortgage recording taxes or otherwise
comply with, or facilitate a refinancing under, the laws of such jurisdiction;
(ii) the substance of the assignment is, and is intended to be, a
refinancing of such Mortgage Loan and the form of the transaction is solely to
comply with, or facilitate the transaction under, such local laws;
(iii) the Mortgage Loan following the proposed assignment will be
modified to have a rate of interest at least 0.25 percent below or above the
rate of interest on such Mortgage Loan prior to such proposed assignment; and
<PAGE> 212
(iv) such assignment is at the request of the borrower under the
related Mortgage Loan.
Very truly yours,
------------------------------------------
(Lender)
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
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<PAGE> 213
EXHIBIT M
SCHEDULE OF MORTGAGE LOAN EXCEPTIONS
None
<PAGE> 214
EXHIBIT N
Information Available for Reports to Certificateholders
Deal Name
Remit Date
Loan Number
City
State
Zip Code
Property Type (SFR, CONDO, etc.)
Occupancy Status (Owner, Investor, etc.)
Loan Purpose (Purchase, Refi, etc.)
Loan Type
Balloon Flag
Loan Status (Current, Foreclosure, REO, Bankrupt)
Original Term of Loan
Amortization Term
FirstPayment of Loan
Maturity Date
Appraisal Value
Original LTV
Original Principal Balance
Initial Principal Balance
Previous Month's Balance
Current Balance
Prepay Date
Prepay Status (Loan has prepaid, liquidated or repurchased by the servicer)
Original Scheduled P&I
Initial Scheduled P&I
Scheduled P&I
Scheduled Interest Amount
Scheduled Principal Amount
Curtailment
Original Note Rate
Initial Note Rate
Current Note Rate
Next Note Rate
Current Servicing Rate
Next Servicing Rate
Current Pass-Through Rate
Next Pass-Through Rate
Paid to Date
Current Payment Date
Next Payment Date
Index Type
<PAGE> 215
Gross Margin
Original Index
Current Index Rate
Next Index Rate
First Rate Adjust
Current Interest Adjust Date
Next Interest Adjust Date
Adjust Frequency Rate
Cap Rate
Maximum Interest Rate
Minimum Interest Rate
First Payment Adjust Date
Current Payment Adjust Date
Next Payment Adjust Date
Adjust Frequency Payment
Cap Payment
N-2
<PAGE> 216
EXHIBIT O
FORM OF CUSTODIAL AGREEMENT
THIS CUSTODIAL AGREEMENT (as amended and supplemented from time to time,
the "Agreement"), dated [ ] with respect to the obligations of the
Owner and the Custodian, and as of the Closing Date under the Pooling Agreement
(defined below) with respect to the obligations of the other parties hereto, by
and among Bankers Trust Company of California, N.A., as Trustee (including its
successors under the Pooling Agreement defined below, the "Trustee"), BA
MORTGAGE SECURITIES, INC. (together with any successor in interest, the
"Depositor"), Bank of America [National Trust and Savings Association][, FSB]
(together with any successor in interest, the "Owner") [, and together with any
successor in interest or successor under the Pooling Agreement referred to
below, the "Master Servicer"] [Bank of America, FSB (together with any successor
in interest or successor under the Pooling Agreement referred to below, the
"Master Servicer")], and (together with any successor in interest or
any successor appointed hereunder, the "Custodian").
W I T N E S S E T H T H A T :
WHEREAS, the Owner owns certain Mortgage Loans and the related Mortgage
Files (each as defined below);
WHEREAS, the Owner intends to sell the Mortgage Loans to the Depositor;
WHEREAS, the Depositor, the Master Servicer and the Trustee intend to
enter into a Pooling and Servicing Agreement dated as of April 1, 1998, relating
to the issuance of BA Mortgage Securities, Inc., Mortgage Pass-Through
Certificates, Series 1998-1 (as in effect on the Closing Date thereunder, the
"Original Pooling Agreement," and as amended and supplemented from time to time,
the "Pooling Agreement"); and
WHEREAS, the Custodian has agreed to act as agent for the Owner, prior
to the Closing Date under the Pooling Agreement, and thereafter for the Trustee,
for the purposes of receiving and holding certain documents and other
instruments delivered by the Depositor and the Master Servicer under the Pooling
Agreement, all upon the terms and conditions and subject to the limitations
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the Owner, the Trustee, the
Depositor, the Master Servicer and the Custodian hereby agree as follows:
<PAGE> 217
ARTICLE I
Definitions
Capitalized terms used in this Agreement shall have the following
meanings or, if not defined below, shall have the meanings assigned in the
Original Pooling Agreement, unless otherwise required by the context herein.
Assignment of Mortgage: An assignment of the Mortgage, notice of
transfer or equivalent instrument, in recordable form, sufficient when recorded
under the laws of the jurisdiction wherein the related Mortgaged Property is
located to reflect of record the sale of the Mortgage Loan, 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.
Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a
day on which banking institutions in the State of California or the State of
__________ are required or authorized by law or executive order to be closed.
Delivery Date: The date, prior to the Closing Date, upon which the Owner
delivers Mortgage Files to the Custodian pursuant to this Agreement.
Final Certification: A final certification in the form attached hereto
as Exhibit Two delivered by the Custodian to the Owner or the Trustee pursuant
to Section 2.2(b) or Section 2.02 of the Pooling Agreement, respectively, with a
Mortgage Loan Schedule attached thereto.
Initial Certification: An initial certification in the form attached
hereto as Exhibit One delivered by the Custodian to the Owner pursuant to
Section 2.2(a) with a Mortgage Loan Schedule attached thereto.
Mortgage: The mortgage, deed of trust or other comparable instrument
creating a first lien on an estate in fee simple or leasehold interest in real
property securing a Mortgage Note.
Mortgage File: The mortgage documents pertaining to a particular
Mortgage Loan held by the Custodian pursuant to this Agreement, which shall
include:
(i) The original Mortgage Note, endorsed in blank and
showing an unbroken chain of endorsements from the originator thereof to
the Person endorsing it in blank, or, in the event of any Mortgage Note,
the original of which was permanently lost or destroyed and has not been
replaced, a copy of a duplicate original of the Mortgage Note, together
with an original lost note affidavit from the originator of the related
Mortgage Loan stating that the original Mortgage Note was lost,
misplaced or destroyed, together with a copy of the related Mortgage
Note;
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(ii) The original Mortgage with evidence of recording
indicated thereon or a copy of the Mortgage certified by the public
recording office in which such Mortgage has been recorded;
(iii) An original Assignment of the Mortgage in blank;
(iv) The original recorded assignment or assignments of the
Mortgage showing an unbroken chain of title from the originator thereof
to the Person assigning it in blank or a copy of such intervening
assignment or assignments of the Mortgage certified by the public
recording office in which such intervening assignment or assignments
have been recorded;
(v) The original of each modification or assumption
agreement, if any, relating to such Mortgage Loan or a copy of each
modification or assumption agreement certified by the public recording
office in which such document has been recorded; and
(vi) the mortgage title insurance policy, title commitment,
binder or attorney's opinion of title and abstract of title, which in
each case may be a copy of the original thereof.
With respect to any endorsement described in item (i), the endorsement
may be contained on an allonge.
The Mortgage Files shall also contain originals or certified copies of
powers of attorney for any party executing any instrument or document set forth
in items (i) through (v) above pursuant to delegated authority.
Mortgage Loan Schedule: The list of the Mortgage Loans on computer
readable tape, containing the information set forth on Exhibit Three attached
hereto (as amended from time to time to reflect the removal or the addition of
Mortgage Loans pursuant to Section 2.3), which list shall set forth at a minimum
the following information as to each Mortgage Loan:
(i) the name of the Mortgagor;
(ii) the Owner's Mortgage Loan identifying number;
(iii) the street address of the Mortgaged Property including
state and zip code;
(iv) the maturity date of the Mortgage Note;
(v) the Mortgage Rate; and
(vi) the principal balance of the Mortgage Loan at
origination.
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Such schedule may consist of multiple reports that collectively set forth all of
the above information.
Mortgage Loans: The mortgage loans identified on the Mortgage Loan
Schedule (as amended from time to time to reflect the removal or the addition of
Mortgage Loans pursuant to Section 2.3).
Mortgage Note: The originally executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan,
together with any modification thereto.
Mortgage Rate: As to any Mortgage Loan, the interest rate at origination
borne by the related Mortgage Note, or any modification thereto.
Mortgaged Property: The underlying real property securing a Mortgage
Loan.
Mortgagor: The obligor on a Mortgage Note.
Person: Any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
Request for Release: A request for release of Mortgage Files and receipt
in the form attached hereto as Exhibit Four delivered prior to the Closing Date
by the Owner and on or after the Closing Date, by the Master Servicer, to the
Custodian pursuant to Section 2.3.
Servicing Officer: Any officer of the Owner involved in, or responsible
for, the administration and servicing of the Mortgage Loans whose name and
specimen signature appear on a list of servicing officers furnished to the
Custodian by the Owner, as such list may from time to time be amended.
Capitalized terms used in this Agreement shall have the following
meanings or, if not defined below, shall have the meanings assigned in the
Original Pooling Agreement, unless otherwise required by the context herein.
ARTICLE II
Delivery and Custody of Mortgage Files
Section 2.1. Delivery of Mortgage Files; Custodian to Act as Agent;
Acceptance of Mortgage Files. The Owner, from time to time, will cause to be
delivered to the Custodian on each Delivery Date the Mortgage Files relating to
the Mortgage Loans identified on the Mortgage Loan Schedule for such Delivery
Date. The Custodian, as the duly appointed agent of the Owner for these
purposes, declares that it will hold such Mortgage Files as agent for the Owner,
in trust, for the use and benefit of the Owner and its assigns. The Custodian
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acknowledges that the Owner intends to sell the Mortgage Loans to the Depositor,
and the Depositor intends assign the Mortgage Loans to the Trustee, on the
Closing Date, and the Custodian agrees that it will hold the Mortgage Files as
agent for the Trustee, in trust for the use and benefit of all present and
future Certificateholders, upon receipt of written notice from a Servicing
Officer of such sale and assignment.
Section 2.2. Review of Mortgage Files.
(a) Within two (2) Business Days following each Delivery Date, the
Custodian shall deliver to the Owner an Initial Certification evidencing receipt
of a Mortgage File for each Mortgage Loan listed on the Schedule attached hereto
(the "Mortgage Loan Schedule").
(b) Within 10 days following each Delivery Date, (and within 45 days of
the Closing Date) the Custodian agrees, for the benefit of the Owner and its
assigns and the Trustee, to review each Mortgage File to ascertain that (i) the
documents required to be delivered in the definition of Mortgage File are in its
possession; (ii) such documents have been reviewed by it and appear regular on
their face and relate to such Mortgage Loan; and (iii) based on its examination
and only as to the foregoing documents, the information set forth in items
(i)-(vi) of the definition of Mortgage Loan Schedule is correct. If the
Custodian finds any document or documents constituting a part of a Mortgage File
to be missing or defective in any material respect, the Custodian shall promptly
so notify the Owner and its assigns, or the Trustee if after the Closing Date.
Upon completion of such review, the Custodian shall promptly deliver to the
Owner, or the Trustee if after the Closing Date, a Final Certification with
respect to the Mortgage Loans on the related Mortgage Loan Schedule, with any
exceptions listed on an attachment thereto. The Custodian shall be under no duty
or obligation to inspect, review or examine said documents, instruments,
certificates or other papers to verify (i) the validity, legality,
enforceability, sufficiency, due authorization, recordability or genuineness of
any document in any Mortgage File or of any of the Mortgage Loans or (ii) the
collectability, insurability, effectiveness or suitability of any such Mortgage
Loan.
(c) The Mortgage File review set forth in Section 2.2 (b) shall also
constitute the Mortgage File review under Section 2.02 of the Pooling Agreement.
The Trustee shall deliver a certification in the form to be set forth in the
Pooling Agreement in sole reliance upon receipt from the Custodian of the
Section 2.2(b) Final Certification. Trustee shall not be entitled to any
compensation in addition to that set forth in the Pooling Agreement in
connection with the delivery of any such certification pursuant to the Pooling
Agreement unless the Trustee is requested to perform an additional review of the
Mortgage Files.
Section 2.3. Custodian to Cooperate; Release of Mortgage Files;
Completion of Endorsements and Assignments.
(a) Upon receipt by the Custodian of a Request for Release, which
Request for Release shall have attached thereto a revised Mortgage Loan Schedule
reflecting the deletion of the Mortgage Files requested by such Request for
Release (if such Request for Release related to less than all of the Mortgage
Files), the Custodian shall deliver the Mortgage Files requested by the Owner to
the Owner or the Person designated by the Owner in such Request for Release
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within five Business Days of receipt of such Request for Release. Custodian
shall comply with any instructions regarding the completion of Assignments of
Mortgages and endorsement of Mortgage Notes set forth in any such Request for
Release prior to making such delivery.
(b) Upon the repurchase or substitution of any Mortgage Loan pursuant to
Article II of the Pooling Agreement or payment in full of any Mortgage Loan, or
the receipt by the Master Servicer of a notification that payment in full will
be escrowed in a manner customary for such purposes, the Master Servicer shall
immediately notify the Custodian by a certification (which certification shall
include a statement to the effect that all amounts received or to be received in
connection with such payment which are required to be deposited in the Custodial
Account pursuant to Section 3.07 of the Pooling Agreement have been or will be
so deposited) of a Servicing Officer and shall request delivery to it of the
Mortgage File. The Custodian agrees, upon receipt of such certification and
request, promptly to release to the Master Servicer the related Mortgage File.
The Master Servicer shall deliver to the Custodian and the Custodian agrees to
accept the Mortgage Note and other documents constituting the Mortgage File with
respect to any Qualified Substitute Mortgage Loan.
From time to time as is appropriate for the servicing or foreclosures of
any Mortgage Loan, including, for this purpose, collection under any Primary
Mortgage Insurance Policy or any Mortgage Pool Insurance Policy, the Master
Servicer shall deliver to the Custodian a certificate of a Servicing Officer
requesting that possession of the Mortgage File be released to the Master
Servicer and certifying as to the reason for such release and that such release
will not invalidate any insurance coverage provided in respect of the Mortgage
Loan under any of the Required Insurance Policies. With such certificate, the
Master Servicer shall deliver to the Custodian a trust receipt signed by a
Servicing Officer on behalf of the Master Servicer, and upon receipt of the
foregoing, the Custodian shall deliver the Mortgage File to the Master Servicer.
The Master Servicer shall cause each Mortgage File so released to be returned to
the Custodian when the need therefor by the Master Servicer no longer exists,
unless (i) the Mortgage Loan has been liquidated and the Liquidation Proceeds
relating to the Mortgage Loan have been deposited in the Custodial Account or
(ii) the Mortgage File 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 to the Custodian a certificate of a Servicing Officer certifying as to
the name and address of the Person to which such Mortgage File was delivered and
the purpose or purposes of such delivery. In the event of the liquidation of a
Mortgage Loan, the Custodian shall deliver the trust receipt with respect
thereto to the Master Servicer upon deposit of the related Liquidation Proceeds
in the Custodial Account as provided in the Pooling Agreement.
Section 2.5. Notification of Breaches of Representations and Warranties.
Upon discovery by the Custodian of a breach of any representation or warranty
made by the Master Servicer as set forth in the Pooling Agreement or by a Seller
in a Mortgage Loan Purchase Agreement with respect to a Mortgage Loan relating
to a Mortgage File, the Custodian shall give prompt written notice to the
Depositor, the Master Servicer and the Trustee.
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Section 2.6. Assumption Agreements. In the event that any assumption
agreement or substitution of liability agreement is entered into with respect to
any Mortgage Loan subject to this Agreement in accordance with the terms and
provisions of the Pooling Agreement, the Master Servicer shall notify the
Custodian that such assumption or substitution agreement has been completed by
forwarding to the Custodian the original of such assumption or substitution
agreement, which shall be added to the related Mortgage File and, for all
purposes, shall be considered a part of such Mortgage File to the same extent as
all other documents and instruments constituting parts thereof.
ARTICLE III
Concerning the Custodian
Section 3.1. Custodian a Bailee and Agent of the Owner and its Assigns.
With respect to each Mortgage Note, Mortgage and other documents constituting
each Mortgage File which are delivered to the Custodian, the Custodian is
exclusively the bailee and agent of Owner, until the Custodian has received the
notice described in Section 2.1 hereof, and thereafter as the exclusive bailee
and agent of the Trustee as the Owner's assign, and has no instructions to hold
any Mortgage Note or Mortgage for the benefit of any person other than the Owner
and its assigns, holds such documents for the benefit of the Owner and its
assigns and undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement. Except upon compliance with the
provisions of Section 2.3 of this Agreement, after receipt of the notice
described in Section 2.1 on the Closing Date, no Mortgage Note, Mortgage or
other document constituting a part of a Mortgage File shall be delivered by the
Custodian to the Depositor or the Master Servicer or otherwise released from the
possession of the Custodian.
Section 3.2. Indemnification. The Depositor hereby agrees to indemnify
and hold the Custodian harmless from and against all claims, liabilities,
losses, actions, suits or proceedings at law or in equity, or any other
expenses, fees or charges of any character or nature, which the Custodian may
incur or with which the Custodian may be threatened by reason of its acting as
custodian under this Agreement, including indemnification of the Custodian
against any and all expenses, including reasonable attorney's fees if counsel
for the Custodian has been approved by the Depositor, and the cost of defending
any action, suit or proceedings or resisting any claim. Notwithstanding the
foregoing, it is specifically understood and agreed that in the event any such
claim, liability, loss, action, suit or proceeding or other expense, fee or
charge shall have been caused by reason of any negligent act, negligent failure
to act or willful misconduct on the part of the Custodian, or which shall
constitute a willful breach of its duties hereunder, the indemnification
provisions of this Agreement shall not apply.
Section 3.3. Indemnification by the Custodian. The Custodian agrees to
indemnify the Trustee for any and all liabilities, obligations, losses, damages,
payments, costs or expenses, including attorney's fees, of any kind whatsoever
which may be imposed on, incurred by or asserted against the Trustee as the
result of any act or omission in any way relating to the maintenance and custody
by the Custodian of Mortgage Files relating to the Mortgage Loans; provided,
however, that the Custodian shall not be liable for consequential damages of any
kind
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<PAGE> 223
or any portion of such liabilities, obligations, losses, damages, payments or
costs due to the gross negligence or willful misconduct of the Trustee.
Section 3.4. Custodian May Own Certificates. The Custodian in its
individual or any other capacity may become the owner or pledgee of Certificates
with the same rights it would have if it were not Custodian.
Section 3.5. Custodian's Fees and Expenses. In consideration for the
services rendered by the Custodian hereunder, until the Closing Date the Owner,
and thereafter the Master Servicer, shall pay such fees and expenses of the
Custodian as are set forth in that certain letter agreement dated August 21,
1997 between the Custodian and the Owner.
Section 3.6. Custodian May Resign; Trustee May Remove Custodian. The
Custodian may resign from the obligations and duties hereby imposed upon it as
such obligations and duties relate to its acting as Custodian of the Mortgage
Loans by giving 30 days written notice to the other parties to this Agreement.
Upon receiving such notice of resignation, the Owner, if such notice is received
prior to the Closing Date or the Trustee if such notice is received on or after
the Closing Date, shall either take custody of the Mortgage Files itself and
give prompt notice thereof to the Depositor, the Master Servicer and the
Custodian, or promptly appoint a successor Custodian (with the prior approval of
the Depositor and the Master Servicer in the case of the Trustee) by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Custodian and one copy to the successor Custodian. If the Owner or the
Trustee, as applicable, shall not have taken custody of the Mortgage Files and
no successor Custodian shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning Custodian may petition any court of competent jurisdiction for the
appointment of a successor Custodian.
The Owner and its assigns may remove the Custodian at any time. In such
event, the Owner or its assigns shall appoint, or petition a court of competent
jurisdiction to appoint, a successor Custodian hereunder. Any successor
Custodian appointed by the Trustee shall be a depository institution subject to
supervision or examination by federal or state authority and shall be able to
satisfy the other requirements contained in Section 3.7 and shall be
unaffiliated with the Master Servicer, the Depositor or any Seller.
Any resignation or removal of the Custodian and appointment of a
successor Custodian pursuant to any of the provisions of this Section 3.5 shall
become effective upon acceptance of appointment by the successor Custodian. The
Trustee shall give prompt notice to the Depositor and the Master Servicer of the
appointment of any successor Custodian. No successor Custodian shall be
appointed by the Trustee without the prior approval of the Depositor and the
Master Servicer.
In the event that the Trustee becomes the successor Custodian, the
Trustee shall review the Mortgage Files and shall be entitled to such fees and
expenses as agreed upon between the Owner and the Trustee.
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If the Owner or the Trustee removes the Custodian, all costs of the
transfer of the Mortgage Files to the Owner, the Trustee, or the successor
Custodian, as applicable, shall be paid by the Owner, if prior to the Closing
Date, or otherwise by the Trust Fund. If the Custodian resigns, the Custodian
shall bear the costs of the transfer of the Mortgage Files to the Owner, the
Trustee or the successor Custodian, as applicable.
Section 3.7. Merger or Consolidation of Custodian. Any Person into which
the Custodian may be merged or converted or with which it may be consolidated,
or any Person resulting from any merger, conversion or consolidation to which
the Custodian shall be a party, or any Person succeeding to the business of the
Custodian, shall be the successor of the Custodian hereunder, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
Section 3.8. Representations of the Custodian. The Custodian hereby
represents that it is a depository institution subject to supervision or
examination by a federal or state authority, has a combined capital and surplus
of at least $10,000,000 and is qualified to do business in the jurisdictions in
which it will hold any Mortgage File.
ARTICLE IV
Miscellaneous Provisions
Section 4.1. Notices. All notices, requests, consents and demands and
other communications required under this Agreement or pursuant to any other
instrument or document delivered hereunder shall be in writing and, unless
otherwise specifically provided, may be delivered personally, by telegram, telex
or facsimile, or by registered or certified mail, postage prepaid, return
receipt requested, at the addresses specified on the signature page hereof
(unless changed by the particular party whose address is stated herein by
similar notice in writing), in which case the notice will be deemed delivered
when received.
Section 4.2. Amendments. No modification or amendment of or supplement
to this Agreement shall be valid or effective unless the same is in writing and
signed by all parties hereto, and neither the Depositor, the Master Servicer nor
the Trustee shall enter into any amendment hereof that is not permitted by the
Pooling Agreement. The Trustee shall give prompt notice to the Custodian of any
amendment or supplement to the Pooling Agreement and furnish the Custodian with
written copies thereof.
Section 4.3. Governing Law. This Agreement shall be deemed a contract
made under the laws of the State of California and shall be construed and
enforced in accordance with and governed by the laws of the State of California.
Section 4.4. Recordation of Agreement. To the extent permitted by
applicable law, this Agreement is subject to recordation in all appropriate
public offices for real property records in all the counties or other comparable
jurisdictions in which any or all of the properties subject to the Mortgages are
situated, and in any other appropriate public recording office or elsewhere,
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such recordation to be effected by the Master Servicer and at its expense on
direction by the Trustee (pursuant to the request of holders of Certificates
evidencing undivided interests in the aggregate of not less than 25% of the
Trust Fund), but only upon direction accompanied by an Opinion of Counsel
reasonably satisfactory to the Master Servicer to the effect that the failure to
effect such recordation is likely to materially and adversely affect 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 4.5. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
Section 4.6 No Conflict. In the event of any conflict between the terms
of this Agreement and the terms of the Pooling Agreement, the terms of the
Pooling Agreement shall prevail.
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IN WITNESS WHEREOF, this Agreement is executed as of the date first
above written.
Address: BANKERS TRUST COMPANY OF
CALIFORNIA, N.A.,
as Trustee
By:
---------------------------------
Name:
Title:
Address: BA MORTGAGE SECURITIES, INC.,
as Depositor
By:
---------------------------------
Name:
Title:
Address: BANK OF AMERICA, FSB,
as [Owner and] Master Servicer
By:
---------------------------------
Name:
Title:
[Address:] [BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Owner
By:
---------------------------------
Name:
Title: ]
Address:
------------------------------------
as Custodian
By:
---------------------------------
Name:
Title:
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<PAGE> 227
[STATE OF __________ )
) ss.:
COUNTY OF __________ )
On the ____ day of __________, 19__, before me, a notary public in and
for said State, personally appeared _______________________, known to me to be a
______________ of Bank of America National Trust and Savings Association, a
national banking association that executed the within instrument, and also known
to me to be the person who executed it on behalf of said association 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
[SEAL]
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<PAGE> 228
STATE OF __________ )
) ss.:
COUNTY OF ______________ )
On the ___th day of __________, 19__, before me, a notary public in and
for said State, personally appeared ____________________, known to me to be a
____________________ of Bank of America, FSB, the federal savings bank 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]
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<PAGE> 229
STATE OF __________ )
) ss.:
COUNTY OF ______________ )
On the ___th day of __________, 19__, before me, a notary public in and
for said State, personally appeared ____________________, known to me to be a
____________________ of Bankers Trust Company of California, N.A., the national
banking association that executed the within instrument, and also known to me to
be the person who executed it on behalf of said association, and acknowledged to
me that such association 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]
O-14
<PAGE> 230
STATE OF __________ )
) ss.:
COUNTY OF ______________ )
On the ___th day of __________, 19__, before me, a notary public in and
for said State, personally appeared ____________________, known to me to be a
____________________ of BA Mortgage Securities, 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]
O-15
<PAGE> 231
STATE OF __________ )
) ss:
COUNTY OF ______________ )
On the ___th day of __________, 19__, before me, a notary public in and
for said State, personally appeared ____________________, known to me to be a
____________________ of [NAME OF CUSTODIAN], the [national banking association]
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]
O-16
<PAGE> 232
EXHIBIT ONE
FORM OF CUSTODIAN
INITIAL CERTIFICATION
_____________, 1998
[name and address
of Owner]
Re: Custodial Agreement dated as of __________, 1998, by and among Bankers
Trust Company of California, N.A., BA Mortgage Securities, Inc., [Bank
of America National Trust and Savings Association,] Bank of America, FSB
and [NAME OF CUSTODIAN], Mortgage Pass-Through Certificates, Series
1998-1
Ladies and Gentlemen:
In accordance with Section 2.2(a) of the above-captioned Custodial
Agreement, and subject to Section 2.02 of the Pooling Agreement, the
undersigned, as Custodian, hereby certifies that it has received a Mortgage File
with respect to each Mortgage Loan listed in the Mortgage Loan Schedule attached
hereto, with any exceptions listed on Schedule A attached hereto.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Custodial Agreement.
-------------------------------------
as Custodian
By:
----------------------------------
Name:
--------------------------------
Title:
--------------------------------
O-1-1
<PAGE> 233
EXHIBIT TWO
FORM OF CUSTODIAN FINAL CERTIFICATION
________________, 1998
[name and address
of Owner or Trustee,
as applicable]
Re: Custodial Agreement dated as of __________, 1998, by and among
Bankers Trust Company of California, N.A., BA Mortgage
Securities, Inc., [Bank of America National Trust and Savings
Association,] Bank of America, FSB and [NAME OF CUSTODIAN],
Mortgage Pass-Through Certificates, Series 1998-1
Ladies and Gentlemen:
In accordance with Section 2.2(b) of the above-captioned Custodial
Agreement and Section 2.02 of the Pooling Agreement, the undersigned, as
Custodian, hereby certifies that it has received a Mortgage File with respect to
each Mortgage Loan listed in the Mortgage Loan Schedule attached hereto
containing with respect to each such Mortgage Loan, with any exceptions listed
on Schedule A attached hereto:
(i) The original Mortgage Note, endorsed in blank and
showing an unbroken chain of endorsements from the originator thereof to
the Person endorsing it in blank;
(ii) The original Mortgage with evidence of recording
indicated thereon or a copy of the Mortgage certified by the public
recording office in which such Mortgage has been recorded;
(iii) An original Assignment of the Mortgage in blank;
(iv) The original recorded assignment or assignments of the
Mortgage showing an unbroken chain of title from the originator thereof
to the Person assigning it in blank or a copy of such intervening
assignment or assignments of the Mortgage certified by the public
recording office in which such intervening assignment or assignments
have been recorded;
O-2-1
<PAGE> 234
(v) The original of each modification or assumption
agreement, if any, relating to such Mortgage Loan or a copy of each
modification or assumption agreement certified by the public recording
office in which such document has been recorded; and
(vi) the original mortgage title insurance policy, title
commitment, binder or attorney's opinion of title and abstract of title,
which in each case may be a copy of the original thereof.
With respect to any endorsement described in item (i), the endorsement
may be contained on an allonge.
Custodian hereby further certifies that it has reviewed each Mortgage
File and the Mortgage Loan Schedule attached hereto and has determined that (i)
the documents required to be delivered in the definition of Mortgage File are in
its possession; (ii) such documents have been reviewed by it and appear regular
on their face and relate to such Mortgage Loan; and (iii) based on its
examination and only as to the foregoing documents, the information set forth in
items (i)-(vi) of the definition of Mortgage Loan Schedule is correct.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Custodial Agreement.
--------------------------------
as Custodian
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
O-2-2
<PAGE> 235
EXHIBIT THREE
MORTGAGE LOAN SCHEDULE
O-3-1
<PAGE> 236
EXHIBIT FOUR
FORM OF REQUEST FOR RELEASE
To: [Address]
Re: Custodial Agreement dated as of __________, 1998, by and among
Bankers Trust Company of California, N.A., BA Mortgage
Securities, Inc., [Bank of America National Trust and Savings
Association,] Bank of America, FSB and [NAME OF CUSTODIAN],
Mortgage Pass-Through Certificates, Series 1998-1
In connection with the administration of the Mortgage Loans held
by you as the Custodian on behalf of the [Owner][Trustee], we request the
release, and acknowledge receipt, of the Mortgage File/[specify documents] for
the Mortgage Loan described below. Send file/documents to:
------------------------------
------------------------------
------------------------------
------------------------------
Attn:
---------------------------
Mortgagor's Name, Address & Zip Code:
- ----------------------------------------
- ----------------------------------------
- ----------------------------------------
- ----------------------------------------
Mortgage Loan Number:
----------------
O-4-1
<PAGE> 237
Upon our return of the above documents to you as the Custodian,
please acknowledge your receipt by signing in the space indicated below, and
returning this form.
[Name of Owner or Master Servicer, as
applicable]
By:
------------------------------------
Name: [Name of Servicing Officer]
------------------------------------
Title:
------------------------------------
Date:
------------------------------------
Acknowledgement of Documents returned to the Custodian:
------------------------------------
as Custodian
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
Date:
------------------------------------
O-4-2
<PAGE> 238
EXHIBIT P
FORM OF TRUSTEE'S INITIAL CERTIFICATION
[ ], 1998
BA Mortgage Securities, Inc.
345 Montgomery Street
Lower Level #2, Unit #8152
San Francisco, CA 94104
Re: Pooling and Servicing Agreement dated April 1, 1998 by and
among BA Mortgage Securities, Inc., Bank of America, FSB, and
Bankers Trust Company of California, N.A., Mortgage Pass-
Through Certificates Series 1998-1
Ladies and Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling
and Servicing Agreement, the undersigned, as Trustee, hereby certifies that it
has received a mortgage file with respect to each Mortgage Loan listed in the
Mortgage Loan Schedules attached hereto containing with respect to each such
Mortgage Loan, with any exceptions listed on Schedule A attached hereto:
(i) The original Mortgage Note, endorsed in blank and
showing an unbroken chain of endorsements from the originator thereof to
the Person endorsing it in blank, or, in the event of any Mortgage Note,
the original of which was permanently lost or destroyed and has not been
replaced, a copy of a duplicate original of the Mortgage Note, together
with an original lost note affidavit from the originator of the related
Mortgage Loan stating that the original Mortgage Note was lost,
misplaced or destroyed, together with a copy of the related Mortgage
Note;
(ii) The original Mortgage with evidence of recording
indicated thereon or a copy of the Mortgage certified by the public
recording office in which such Mortgage has been recorded;
(iii) An original Assignment of the Mortgage in blank;
(iv) The original recorded assignment or assignments of the
Mortgage showing an unbroken chain of title from the originator thereof
to the Person assigning it in blank or a copy of such intervening
assignment or assignments of the Mortgage certified by the public
recording office in which such assignment or intervening assignments
have been recorded;
<PAGE> 239
(v) The original of each modification or assumption
agreement, if any, relating to such Mortgage Loan or a copy of each
modification or assumption agreement certified by the public recording
office in which such document has been recorded; and
(vi) The original mortgage title insurance policy, title
commitment, binder or attorney's opinion of title and abstract title,
which in each case may be a copy of the original thereof.
With respect to any endorsement described in item (i), the endorsement
may be contained on an allonge.
The Trustee further certifies [based solely on receipt by it of the
Final Certification under Section 2.2(b) of the Custodial Agreement] that
[it][the Custodian on its behalf] has reviewed each Mortgage File and the
Mortgage Loan Schedules attached hereto and has determined that (i) the
documents required to be delivered in the definition of Mortgage File are in its
possession; (ii) such documents have been reviewed by it and appear regular on
their face and relate to such Mortgage Loan; and (iii) based on its examination
and only as to the foregoing documents, the information set forth in items
(i)-(vi) of the definition of Mortgage Loan Schedule is correct.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., as Trustee
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
P-2
<PAGE> 240
EXHIBIT Q
CERTIFICATE INSURANCE POLICIES
<PAGE> 241
EXHIBIT R
TARGETED PRINCIPAL BALANCES
[See Appendix A of the Prospectus Supplement]
<PAGE> 242
EXHIBIT S
FORM OF SPECIAL SERVICING AGREEMENT
SPECIAL SERVICING AND COLLATERAL FUND AGREEMENT
This SPECIAL SERVICING AND COLLATERAL FUND AGREEMENT (the
"Agreement") is made and entered into as of __________, between Bank of America,
FSB, as master servicer under the Pooling Agreement described below (in such
capacity, the "Master Servicer"), and ______________________ (the "Loss
Mitigation Advisor").
PRELIMINARY STATEMENT
____________________ is the holder of the entire interest in BA
Mortgage Securities, Inc. Mortgage Pass-Through Certificates, Series 1998-1,
Class ____ (the "Class B Certificates"). The Class B Certificates were issued
pursuant to a Pooling and Servicing Agreement dated as of April 1, 1998 (the
"Pooling Agreement") among BA Mortgage Securities, Inc., as Depositor (the
"Depositor"), the Master Servicer and Bankers Trust Company of California, N.A.,
as Trustee.
____________________ intends to resell all of the Class B
Certificates directly to ___________________________ (the "Purchaser") on or
promptly after the date hereof.
In connection with such sale, the parties hereto have agreed that
the Master Servicer will engage in certain special servicing procedures relating
to foreclosures for the benefit of the Purchaser, and that the Loss Mitigation
Advisor will deposit funds in a collateral fund to cover any losses attributable
to such procedures as well as all advances and costs in connection therewith, as
set forth herein.
In consideration of the mutual agreements herein contained, the
receipt and sufficiency of which are hereby acknowledged, the Master Servicer
and the Loss Mitigation Advisor agree that the following provisions shall become
effective and shall be binding on and enforceable by the Master Servicer and the
Loss Mitigation Advisor:
ARTICLE I
DEFINITIONS
Section 1.01 Defined Terms.
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
<PAGE> 243
Collateral Fund: The fund established and maintained pursuant to
Section 3.01 hereof.
Commencement of Foreclosure: The first official action required
under local law in order to commence foreclosure proceedings or to schedule a
trustee's sale under a deed of trust, including (i) in the case of a mortgage,
any filing or service of process necessary to commence an action to foreclose,
or (ii) in the case of a deed of trust, posting, the publishing, filing or
delivery of a notice of sale, including in either case (x) any notice of
default, notice of intent to foreclose or sell or any other action prerequisite
to the actions specified in (i) or (ii) above, (y) the acceptance of a
deed-in-lieu of foreclosure (whether in connection with a sale of the related
property or otherwise) or (z) initiation and completion of a short pay-off.
Current Appraisal: With respect to any Mortgage Loan as to which
the Loss Mitigation Advisor has made an Election to Delay Foreclosure, an
appraisal of the related Mortgaged Property obtained by the Loss Mitigation
Advisor at its own expense from an independent appraiser (which shall not be an
affiliate of the Loss Mitigation Advisor) acceptable to the Master Servicer as
nearly contemporaneously as practicable to the time of the Loss Mitigation
Advisor's election, prepared based on the Master Servicer's customary
requirements for such appraisals.
Election to Delay Foreclosure: Any election by the Loss
Mitigation Advisor to delay the Commencement of Foreclosure, made in accordance
with Section 2.02(b).
Election to Foreclose: Any election by the Loss Mitigation
Advisor to proceed with the Commencement of Foreclosure, made in accordance with
Section 2.03(a).
Monthly Advances: Advances and Servicing Advances including
costs and expenses of foreclosure.
Required Collateral Fund Balance: As of any date of
determination, an amount equal to the aggregate of all amounts previously
required to be deposited in the Collateral Fund pursuant to Section 2.02(d)
(after adjustment for all withdrawals and deposits pursuant to Section 2.02(e))
and Section 3.02 to be reduced by all withdrawals therefrom pursuant to Section
2.02(g) and Section 2.03(d).
Section 1.02 Definitions Incorporated by Reference.
All capitalized terms not otherwise defined in this Agreement
shall have the meanings assigned in the Pooling Agreement.
S-2
<PAGE> 244
ARTICLE II
SPECIAL SERVICING PROCEDURES
Section 2.01 Reports and Notices.
(a) In connection with the performance of its duties under the
Pooling Agreement relating to the realization upon defaulted Mortgage Loans
serviced by it, the Master Servicer shall provide to the Loss Mitigation Advisor
the following notices and reports:
(i) Upon request by the Loss Mitigation Advisor, the
Trustee shall provide such information as is available to any Eligible
Certificateholder pursuant to Section 4.03(f) of the Pooling Agreement,
at the expense of the Loss Mitigation Advisor.
(ii) Prior to the Commencement of Foreclosure in
connection with any Mortgage Loan serviced by it, the Master Servicer
shall provide the Loss Mitigation Advisor with a notice (sent by
telecopier) of such proposed and imminent foreclosure, stating the loan
number and the aggregate amount owing under the Mortgage Loan. Such
notice may be provided to the Loss Mitigation Advisor in the form of a
copy of a referral letter from the Master Servicer or a Subservicer to
an attorney requesting the institution of foreclosure.
(b) If requested by the Loss Mitigation Advisor, the Master
Servicer shall make its servicing personnel available (during their normal
business hours) to respond to reasonable inquiries, by phone or in writing by
facsimile, electronic, or overnight mail transmission, by the Loss Mitigation
Advisor in connection with any Mortgage Loan identified in a report under
subsection (a)(i)(B), (a)(i)(C), (a)(i)(D), or (a)(ii) which has been given to
the Loss Mitigation Advisor; provided, that (1) the Master Servicer shall only
be required to provide information that is readily accessible to its servicing
personnel and is non-confidential and (2) the Master Servicer shall respond
within five Business Days orally or in writing by facsimile transmission.
(c) In addition to the foregoing, the Master Servicer shall
provide to the Loss Mitigation Advisor such information as the Loss Mitigation
Advisor may reasonably request provided, however, that such information is
consistent with the Master Servicer's normal reporting practices, concerning
each Mortgage Loan that is at least ninety days delinquent and each Mortgage
Loan which has become real estate owned, through the final liquidation thereof;
provided, that the Master Servicer shall only be required to provide information
that is readily accessible to its servicing personnel and is non-confidential
and provided, further, that the Loss Mitigation Advisor will reimburse the
Master Servicer for any out of pocket expenses.
S-3
<PAGE> 245
Section 2.02 Loss Mitigation Advisor's Election to Delay
Foreclosure Proceedings.
(a) In the event that the Master Servicer does not receive
written notice of the Loss Mitigation Advisor's election pursuant to subsection
(b) below by overnight courier (with tracking service) within 24 hours
(exclusive of any intervening non-Business Days) of transmission of the notice
provided by the Master Servicer under Section 2.01(a)(ii) subject to extension
as set forth in Section 2.02(b), the Loss Mitigation Advisor shall be deemed to
direct Master Servicer to proceed with the Commencement of Foreclosure in
respect of such Mortgage Loan in accordance with its normal foreclosure policies
without further notice to the Loss Mitigation Advisor. Any foreclosure that has
been initiated may be discontinued without notice to the Loss Mitigation Advisor
if (i) the Mortgage Loan has been brought current or if a refinancing or
prepayment occurs with respect to the Mortgage Loan (including by means of a
short payoff approved by the Master Servicer or related Subservicer) or (ii) the
Master Servicer or related Subservicer has reached the terms of a forbearance
agreement with the Borrower.
(b) In connection with any Mortgage Loan with respect to which a
notice under Section 2.01(a)(ii) has been given to the Loss Mitigation Advisor,
the Loss Mitigation Advisor may elect to instruct the Master Servicer to delay
the Commencement of Foreclosure until such time as the Loss Mitigation Advisor
determines that the Master Servicer may proceed with the Commencement of
Foreclosure. Such election must be evidenced by written notice received within
24 hours (exclusive of any intervening non-Business Days) of transmission of the
notice provided by the Master Servicer under Section 2.01(a)(ii). Such 24 hour
period shall be extended for no longer than an additional four Business Days
after the receipt of the information if the Loss Mitigation Advisor requests
additional information related to such foreclosure; provided, however, that the
Loss Mitigation Advisor will have at least one Business Day to respond to any
requested additional information. Any such additional information shall (i) be
provided only to the extent it is not confidential in nature and (ii) be
obtainable by the Master Servicer from existing reports, certificates or
statements or otherwise be readily accessible to its servicing personnel. The
Loss Mitigation Advisor agrees that it has no right to deal with the Mortgagor
during such period. However, if such servicing activities include acceptance of
a deed-in-lieu of foreclosure or short payoff, the Loss Mitigation Advisor will
be notified and given two Business Days to approve or disapprove, in writing, of
such action. If the Master Servicer does not receive a written approval or
disapproval of the proposed short payoff or deed-in-lieu of foreclosure from the
Loss Mitigation Advisor within two Business Days after sending the notice of
such action the terms of this Agreement will no longer apply to the Servicing of
such Mortgage Loan.
(c) With respect to any Mortgage Loan as to which the Loss
Mitigation Advisor has made an Election to Delay Foreclosure, the Loss
Mitigation Advisor shall obtain a Current Appraisal as soon as practicable, but
in no event more than seven business days thereafter, and shall provide the
Master Servicer with a copy of such Current Appraisal.
(d) Within two Business Days of making any Election to Delay
Foreclosure, the Loss Mitigation Advisor shall remit by wire transfer to the
Master Servicer,
S-4
<PAGE> 246
for deposit in the Collateral Fund, an amount, as calculated by the Master
Servicer, equal to the sum of (i) 125% of the greater of the unpaid principal
balance of the Mortgage Loan and the value shown in the Current Appraisal
referred to in subsection (c) above, and (ii) three months' interest on the
Mortgage Loan at the applicable Mortgage Rate. If any Election to Delay
Foreclosure extends for a period in excess of three months (such excess period
being referred to herein as the "Excess Period"), within two Business Days the
Loss Mitigation Advisor shall remit by wire transfer in advance to the Master
Servicer for deposit in the Collateral Fund the amount of each additional
month's interest, as calculated by the Master Servicer, equal to interest on the
Mortgage Loan at the applicable Mortgage Rate for the Excess Period. The terms
of this Agreement will no longer apply to the servicing of any Mortgage Loan
upon the failure of the Loss Mitigation Advisor to deposit any of the above
amounts relating to the Mortgage Loan within two Business Days of the Election
to Delay Foreclosure or within two Business Days of the commencement of the
Excess Period subject to Section 3.01.
(e) With respect to any Mortgage Loan as to which the Loss
Mitigation Advisor has made an Election to Delay Foreclosure, the Master
Servicer may withdraw from the Collateral Fund from time to time amounts
necessary to reimburse itself or the related Subservicer for all related
Advances, Servicing Advances and Subservicer Servicing Advances thereafter made
by the Master Servicer or a related Subservicer in accordance with the Pooling
Agreement and any related Subservicing Agreement. To the extent that the amount
of any liquidation expenses with respect to any Mortgage Loan is determined by
the Master Servicer based on estimated costs, and the actual costs are
subsequently determined to be higher, the Master Servicer may withdraw the
additional amount from the Collateral Fund. In the event that the Mortgage Loan
is brought current by the Mortgagor and the foreclosure action is discontinued,
the amounts so withdrawn from the Collateral Fund shall be redeposited therein
and to the extent that reimbursement therefor from amounts paid by the mortgagor
is not prohibited pursuant to the Pooling Agreement, applicable law or the
related Mortgage Note. Except as provided in the preceding sentence, amounts
withdrawn from the Collateral Fund to cover Advances, Servicing Advances and
Subservicer Servicing Advances shall not be redeposited therein or otherwise
reimbursed to the Loss Mitigation Advisor. If and when any such Mortgage Loan is
brought current by the Mortgagor, all amounts remaining in the Collateral Fund
in respect of such Mortgage Loan (after adjustment for all permitted withdrawals
and deposits pursuant to this subsection) shall be released to the Loss
Mitigation Advisor.
(f) With respect to any Mortgage Loan as to which the Loss
Mitigation Advisor has made an Election to Delay Foreclosure, the Master
Servicer shall continue to service the Mortgage Loan in accordance with its
customary procedures (other than the delay in Commencement of Foreclosure as
provided herein). If and when the Loss Mitigation Advisor shall notify the
Master Servicer that it believes that it is appropriate to do so, the Master
Servicer may proceed with the Commencement of Foreclosure. In any event, if the
Mortgage Loan is not brought current by the Mortgagor by the time the loan
becomes 6 months delinquent, the Loss Mitigation Advisor's election shall no
longer be effective and at the Loss Mitigation Advisor's option, either (i) the
Loss Mitigation Advisor shall purchase the Mortgage Loan from the Trust Fund at
a purchase price equal to the fair market value as
S-5
<PAGE> 247
shown on the Current Appraisal, to be paid by (x) applying any balance in the
Collateral Fund to such purchase price, and (y) to the extent of any deficiency,
by wire transfer if immediately available funds from the Loss Mitigation Advisor
to the Master Servicer for deposit in the related Custodial Account; or (ii) the
Master Servicer may proceed with the Commencement of Foreclosure.
(g) Upon the occurrence of a liquidation with respect to any
Mortgage Loan as to which the Loss Mitigation Advisor made an Election to Delay
Foreclosure and as to which the Master Servicer proceeded with the Commencement
of Foreclosure in accordance with subsection (f) above, the Master Servicer
shall calculate the amount, if any, by which the value shown on the Current
Appraisal obtained under subsection (c) exceeds the actual sales price obtained
for the related Mortgaged Property (net of liquidation expenses and accrued
interest related to the extended foreclosure period), and the Master Servicer
shall withdraw the amount of such excess from the Collateral Fund, shall remit
the same to the Trust Fund and shall apply such amount as additional Liquidation
Proceeds pursuant to the Pooling Agreement. After making such withdrawal, all
amounts remaining in the Collateral Fund in respect of such Mortgage Loan (after
adjustment for all permitted withdrawals and deposits pursuant to this
Agreement) shall be released to the Loss Mitigation Advisor.
Section 2.03 Loss Mitigation Advisor's Election to Commence
Foreclosure Proceedings.
(a) In connection with any Mortgage Loan identified in a report
under Section 2.01(a)(i)(B), the Loss Mitigation Advisor may elect to instruct
the Master Servicer to proceed with the Commencement of Foreclosure as soon as
practicable. Such election must be evidenced by written notice received by the
Master Servicer by 2:00 p.m., Los Angeles time, on the third Business Day
following the delivery of such report under Section 2.01(a)(i).
(b) Within two Business Days of making any Election to Foreclose,
the Loss Mitigation Advisor shall remit to the Master Servicer, for deposit in
the Collateral Fund, an amount, as calculated by the Master Servicer, equal to
125% of the current unpaid principal balance of the Mortgage Loan and three
months interest on the Mortgage Loan at the applicable Mortgage Rate. If and
when any such Mortgage Loan is brought current by the Mortgagor, all amounts in
the Collateral Fund in respect of such Mortgage Loan (after adjustment for all
permitted withdrawals and deposits pursuant to this Agreement) shall be released
to the Loss Mitigation Advisor and to the extent that reimbursement therefor
from amounts paid by the Mortgagor is not prohibited pursuant to the Pooling
Agreement, applicable law or the related Mortgage Note. The terms of this
Agreement will no longer apply to the servicing of any Mortgage Loan upon the
failure of the Loss Mitigation Advisor to deposit the above amounts relating to
the Mortgage Loan within two Business Days of the Election to Foreclose subject
to Section 3.01.
(c) With respect to any Mortgage Loan as to which the Loss
Mitigation Advisor has made an Election to Foreclose, the Master Servicer shall
continue to service the Mortgage Loan in accordance with its customary
procedures (other than Commencement of
S-6
<PAGE> 248
Foreclose as provided herein). In connection therewith, the Master Servicer
shall have the same rights to make withdrawals for Advances, Servicing Advances
and Subservicer Servicing Advances from the Collateral Fund as are provided
under Section 2.02(e), and the Master Servicer shall make reimbursements thereto
to the limited extent provided under such subsection in accordance with its
customary procedures. The Master Servicer shall not proceed with the
Commencement of Foreclosure if (i) the same is stayed as a result of the
mortgagor's bankruptcy or is otherwise barred by applicable law, or to the
extent that all legal conditions precedent thereto have not yet been complied
with, or (ii) the Master Servicer believes there is a breach of representations
or warranties by a Seller, which may result in a repurchase or substitution of
such Mortgage Loan, or (iii) the Master Servicer or related Subservicer
reasonably believes the Mortgaged Property may be contaminated with or affected
by hazardous wastes or hazardous substances (and, without limiting the Master
Servicer's or related Subservicer's right not to proceed with the Commencement
of Foreclosure, the Master Servicer supplies the Loss Mitigation Advisor with
information supporting such belief). Notwithstanding anything contained in the
foregoing sentence, the Master Servicer shall not be required to make any
investigation in addition to its customary service procedures. Any foreclosure
that has been initiated may be discontinued without notice to the Loss
Mitigation Advisor if the Mortgage Loan has been brought current or if a
refinancing or prepayment occurs with respect to the Mortgage Loan, including by
means of a short payoff approved by the Loss Mitigation Advisor in accordance
with the procedures for notice by the Master Servicer and response by the Loss
Mitigation Advisor set forth in paragraph 2.02(b) above.
(d) Upon the occurrence of a liquidation with respect to any
Mortgage Loan as to which the Loss Mitigation Advisor made an Election to
Foreclose and as to which the Master Servicer or related Subservicer proceeded
with the Commencement to Foreclosure in accordance with subsection (c) above,
the Master Servicer shall calculate the amount, if any, by which the unpaid
principal balance of the Mortgage Loan at the time of liquidation (plus all
unreimbursed interest, Servicing Advances and Subservicer Servicing Advances in
connection therewith other than those paid from the Collateral Fund) exceeds the
actual sales price obtained for the related Mortgaged Property, and the Master
Servicer shall withdraw the amount of such excess from the Collateral Fund,
shall remit the same to the Trust Fund and shall apply such amount as additional
Liquidation Proceeds pursuant to the Pooling Agreement. After making such
withdrawal, all amounts remaining in the Collateral Fund (after adjustment for
all withdrawals and deposits pursuant to subsection (c) in respect of such
Mortgage Loan shall be released to the Loss Mitigation Advisor.
Section 2.04. Termination.
(a) The Loss Mitigation Advisor's right to make any Election to
Delay Foreclosure or any Election to Foreclose and the Master Servicer's
obligations under Section 2.01 shall terminate (i) at such time as the Stated
Principal Balance of the Class B Certificates has been reduced to zero, (ii)
upon any transfer by the Loss Mitigation Advisor of any interest (other than the
minority interest therein, but only if the transferee provides written
acknowledgment to the Master Servicer of the Loss Mitigation Advisor's right
hereunder and that such transferee will have no rights hereunder) in the Class B
Certificates
S-7
<PAGE> 249
(whether or not such transfer is registered under the Pooling Agreement),
including any such transfer in connection with a termination of the Trust Fund
or (iii) any breach of the terms of this Agreement by the Loss Mitigation
Advisor.
(b) Except as set forth in 2.04(a), this Agreement and the
respective rights, obligations and responsibilities of the Loss Mitigation
Advisor and the Master Servicer hereunder shall terminate upon the final
liquidation of the last Mortgage Loan as to which the Loss Mitigation Advisor
made any Election to Delay Foreclosure or any Election to Foreclose and the
withdrawal of all remaining amounts in the Collateral Fund as provided herein.
The Loss Mitigation Advisor's right to make an election pursuant to Section 2.02
or Section 2.03 hereof with respect to a particular Mortgage Loan shall
terminate if the Loss Mitigation Advisor fails to make any deposit required
pursuant to Section 2.02(d) or 2.03(b) or if the Loss Mitigation Advisor fails
to make any other deposit to the Collateral Fund pursuant to this Agreement.
ARTICLE III
COLLATERAL FUND; SECURITY INTEREST
Section 3.01. Collateral Fund.
Upon receipt from the Loss Mitigation Advisor of the initial
amount required to be deposited in the Collateral Fund pursuant to Article II,
the Master Servicer shall establish and maintain with the Master Servicer as a
segregated account on its books and records an Eligible Account (the "Collateral
Fund"), entitled "Bank of America, FSB, as Master Servicer, for the benefit of
registered holders of BA Mortgage Securities, Inc. Mortgage Pass-Through
Certificates, Series 1998-1." Amounts held in the Collateral Fund shall continue
to be the property of the Loss Mitigation Advisor, subject to the first priority
security interest granted hereunder for the benefit of the Certificateholders,
until withdrawn from the Collateral Fund pursuant to Section 2.02 or 2.03
hereof. The Collateral Fund shall be an "outside reserve fund" within the
meaning of the REMIC Provisions, beneficially owned by the Loss Mitigation
Advisor for federal income tax purposes. All income, gain, deduction or loss
with respect to the Collateral Fund shall be that of the Loss Mitigation
Advisor. All distributions from the Trust Fund to the Collateral Fund shall be
treated as distributed to the Loss Mitigation Advisor as the beneficial owner
thereof.
Upon the termination of this Agreement and the liquidation of all
Mortgage Loans as to which the Loss Mitigation Advisor has made any Election to
Delay Foreclosure or any Election to Foreclose pursuant to Section 2.04 hereof,
the Master Servicer shall distribute to the Loss Mitigation Advisor all amounts
remaining in the Collateral Fund (after adjustment for all deposits and
permitted withdrawals pursuant to this Agreement) together with any investment
earnings thereon. In the event the Loss Mitigation Advisor has made any Election
to Delay Foreclosure or any Election to Foreclose, prior to any distribution to
the Loss Mitigation Advisor of all amounts remaining in the Collateral Fund,
funds in the Collateral Fund shall be applied consistent with the terms of this
Agreement.
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Section 3.02. Permitted Investments.
The Master Servicer shall, at the written direction of the Loss
Mitigation Advisor, invest the funds in the Collateral Fund in Permitted
Investments. Such direction shall not be changed more frequently than quarterly.
In the absence of any direction, the Master Servicer shall select such
investments in accordance with the definition of Permitted Investments in its
discretion.
All income and gain realized from any investment as well as any
interest earned on deposits in the Collateral Fund (net of any losses on such
investments) and any payments of principal made in respect of any Permitted
Investment shall be deposited in the Collateral Fund upon receipt. All costs and
realized losses associated with the purchase and sale of Permitted Investments
shall be borne by the Loss Mitigation Advisor and the amount of net realized
losses shall be deposited by the Loss Mitigation Advisor in the Collateral Fund
promptly upon realization. The Master Servicer shall periodically (but not more
frequently than monthly) distribute to the Loss Mitigation Advisor upon request
an amount of cash, to the extent cash is available therefor in the Collateral
Fund, equal to the amount by which the balance of the Collateral Fund, after
giving effect to all other distributions to be made from the Collateral Fund on
such date, exceeds the Required Collateral Fund Balance. Any amounts so
distributed shall be released from the lien and security interest of this
Agreement.
Section 3.03. Grant of Security Interest.
The Loss Mitigation Advisor hereby grants to the Master Servicer
for the benefit of the Certificateholders under the Pooling Agreement a security
interest in and lien on all of the Loss Mitigation Advisor's right, title and
interest, whether now owned or hereafter acquired, in and to: (1) the Collateral
Fund, (2) all amounts deposited in the Collateral Fund and Permitted Investments
in which such amounts are invested (and the distributions and proceeds of such
investments) and (3) all cash and non-cash proceeds of any of the foregoing,
including proceeds of the voluntary conversion thereof (all of the foregoing
collectively, the "Collateral").
The Loss Mitigation Advisor acknowledges the lien on the security
interest in the Collateral for the benefit of the Certificateholders. The Loss
Mitigation Advisor shall take all actions requested by the Master Servicer as
may be reasonably necessary to perfect the security interest created under this
Agreement in the Collateral and cause it to be prior to all other security
interests and liens, including the execution and delivery to the Master Servicer
for filing of appropriate financing statements in accordance with applicable
law. The Master Servicer shall file appropriate continuation statements, or
appoint an agent on its behalf to file such statements, in accordance with
applicable law.
Section 3.04. Collateral Shortfalls.
In the event that amounts on deposit in the Collateral Fund at
any time are insufficient to cover any withdrawals therefrom that the Master
Servicer is then entitled to
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make hereunder, the Loss Mitigation Advisor shall be obligated to pay such
amounts to the Master Servicer immediately upon demand. Such obligation shall
constitute a general corporate obligation of the Loss Mitigation Advisor. The
failure to pay such amounts within two Business Days of such demand (except for
amounts to cover interest on a Mortgage Loan pursuant to Sections 2.02(d) and
2.03(b)), shall cause an immediate termination of the Loss Mitigation Advisor's
right to make any Election to Delay Foreclosure or Election to Foreclose and the
Master Servicer's obligations under this Agreement with respect to all Mortgage
Loans to which such insufficiencies relate, without the necessity of any further
notice or demand on the part of the Master Servicer.
ARTICLE IV
MISCELLANEOUS PROVISIONS
Section 4.01. Amendment.
This Agreement may be amended from time to time by the Master
Servicer and the Loss Mitigation Advisor by written agreement signed by the
Master Servicer and the Loss Mitigation Advisor.
Section 4.02. Counterparts.
This Agreement may be executed simultaneously in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
such counterparts shall constitute but one and the same instrument.
Section 4.03. Governing Law.
This Agreement shall be construed in accordance with the laws of
the State of California and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.
Section 4.04. Notices.
All demands, notices and direction hereunder shall be in writing
or by telecopy and shall be deemed effective upon receipt to:
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(a) in the case of the Master Servicer,
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Attention:
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Phone:
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Fax:
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(b) in the case of the Loss Mitigation Advisor,
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Attention:
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Phone:
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Fax:
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Section 4.05. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever, including
regulatory, held invalid, then such covenants, agreements, provisions or terms
of this Agreement shall in no way affect the validity or enforceability of the
other provisions of this Agreement.
Section 4.06. Successors and Assigns.
The provisions of this Agreement shall be binding upon and inure
to the benefit of the respective successors and assigns of the parties hereto,
and all such provisions shall inure to the benefit of the Certificateholders;
provided, however, that the rights under this Agreement cannot be assigned by
the Loss Mitigation Advisor without the consent of the Master Servicer.
Section 4.07. Article and Section Headings.
The article and section headings herein are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
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Section 4.08. Confidentiality.
The Loss Mitigation Advisor agrees that all information supplied
by or on behalf of the Master Servicer pursuant to Sections 2.01 or 2.02,
including individual account information, is the property of the Master Servicer
and the Loss Mitigation Advisor agrees to hold such information confidential and
not to disclose such information.
Each party hereto agrees that neither it, nor any officer,
director, employee, affiliate or independent contractor acting at such party's
direction will disclose the terms of Section 4.09 of this Agreement to any
person or entity other than such party's legal counsel except pursuant to a
final, non-appealable order of court, the pendency of such order the other party
will have received notice of at least five business days prior to the date
thereof, or pursuant to the other party's prior express written consent.
Section 4.09. Indemnification.
The Loss Mitigation Advisor agrees to indemnify and hold harmless
the Master Servicer, the Depositor, and each applicable Subservicer and each
person who controls the Master Servicer, the Depositor, or any applicable
Subservicer and each of their respective officers, directors, affiliates and
agents acting at the Master Servicer's, the Depositor's, or any applicable
Subservicer's direction (the "Indemnified Parties") against any and all losses,
claims, damages or liabilities to which they may be subject, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of, or are based upon, actions taken by, or actions not taken by, the Master
Servicer, the Depositor, or any applicable Subservicer, or on their behalf, in
accordance with the provisions of this Agreement and (i) which actions conflict
with the Master Servicer's, the Depositor's, or any applicable Subservicer's
obligations under the Pooling Agreement or the related Subservicing Agreement,
or (ii) give rise to securities law liability under federal or state securities
laws with respect to the Certificates. The Loss Mitigation Advisor hereby agrees
to reimburse the Indemnified Parties for the reasonable legal or other expenses
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action. The indemnification obligations of the Loss
Mitigation Advisor hereunder shall survive the termination or expiration of this
Agreement.
IN WITNESS WHEREOF, the Master Servicer and the Loss Mitigation
Advisor have caused their names to be signed hereto by their respective officers
thereunto duly authorized, all as of the day and year first above written.
BANK OF AMERICA, FSB,
as Master Servicer
By:
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Name:
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Title:
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LOSS MITIGATION ADVISOR
By:
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Name:
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Title:
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LOSS MITIGATION ADVISOR
By:
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Name:
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Title:
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